ii view: Taylor Wimpey struggles to build sustainable recovery

Second-half trading update (30 June to 9 November)

• Net private sales rate per outlet per week of 0.63, down from 0.71 in the same period last year 
• Order book value of £2.12 billion versus a previous £2.21 billion

Guidance:

• Continues to expect full-year UK home completions of between 10,400 and 10,800
• Continues to expect full-year operating profit of £424 million versus £416 million in 2024

Chief executive Jennie Daly said:

"We have delivered a resilient performance thanks to the hard work of our teams on the ground. 

“Taylor Wimpey is a strong and agile business, and we remain well positioned to capitalise on the improving planning environment, generating value from our high-quality, well-located landbank, while advancing new opportunities in our pipeline."

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 ii round-up:

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

Today it operates across 22 UK regional divisions as well as a small Spanish housebuilding business.  

For a round-up of this latest trading update announced on 12 November, please click here.

ii view:

Tracing its history back to 1880, Taylor Wimpey today employs over 4,000 people. Headquartered in High Wycombe, Buckinghamshire, the company builds everything from flats to six-bedroom houses. Just over a fifth of its 10,593 new home completions in 2024 were affordable housing. Sales at its small Spanish business totalled just under 6% of overall revenues in 2024. Competitors include Barratt Redrow (LSE:BTRW), Persimmon (LSE:PSN), Berkeley Group Holdings (The) (LSE:BKG) and Bellway (LSE:BWY). 

For investors, while in line with its policy linked to net asset value (NAV), a 3% cut to the previously announced interim dividend payment is not to be forgotten. Forecast dividend cover now stands at less than one, meaning the dividend might have to be funded by borrowing. Both customer affordability constraints and uncertainty ahead of the UK Budget were blamed for a declining sales rate, while a previous increase in fire safety cladding provisions and charge for historical contractor remediation works demonstrates the risk of other possible charges in future.

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On the upside, hopes of further Bank of England interest rate cuts persist. A government emphasis on easier planning regulations remains. Previous consolidation across the sector with Barratt and Redrow having merged should not be forgotten, while a net asset value-to-share price of under one times and below a three-year average may point to emerging value. 

In all, reduced sales, at least before the UK Budget, potentially provide increased profit headwinds. That said, likely interest rates cuts, a forecast dividend yield of over 9% and consensus analyst fair value estimate above 125p per share are likely to catch the attention of investors. 

Positives: 

• Improving customer service scores
• Attractive dividend yield (not guaranteed)

Negatives:

• Uncertain economic outlook
• Low single digit cost build inflation

The average rating of stock market analysts:

Buy