Taywood and Wimpey hit hard by UK downturn

Confidence in the UK housing market was dealt a double blow on Tuesday after Wimpey and Taylor Woodrow turned in poor results.

Both firms turned in strong performances in the USA, where the housing market is booming, but these were not enough to offset the downturn in the UK, and profits in both companies fell.

Wimpey was worst affected. Overall profit fell 21% to £122m and operating profit in the domestic market fell 32% to £106m in the six months to 3 July.

Completions in the UK fell 10% to 4576, although the average selling price remained roughly stable at £184,600. Peter Redfern, Wimpey UK’s chief executive, said the company had increased its use of incentives. He noted that one of the company’s weaknesses was the high price it has paid for its landbank, relative to some of its rivals. He said: “We have managed the short term well but have always suffered because the land we use has been bought relatively recently.”

Wimpey’s US business, Morrison Homes, increased its operating profit 69% to $102m (£55m). The group showed that it has faith in the prospects of the firm by recommending a 10% increase in interim dividend to 5.7p.

Profit in Taylor Woodrow’s UK housing business fell by almost 18% to £108m in the six months to 30 June; completions dropped 17% to 3194. Iain Napier, the chief executive of Taywood, said:

“The outlook in the UK remains uncertain for the rest of the year, although the market fundamentals are strong.”

Taywood’s North American business performed much better, than its UK arms, with profit rising 38% to £74m.

Analysts at Teather & Greenwood said Taywood’s brightest prospects in the short term were overseas: “The outlook continues in a similar vein with a strong performance expected in the USA and an uncertain outlook in the UK. The order book is down 18% by value in the UK but up 40% in America.”

In the UK, the average selling price was £4000 lower at £195,000 because of an increased proportion of social and apartment sales.

Overall, group pre-tax profit fell 3% to £170m. Taywood and Wimpey both sought to reassure investors by increasing the interim dividend by 50% to 4.5p a share.