Taylor Wimpey expects build cost rises to ease to 3-4%

Aaron Morby 8 months ago

House builder Taylor Wimpey is forecasting that build cost inflation will ease across the industry to 3-4% after topping 5% last year.

Peter Redfern Taylor Wimpey
Pete Redfern says Taylor Wimpey's strategy is differentiated by a long term focus on value

Announcing record profit and sales growth for 2015, the house builder said the supply of quality subcontractors remained challenging, but looking forward material pricing would remain broadly flat with a reduced rate of inflation on labour pricing.

To reduce the impact Taylow Wimpey said it had agreed product lines and volumes with key suppliers to mitigate long lead times and shortages. 

The firm raised home completions by just 7.5% to 13,470 over the year as it continued to focus on margins which rose to 20%.

This helped raise the contribution to profit of every home built from £50,000 to £60,000. As a result pre-tax profits topped £600m, ahead 28% on the previous year.

Pete Redfern, chief executive, said: “Taylor Wimpey delivered a record performance in 2015, building over 13,000 homes across the UK and contributing over £335m to local communities.

“We are focused on creating long term value and are supportive of policy initiatives that promote sustainability and reduce volatility in the housing market.”

He added: “2016 has continued to be positive across all of our regional markets, with demand strong and good access to mortgages. With a strong order book and high-quality landbank, we continue to work with stakeholders to ensure we open all sites with implementable planning and begin building as quickly and efficiently as possible.”

Group revenue increased by 17% to £3.2bn last year driven by much improved selling prices in the UK, up 8% to £230k and improved completions.

Taylor Wimpey’s land cost per unit sold dropped to £42.4k from £45.1k in the prior year, reflecting the increased contribution from sites acquired through the strategic pipeline and trading from a lower number of sites acquired before the economic downturn. 

Build cost per unit increased to £121.9k (2014: £112.9k).

The house builder ended the year with a record order book, which increased in value by 27% to £1.78bn, excluding joint ventures.

The increase in the order book value also benefitted from a stronger presence in Central London which Taylor Wimpey said was now at optimal scale. This order book represents 7,484 homes (31 December 2014: 6,601 homes).

Redfern confirmed a further £300m surplus cash will be returned to shareholders in July, equivalent to over £22,000 per home.

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