ii view: income play Taylor Wimpey offers confident outlook

First-half results to 2 July

• Revenue down 21% to £1.64 billion
• Operating profit down 44.5% to £236 million
• Interim dividend up 3.7% to 4.79p per share
• Net cash up 2% to £655 million
• Order book of 7,866 homes with a value of £2.15 billion, down from 10,102 homes and a value of £2.8 billion a year ago

Guidance:

• Now expects full-year UK completions of between 10,000 to 10,500, up from a previous 9,000 to 10,500.

New chief executive Jennie Daly said: “The first half of the year has been characterised by variable market conditions including substantially higher mortgage rates. While this has inevitably impacted our results, I am pleased that we have delivered a resilient performance with first-half completions slightly ahead of our expectations. 

“Taylor Wimpey is a strong, sustainable and agile business underpinned by a robust balance sheet and an excellent land bank. We remain well positioned to manage the business through near-term challenges while maximising value in the medium to long term.”

• Invest with ii: Top UK Shares | Share Tips & Ideas | Cashback Offers

ii round-up:

Housebuilder Taylor Wimpey (LSE:TW.) operates across 22 UK regional divisions. It also has a small Spanish housebuilding business generating just under 3% of sales. 

For a round-up of these latest results announced on 2 August, please click here. 

ii view:

Taylor Wimpey was formed from the merger of George Wimpey and Taylor Woodrow in 2007. Headquartered in High Wycombe, Buckinghamshire, today it employs around 5,000 people building flats to six-bedroom houses. It is currently the third-largest UK listed housebuilder by stock market value at just under £4 billion, behind rivals Barratt Developments (LSE:BDEV) and Berkeley Group (LSE:BKG), but ahead of Persimmon (LSE:PSN). 

For investors, higher borrowing costs are impacting customer affordability and hindering sales. A previous end to the government’s Help-to-Buy scheme has further dented buyer demand, costs generally for businesses remain elevated, while stretched UK government finances may now be limiting room for sector assistance such as stamp duty holidays. 

• Insider: FTSE 250 chief back buying after results slump
• Stocks rally as rates’ peak moves into view
• Stockwatch: a buying opportunity at two UK shares

On the upside, hopes that interest rates may be close to a peak now persist. Rising selling prices have helped counter elevated build costs, more selective land buying has aided the group’s cash position, while the dividend payment, unlike some rivals, has stayed progressive.  

On balance and given a historic and estimated future dividend yield of over 8%, existing income-oriented investors at least are likely to stay with the shares.   

Positives: 

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

Negatives:

• Uncertain economic outlook
• Falling house prices

The average rating of stock market analysts:

Buy