Taylor Wimpey building its hopes courtesy of high demand in second half

As Taylor Wimpey updates the market Graham Spooner, investment research analyst at The Share Centre, explains what it means for investors:

“In a trading update released to the market this morning, housebuilder Taylor Wimpey highlighted a strong performance during the second half, as demand for new housing remained high. Sales for the period were also encouraging, averaging at 0.81 per outlet per week, compared to 0.75 in the year previous. Investors should appreciate however, that its order book was slightly lower year-on-year whilst cancellation rates ‘remain low’.

“The group nodded to the fact that it is making good progress against its operational targets in what it described as ‘favourable’ market conditions. Indeed, the FTSE 100 company reported that the all-important London market was stable, which is reassuring given that others in the sector have reported a slight slowing in this area. Despite its confidence however, the group highlighted today that possible risks remain from increased political and economic uncertainties.

“Nevertheless, the group remain on track to meet full year expectations and it believes it is well placed to deliver further growth next year. Investors should also appreciate that Taylor Wimpey confirmed a total dividend for 2018 of around £500m and reiterated its intention to make further material capital returns in 2019 and beyond.

“With a strong recovery in the share price since Brexit combined with cost pressures building up, it will be harder for housebuilders’ share prices to repeat the success of the last several years. We therefore remain cautious on the sector and continue to recommend Taylor Wimpey as a ‘hold’ for investors seeking capital growth and willing to accept a medium to higher level of risk.

“The share price, which is hovering close to a 10 year high, is up 1% in mid-morning trading.”