- Taylor Wimpey doesn't follow Persimmon in warning on dividend
- Sales rates down and cancellations up
- Sticks to profit guidance for 2022
Unlike its peer Persimmon (PSN) which warned on the dividend yesterday, Taylor Wimpey (TW.) made no mention of a cut to the payout in its latest trading update.
Where there were similarities in both statements was in the evidence of a cooling housing market as rising mortgage rates and cost-of-living pressures have an impact.
The market has been pricing in a deterioriating situation for the housebuilders for some time and, while it is significantly lower year-to-date, Taylor Wimpey was down just 0.2% to 95.8p this morning.
The company noted it had achieved a net private sales rate of 0.74 homes per outlet per week for the year-to-date compared with 0.95 for the same period a year ago. Since the end of June that has dropped to just 0.54.
Cancellation rates are also higher for the same period, up from 14% a year ago to 24% which undermines visibility on earnings.
STRONG BALANCE SHEET
The company noted build cost inflation of between 9% and 10% and as house prices moderate or even fall, Taylor Wimpey’s profitability will be more exposed to the rising cost of materials and labour.
However, the company did guide for year-end net cash of £800 million, which would represent an increase of more than £150 million on the balance at the 30 June and kept guidance for 2022 profit in place. The consensus estimate is around £922 million.
Quilter Cheviot research analyst Oli Creasey commented: ‘Despite slowing sales, Taylor Wimpey has also been able to increase company guidance for the cash balance at year end by £200 million, up to £800 million in total, partly as a result of disciplined cost control and slower land purchases.
‘We can’t say for certain at this point, but such a healthy balance is likely to support at least existing dividend payments, with management offering no suggestion that a dividend cut would be necessary - which was the case for Persimmon yesterday.’
