Taylor Wimpey plc

Hi, good morning everyone. I think we're just going to take the heating down a little bit because it's a little bit warm here this morning. So it looks good to see you all today. Just to get a start, take the heating down a little bit because it's a little bit warm here this morning. So it looks good to see you all today. Just to get us started, so as usual I'll take you through some of the highlights from the half and Chris will take you through the detailed financials and then I'll come back on how we're set up and the outlook. So firstly, underlying performance is good and delivering in the first half what we said we would. And turning to the current housing market conditions, the fundamentals underpinning demand remain good. However, the market has softened more recently and is a little bit more uncertain than we hoped for coming into the year. I'll come back and talk about that a bit later. But you'll have seen that we are reconfirming our guidance for the year of 10,400 to 10,800 completions. And of course, you'll also have noted the announcement this morning of an increase in the cladding and fire safety provision. Chris is going to cover this in more detail shortly with a full explanation of what's driven the increase, but so just up front from me. The topic of cladding remains very important to us and we're 100% committed to getting this right, to doing the right thing for our customers and leaseholders and, of course, progressing the remediation works swiftly without compromising safety or quality. And then finally, you'll have seen from our release this morning that we're going to be hosting an investor and analyst event on the 1st of October. I think, as you know, our strategy at Chair of the Wimpy is to focus on through the cycle operational delivery. And as we look to the next stage of the cycle, I think now is the right time to take you through how we've set up the business for growth beyond 2025. So I hope you'll all join us for that. Okay, so turning now to our usual highlight slide, a sales rate of 0.79 per week, which is 0.73 excluding bulk, I think was a good performance against a market that was robust up to spring, but not as strong during the second quarter. As you can see, we grew group half-won completions, including JVs, by 11%. However, operating margin was impacted by an unexpected cost at a completed London development undergoing remedial works, where we stepped in to take over work of a principal contractor who has withdrawn from site due to financial difficulties. My thanks go to our teams and subcontractors across the group for all of their hard work in achieving today's result. And we'll come back later in the presentation on how we're positioned for the future, but our strong land bank and continuing drive for high standards and customer service and quality give me significant confidence in the future. We've characterised our overall trading performance in the first half as resilient, reflecting a good first quarter, but as I said, becoming softer during the second quarter. You can see this reflected in the sales rate, which has not seen any benefit from the recent rate cuts. As a result, and as you would expect, we are leaning into self-help measures, we're leveraging our database, we're driving the basics, and of course, we're leveraging our very and highly engaged sales teams. We continue, however, to see the benefit of offering a quality product in the right locations and a resilient customer base. With affordability still challenging for many, especially the first-time buyer, we see some fragility in chains. But I'll talk more about that and what we're seeing from the market after you hear from Chris. So finally, we're on track with outlet openings, and we've opened 23% more in the first half than in the same period last year, and more outlets to open in the second half than in the first half. We've already started on site for around 50% of the outlets due to open in the second half. So I'll pass over to Chris.

Thanks, Jenny. Good morning, everyone. So we delivered a good underlying performance in the first half of 2025. A 12% increase in group completions helped drive a 9% uplift in revenue, which reached £1.65 billion. Pardon me. Both our gross and operating profit were affected by an unexpected £20 million charge, and this stems from a historic London development where defective workmanship was uncovered. The principal contractor had been undertaking remediation works, but was since withdrawn due to financial difficulties. As a result, we've provided for the cost of completing those works. Excluding that charge, our underlying half-won operating profit was £181 million, representing a margin of 10.9%, slightly ahead of the guidance we gave at the full year. Including the charge, the reported operating margin stands at 9.7%, as you can see on the slide. Tangible net asset value per share has reduced by 5.6% year-on-year, driven principally by the increase in our cladding provision, which I'll explain in more detail shortly. Despite the softening of the market backdrop in the UK since our last update, we delivered a well-balanced and resilient performance in the first half, reflecting our disciplined approach and consistent execution. Our UK sales rate averaged 0.79, that's a 5% improvement on last year's 0.75 and helped drive a 9% increase in UK completions. We delivered full improvement on last year's 0.75 and helped drive a 9% increase in UK completions. we delivered 4,894 homes excluding joint ventures, which represents 46% of the midpoint of our full year volume guidance range. The blended average selling price came in below our half-won guidance of £330,000 and this was mainly due to the mixed impact of a high value London apartment scheme moving into the second half and a higher proportion of affordable homes in half one at 21.6% of completions, which is slightly above our full year expectation of around 20%. We anticipate a lower proportion of affordable homes in the second half, which should bring the full year mix back in line. As a result, we continue to expect a full year blended average selling price approaching £340,000. As I mentioned on the last slide, both gross and operating profit were impacted by the unexpected £20 million charge, and you'll see more detail on that on the next slide. Overall, it was a resilient first half, which is testament to the consistent approach of delivering high-quality homes with discipline and focus. So this slide sets out the key drivers behind the movement in our UK operating margin for the first half of 2025 compared to the same period last year. As we outlined at the full year results, lower pricing in the opening order book and modest bill cost inflation created a small drag on margin around 70 basis points combined. Land bank evolution also had a small impact as we continued to trade out of older high margin sites bought in the years after the Brexit referendum. We flagged at the full year that the margin reported in half one 2024 included a positive contribution from land sales which were margin accretive. As anticipated that benefit hasn't repeated this year resulting in a 90 basis point headwind to margin. The most material item is the 20 million charge related to the historic London development where that principal contractor has withdrawn from remediation works. This was not anticipated in our original guidance and has reduced half one UK operating margin by 130 basis points. We are pursuing the contractor for breach of contract. In total, these factors account for a 300 basis point year-on-year reduction in operating margin. Excluding the unexpected charge, the movement is fully in line with the guidance that we set out in February. Looking ahead to the second half, we expect stronger volumes to support improved operating leverage which will help drive margin improvement. While bill cost inflation remains modest, it will continue to exert some downward pressure on margin. Overall, assuming pricing remains stable, we're well positioned to deliver a stronger operating margin performance in half two through continued disciplined execution. Turning to cladding and fire safety. As part of our ongoing work to meet the government's remediation action plan deadlines, we've continued to carry out intrusive investigations and update fire risk assessments across our legacy buildings. These assessments have evolved over time, particularly as chartered fire engineers have adopted increasingly cautious interpretations of the relevant standards, especially PAS 9980, which provides recommendations and guidance to fire engineers when carrying out fire risk assessments. While our initial building assessments were carried out thoroughly based on all accessible information available at the time, many of the issues we are now identifying, particularly cavity barrier defects, are located behind external finishes such as brickwork and render. And these areas aren't visible without physically opening up the structure which requires intrusive investigations. As a result of these assessments, we've increased our cladding provision by £222 million in the first half. Of this, £145 million relates to confirmed or estimated cavity barrier defects, including £94 million for buildings still awaiting external fire engineer assessments. A further £39 million reflects more conservative interpretations of the PAS9980 standard, particularly in relation to timber and HVL cladding types. The remaining 38 million covers site-specific cost increases, professional fees, contingency, and an uplift in building safety fund-related properties. Given the long-term nature of these works, with cash outflows now expected to extend to 2030, we've applied discounting and included an allowance for build cost inflation. Clearly today's update, reflecting the new information we have, represents a significant increase to our cladding provision. Our priority remains doing the right thing for our customers and leaseholders, completing these works as quickly and efficiently as possible without compromising on quality or safety. our cost assumptions now include a best estimate allowance for cavity barrier defects on buildings that have not yet been intrusively assessed, helping to reduce the risk of further material changes. From a cash flow perspective, we still expect to spend around £100 million on cladding rematerial changes. From a cash flow perspective, we still expect to spend around £100 million on cladding remediation in 2025 as previously planned. The increase in provision mainly relates to works that will take place in future years. However, as the provision is tax deductible, we anticipate lower tax payments in 2025 and this reduction is expected to more than offset the increase in remediation spend in 2026. So overall, we don't anticipate a material change to cash flows in the period to the end of 2026. That said, we remain fully committed to resolving these issues responsibly and efficiently. We continue to maintain a strong and disciplined balance sheet with net assets of £4.2 billion at the end of June. land holdings are slightly higher than june last year with own short-term plots increasing from 59 000 to 62 000 supporting future delivery the value of land net of land creditors is broadly flat as expected work in progress is up year on year landing within the range i guided to of 2.1 to 2.2 billion And this reflects the second half weighting of completions and continued infrastructure investment in new outlets, positioning us well for delivery into half two and into 2026. The increase in provisions reflects both the increase in the cladding provision and an 18 million provision related to the previously reported commitment to conclude the CNA investigation. Both items are classified as exceptional. Turning to cash flow, the movement in the period reflects our commitment to position the group for growth through investment in opening outlets and our differentiated dividend policy which provides a much valued stable income to shareholders. We closed the half with a strong net cash position of £327 million which is within the range that we guided to in February On an adjusted basis after deducting land creditors, gearing remains very low at 5%, underlying the strength of our financial position. In addition, we've extended our 600 million revolving credit facility by a further year, now maturing in July 2030, alongside our 100 million euro loan notes, further strengthening our long-term liquidity profile. As planned, net investment in land remains minimal, reflecting our focus to drive improved capital efficiency by growing into our strong land bank. Meanwhile, the increase in WIP reflects investment to support delivery in the second half and beyond. Tax paid in half one did not fully reflect the increased cladding provision so tax payments in the second half will be lower as a result and for modelling purposes the pre-exceptional group effective tax rate for the full year is expected to be around 28%. Cladding related cash outflows were lower than anticipated at £20 million due to the timing of payments to the Building Safety Fund However, we continue to expect total cladding-related cash spend for the year to be around £100 million. And finally, we returned £165 million to shareholders through the 2020 full final ordinary dividend, demonstrating our continued commitment to disciplined capital allocation. So this slide will be familiar. Our capital allocation priorities are unchanged. We continue to guide how we manage the business with discipline and focus. First, we maintain a strong balance sheet that's non-negotiable and underpins everything we do. Second, we invest in land and WIP to support future growth. As mentioned earlier, we've increased investment in WIP to support outlet expansion and completions in the second half and beyond. Third, we continue to pay a sustainable ordinary dividend, returning 7.5% of net assets annually through the cycle. Today, we're announcing an interim dividend for 2025 in line with that policy, 4.67 pence per share payable in November. And finally, where we have excess cash, we will return it to shareholders. We've done that consistently and we'll continue to do so at the right point in the cycle. Now, I think this is the right time to pause and reflect. We've had a number of questions recently about the sustainability of our ordinary dividend policy, and that's entirely fair. When you return two-thirds of your market cap to shareholders over seven years, people naturally ask, can it continue? The answer lies in how we've planned and managed the business, not just in the last year, but over the long term. Our shareholder returns policy was introduced in 2018 and has remained unchanged since then. It's a core part of our strategy, intentionally differentiated from others in the sector and designed to deliver change since then. It's a core part of our strategy for reliable returns through the cycle. Since its introduction, we've returned 2.7 billion to shareholders, 1.9 billion in ordinary dividends and 840 million through specials and buybacks. That includes 1.2 billion in ordinary dividends alone since the start of 2022 as we've navigated the current downturn. And we've done that while maintaining a strong balance sheet with low adjusted gearing and a land bank with over seven years of short-term supply. 82% of which at the end of June was already owned. That hasn't happened by chance. It's the result of deliberate, disciplined investment decisions. We already own and have planning for all of the homes that will legally complete in 2026 and we're actively building on the sites that will deliver more than 80% of those completions. The land we're approving today is for delivery in 2028 and beyond because we already own and control everything we need for 2027. That gives us flexibility. Depending on the quality of the opportunities available, we can adopt a replacement approach to land acquisition, maintaining capital efficiency while retaining full confidence in our ability to grow. And we know that our land bank can support that growth because the scale of our short-term land bank at 76,000 plots is at a level that has previously supported significantly higher volumes of completions. So as we stand and sit here today, reflecting on both our progress and our path ahead, we remain confident that our dividend policy strikes the right balance. delivering an attractive and sustainable return to shareholders while supporting the group's continued growth. It is a policy that aligned with our long-term strategy to create value, ensuring we reward shareholders today while investing responsibly for tomorrow. Finally, turning to guidance. Our UK volume guidance remains at 10,400 to 10,800 completions. Company compiled consensus currently sits just below the midpoint of the range at 10,588, which we think is fair given the softening in the market in Q2 and uncertain outlook for the second half. As a result of the unexpected 20 million charge outlined earlier, we are revising our full year group operating profit guidance from 444 million to approximately 424 million, and this reflects the one-off nature of the charge and does not alter our view of the underlying strength of the business. Expectations for net finance charges have increased to around 25 million in the year, largely due to discounting of the cladding provision The share of profit from joint ventures remains consistent with our previous guidance. We expect year-end net cash to be around £350 million depending on land spend timing, broadly in line with consensus. In summary, we've delivered a first half performance that is in line with expectations on an underlying basis. The increase in cladding and fire safety provision is clearly disappointing but our focus remains firmly on doing the right thing for our customers and leaseholders and progressing remediation works as efficiently and safely as possible. We're well set up for the second half and beyond and our ordinary dividend policy remains fully supported by the strength of the balance sheet, our land position and our disciplined approach to capital allocation. And I'll now hand you back to Jenny.

Thanks for that, Chris. So while performance has been good in the first half, the current market is not as strong as the spring. But if we think of the fundamentals, many do remain supportive. Unemployment remains low and we continue to see real wage growth. For those with a loan to value of 75% or better, it remains cheaper to service a mortgage than to rent. The desire for home ownership remains high and underlying demand remains good. And there also continues to be good news in the availability of mortgages. Lenders continue to be competitive in the market and mortgage rates are marginally lower than where we entered the year. So trending in the right direction. But all that said, there are challenges for our customers. Affordability remains a key headwind at today's rates, especially for first-time buyers. And of course, interest rates have remained higher than many predicted at the start of the year. And finally, on this slide, it is noticeable that since the spring, we are seeing a greater supply of second-hand stock coming to the market, the most for a decade. So whole market competition is a factor. coming to the market, the most for a decade. So, in the next slide. Pricing remains relatively stable and down valuations remain low. Cancellations are a bit higher, reflecting, I think, the fragility of chains, which in turn can be traced back to the affordability challenge first-time buyer. As previously flagged, Section 106 delivery has been more challenging, though we're in a good place for this year. The recently announced funding of £39 billion over 10 years via the Social and Affordable Housing Programme, the rent settlement and the consultation on the route to rent conversions are all very welcome. However, these will not immediately flow to increase Section 106 funding in the short term. This will remain a sector wide issue until we have clarity and visibility of the flow through of that funding to increase appetite and commitment from housing associations for Section 106 affordable homes. So we're very focused on driving performance in this market. When I spoke to you in February, I flagged that we had adjusted our approach to digital marketing to drive up the quality of our leads. This work has continued throughout the period with a focus on the quality of leads and improving conversions. Feedback from our team suggests that this change in market sentiment came post-Easter 2020. Cancellations are something of a mixed bag, but anecdotally our teams would call out customer caution overall and by those whose affordability is really being tested in today's environment. The permanent mortgage guarantee scheme and the recent announcements and changes in the FCA and PRA rules are incrementally supportive, but for an affordable mortgage at today's rates, deposit building is needed. With no government assistance for the first time buyer for the first time in 60 years, this is one of the biggest hurdles for those aiming to get on the property ladder today. So we just launched a new nationwide summer marketing campaign, which is landing well and generating some strong levels of inquiries. The campaign emphasizes the differentiation in our offering, how we're able to support customers in getting on the ladder and the benefits of new build. The campaign is aimed at driving people towards our sites to engage with our sales teams on the ground and our offer is aimed at gaining that all-important customer commitment. And not surprisingly then, incentives remain a key part of the offer. Chains are longer, and as you heard me say earlier, can be fragile. So we have packages available to assist the next stepper. So, for example, Easy Mover, when our experienced sales teams assist the customer in selling their home, or Part Exchange, which our customers can use, our teams can use in a disciplined way as a tool to help our customers. So as you already know, the MPPF represents a very positive step in planning opportunity and housing delivery for the sector and is an absolute must in addressing the housing crisis. However, we look to the implementation phase now in order to drive delivery. It's still relatively early and much still needs to be done, but we have seen signs of encouragement, which I'll run through shortly. Part of the implementation impetus is expected to come from the Planning and Infrastructure Bill, which we expect to streamline decision-making and support the more timely delivery of planning consents. And as you can see from the slide, the bill is currently progressing through the legislative process. So moving in the right direction. There's a lot of other regulation also making its way into operation. We have the building safety levy which is expected to come into effect from the 1st of October 2026 with guidance on its operation issued just earlier in July. As you would expect, we are actively preparing for its implementation in relation to both new and existing land assets and will mitigate its impacts wherever possible. We also await the update of the future home standards expected in the autumn, which, as you know, we have been preparing for for some time. So directionally, we are pleased with the changes underway for planning and supply side support to ensure that we have land and consents from which to deliver those much needed homes. But the demand constrained by affordability in many areas progresses perhaps slower than we had hoped. So given this backdrop, it remains critical that we control the things we can to drive value for our stakeholders. And as ever, it starts with land. We continue to have a strong land bank strategic pipeline and balance sheet. And as Chris pointed out, this means that we are in a good place to grow volumes when market conditions allow and do not need any new net land investment to do so. You will have seen from our release this morning that we'll be hosting an investor and analyst event on the 1st of October, where we will talk to you in much greater detail on how the business is positioned to navigate the next stage of the cycle. But in advance of that, let me update you on some of the actions already underway. So for the last two years, we've been focusing on getting the business ready to deliver growth and in doing so, increase efficiency. To leverage the improving planning environment, our focus for some time has been on deliver growth and in doing so, increase efficiency. To admitting high quality planning applications, including assertive and enterprising applications drawn from our strategic pipeline. We currently have around 29,000 plots and planning for first principal determination. That's up from 26,500 in December. A continuation of the strategy we commenced in 2023. We have more planning applications in preparation targeted for submission during the second half and into 2026. So whilst in the first half of the year conversions from the strategic pipeline continue to reflect a sluggish planning system, we remain positive of the actions we have taken and we would expect the pace to increase towards the end of 2025 and into 2026. So with that planning activity driven from our strategic pipeline as context, we will continue to be active, though selective and opportunistic in reviewing land opportunities as we remain mindful of securing and ensuring that the group has an efficient land bank. And this is reflected in the relatively modest 3,000 new plots approved in the period. Importantly, we now own all of the land for 2026 completions, over 90% of which has detailed planning. And we continue to expect to open more outlets this year than in 2024, with new outlet openings waited towards the end of the year. So still lots to do, but we remain optimistic. Decisions are still sporadic and the time delays continue to be frustrating. But this slide includes just a couple of examples by way of illustration. These are some of our earliest assertive applications and are at the smaller end of the site size, which is what I would expect to see at this stage of the planning cycle. In Hamilton Selby, we submitted an outline application for 110 homes in December 2023. At the time, the council could identify a five-year housing land supply, but the local plan was not forecast to be adopted until December 2025. However, in July, 2024, when it became clear that the MPPF would require a significant increase in housing requirement, the council agreed to work proactively to bring forward sites to maintain land supply. The council became more engaged in quarter one, 2025, which turned constructive in quarter two when the application was brought to committee and the scheme unanimously approved subject to section 106. In Buntingford, we made an assertive planning application for 200 homes and that was submitted in February 2024. In this instance, the local plan was over five years old and we predicted that the council did not have a five-year housing land supply. Our strategy aligned to that deficit kicking in during the determination period. The scheme was initially taken to committee prior to the MPPF being confirmed in October 2024, at which time members were opposed. However, the application was returned to committee for determination in January 2025 when it was approved by a significant majority vote. So I think these applications just serve to illustrate both the benefit of our early application actions, thereby ensuring that we're in a good place to achieve early planning outcomes from the introduction of the MPPF, and also how some councils are responding to the challenge of increased housing targets. So as I say, still sporadic, but with a focus by government on the implementation phase, we hope to see more decisions like these emerging in the near term. So to conclude, we are continuing to focus on operational excellence to protect and drive value and position the business for growth. We've been preparing for growth for some time, and we've been front-footed with assertive and enterprising planning applications to enable us to get ahead. This, together with our strong land bank, means that we have great visibility for next year and beyond. And the foundations to deliver growth have already been laid to with Taylor Whidbey Logistics, our timber frame factory, Taylor Whidbey Manufacturing, and the work that we've done in improving service, quality and skills. Today's market is not straightforward, but we have reiterated guidance on an underlying basis. And as you expect, we continue to drive sales and are focused on building our order book to position us best for 2026. And subject to the market, we are well placed for growth given our strong balance sheet and excellent land bank. And finally, as I mentioned earlier, on the 1st of October, given our conviction in the strong long-term fundamentals of the market, we will host an investor and analyst event and take you on a deeper dive into how we've set the business up for growth beyond 2025. I look forward to seeing you all there. So now I'm happy to move to questions.