Taylor Wimpey’s weekly net private sales rate was 0.69 in the year to 21 April, up from 0.66 in the prior year. Cancellation rates improved in the period, down from 15% to 13%.
Total order book value slipped from £2.4bn to £2.1bn. Build-cost inflation over the first half of the year is likely to run at around 4%.
CEO Jennie Daly said that the group is on track to deliver its 2024 guidance. This calls for UK home completions, excluding joint ventures, to be in the 9,500 to 10,000 range. Full-year performance is expected to be weighted toward the second half.
2023’s final dividend of 4.79p per share is broadly in line with the prior year.
The shares were broadly flat following the announcement.
Our view
Taylor Wimpey’s made a decent start to 2024, with the Spring selling season progressing in line with management’s expectations. Affordability pressures are likely to remain a key issue throughout the year. But good mortgage availability and improving consumer confidence helped push sales rates higher at the start of the year.
Tough trading conditions in 2023 saw revenue and profits both fall significantly from the prior year’s level. Markets are expecting further, but much smaller, declines this year before a return to growth in 2025, when the housing market is expected to really pick back up.
A combination of real house price declines and lower mortgage rates have eased some of the affordability pressures on buyers of late. And with softer UK inflation figures coming through, markets expect rates to fall over 2024. Lower rates are a tailwind for buyers, increasing their purchasing power. A potential homebuyer with a £1500 monthly mortgage budget has over 10% more borrowing capability at 4.0% than 5.0%.
Keep in mind that Brits are ideologically committed to home ownership and the country has been in a prolonged period of housing undersupply, a trend that's unlikely to change anytime soon.
The landbank is a particular strength for Taylor Wimpey, who have a robust pipeline of potential projects. The focus now is bringing plots online, with new land spending remaining at subdued levels. That's wise, given the cost of land is yet to reflect the less favourable outlook.
But there are still challenges to navigate.
The sector's also facing ongoing labour and supply chain challenges, and planning permission disruptions are continuing to be a thorn in the group's side. The latter of these issues is unlikely to be resolved in the short term.
The balance sheet's in very good shape last we heard, arguably one of the strongest in the sector. A net cash position of £678mn at year-end should help provide a cushion for any potential bumps in the road.
The current dividend policy is linked to asset value, rather than earnings. That means investors are more likely to receive a base level of dividend even in a downturn. But remember, dividend policies can change on a dime. No dividends are guaranteed.
There’s still plenty of uncertainty ahead in 2024, with margins likely to remain under pressure throughout the year. But there are tentative signs of improved buyer activity, and with a longer-term lens, the valuation remains attractive. Given its robust financial position, Taylor Wimpey is one of our preferred names in the sector.
Environmental, social and governance (ESG) risk
Most housebuilders are relatively low risk in terms of ESG, particularly for those in Europe. However, there are some environmental risks to consider, from direct emissions to the impact of their buildings on the local ecology. The quality and safety of their buildings is also a key risk.
According to Sustainalytics, Taylor Wimpey’s management of ESG risk is strong. The group has a strong greenhouse gas reduction programme in place and reports on scope 1, 2 & 3 emissions. There are clear deadlines in place and a renewable energy programme has also been implemented. While the group uses recycled materials, there’s no disclosure of the percentage used.
Taylor Wimpey key facts
All ratios are sourced from Refinitiv, based on previous day’s closing values. Please remember yields are variable and not a reliable indicator of future income. Keep in mind key figures shouldn’t be looked at on their own – it’s important to understand the big picture.
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