13 January 2023
If you are covering Taylor Wimpey’s financial results, please see the following comment from Oli Creasey, equity research analyst at Quilter Cheviot:
"Taylor Wimpey released a FY trading statement this morning, which is similar in tone to releases from other housebuilders (Persimmon, Barratt Developments) who have also made announcements this week.
"2022 was a year of two halves for the housebuilder, with relatively high volumes of houses sold, and low cancellation rates. That reversed course in H2, although no differently to the experiences of the other builders, with Taylor Wimpey’s sales rate of 0.68x (per outlet per week) almost exactly matching Persimmon’s 0.69x. Although not explicitly stated, it appears that TW’s sales rate in the final weeks of 2022 were somewhat higher than peers.
"While the performance in the second half is lacklustre, it was also to be expected, and if anything has been better than those expectations. What is notable is that despite the low volumes, profitability is yet to take a hit – management have guided to 2022 operating profit in line with consensus, which suggests around £920m for the FY, of which almost £500m has come in H2. The company also expects the reported operating margin to be up year-on-year: we would expect this figure to be above 20% when it is reported in early March. The firm has accordingly increased its year end cash position to £864m – notably this is just above Persimmon’s equivalent figure, who have long been considered the industry’s best capitalised.
"Taylor Wimpey is understandably guiding to lower completion volumes in 2023. The company has accordingly identified c. £20m of annual cost savings – worth approximately 0.4% of operating margin – which could be achieved for a relatively modest cost. Management note that land values have not yet fallen to reflect the changing market, but with a landbank of 83k plots (equivalent to over 5 years of volume), the company is able to operate on a “highly selective” basis."
