Trading update says builder will go further than 10% reduciton of 2010

Housebuilder Taylor Wimpey is to further squeeze build costs as it seeks to recover its profit margin in 2011, the firm said.

In a trading update for 2010 the firm said it had already reduced construction costs by 10%, but was aiming to reduce this further.

The company will continue to keep pressure on suppliers, but is aiming to get the bulk of further cost savings by re-planning its sites for cheaper homes. This will allow it to making a 7% operating profit margin in 2011, it said, putting it in line to return to profit.

In the update the firm reported better than expected net debt, but sales down 2.2% on 2009,

At the same time the company said it sold 9,962 homes last year, at an average price 7% higher than in 2009, due to changes in mix. In addition it said its US business had performed more strongly than expected.

Net debt is now £660m, £90m less than at the same point last year.

However, the company gave no specific update on what trading conditions had been like in the first two weeks of the year, saying mortgage lending constraint was still an issue and it was continuing to run the business cautiously. The firm added it had been “encouraged by the enhanced sales rates, sales prices and margins that we are achieving on recent outlet openings

The company also declined to give any update on the widely rumoured sale of its US business.

Pete Redfern, chief executive of Taylor Wimpey, said “We have delivered a much improved performance in 2010.  We are now in a strong position to add significant value by maximising returns from our existing land portfolio and adding high quality new land on attractive terms.”