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Taylor Wimpey bounce-back prompts upgrades

The housebuilder reported a record order book and sales price increases this year
Taylor Wimpey bounce-back prompts upgrades
  • Completion volumes are expected to be almost 90 per cent of 2019’s level
  • The dividend was reinstated, with a final payment of 4.14p a share

Taylor Wimpey (TW.) has guided towards a more rapid recovery than anticipated by analysts this year, ahead of further expected government stimulus for the housing market.  

The housebuilder said completion volumes this year would be between 85 and 90 per cent of 2019 levels, which would boost operating margins to 18.5-19 per cent, towards a medium-term target of 21-22 per cent. Analysts at Peel Hunt expect to increase the £694m in pre-tax profits currently forecast for 2021 by between 8 and 10 per cent. 

However, the group will also book a £125m provision for fire safety improvements across apartments built over the last 20 years, including those below 18 metres. Currently the government has only made available funding for buildings over 18 metres, following the Grenfell Tower tragedy.   

The FTSE 100 constituent reported a record order book of £2.8bn and said it had grown sales prices across developments during the first two months of the year. Nationwide also today revealed a surprise bounce in house price inflation of 6.9 per cent in February, despite the scheduled end to the stamp duty break. The Times last week reported that a three month extension to the tax holiday would be unveiled in the upcoming Budget. 

The group also put to use the cash raised in June to take advantage of cheaper land, agreeing gross purchases of £1.3bn. Despite the step-up in land purchasing activity, it expects to end 2021 with £500m in net cash. The consensus dividend forecast was lifted to 7.93p a share for this year following the group’s return to the dividend list. The shares trade at 1.5 times forecast NAV at the end of December - there is better value elsewhere in the sector. 

Last IC view: Hold, 123p, 29 Jul 2020

TAYLOR WIMPEY (TW.)   
ORD PRICE:171pMARKET VALUE:£ 6.09bn
TOUCH:170.4-171p12-MONTH HIGH:215pLOW: 98p
DIVIDEND YIELD:2.4%PE RATIO:27
NET ASSET VALUE:113pNET CASH:£691m
Year to 31 DecTurnover (£bn)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20163.6873318.12.82
20173.9768217.04.74
20184.0881120.16.24
20194.3483620.60.00
20202.792646.34.14
% change-36-68-69-
Ex-div:01 Apr   
Payment:14 May