ii view: Taylor Wimpey predicts high-end annual profit

Second-half trading update from 1 July to 5 November

• Net private sales rate per outlet per week unchanged at 0.51
• Total order book excluding joint ventures down 27% to £1.9 billion or 7,042 homes

Guidance:

• Expects full-year operating profit to be at the top end of its estimated range of £440 million to £470 million
• Expects end-of-year cash held to be between £500 million and £650 million

Chief executive Jennie Daly said:

“Taylor Wimpey has delivered a resilient performance in what continues to be a challenging market backdrop, reporting a robust sales rate and strong financial position.”

“Looking ahead, while the market backdrop remains uncertain, we are confident in the medium to long term sector fundamentals, with a meaningful supply and demand imbalance in UK housing."

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ii round-up:

Housebuilder Taylor Wimpey (LSE:TW.) today flagged its expectation for full-year profit to be at the upper end of its previous forecast given its high focus on costs and home selling prices. 

Full-year build completions are still forecast to be between 10,000 and 10,500 homes, but with profit now expected to come in at the upper end of its prior £440 million to £470 million range. 

Shares in the FTSE 100 company rose by more than 2% in UK trading having come into this latest news up by just over a tenth year-to-date. That’s similar to rivals Berkeley Group (LSE:BKG) and Barratt Developments (LSE:BDEV) and ahead of an almost unchanged performance for the FTSE 100 index in 2023. 

Taylor Wimpey operates across 22 UK regional divisions as well as a small Spanish housebuilding business. 

Sales remained stable year-over-year, with the net rate per site per week for the second half to early November proving unchanged at 0.51 and management flagging a continued easing in build cost inflation. 

Taylor Wimpey’s total order book excluding joint ventures stood at £1.9 billion as of early November, representing 7,042 homes. That’s a fall from £2.6 billion the same time last year and 9,153 homes. 

Cash at year-end is expected to come in at between £500 million and £650 million after paying £338 million in annual dividend payments. Its next trading update is scheduled for 11 January. 

ii view:

Taylor Wimpey was formed from the merger of George Wimpey and Taylor Woodrow in 2007.  Headquartered in High Wycombe, Buckinghamshire, it builds homes from flats to six-bedroom houses. Sales at its Spanish business total under 3% of overall revenues. 

For investors, customer affordability is likely to remain an industry issue given increased borrowing costs, while costs for businesses generally have risen. The planning system remains tough to navigate, while stretched UK government finances are likely limiting its ability to assist the sector with moves such as stamp duty holidays.

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On the upside, build cost inflation headwinds are easing as demand has reduced and global supply chain issues following the pandemic have largely been resolved. A potential change of UK government could also see assistance for the sector reconsidered. A strong focus by management on costs persists, while the dividend payment, unlike some rivals, has remained progressive.  

For now, and while some caution remains sensible, a forecast dividend yield of around 8% is likely to see at least existing income orientated investors sitting tight. Growth focused investors might wait for further signs that the economic cycle is about to turn.

Positives: 

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

Negatives:

• Uncertain economic outlook
• Pressured house prices

The average rating of stock market analysts:

Buy