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Taylor Wimpey rises as sector emerges from lockdown

housebuilding

Housebuilding remains in lockdown in Scotland

Taylor Wimpey said it is preparing for a return to work in Scotland as it order book across the UK continues to increase.

The stock advanced 5.6% in early trade to 167.6p after it reported a high level of requests to view its houses in recent weeks.

Cancellation rates have remained at a low level during the crisis and lower than the same period last year.

In the nine weeks since the start of lockdown there were 306 cancellations, which represents 5% of the private order book over that time (2019 equivalent period: 386 cancellations and 6% of the private order book).

The company, which has just secured permission to build 250 homes at West Craigs, Edinburgh, said forward indicators have improved since reopening sales centres in England and it has experienced a strong level of interest with a threefold increase in appointment bookings made in the week to 31 May and a 32% increase in website traffic compared to the same period last year.

No staff remain on furlough and PWC has been appointed auditor. Deloitte did not participate in the tender due to the rules regarding the mandatory rotation of auditors and will remain the group’s external auditor for the financial year ending 31 December 2020.

Ian Forrest, an investment research analyst at The Share Centre, said: “The fact the company is rapidly returning to normal in terms of its operations is good news, and perhaps sooner than many expected.

“The fact that there was no mention of when dividends might restart today is not surprising given that it is still early days in the recovery process, but investors will be keeping a keen eye on the interim results, due on 29 July.”

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Russ Mould, investment director at AJ Bell, said: “The latest update from housebuilder Taylor Wimpey repeats the surprisingly upbeat tone from the sector through lockdown.

“Housing market in hibernation? ‘No problem,’ says Taylor Wimpey. Order books are still going up, sales are still going through, cancellations are low, and construction has resumed with social distancing measures in place.

“That confident outlook is building now that the property sector is stirring back into life. Taylor Wimpey’s bookings are up markedly as sales centres reopen.

“In another sign of a return to some form of normality, the company hopes to have meaningful construction capacity in place by the end of this month.

It is worth noting that the full economic impact of the coronavirus crisis and the lockdown is yet to feed through

– Russ Mould, AJ Bell

“A notable feature of this latest announcement is its appetite to acquire land. One of the reasons why the industry has been so profitable in recent years, alongside the Help to Buy scheme and the availability of cheap mortgages, was it was building on land picked up cheaply in the wake of the financial crisis.

“By moving now, when demand is again low, Taylor Wimpey will hope for a similar boost to profitability down the line.

Despite the positive noises, Mr Mould warns that the effects of the virus may yet feed through to the housing sector.

“Amid all these positive bits of news and the impressively resilient customer demand, it is worth noting that the full economic impact of the coronavirus crisis and the lockdown is yet to feed through. This is a cloud hovering over Taylor Wimpey’s otherwise sunny horizon.”



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