Taylor Wimpey building on strong post-pandemic demand

Full year revenue fell 35.7% to £2.8bn at housebuilder Taylor Wimpey, reflecting reduced completions because of the pandemic.

As a result, underlying operating profit declined 64.7% to £303.3m. Results were in-line with market expectations.

Volumes are expected to recover to 85-90% of 2019 levels in the current financial year. Combined with slightly lower build cost inflation, operating margins are predicted to increase to 18.5% – 19.0%.

The group’s resumed its ordinary dividend policy to pay out around 7.5% of net assets. A final dividend of 4.14p was announced.

The shares rose 2% in early trading.

Laura Hoy, Equity Analyst at Hargreaves Lansdown said:“After a year punctuated with pandemic-related uncertainty, Taylor Wimpey is seeing evidence that demand in the UK housing market should remain firm in the near term. The group’s order book has seen a healthy mix of sales extending beyond the end of the Stamp Duty holiday and well into the next phase of the Help to Buy scheme. That tells us that low interest rates and widely available mortgage lending is keeping the UK housing market buoyant.

“Moving forward, the strategy hinges on improving margins—the group sunk £12.1m into the business in the name of generating long-term efficiency last year, and that’s expected to deliver cost savings worth £16m from 2021. Ultimately, management is working toward operating profit margins between 21% and 22%. While that sounds manageable at this point, a lot depends on trading returning to normal in the expected timescale – news of a potential reintroduction of widespread 95% mortgages in this week’s budget would help this along.

“The pandemic may have helped move Taylor Wimpey closer to that goal as it wiped out some of the competition in the land-buying market. The group jumped on this opportunity to buy cheaper land with a £510m equity raise in June, which funded the purchase of roughly 22,600 plots.”