Hello, and welcome to the Taylor Wimpey trading update. My name is Elliot, and I'll be coordinating your call today. If you would like to register a question during today's event, please press star followed by one on your telephone keypad. I'd now like to hand over to Jennie Daly, CEO. The floor is yours. Please go ahead.
Thank you, Elliot, and good morning, everyone, and happy New Year to you all, although I know it might feel like a while ago now. So thank you for joining us this morning. As usual, I'm joined by Chris Carney, our Group Finance Director. You'll have already seen our short trading statement this morning. So as usual, I'll just take you through some brief introductory comments, and then we can open up to your questions. As you all know, we came into 2023 in a strong position, which I think stood us in good stead in what was a challenging year for the industry, coming in the week of the Mini Budget , cost of living challenges for our customers and increased mortgage rates, significantly impacting affordability.
Firstly, I would like to thank all of our teams and our partners for their hard work in delivering a good set of results in difficult market conditions. So, we completed 10,438 homes in the U.K., including 82 JV completions, which is comfortably within our guidance range, and we expect to deliver operating profit at the top end of our guidance. So very much in line with what we told you back in November. In the year, affordability was the main focus for our customers, and while underlying demand was there, their ability to execute was negatively affected and conversion of interest took longer.
Our net reservation rate was 0.62 versus 0.68 last year, which I think is a great result and reflects the quality of our locations and, our homes for sale. If I exclude bulk sales, we achieved a net private sales rate of 0.54 versus 0.65 in the previous year. So as we mentioned, in November, while pricing generally has been reasonably firm, we've seen low single-digit pricing deflation versus the peak, of September 2022, which will continue to work its way through the order book in half one. Build cost inflation continued to moderate as expected, and I'm pleased to say that new tenders are today running at 0-1%.
But like pricing, I'd remind you here that it takes time to flow through, and as such, completions today reflect prevailing cost environment when those properties were constructed. So you'll see that we've given you guidance in the statement on how we expect that to unfold, which I hope is helpful. We continue to make good progress against our priorities, and I'm pleased that throughout 2023, we have made good headway in customer service improvements, and we're delivering a five-star performance. The land environment remains challenging in the year. Opportunities existed, but prices didn't move to reflect either the increased market or planning risk environments.
With the benefit of a very high-quality land bank and strategic pipeline, and with the vast majority of our planning in place for 2024, we have had the advantage of being very selective to meet demands and drive value. So you can see that the approvals are meaningfully down on last year. We continue to assess the balance between risk, demand, and value, and we'll be agile in our response to evolving conditions on a site-by-site basis. We retain a very healthy financial position with a strong balance sheet, and we ended the year with net cash of GBP 678 million, slightly ahead of our expectations. We are only two weeks, not even that, into 2024, so it's too early to call, but of course, there are encouraging signs.
We've seen mortgage interest rates come in a bit towards the end of the year and again at the start of 2024, which is encouraging, particularly as we head into the important, spring selling season. Our customers can now get a five-year fix at a 75% loan- to- value from Halifax at around 4.39%, compared to 4.55% a year ago, and a two-year fix from Halifax at, 4.7%, compared to 4.95% a year ago. And the appetite from lenders remains strong.
Our teams are staying close to our customers, and just to give you a bit of an anecdotal sense of what we're seeing, we're seeing pretty high levels of early engagement and inquiry activity, and we're starting to see more interest from first-time buyers than in recent times. Obviously, we'll be able to say more on this in the results in February, when we can talk more about how the spring selling season is evolving. In line with our expectations, and as we previously flagged, we have come into 2024 with a lower order book compared to a stronger 2023. And as you know, sales rates today don't translate into volumes today. There will be a lag.
On outlets, these will be impacted in 2024 by our reduced land buying and the continuing slow and under-resourced planning system. Our teams, though, remain very active on getting outlets opened as efficiently as possible. We are, as always, very focused on controlling what we can control and about driving incremental value efficiencies in all areas of the business, all the way down to site level. So to summarize, now, whilst the near-term demand environment remains uncertain, we are really very well positioned with a robust balance sheet, excellent land position, and highly experienced teams.... We've talked to you a lot about agility in the last 18 months, and this remains very important to us as we seek to maximize the market opportunity available to us now and in the future.
We continue to pull all the levers available, ensuring that we are actively progressing our land bank, including our strategic pipeline, and positively positioning the business to capture customer demand as we move forward. And as you all know, there is very significant unsatisfied demand for U.K. housing, and we remain very confident in the medium and long term for our business. Our priority in 2024 continues to be optimizing value and performance. So that's it from me for now. I'm happy Chris and I will take your questions.
Thank you. If you would like to ask a question, please press star followed by one on your telephone keypad. If you would like to withdraw your question, please press star followed by two. When preparing to ask your question, please ensure your device is unmuted locally. First question today comes from Aynsley Lammin with Investec. Your line is open. Please go ahead.
Thanks very much. Morning, all.
Morning.
Just two from me. Well, morning, maybe three, actually. Just, interested to hear your comments on expectations for pricing, and how you're tactically kind of going into the spring selling season with incentives versus kind of what you had to, use last year. And then second related question, I guess if you're kind of looking at maybe call it 2%-3% build cost inflation on average for the year next year, you know, underlying margins still kind of expected to be down on that assumption that pricing is broadly flat. Is that fair? Are you doing anything kind of cost-wise to maybe support the margin a bit more? Interested to hear your thoughts, how much you could offset of that underlying erosion. And then just lastly, on the site numbers, you flag up the planning issues and challenges.
I mean, at this point, what, what do you assume average outlets to be this year? Would it be kind of in line with the 238, that you, you delivered on average last year, or slightly less, slightly more? Interested to hear your thoughts there. Thanks.
Okay, thanks, Aynsley. So in terms of, you know, expectations on, on pricing, I think, you know, last year we talked about agility, you know, we talked about assessing, you know, plot by plot, site by site, and, you know, and that behavior is well embedded in, in our business. So from a pricing point of view, it'll be really, a matter of the strength of the market, and, and I do expect it to vary, on a site-by-site, basis, more than necessarily on a, on a regional basis. Incentives, we've seen, you know, the use of incentives. We've been really targeted. It still remains around 5%. We saw, you know, when the spring selling season last year, you know, was, was doing well, but we eased in our incentives.
They declined a little bit, again, through the year, but overall, actually, you know, we were at circa 5%. So I'm really happy with the way that our sales teams deploy incentives. You know, you'll remember that we've built a fairly bespoke approach to incentives for customers, and so I do see that oscillating, and it certainly would be one of the first places for us to go to compress if demand pulls through. On site numbers and sort of outlets, you know, Aynsley, that we don't give guidance around outlets. I mean, I'm pleased that you'll note that the outlet number that we've given is sort of 10%, sorry, 10 sites more than we reported in November.
Despite the backdrop, you know, those planning challenges, and they're very real, and the reduced land buying, I'm still pretty happy with the outlet number, that we've got to, to open this year. But, but where we get on average outlets is really gonna be a function of how the sales, market, sort of plays through. So, I'm, I'm not, I'm not going to try and crystal ball that, for you, at this point. And, Chris, can you pick up the, the build cost?
Yeah, Aynsley, so obviously, today, that inflation rate on new tenders is around 0%-1%. Actually, if you look at materials, it's probably a bit higher, maybe 1%-2%, and that's been partly offset by slightly lower labor costs. There's still quite a lot of noise on price increases from material suppliers in general, but, you know, I think we'll be able to navigate our way around most of that. And, you know, labor costs on average, obviously slightly less than this time last year, because, you know, subcontractor order books have come under pressure over the last six months as the build rates across the industry have fallen in line with sales. And we sort of anticipated that and retendered where we felt there was value.
You know, how it then progresses, as we go through the year, you know, I don't have a crystal ball, but there's you know, there's plenty of moving parts. We've tried to give you some help in the statement so you can understand the dynamics of the first half. I mean, we, as you would expect, you know, notwithstanding whatever happens in the market with costs, we have quite an extensive program, certainly over the last couple of years, and that has continued, right up to the current date, where we look to share knowledge with the supply chain to really identify areas where we can improve value without impacting quality, customer experience, or health and safety.
Each one of our business units, pardon me, has a detailed value improvement plan as a result of that process. Yeah, we'll be doing everything that we can to offset any increases that come through.
Great. Thank you very much.
Thank you.
We now turn to Will Jones with Redburn Atlantic. Your line is open. Please go ahead.
Thanks. Morning. I'll go with three, please, if I could. The first maybe just on planning. There was the latest iteration of the NPPF published in December. Just wondered if you thought that left any scope for planning to get maybe a little less bad? Second, around land buying, no more approvals, I don't think, in the last couple of months of the year. But what would you say is most important for you to—when you consider the, the appetite to get back to purchases? Is, is—would an improving sales market be enough, or do you feel like you do need lower, lower prices as well? And maybe link that to whether there's any, any scope for the strategic land bank to, to help out, if the open market doesn't.
And then just finally, the bulk sales, I think 13% of the mix last year, is there a base case for thinking on how that trends in 2024? Thank you.
Okay. Thanks, Will. I'll take the planning point last, and sort of address the others. I mean, on the land, you know, we've talked about being highly selective, and I'd say, you know, with the sort of the early signs of improvement around sort of customer inquiries, probably becoming more thoughtful about that. But, you know, the constraints in planning do mean that land availability is tight, and therefore prices aren't moving, and so it's still very much a balance of value, the risk, both in planning, technical and timing, and you know, ensuring that we're serving the best interests of our shareholders in the deployment of capital.
So quality and value, I think, will be, you know, very much a focus in our decision to, you know, to look at actions in the land market. But, you know, we'll also be looking at locational, you know, selectiveness, you know, is it a strong location from a quality and value point of view? But, you know, we'll also be considering those parts of the business maybe where we would like to see a little bit more investment. So quite an iterative process, I think, from here and really looking to see the inquiry levels, which are really pleasing, actually sort of manifest into demand and commitment from customers.
Around bulk, I mean, we've talked about bulk being part of our toolkit, and, you know, and I'd still sort of lean heavily into that. It has a place, but, you know, again, we always seek to balance that against the value and what's right for the site. So no change in our strategy overall. Fair to say, you know, we've been maybe a bit more tactical in parts of the year. Last year, we took what we needed, and no more. How it plays out, I think it'll be really a matter of how the market develops. You know, there's always a place for some elements, but the size will reflect how the market's doing.
And then on planning, I mean, I think that the overall sort of message from me on the NPPF is, the NPPF that was sort of issued at the end of the year is, you know, by a slim margin, better than the consultation the year before, but the consultation in December 2022 was quite a major negative for the sector. So, you know, I still feel that we're in a worse position from a planning sort of strategic planning policy position now than we would have been before the consultation was issued in December 2022. We can see the planning approvals continue to fall quite rapidly.
And, you know, I am concerned that, with the removal of the five-year housing land supply, when you have an up-to-date plan, that might not sound too scary on an academic basis, but there's 100 local plans out there that don't, have a five-year housing land supply, but are defined as up to date. Local plan environment is worsening, and by next year, I think less than 30% of authorities will have an up-to-date Local Plan . And, you know, we've got no mandatory housing targets, and we're in an election year, and, and actually two elections, some local authorities affected in a national election. So, you know, I do, I, I do think, that it's going to be a challenging, sort of planning environment for a while.
Thank you.
Our next question comes from Harry Gillis with Berenberg. Your line is open. Please go ahead.
Yeah. Hi, morning, Chris, and Jennie, thanks for taking my question. Can I just come back on this land topic, and I hope this isn't just repeating Will's question, but, you know, if we have another year where, let's say, land prices don't really move because of the constraints you've talked about in the planning environment, how do you sort of almost philosophically think about, you know, land purchases? You know, if you're unable to get to what would have been your sort of target hurdle rates, are you willing to compromise a little bit in some geographies to start replenishing the land bank? Or how do you think about that? And I appreciate it's a bit hypothetical, but it may become a real issue in 2024? Thanks.
Yeah, I mean, look, I think, you know, land acquisition in any market is always a, you know, a range of compromises and checks and balances. So really, it's no more changed. But when we see whether it's market sort of contraction or, you know, hopefully, optimistically, market improvement, it doesn't tend to operate universally. It'll sort of move patchily. It'll be variable for a while, and we'll be following that variability. And we'll also be looking at the land availability dynamic.
You know, where land is available, then, you know, it's likely that, you know, pricing would be better, and, you know, the ability to conserve or drive margin would be improved versus areas that are really under pressure. So it's quite a patchwork, and it really comes down to, you know, the point that I was making, with Will, which is, you know, it's sort of a site-by-site, by-area assessment, Harry. I don't see... You know, I think maybe in November, I might have said something about flicking a switch. You know, it's not that dramatic. It will be more sort of, it'll evolve and be more iterative.
Okay, thank you.
We now turn to Glynis Johnson with Jefferies. Your line is open. Please go ahead.
Morning. Thank you. Just two from me. I guess the first one might have a couple of parts, but the first one is about you referenced, Jennie, actually, the fixed rate mortgages for 75% loan-to-value mortgage. Is that the typical mortgage that your customers are taking? Are most sitting around that, you know, you improved against 78% loan-to-value, but is that what you think is most important, or is it that we need more 90% loan-to-value mortgages? And I'm just wondering, in terms of, you know, sort of advice, what are lenders telling you in terms of with their willingness to put money behind, you know, some of these lower rates that are coming through? And then the second question, which you've possibly been battered away, but I'm going to ask anyway.
You said the outlets will be impacted, and I just wanted to kind of be a bit more forensic on that. Do you mean that the number of outlet openings that you'll do in 2024 will be lower than a normal year, or are you talking about the net number of outlets?
Okay. Thanks, Glynis. On the fixed rate, I mean, I think in the, and I don't have, you know, sort of the, absolutely up-to-date, but, but when we, when we looked at the information, most recently, it was about 80%, 78%, or thereabout, I think was the sort of the level of loans, that our average customer, was taking. But the-- your point on first-time buyers is absolutely spot on. You know, what we want to see is, you know, better value lending at the higher LTV levels to stimulate more, first-time buyer, activity. You know, I don't, I don't see that a functioning housing market, can operate without first-time buyers.
You know, whether that's second steppers or getting onto the market. The lenders, you know, other than Lloyds, you know, in terms of big names, there's not many lenders in the 95% category. I would be hopeful that as the sort of the wider environment improves and, you know, any concerns that lenders might have of house prices reducing now sort of paling into the background, that they'll get braver and start sort of filling that 95% LTV category. I think it is really important.
On outlets, I mean, look, I think in terms of impact, you know, we are calling out the planning situation where, you know, we've been very clear about, you know, it's, you can't be out of the land market, and you can see how low our approvals were without there being some impact. What I'm not being specific about is the overall timeframe, because, you know, it does play back to sales rates, and, you know, high sales rates then flow through the outlet dynamic. So, you know, not really going to be drawing very much further than that this morning, Glynis.
Thank you.
Our next question comes from Ami Galla with Citigroup. The line is open. Please go ahead.
Thanks. Just two questions from me. The first one was just on your marketing efforts in, into the spring season. I think last year you talked about relying on not just organic traffic, but also utilizing paid channels. Is that still the strategy that you would take? And, you know, are you, are you looking at doing something different of, from a sales and marketing effort in that respect? And the second one was just on land pricing. I know there have been a couple of questions on land so far, but on land pricing, given the constraints and consented land, do you see a bigger discount on the strategic pipeline? And, naturally, would you kind of divert more focus on building a strategic pipeline in this market? Thank you.
Okay. From a marketing effort point of view, I mean, we sort of redoubled our efforts coming into the year. So, you know, Boxing Day campaign, I think it was a really good one. We had some really good sort of media, social media pickup. I hope that you had the opportunity to see it. But we are relying still quite heavily on sort of paid media to drive the inquiries. I think I'm pleased at this point that the quality of the inquiries that we're, you know, some of the feedback from the sales teams is improving. Probably, you know, the thing to look out for is, you know, where is there a sense of urgency?
I think that's, that's what we would be looking for through the spring selling season or, particularly first-time buyers, you know, going to wait to see if, rates drop further. So that's the, that's the test that we will be looking for in the spring selling season. In terms of sales and marketing, at this point, you know, I think that we've got, you know, real positive start, but it's fragile. There's still issues around affordability and other things. So, I don't see us pulling back from sort of paid media for some time. I think that we'll continue that strategy. Just on land pricing, and you reminded me that actually I didn't fully answer Will's question about strategic, so I'll just pick the two up together.
My apologies to Will. He was very polite there. I mean, our strategic land pipeline, you know, I've talked about it in terms of its depth and breadth, you know, is a real positive and an opportunity lever. We can't get away from the fact that the strategic land pipeline also has to navigate the planning environment, but when we do so, we do expect to see, you know, price benefit flowing through that. But strategic land valuation is marked to market. There's a discount embedded, so, you know, it's still pegged to overall market dynamics, and if land pricing is holding, then, you know, the strategic land sort of price paid will also reflect that.
We are working our strategic land pipeline really very hard, and we actually had a pleasing level of output from it last year. But if you remember, 2022 probably was a little bit of a disappointment, so you can see that it really is that congestion just flowing through rather than, you know, that sort of marking a step change in the way that local authorities are processing things. But you know, I'm still very much sort of a proponent of our strategic land pipeline and the value that it can deliver to the business through all parts of the cycle, including land market cycles.
Thank you.
We now turn to Marcus Cole with UBS. Your line is open. Please go ahead.
Good morning, all. Just three questions. I think this should be quite simple. What was the private ASP in the order book? Land creditor balance at the end of 2023 would be helpful, and any comments on fire safety cash out earlier. Thanks.
Okay. Chris, are you happy to take those?
Yeah, that's fine. So, on the first one, Marcus, if you're looking for an indication of the average selling price on completions in the first half, I'd expect that to be similar to the GBP 320,000 average that we reported in the first half of 2023, probably with a slightly higher affordable ASP and a slightly lower private ASP. The land creditor balance at the end of the year, I'm expecting to be around the GBP 520 million sort of mark. And fire safety cash, I'm assuming you're asking for next year. I think, you know, this year, we've spent round about, I think, GBP 17 million... Sorry, this year, up in 2023, we spent round about GBP 17 billion, leaving a remaining provision of GBP 192 million.
I'm expecting that spend will increase to probably something around GBP 60 million, when we get into 2024.
Okay. Thank you very much.
Thank you, Mark.
We now turn to Chris Millington with Numis. Your line is open. Please go ahead.
Thank you. Morning, all. Happy New Year. I'll go with the usual three, but hopefully, they're fairly straightforward. Just love your opinion on what you see OpEx doing next year, you know, just in light of inflation and potential variable remuneration coming back in. Second one's really just to put the inquiry point you're making into context. So just wonder if you could comment, you know, what, are we running ahead of last year? How does it compare to pre-COVID? Just anything you can give there. And then the final one is probably for Chris, but just really the moving parts on cash, just why you've outperformed this year, maybe the land creditor point I think you just mentioned there, Chris, but also what you expect the moving parts to be in 2024.
Okay. Thanks, Chris, and Happy New Year. From an inquiry point of view, yes, they are positive to comparable of last year. You know, we can see sort of website traffic is up pretty strongly. We've seen quite a strong level of appointments. Sort of website appointments is up. Walk-ins are up quite materially. Organic traffic, you know, isn't picking up quite so well, and it's actually gone back a little bit. So, you know, that plays into the comment that I had with Ami, that we'll be sort of keeping the foot on the gas in terms of sales and marketing. So, you know, appointments held in the period up quite strongly as well, Chris.
Very helpful. Thank you.
And then in terms of your OpEx question, I think, you know, obviously, I'll provide more color when we get to the prelims, but I think you won't go too far wrong if you assume admin expenses for 2024 will increase slightly compared to 2022. And I think then on cash moving parts, you know, yeah, we ended the year with GBP 678 million in net cash, really strong position, slightly ahead of the guidance range, which was GBP 500 million-GBP 650 million, mainly due to lower land spend in the second half. And that incorporated GBP 575 million of net land spend in the year, probably around about GBP 20 million of exceptional provision spend in the year, GBP 7 million on pensions in the year.
Yeah, we'll give you guidance on 2024 cash when we get there. You've already heard me, I think, earlier, in response to Marcus's question, say that I think the, you know, the cladding spend likely to be around about the GBP 60 million mark. I'm expecting pensions to be pretty much flat at the GBP 7 million, but I'll give you more on the rest of the moving parts when we get to the prelims.
Okay, helpful. And just a quick checking query, Chris. You mentioned admin costs going up a little bit versus 2022. I presume you meant 2023, though, did you?
Sorry, sorry. Yes, I did. It was, I was sort of saying admin expenses for 2024 will be slightly, slightly up on 2023.
Understood. Understood. Thanks so much, guys.
Thank you.
This concludes our Q&A. I'll now hand back to Jennie Daly, CEO, for closing remarks.
Thanks, Elliot. So, thank you, as always, for your time this morning, guys, and your questions. Hopefully, you find it helpful. We are pleased to have delivered a good performance against a tough market backdrop. I think testament to the strength of our business overall, including our highly experienced teams. It's still very early days and uncertainty remains, but it is encouraging to see mortgage interest rates decreasing, and as you've heard, we've seen a good level of inquiries. We will continue to be disciplined. We're working hard, progressing our land bank, including our strategic pipeline, and positively positioning the business for this year and the medium term. So, Chris and I look forward to speaking to you all again in the full year results on the 28th of February.
Thank you. Have a good day.