Taylor Wimpey PLC

Taylor Wimpey Plc (LON: TW) is a United Kingdom-based largest residential developers’ company, which develops a broad range of properties, with the different price range of the product. It produces both affordable and private homes. From 24 regional offices, the company is operating its businesses. The company’s operations are distinguished in four geographical segments, namely Central & South West, North, Spain, and London & South East.

On 26^th February 2020, the company will announce the full-year results for 2019.

Trading Statement (as on 14^th January 2020)
The company announced a trading update for the year ended 31st December 2019. In 2019, the total home completions, including joint ventures, increased by 5% to 15,719 as compared with the corresponding period of the last year (2018: 14,933). The company delivered 3,548 affordable homes (including joint ventures). For 2019, the net private reservation rate per outlet per week stood at 0.96 homes, an increase from the previous year (2018: 0.80). But cancellation rates stayed low. The average selling prices on private completions for 2019 surged by 1% to £305 thousand (2018: £302 thousand), with the overall average selling price increasing to £269 thousand. At the end of 2019, the total order book, excluding joint ventures, increased to £2,176 million against the same period last year. In 2019, the company traded from an average of 250 outlets and enter in the year 2020 with 240 outlets. In 2019, the build cost inflation stood at 4.5%.

In 2019, the land market stayed stable. Overall, the Spanish market stayed healthy in 2019. The company will report 2019 full-year results in line with the anticipations, providing an operating profit margin of 19.6% and a return on net operating assets of 31%. At the year ended 2019, the company has a robust net cash balance of £546 million, driven by the timing of certain land investments. This reflects after the payment of dividends of £600 million to investors in 2019. The company intends that the return to shareholders will be £610 million by way of total dividend in 2020. 

Share Price Performance

Daily Chart as at January-14-20, before the market closed (Source: Thomson Reuters)

On 14th January 2020, Taylor Wimpey PLC shares were trading at GBX 207.40 at the time of writing before the market close (at 1:44 PM GMT), up by 2.673% against the previous day closing price. Stock's 52 weeks High and Low are GBX 209.22/GBX 141.70. The company's stock beta stood at 1.07, reflecting the higher volatility as compared to the benchmark index.

Conclusion
In the full-year results for the year ended 31^st December 2019, the company’s performance will be in line with the anticipations. In spite of the uncertain economic and political backdrop in 2019, the company has maintained to experience an excellent level of demand for the houses/homes and trading in the H2 of the year was as expected. Once again, the company has provided a record sales rate and also surged home completions by 5 per cent in the current year.
The company aims at long-term sustainability of the business, increasing operating capacity and flexibility, and improving the build quality and client offering. In the current year 2020, the company will prioritise a renewed cost focus and process simplification enhancements and will also continue with these initiatives.

Based on the rationale as highlighted above, we have given a “Hold” recommendation at the closing price of GBX 202 (as on 13^th January 2020).

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