Earnings call: Taylor Wimpey maintains strong landbank amid market challenges

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Earnings call: Taylor Wimpey maintains strong landbank amid market challenges
Credit: © Reuters.

In a recent earnings call, Taylor Wimpey (LON: TW )'s CEO Jennifer Daly reviewed the company's 2023 performance, highlighting a net private sales rate of GBP 0.62 and a robust landbank of over 80,000 plots.

Despite a reduction in sales rate due to peaking mortgage rates, Taylor Wimpey (TW.L) reported stable cancellation rates and increased average selling prices year-on-year.

The company anticipates completing up to 10,000 units in the UK and 500 in Spain in 2024. Daly also noted the company's strong financial position, unchanged dividend policy, and focus on operational excellence aimed at growth from 2025.

Key Takeaways

  • Taylor Wimpey achieved a net private sales rate of GBP 0.62 in 2023.
  • The company maintains a strong landbank with over 80,000 plots, predominantly owned.
  • Sales rates decreased due to high mortgage rates, but cancellation rates remained stable.
  • Average selling prices on completions rose compared to the previous year.
  • Between 9,500 and 10,000 UK unit completions are expected in 2024, plus 500 from the Spanish market.
  • The balance sheet remains solid with an unchanged dividend policy.
  • Early signs of market improvement observed with reduced mortgage rates and increased customer interactions.

Company Outlook

  • Taylor Wimpey is preparing for growth starting from 2025, focusing on long-term success and sustainability.
  • The company aims for 9,500 to 10,000 UK completions and an additional 500 in Spain for 2024.
  • A strong focus on operational excellence and value optimization is central to their strategy.

Bearish Highlights

  • A reduction in sales rate was experienced in the second half of 2023 due to peaking mortgage rates.
  • The planning system poses challenges with extended wait times for planning permissions.

Bullish Highlights

  • Customer interactions and site visits have increased with the reduction in mortgage rates.
  • The current trading is encouraging with sales rates ahead of the previous year.
  • Continuous business improvement and value optimization programs are underway.

Misses

  • Despite a strong landbank, land availability constraints may limit the ability to build more homes.
  • The company expects net cash to decrease due to land creditor payments and the final dividend.

Q&A Highlights

  • Sequential improvement in sales rates has been noted, with mortgage rate fluctuations not significantly impacting customer behavior.
  • Taylor Wimpey is confident in its fire safety remediation provision, although it may change in the future.
  • The company's strategic land conversion levels were good in 2023, with a higher intake expected in 2024.

Taylor Wimpey continues to navigate a challenging market with a strong landbank and a commitment to operational excellence. The company's focus on sustainable growth and value optimization, combined with early signs of market improvement, position it well for future success. Despite some market constraints and uncertainties, Taylor Wimpey's solid financial foundation and strategic planning are seen as key drivers for its anticipated growth in the coming years.

Full transcript - None (TWODF) Q4 2023:

Jennifer Daly: Good morning, everyone, and thank you for joining Chris and I today. We also have our senior leadership here as usual. So I know many of you know them well. So a fairly straight forward agenda this morning. As usual, I'll give a brief overview of 2023 trading and the market backdrop, before Chris gives you a run through of our financial performance and guidance for the year. I'll then come on to how we are positioning the business for the future, our priorities and outlook. So reflecting on the year, I'm very pleased with our financial and operational performance in a challenging market. During 2023, we focused on driving value from our operations using all the levers available to us with cost discipline, a core focus. And there are a number of highlights here on the slide, but I'll just pull out a few this morning. First, our sales rate. We achieved a net private sales rate of GBP 0.62. And I'm really pleased with this because it's not been at the expense of price or driven by large bulk deals. The performance, I think, is a testament to the quality of our product, locations of our sites and a continued proactive sales effort. So a big thanks goes to our teams on the ground for their continued hard work. Second, our strong landbank position. As you know, we were highly selective on new land acquisitions during the year, and we've been comfortable doing so. As I've highlighted many, many times, one of Taylor Wimpey's key differentiators is the strength of our landbank. So with strategic land conversions of 8,000 plots last year, we still have a high level of plots in our short-term landbank at 80,000 plots. This is a really good number, but even more pleasing, over 3/4 of these are owned. And third, again, as you've heard me mentioned many times before, our strategy very deliberately has been to set the business up to perform through the cycle. Our differentiated dividend policy reflects this, and I'm really very pleased that shareholders continue to benefit from this. While much of our focus in 2023 has been on driving value and maintaining our sharp operational focus, we have continued to look to the future and invest in areas that we believe will be the driver for long-term success and sustainability of our business, ensuring that we are poised for market recovery and position for growth from 2025, assuming supportive market conditions. And moving on to trading performance in 2023. The chart on the left of this page shows the mortgage rates impacted sales the year. You can see here the reduction in sales rate as mortgage rates peaked, followed by a gradual return as rates moderated in the second half. It's not a perfect representation obviously, given seasonal impact, but hopefully gives you a good sense. In summary, a weaker than usual summer and a flat autumn period then weaker trading in the second half. And as we flagged in November and again, in January, that muted second half of the year impacted the order book coming into this year and consequently, will impact 2024 volumes. Cancellation rates were stable overall, averaging 18%, in line with 2022. Average selling prices on completions increased year-on-year, largely due to mix. Pricing remained fairly firm. All to all then, we have seen a low single-digit house price deflation from the peak in September 2022. And we'll talk about it later, but while we would always like to have more outlets, I'm very pleased that against an extremely difficult planning backdrop and aligns with our plans, we opened 47 outlets in the year. And so now I'll hand over to Chris.

Christopher Carney: Thanks, Jennie. Good morning, everyone. So the market conditions in 2023 were difficult, but we delivered a good set of results in line with expectations and at the top end of our guidance range. This slide clearly illustrates that the financial performance of the business in 2023 doesn't bear comparison to the record performance we delivered in a very different market in 2022. And this is because lower sales rates in 2023 meant lower volumes, lower revenues and lower profits. But those reduced profits, even with an increase in tax rate, cover the dividend and generate a small increase in tangible net asset value per share. The step down in U.K. completions in 2023 was due to the lower order book at the start of the year in the wake of the mini budget and a lower sales rate throughout the year. The 5.1% increase in private average selling price is mainly due to an increase in Central London completions in the sales mix, plus some underlying house price inflation. Year-on-year, house price inflation on completions was running at 4% in the first half, but that reduced to around 1% for the full year as the impact of increased incentives started to flow through. And I'm expecting prices on private completions to reduce slightly in half 1 this year as the Central London mix reduces and as prices on reservations from half 2 last year are realized. Affordable selling prices also nudged up in 2023, and I'm expecting them to continue to increase in half one 2024. So as private prices moderate and affordable prices continue to increase, that should mean a blended rate for average selling prices in half 1 this year, somewhere around the GBP 320,000 mark. Completions from JVs reduced as expected, and they will stay around the same level in 2024. The 2 largest contributors to the reduction in operating margin in 2023 were build cost inflation and lower volumes. The largest of these was build cost inflation, which ran at 8.5% on completions and reduced margin by over 500 basis points year-on-year. The reduced recovery of fixed costs is mostly seen in the net operating expenses and direct selling costs, which, together, total 260 basis points. There's a small drag, a 20 bps drag, from landbank evolution, which is the impact of older sites, with the cumulative impact of house price and build cost inflation being replaced by newer sites, and this reflects a smaller percentage of completions from high-margin land purchased in 2016 to 2018 after the Brexit vote. Looking forward, just a few thoughts on the impacts to operating margin in half 1 this year. We expect gross margin in half 1 to continue to reduce from the 19.1% achieved in half 2 last year, but the rate of reduction will slow. As disclosed in our January update, we expect underlying build cost inflation of around 4% in half 1 income statement compared to half 1 2023 as the inflation contained in the opening WIP balance is realized. And we will see a small impact on half 1 margin from lower net pricing compared to half 1 last year. And there will also be some small impacts as we continue to invest for the future as noted here, too. As we move into half 2, the impact from build cost inflation will be much smaller. And any impact from net pricing will be a function of how the remainder of the spring selling season goes, but so far, so good with pricing stable since the start of the year. Turning to the balance sheet. The strength of our balance sheet is sector-leading, taking account of net cash, land creditors and provisions. And we think that strength, just like our dividend policy is a differentiator and illustrates the point that Jennie has just made that this business has been set up to perform through the cycle. As you would expect, land and land creditors continue to reduce during the year, reflecting the very low level of purchases. WIP increased in line with our expectations to GBP 1.9 billion, mainly as a result of build cost inflation. And the largest element of the provisions balance is the cladding provision, which was GBP 192 million at the end of the year. And we're continuing to make good progress with 47 buildings fully remediated and a further 19 underway out of a total of 214. And we expect to pay out around GBP 60 million on cladding remediation during 2024. We ended the year with GBP 678 million of net cash, which is a strong position and slightly ahead of our guidance, mainly due to lower than expected land spend towards the end of the year. The net investment in land, you can see on the slide, reflects a reduction in land creditors during the year, exceeding the reduction in land. Tax payments reflect a U.K. headline rate of corporation tax for the period of 23.5%, plus a further 4% for the residential property developer tax. And as things stand, the combined tax rate will increase to 29% this year. So turning to capital allocation. Our approach and priorities remain unchanged. We have a very strong balance sheet, giving us the flexibility to respond to changing market conditions, which continues to be important to the general election year. Retaining our balance sheet strength will continue to be a priority. I'm confident that we have better control of build releases than at any other point in my 18 years in the business. And that's saying something when you consider for 2009, 2010, when and by how much we decide to invest in WIP. In response to improved demand in order to support growth in 2025 is something we are monitoring closely. Our dividend policy remains unchanged, continuing to provide a reliable return for shareholders amidst the unpredictability of the housing market. And so today, we've declared final dividend for 2023 at 4.79p per share, which is due for payment in May, subject to shareholder approval. So looking forward to the balance of this year, we are guiding to a range of 9,500 to 10,000 completions in the U.K., excluding joint ventures, which will be supplemented by an additional 500 completions from our Spanish business, so 10,000 to 10,500 wholly-owned completions across the group compared to 10,766 in 2023. The reduction year-on-year being the result of entering this year with a lower order book. The upper end of the volume range at 10,000 completions has been set to allow for an increased order book going into 2025 to position the business for volume growth and price optimization, assuming stable market conditions. Admin expenses were GBP 233 million in 2023, and we're anticipating they will remain broadly similar in 2024, slightly weighted to the second half. And that will be achieved through efficiency savings, along with the absence of the GBP 8 million of restructuring costs incurred in 2023. And those will be replaced with some salary inflation, a full year of costs relating to our timber frame operations and targeted IT spend to modernize and improve future productivity. We're also guiding to GBP 5 million of net finance charges and a GBP 1 million contribution from joint ventures. So in summary, we've retained a very strong balance sheet in a difficult year. We've tightly controlled both costs and with investment, reflecting market conditions. And the business is very well set up to return to growth from 2025, with a strong landbank position, a highly engaged and experienced workforce and a continued focus on operational excellence. And I'll hand you back to Jennie.

Jennifer Daly: Okay. So I said last month that we were seeing some encouraging early signs of improvement in the market, and I'm pleased to say that, that has continued with positive feedback from our teams on the ground. You'll all be familiar with the reduction in mortgage rates that started at the end of last year. And importantly, there are more mortgage products available at higher LTVs and even more competition among the banks. I think it is important to say that throughout the last 18 months, the banks have continued to be positive about U.K. home lending and the new homes market generally and down valuations throughout have been low. As a consequence of these movements and our sales tool kits, which we talked previously, our teams are having greater success in driving increased levels of customer interactions and visits to our sites. We've seen some improvement on first-time buyer inquiries and an improving picture in terms of mortgage costs versus rental costs. However, whilst confidence is improving, it is worth keeping in mind the time lag between initial interest and making a reservation. But we are encouraged by recent trends and lead indicators, and this is reflected in our guidance volume range for 2024. A number of you have asked me a few times about regional variations. So the bottom left-hand graph will be of interest. The main takeaway here is that there's been no fundamental shift in affordability across the regions, with the exception of London and the Southeast, which as you know, has its own dynamic. So taking a step back, I think it's important to remember that chronic undersupply and regulation mean that the medium- to long-term outlook for the new build housing market remains extremely attractive. I think this underpins our confidence and informs how we position the business to lean into this. Whilst there remains economic and geopolitical instability, unemployment levels remain at very low levels and is a forecast to remain so. We're seeing real pay growth, which together with a reduction in real house prices, will flow through to aid affordability overall. And whether we look at household formation rates or population increases in absolute terms, these are only adding to an already significantly undersupplied position for housing in the U.K. Turning now to current trading. So we're 8 weeks into the year. So it's still early days, and the key weeks of the spring selling season are ahead of us. But to date, trading has continued to be encouraging. Sales rates of GBP 0.67 are ahead of last year. There are no bulk sales in the period, which isn't unusual, of course, for this time of year. And our approach to bulks hasn't changed. And I would expect to see some level, generally on our larger sites planned at acquisition, just to drive capital churn. And as I said, pricing remains reasonably firm with incentives at around the 5% to 6% mark, where they've been for much of 2023. And as a reminder, we use tailored incentives, such as help with deposits and option upgrades as a tool, which our sales teams personalized for each customer. Pricing is tested on a weekly basis. And the same is true for incentives, both on a site-by-site and plot-by-plot basis, in line with our focus on our value optimization. As you can see from the 2 graphs here, organic interest, which is the measure of general property searches that come to our website, is being supplemented with the work that we are doing to drive engagement to our website through social media ads, mail shots and the like as well as targeted marketing using our sales databases. Customer visits continue to be at good levels, and I've been really pleased with the success of our national campaigns like the one you saw on your screens outside or the events we hold on site with our IFAs. We often talk about the customer funnel. And you can think of the journey from first interest to conversion in a number of ways. But in this market, I particularly like this more circular version from Google (NASDAQ: GOOGL ). And what we're seeing from customers in this environment, perhaps not surprisingly, is that they're spending longer on the evaluation stage. So conversion time from first registering to reservation has increased. It's not a huge increase, but just to give you some sense, average days from registration to reservation have increased from 78 days in June 2022 to around 85 days in January this year. And they peaked at around 89 days last year. So overall, confidence is improving, but the ability to convert remains slower. Delivering a robust and engaging customer experience through the whole process, including an extended front-end, is key. The quality of our staff, the quality of our product and the ability of our sales teams to sell that is fundamental in this market and enables us to optimize the value of our homes. I think we've never better understood our customers, what motivates them, what drives them. I've shown you these stats before, and I know that there were quite a lot of interest, and so we've updated them again. But they can be correctly summed up by saying we have a resilient customer base is in a good income bracket and generally has a relatively high deposit even on average, are first-time buyers, and this is largely unchanged over the past year. I spoke to you around the focus we have on getting close to our customers and at leveraging the systems that we put in place to support those efforts, reeducating and upskilling our sales force, and we can see the benefit of this coming through and informing the way that we are approaching marketing. Working our large database has been key in this environment, and our systems have, I think, come into their own and to specifically allow us to target tailored messages to our customers, which will resonate with them and provide them reason to revisit their interest in buying a home with us. So for example, the recent drop in mortgage rates from when customers first registered has given our sales teams a good reason to reach out and reignite the conversation with those prospects. We've also been able to innovate in this environment and add value to the overall customer experience through the use of, for example, interactive tools. Some of you will have seen those at our site at Sudbury last year. And these have been rolled out to all of our sales centers and really demonstrate, I think, the benefits of our new homes. So there is no doubt that we are all experiencing a challenging planning backdrop, which is likely to remain the case in the very near term, particularly in the further period, in the run-up to local elections in May and where necessary, the resetting of planning committees as a result. And this is having a direct impact on progress to outlets in the near term. However, as it's not a surprise, we have been focused on this for some time. But as you know, the time taken to navigate the system has been increasing significantly. So -- for example, 10 to 15 years ago, we used to talk about planning permissions in terms of weeks, 16 weeks, 20 weeks, 26 weeks. But now we talk about them in terms of months and unfortunately, years. With our current applications now taking anywhere between 9 and 28 months. And that's after -- I have to say, removing the outliers. And the average time taken in the 2023 actuals was 19 months. The planning horizon continues to move out further for all the reasons that we've talked about in the past, and we have had to do the same. As you may recall, we've been giving you insight into the number of plots that we have in the system for a while now. At the close of 2023, we had 30,000 plots in the planning system for first principle determination. Though the path to approval is very frustrating. The scale of our activity and planning, I think, does clearly show our firepower and the opportunity we have to deliver much needed housing across the country. We continue to grind away at the system. But I think the important thing is that if national policy were to move to support increased housing delivery more actively, we are on our toes. And we are very well prepared to seize the opportunity. And this is why we think we have the best-in-class landbank. The maturity of our strategic land pipeline enables us to be enterprising and prepare for just such an opportunity and is a really important part of our strategy and how we have set up the business. And I do want to be really clear about this. We do adopt a proactive approach, doing everything we can to put ourselves in the best possible position to accelerate growth on both the market and the policy environment alike. Our application submissions are the best quality that I have seen. And while we have always valued and will continue to value our ability to work collaboratively with local authorities, we will be assertive in using the appeal system, for example, when needed. Our clear priority across the business is liberating our landbank through planning and getting outlets open. And as you would expect, we entered the year building or due to start building on -- in the first quarter on 99.6% of sites with implementable planning consent, with the remainder due to start in the second quarter. And here, I think, is perhaps a good place just to pause and comment on this week's CMA update. We very much welcome the focus on improving the planning system as well as the adoption of amenities and ensuring good quality outcomes for home buyers. We do note the CMA's decision to investigate information sharing. There's nothing we can really say here other than to be really clear that we will fully cooperate with the CMA. So let's now take a look at our differentiated landbank. We have long maintained that we have one-off, if not, the strongest landbanks in the sector. So let me just break that down for you, with 80,000 plots in our short-term landbank and an industry-leading strategic pipeline feeding into that. Our short-term landbank has only decreased by 3,000 plots, and the owned landbank by 2,000 plots in the year, which given that we've been out of the land market for 18 months is a great result, and shows you how hard the work has been behind the scenes to support our resilience. I think this gives us choices to protect value. With the benefit of a very high-quality landbank and strategic pipeline and with the vast majority of our planning in place for 2024, we have the advantage of being highly selective in 2023 to meet demand and drive value. So you can see that new approvals in 2023 were meaningfully down. On new land, going forward, we will remain selective given the strength of the landbank and particularly our owned position. But the dynamic is shifting, and we will be active where we see opportunities. We've approved around 1,000 plots in the year to date, which is largely the result of deals the teams have been working on for some time. So we're not expecting that to be the run rate. Ultimately, it will be a balance between risk, reward and value. Our land teams do hear me regularly say that land doesn't flow like water. And as a result, decisions are very local, and the balance in each area and each site will be different. So what do we mean when we say a resilient landbank? For us, that means the breadth and depth of our landbank. I last shared this data, you may remember, in May 2022. And as you might expect, it hasn't meaningfully shifted. I've been asked quite a lot recently about our approach to single-branded sites. So it's a good opportunity perhaps to remind you about our outlet philosophy and why we do it the way we do? You remember that we recognize our outlets once the sales infrastructure is in place. Our preference is to open a show home rather than a cabin, which helps the customer visualize what it will be like to live on the development. And this, I believe, is particularly important during times of uncertainty. For the most part, we tend to have 1 sales outlet per site. You remember that when we redesigned our house type range, and we spoke about that a few years ago, we ensured that it included a range of homes that were capable of serving the whole price and size range from 1-bedroom apartments to 5- and 6-bedroom homes. This range can be designed in the vernacular to meet a range of environments and setting, and our place-making skills create attractive and desirable communities. So when sales planning for specific sites, our teams ensure that through market research and local knowledge that we utilize the optimum extent of our house type range to drive interest and demand, increasing the breadth of market that we serve and the pool of potential customers within that market area. But of course, we can offer a variety and we can nuance those requirements to the site and market specifics, so by varying sales specifications and customer options to meet varying customer and affordability requirements. We see significant benefit in creating diverse and mixed communities on all of our sites and in doing so, optimize value and, of course, sales. Where we do double head sites, they are almost exclusively on larger sites, where there's a depth of market and that can absorb demand without cannibalizing our own sales rates. And in this instance, we often have the benefit of different accesses and differentiated field. So for example, different character areas, like high-density areas or woodland edge areas. Where we do see more opportunity for value and better market conditions is by running more than 1 build team on a site, and this allows us to flex our production capacity. So continuous business improvement is the way we strive to protect shareholder value against a backdrop of increasing regulatory demands. And I talked to you about our value improvement programs in 2022, and again, throughout last year. And I'm really very pleased that this is getting embedded in the business. And I just wanted to give you a bit of a flavor, a sense of some of the examples. So in 2023, we undertook a full spec review. We systematically assessed our offering for value improvement opportunities, which importantly, wouldn't impact health and safety, brand quality or the customer experience. This has also been the subject of extensive customer feedback and competitor review. So for example, double ovens have been replaced with single ovens in our standard specification, which brings us in line with main competitors, saving close to GBP 1.4 million. We've also benchmarked across the business, undertaking more direct sourcing and for example, saved around GBP 2 million in directly sourcing floor beams. So you've heard Chris and I previously say that we've been increasingly challenging over supply chain for savings and efficiency improvements. And we've negotiated commercially enhanced deals across a number of our nationally managed categories. And we've also managed down the reliance on highly priced material SKUs. For us, this is about discipline and execution. And whilst individually these are modest savings, there are many others in hand and in the group, and I think they will and do add up. And I think that's a good place maybe for me to remind you that we are the only housebuilder that has its own logistics business, casually called Taylor Wimpey Logistics. This enables us just-in-time delivery of build packs across the vast majority of our sites. This also helps with the security of supply and maximize efficiencies and the reduction of wastage. So for example, TWL supplied 99% of build packs on time in full to our sites versus 87% on time in full to Taylor Wimpey Logistics by the wider supply chain. And as you know, part of our investment in the long term is in the timber frame factory, which is helpfully located right next door to TWL. The first units from that factory will come off the production line and will be delivered in half 1 2024. We will, of course, take some time to scale up the factory on build, but ultimately, it will support our goals increasing timber frame usage across the business, which, in turn, will assist us with future skills, buildability and, of course, our environmental goals. And finally, on this slide, our subcontractor portal, My Task, is an example of how we have invested in digitization to improve the efficiency and quality of our customer service. This allocates tasks to subcontractors and enables our teams to closely monitor progress. It's been very positive and practical application and how works are managed on our customer satisfaction and, of course, on work efficiency. And I know many of you came to Sudbury last summer and saw our prototypes. But in advance of that, we carried out quantitative research with 1,000 customers across the country and got some interesting results. The data suggested that 72% would be more likely to buy a home if it were built to future home standard specification. 66% expected those homes to have cheaper bills and around half expected to pay more for it. So we're quite early in the customer education journey, but it's encouraging signs ahead of that major move away from gas. And as demonstrated, we are well prepared for the upcoming future home standard, and we'll be submitting our response to the government consultation in the next month. We are also well prepared for the recently activated requirements of biodiversity net gain. We've known this has been coming for some time, have planned for it and included it in our land appraisals assessments. So some of our sites are already being built to these standards because local authorities moved ahead of regulation, and we're almost there. So let's move on to our priorities for the year. Our focus remains on optimizing value across all of the business. We have a very clear strategy to build a stronger and more resilient business and deliver superior returns, underpinned by our industry-leading landbank. We will flex build to reflect demands and are focused on building a strong order book to optimize price and support growth through 2025, and this is consistent with our intention to prioritize value. Whilst we remain selective in acquiring new sites, we will be active where we see good opportunities to create value for shareholders. And we will continue to intensely focus on getting our significant landbank through the planning system to support growth. And we'll continue to invest in long-term sustainability of the business, including to develop our highly engaged employees. And to finish outlook, as I said, it's still relatively early days, but it is encouraging to see signs of improvement as we come into that all-important spring selling season. As expected, we came into the year with a lower order book, which will impact completions in 2024. Planning and as a result, site openings are likely to be a constraining factor for the sector in the near term, however, we have a very strong landbank, including an industry-leading strategic pipeline, and this has served us very well over the last 18 months and positions us well for the future, subject to market conditions. We remain confident in the medium and long term, with a recognized imbalance in the supply and demand for new housing. And our belief in the structural demand for our homes is unchanged. Our business is very well positioned and has been set up to manage through the cycle. We have shown you what we can do with a strong landbank and with a clear strategy, focused on operational excellence. We remain firmly focused on value. All levers are being pulled to optimize this and to ensure that we are poised for growth from 2025, assuming supportive market conditions. So thank you. And Chris and I are happy now to take your questions.

Q - William Jones: Will Jones from Redburn Atlantic. Three, please. The first, just around the order book. It seems like that's a governing factor behind your thinking for completions in '24. Do you have any levels in mind about where you'd ideally want that order book to be sitting at the end of the year? The second one is really just the extent to which you're confident that first half margins will be the trough for the P&L. And whether there's any comment around landbank gross margins that you might set against that? And then the last one was just coming back to the comments around double-headed sites. Of the 240 or so you had last year, how many of those would have been double-headed roughly? Does that need to rise? And perhaps you can link that back to the preference in the group for just the one-brand approach.

Jennifer Daly: Okay. If I take the first and last. Chris, if I can ask you to speak to the margin and landbank margin. I mean order book-wise, traditionally, we have always managed a strong order book, and that's a position that we would like to return to. And the 35% of future year volumes would be our target within the business. It's going to take time to recover that, but that would be the ideal level that we would seek to get to. On double-headed sites, I think that we had fewer last year given market conditions. I don't think that it would have been very many more than a dozen on -- in the portfolio. Chris, on half one margins.

Christopher Carney: Yes, I think the question was on beyond half 1 margins, if I'm right, Will. I mean we've not given you a margin guidance for the balance of the year. Obviously, we've given quite a lot of detail on that first half. I think there are things that I would point to, though, that pricing has been very stable now for 6 months. And we're reporting today that build cost inflation is flat. So when we look at the margin reconciliation, that tells you that the nature of the items that are going to influence margin in the future because the same things that have influenced margin in the past. And so those 2 big ticket items are sort of neutral at the moment. So yes, I think it really is all about how those trend from here as to where margins in the relatively short to medium term going.

Aynsley Lammin: Aynsley Lammin from Investec. I think I've just got 3 quite quick ones. Just on the year-to-date sales rate, just interested how that trend has been. Obviously, mortgage rates have ticked up in recent weeks. Has the momentum been sequentially very positive as you've seen it edge back a bit, maybe recently? And then secondly, just as you kind of -- if you reach your -- where you want to get on the order book? And what sales rate assumption underlines the kind of 9,500 to 10,000 volume guidance compared to the 0.62 obviously you did last year? And then just interested here, lots in kind of the media around the budget. Interested in your thoughts, what you're hearing, obviously, closer to it than most people, what might come up in the budget.

Jennifer Daly: Okay. Thanks, Aynsley. Year-to-date sales rate, yes, we have seen sequential improvement. If I look at February we've got -- against 0.67 year-to-date, I think the February sales rate was 0.73, and that was comparable to February in 2023 of 0.66. So we are seeing that sequential improvement. And we really haven't seen any sort of change in customer behavior. Compared to the volatility that we saw last year, the nudging around that we're seeing with mortgage rates, really, they're not that significant. And I think when we're talking about customer conversions taking longer, there's definitely a sense that a number of customers are in the market doing the compart of shopping, for want of a better phrase, with a ['92] sort of potential Bank of England movements later in the year. On the sales rate that sort of depends the volume guidance allowing for that building of a strong order book into 2025. It's in the 0.6, 0.7 range. So the current trading sales rate gives you a good sense. We're in that place. And on the budget, I mean conversations with treasury tend to be very one way. We talked to treasury, we don't often get a lot back. But what I would say is there's certainly being sort of inquisitive conversations from treasury around what the various impacts of a range of options would include. Like me, you will have read the press around 99% mortgage guarantee being one that seems to be picking up some of the traction. How meaningful that would be to the market, I think, remains to be seen. We don't actually have very many lenders, 95%. And there's obviously a significant view that banks would have to take around their own trading and how much of a 99% mortgage they could support, even with a mortgage guarantee scheme there.

Christopher Carney: I've got the microphone...

Jennifer Daly: It's just behind you. Yes. Thank you, Chris.

Ami Galla: Ami Galla from Citi. Just 2 questions from me. The first one was on build cost inflation at spot levels. Can you give us some color between materials labor? What are the trends that you're seeing today? And the second one was one on land market. On the back of the transaction that we've heard from Barratt and Redrow, you anticipate in future it will be a lot more challenging or competitive to kind of get on to some of the largest sites that you historically had had access to. I mean what are your thoughts in terms of how this shapes the future competitive landscape in the land market?

Jennifer Daly: Okay. I'll take the land market and, if you will, the materials and labor. I mean, look, I'm not going to comment. As a point of principle, I wouldn't comment on the sort of M&A and particularly not of competitors. But -- from a land market perspective, we've talked last year about a lack of actual availability and that currently sort of remains a constraint. Large sites tend to have particular complexities in their delivery. And we have been delivering these larger sites for a significant amount of time within our business. There are hard lessons to learn in the acquisition management and delivery of those. And I think that we have that knowledge within the business and to the management team sitting among you. So I think I'm not concerned about our ability should we wish to buy to differentiate it and compete really positively and really strongly with anyone else in that market. But the buying is easy. The delivery is where the challenge and expertise is. So on that build cost inflation?

Christopher Carney: The really short answer is materials up a bit, labor down a bit. If you look at sort of things like commodities, timber saw lower prices in 2023, but we're now seeing very early indications of price rises in 2024 due to sort of rising log prices. We have some prices fixed until the end of June, and we have the ability to forward buy when we deem that that's sort of advantageous. Still sort of a similar story in that prices were lower in 2023, but we're starting to see them increase very slowly, expecting less volatility with steel than we've seen in the recent past. And again, we've got a dynamic pricing in place with some of our suppliers to mitigate against that. Gas prices, materially lower than they were and got to see where they go. But I think the forecast is for them to rise this year. And generally, price requests from suppliers have been managed, but that will get incrementally harder as and if the market picks up. And yes, so no real change on -- labor cost, they're slightly down.

Ami Galla: One follow-up on the labor cost. Regionally, are there any pockets of meaningful difference? I mean are you seeing the scope of actually bringing those down more significantly in certain areas?

Christopher Carney: I mean if you go to like quite local sort of sites, you always see a different sort of pricing dynamics depending on the availability of sort of certain trades in certain locations. but there's nothing that I would pull out on a regional basis that is sort of evident at the moment.

Jennifer Daly: No. I think where we see the differences, as Chris has said, across all things, pricing, customer behavior and other things. And to the point on that regional graph, they've tended to move in exactly the same relative balance to -- that they always have. So very local.

Marcus Cole: I've got the microphone in the back of the room. It's Marcus Cole, UBS. Just 2 questions from me. I just wanted to double check your outlet assumption for this year. It seems like you're assuming stable outlets from here to the year-end. Is that correct? And then just the second one is around estate management charges. We don't have much color on the run rate of what's been going on in the last couple of years. Could you just add some -- maybe some rough numbers to the profit you recognized there in relation to the CMA?

Jennifer Daly: Okay. Well, I'll go straight to the estate management. We don't recognize any profits at all, and I can be really very clear about that on estate management practices, Marcus. And on outlets, as you know, we don't guide, but it would be wrong to assume a flat and stable outlet. We're well positioned to sort of open outlets through the year. I was really pleased with the 47 that we opened last year, given all of the headwinds that we've referred to. We'll have a strong opening in half 1, certainly better than half 1 last year.

Luka Bodrozic: Luka here from Bank of America (NYSE: BAC ). Just 2 quick questions. One, just get a clarification on the ASP sort of blended average [320,000]. Is that the H1 or full year? And second, what conditions would you need to see for you to be going back and active in the land market?

Jennifer Daly: Okay. Again, I'll take the land and Chris can take the ASP question. I mean I mentioned sort of a minority that the balance is shifting and we will be looking at the market for opportunities. But we continue to have a very strong landbank, and so we're not going to feel under pressure to sort of commit into that. But the land market is also going to be a reflection of land availability overall to the level of competition. And availability is not free flowing. It is still quite constrained. So I'm expecting that although we've approved quite a number in the last sort of 8 weeks, that's not likely to be the run rate and not likely to be the run rate for a range of reasons that we don't require a significant level of land. That -- the land availability is going to be tight. And so the quality isn't necessarily going to be there. So I would say we will be active in the land market, but you should always bear in mind that, that might be to actively say no.

Christopher Carney: Yes. On the ASPs, I think in the January call, I was very sort of specific to the 320 was for the first half. But I also -- I don't think you would go massively wrong to assume around about that level for the full year.

Jennifer Daly: And Glynis is at the back when Chris is finished. Yes, yes, of course. You've been very kind already.

Christopher Millington: Chris Millington, Deutsche Numis. Just the first one, It's just about your relative sales rate. If we look back in history, your sales rate used to be 30%, 40% higher than most of the peers. It seems more recently it's kind of converged somewhat. I'm just wondering what you think the reasons for that are? And kind of how you think you could propel it to that higher level just to kind of offset where your outlets are? So a bit of a convoluted one, but I'll go one at a time, if that's okay?

Jennifer Daly: Yes, okay. I mean, look, I think that when sales rate falls, the relativity of the gap, the delta becomes tighter and tighter. It's in a constrained sales market that's naturally going to be the pace. But I think that we are performing well. And I think the reliance of the market and the sector overall on bulks and all the things needs to be taken into account. I do think that we have a really strong product. I strongly believe in the quality of the locations that we've invested in. And we have a very strong sales team. And so I do believe that market conditions will support driving that differential again. But affordability is definitely something that is affecting us all at this point.

Christopher Millington: That's helpful. Next one is just really on confidence around fire safety. There's still quite a lot which you're in scope, still quite a lot which are in design. I mean how confident are you that the provision is right?

Christopher Carney: Yes, I mean the provision hasn't moved. And we're very confident that, that provision is our best estimate at this stage as to what is going to cost us to remediate those properties. And we are making good progress with them. Pleased with the progress. We would love it to be faster, but -- and I've said this before, due to the sort of duration and the complexity of what we're doing there, it's not impossible that the provision would need to change. But at this point in time, it's our best estimate.

Christopher Millington: That's helpful. And last one, it's -- if we can see it here. Just lost of here slightly. Yes, sorry, it's just the kind of key moving parts in cash and land creditors. And I think you mentioned in the statement that you'd like to have lower adjusted gearing. Perhaps you could just kind of qualify that a little bit.

Christopher Carney: Yes. I have been asked on the lower adjusted gearing in the past, and I've tended to avoid giving an absolute number, simply because it depends a little bit on where you are in the cycle. But also I never wanted to tie the business' hands. Let's say -- I think these example I've given in the past was if there was a fantastic land deal to be done. I don't want the tail wagging the dog in terms of us like really trying to hit a particular adjusted gearing number and say, "No, Jennie, you really can't do that." So I've always been reluctant to sort of give a particular number. But in terms of the other part of your question...

Christopher Millington: Moving parts.

Christopher Carney: Yes, moving parts. So -- I mean, we started, obviously, the year with GBP 678 million of net cash, GBP 560 million of land creditors, so a strong position. By the time we get to the half year, I would expect cash to be lower, reflecting land creditor payments in the period and the final dividend in May. And some of the numbers, I think, in respect to the first half, you could assume GBP 6 million spend on pensions, around about GBP 25 million spend on cladding. The final dividend, GBP 169 million. So yes, some of the items.

Christopher Millington: And have you got the profile of land creditors in the statement? How much role of the [indiscernible]?

Christopher Carney: It's in the appendices.

Glynis Johnson: Glynis Johnson, Jefferies. Just 2 actually and probably slightly more big picture. Strategic land, you had some really good levels of conversion in 2023. I appreciate it's lumpy. I appreciate it's slightly crystal ball territory. But in terms of your intake of land in 2024, do you think the proportion will be more skewed towards drought land than perhaps there's been historically the case? I'm just wondering if there's a bulge that we might be seeing there? And then secondly, just in terms of what is the constraint on building more homes if the demand is there? Obviously, you talked about your landbank, but is there other bottlenecks in terms of certain products that you just not sure you'll get the -- would get in time? Is there a lead time that we need to be thinking about in terms of when you want to turn the taps on when your suppliers can start fulfilling that? Are there certain trades, which are short maybe later cycle trades that would be the constraint? What are the bottlenecks?

Jennifer Daly: Okay. On strategic land, Glynis, it's very much a view of what's available in the market in terms of the intake into our strategic land pipeline. We have a really strong position, we're 142,000 plots under active management, and they're very rigorously sort of managed and driven. Given the slowdown in local plan, sort of adoption and development, there's quite -- there is quite a lot sitting in our strategic land that's if I called it a pregnant sort of land position, I think that's probably the best description that I can find. So we've got a lot of activity, and we've been at this -- it's not even years, not as decades. So we're in a very mature position.So our intake will be driven by quality, and quality of the site and its provenance and quality of the year -- of the deal. On constraints on building homes, I'm tempted to say, well, there are many, but we have been really thinking about that over the last few years and very actively putting our business in a position where we can grow and that we can navigate those bottlenecks. So around materials, for example, we've talked about the importance of our Taylor Wimpey Logistics business and the way that we procure in ensuring that we've got as much sort of buffer that we can, and that is part of our sort of active planning around those bottlenecks. We map the chessboard of where we think material constraints will be. If I think back, we have done that more recently with the issues in the Suez Canal. We did it before through '21, '22, the COVID, Brexit. So we are really now very skilled, and our procurement teams really are constantly scanning for where material issues are. Lead times, where we've been managing the business, Chris talked about sort of our web controls and manage and build to sales. And I think that we've executed that extremely well within the business as we brought with control -- under control. And we're using the same signals in order to determine when we would start to sort of loosen the reigns and the lifting to ago. And Chris, I think, reflected on the thoughtfulness of the conversation that's ongoing through the business. So we will also play in a little bit of gut feel and intuition into that as well. And around trades, I mean, I think it's just a continuous area of concern. We look at trades where we think we are going to have more challenges. As with the conversation that we are having with Amy, it tends to be quite local. It's not necessarily the same trade right across the business. We have areas that are more constrained than others. It's one of the reasons why we're looking at timber frame. It's one of the reasons why we wanted to be very much on the front foot and practical about the future home standards assessments. I think we've got a very practical bent within our business and how to address these. And part of that assessment has been to look at the trades and how the trades will be able to navigate that. So the buildability and the ability to step up our production is something that we're trying to be really thoughtful and preplanning and -- okay. You're on.

Clyde Lewis: Clyde Lewis, Peel Hunt. I've still got 3, if I can, Jennie. One on cancellation rates. Obviously, a nice improvement there. Just be useful to get a little bit more color around, I suppose, the improvement there and where you think that's sustainable? The second one was really around the timber frame. And obviously, you're going to ramp that business up now. And it'd be interesting to hear your thoughts around what that will do in terms of sort of build costs? Do you think it's neutral in terms of build costs? Or do you think it's actually probably a slight headwind and the trade-off is obviously the faster build rates? And the last one was around your -- I suppose your thinking about the mix of product that you're going to look at delivering. I mean it looks very much obviously the writings on the wall for this current government. There's going to be a change, and there's going to be a lot more focus and effort, I suspect, push towards more affordable type products. So I'd be interested to hear your thoughts as to where you've got to on that side at the moment.

Jennifer Daly: Okay. All right. Cancellation reset is really pleasing. 12% is subnormal, I would say. The main reason for cancellations through the last year have been heavily driven by sort of 3 factors: change in personal circumstances, unable to secure a mortgage, so affordability and chain collapsing. So we are seeing just the things like the change in person circumstances as customer confidence returns, that component just easing joint a bit. Chain -- sort of stickiness of chains, I think, is still an issue that I'm hearing back from the business. I can see Ingrid sort of nodding there in her division. But I would put a normal market cancellation rate at around 14%. So I think it's really healthy. And I would read to that consumer confidence improving. On the timber frame and ramping up, it's not quite cost neutral, but there's familiarity in the business. There's other opportunities, build quality, lack of delays on site, which really go into the sort of the experiential end of timber frame, and I think do sort of work then to bring it back to that sort of neutral position. The fact that we can sort of deliver own through sort of timber -- Taylor Wimpey sort of timber frame business, I think, will also allow us to leverage all of the incremental elements of that. And I would reflect on the question that Glynis was asking around the bottlenecks. So if we think about bricklaying, timber frame we'll take that off the critical path. So it will insulate to an extent around some of the delays, which cost but are very difficult to assess in the -- at the point of appraisal. But I think we're working really well. And I could see Ian [indiscernible] from our Scotland North Eastern Yorkshire business, and they use a substantial amount of timber frame. And then it drives an efficiency within those businesses that I would like to see more of across our wider group footprint. And then on sort of the mix of product, I think that we deliver a really strong mix. We try to curate it specifically for the site in the market that we think is going to drive the optimum outcome, things like tenure mix, whether it's the government policy driving more sort of affordable products or others, it really needs to stay within the realms of retaining viability because otherwise, they end up with 100% of nothing. So I think that there's a balance there, and we really need to see some of the details of how government in the future would want to deliver some of those policies. And I think that certainly, the rhetoric that we've seen from labor to date is reflective of the need to retain viability, and that the first step is to drive up delivery overall. And once returning that to a level of health start to widen the tenure mix. Okay. Anyone else? No. I know we've kept you maybe a bit longer than usual this morning. Thank you very much for your questions, and we look forward to seeing you later in the summer. Thank you.

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