Interactive Investor

ii view: Taylor Wimpey share price recovery on track as reassures on profit

23rd January 2023 15:24

by Keith Bowman from interactive investor

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Shares for this FTSE 100 housebuilder have fallen by more than a quarter over the last year. We assess prospects. 

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Full-year trading update to 31 December

  • Net private reservation rate of 0.68 homes per outlet per week, down from 0.91 in 2021
  • UK average selling prices on private completions up 6% from 2021 to £352,000
  • Expects full-year profit to prove in line with City forecasts

Outlook:

  • Expects overall volumes to reduce in 2023

Chief executive Jennie Daly said:

"Taylor Wimpey is a strong and agile business benefitting from a high quality and well located landbank, a strong balance sheet and unwavering focus on operational execution as we continue to manage the business with discipline to deliver value for all our stakeholders. Despite near term uncertainty we remain confident that the medium to long term fundamentals of our business remain highly attractive."

ii round-up:

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

It now operates across 23 UK regional divisions as well as a small Spanish housebuilding business.  

For a round-up of this latest trading update announced on 13 January, please click here.

ii view:

Taylor Wimpey sold its construction business back in 2009 and its North American business in 2011. Today it is the fourth-largest UK listed housebuilder by stock market value at just over £4 billion, behind Persimmon (LSE:PSN), Barratt Developments (LSE:BDEV) and Berkeley Group Holdings (The) (LSE:BKG). Building flats to six-bedroom houses, in 2021 it completed 14,087 new homes. 

For investors, a backdrop of increased and rising interest rates offers caution. Consumer spending is also being squeezed by a cost-of-living crisis including elevated energy prices, costs across the housebuilding sector have been rising, while competition for land remains high. Slow planning applications also warrant consideration, as do stretched UK government finances limiting room for sector assistance such as stamp duty holidays. 

On the upside, UK inflation has shown signs of possibly peaking, potentially limiting the need for further aggressive interest rate rises. Higher selling prices have helped counter elevated build costs, more selective land buying has aided the group’s cash position, while an increased focus on cost savings has been made. 

For now, and with the support of an historic and estimated future dividend yield at over 7%, income orientated investors at least are likely to stay faithful to this cyclical stock.  

Positives: 

  • Prices rises offsetting higher costs
  • Attractive dividend yield (not guaranteed)

Negatives:

  • Tough consumer outlook
  • Rising interest rates

The average rating of stock market analysts:

Buy

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

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