Taylor Wimpey PLC (LSE:TW.) revealed profits plunged 48% lower last year as sales fell and costs rose, though this was not as bad as expected.
The FTSE 100-listed housebuilder expects this year to see a further decline in completed home sales, with profit margins continuing to be squeezed by lower house pricing and higher costs.
It said it will "cooperate fully" with the Competition & Markets Authority (CMA) housebuilding market study that was launched earlier in the week into possible collusion by leading building firms, including TW and six other blue-chip rivals.
Profits of £473.8 million before tax and exceptional items were the result for the 2023 calendar year, beating the £470 million top end of guidance, but down from £908 million a year earlier.
Revenue fell 20.5% to £3.5 billion, as it had flagged last month, on the back of total UK house completions falling to 10,438 from 13,773.
Chief executive Jennie Daly called it a “good full-year performance in line with expectations despite a challenging market”.
For 2024 she said: “it is encouraging to see some signs of improvement in the market, with reduced mortgage rates positively impacting affordability and customer confidence”, although the planning environment “remains challenging”.
The group expects the number of UK completions this year to come in between 9,000 and 10,000, with 45% in the first half of the year.
First half operating profit margin will reflect slightly lower pricing in the order book, build cost inflation and investments in technology and timber frame which it said is to drive operational efficiencies.
Build cost inflation is running at around 4% in current work in progress, but is down to around 1% on new tenders.
Net private sales in the first two months of the year are 0.67 per outlet per week, up from 0.62 at this point last year, with the level of down valuations “low”.
Shares in the group fell 2.7% to 136.9p on Monday morning, having climbed almost 50% since last summer.
Profits were slightly ahead of consensus expectations, said analyst Edward Prest at Liberum, but guidance for completions was slightly below.
The average forecast for UK completions stands at 10,451 units, he said, adding that the company's outlook "appears prudent if the recent improvement in the market can hold" and he expects it to build the order book in preparation for 2025.
Richard Hunter at Interactive Investor said: “Housebuilding is a cyclical industry which is currently near the low point of the cycle, which tends to lead to the survival of the fittest, with Taylor Wimpey remaining in that camp."
Following a torrid market in the past year or so and, despite the CMA probe into issues including poor build quality and potential price collusion, Hunter said: "The tide could be turning and while Taylor Wimpey is not calling for anything approaching a full recovery, there are some encouraging signs".
He pointed to £678 million of net cash and a strong cash-generative ability that means a progressive dividend policy can continue to be pursued, with the shares currently yielding 6.8%.