Taylor Wimpey shares sink on costs warning
Profit margins for the full year will be lower than expected.
Shares in Taylor Wimpey were on the slide after the housebuilder warned that it is costing more to build homes.
The group said profit margins for the full year would be lower than expected after a rise in building costs over the first quarter.
Taylor Wimpey saw “higher than expected” cost inflation, particularly in materials, and now expects inflation of around 5% for the year.
The cost increase was driven by a combination of underlying inflation, exchange rate impacts on suppliers and stockpiling of materials by developers.
Taylor Wimpey shares dropped 4.4% to 183.7p following the update.
A number of other housebuilders were impacted by the news of cost rises, as Persimmon, Barratt and Berkeley all also fell in early trading.
Despite the warning, the FTSE 100 Taylor Wimpey was upbeat as it hailed “record sales rates” in a trading update on Thursday morning.
It said the market for new housebuilding remained stable over the first four months of 2019, and it had seen a year-on-year rise in the average number of weekly private sales.
Performance for the spring selling season has been at “encouraging levels” and it has an order book of more than 10,000 homes, it added.
Chief executive Pete Redfearn said: “We’ve made a good start to 2019 and in spite of wider macroeconomic uncertainty, the housing market has remained stable.
“We’ve made a good start to 2019 and in spite of wider macroeconomic uncertainty, the housing market has remained stable.”
The company is on track to meet expectations for the year with full year sales volumes expected to be “slightly higher” than in 2018, it said.
In 2018, revenues rose to £4.1 billion from £4 billion in 2017, while pre-tax profits in 2018 rose to £810 million from £682 million the previous year.
Sophie Lund-Yates, equity analyst at Hargreaves Lansdown, said: Taylor has enjoyed a strong run of pumping up margins, so these unexpectedly high costs will have come as an unwelcome shock.
“Despite the blip, the group remains convinced the housing market remains stable, with prices flat year-on-year. It can’t escape the political environment though, with talk of current stability heavily caveated with the threat of wider economic uncertainty.”