Taylor Wimpey Shares (LON:TW) Drop: H1 Results Disappoint, Guidance Trimmed

Taylor Wimpey shares (LON:TW) are moving lower today, down 4.6%, and having dipped below 100p intraday to 99.40p as markets react the H1 results. A cut to dividends and guidance, along with one off charges that pushed the firm to a H1 pre-tax loss have given bears something to get behind, and brought TW within touching distance of 52wk lows.

Today's H1 2025 results, paint a mixed picture for the firm, one of a company navigating a complex housing market with strong underlying demand offset by growing affordability concerns.

While the headline figures show a dip in profitability due to exceptional charges, a closer examination reveals a resilient business focused on long-term growth.

Chief Executive Jennie Daly acknowledged the “softer market conditions” experienced in the second quarter, attributing them primarily to affordability constraints, particularly impacting first-time buyers.

Despite this headwind, Daly emphasized the positive long-term fundamentals of the UK housing market, citing a “significant unmet need” for homes. This underlying demand is crucial to understanding Taylor Wimpey's strategic positioning.

The company increased group completions by 11% to 5,264 homes, demonstrating its ability to deliver even in a challenging environment. However, this increase in volume was not enough to offset the impact of exceptional charges on the bottom line.

The most significant of these charges is a £222.2 million provision for cladding fire safety remediation, reflecting the ongoing industry-wide effort to address safety concerns in existing buildings. This provision, along with an £18.0 million charge related to the Competition and Markets Authority (CMA), pushed the company to a pre-tax loss of £92.1 million, a stark contrast to the £99.7 million profit reported in H1 2024.

While these charges are substantial, management is keen to emphasize that they are largely one-off in nature and do not reflect a fundamental deterioration in the business.

Adding to the challenges, the average selling price (ASP) on completions decreased by 1.3% to £313,000. This decline, though modest, highlights the pressure on pricing in the current market. The company expects the full-year ASP to be around £340,000, suggesting an anticipated improvement in the second half driven by a change in the mix of homes sold.

Operationally, Taylor Wimpey demonstrated some positive momentum. The net private sales rate increased to 0.79 per outlet per week (0.73 excluding bulk deals), indicating sustained demand for its homes. The order book remains healthy, with a value of £2,190 million, representing 7,452 homes.

Looking ahead, Taylor Wimpey is maintaining its full-year completions guidance of 10,400 to 10,800 homes. However, the £20 million unexpected charge related to historical defective workmanship by a principal contractor has impacted the Group's operating profit forecast, which is now expected to be around £424 million.

The interim dividend of 4.67 pence per share, while slightly lower than last year, underscores the company's commitment to returning value to shareholders. However, the dividend yield will likely be a key point of focus for investors given the current market volatility

While exceptional charges have impacted profitability, the underlying business remains resilient, supported by strong demand, a healthy order book, and a robust balance sheet. However, the headwinds of affordability constraints and potential further regulatory costs remain significant concerns.