Shareholder Returns Shift
Taylor Wimpey Slashes Shareholder Returns, Launches £42 Million Buyback Amid Housing Downturn
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Key Points
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The annual shareholder return target has been cut to 4% of net assets, with at least 2% paid as an ordinary dividend and up to 2% returned via dividends or buybacks—down from the previous target of about 7.5% (5% dividends and 2.5% buybacks).
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The interim dividend for H1 is 1.20p per share, about 74% lower than last year's 4.67p, and the company has authorised a £42m share buyback that starts immediately.
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In the first half, pretax profit rose to £116.8m from a £92.7m loss the prior year, with revenue around £1.68bn and total completions of 4,986 (4,723 ex-JVs), indicating a return to profit despite lower completions YoY.
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The group ended the period with net cash of £168.6m, down 48.4% year-on-year, and it expects year-end net cash of about £250m after around £100m in cladding remediation costs.
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Taylor Wimpey also disclosed a Merrill Lynch International arrangement to buy up to £41.9m of its ordinary shares, with purchases commencing July 31 and running until December 31.
Taylor Wimpey slashed its dividend by 74% on Wednesday, cutting its half-year payout to just 1.20p per share — down from 4.67p a year ago — as the UK's housing market slump forces the housebuilder to rethink how much cash it hands back to shareholders. Investors Chronicle reported the company also dropped its annual return target from roughly 7.5% of net assets to just 4%.
Shares fell 5% on the news. To soften the blow, Taylor Wimpey launched a £42 million share buyback — a way of returning cash by buying its own shares rather than paying dividends. MarketScreener noted purchases begin July 31 and run through December 31.
New Dividend Policy Cuts Target Nearly in Half
The old plan returned about 7.5% of net assets each year — 5% as a regular dividend and 2.5% via buybacks. The new plan cuts that to 4%. At least 2% must be paid as an ordinary dividend. The other 2% can come as extra dividends or buybacks, giving management more flexibility. MarketScreener called it a shift aimed at balancing "generous returns with financial flexibility."
The £42 million buyback is handled through Merrill Lynch International. Taylor Wimpey said the programme starts immediately. Investors Chronicle noted the move is designed to prop up returns at a time when the company wants to hold on to more cash.
Profit Returns But Completions and Margins Fall Short
Taylor Wimpey did swing back to profit in the first half. Pretax profit hit £116.8 million, compared to a £92.7 million loss in the same period last year. Revenue rose 1.7% to £1.68 billion. That sounds good — but the details are tougher. Adjusted operating profit dropped 19.4% to £129.7 million, according to Yahoo Finance.
Completions — the number of homes fully sold and handed over — came in at 4,986 total, or 4,723 excluding joint ventures. That is down year-on-year. The company trimmed its full-year UK completions forecast to between 10,600 and 10,800 homes. Twelfth Magpie noted management warned that market conditions would stay tough.
Cash Pile Shrinks as Cladding Costs Bite
Taylor Wimpey ended June with net cash of £168.6 million. That is down 48.4% from a year earlier — nearly half gone in twelve months. The company expects to finish the year with about £250 million in cash. But it still faces around £100 million in cladding remediation costs. Cladding repairs refer to fixing unsafe building materials on older homes — a lingering cost for many UK builders.
MarketScreener reported that preserving liquidity is a key reason for the new, lower return target. Inflation and rising build costs are also squeezing margins. Management said the revised policy gives the business room to strengthen its balance sheet while the market finds its footing.
What This Means for Taylor Wimpey Investors
The dividend cut is a clear signal that normal times have not returned. Income investors — those who buy shares mainly for the regular cash payout — took a direct hit. A drop from 4.67p to 1.20p per share is not a small trim. It wipes out most of the income those shareholders expected. Twelfth Magpie described the news as "bad news for dividend investors."
The buyback offers some comfort. Buying back shares reduces the total number in circulation, which can lift the value of each remaining share. But it is not the same as cash in hand. For now, Taylor Wimpey is asking shareholders to accept less while the UK housing market recovers.
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