Double-digit profit declines are never an easy thing for investors to stomach, but a slightly deeper dive into today's half-year results from Taylor Wimpey reveals a number of reasons for a fair bit of optimism going forward.
A manifestly cyclical industry whose fortunes are tied to the health of the economy, housebuilding has struggled to maintain momentum as high interest and mortgage rates have put off potential buyers coping with cost increases on multiple fronts. And as ever, planning delays continue to frustrate builders in Scotland and throughout the UK.
Against this backdrop, Taylor Wimpey had a relatively solid start to the year.
While the number of properties sold was low at 4,728 and average sale prices declined by 1%, the group said that trading during July has been relatively strong despite the summer holidays being a historically slow period. It also maintained its guidance on completions for the full year at the top end of the previously disclosed range of 9,500 to 10,000 homes.
READ MORE: Taylor Wimpey profits plunge as new home completions tumble
Oli Creasey, a property analyst at Quilter Cheviot, said the slowdown in volume appears to be a timing issue. The group had 8% fewer outlets open during 2024 compared to 2023, but saw an increased sales rate at those which were open.
That 0.75x sales rate - homes sold per outlet per week - is "getting close" to the company and industry’s long-term average which Mr Creasey reckons is around 0.85x.
Furthermore, while first half profits were down by a whopping 58% at £99.7 million, this was still 12% ahead of consensus expectations.
It's no surprise that chief executive Jennie Daly has given fulsome support to Labour's plans for homes, as outlined this week by Angela Rayner in the House of Commons. The government's commitment to building new housing and reforming the planning system could bring significant tailwinds for the sector as a whole.
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