Taylor Wimpey shrugs off Brexit fears

Shares in Taylor Wimpey rose more than 5 per cent on Tuesday morning after the UK housebuilder upgraded its profit guidance and said it would boost its dividend payout.

The FTSE 100 construction group, one of Britain’s biggest housebuilders, said ahead of an investor day that it was confident in its business “against the backdrop of a strong, growing housing market”. It shrugged off concerns about a slowdown in sales in the run-up to the June 23 referendum on Britain’s EU membership.

The company lifted its guidance on operating profit margins to 22 per cent for the period between 2016 and 2018, and said that it would increase its total dividend payout for 2017 by 26 per cent to £450m, or 13.8p per share, subject to shareholder approval.

In 2015, the housebuilder’s operating profit margin was 20.3 per cent and its total dividend payout was 11p per share.

“The UK newbuild housing market remains very positive across most of our geographies, with a healthy and controlled lending environment providing good accessibility to mortgages at competitive rates,” the company said on Tuesday.

“Consumer demand and confidence remain high. In central London, the market continues to be stable.”

Last month, Taylor Wimpey reported its order book was up 7.5 per cent from the same time last year to 8,811 and its total value had increased by 16.6 per cent to £2.2bn.

Despite listed estate agents Countrywide, Savills and Foxtons warning of a short-term downturn in transactions as a result of referendum uncertainty, Taylor Wimpey also said last month that its trading had been unaffected by the forthcoming vote.

Pete Redfern, chief executive, said the housebuilder was “well equipped to react to any potential changes in the market that may be caused by the EU referendum”.

But Standard & Poor’s has said that a vote for Britain to leave the EU in next month’s referendum would carry the “greatest risk” for Taylor Wimpey and other construction groups with large exposure to London.

Taylor Wimpey has around 30 per cent of its current building projects in and around the capital.

Jefferies equity analyst Anthony Codling said, however, that Taylor Wimpey’s statement on Tuesday “highlighted today how fundamentally strong the demand for new homes is”.

“Even before the first referendum vote is cast, the group set out plans today to return a total of £1.3bn of dividends over the next three years,” Mr Codling said.

“Today’s announcement puts a marker in the ground that it will continue to supply a significant number of much-needed homes, irrespective of the underlying economic backdrop over the medium term and if it does the shareholders which back it will be handsomely rewarded.”

Taylor Wimpey is not the only confident construction group. One of the housebuilder’s biggest competitors, Bovis Homes, also brushed off worries of a pre-referendum slowdown last week, saying the poll had “no discernible impact” on its business.

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BDC 305 Jun 2023