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Margins and cash up at Taylor Wimpey

Profit margins are up at Taylor Wimpey, which has announced a £300m special dividend
July 29, 2015

Shares in Taylor Wimpey (TW.) spiked by 7 per cent after the Conservative victory in May, and since then the company has seen "significant improvement in consumer confidence and mortgage availability". Prior to that, and despite the uncertainty that hung over the property sector in the run-up to the general election, the FTSE 100 housebuilder witnessed "resilient sales rates and small incremental increases in house prices".

IC TIP: Buy at 182p

This strong trading environment helped Taylor Wimpey increase both the number of homes it completed in the first six months of 2015 and, crucially, the profit contribution per completion, which was up 23 per cent to £55,900. Labour and material costs continue to mount, and are expected to be 5 per cent higher for the full year, but Taylor Wimpey still managed to boost its operating profit margin by an impressive 310 basis points to 19.2 per cent.

Although the management team is "slightly behind" its ambition to convert 65 per cent of operating profit into cash flow by 2017, it found enough cash to announce a £300m special dividend - 20 per cent up on last year's special payout and equivalent to 9.22p a share. This will be paid in July 2016, subject to shareholder approval.

JPMorgan Cazenove expects full-year pre-tax profits of £601m and adjusted EPS of 14.9p, up from £447m and 11.2p for the 2014 calendar year.

TAYLOR WIMPEY (TW.)

ORD PRICE:182pMARKET VALUE:£5.9bn
TOUCH:182.2-182.3p12-MONTH HIGH:198pLOW: 100p
DIVIDEND YIELD:1.0%*PE RATIO:14
NET ASSET VALUE:74pNET CASH:£87.6m

Half-year to 28 JunTurnover (£bn)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20141.191974.70.24
20151.342375.80.49
% change+12+20+23+104

Ex-div: 20 Aug

Payment: 2 Oct

*Excludes special dividend of 7.68p a share for 2014 and 9.22p for 2015, payable July 2016