ii view: Taylor Wimpey hails higher sales and bigger dividend

This FTSE 100 housebuilder was hit hard in 2022 but has rallied this year. We assess prospects. 

Full-year results to 31 December

• Revenue up 3.2% to £4.42 billion
• Pre-tax profit up 22% to £828 million
• Final dividend up 8% to 4.78p per share
• Total dividend for the year up 9.6% to 9.40p per share
• Net cash up 3% to £864 million

Chief executive Jennie Daly said:

"In a year marked by two distinct halves, we acted quickly and decisively to address rapidly changing market conditions in the second half of the year and continued to focus on operational excellence and efficiency. 

"Looking forward, we have a strong proposition that is clearly recognised and valued by our customers, supported by our sharp operational focus and highly experienced teams. We have a high-quality, well located landbank and a strong financial position which underpins our Ordinary Dividend Policy of paying out 7.5% of net assets, or at least £250 million, annually throughout the cycle."

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ii round-up:

Housebuilder Taylor Wimpey (LSE:TW.) today flagged a recent pick-up in 2023 sales despite suffering an overall drop in its order book year-over-year. 

A year-to-date sales rate of 0.62 per outlet per week was up from a rate of 0.48 in the second half of 2022, with management highlighting a recent drop in mortgage rates in assisting. An end of year forward order book of £2.15 billion compares to £2.9 billion at the end of 2021 before global interest rates began to rise to try and contain inflation. 

Shares in the FTSE 100 company were little changed in UK trading having risen by around 16% in 2023 and following a 40% plus fall in 2022. Rivals Barratt Developments (LSE:BDEV) and Bellway (LSE:BWY) are up by similar amounts year-to-date while the FTSE 100 index is up 5%.

Taylor Wimpey’s customer cancellation rate had risen marginally to 17% compared to the equivalent period in 2022 of 14%. Build completions for 2023 are expected to come in at between 9,000 and 10,500 units, down from 14,154 in 2022 as the company slows builds to adjust for slower sales.  

Average pricing for private builds during the first half of 2023 is expected by management to be similar to the £367,000 achieved on completions during the second half of 2022.

An 8% increase in the final dividend to 4.78p per share adds to the £150 million already returned to shareholders over the year via share buybacks.  

A 3% improvement in revenues over 2022 helped pre-tax profit climb 22% to £828 million.

Taylor Wimpey’s next trading update is scheduled for 27 April. 

ii view:

Taylor Wimpey was formed from the merger of George Wimpey and Taylor Woodrow in 2007. Today it operates across 22 UK regional divisions as well as a small Spanish housebuilding business, building flats to six-bedroom houses. It is currently the third largest UK listed housebuilder by stock market value at just over £4 billion, behind rivals Barratt Developments and Berkeley Group Holdings (The) (LSE:BKG) but ahead of Persimmon (LSE:PSN). 

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For investors, a backdrop of increased and rising interest rates generates caution. A cost-of-living crisis continues to pressure consumer spending, costs across the housebuilding sector have been rising, while competition for land remains intense. Slow planning applications also warrant consideration, as do stretched UK government finances limiting room for sector assistance such as stamp duty holidays. 

More favourably, recent Bank of England comments suggest that interest rates may not rise much further. Rising selling prices have also helped counter elevated build costs, more selective land buying has aided the group’s cash position, while the dividend payment, unlike some rivals, remains progressive.  

On balance, and given a historic and estimated future dividend yield of over 7%, income focused investors are likely to remain loyal.   

Positives: 

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

Negatives:

• Uncertain economic outlook
• Falling house prices

The average rating of stock market analysts:

Buy