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.