2 August 2023
Taylor Wimpey plc
Half year results for the period ended 2 July 2023
Resilient first half performance with completions slightly ahead of our expectations
Jennie Daly, Chief Executive, commented:
“The first half of the year has been characterised by variable market conditions including substantially higher mortgage rates. While this has inevitably impacted our results, I am pleased that we have delivered a resilient performance with first half completions slightly ahead of our expectations. This performance is testament to the hard work of our teams on the ground and our strong focus on operational excellence and tight cost management.
As we move into the second half of the year, our focus remains on optimising all areas of our operations as we continue to support our customers during this uncertain period. With a healthy orderbook and strong underlying interest for our well-located, high-quality homes, we expect full year UK completions excluding joint ventures to be in the range of 10,000 to 10,500, the upper end of our previous guidance.
Taylor Wimpey is a strong, sustainable and agile business underpinned by a robust balance sheet and an excellent landbank. We remain well positioned to manage the business through near term challenges while maximising value in the medium to long term.”
Group financial highlights:
| H1 2023 | H1 2022 | Change | FY 2022 | |
| Revenue £m | 1,637.1 | 2,076.8 | (21.2)% | 4,419.9 |
| Operating profit* £m | 235.6 | 424.6 | (44.5)% | 923.4 |
| Operating profit margin*† | 14.4% | 20.4% | (6.0)ppt | 20.9% |
| Profit before tax and exceptional items £m | 237.7 | 414.5 | (42.7)% | 907.9 |
| Profit before tax £m | 237.7 | 334.5 | (28.9)% | 827.9 |
| Basic earnings per share pence | 5.0 | 7.2 | (30.6)% | 18.1 |
| Adjusted basic earnings per share pence†† | 5.0 | 9.0 | (44.4)% | 19.8 |
| Tangible net assets per share pence† | 126.7 | 120.0 | 5.6% | 126.5 |
| Net cash £m ‡ | 654.9 | 642.4 | 1.9% | 863.8 |
| Return on net operating assets** | 19.7% | 24.4% | (4.7)ppt | 26.1% |
Key highlights:
· Group completions of 5,120 homes (H1 2022: 6,922)
· Group operating profit margin of 14.4% (H1 2022: 20.4%), reflecting a lower level of completions and the impact of build cost inflation which was not fully offset by house price inflation for the period
· Announced 2023 interim dividend of 4.79 pence per share (H1 2022: 4.62 pence per share) amounting to £169 million (H1 2022: £163 million), in line with our stated Ordinary Dividend Policy to return 7.5% of net assets annually
· Full year UK completions excluding JVs now expected to be in the range of 10,000 to 10,500, at the upper end of our previous guidance with full year Group operating profit including JVs expected to be between £440 million and £470 million
· Ended the period with net cash of £654.9 million (H1 2022: £642.4 million)
· Renewed revolving credit facility in July 2023, increasing it to £600 million and extending maturity to July 2028. The new facility includes sustainability linked performance measures
First half UK operational highlights:
· Delivered a net private sales rate of 0.71 (H1 2022: 0.90) for the first half, which was 0.62 excluding bulk deals (H1 2022: 0.88)
· Total order book representing 7,866 homes, excluding joint ventures, with a value of £2,147 million as at 2 July 2023 (3 July 2022: 10,102 homes with a value of £2,800 million)
· Total UK average selling price increased by 6.7% to £320k (H1 2022: £300k), reflecting house price growth and positive mix impacts
· Operated from 244 average outlets during the period (H1 2022: 228) and ended the period with 235 outlets (H1 2022: 233)
· Short term landbank as at 2 July 2023 of c.83k plots (31 December 2022: c.83k plots) in high-quality locations where customers want to live
· Strategic land pipeline of c.140k potential plots (31 December 2022: c.144k potential plots)
· Further improved quality with average Construction Quality Review score of 4.90 (H1 2022: 4.77)
Sustainable, responsible business:
· Published our Net Zero Transition Plan in March 2023 outlining the steps we will take to be net zero by 2045, five years ahead of the Government’s target
· Successfully launched our zero carbon ready homes trial in Sudbury, the first of its kind on a live development site
· Continued focus on health and safety with rolling 12 months†*** Injury Incidence Rate (per 100,000 employees and contractors) of 136 (H1 2022: 212)
· Highly experienced build teams with 51 of our Site Managers winning NHBC Pride in the Job Quality Awards
· Major contributor to the regions in which we operate generating employment and investing £210 million in local communities via planning obligations (H1 2022: £218 million)
· Five-star builder and 90% of customers would recommend Taylor Wimpey according to the Home Builders Federation (HBF) 8-week customer satisfaction survey (H1 2022: 92%) and retained a 4 out of 5 star rating on Trustpilot
· Continued to work on fire safety remediation and signed the Scottish Safer Buildings Accord. Our existing total provision of £245 million remains unchanged
Resilient performance against a variable market backdrop
In the first half, we continued to drive performance across the business and have delivered completions slightly ahead of our expectations, against a variable market backdrop. We saw an encouraging start to the year with demand in the traditionally strong spring selling season recovering from the low levels of Q4 2022 and with mortgage rates reducing from the highs of late 2022.
However, market conditions weakened in the second quarter as the Bank of England responded to higher than expected inflation by increasing the base rate from 4.5% to 5% in June, which drove an increase in the cost of mortgages towards the end of the half. We are working to proactively support our customers through changing market conditions, utilising our Microsoft Dynamics customer relationship management system (CRM) to drive further enhancements in the sales process.
Against a challenging market we have delivered a robust sales rate of 0.71 (H1 2022: 0.90) reflecting our high-quality locations, the hard work of our teams, and our focus on effective customer engagement. Excluding bulk deals, our net private sales rate for the first half was 0.62 (H1 2022: 0.88).
We have maintained our commitment to operational excellence, tightly controlling costs whilst continuing to invest in the long term sustainability of the business, for example in developing zero carbon ready homes.
UK current trading and outlook
For the four weeks ended 30 July 2023, at the start of the seasonally quieter third quarter, our net private sales rate was 0.47 per outlet per week (2022 equivalent period: 0.57). The cancellation rate for the same period was 24% (2022 equivalent period: 19%).
As at the week ended 30 July 2023, our total order book value was £2,175 million (2022 equivalent period: £2,893 million), excluding joint ventures, representing 7,900 homes (2022 equivalent period: 10,392 homes), of which 77% are exchanged (2022 equivalent period: 77%).
Whilst increased mortgage costs are impacting affordability for our customers, we continue to see strong underlying interest. However, reservations are below the levels we have experienced in recent years. Pricing has remained resilient, and the level of down valuations continues to be low. Our focus remains on building as strong an order book as possible to allow us to optimise price going into 2024.
In terms of costs, we have seen some moderation in the rate of material and labour cost inflation, with prevailing annualised build cost inflation on new tenders now around 6% compared to around 9-10% at the start of the year. We expect to continue to see inflation moderate as the year progresses.
Planning remains extremely challenging and is likely to impact the future delivery of new homes across our industry. Our experienced teams continue to work hard to progress our land through the planning stages.
We expect full year UK completions excluding joint ventures to be in the range of 10,000 to 10,500, at the upper end of our previous guidance and we expect Group operating profit including joint ventures to be in the range of £440 million to £470 million. Our 2023 year end net cash balance is anticipated to be in the range of £500 million to £650 million.
Looking ahead, we remain well positioned with a strong balance sheet, high-quality landbank in desirable locations where our customers want to live, and strong and experienced teams. Our differentiated Ordinary Dividend Policy based on returning 7.5% of net asset value is also designed to give investors increased certainty of a reliable income stream throughout the cycle.
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