ii view: Costs rise at Taylor Wimpey

Housebuilder Taylor Wimpey suffered rising costs but remains confident for the full year. 

Half-year results to 30 June 2019

• Completed homes up 0.7% to 6,541
• Operating profit margin to 18% from 20%
• Operating profit down 9.4% to £311.9 million
• Net cash down 25% to £392 million
• Interim dividend up 57% to 3.84p per share

Chief executive Pete Redfern said:

"We delivered a record sales rate in the first half as we saw strong customer demand for our homes in a stable market and the success of our strategy to build more homes on our larger sites coming through more quickly than anticipated. Despite wider political uncertainty, conditions for the housing market continue to be supportive with good affordability and access to finance."

ii round-up:

In 2007, George Wimpey and Taylor Woodrow merged to form Taylor Wimpey (LSE:TW.). It now operates 24 regional offices around the UK, along with a small operation in Spain. 

In 2018, it built more than 14,500 UK homes ranging from apartment buildings to five-bedroom houses. 

The housebuilder delivered mixed and marginally disappointing half-year results. 

An increase in builds completed and a reiteration of full-year guidance provided the positives, along with a hike in dividend payment further underlying the company's commitment to shareholder returns. 

Less favourably, increasing costs weighed on profitability, with the fall in earnings exceeding analyst forecasts. 

The share price fell by over 4% in mid-morning UK stock market trading. 

ii view:

A no deal Brexit and the Bank of England's estimate of a possible 30% fall in house prices top the list of investor concerns. The government's Help to Buy scheme and whether or not it is closed warrant full consideration. 

For Taylor Wimpey itself, today's results appear to leave it more to do in the second half of the year. For investors, shareholder returns across the housebuilding sector remain a core attraction. A one-year forecast dividend yield of over 10% is highly attractive in the current low interest rate environment, although dividend cover is now below the three-year average. For now, Brexit and its impact on UK consumer sentiment are likely to prove an overhang. 

Positives: 

• Full-year 2019 guidance reaffirmed
• Total order book value up 11% to £2.52 billion 
• Ongoing focus on returning surplus cash to shareholders

Negatives:

• Increased build cost pressures
• Brexit uncertainty overhangs the housing market
• Help to Buy scheme ends in 2023

The average rating of stock market analysts:

Buy