Hello, everybody. Thank you for standing by, and welcome to the Taylor Wimpey Trading Update. My name is Harry, and I'll be your operator today. If you'd like to enter the questions queue ready for Q&A, you may do so by pressing star one on your telephone keypad. It's now my pleasure to hand over to Jennie, Jennie Daly, Taylor Wimpey's Chief Executive Officer. Please go ahead when you're ready.
Thank you, Harry. Good morning, everyone, and thank you for joining us. As usual, I have Chris here with me. Today we've released a statement ahead of our AGM this morning. As you'll have seen, we've reiterated our guidance and remain confident in our ability to deliver this year and importantly, ensure that we are positioned for growth from 2025, assuming a supportive market. I'll make a few brief comments before we open up to Q&A this morning. I know you'll be very interested in how this spring selling season has progressed, and while there remains some market uncertainty, as well as affordability issues for some of our customers, the period has been in line with what we expected. Mortgage rates have remained below last year's highs, with very good product availability.
More recently, we have seen some movement in swap rates and some small upward moves in mortgage rates since we last spoken. We note that market expectations for interest rate cuts have moved further out. So as you'd expect, we'll be watching this closely. The sales rate for the year to date is GBP 0.73, and excluding bulks, it's 0.69. So this has increased from the rate we spoke to you about in February at 0.67, and is also a small uplift from what we reported at this point last year on an underlying basis. The cancellation rate is 13% and is back to normalized rates, having been at 18% in 2023, which we see as a sign of improved customer confidence and more resilient chains.
So I'm pleased with how we've performed, which comes from a lot of hard work from our teams and is a testament, I think, to our marketing strategy, as well as the quality of our excellent locations. Build cost inflation on new work remains around 1% and reduces to zero due to our self-help measures and net house prices have been flat. Outlet openings are in line with our plans. We now have 215 outlets open and have operated from an average of 230 during the period. In terms of guidance, we expect to deliver 9,500-10,000 completions for 2024, and this hasn't changed from what we said at the full year.
But as flagged back then, first half operating margin will be lower than the second half of 2023, principally due to the embedded build cost inflation and slightly lower pricing, working its way through, the order book. We have had, a consistent strategy over several years to build a strong and resilient business, and we are set up to manage the business through the cycle for the benefit of all our stakeholders. I think a great demonstration of this is our differentiated ordinary dividend policy, which provides a reliable income stream for investors through the cycle.
Subject to approval at today's AGM, the final dividend of GBP 0.0479 per share will be paid to shareholders in May, meaning that we will have returned a total GBP 0.0958 per share or GBP 339 million to shareholders via the 2023 dividend. I did say I'd keep it brief, so in summary, the encouraging signs we flagged previously have continued. Of course, we aren't complacent. We have a general election later in the year, as well as global conflicts and uncertainty, but we continue to execute in line with our strategic priorities and to focus on prioritizing value, driving increased operating efficiency, cost savings, and value improvement, and also continuing to invest in areas that matter for the long-term success and sustainability of the business.
All this, together with our excellent land bank, means we are poised for growth from 2025, assuming a supportive market. So now, let's open up to questions.
Thank you. If you would like to ask a question, please press star, followed by one on your telephone keypad now. If you change your mind, please press star, followed by two, and when preparing to ask your question, please ensure that your phone is unmuted locally. Our first question today is from the line of Chris Millington of Deutsche Numis. Chris, your line is now open. Please go ahead.
Thank you. Morning, Jennie. Morning, Chris. Thanks for taking my questions. A few, if I could, please. First, I'd just like to explore the sales rate evolution over the year to date first, and perhaps you can remind us where the spot rate was at the back end of February, when you last reported, just so we can put this rate into context. That's number one. Second one is just really about what you've been doing on pricing and incentives. Any change there? And perhaps, have you changed your desire to do bulk deals, in relation to this supportive backdrop? And then the final one is just a bit of a checking query, Jennie. Did you mention you're currently at 215 outlets? And if that is the case, how would you expect these to evolve over the year?
Just surprises me it's down at 215 at the moment, relative to that first half average. Many thanks.
Okay. If I take it, the last two questions, Chris, if you could just take us through the evolution of the sales rate.
No problem.
Okay, just on outlets, Chris, we're exactly where we expected to be. We've opened 10 outlets year to date. I think at the prelims, I mentioned that, you know, our expectation was that we would open more outlets in the first half of this year than we opened in the first half of last year. And you know, as you also know, we don't give outlet guidance. But you know, I'm comfortable we are where we expected to be.
Jennie, just really quickly, so would you expect it to build a little bit as we head through the back end of the year?
Well, as I say, Chris, I'm not going to give-
Okay. Okay. All right. No problem.
So on incentives, there hasn't been, you know, much movement. I think, we reported it again at the prelims, a sort of 5%-6% incentive rate, and we're still at that level. You know, there is movement on a site-by-site basis, but overall, you know, I think, incentives remain a, you know, important tool in the market. And as regards bulks, I mean, I think there are a few things that I would say we've always sort of been clear that our preference is to use bulks, preferably planned, from the outset of sites, particularly our large sites, to sort of maximize returns, and that very much remains our outlook.
Probably this sort of first sort of few months of the year are generally quieter. If you can remember, last year, we had one largest bulk that we talked about with the MoD or the DIO, I think as it's now sort of referred to, at one of our sites in Bristol. So there was probably a higher level of bulks on the comparator last year-
Mm-hmm
... than this year. But it's probably also fair to say that, you know, I am conscious that as, you know, the market stabilizes and, you know, the opportunities in the private market firm up, that we don't want to sell too deep into our developments on bulk sales. So, you know, just generally no change in strategy, still a preference on a planned basis.
Got you.
And then sales rates, Chris?
Yeah. So, Chris, when we updated you at the prelims, our sales rate, which was week 1- 8, was GBP 0.67. The sales rate, including bulks, from weeks 9- 16 was 0.81. And you'll remember that there were no bulks in week 1 - 8, so the rate for 1- 8 without bulks is exactly the same at GBP 0.67. And if we strip bulks out of weeks 9- 16, the rate is 0.72.
That's really helpful. Thank you, Jennie. Thanks, Chris.
No problems.
Our next question today is from the line of Will Jones of Redburn Atlantic. Will, your line is now open. Please proceed.
Thanks. Morning, I'll try three, if I can, please. The first is when you think about lead indicators and seasonality as we look to the summer months, any feel that this will be any different to normal seasonality in 2024? I know it's obviously varied quite a bit over the last number of years for different reasons, but any thoughts there? But maybe just perhaps returning to price. Obviously, you've got the strategy focusing on value over volume, and you've had a good start to the year on sales rate. Are we closer to testing the market on either a price or incentive, or is it just not quite ready for it yet?
And then lastly, on land, I think, I think it's 3,000 or so plots combining the strat land conversions and the new approvals. That's actually a reasonably decent run rate, probably relative to completions. Do you think you're... It wouldn't be unfair to suggest that you could be on track for kind of one times replacement, i.e., land bank, plot count holding, as things currently stand in 2024? Thank you.
Okay. So, quite a bit there. I mean, in terms of customer inquiries, early lead indicators, the likes of sort of brochure downloads, website registrations, a bit down on last year. But what we are seeing is, you know, the quality of the customer and appointments to site, you know, remaining strong. The feedback from our sales execs are that, you know, customers sort of in the pipeline and walking through our doors are, you know, are better quality than last year. So, you know, realistically, we need less of those early indicators to deliver the sales rate.
On sort of normal seasonality, it's really hard to actually think back and find a year that is normal. Now, there's nothing, you know, that I'm hearing or seeing, Will, that suggests that, you know, we're not going to see, you know, some slowing down as we head into the summer. So, you know, that's our expectation, is that you will see a, you know, a slowdown towards the summer. Hopefully, you know, last year's interest rate spike in May probably accentuated that. So, you know, we'll be watching trading coming into sort of the May and early June quite carefully.
On price, I mean, we do, as you know, sort of retest price on a regular basis, plot by plot, site by site, you know, always looking at, you know, the, the opportunity. I think it's probably fair to say that it's a, that there's a mix. There's definitely, you know, some sites where we're seeing the ability to pare back on incentives and looking at, you know, potential price opportunity. On other sites, you know, there, those parts of the market aren't quite ready for it. And so overall, you know, we're on a like-for-like basis on incentives, but something that we're really focused on. And then on land, generally, I talked about, you know, being selective....
and thoughtful that, you know, we'll be active where there's opportunities, and, you know, and that remains our view. You know, if I was to reflect on the market overall, I think, you know, land availability remains tight in most areas, but, you know, competition has increased for those sites that are available as competitors come back to the market. I'm very pleased with the strategic land pull through in the, you know, so the first few months of the year, particularly given, you know, the headwinds that we've talked about in planning. So, you know, that gives us, you know, some confidence there.
I think I said at the prelims that, you know, we didn't expect land approvals to carry on at the pace that we were reporting at the prelims, because that reflected some hard work that the teams have been doing around sort of reshaping and sort of working with landowners through the back end of last year. So, while I'd never rule anything out because, you know, we will always be, you know, sort of looking at opportunities, it's not my expectation that we would be at replacement levels, well.
Great. Thank you.
Okay.
Our next question today is from the line of Marcus Cole of UBS. Marcus, your line is open. Please go ahead.
Thank you, and morning, both. I've got two questions. The first one is just looking at the consensus numbers, I think there's about 10% volume growth for next year. Just thinking about where do you need the order book to be to get there by the end of this year? And then the second one is just around the CMA investigation. Is there any update to say? Thanks.
Yeah, I mean, look, I've said in my opening comments that, you know, that we remain focused on sort of the opportunity for growth in 2025, you know, assuming a supportive market, and that remains, you know, our focus. And I think also with the prelims, you know, we did say that we had a very good handle on the land that would be delivering those opportunities. Building the order book is a real focus on and for the business, and, you know, we will continue to be focused on that.
But I think it's too far, you know, towards the end of the year for me to really sort of give a really clear indication of how that will help us carry into 2025. But I know that you recognize that the order book is a fundamental building block, you know, for any year's delivery. And then on CMA, Marcus, we're so, you know, very much in the sort of the information gathering stages with the CMA. We will, of course, comply with all of their requests, but it's really not something that I can, you know, sort of speculate on or comment on any further than that at this point.
Okay, thank you very much.
Thank you.
Our next question today is from the line of Arnaud Lehmann of Bank of America. Arno, your line is open. Please go ahead now.
Thank you very much. Good morning, Jennie. Good morning, Chris. Two questions on my side, please. Firstly, on the gross margin, Jennie, you commented in your introduction about the pressure in the first half. Could you give us a bit of color heading into the second half? I mean, I think you're gonna, you will have more completions, and hopefully the cost side will help a little bit. So are you confident that the gross margin can start to recover from H2? And my second question is a bit of a follow-up on the point you made around the 2025 recovery, and obviously, you know, we take a view on demand and mortgage rates.
But setting that aside, what is the potential for completions to increase in 2025, assuming demand is normalized, thinking about planning, opening outlets, the pace of construction? What is a range that you could give us today in terms of the potential for the completion recovery? Thank you.
Thank you, Arnaud. So I'll try to give you a response on the 2025, and Chris will help you on the gross margin question. I mean, look, I'll remind you, and I understand why the interest, but you know, it's a 2024 trading update, and I'm not going to get too drawn into 2025 at this time of the year. You know, we've talked about our ability to grow in 2025, subject to that supportive market.
You know, there's no doubt that planning, you know, and the availability of outlets is a key component of, you know, any growth aspiration right across the sector, and that there are headwinds there. But as I mentioned at the prelims, I think we are in a good place for our land in 2025, and I'm not gonna lean into it any further today. But Chris, on gross margin?
Yeah, Arnaud, as you know, we've given pretty detailed guidance for the margin in the first half. I think, you know, where it goes in the second half as a function principally if the balance between house price inflation and build cost inflation, the net impact obviously is still going against us in half one 2024, but it's more balanced now in the prevailing sort of annualized spot measures, which are both flat. So, as you look into the second half, you know, we've guided for a volume split this year of 45, 55, and because some of the fixed costs are in gross margin, then, you know, volume growth does improve overhead recovery.
Thank you very much.
Our next question today is from the line of Sam Cullen of Peel Hunt. Sam, your line is open. Please go ahead.
Hi, morning, all. I've got a couple, if possible. You chatted a bit about sales rates already, but can you give us an idea of the build rate currently on site? How quickly you're building out plots? That's number one. And then secondly, kind of related to that and coming back to a point that's been touched on a couple of times in terms of not asking for a 2025 forecast, but just trying to explore your confidence, all things being equal in terms of market backdrop and sales rate, the ability to open outlets at a net rate of 10 or 15 per year on a 3-5-year view, and how comfortable you are with assumptions of that sort of nature.
So, Sam, I'm really not going to be drawn any further on 2025, you know, but I will happily talk to our sales rate and build rate, indeed, in the current year. We talked quite in quite some detail last year, and at the end of 2022 about our aligning our build rates to sales rates. And that's a discipline that we have retained, you know, sort of quite faithfully, through the last 18 months. So we continue to pace our build to sales demand.
And, you know, as we did, as sort of the market sort of tightened and sales rates fell, you know, we are in a, you know, a good position to increase our build rates and output as sales rates increase. So, you know, quite responsive. Clearly there is a degree of lag, but there is also a, you know, levels of a sort of aspiration or, you know, sort of speculation or gut feel, if we feel that sales rates in any given site are improving.
Okay, thanks.
Our next question today is from the line of Ami Galla of Citigroup. Ami, your line is open. Please go ahead.
Thank you. Two questions from me. First one was on trading. I mean, were there any significant regional trends that you could discern from the trading to date, both on demand and in terms of pricing? I think in the market data point, there's a little bit more commentary. There's some strength in pricing in slightly higher, larger homes. Is that a dynamic that you see at the site level? The second one was on the order book. If you could give us a split of the current order book between private and social. And on social volumes, are you experiencing any sort of bottlenecks in the take-up by housing associations in that market?
Okay. Thank you, Ami. I mean, on regional trading, you know, we, we've talked in the past, but we haven't seen sort of great differentials, over sort of the normal deltas that you might see regionally, but have commented that, you know, that we can see differences, you know, on a site-by-site basis, you know, bearing in mind sort of location and other elements.
In terms of sort of larger homes or higher ASPs, I think that they're, they have been fairly reliant on chains, and so I think it is particularly pleasing that we've seen cancellation rates falling and that we've seen more resilient chains, and I think that that is benefiting some of those further up the chain sales. On order book, I'll ask Chris to answer to the breakdown between private and affordable, but around sort of behavior of affordable housing providers in the market, you know, we have seen some sort of reluctance or withdrawal of certain affordable housing providers in certain markets.
I think you'll all be aware that there is a level of pressure on some of those organizations with either legacy issues, fitness and future investment required to address a sort of environmental standards, and that has affected some of their appetite for the purchase of affordable housing. And it's something that, you know, we monitor very carefully. You know, I'm very pleased we have some very long established relationships with affordable housing providers, and our teams are, you know, very very engaged with them to ensure that we're delivering to their needs, and timing.
The order book split is 3709 private and 3977 affordable.
Thank you.
Our next question is from the line of Clyde Lewis of Peel Hunt. Clyde, please go ahead. Your line is open.
Thank you. Morning, Jennie. Morning, Chris. Just, I'm intrigued as to how maybe your engagement with the Labour Party has gone over the last few months, whether they're stepping up their, you know, their talks with you and I sort of, I suppose, attached to that, what's your view of the sort of possible grey belt that Keir Starmer is talking about now, and whether that would have a beneficial or a detrimental impact, you think, for TW?
... Okay, I mean, look, we do engage both with government and with opposition parties. And you know, we had quite a busy period, I think, on all fronts, you know, towards the end of last year and the very early start of this year. But I'm sure you won't be surprised to hear that, you know, as both the mayoral, local and you know, the potential general election comes closer into view, that all political parties are more focused on the sort of the electioneering than the business engagement end. But you know, we keep all of our lines of communication open.
In terms of the grey belt and sort of announcements, you know, I think it's useful to see parties engage with, you know, some of the sort of more challenging ends of planning policy. I think it's welcome to see sort of recognition that the green belt is not intended to be a permanent fixed sort of feature. It's a planning policy designation.
I think that the grey belt discussion, you know, for want of sort of better terminology, does give, you know, sort of an indication or an openness to discussion on land of lesser quality that may be well located, which, you know, I think sits very well along lines of sort of good town planning and settlement growth. You know, as to the Labour announcement, you know, there were some caveats there. I think, you know, I understand the aspiration, but, you know, to look at sort of a designation and think that everything is capable of viability, no matter where it's located, I think is going to be a challenge.
But I see it as a net benefit that we've opened to the discussion, the green belt is a policy designation, and there are certain conditions under which it could be brought forward for development.
Okay, perfect. Thank you, Jennie.
Thank you. We have no further questions in the queue at this time, so I'd like to hand back to Jennie for any closing remarks.
Thank you, Harry. Yes, just very briefly, thanks for joining us and for your questions today. Just to sum up, given our excellent land bank and disciplined focus on protecting and enhancing value, we remain on track to deliver in line with our guidance for 2024. And as we've discussed a few times on the call, and for growth in 2025, subject to a supportive market. Thank you all for your time, and have a good rest of the day.
Thank you. This will conclude the Taylor Wimpey trading update. Thank you, everyone, for joining. You may now disconnect your lines.