ii view: is income play Taylor Wimpey a buying opportunity?

Full-year results to 31 December

• Revenue down 21% to £3.5 billion
• Pre-tax profit down 43% to £474 million
• Net cash held of £678 million, down from £864 million
• Final dividend of 4.79p per share
• Total 2023 dividend up 1.9% to 9.58p per share

Chief executive Jennie Daly said:

“We delivered a good full year performance in line with expectations despite a challenging market, benefiting from our sharp operational focus, the quality of our homes and locations and a continued proactive sales effort. 

“It is still early in the year and the macroeconomic backdrop remains uncertain, however it is encouraging to see some signs of improvement in the market, with reduced mortgage rates positively impacting affordability and customer confidence.”

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ii round-up:

Taylor Wimpey (LSE:TW.) was formed from the merger of George Wimpey and Taylor Woodrow back in 2007. 

Today it operates across 22 UK regional divisions as well as a small Spanish housebuilding business.  

For a round-up of these latest results announced on 28 February, please click here.

ii view:

Headquartered in High Wycombe, Buckinghamshire, Taylor Wimpey builds homes from flats to six-bedroom houses. Employing around 5,000 people, the FTSE 100 company is currently the UK’s largest housebuilder by stock market value at £4.94 billion, just ahead of rival Berkeley Group Holdings (The) (LSE:BKG) at £4.9 billion, with Barratt Developments (LSE:BDEV) next at £4.6 billion and Persimmon (LSE:PSN) at £4.3 billion. Sales at Taylor Wimpey’s small Spanish business totalled 4% of overall revenues in 2023.

For investors, a previously announced investigation by the Competition and Markets Authority into issues including poor build quality and potential price collusion across the sector, is not to be forgotten. Consumer spending remains pressured, with expected cuts in interest rates later this year dependent on falling inflation and not guaranteed, while the planning system remains tough to navigate, with a potential change of UK government offering further uncertainty. 

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On the upside, expected cuts in interest rates have seen mortgage rates easing, helping Taylor Wimpey’s private sales rate improve to 0.67 per outlet per week from 0.62 a year ago. The previous opening of a new timber frame building facility is expected to improve efficiency going forward, costs remain a focus with annualised savings of £19 million made in 2023, while the company has, unlike some rivals, maintained a progressive dividend strategy.

In all, and while some caution remains sensible, a forecast dividend yield of around 6.5% should attract the interest of income investors, while growth investors might be encouraged when interest rates eventually start to fall.

Positives: 

• Focus on costs
• Attractive dividend yield (not guaranteed)

Negatives:

• Uncertain economic outlook
• Difficult planning environment

The average rating of stock market analysts:

Buy