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Taylor Wimpey - CEO to Step Down

Laura Hoy | 8 December 2021 | A A A
Taylor Wimpey - CEO to Step Down

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Taylor Wimpey plc Ordinary 1p Shares

Sell: 123.25 | Buy: 123.35 | Change -4.70 (-3.68%)
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CEO Pete Redfern has announced plans to step down. He will remain in the role until a replacement has been found and the handover process is complete. No one has been named for the position as yet.

Redfern said, ''The business is in excellent health and is well positioned for strong future growth. Accordingly, I am confident that now is the right time for fresh leadership as Taylor Wimpey starts the next chapter.''

The shares were broadly flat following the announcement.

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Our view

Losing a CEO is never a good thing, but Pete Redfern's departure is coming at an opportune time. After a rollercoaster 18 months, Taylor Wimpey is trading near pre-pandemic levels, opening the door for a smooth transition to new leadership.

Redfern's bold leadership throughout the pandemic means the new CEO will inherit a business primed to capitalise on the red-hot housing market. An aggressive buying spree during the second half of 2020 set Taylor Wimpey apart from most of its peers who were tightening the purse strings. The group saw an opportunity to snap up swathes of well-priced land and raised extra capital to do so. It's a move that could yield strong returns well into the future - if the housing market holds up.

That is of course a big ''if''. So far, Taylor Wimpey's seen no signs of demand for new houses slowing and demand for homes under the new Help to Buy scheme has been ''strong.'' Rising house prices are more than offsetting the cost increases from supply chain disruption - although volumes could come under pressure if prices keep rising. Bad news for any housebuilder, especially one with large sums of capital tied up in land and cash flow could quickly come under fire.

A strain on cash would put Taylor Wimpey's dividend on the chopping block - as we saw last year.

For now, the group has more than enough cash to cover its dividend payments and the housing market appears to be on stable footing. Brits are ideologically committed to home ownership and the country still faces a major housing shortage. Interest rates are incredibly low by historical standards, so mortgages remain cheap and the reintroduction of widespread 95% mortgages could go a long way in boosting demand.

All that feeds into a strong order book for future sales, encouraging given the end of the Stamp Duty holiday and the reworked Help to Buy scheme.

Taylor Wimpey's balance sheet is in good shape and the group can deploy its cash reserves to develop its land acquisitions this year. Management is committed to achieving margins between 21% and 22%, which looks manageable to us, if trading normalises as expected.

Taylor Wimpey is in a strong position and boasts a valuation that isn't too demanding. We see the risks of an economic meltdown as relatively mild at this stage, though they can't be discounted completely. That makes the group's bold attitude throughout the pandemic look like a smart move that could drive long-term growth for some time to come, although of course there are no guarantees.

Taylor Wimpey key facts

  • Price/Earnings ratio (next 12 months): 9.0
  • 10-year Average Price/Earnings ratio: 10.4
  • Prospective dividend yield (next 12 months): 7.4%

All ratios are sourced from Refinitiv. 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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Third quarter trading statement (11/11/21)

Taylor Wimpey remains on track to deliver full-year margin guidance, with strong demand and good mortgage availability supporting prices. Higher prices are fully offsetting build cost inflation.

Outlet openings continue in line with expectations, with 64 opened year to date. The group's operated with an average of 224 outlets so far this year, compared to 239 in 2020 and 252 in 2019.

Sales rate per outlet per week came in at 0.95, compared to 0.73 in 2020 and 0.97 in 2019. Cancelation rates of 14% are back in line with 2019 levels, following an increase in 2020 to 21%.

As of 8 November 2021, the order book, excluding joint ventures, stood at £2.8bn. Up marginally from 2019 but down on the £3bn this time last year.

As of the end of October, the groups short term landbank stood at 84,000 plots with a strategic pipeline of 148,000 potential plots.

The group expects year end net cash to remain strong, with the exact level subject to the timing land purchases.

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This article is original Hargreaves Lansdown content, published by Hargreaves Lansdown. Unless otherwise stated estimates, including prospective yields, are a consensus of analyst forecasts provided by Refinitiv. These estimates are not a reliable indicator of future performance. Yields are variable and not guaranteed. Investments rise and fall in value so investors could make a loss.

This article is not advice or a recommendation to buy, sell or hold any investment. No view is given on the present or future value or price of any investment, and investors should form their own view on any proposed investment. This article has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is considered a marketing communication. Non-independent research is not subject to FCA rules prohibiting dealing ahead of research, however HL has put controls in place (including dealing restrictions, physical and information barriers) to manage potential conflicts of interest presented by such dealing. Please see our full non-independent research for more information.

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