By Aby Jose Koilparambil and Suban Abdulla
(Reuters) – British housebuilders Persimmon and Taylor Wimpey publish full-year earnings this week with analysts seeking to establish whether a protracted sector downturn is on the cards.
Mortgage approvals slumped in December to levels last seen during the global financial crisis, Bank of England data shows, leaving the British housing market grappling with weak demand and falling prices ahead of the peak spring season.
Analysts, therefore, will be focusing on sales updates within Persimmon and Taylor Wimpey’s annual results statements on Wednesday and Thursday respectively.
“It will be interesting to see how trading has evolved since mid-January and whether buyers have started coming back to the market,” said Peel Hunt analyst Samuel Cullen.
The two companies are expected to report a slight improvement to full-year earnings, but trading statements last month said their order books were down year on year.
“The caution reflected in management commentaries in January trading updates outline a more difficult demand backdrop and spring trading trends are likely to be a key catalyst ahead,” Citi analysts said in a note.
On a more optimistic note, analysts polled by Reuters said that British home prices will fall less than previously expected in 2023 as a resilient job market and easing recession fears soften the blow from higher borrowing costs.
The focus in this week’s earnings statements will be sales trends and pricing, said Aynsley Lammin, equity research analyst at Investec Bank.
Besides sales and booking rates, investors will also be alert to possible dividend cuts.
Persimmon, Britain’s second-largest housebuilder behind Barratt, has already ruled out special dividend for 2022 and will announce its annual dividend on Wednesday as part of a new capital allocation policy.
Barratt, meanwhile, has cut its mid-year dividend by 9% as housebuilders increasingly look to preserve cash.
Taylor Wimpey in January said that it started consultation on a series of proposed changes to increase operational efficiency including a reduction in overheads.
(Reporting by Aby Jose Koilparambil in Bengaluru and Suban Abdulla in London; Editing by David Goodman)
