09 November 2023
If you are covering Taylor Wimpey's Q3 trading update, please see comment below from Oli Creasey, property equity analyst at Quilter Cheviot:
“Taylor Wimpey released a Q3 trading statement this morning, which paints a picture of resilience in a challenging market. The company has reaffirmed guidance for full year volumes to be between 10,000-10,500 homes, but has been able to increase operating profit expectations, guiding analysts towards the top end of the previously announced range of £440-470m.
“The guidance suggests that the company has been able to maintain profit margins at the same level as in H1 2022 (operating profit margin was 1.4%), which is some way below the 20.9% reported in 2022, but still healthy, particularly in the wider context of higher interest rates and their impact on the UK property market. Today’s statement contained no direct information on house prices, but management has pointed to ‘optimised prices’ as a reason for the improved guidance. We estimate that this means similar prices to those achieved in H1 2023, which had actually increased +6.7% YoY, albeit partly driven by a change in mix.
“Management also noted that cost discipline was a key factor in maintaining profitability, and note that the company has not been buying replacement land plots at the same rate as sales – in the past 12 months, the size of TW’s landbank has shrunk by c.9,000 plots (-4k in the short term landbank, -5k in strategic pipeline). However, with 82k plots still in the short term landbank alone (equivalent to eight years of volume at 2023 rates, or six years at 2022 rates), the company has less need to buy land compared to some peers.
“Management has noted that the current market backdrop remains uncertain, but are confident in the medium to long term fundamentals of the UK residential property market.”
