Join our community of smart investors

Taylor Wimpey raises £522m to buy cut-price land

The housebuilder is taking advantage of a substantial reduction in competition for land
June 18, 2020

Taylor Wimpey (TW.) has raised £522m via a share placing to take advantage of cheaper land buying opportunities, as it increases the proportion of less risky smaller sites within its portfolio.

IC TIP: Hold at 140p

The new shares will be priced at 145p, a 4.5 per cent discount to last night’s closing price, with the money raised equivalent to 11 per cent of the group’s market value. Management said that a significant reduction in potential land purchasers had resulted in a greater number of deals at lower prices. 

During recent weeks, the group has agreed terms and approved the acquisition of 12 sites at an operating margin above its medium-term target of around 21-22 per cent and an average return on capital employed of  around 34 per cent. It has also agreed terms on a further 13 sites and has a further pipeline of around 60 sites under discussion. Those include smaller sites that are less risky than the more capital-intensive, larger sites, which are more prevalent within the group's portfolio. Land acquired over the next 12 months will deliver completions from 2022, when the group expects the housing market to have recovered.  

During the three weeks since construction and sales have reopened, the net private sales per outlet has improved from lockdown levels to 0.62 a week but completions for the 24 weeks to 14 June were almost half that of the same time the prior year. Management expects the lockdown to result in a “meaningful reduction” in full-year completion volumes and while an improvement is expected in 2021, there is unlikely to be a rebound to pre-Covid 19 levels.