Taylor Wimpey strikes cautious tone as cost pressures increase

Taylor Wimpey's (TW.) shares slid 3 per cent despite it reiterating its guidance for 2024, as the housebuilder struck a cautious tone for 2025. 

The housebuilder warned that it anticipated increased build cost pressure as a result of the economic backdrop, adding that suppliers will “seek to factor in the impacts of the recent UK Budget”.

While the underlying order book is up 12.6 per cent at £2bn, stretched affordability in the south of England contributed to the underlying pricing in the order book being around 0.5 per cent lower year on year. Taylor Wimpey noted that it had captured some price growth in the north. 

Completions excluding joint ventures fell 3.7 per cent to 9,972, of which 22 per cent were classed as affordable. 

Taylor Wimpey’s strong net cash position has set it apart from its peers. It ended the year with £565mn of net cash, a 17 per cent reduction compared with the previous year and slightly ahead of expectations due to the timing of land purchases. 

Anthony Codling, analyst at RBC, said that the company was sounding more cautious for 2025. “On the plus side, the order book is up and customer enquiry levels are encouraging, and the group is set up for growth, but uncertainty around mortgage rates and build cost inflation may temper homebuyer enthusiasm and margins,” he said. 

Taylor Wimpey is trading at 0.91 times its 2025 estimated book value, according to RBC. It also carries a dividend yield of 6.1 per cent. 

Last IC view: Sell, 138p, 14 Nov 2024