Taylor Wimpey sees robust demand, and Rentokil’s rat delight may not be enough

“Stock markets across Europe and Asia were generally in positive territory on Thursday, thanks to positive earnings reports from some big-name companies and a strong showing from miners and industrials,” says Russ Mould, investment director at AJ Bell.

“Nestle has enjoyed strong demand for coffee, dairy products and pet food, helping it report better than expected sales growth. Also beating expectations was truck maker Volvo, but its outlook is somewhat clouded by the automotive industry having to grapple with a global chip shortage.

“The FTSE 100 advanced 0.2% to 6,908 with precious metals miner Polymetal among the top risers following a reassuring trading update, helping to extend a rally in its shares which has been in motion since the start of April.”

Taylor Wimpey

“It is interesting to see Taylor Wimpey describe the housing market as healthy in its latest trading update.

“On one level this is simply a way of describing the company’s confidence in its own immediate prospects, backed by a strong order book and robust sales rate, but it jars with the view of many observers who think the market has become divorced from economic reality.

“From the perspective of people looking to gain access to the property market and without the means to do so it could look dysfunctional.

“The nature of the support provided to the sector, which largely seems to be directed at boosting demand rather than supply, means the market is functioning pretty well for Taylor Wimpey and its peers.

“There are questions about what will happen when the current schemes disappear, though politicians of all stripes seem committed to incentivising the housebuilders to keep building.

“Given how well Taylor Wimpey is doing in the current environment, there may be some disappointment that it has no plans to pay a special dividend in 2021 – even if it says it will revisit the idea next year.

“Perhaps its cash is better spent on acquiring land in an environment where valuations are depressed, helping to bolster profitability on future housing schemes and underpinning the company’s margin targets.”

Rentokil

“‘There’s a rat in the kitchen, what am I gonna do?’. Restaurateurs in various parts of the world including the UK are going to be reciting UB40 lyrics over the coming months as lockdown restrictions are eased.

“A long period of empty restaurants and even office blocks have given rats a perfect place to nest away during the cold months, and now landlords are facing a pest problem. That’s an ideal situation for Rentokil which flags strong trading for its pest control arm during the first quarter.

“Workers could soon discover that rats have been busy munching on cables, wood, carpets and plastics, creating yet another headache for the manager of each premises.

“That should give Rentokil a near-term boost, yet like many winners of the pandemic, the company is going up against some tough year-on-year comparatives. Its saw strong demand for hygiene and disinfection services in 2020 which could be difficult to repeat in 2021.”

These articles are for information purposes only and are not a personal recommendation or advice.