Housebuilder Taylor Wimpey (TW.) fell 4.5% to 145p as the market responded to the dilution implied by a £522 million placing announced after the close yesterday.
This cash is being raised to support a land acquisition strategy aimed at taking advantage of opportunities created by the coronavirus pandemic and the impact this has had on competition for land and therefore on prices.
The issue of new shares, which included an allocation to retail investors on the Primarybid platform, will be put to work on an identified pipeline which includes 13 sites where terms have been agreed in principle alongside another 50 sites under consideration.
The company also announced a return in sales demand since the reopening of the housing market in England with 0.62 net private sales per outlet per week in the three weeks to 14 June, and said it planned to resume dividends in 2021.
‘FORTUNE FAVOURS THE BRAVE’
AJ Bell investment director Russ Mould says: ‘Fortune favours the brave and in time Taylor Wimpey’s plan to raise £500 million for a land buying spree may look an inspired call.
“Part of the reason housebuilders have been so profitable in recent years, alongside the Help to Buy scheme, strong supply/demand dynamics and the availability of cheap mortgages, is they acquired land cheaply in the wake of the financial crisis.
‘With at least a couple of years between buying the land and completing a build, Taylor Wimpey has time for the housing market to recover. Confidence in an eventual recovery may be bolstered by the solid trading seen since the English housing market emerged from hibernation.’
Liberum analyst Charlie Campbell says: ‘Management believes that a reduced number of buyers in the land market is creating opportunities to lock in future returns in excess of its medium term target (21-22% operating margin).
‘This is promising for future returns, but sites purchased now should only start delivering completions from 2022 and beyond, therefore we need to see evidence of this before moving our forecasts.’
