Shares in Taylor Wimpey (TW.) hit their lowest level in over a decade after the firm’s latest trading update. The stock dropped 5% to 79p, taking year-to-date losses to 26% and marking its lowest level since 2013.
Margin squeeze
In a statement ahead of its AGM, the company revealed its order book at 26 April was down on FY25. It also warned selling prices were falling while input costs were rising.
Overall pricing in the order book is 1% lower than last year, with prices most impacted in Southern England. This where affordability is most stretched, and where the firm has decided to phase out its Greater London appartment schemes.
Meanwhile, as a result of rising energy prices, build cost inflation will be low to mid single digits this year. The firm said cost pressures and surharges were already starting to come through from its supply chain.
The company is therefore driving sales where it can but tightly controlling land spend and work-in-progress spend. On the plus side, momentum on the planning side is good and it has made progress getting plots through the system.
Just for a moment there seemed to be a ray of light in the housebuilding sector, but it was quickly extinguished. Fragile consumer confidence and stretched affordability is now feeding through into pricing, which had been fairly steady.
Taylor Wimpey had already warned earnings would decline this year as the housing recovery struggled. Add to the mix higher build cost inflation as energy and material prices rise and the picture for this year looks gloomier still.
There is a danger Taylor Wimpey and other developers have to lower their guidance again, so this is not the time to buy. Investors who want exposure to the construction sector should look at infrastucture instead, as we’ve said before.
Read the press release here:
https://www.taylorwimpey.co.uk/corporate/investors
