13th Jan 2023 19:33
(Alliance News) - Taylor Wimpey echoed the caution of its housebuilding peers on Friday, after its sales remained "significantly" below levels seen before the third quarter of 2022, when mortgage rates started to rise.
"Given what Persimmon [PLC] and Barratt [Developments PLC] had already said about the state of the housing market this week there wasn't much chance of Taylor Wimpey offering up a surprise," said Russ Mould at AJ Bell.
"It's not difficult to draw a conclusion on the cause of the downturn in the property market – all three of the big housebuilders have drawn a dividing line between the period before the mini-budget and the weeks after when the availability of inexpensive mortgages dried up overnight."
The Buckinghamshire, England-based firm explained that, despite strengthening its outlet position during 2022, ongoing market uncertainty means that sales remain significantly below levels seen prior to the rise in mortgage rates in the third quarter of 2022.
Further, total group completions slipped to 14,154 in 2022, from 14,302 in 2021 and its net private reservation rate for 2022 slowed 25% to 0.68 homes per outlet per week from 0.91 in 2021.
Hargreaves Lansdown's Aarin Chiekrie said that things would "get worse before they get better" for Taylor Wimpey, saying that the group is likely to see further declines in reservation rates as ongoing market uncertainty takes its toll.
Nonetheless, Taylor Wimpey said annual profit was in line with expectations and said it saw its margin improved during the year.
Taylor Wimpey expects 2022 operating profit, including joint ventures and excluding exceptional items, in line with consensus of GBP921 million. Operating profit a year earlier amounted to GBP828.6 million.
Richard Hunter at interactive investor pointed to some positive for the firm, meanwhile.
"The group's decision to scale back on land purchases by becoming much more selective resulted in a year end net cash position of GBP864 million, as compared to the GBP800 million they had previously expected, without affecting its substantial land bank which can be kept in reserve. This will not only give Taylor Wimpey some flexibility in tackling the more pressing issues ahead, but it should also enable the continuation of shareholder returns, although perhaps not quite at the present level."
The company's short term landbank as at December 31 stood at 83,000 plots, down from 85,000 a year prior.
For Chiekrie at Hargreaves Lansdown, Taylor Wimpey finishing the year with an "even bigger" cash pile than the year prior, coupled with a strong balance sheet, would allow the firm to ride out "near-term turbulence."
"But only time will tell whether it'll be enough to sustain the group if tough times persist," he added.
Shares in Taylor Wimpey finished finished 1.7% higher at 114.60 pence on Friday in London. Over the past 12-months, the stock was down just under 26%.
ii's Hunter noted the drop is not as severe as some of Taylor Wimpey's peers, adding that a more recent hike of 30% over the last three months could signal a "changing fortune" for the housebuilder, "even if the ride will remain volatile."
"On balance," he said, "and with eyes looking towards the medium to longer term future for the housebuilders, the market consensus remains positive for Taylor Wimpey, and continues to come in at a buy."
By Heather Rydings, Alliance News senior economics reporter
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