Taylor Wimpey plc

So good morning. It's good to see you all here today. I know it's a busy reporting day, so thank you very much for coming in a little early. I think you'll recognise our I'll make a few comments and highlights on the first half. Chris will then take you through the detailed financials. And then I'll update you on how we're seeing the market, which I know will be a focus for you all. And importantly, how we're driving performance in today's environment. So there are four key things I'd like to draw to your attention this morning. First, completions are slightly ahead of expectations in the first half at 5,120, despite the mixed market and the challenges, of course, of rising interest rates for customers. Second, we've delivered a strong operational performance, driving best-in-class execution and tight cost discipline. Our sales rate of 0.71 compares well to the market. This is driven, I believe, by our quality site locations and continuing to realise value from recent investments. such as our CRM system, our strong customer proposition and our experienced sales teams. It's worth saying that this performance has been achieved with minimal bulks and without giving away price, in line with our value over volume approach. We moved early to align build to sales rates, reduced overheads, and have taken a highly selective approach to land acquisitions. This is a choice open to us because of our strong land bank of around 83,000 plots, benefiting from the conversion of 6,000 plots from our strategic pipeline, and the strategic pipeline now stands at 140,000 potential plots. Third, against an uncertain macroeconomic backdrop, the value of our differentiated ordinary dividend policy is clear and remains a key focus and priority for us. Today, we've announced an interim dividend of 4.79 pence per share, amounting to 169 million. And four, we continue to manage the business for the long term as we make further progress on build quality and customer service and ensuring that we are future fit. This includes continuing to progress our net zero programme and the future homes trials at Sudbury, which I know many of you have visited. So in summary, we're very pleased with our half year performance and I'll now hand over to Chris.

So thanks, Jenny. Good morning, everyone, and thanks for joining us again today. So I would echo what Jenny said. We're very pleased with results in the half which demonstrate how well the business is performing despite the macroeconomic challenges. We ground out a very good sales rate, meaning completions were ahead of our guidance of 45% in the first half, and that combined with disciplined build and cost control resulted in a gross profit margin of 21.6% and an annualized return on net operating assets of just under 20%. Lower volumes and margins meant that the profit before tax was reduced by over 40% year on year, but after allowing for tax and paying the ordinary dividend, we still maintained the tangible net asset value per share at the 2022 closing level. I'll move the slide on this time. So the reduction in UK volume is mainly a function of the lower order book we entered the year with. Sales in the period from the start of the year through the spring selling season were actually quite encouraging before higher mortgage rates in recent months weighed on affordability for customers impacting demand. Despite these changing conditions, both the private and affordable average selling prices landed in line with the guidance we provided back in March. Private pricing was up 8.6% year on year. This was driven by a greater mix of completions from our higher quality locations throughout the country and from London, as well as underlying price improvements. In contrast, affordable pricing was slightly lower due to mix with fewer homes from London than the first half of last year. As we guided, affordable mix was 23%, 1% higher than last year, and in half two, I'm expecting the affordable mix to be slightly higher than the 20.5% we reported in half two last year. At the bottom of the slide, you can see the reduction in the gross and operating margins for the UK business, excluding Spain, and I'll break these down on the next slide. So let me talk you through the moving parts on margin. Underlying inflation on selling prices compared to the first half of last year was 4% on average. Inflation on bill costs was 9% in the first half, consistent. with the annualised rate of cost inflation on new tenders that we communicated through half two last year. Overall, the net impact from price and cost inflation reduced gross margin by 2.7 percentage points year on year. The absence of land sales, together with higher marketing costs, contributed a further 1.2 percentage point decreased gross margin. Inevitably, lower volumes meant lower recovery of fixed costs seen in the two percentage point reduction relating to net operating expenses. As you'll recall, we took decisive early action with our cost base in the second half of last year and made further changes at the start of this year to optimize efficiency across our operations, positioning the business for more challenging market conditions. These changes incurred £8 million of one-time costs in half-one operating expenses, which alone reduce our half-one operating margin by close to 50 basis points. After allowing for the £19 million of annualised savings from those changes, our run rate on UK fixed costs is now around £320 million a year, with roughly 30% of those in cost of sales. Looking forward to half-two, We expect further impact to our margin following the recent increases to mortgage rates and as a result of ongoing build cost inflation. This, however, is moderating. The prevailing annualised rate of build cost inflation on new tenders is 6%, and I'm expecting that to reduce to low single digits by the end of this year. We ended the half with a very strong balance sheet and this demonstrates our resilience and how well we've adapted to the changing market conditions. The value of our land holdings has reduced by £274 million over the last 12 months as our highly selective approach meant that we approved the purchase of very little land. Nonetheless, we remain in a strong position with seven years of supply in our short-term land bank based on current output. The increase in work in progress year on year reflects the high levels of build cost inflation, the waiting of completions to the second half, and a bit more infrastructure spend as we move forward with opening new outlets. Last year, we implemented increased controls over both plot and infrastructure investment to match the build rate in every location to the corresponding sales rate, and this remains an area of sharp focus. land creditors have continued to reduce and remain less in total than our net cash balance. And this demonstrates our capacity to thrive when conditions improve and our continued ability to pay the ordinary dividend. The largest component of the provisions balance relates to fire safety. We are constantly reviewing and updating our expectations for remediation costs on a building-by-building basis, and the existing provisions remain our best estimate of the cost of the works. Net cash ended £13 million higher than it was at the same point last year, and that is down to the focus across the business on cash and our controls over costs, land and WIP spend. Net land spend was £323 million during the period, mainly related to paying down land creditors. Even so, those payments still exceeded land recoveries, hence the £80 million net investment in land on the chart. The net investment in WIP is a function of bill cost inflation and the other factors I referenced on the previous slide. Tax paid reflects a full half of the residential property developer tax and the increase in corporation tax from April. We paid £10 million in total against our provisions in the first half, £7 million of which related to fire safety, and I'm expecting that to pick up to around about £40 million in half to including reimbursement of the Building Safety Fund. There's absolutely no change to our capital allocation priorities, so I'm expecting this to sound reassuringly familiar. Our first priority will always be maintaining a strong balance sheet. Where there are good opportunities in the land market, we will look to take advantage of those. But of late, good opportunities have been few and far between, and that's because land prices haven't adjusted. despite house prices being 3% below the peak, bill costs increasing period on period, and sales rates being slower. We can bide our time because we have a strong land position and we retain the skills, experience, and capital to respond swiftly when the situation changes. Our ordinary dividend policy to pay 7.5% of net assets is measured and prudent and provides investors with certainty. We've stated our intention to pay the ordinary dividend through the cycle and in the event of a normal downturn. We've also gone beyond that and noted that the policy could withstand a reduction of 30% in volumes and 20% in price from the peak. The middle of our updated volume guidance for this year would represent a 26% reduction on 2021 volumes. but pricing has been pretty resilient, and today it's only fallen 3% from the peak 12 months ago. So today we are proposing an interim dividend for 2023 of £169 million, or 4.79 pence per share, in line with our policy, which will be paid in November. Whilst we remain committed to returning excess capital to shareholders, we recognise that despite the good news on inflation from a couple of weeks ago, mortgage rates are likely to remain high for some time and there's still lots of uncertainty. It's therefore right to retain maximum strength and flexibility. So the Board is not proposing any return of excess capital at the moment, but we will continue to keep that position under review. On guidance, given our better than expected sales rate in half one, we have narrowed the range of our volume guidance for this year to 10 to 10 and a half thousand UK completions at the top of the range we previously communicated. While there are more moving parts than we would normally be experiencing at this point in the year, we wanted to try and be as helpful as possible. We are expecting group operating profit, including joint ventures, in the range from 440 to 470 million, depending on volumes. Similarly, we are providing a range for year-end net cash, which is also based on the volume range. There's no change to our approach on land. We are only approving a small number of sites where the risk return profiles are compelling. One small benefit of the increase in interest rates is that we are now earning more income on our cash balances, and we reported 2 million of net finance income in the first half. We've updated our guidance on net finance charges to switch to a 3 million net interest income for the year. And this guidance incorporates allowance for new rates on both our 100 million euro private placement loan and our revolving credit facility, both of which have recently been renewed, meaning that we've extended our average maturity across those facilities to 5.3 years. And our JV guidance is unchanged. So in summary, a strong first half performance, partly due to better trading conditions in Q1 than we expected, but also due to the actions that we took last year and at the beginning of this year to reduce costs and improve efficiency without losing capacity for future growth.

Okay, thank you, Chris. So in terms of customer demand, we know that underlying interest is there, but high mortgage rates and the cost of living generally are biting, particularly for first-time buyers. You'll be well versed in these stats by now, but with the five-year fix at 6.54%, and the average two-year fix at 6.88%, based on a 75% loan-to-value, versus last year's 3.43% and 3.48%, respectively. It's not hard to see why affordability is tight. The good news is that lenders remain keen to lend into the new homes market, and we've seen some reductions in the last couple of weeks. Overall, customer confidence is low, But with employment remaining high, strong wage growth, and supply of housing remaining tight, pricing has remained resilient. Moving to the medium to longer term, there's a lot of reasons to be positive about the outlook. The desire for home ownership remains high, the supply and demand imbalance is widening, and pent-up demand is likely to increase given the rising population and falling industry volumes given the planning environment. Our latest sales figures are for the four weeks to the 30th of July, so a traditionally quieter period for the sector. We've seen a trending down of sales rates as mortgage rates increased and consumer confidence weakened. So the sales rate of 0.47%, which doesn't include any bulks, won't come as a big surprise. This compares to 0.62 for the first half, excluding bulks. And as I've said previously, we are not doing an especially large number of bulks, but they do tend to stand out given that sales rates are lower. And in the interest of transparency, we've separated them out here for you. As at July 30th of July, the order book stood at 7,900 homes with a value of 2.2 billion. And we were 91% forward sold for private completions for 2023. So well set. Net pricing continues to be resilient, down 3% from the peak in quarter three 2022. We continue to develop and evolve our customer offering, ensuring that an appropriate balance is made between sales rate and price. We have a strong customer proposition with quality product and locations, which I do believe differentiates us and an improved and effective sales effort to deliver it. We have said from the outset that we don't intend to lead the market down. We will, however, continue to monitor the market and we'll respond to market pricing as it evolves on a site-by-site basis. Incentives are around 5%. The most popular ones continue to be mortgage contribution, deposit paid and option upgrades. Down valuations, which do tend to be an early sign of future pricing pressures, have remained low. Customers have been willing to transact despite the interest rate environment. However, today's market is about those who can affect that demand. Of reservations taken in July, 69% came from prospects first registered from 1 May onwards. And our proactive approach to marketing, which I'll come on to talk to you about, has driven customer inquiries and, while no doubt reflecting the macroeconomic environment, are above 2019 levels. Appointments are holding up well, also supported by walk-ins. So understanding and supporting our customers has been a key focus in our response to the changing market conditions. And I want to share some of that colour with you. The chart on the left hand side shows the shift in reservations by buyer type, particularly highlighting the changes in first time buyers, reducing substantially to 30% from 40% in half one 2021 and down from 37% just 12 months ago. The data on the right hand side comes from our IFA, so I do want to caution that this is representative rather than complete. I know you like data and there's lots of it here, but a key takeaway for us is that while the market is constrained by affordability, our customers and their lenders are adapting. So, for example, increasing the length of mortgage terms has become more normal, with 27% of first-time buyers now taking a 36-year-plus term versus only 7% in 2021. And for second-time buyers, the 31 to 35 and 36-year-plus terms have increased this year up to 42% versus 28% in 2021. A few of you have asked previously at what mortgage rates are customers unable to buy, and it's one that we've been working to understand better. It's not straightforward, though, given that single-income purchasers are now in the minority. So if customers requiring a mortgage, 68% buy with two applicants, and with the majority of those having a joint income of between £50,000 and £100,000. and 18% with a joint income of over 100,000. As I've said, the sales team are driving real value from the investments that we made in recent years in our CRM system and the ability to leverage that is a real differentiator. We can't change the market, but we can make sure that we are capturing the demand that's there and that we're supporting our customers along their buying journey. Our CRM system gives us more insight at individual customer and site level than ever before and is driving real value for our business. Inquiries drive our database and marketing efforts are targeted to drive relevancy and quality. From there, inquiries are filtered and categorised using the CRM, ensuring our experienced sales teams are following the highest quality leads and prospects. And when I've been to sales centres, I continue to be impressed by the skill and focus of our sales executives in their engagement with our customers, all of which are logged, a significant benefit given the longer periods we are now engaged with our customers before commitment. And I've even listened in on a few of the mystery shops and heard for myself how our teams on the ground support our customers through their buying decisions. We are proud to be a five-star builder. However, I do believe that we can still do better. And we've been working across our business to improve our customer responsiveness internally and by engagement with and improving the performance of our supply chain. So we've talked about how our customers are responding, but what have we been doing? We continue to be proactive and take a sort of dynamic approach to the prevailing market conditions. This isn't a single action, but a continuous series of actions. We pulled levers quickly, as Chris pointed out, but we aren't just sitting back. We continue to be very focused on operational performance, increased cost control across all of our departments, increased management controls and sign-off of levels of WIP, and ensuring our sales teams have the tools to operate in a tougher market. The land market hasn't changed since we updated you in April. and prices are not reflective of the increased level of risk that we are seeing in the sales market. We therefore do remain cautious. We only approved around 1,400 plots in the first half. Land decisions are carefully considered, having regard to local market conditions, planning risk, and the quality of the key metrics, but remembering that uncertainty does bring opportunity. We continue to target savings in procurement through standardisation and this helps to offset build cost increases as well as the consolidation of stock resulting in savings, efficiency and installation and increasing economies of scale. There are a number of small incremental changes across our operations too that are driving meaningful efficiencies. This is a constant focus for us as we work to offset inflation and regulatory costs. And I'll give you a few small examples. We've revised and improved our scope of works to increase consistency, reduce day works and variations. And we've upgraded our management systems, tracking commercial variances, excesses, etc., across our commercial activities. This supports earlier management intervention too, where necessary. And we've adopted a reusable stairwell system, which improves safety, reduces timber waste, and delivers efficiencies. And finally, we launched a new standard suburban apartment range at the beginning of May, which will drive savings over the next three or four years. And like our standard house type range, these I think will also result in improved quality, a more consistent customer offer, more efficient use of land and better planning outcomes. Now I just want to take a step back and try to put the planning challenges that we've talked about for some time into perspective. This slide shows the HBF quarter one 2023 housing pipeline report showing that both plots and projects achieving planning approval and it gives you a relatively long run view. It shows that the downward trend in approvals we talked about during 2022 continue into quarter one of this year. At around 3,000, the number of housing projects granted planning permission in the first quarter fell by 11% from quarter four. And the number of units approved at 71,000 was 24% lower than the same time last year. It's worth pointing out here that the decline in approvals during the first quarter was widespread. Large private and social housing projects and smaller sized sites all declined. I know I need to be careful because I could talk about this for a very long time and time is short this morning, but let me boil the complex issues down into two main areas. Firstly, local authority resources with local planning authorities seeking a reduction or seeing a reduction in their funding by 55% since 2009-10. And secondly, only 42% of local planning authorities had a fully up-to-date local plan as of March 2022. Though repetitive, I think it is important to call these out because these are the challenges that affect the overall delivery of housing in our country and directly affect the opening of outlets for Tilly Wimpy and right across the sector. As you know, the National Planning Policy Framework in 2012 led to improvements that benefited land supply right up to 2018. And during this period, it certainly wasn't easy, but plans were progressing and visibility was good with the presumption in favour of sustainable development as a backstop. The graph, I think, clearly shows that the last few years have been much more problematic. Litchfields, the planning consultant, has estimated that an additional four to five medium-sized sites of about 50 to 250 homes are required per district per year in order to achieve government targets, something that is simply not supported by the current state of our planning system. And of course, it wouldn't be a planning slide at the moment without mentioning neutrality. The issues continue to affect 74 councils and an estimated 145,000 plots, placing further pressure on delivery. For us, the focus remains ensuring that we're progressing planning and driving the most value from our assets, but it's frustrating and slow. We continue to engage with government on all of these issues, and as you might expect, we're actively engaged across all of the key political parties and, of course, at local authority level. We have 26,000 plots representing 133 sites in planning for first principal determination. But with the average length of time taken to determine continuing to extend, I think we really do need this level in the hubber. And having painted that rather stark picture, just let me give you some reassurance that we own and control all of our land for 2024 completions, almost all of it with detailed planning. So we are in a really good position. Given the land market, the frustrations in the regulatory process, the length of our land bank is, I believe, a benefit. So I spoke to you previously about the way we measure our land bank at our capital markets last year, and I talked about the five main ways that we look at it. Length, weight, shape, efficiency and quality. Look, I won't go through all of these again, but you might remember that I also told you that at different times in the cycle and operating conditions, we would prize some of those measures over others. key strengths of Tear Whimpy is the quality and the length of our land bank. The land decisions that we've made in respect of land acquisitions in recent years have set us up with a strong land bank which has given us choices and it has allowed us to be disciplined in our approach to land acquisition in these uncertain times. We're also differentiated by the scale, maturity and distribution of our strategic land position. Standing at 140,000 potential plots and converting 6,000 plots in the period, this is an excellent result and provides support to our short-term land bank. In this environment, the quality of our land bank is a key component to our customer proposition and I think that you can see this reflected in our strong sales rates relative to the market. So to remind you, we grade all our land right from the very start of the selection process against the macro and micro locations, with 85% of our plots in A or B locations. This is really important, as in tougher markets, locations, I think, are even more important. And I am sure that this is supporting our sales rate and the firm pricing. We remain committed to opening our outlets through the system as quickly as possible. And I would say we are solutions focused in doing so. But the previous stats outline the challenges that the sector is facing. And like I said, this does present a real challenge across the sector. In the first half, we operated from 244 average outlets and ended the period in 235 outlets. And you'll note that we've already started on 21 outlets due to open in the second half. So a lot of you have heard about how we're setting ourselves up in the current market. But as a team, we are constantly thinking about the longer term, how our actions today can ensure that we are a thriving and sustainable business in the future. This year, we've been working hard to communicate and implement our net zero plans across the business. And this is a key priority. Again, we were delighted that so many of you in the room were able to join us and visit our site in Sudbury, where we have five homes testing a different combination of fabric and technology solutions to deliver zero carbon homes. The goal is to find solutions to enable Taylor Wimpey to build high quality, zero carbon ready homes that our customers will enjoy living in and which will be deliverable at scale. Importantly, these homes were completed on a live development by Taylor Wimpey employees and our subcontractor partners rather than in controlled conditions. I think this allows us to better capture the lessons to be learned. We'll continue to monitor the performance of the properties following sale and this will allow us to collect valuable data and customer feedback. So just to recap, whilst we continue to await the government's consultation, and we won't know the outcome of that potentially until the summer 2024, we are, I think, well placed, having worked through the transition into parts L and F, and the trials such as that at Sudbury, I think we're actively working towards the Future Homes 2025 regulations. I think it is important to state, particularly with the backdrop of discussions in the last few weeks, that though Future Homes is part of a solution to the government's net target of net zero carbon by 2050, it doesn't stand on its own and wider government commitment is required for consumers to benefit. We're also progressing our timber frame factory, which is currently being fitted out, with production due to commence later in the year and the first kits to be delivered to site early next year. And we continue to seek further cost efficiencies in central procurement through our strategy of standardisation and simplification and by leveraging Tilly Wimpy logistics wherever possible. So we're nearly there. Turning to the priorities I set out this year, we're making good progress in all of these areas. As you've heard today, we're getting the customer offering right. I think this is key. Our teams remain focused on tight cost management and web control. We're building as strong an order book as possible to allow us to optimise price going into 2024. And we remain committed to net zero and investing in the areas that matter and will drive most value in the future. So just pulling that together, we're performing well in a challenging market and we continue to work hard to drive performance. We run the business for the long term and given our strong position and our priority to drive value by optimising price over volume in the face of inconsistent market demand. We're driving performance. We're leveraging our assets as effectively and efficiently as possible and pursuing operational excellence and discipline across all our activities. And we're well positioned with a strong balance sheet, a differentiated dividend policy where the ordinary dividend is a clear priority to provide visibility to our investors, an excellent land bank and experienced teams right throughout the business. In conclusion, we're well placed and we're a resilient business, performing well in the current market, firmly focused on execution, controlling what we can, whilst continuing to prudently invest in the future to ensure that we can come out of this stronger. So thank you for your attention this morning. And Chris and I will be happy to ask your questions. Answer your questions, even.

Thank you. Will Jones from Redburn. I'll start with three, please, if I can. The first, just thinking, I guess, tactically in the second half, it seems like you're moving the focus to building that year-end order book for price optimization into next year. What kind of sales rate do you think you need to achieve in the second half to get there? And do you think the minus three price experience today is sufficient for that? And perhaps how the bulk sales will come into that picture as well? Second one around the land bank. I think you said you approved only 1,000 or so plots in the half, but I think the land bank was sequentially pretty steady in plot turns because of a couple of quite big strategic transfers. Can you just talk us through those and that you're happy that they reflected prevailing market conditions? And the last one was just a clarification, actually, on mortgage terms for customers. Am I right in interpreting that slide 17? You're saying that the average mortgage term of your customers is 36 years, or is it just a proportion or above 35? And any sense on how that number has changed over the last few years? Thanks.

Okay. I'll pass over to Chris just on the order book. But essentially, look, I think this is a week-to-week, month-to-month trading environment. I've set out, I think, quite clearly what we're doing to support our customers. But there's no doubt that the sort of wider macroeconomic backdrop and how that's playing through to mortgage interest rates has affected demand significantly. The order book is a real focus and we've taken that into account in our assessment of that volume range that we've narrowed in on today. Pricing has been pretty resilient. consider that there's a number of factors playing through here, the sheer level of demand that there is, but also the really high employment levels that we're retaining, that we are seeing wage growth, and although sentiment is weak, there is still a level driving that affordability. And just on bulk sales, look, I think we're striking the right balance. We're striking the balance that we need at the moment. It's a tool and certainly something that we have good partners that we have worked with over time. But we do tend to look at these things on a project-by-project basis and the quality of the proposal ahead of us. And keep in mind that value over volume sort of balance that we're seeking to achieve. On the land, 1,400 approvals. You're absolutely right. The 6,000 strategic land transfers is what's holding sort of our land bank at that sort of stable 83,000. They are good quality. I mean, one of the benefits of strategic land, well, we've talked about in the past, of course, and I tend to do this when I'm talking about it, we call our strategic land in over a period. Now, it's been very frustrating with the planning environment, but we get to check and recheck the quality of the metrics of those sites on their way through. So I'm quite pleased with those. And in terms of the mortgage terms, I would again stress that this comes from our IFAs, so it's a relatively small sample versus the overall market, but I think it's directional. And we are seeing, particularly first-time buyers, have moved to that 36-year-plus, and I think the number was 27%, but would caution around the size of the data capture. Chris, is there anything that you want to add just on the order book point?

Well, I'd just say that, you know, the sales rate for the last four weeks in the statement, you know, 0.47. We're now at the start of August. That has, you know, historically been a pretty quiet sort of period. There's, I guess, a little bit of further uncertainty. We've got a bank decision tomorrow that's finally balanced, I think, between 25 and 50 bps. And, you know, the volume range for this year – a reasonably wide range of sales rate outcomes for sales in August and September, as you would expect. And really, sales in the last quarter are what builds the order book for the year end. And it's really hard to absolutely pinpoint at this point in time based on what I've just said exactly what the market's going to be like, but we will be targeting to build as strong as order book as we can possibly get to go into next year. Typically, you know, we would target to be 35% forward sold. I'm not suggesting that we will get there, but that would, in normal market circumstances, be the target. Excellent.

Thank you. Rajesh Patki from JP Morgan. I've got three as well, please. First one, could you give us some color on the discount on the bulk sales? Is it diluting the overall margin profile of the group? Second one is on sales outlets. How are you thinking about those heading into next year? And last one is any initial remark on 2024? Are you thinking about volume recovery next year? Thank you.

Okay. If I take the 2024 ones, Chris, any of you pick up the discount query? In terms of outlets, you know, we've identified that there's 21 that we've already sort of actively working on, and I'd describe it as a chunk more with detailed planning that we've yet to start for 2023, and that will certainly support 2024. And I've set out just how well set we are for our delivery in 2024 with all those sites with detailed planning and strong ownership and control profiles on them. We don't give guidance on outlet opening, as you know, and given everything that I've said about planning, hopefully you've got a degree of sympathy for why that's so difficult in the current environment. But I think that we're in a really good place in terms of control and forward planning for 2024. I mean, given what we said, Rajesh, about, you know, trading week to week, month to month, you know, in this half, it's very hard for us to, you know, predict what 2024 is. But, you know, we'll talk to you later in the year about that. And just on that discount point.

Yeah, I mean, that... 0.47 sales rate for last week's doesn't have any bulks because we haven't done any bulks in that period. And I think we gave a sort of reasonable commentary back at the prelims about, you know, I think the majority of the bulks, certainly the larger ones that we would have done this year, actually have been pre-planned for quite a long time on sites. So, you know, I know that you would hear in the market that typically a bulk deal at this point in time might have a 10% discount. That's certainly not our experience with the bulks that we've done year to date because most of those, like I say, were sort of already baked into our market. site assumptions, and therefore they were in negotiation over an extended period. What that looks like going forward, I don't know.

Morning. Glynis Johnson, Jefferies. I'm going to add you up to four, if I may. The first one, just in terms of the land market, your ASP, plot cost ASP in the back of the pack actually looks very low, obviously on a relatively few number of sites. But given what's happened in terms of build cost, given what's happened in terms of selling rates, What actually is a good plot cost to ASP in this environment? Because really it needs to be lower to make it look interesting. The second question, just in terms of, again, back of the pack, the website hits look like with the media push, actually look like they might have improved a little bit. Is there underlying interest? And it's just the customers are sitting on their hands waiting for the best deal, but they still could transact. They're just sitting and waiting just to see if it gets any better, right? Or is there something else in there? The fact you haven't taken out any substantial costs, where we've seen a couple of your peers be a little bit more dynamic, how do you read that in terms of your ambitions from a volume perspective? When do you think you're going to get back to previous volumes? How quickly can you return there? And then lastly, government interaction. We obviously saw some stats in terms of Gove's interactions with the house builders over the last quarter that was in the paper over the weekend. But he did mention that further down the chain, there'd been some interactions. What are governments saying to you in terms of particularly support for the first time buyer, but also planning nutrient neutrality? Can they sidestep it with presumption of water treatment? Anything there? Yeah.

Okay, thanks for that, Linus. I mean, the land market is, you know, we describe a market, but obviously it's multiple markets across a wide sort of wide geography and also sort of a wide range of site sizes, types, costs. Just addressing the figure in approvals, I think it's 12.9, 13%. There's some strategic land in there. There's definitely some very good deals in there. And there's also a reflection of the geographical mix and the level of commitment in infrastructure. So there's quite a few things at play. But it is a small number of sites to be making sort of broad assumptions on. In terms of, well, what does a good plot cost look like in this market, I'd have to give you the same answer. It's highly variable. Planning risk, technical risk, overall market risk are the things that we would be considering, though, if that's helpful. On the website hits, you know, organic traffic in the website has fallen. You know, it's down, you know, sort of in around the sort of 30% level sort of consistently over the last year. But we have been supplementing that with paid media. Our teams, our sales and marketing teams are really targeted. I talked about that targeted sort of impact. And channels specifically to ensure that we're capturing good quality sort of interest. And that's been very important for us. The underlying levels of interest, you know, are good. And I sort of made a reference to they still, you know, look pretty good against 2019 comparators. So there's a level of sentiment there. and affordability with the mortgage interest rates. You know, probably a dollop of concern around prices falling a little bit further and wider sort of economic issues. So stability, I think, you know, whether that's in the interest rate environment and the economic environment and sort of will support recovery and customer sentiment. Just on the sort of substantial costs, I mean, we obviously moved quite quickly earlier in the year, and although it's always disappointing to have to make redundancies, I do think that that was the right decision to make, and particularly as the year unfolded. We retain a structure that's capable of supporting that sort of 16,000 to 17,000 unit structure, Our function of recovery to those volumes is going to be a combination of the macroeconomic environment, easing and affordability, and importantly, the overall easing up of that sclerotic planning system that we've talked about. But look, we remain sort of ambitious overall for the business. I think that we're really well positioned, Glynnis, and we're poised. And if the indicators were right, then we would start sort of moving the business in that direction. And then finally on government interaction, there's a lot of interaction. We're both at Taylor Wimpey as our own business entity, but also with the HBF and some of the other sort of umbrella groups. And they have been mostly focused around planning. Supply side has been a big part of those discussions, but there have been some demand side conversations. They're probably getting a bit old now. They were really in the spring, around the spring budget. But we would expect some of those conversations to start again now as we head into the autumn and the autumn budget. And then nutrient neutrality, we're getting more positive signals from government, but it does seem to be quite a legal knot that has been woven around it. We're looking quite hopeful at one point, but it seems to have gone a little bit quiet. It's a very complex issue, as you know, but probably more optimistic, but I'd say on a very measured basis than I was earlier in the spring.

Can I ask how many sites you have tied up with nutrient neutrality?

It's a difficult question to answer, Glenis, because we have a number that are stuck because of the requirement for assessment, but that there are solutions. Those solutions are part what we can do on site, part what we can do. So, for example, in Teesside, we've recently successfully bid for and acquired some of the credits from natural resources. England. So it's continually dynamic and we're taking our cautious approaches about the way that we're sort of plugging those into our forecasts and plans in the future.

Thanks. Ainsley Lammer from Investec. Just two questions for me. Coming back to the last four weeks of trading, I'm obviously aware it's a very short period, but The cancellation rate has gone up to 24%. What should we read into that? Is that more indicative of a weaker market, higher interest rates having their effect, as opposed to the kind of seasonal slowdown? Just interested to hear your thoughts around that increase. And then just on cost inflation, I think, Chris, you mentioned current tender prices, inflation is around 6%. You expect it to go to 3%. Just a bit more colour around what's driving that trend, labour, materials, and any other colour you can give. Thanks a lot.

Yeah, I mean, just on the four weeks and, you know, 24%, you know, it sounds high, but you need to look at it in terms of the overall gross sales versus the cancellation. So in absolute terms, you know, numbers on the order book, it's not that great. It's just that the overall sort of sales number is low. And then I'm going to pass cost inflation to you, Chris.

Yeah, no, that's fine. I mean, the main driver of cost inflation in terms of the 6%, obviously, has been materials. energy-intensive categories, anything sort of cement-based over the last 12 months have shown increases. We aren't anticipating any further pressure at this point from energy. You know, we'd be looking hopefully to get some reductions as hedges expire, you know, if the energy prices stay where they are. So, you know, that would be one element of that reduction down to low single digits hopefully by the end of this year. And on labour, yeah, there's been less pressure from labour in the 6%. Sites across the industry obviously have become less busy over the course of the year. That is mitigating the pressure on wages. Most recently we've had, you know, the most success with, you know, negotiating on labour-only trades because it's just so much more transparent. And so, yeah, I suppose I'm assuming that that's really quite flattish by the time we get to the end of the year within that low single digit. So really that's sort of weighted towards materials.

Just one follow-up. On the cancellation rates, how does it compare to the autumn period last year in terms of what you're seeing?

Yeah, I mean, I think last autumn we got up to about 29% over, you know, sort of one of the discrete periods of cancellations. But it was the same, you know, it was the same balance. You know, gross sales were down. Therefore, the cancellations have a more meaningful impact. I think if we looked at absolute numbers and, you know, Chris, you'll correct me if I'm wrong. there's nothing that stands out. Ainsley, if that gives you any, you know, it doesn't look like, you know, a particular run, for example, on sentiment. It's just the math. Yeah, that's right.

Marcus Cole, UBS. A couple of questions for Chris on the cash flow. I just wondered if you could help us out with the moving parts in H2. And I just wondered where you get to land creditors by the year end.

Yeah. So I guess you've got the guidance, 500 to 650 million for the year-end cash. That is based, you know, the range is based on the volume range. It assumes roundabout 650 million of net land spend. So I think we did 323 is what we just said for the first half, so roundabout the same amount again for the second half. Exceptional provisions in total were around about $50 million. Pensions for the year, $7 million. So, yeah, and then land creditors, I would expect to see them to continue to increase as we move through the year if we remain in the same position on land, which I would expect us to.

Thanks very much. Charlie Campbell of Librem. Lots of questions not answered already, so just one really from me. I'm intrigued to see the joint income stat that you showed, 66% was it from memory. It just seems a high number. I just wondered how that compares to normal periods in the past or whether that's just a function of first-time buyers being slow. I just wondered if you could help us with that because that would be a higher number than I would have expected it to be.

Yeah, it's a good question. I'm going to again put our health warning that this is a sort of data that's called from our IFAs because we don't hold this data ourselves. I'd say, Charlie, that we were surprised by some of the data, so we rechecked it. So there's definitely a sense that, first of all, that double income, it's very hard to map when incomes come together what the outcome's going to be. I can't really give you very much more other than that's the data that we had. We rechecked it because it was surprising. We even looked at it on a geographical basis and actually that didn't explain it. So, you know, it is what it is. So, Ami.

Thanks, Amigal from Citi. Just a couple of follow-ups from me. One on planning. Beyond the broader sector challenges around planning, What proportion of local elections played a role in the sort of planning delays in the first half? And incrementally, do you see that improving as we got into the second half in that respect? And also on the plots pending planning that you gave us, that was quite helpful. Do you have any color of what that number looked like last year at this time? The second one, really, in terms of, I mean, on the cash side, the last follow-up, really, was on the work in progress. I mean, we've seen infrastructure investment on the back of site openings in the first half. But I kind of look historically, the level of work in progress is at a pretty elevated level versus, say, revenue. Is that the new normal, or do we expect that to normalize in the future years? And as we kind of think about site openings and maybe if the average outlet levels remain similar to, Next year, they remain similar to this year. Do we need further investments on infrastructure?

Okay, on planning, look, I think you've got to the heart of one of the issues, which is, you know, planning is determined at a local level, at least in the first instance. And our preference as a business has always been to drive sort of mutual outcomes at local levels. So local elections do have an impact. Planning committees go into PERTA. So there's sort of a gap in decision making if there's a meaningful change. And there has been in quite a number of councils this year. It takes time for planning committees to reconstitute. planning officers and chief planning officers might decide to take less controversial or, you know, sort of significant schemes to the first committee just to help them bed in. So there's absolutely no doubt in my own mind that years where there's meaningful local government elections that we do suffer delays in decision making. I think, you know, history will show that we get there, but it's we get there in the end as opposed to on our original timescales. Over the years, though, we have sort of increasingly in our operational businesses, they do map local government elections. We do take local political movements into account. So they don't come as a surprise, but it does have an effect. In terms of sort of plots for last year, actually, we don't have the data from last year because we really only tend to do it at full year end, if you remember, sort of almost like a little census. But we've been tracking it more closely because of the scale of opportunity that is in there. I would say that last year it would have been a little bit lower than it's sitting now as we've put in sort of schemes we were building up through that land acquisition activity that we had in 21 and 22 going into applications. And we've got a little bit of, you know, ins and outs now happening. I think at the prelims we were at around 25,000. Now we're at 26,000. And I think that that's a pattern that unless we see, you know, a real sort of change in local decision making, that that's probably going to stay there, which is, you know, my comment about I think we need a hopper of that size in order to pull through that. And, you know, outlets-wise, I've given you as much colour as I think I can give you, Ami. You know, we are sort of well set for sort of more outlet openings this half. 2024, we're in a really strong position, as I said, in terms of, you know, planning control, ownership control for our 2024 plots. And then it's a factor of where we go on land acquisition, you know, planning, you know, how... how much improvement of any we see through that process. And then I'm going to throw the whip at Chris.

Yeah, I mean, we started the year with a whip on the balance sheet of $1.7 billion. and we have managed WIP spend very, very tightly all the way through the year. But given that we're over 90% forward sold and the volume is weighted towards the second half and you've got build cost inflation, that's why the balance is $1.9 billion at the half. And I think it's just worth reflecting in terms of the – The question about, you know, all right, is it reset? If you look at cumulative bill cost inflation actually over the last three, four years, actually it's more material than you might think it is. And I think, you know, for years we had, you know, bill cost inflation around about, what, 3%. And you sort of, at that level, it's in the noise and you sort of forget about it. but it's just been more elevated of late, and that does sort of cause you to research on nominal values, actually what is a sensible level.

Thank you. Sorry. Go ahead.

Thanks. John Fraser Andrews. Three for me, please. Firstly, incentives, the 5%. Can you just recap the journey of those from last year, what the base level was before the mini-budget and how those have oscillated in half one in the sort of better trading period in Q1 and the deterioration? Secondly, sites, the reduction from December Is that purely planning or any strategic choice on your part? Is it strategy to grow sites, average outlets open from here on? And finally, in Spain, it seems to be a remarkably resilient market compared to the UK in terms of completions, pricing, margins. Everything looks pretty stable. Perhaps you could elaborate on if that is the case, and the outlook there. Thank you.

Okay. So in terms of incentive journey, I'd say the first half of 2022, incentives were very, very low, if you can remember back that long. We were really sort of pushing value and price. Through the sort of last quarter of last year, I think the incentive usage went up and we exited the year at about 4 or 5%, but overall incentives for 2022 were about 2%. At the start of the year, I think we were closer to 5%. There was a period where the sales rate started to pick up, where we did observe a ticking down of incentives, so probably falling sort of in the mid-4% range, but it's ticked back up again. So that's the journey. It sort of oscillates with confidence in the market. In terms of site reductions, it's very much planning. It's not a strategic decision. I can absolutely state that we are on every site that planning allows us to be on. We were focused. One of our sort of business internal priorities is to, you know, continue to liberate our outlets. We, you know, see little benefit in holding outlets back. We do need to look at them in terms of the WIP, you know, sort of the opening structure of the outlet, but, you know, we will continue to sort of open all of our outlets. And then to the point on Spain, it is, you know, we can see that demand has remained really robust there. Obviously, it's predominantly second-hand homes or sort of second homes. So, you know, it's a different kind of buyer that we have in our Spanish business. But, you know, pricing has been holding. There has been some inflationary pressures there, but they're coming in quite well. The outlook remains quite favourable in our Spanish business. Thank you. Pass the parcel.

Thank you. Sam Cullen from Peel Hunt. Just two, if possible, and thanks for the... Thanks for waiting, Sam. That's all right. Thanks for the mortgage stuff on slide 17. Just one step further, I guess. You've got the 69% people that you've reserved in July, first interest in May. Have you seen a tick up, just looking at the percentage of second-steppers have increased in people porting their mortgage and a reduction of people sort of playing in the spot market, if you like, in terms of refinancing it? five and a half or six, or are they taking a 2% fix they had in 2021 and moving that over to a TW product?

I mean, it's hard for us to see that visibility, but in discussions with our sort of sales and marketing team, until customers go to our brokers that probably are a bit more informed, very few customers are actually aware of their ability to port mortgages. And that's certainly one of the myth-busting, you know, actions that we tend to take. You know, I know I can see in Drummond, you know, here our divisional chair in the Covers Scotland, and they've had quite a lot of success, for example, on, you know, having IFAs and brokers on site to talk to customers about some of those tools. We did see a little bit more taking variable rates towards the end of last year and early this year. That seems to have changed, and the customer seems to be valuing certainty in their mortgage insofar as we can see.

Thank you. The second one was on you answered Glynis' question about chats with the current government. Given planning looks like it's probably going to get worse before it gets any better, so we can run into next year's election, how much talk have you had with the other side of the aisle on potential changes?

Yeah, I mean, we're in a pre-election sort of period, and so we are engaging. We're engaging across all the political parties and have had quite a good level of engagement with Labour as well as with the government.

Thank you. Anthony Marion from Bank of America. Just a final one from me, maybe more for Chris. On the outlook for net operating costs, can you remind us of how much of the cost savings have been realized this year, how much is going to be in next year? And is that enough to offset the other inflation you're seeing in that fixed cost basket? Not to push you on 24 guidance, but, you know, how should we think about that evolving, you know, over H2 and into next year?

Yeah, okay. So net operating expenses, I think, $118 million in the first half. I would suggest that if you doubled that and took off a little bit, that's probably close to where we'd be for the full year. And the reasons for that, the savings that we expect this year were probably around about 85% of the full annualized run rate. So you remember that when we announced those changes, we were targeting... $19 million of savings. There was a cost of $8 million in the first half. In the first half, we achieved $7 million of savings, five of them in net operating expenses, two of them in cost of sales. And obviously that run rate will increase in the second half, so you'll have, I think, sort of in net operating expenses, a benefit of 2 million from the increased run rate in the savings and a benefit of not having 8 million of change costs in there. So there's like a 10 million benefit in the second half in net operating expenses. But that is partially offset by wage inflation and the opening of the new timber frame factory. and also just general inflation as well. So that's why I say double it and take a bit off. Great. Thank you.

Thanks. Okay. Then just to close, thank you for all your questions. I think we've performed well, given the backdrop. We're in a great position. I think we're well prepared for whatever the market throws at us, and look forward to speaking to you in the autumn. Thank you.