British homebuilder Taylor Wimpey flags market uncertainty

By Aby Jose Koilparambil

(Reuters) -UK homebuilder Taylor Wimpey on Thursday forecast annual operating profit would come in at the top end of its expected range, but also flagged "significant market uncertainty" as high mortgage rates dent demand.

FTSE 100-listed Taylor Wimpey's trading update echoed peer Persimmon's, which marginally lifted its annual home-build targets on Tuesday while pointing to "highly uncertain" market conditions in 2024. Britain's largest homebuilder Barratt in October flagged that the housing market would remain difficult over the next few months.

Britain's housing market has been stuck in the doldrums for much of this year, as expensive home loans amid a series of Bank of England (BoE) interest rate hikes and broader economic concerns crimp affordability for homebuyers.

Reflecting the challenges ahead, Taylor Wimpey's total order book excluding joint ventures - a key industry metric which gauges near-term demand - fell 27% year-on -year to about 1.9 billion pounds ($2.33 billion) as of Nov. 5.

Investec analysts said in a note that the trading update pointed to a slightly better-than-expected performance at the profit line, but the key focus now would be on how the macro and trading backdrop develops in 2024.

Taylor Wimpey said the year-to-date cancellation rate improved to 18%, compared with 24% during the four weeks to July 30, while the weekly net private sales rate per outlet stood at 0.63 units, versus 0.74 homes a year earlier.

CEO Jennie Daly said the group's "focus on optimising price and sharp cost discipline" helped it to lift profit expectations to the upper end of its forecast range of 440 million pounds ($540.4 million) to 470 million pounds.

The top end of that range would mark a 49% profit drop from 2022 and be slightly ahead of market expectations for 456 million pounds.

Daly told analysts in a call that there were some marginal improvements in demand in October and a slight increase in the number of first-time buyers during the month, but the overall demand scenario remained "fragile".

The company reaffirmed its annual home-build targets of 10,000-10,500 units.

Taylor Wimpey shares were trading about 2% higher in morning trade, while the benchmark index was down 0.2%

($1 = 0.8142 pounds)

(Reporting by Aby Jose Koilparambil in Bengaluru; Editing by Rashmi Aich, Bernadette Baum and Miral Fahmy)