Construction Enquirer News House builder to exceed profit forecast as completions to return to 90% of last year
House builder Taylor Wimpey has launched a £10m cost-cutting plan in a bid to return the business to 22% operating margins.
The firm is removing one tier of operational management throughout the group and rationalising its London operating structure to focus on affordable price points that meet the affordability needs of Londoners.
It is also in consultation on a series of reductions in central and business unit overheads. This will bring £15m in annual operational savings from 2021.
Taylor Wimpey is also on a land buying spree following June’s £500m fundraising, agreeing on terms on 70 sites totalling 14,500 plots worth £826m.
Pete Redfern, chief executive, said: “Operating through the challenges of the last six months has also highlighted opportunities for ongoing efficiency and performance improvement, as our recent investments in systems and processes have performed well.
He said the business was now expecting to exceed previous profits forecasts for the year with next year’s completions set to return to last year’s level.
In a start of second-half trading statement this morning, Redfern said: “All sites continue to operate within Covid-secure guidelines, and through the second half, we have focused on removing bottlenecks to increase construction pace without compromising on safety or quality.
“At present, the majority of our sites are operating at or near normal construction pace and we do not expect this to be adversely affected by the new restrictions.”
He added: “With our sites operating at or near to normal capacity and with a strong order book and resilient customer demand we now expect 2021 completions to be between 85-90% of 2019 levels.”
Taylor Wimpey’s order book is up 11% at £3bn compared to last year. This equates to 11,530 homes (2019: 10,486).
The group has also been snapping up land at attractive returns in line with its medium-term operating margin target of 21-22% and with an average return on capital employed of 34%.
This includes an increased number of smaller sites compared with recent years to get a better balance of both large and small sites.
Redfern said: “Looking ahead, we are on track to deliver full-year 2020 results towards the upper end of market expectations and with strong operational momentum and positive forward indicators, our confidence in 2021 has increased.
“As a result, assuming the market remains broadly stable, we expect to deliver 2021 operating profit materially above the top end of the current consensus range.”