3 March 2022
If you are covering Taylor Wimpey’s latest financial results, please find below a comment from Oli Creasey, property research analyst at Quilter Cheviot:
“Jennie Daly, currently Group Operations Director, will in April become the new CEO at Taylor Wimpey, and inherits a company in good, if not perfect health.
“2021 was a year of recovery for the UK housebuilder, generating a 19.3% operating margin that is in line with 2019’s performance and significantly better than the 10% achieved in 2020. Focus on selling prices and cost control will have helped, but the c.50% year-on-year increase in sale volumes and revenues will have made it much easier to cover the company’s fixed costs and recover the margin back to pre-pandemic levels.
“There is still work to do. The company has medium term goals to improve the operating margin further to 21-22%, while keeping cost inflation, currently c.6%, under control. Management expect house price growth to offset inflation and believe the company can make progress towards the target margin without the assistance of house price inflation. That is certainly possible, with the land investments made during the pandemic at attractive prices making a good base for profitable development.
“The company has provided further information on the proposed share buyback, intending to purchase £150m of shares in 2022. If achieved, that is equivalent to c. 4p per share, or nearly 3% based on yesterday’s close price. Combined with the ordinary dividends, this equates to a roughly 8.7% return to shareholders assuming it is distributed fully and evenly. However, it is not always the case that share buybacks are fully reflected in share prices and it remains to be seen precisely how the market will respond to this new programme.”
