Stocks in Taylor Wimpey (TW.L) shed 7.5% on Wednesday, as it swung to a loss in the first half of the year and warned of a steep drop in new home completions.
Britain’s third largest housebuilder said it expected to complete about 40% fewer homes this year than in 2019. Homes scheduled for completion in the final three months of this year will now largely be delayed until the first three months of next year.
The company shut down sites as the coronavirus sent Britain into lockdown in March, and the pandemic and safety measures appear to be hampering construction despite all sites reopening since. Building sites are operating at 80% capacity, according to the company.
“This will have a significant impact on revenues and margins in 2020 and will have some knock on impact on 2021 delivery,” according to the company’s half-year results published on Wednesday.
Completions in the first six months of 2020 more than halved year-on-year to 2,771 homes. First-half revenues also more than halved to £754.6m ($971m), leaving the company with pre-tax losses of £39.8m, compared with a £299.8m profit a year earlier.
The company’s latest update to investors also sounded the alarm over the “high degree of uncertainty” caused by both COVID-19 and Brexit.
But Pete Redfern, chief executive of Taylor Wimpey, said all sites had reopened, all staff had returned to work, furlough subsidies had been repaid and levels of construction and sales were now at a “sustainable level.”
“Looking ahead, balance sheet strength, a long order book and our high quality and growing landbank gives us confidence in our ability to navigate the challenges and emerge stronger from the pandemic,” he said.
Around 97% of the private homes due to be finished this year have been bought before completion, according to the company, up 10 percentage points on a year ago.
Meanwhile sales have increased and appointments booked at sales centres have jumped 206% year-on-year in a post-lockdown surge of interest. The company had orders for 11,686 homes at the end of June, a 15% increase on a year ago.
The company highlighted lower interest rates and the continued availability of mortgages from lenders as important in sustaining demand, with Britain’s property market surging since lockdown eased despite the economic crisis.
Housing market analyst Anthony Codling said the new-build market appeared to be performing better than the second-hand market, and noted the importance of government Help to Buy support.
Meanwhile purchasing managers’ index (PMI) data for the construction sector earlier this month showed a “strong rebound” in activity in the past month. Residential construction witnessed the biggest reported jump in five years after steep declines earlier this year. 46% of firms said workloads were higher than a month earlier.
Housebuilding stocks also rose earlier this month when UK chancellor Rishi Sunak announced a stamp duty holiday in England and Northern Ireland, which is expected to boost sales.
But at Taylor Wimpey, the construction backlog and delays may place some limits on its ability to benefit from the current revival in activity. “Reduced availability is likely to mean that sales rates remain below normal until construction catches up,” the company added.