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The Taylor Wimpey (LSE:TW.) share price was down by as much as 7% on Wednesday (30 July) morning after the company released its results for the first half of the year.
As the share price actions suggests, these results were disappointing. Taylor Wimpey swung to a pre-tax loss of £92m, down from a pre-tax profit of nearly £100m last year.
This was mainly due to one-off costs from fire cladding provisions, a Competition and Markets Authority (CMA) investigation settlement, and issues with historical contractors.
The company announced an interim dividend of 4.67p per share, slightly lower than 4.8p last year. That still leaves the dividend yield elevated. And based on last year’s payments, the trailing yield stands around 9.3%.
Guidance maintained
Despite this, Taylor Wimpey said first-half trading was strong. Group completions increased by 11% to 5,264 homes. It maintained its full-year UK home completion guidance between 10,400 and 10,800 homes.
Group operating profit for 2025 is expected to be about £424m. This figure includes a one-time £20m charge but remains unchanged on an underlying basis.
Build cost inflation remains a challenge. Average selling prices fell in the first half, and net private sales rates declined recently.
While the company’s profits were hit by one-off costs, there’s some hope about improving margins in the second half.
The company pointed towards improving volumes in the next six months and said it was well positioned to improve operating margins if pricing remained stable.
Are the shares cheap?
There are plenty of reasons to like Taylor Wimpey. The business is expected to have a net cash position circa £350m at the end of the year. That’s really rather strong for a company with a market-cap that’s just 10 times that amount.
It’s also trading around 13 times forward earnings, which isn’t expensive but isn’t cheap. Well, that was the forecast. Analysts don’t update their outlooks immediately, so it may take some time before the consensus prediction reflects the first-half loss.
However, analysts point towards some medium-term growth which is certainly enticing. This price-to-earnings (P/E) figure’s expected to fall to around 10.9 times in 2026 and 9.1 times in 2027. This is based on the current share price and earnings forecasts.
I’d also add that while the dividend yield looks spectacular, it may be unsustainable in the long run. Dividend payments will exceed earnings this financial year, according to the forecasts, and the payout ratio will remain above 80% in 2027.
And, yes, the net cash position makes the dividend more sustainable. It also has a sizeable land bank which it can liquidate. But I do find that position to be a little precarious.
What’s more, with UK homes now worth £10trn, I wouldn’t rule out more taxes on the property market as the government attempts to fill its black holes. That could stifle activity in the market.
Watching from the sidelines
There could be an opportunity here. However, I wouldn’t be surprised to see the stock trade at depressed levels for some time. I’ll keep this on my watchlist until there are more signs of improvement. It’s certainly worth considering for investors, but risks persist.
