Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Can Taylor Wimpey's Share Price Rebuild Continue?

Published 21/04/2021, 07:23
Updated 03/08/2021, 16:15

Housebuilding stocks experienced large share price falls in the wake of the initial lockdown of the UK economy over a year ago. Taylor Wimpey's (LON:TW) share price, for example reached a high of 232.40p in February 2020, but less than six week later in early April, the shares had sunk to 101.50p, a fall of 56%.

Taylor Wimpey share price rebuilds

Taylor Wimpey’s share price gradually recovered from the initial lockdown but plunged again – and even lower this time – to just 98p on 24 September, as it became clear that UK coronavirus rates were on the rise and some restrictions were reintroduced. The FTSE 100 constituent's shares have slowly recovered again since then, reaching a 52-week high of 193p last week on 16 April, but are still below their pre-pandemic lows.

The sector has managed to shake off the worst of the past 12 months, as was shown in Taylor Wimpey’s full-year numbers released in March, however costs have increased significantly in order to safeguard the workforce. Costs have also been increased in the supply chain, with prices of some materials rising as a result of port delays. This has led to operating margins falling quite sharply, from 19.6% to 10.8% – a decline of 8.8%.

Those escalating costs and the squeeze on margins saw full-year revenue decline by 35% to £2.79bn, sending profit lower by 68% to £217m. The fall in completions to 9,799 was largely as a result of the first lockdown, which delayed the sales process. The company also set aside £125m in respect of funding to support fire safety improvement works for leaseholders in high-rise buildings, to ensure they meet fire safety regulations.

Outlook brightens

On the plus side, management took the decision to pay a final dividend of 4.14p per share. And with the stamp duty holiday extended further in March’s UK Budget, the demand outlook has continued to look solid, while average selling prices have increased to £288,000 from £269,000. In March, the company said that the order book was just shy of £2.8bn, comprising just over 11,000 homes, with over 50% sold.

There’s certainly been a boom in construction activity, after the IHS Markit purchasing managers’ index (PMI) for the construction sector reach 61.7 in March, up from 53.3 in February, signalling strong growth. IHS Markit economic director, Tim Moore, said “total activity expanded to the greatest extent for six-and-a-half-years as residential spending remained robust, commercial projects restarted and infrastructure contact awards moved ahead.”

Expectations are for Taylor Wimpey’s 2021 volumes to come in at around 85% to 90% compared with 2019, with a view to getting operating margins back up to around 21%-22% in the next two to three years. This year’s target is for a return to between 18.5% and 19%, which seems a big ask given margins are currently only at 10.8%

How will Taylor Wimpey’s share price react when the housebuilder’s Q1 results are released at 7am on Thursday 22 April?

"DISCLAIMER: CMC Markets is an execution only provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed.

No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. "

Original Post

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.