Taylor Wimpey slumps as profit margin fears overshadow ‘robust’ 2025

There were signs of improvement last year, but buyers of the shares and its houses remain on the sidelines for now. ii’s head of markets runs through this trading update.

15th January 2026 08:21

by Richard Hunter from interactive investor

Share on

Taylor Wimpey (LSE:TW.) may be well-positioned for an uptick in demand if and when it comes, but for the moment affordability concerns and worries ahead of the Autumn Budget unsurprisingly kept potential buyers on the sidelines.

Our Services: SIPP Account | Stocks & Shares ISA | See all Investment Accounts

This is a thorny environment for the housebuilders and Taylor Wimpey is no exception. Planning permissions are beginning to gather some momentum after Government reforms and affordability is improving in what should continue to be a lower interest rate environment, but demand remains weak, especially among first-time buyers.

The torrid backdrop has been echoed in housebuilder boardrooms over recent times. Higher interest rates, lower consumer confidence and general cost of living pressures have all worked against the industry. High build cost inflation, a lengthy and laborious planning permission process and pressure on operating margins given some fixed costs have provided additional headwinds.

That being said, there are a number of tailwinds which could yet revitalise the sector. More broadly, there remains a noticeable supply shortage of homes domestically, government reforms to planning should oil the wheels of being able to break ground, and the recent interest rate cut is a step in the right direction if not the ultimate goal, which should improve mortgage availability and affordability. At the same time, inflation-beating pay rises and the relaxation of lending rules has led to a good level of enquiry rates coming into the vital Spring selling season.

This statement has revealed a number of key metrics which show some marginal signs of improvement. Revenue for the year is expected to rise to £3.8 billion from a previous £3.4 billion, and operating profit to £420 million from £416.2 million in the corresponding period, which is lower than the £424 million guided in November. Operating profit margin is a source of some concern, having dropped from 12.2% to 11% and likely to weaken further over the coming year given softer pricing on bulk deals and continuing single digit build cost inflation.

Meanwhile, group completions rose from 10,593 to 11,229, of which and excluding joint ventures the figure of 10,614 homes (compared to 9,972 the previous year) was bang in the middle of the guided range of 10,400 and 10,800 completions.

A short-term landbank of 77,000 plots and a strategic pipeline of 133,000 leaves Taylor Wimpey poised with its finger on the trigger, hoping for the much awaited rebound in light of government reforms on the planning process. The forward order book remains healthy at £1.86 billion representing 6,832 homes, albeit slightly shy of the previous £2 billion, while a private average selling price of £374,000 against £356,000 in the corresponding period is a welcome development.

The group expects to end the year with net cash of £343 million, compared to £565 million. This brings the question of dividend payments into play, where the current yield of 9% is exceptional by any standards. There is little doubt that Taylor Wimpey enjoys the benefit of a strong balance sheet, but a dividend cover of less than one can be something of a red flag. It implies that dividends are being paid out of previous profit (or even by borrowing in extreme examples) which could reduce net cash, meaning that the level is therefore unsustainable over the longer term. Even so, the group’s focus on shareholder returns and cash generative ability should keep such concerns at bay for the time being.

The share price has not reaped the benefit of the rerating which has lifted the sector, and indeed this weakness culminated in the group being relegated from the FTSE 100 index in September. The shares have fallen by 5% over the last year, as compared to a gain of 13% for the wider FTSE 250, and by 28% over the last two years, with a further dip at the open underlining the investor disappointment which has blighted housebuilders over recent days.

Conversely, this makes the shares increasingly attractive on both recovery and valuation grounds, and the market consensus of Taylor Wimpey as a buy recognises this potential opportunity.

Results for the year ended 31 December 2025 will be announced on 5 March.

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.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

Get more news and expert articles direct to your inbox