Housebuilder Taylor Wimpey says Brexit vote yet to hit demand

Taylor Wimpey (London Stock Exchange: TW.-GB) has sought to reassure that there is life beyond Brexit by telling investors it has seen "no meaningful change to date" in trading since the U.K.'s referendum last month.

The British homebuilder qualified this by using a line popularly quoted by companies this earnings season that it was "too soon to really tell yet".

Speaking to CNBC, Taylor Wimpey Group Finance Director Ryan Mangold pointed to long-term tailwinds for the company and broader sector: "From a market point of view, the structural undersupply of housing in the U.K. will underpin the fundamentals really positively for us."

This message was reinforced by the 5.8 percent jump in total average selling prices to £238,000 achieved by Taylor Wimpey in the first half.

Expectations that the Bank of England will cut rates on August 4th have risen since a key "hawk" on the bank's monetary policy committee, Martin Weale, said weak PMI data had prompted him to change tack and advocate immediate policy changes. However, Mangold cautioned that he didn't think mortgage rates could go much lower.

Homebuilders such as Taylor Wimpey are more reliant on the U.K. government's Home to Buy Equity Loan Scheme, which offers a 20 percent five-year loan to buyers (40 percent in London) of new homes only. Some analysts believe that in the case of a prolonged slowdown, new builds could stand to be better supported than existing stock.

Analysts are broadly positive on Taylor Wimpey's stock, with most target prices significantly above today's level despite a series of price target cuts in recent weeks. Deutsche Bank slashed its target price from 261 pence to 218 pence on Tuesday but reconfirmed its "buy" rating – no surprise given an implied upside of around 50 percent from Taylor Wimpey's Tuesday night close.

The company's price-to-book value ratio is now back in line with historical levels. Combining this with a solid landbank, a tidy balance sheetand a strong net cash position, some commentators see much to like. A further bright point is the company's dividend policy which was enhanced last May and reaffirmed today. Shareholders are set to receive a £300 million special dividend in both July 2016 and July 2017, as well as an ordinary dividend set at around 5 percent of net assets or a minimum level of £150 million.

And Mangold's comments to CNBC did not indicate any let up in that approach. In Mangold's words: "We've got a clearly stated strategy in terms of what we're trying to deliver as a business and the balance sheet scale and the land bank scale fits perfectly with that strategy. To the extent we have surplus cash available, it's available for return to shareholders."

Nonetheless, the U.K. housing market faces a significant slowdown in transactions, record high affordability pressures, recent obstructive policy changes and nerves over consumer confidence levels and economic prospects.

While homebuilders' earnings are much more driven by falling house prices than tumbling transaction levels, warnings out of real estate giants Foxtons and LSL in the past few weeks raise the prospect of price cuts being pushed through at some point if sales fail to get going again.

A sobering estimate from Bank of America Merrill Lynch suggests a 10 percent reduction in volumes and prices over two years could cut earnings in the U.K. homebuilder sector by around 50 percent.

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