Taylor Woodrow was this week the latest housebuilder to warn the market that margins within its UK housing business were under pressure, writes Angela Monaghan.
Ahead of its half-year results, to be announced in September, Taylor Woodrow said UK operating margins had dropped 2% to about 14%.
Chief executive Ian Napier also said that completions in the UK were down 17% to 3194 and that the order book was 18% lower than in June 2004, at £600m.
Despite the downbeat news, shares in the company rose 4.5p or 1.32% at 345.25p after the announcement on Monday. This was largely because of a strong performance from Taylor Woodrow’s US business.
Overall, Napier said that group operating profit would be slightly ahead of market expectations, but down on the first half of last year.
Taylor Woodrow operates in California, Florida, Arizona, Texas and Canada – in the fastest growing markets in North America.
Completions in the six-month period increased 11% to 1667, and the North American business will generate a higher proportion of group operating profit compared with the same period last year.
The company’s US order book was up 40% to $1.65bn (£940m). Margins rose 1.5% to 16.5%, compared with the first half of 2004.
“We are continuing to see the benefit of our strategy over the past three years of investing disproportionately in North America, relative to the UK,” said Napier. Analysts Teather & Greenwood are forecasting Taylor Woodrow’s interim pre-tax profit at £158.5m, a 17% fall compared with last year.
Looking ahead, Taylor Woodrow’s finance director, Peter Johnson, told Building: “We are hopeful we will see a cut in interest rates before long. However, there will be a lag between this and any sign of a return in consumer confidence. This means the market is likely to remain as it is for the rest of the year and any upturn will be seen in 2006.”
The company said it was on track to sell its regional business park portfolio by the end of the year, which would raise about £50m in cash. It also made £30m in cash after selling the Orchard shopping centre at Didcot. The moves are part of the firm’s plan to exit commercial property and focus on housebuilding.