UK housebuilder Taylor Wimpey is launching a £500 million share placement to raise cash that will be used to add to the company’s development land bank. With the market currently softened as a result of the disruption caused by the Covid-19 pandemic, the FTSE 100 residential properties construction company is hoping to take advantage of lower land prices.
Taylor Wimpey and other big house builders adopted the same tactic in the wake of the 2008-09 economic crisis and reaped the benefits. While announcing the cash raise the company also praised the “resilience and strength of the business”, while pledging to return taxpayer funds made use of through the government’s furlough scheme.
With smaller house builders limited by “weaker balance sheets and reduced cashflows”, as a result of the coronavirus crisis, Taylor Wimpey is looking to take advantage of reduced competition meaning a drop in land prices.
It told investors it has identified “short-term opportunities”, of land available from multiple sources at prices below pre-lockdown levels and which promise attractive returns. It has already agreed terms on 25 development sites and talks are ongoing for 60 more.
Retail investors will also be able to take part in the share offer via the Primarybid platform, which pools investments from smaller investors, allowing them to participate in subscriptions alongside institutional investors.
Pete Redfern, the company’s chief executive, has led the way by personally committing £200,000 to the equity raise, commenting:
“We have taken decisive and early action to conserve cash and increase flexibility through the pandemic and we are now seeing a significant opportunity to invest in land at attractive prices.”
Mr Redfern is confident the “robust demand”, that has continued for its homes throughout the lockdown period is indicative of a UK residential property marked that shows “continued resilience”.
Taylor Wimpey, along with other construction companies, was forced to temporarily close its building sites during lockdown, while assessing how to reorganise operations in accordance with social distancing measures. At the lockdown’s height, the company’s sales rate per outlet dropped to 0.3 from 0.97 over the first quarter before restrictions came into place. It has since improved back to 0.62%.
A strong bounce back has seen an 176% increase in sales appointments booked at show homes compared to the same period last year and the house builder reports website visits also up 51% on a year earlier.
Despite the positive indications that the housing market will not suffer a protracted slump, Taylor Wimpey has declined to resume offering financial guidance on expected results for the rest of this year. However, the company did caution that the halt to construction over lockdown will see a “meaningful reduction”, in the number of completions over 2020.
