UPDATE: Taylor Wimpey Confident Despite Uncertain Market

28th Jun 2010 09:40

(Adds detail, comment.) By Anita Likus Of DOW JONES NEWSWIRES LONDON (Dow Jones)--U.K. house builder Taylor Wimpey PLC (TW.LN) said Monday it will increase sales and is confident house prices will continue to rise, but cautioned that future spending reviews, new planning structures and a shortage of land for sale could hurt business. "Although the recent U.K. Budget did not contain new measures that we would expect to have a detrimental impact on the housing market, we remain concerned regarding future spending reviews that could impact on housing initiatives, particularly the level of social housing grant," the company said in a trading update ahead of its first-half results for the period to July 4, which will be announced in August. Taylor Wimpey said it will run its business cautiously in the short term, buying land selectively and continuing to focus on costs and cash because of political and economic uncertainties. In the medium term, the housebuilder also remains concerned that a shortage of available land with planning consent will artificially constrain a recovery in industry volumes, which will be exacerbated by the impact and timing of changes in planning policy following the general election. Chief Executive Pete Redfern said he favors the U.K. government's plans to give more planning powers to local authorities, but is concerned about the transition of the system. "Local can be good, we have good relationships with local authorities," said Redfern "in the long term, we can end up with a better planning system so we can see the logic." But he said he is concerned about the transition, the message, and the timing, which could take three months or more. Despite its concerns, Taylor Wimpey said that it continues to perform in line with internal expectations in a gradually improving, but still uncertain, trading environment and that the shortfall of new build housing and strong levels of demand will continue to underpin pricing in the housing market. Still, at 0815 GMT Taylor Wimpey's shares were down 2.9% at 30 pence in a flat London market. The company has already sold 83% of expected houses for the year to Dec. 31. Private sales in the year to date are broadly in line with those last year, at an average of 0.58 sales per site per week. It also reported historically low cancellations at a year to date average of 16%. Redfern said he plans to spend GBP280 million on land this year and focus on price and margins rather than high sales. "We are not pushing for massive volumes," he said adding that this year's operating margin will only reach about 5% but that he expects double digit margins of around 11% in 2012/13. Taylor Wimpey expects to complete around 4,650 homes in the first half of the year at an average selling price of GBP167,000 compared with 4,702 homes at GBP153,000 in the same period last year. Analysts welcomed the stable sales, after a slowdown in the housing market due to the U.K.'s general election last month. "The sector should take some comfort from today's statement," said Liberum Capital analyst Charlie Campbell. Taylor Wimpey expects first-half debt to be GBP650 million, which is around GBP400 million less than last year, and a significant reduction from the GBP1.5 billion it reached in the midst of the credit crunch. -By Anita Likus, Dow Jones Newswires; +44 20 7842 9407; [email protected] (END) Dow Jones Newswires June 28, 2010 04:40 ET (08:40 GMT)