Good morning, and welcome to the Taylor Wimpey PLC Trading update call. Today's conference call will be hosted by Taylor Wimpey Chief Executive, Pete Redfern, and Group Finance Director, Chris Carney, followed by a Q&A. I will now turn the conference over to Pete Redfern, Chief Executive. Please go ahead.
Thanks very much, and thanks everybody for joining us. I think we see this as a fairly straightforward, very much a trading update call rather than anything deeper. Obviously, we gave you a very full run through in November and moved guidance and expectations for 2020 and 2021 materially. This is more of reassuring that that's all in line. Very happy to talk about how we see current trade and current market and our views for this year in terms of the market. I don't think there's any dramatic new news.
I think overall, we feel very positive about how the last couple of months since that trading update have gone, and very much the plans that we set out on cost savings and how we want to run the business and investment in land have continued to follow the track that we set out there, and we see good evidence of the execution of those things. I think particularly the land will continue to jump out at you, which I will come back to. First of all, running over Sales prices probably will be the number that surprises you the most, and I will come back to that as we look forward, up around 6%.
The biggest part of that is around mix. We did continue to push price through the second half of the year, and that 6% is after offsetting the care worker discount, 5% on those plots, but a cost of about GBP 20 million on revenue next year. Even with that, we still see a meaningful improvement in price. Construction activity remained very much in line with what we set out in November, pretty much at normal levels through to the year-end and beyond. Again, I'll talk about that a bit more when I talk about 2021. No material change. We still see friction at a site level in terms of making it more difficult for our guys to manage. Not enough to impact on the level of construction that we saw through to the end of the year or that we expect.
I think particularly reassuring that our WIP levels, particularly as we look at vertical WIP, sort of driving completions for early 2021, ended the year in a good place, I'd say probably slightly ahead of what we would normally expect rather than behind. I think our tactics have been slightly different to others in terms of focusing on ability to move the business forward through 2021 and beyond, and actually pushing our guys to do the right build last year rather than maximize the last completions last year, I think leaves us in a good place. You can see in the stats that Help to Buy 2, which for us, we were able to use in a formal reservation way only from about the 15th of December, helped the post November sales rate to about 0.92.
Ahead of the year to date and ahead of the rest of the second half. I think if you stand back from that, because obviously, we said to you in November that we felt year sales rate was slightly depressed because we didn't have Help to Buy in effect through the previous few weeks. That catch-up could risk exaggerating it. If you smooth that out over the period, I think we saw a very solid, but relatively normal sales rate through that period. I think as we go into 2021, I would still say that construction slightly lags where our order book is overall as we still catch up from second quarter, but not by a lot. Yeah, we expect a more normalized performance as we go through this year. Availability is not quite normal, but it's getting there.
We have our relatively clean entry, I think, into 2021 in terms of those stats. We were pleased that the outlet numbers remained stable, obviously with the slowdown in activity and slowdown in some areas in planning activity risks that new outlet openings would have been affected in the final quarter. Again, because our focus was very much on the forward position in the medium term, I think we devoted more time and effort to getting outlet numbers open through late 2020 and to create that stability. Still see that 2021 might see a small dip and then start to grow materially, as we set out in November, but probably slightly less of a risk than we saw a couple of months ago. As I say, land purchases continued at a high level post the November trading update.
To give you context, GBP 1.3 billion of new land approvals equates to a normal year's land purchase plus the GBP 500 million capital raise all committed in roughly a seven month period and all that returns and margins that very much sit in or slightly above our longer term guidance for financial performance. Very pleased with that and very pleased with the breadth and mix of those sites with, as we said before, more smaller sites, but still decent number of strategic sites coming through. I think our take on that hasn't changed. We expect land purchases through the next year to remain positive, but more like normal levels. We don't expect to run at that kind of run rate into 2021. It also isn't the case of we make those additional purchases and then sit back and see them slide backwards.
We expect to continue to drive normal levels of land purchase through this year broadly. Obviously will be opportunity led, but that's our broad expectation. If I then look at 2021 and beyond, and I've obviously touched on a couple of leads into this year in that historical run through. I think it's been a good start to the year. It's clearly a different mood out there with the third shutdown and more concern over this wave of the pandemic certainly than the November shutdown. From a construction point of view, government guidance is clear. I think there was a point a week or so ago where there was a risk that the housing market became more restricted. I think that risk has reduced over the last few days. We've had fairly clear guidance, both publicly and privately from government, that they expect construction activity to continue.
Where there is a little bit of risk is that some of the sales processes may become restricted, but I don't think that risk is high. With the strength of the order book and the level of capacity we now have for doing most of the process remotely, I think we see that risk as being relatively low. We haven't seen, interestingly, any real impact of that on customer demand. We came into the year clearly with people being in a more cautious mindset about the pandemic. The 1st of January was our third-best day ever of website interest, and the level of activity and interest across all of our forward indicators has remained at good levels.
It's one week. I wouldn't want to pretend this is a statistical piece of analysis, but our sales rate for the first week of the year was well above last year. You continue to see Help to Buy 2 sales probably running at a higher-than-normal level as a bit of catch-up, being part of that. Just ordinary sales also remain solid, and we're not seeing a big sea change in the confidence or approach of our customers. We are going slightly above and beyond the government guidance from a safety point of view on things like sales.
We are used to operating an appointment system in our sales offices, but we're trying to make sure that our people can work from home if they don't have appointments and to make sure that there's some restrictions around appointments, the number of people from one family that attend, those sorts of things, to fit in with the spirit of the guidance as well as the detail. Both on construction and on sales, what we are seeing at the moment through this third shutdown is that we can manage it without material additional cost or change. As I say, more challenging for our people to manage, but not any fundamental difference and not something that affects our guidance and not something as things stand at the moment that we expect to. As I said, we entered the year with in a good position.
We expect a stronger first quarter as we catch up what would have been our fourth quarter 2020 completions. With the strength of the order book, and you know we run with an order book that tends to be longer than the sector, so to be a good 10% plus ahead of that sort of puts us in a strong place. It continues to give us the opportunity to push price, which we expect to do. Not going to give you a big update on that today, but I would expect us to come back in February and give you a clear picture of what price movements we've seen and how we see that impacting as we move forward. On costs, I think it's been a pleasant surprise that overall that remains benign.
I think the strength of the market and obviously the Brexit risk, there was some risk that we'd start to see cost inflation coming back in towards the end of the year. Probably the one area where we've seen material cost inflation is timber, which you'll understand is a more international rather than a U.K. house building sort of thing. We are seeing some offsets. Actually, our view of cost remains running below the level that we've seen over the last few years, not zero, but at a slightly lower level. That balance of price and cost feels healthy. Certainly feel that they're offsetting each other and that there's a bit of upside as we go through this year, but a bit early to build that into our guidance. We'll come back and talk about that in a bit more detail, I think in February.
I think, overall, as we look at this year, we continue to see this as a year where clearly we can show significant improvement from last year. Actually more importantly, if we look at it from a long-term value, that we can show real improvement in some of the underlying metrics and give real confidence in how we can then build both volumes and margins as we go into 2022, 2023, 2024. I'm still of the view that the volume growth piece will come as outlets open. Outlets should open in 2022, but the volume uplift of that comes largely in 2023, 2024. We should be able to show you improving margin dynamics over the next 12, 18, and 24 months. I'm going to stop there. I think that's the key headlines.
Really would like to focus the questions and the discussions around the fact that this is a trading update. Happy to talk about our views of the market. February is a better time to talk about longer forward-looking metrics. Chris, anything I've missed? I'm conscious I didn't cover lots of numerical data. Very happy if you want to give a bit more on guidance and on cash positions, et cetera.
No, I think that's all in the statement, Pete. Happy to move on to questions.
Okay. Melanie, if we can open up to questions, please.
Yes. Thank you, Sir. If you wish to ask a question over the phone, please press star one on your telephone, and please wait for your name to be announced. If you wish to cancel your request, you may press the hash key. Your first question comes from the line of Aynsley Lammin from Canaccord. Your line is now open.
All right. Thanks. Morning. Just two questions from me, really. Maybe, Pete, if you could give a bit more color on the land market. It seems as though you've gone out there quite aggressively, obviously buying land. Is your view now that any bargains that may have been there are Less opportunity in 2021. It's more of a normalized market, but still meeting your hurdle rates. Just your view really on the land market and the outlook. Secondly, the forward sales position, I think it's 50% forward sold for private completions this year. Just could you remind us how that compares to a more normal year? Is that higher forward sales a reflection of you de-risking this year a bit or is it just delays rolling over into 2021 in terms of build? Thanks.
Yeah. I think on the land market, normalizing but not yet normal. We do still see some extra opportunities. It does sort of vary, you should have chosen the on the size of site, the nature of site, the local area. Whatever thus, I'd say that variation is probably bigger than usual. You sort of you've seen land sort of sellers broadly return to the market, you do see a little bit of a drive from some nervousness about future capital gains that is bringing some land to market. Which is a newer dynamic back end of last year, early this year. I would not say we're now in a massively unusual market. I'd say it's getting closer to normal. There are still some players who are not in the market. There are some who are.
You can see from our public investors, obviously, that others have taken a different view through that, and a different timing through that. Sort of time and execution will tell which of those approaches paid off. You can see from their statements very clearly that we were more active than others sort of from very early in the year. It's not been normal. It's not quite normal there. It's close. I think, if I put it in margin terms, we were buying land at about 21% operating margin, but with a heavy mix of strategic land within that. Through this period, we've been buying land at more like 22%, 22.5%, so above, but not massively above, but with a lot more short-term, smaller purchases in there.
It's really hard to sort of totally benchmark that because you've got a different mix. You can see in the stats and the mix, and you can see from some of the data we've quoted, and we'll quote in more detail in February. The mix of sites is different. We'd have had to pay more for those sites in other conditions. Is it a buyer sale land market? No. Is it better than usual? Are there opportunity to do more deals in the short term market with more smaller sites that sort of underpin that year sort of medium-term performance? Absolutely. It's sort of shades of gray. In terms of forward sales, I mean, the forward sales are above 50%.
We're always nervous about quoting an absolute percentage because it feels like a formal forecast of volume if we give you the order book at an absolute percentage, but they're a bit above 50%. Normal is more like 35%, 36%. Sort of what's driving that? It is more weighted towards the business rebalancing as construction has been catching up with sales. It's a bit that our order book at the end of the year continued to perform better than we expected. Both outlet numbers and the year-end order book are slightly above our forecast from a couple of months earlier.
I don't think it's really driven by caution, but it's still the case that although construction activity is looking pretty normal in terms of the rate on site, I do think it would be brave to think that we could suddenly accelerate production, maintain the COVID guidance, keep build quality and costs in line and catch up with sales rates. I do think the construction activity will continue to be the limiting factor. Again, as we've said before, that gives us the opportunity to just focus a bit more on price, focus a bit more on efficiency, and that's not a bad place to be given our objectives around margin recovery leading volume growth.
All very clear. Thank you very much.
No worries.
Thank you. Your next question comes from the line of Gavin Jago of Barclays. Your line is now open.
Yeah, good morning, everyone. Thanks for taking my questions. Just a few of them. The first one is just to revisit your comments on build cost, Pete. One of your peers yesterday talking about build costs this year probably being up kind of a few percentage points. I just wanted some interest in where you think it could be in terms of mix between labor and materials this year. Second one is, I guess a revisit from one of the questions back in November, and obviously your pipeline of forward order book and delivery for Q1. I guess the risks around construction and meeting, I guess, for your customers who have got stamp duty savings to come towards them by the end of March.
The final one is just an estimate of any change in mix between private and affordable, just given where that forward order book is for FY 2021. Thank you.
Yeah. On build cost, we haven't given a numerical number at this point, partly because the movements are so small that actually it'd be quite hard to sort of pin it down. That's broadly true on both materials and labor. As I say, on the material side, we are seeing pressure on timber, specifically. A bit of pressure on other things, offset by sort of some savings elsewhere on materials. I do think we've been very clear and very open. We fully acknowledge that through, particularly early 2019, we saw more cost inflation than some of our peers. Actually, Jenny has refocused our central procurement team, we're seeing some good efficiencies come through that. I think we probably have a slightly different set of things that we can go for, that's probably helping us a little.
I don't know which peer you're talking about who gave you numbers yesterday, but I would be below three to three and a half at the moment. We're consciously waiting till February to be able to give you a slightly clearer numerical guidance. It feels a bit more benign than that.
Okay
We probably got a bit of catch-up in there relative to peers, as well as seeing a broadly stable environment. Similar on the labor side. We're not seeing big pressure, but as ever, it's very much you'll see some pressure in one regional area or one particular trade because of availability. You'll get some savings elsewhere. We expect to see cost inflation this year, but it's not huge. Against the price dynamic we see, I think our underlying guidance of selling price inflation offsetting cost inflation feels secure with a bit of upside, but a bit too early to put a number on it.
Sure. Okay. Thank you.
Sorry, pipeline for Q1. I think at a point as I say a week, sort of 10 days ago, where it did feel there was pressure on the government to constrain construction activity, build activity, clearly that would have had an impact on our ability to deliver Q1 plots. If we had to close sites for a period, there's not a lot of safety factor in there. That risk largely feels like it's reduced. In the environment we see at the moment with, as I say, some friction with some tighter rules, with making sure our own rules are applied really closely, we've gone back probably three or four times over the course of the last seven months and really reinforced the rules to make sure they're genuinely operated on each site. I don't think that that creates a risk against quarter one delivery.
There will be a small number of plots. There always are in the mix. Overall, in terms of delivering to those customers within that timeframe, I think it's within our capacity. We feel in a good place with where Work In Progress is. I go back to, we managed the build recovery carefully, and we set out an objective we knew our people could meet. We increased that steadily as we saw performance match it through last year. I think we finished the year in a good place with our sites feeling like they delivered the right completions last year, and they were set up right for the first quarter of this year. I think what I'm about to say is probably a given, but it is important.
We expect our business to be much smoother during 2021 than it's been for a long time now. How last year went has enabled us to make more progress on that than we would otherwise have expected. The risk through the year on construction delivery is lower than normal. That enables us to absorb some of that friction around build that we're seeing without having to either change our forecasts or see material risk to delivery on timing for customers. Your final question on affordable private mix. I think I'm right in saying, Chris, that the affordable mix will probably be down a bit this year. That's just to do with the contractual delivery and timing and how the different phases of sales and production have worked through the pandemic.
I think our underlying level of affordable housing through the next two, three, four years is. 2019 is probably a better measure of mix there than 2020 or 2021 will be. I think that's fair, isn't it, Chris? In terms of 2021?
Yeah. The affordable mix, as you know tends to vary around a midpoint of about 20% from year to year. A couple of years ago, it was at 23%. In 2022, you can see from the statements that it's at 20%. As Pete says, we'd expect it to be a bit lower next year, perhaps around the 17%-18% mark in 2021.
Brilliant. I see you, Thanks very much, gents.
No worries.
Thank you. Your next question comes from the line of Brijesh Siya of HSBC. Your line is now open.
Thank you. I have two questions if I may. The first one is on the pricing. If you can give a little bit flavor on what have you done since 1st of January, whether you have made any price increases across the sites or any regional difference there. If you can tell us a little more on that. Secondly, on the planning delays, I recollect in November you were talking about probably you're slightly down where you are planning to be. Can you tell us where you are right now and what was your expectation to be? Whether there is a significant difference or you are more trending towards what you thought you would be.
In terms of selling price increase, we did not, on this occasion, give as we did 12 months ago, as sort of an absolute across-the-board price increase, partly because we'd seen our businesses increase prices through November, December, and so they were in slightly different places, and so it was appropriate to have a slightly different approach site by site. We have seen, and the underlying instruction to our teams is where they are sensibly forward sold to start to test and move price up. We have seen statistically that happen in the first week or two of the year. If somebody isn't, then we'll pick it up very quickly, but there's not been a standing instruction on this occasion. The overall sense of just making positive movement on price and using the stronger forward order book remains.
I'm not going to put a number on it today. We will come back in February, as I say, and talk about it in more detail. It's just a bit early days. I think, we feel pretty good about the strength of the underlying market this year. You can't get away from there being some risk around where this third shutdown goes and its impact on confidence. At the moment, the signs are good, but it feels a bit early to give a lead. Sorry, the second question was on impact of planning delays on outlet openings. I think many of you have heard me say many times, we expect planning delays, so we should build them into our forecast. They shouldn't generally be a big reason why we see a difference. I would make the same comment today.
I'm not talking about a slower planning as being a reason why our outlets will be down in 2021 or changing our volume forecast. They remain very robust. I think we are seeing both because of the pandemic and its impact on local authorities and just their priorities and their resources, it is a grind getting through the system. I expect the next couple of years not to be much different from that. Having more sites and having more sites in the hopper, I think is a key strength in that period. We've built that into how we talked about the timing about the openings and the timing of how we expect volume growth to come through. That is what we're seeing.
I think, yeah, if we were where we were 18 months ago with less outlets coming forward, that would make me far more nervous than it does today. I don't expect the planning environment to suddenly be easier over the next 12 or 18 months. The best way of dealing with that is to have more choices. You're not too dependent on any one of them. Again, I go back to having more sites in those choices, a better mix of smaller and larger ones. I think you can see that in some of our competitors' commentary and where outlet numbers are likely to stand in the sector. They're likely to be lower in January 2020 than they were in January 2019. I don't think that's going to reverse overnight.
Thank you very much.
Thank you. Your next question is from the line of Sam Cullen of Peel Hunt. Your line is now open.
Yeah. Morning, everyone.
Hi, Sam.
I have a question for me. Thanks. In terms of the price mix in the order book, can you talk perhaps about the prices you're seeing in the private completions you've got in the order book and how the mix has shifted? Also in terms of how much of that order book is weighted towards the first quarter versus the second and third quarter, perhaps, and where does that sit versus the last couple of years, would be helpful to know.
On price mix, we quote the private movement on private price over the year, actually that's probably pretty reflective of what's in the order book in terms of a private price. That price movement is on the private side. The affordable side tends to not move that quickly. Where is the mix part of that coming from? I would say it's principally coming from the fact that, as we've talked about a couple of times through the last six to eight months, that in the late stages of the COVID shutdown and all the way through last year, the part of the market that relatively performed strongest, I'm careful of my use of the word relative. It's not that first time buyers were slower. First time buyers continued to be pretty healthy, they've been pretty healthy through previous years.
The second-hand market moved better in late 2020 than it had done for a while, and we see that in our mix of properties and prices. Sites with larger product and larger sites with some larger product on them, we've seen just a greater volume on sales rates at healthier prices on those larger sites. That's probably the biggest change year-on-year, that the part of the market that have been slowest seem to be more affected by effectively the dynamic of people staying at home and thinking, "I want to get on with my life. I want to make a move." It did seem to create a bit more movement in that second-hand market as the upper end of the market, and upper for us. We're talking about GBP 300,000 + in the Midlands and the North and GBP 500,000 + in the Southeast.
That's what's driving the mix, is similar level of first time buyers, and particularly if you smooth out the Help to Buy impact and a higher level of other customers in the second-hand movement market. Sorry, Sam, there was a second question, wasn't there?
Yeah, just the weighting of the order book in the.
Yes, sorry.
That you have at the moment, first quarter versus second.
Yeah. Chris, you may have the absolute data in front of you, but I can tell you we are sold out for the first quarter. We are heavily sold for the first half, and a lot of our sales at the moment are going into July, August, and September. There's some product still to sell for June, but there isn't much before June. From that you can take the order book is pretty evenly spread between first and second quarter, and then with a decent level of sales into the second half of 2021.
Yeah, I think that's right, Pete. You're probably looking at 40%-45% of the private order book is for the first quarter on that basis.
Okay. Thank you. Sorry, just to come back on the first question. Are you saying you're seeing more sort of fresh demand for those properties, I guess? Or is it you're seeing more effective demand because second-time buyers can actually sell their existing homes to buy one of your homes?
I'd say it's both, but the one bit I'd pick up on is I don't think that it was that those second-time buyers couldn't sell their property. I think it's that was the dynamic in the market of those second-time buyers taking a sort of 1% or 2% view on price to get liquidity and move. There wasn't enough will in the secondhand market to get it moving. I think anybody who wanted to sell their house in 2019 at a reasonable price could have done and wouldn't have had to take a big discount. If you want to get moving and you want to sell, you've got to sort of take a view and make a decision. We're seeing just far more will to make that decision. I think, to a certain extent yes, there's the psychology of the lockdowns and people seeing their houses.
It's also just the pure confidence piece of a housing market that's remained stable to positive through the Brexit period, through general elections, and then through the pandemic. Those sort of second-time buyers do tend to be more cautious in their nature than first-time buyers. I think there's quite a lot of people who looked at it and thought, "Well, if it's going to stay resilient, then prices aren't going to go backwards in any circumstance. I want to get on with it." It was caution that was probably holding them back before more than the fact they couldn't sell.
Okay. That's good. Thank you.
Thank you. Your next question comes from the line of Arnaud Lehmann of Bank of America. Your line is now open.
Thank you very much. Good morning, gentlemen. Just one question on my side. Could you give us a bit of color on the trend again in the sales rates now that you're able to book Help to Buy 2.0, how much of that boosted your sales rate in December or January? What would you expect now in the context of the solid demand environment, but at the same time, maybe a bit of constraint on the supply side for the industry? What do you think should be a normalized sales rate for 2021, assuming there's no major macro disruption?
I think if you looked at the periods pre-Help to Buy 2 coming in, the actual sales rate was in the low 0.7s. I mean, let's pick 0.72 as a reasonable indication of where it was. Obviously we had a couple of weeks where sales rate was artificially high. If you'd ostensibly smooth that out and adjusted a little bit for not all of the reservations would have come into the December period, some of them will come into early January. I think the sales rate last year in those last three months of the year, Help to Buy 2 have been there throughout, would've been something like 0.82, 0.83. That's taking into account the fact that we had, as we talked about several times, relatively low availability and obviously high order book, low availability go hand in glove.
I think if I look to what we'd expect this year, it starts with a 0.8. I think depending on where we are in the year, availability, underlying strength will probably govern whether that's 0.80 or 0.88, 0.89. That's probably the range. With the length of order book we've got, the impact to us for this year's completions on where we sit in that range isn't huge. It's more about where the order book then lands for 2022 and beyond. Do you think that sort of view, Chris, a 0.8 something for the end of last year if you'd have smoothed Help to Buy out and that view of this year, do you feel that's reasonable?
Yeah. The intervening period between our update in November and the end of the year, that sales rate that was boosted by the additional Help to Buy sales was 0.92. Obviously that was an elevated level. I think where you've got to, Pete, is very fair.
We would not want, in the ideal world our order book to be as elevated at the end of 2021 as it is at the moment. It's fine where it is now because of the circumstances have driven it there. Actually, I still think the right sort of distance to be selling at in normal circumstance, the right balance between volume and price, the right kind of forward look for customers is more like five months than it is six and a half.
Very clear. Thank you very much.
Thank you. The next question is from the line of Marcus Cole of Liberum. Your line is now open.
Morning, both. Three questions, if I may. I was just wondering if you could add a bit more color to the land spend since the equity raise, just in terms of what was that number last year? Just any color you can sort of add to forward indicators, any numbers you can give? Just finally on the dividend policy, I assume it remains unchanged to the 7.5% of ordinary net assets as it was before COVID.
Yeah. In terms of land, there's not a lot of additional color to give at this point. I would say normal year's land purchase would be in the order of GBP 700 million. Obviously in the order of 15,000 plots. GBP 1.3 billion and 22,000 plots gives you a pretty clear indication of where that is. It's important, and hopefully we're very clear in the way that we state this. Obviously, because we're trying to give people a clear sense of where we're going, the number we're quoting is new land we've approved rather than what's come on the balance sheet. You can see in the landbank numbers, a chunk of that started to come onto the balance sheet. You'll see the landbank step up this year as those plots go through from approvals to contracts.
We were quite pleased with the pace with which those sort of first stages post-approval were running at through late November and December. We were slightly nervous that it would slow down a bit because just at the level of activity and just people taking a slower route through the pandemic, but we haven't seen that. We're seeing good traction on that coming through. I think, if you look at roughly that GBP 1.3 billion set against the normal GBP 700 million, you get a sense of the pace last year, but the impact of that on the balance sheet spread out into this year. Sorry, there was a second question.
There were two, actually. There was just one on forward indicators. Are there any sort of numbers you can give, the initial trading in January, just to give us a bit more flavor? The other question was just on dividend policy. Does it remain unchanged from what it was before COVID?
I think on the dividend policy, we've said we expect to pay ordinary dividends from this year at a similar level per share to the 2019 dividend, and that remains the same. We'll come back to the special dividend policy later in the year, but that doesn't signal that we're expecting to fundamentally change it. I think it's right to set it out in the context of a post-pandemic world. We expect there to be material special dividends, and that they're likely to resume from next year. In terms of forward indicators, it is too early to give you something numerical. I think first week sales rates were above last year by a meaningful amount, but that's helped by Help to Buy too. Activity levels and interest are at good, healthy levels, at or above normal levels.
I'm nervous about giving you a single week sales rate because I don't think that's particularly helpful.
Okay. Thank you very much.
Thank you. Your next question comes from the line of Will Jones of Redburn. Your line is now open.
Thanks. Good morning. Three as well, if I could, please. I think mostly an extension of some of the points already discussed. Just coming back to the land, that GBP 1.3 billion, would you be able to give us a broad feel as to how much of that you feel was on the balance sheet at the end of the year? Maybe another way of answering, I suppose, is if you were to say broadly replace going forward in 2021, do you have an idea of, I guess, the cash land spend demands on the business through this year? Second one was just come back on outlets. Could you give us a feel for, I think you mentioned the likelihood of a slippage through 2021.
I appreciate it will be a function of sales as well, is there a number you might be willing to put on that? Is it certainly 10 or something from the 240 odd? Did you say in opening remarks, Pete, that a material lift in 2022? If so, is that the core business kind of catching up? I think you've guided that the new land money, if you like, really kicks in from 2023 on sites. Finally, would you be drawn at all on how you think completions may split this year between the first half and the second half? Obviously, we've had a strange 2020 in that regard and the big order book, and just wondering how much you might be able to book of your target by the six month stage. Thanks.
Yeah. Chris, if on the land one and how much is on the balance sheet, the cash impact, if I leave that to you, and I'll pick up the other three, and then come back to you on that one. On outlets, it's quite possible our outlets will remain stable at about the 240 level. As I've said numerous times, it's not entirely in our gift. The range probably is 10 as we go through this year, and the impact of last year and slower planning kind of means new starts are a bit slower. The range, it dips a bit. As we said in November, we expect it to dip a little and then more or less end the year in the same sort of level that we're at at the moment.
In terms of material lift in 2022, and I'll be very careful and precise with my wording. What I'm saying is that we should see in late 2022 the first of the outlets from new land purchase that have an impact over and above the core business starting to come on, and that's when we should start to see outlets begin to increase.
Right.
Where we talked about the impact on the business, I'm talking particularly about then completions impacting on 2023, 2024. We should be selling from some of those new sites in the second half of last year, but the material impact on completions is in 2023, 2024. That hasn't changed from the dialogue we had with investors back in May, June, that that's where the impact on completions come through. We do recognize that it's really important to be able to show you the forward indicators. Whilst we won't necessarily split, because the end of the day, from one of our businesses, there's no distinction between land that was bought from the capital raise and land that we would have bought anyway.
Yeah.
You can see that we have secured more sites, but it would be artificial to us to run the business as if they were different. The aim is to get the value and the time out of all of them. We will be continuing to show you how that wave of additional land is progressing through the business, through to those outlet openings and then that future volume, because it's our way of giving you confidence that volume growth is there. It's a bit arbitrary to split them as totally different sites. Yeah, outlets in second half of 2022, completions in 2023, 2024. Okay. Chris, if you want to pick up the land. I think on the half one, half two completions split well. Much closer to 50/50.
I think sat here today, I'd still guide to slightly second half weighted high 40s to low 50s, but much closer to 50/50 than we've been in a while.
Yeah.
Yeah. Just on the land, Will. Of course, not all of that spend is going to be reflected on the December 2020 balance sheet, because some of it is still to be contracted or is already contracted but conditionally contracted. Even so, you will be able to see an increase in net land in the balance sheet compared to 12 months ago. When I say net land, I mean land net of land creditors. I think that was something like GBP 2.0 billion at the end of December 2019. I'd expect that to be around about GBP 2.2 billion in the December balance sheet when we report that at the prelim.
Great. Thanks a lot.
Thank you. Your next question comes from the line of Christopher Fremantle of Morgan Stanley. Your line is now open.
Hi, good morning. Two questions from my side. The first is on Help to Buy and stamp duty deadlines. I just want to understand your view on to what extent those deadlines have really pulled forward demand, as well as you obviously satisfying a pent-up demand from the initial lockdown. If you can just talk about Help to Buy, what percentage of your second half volumes are Help to Buy volumes, and how does that compare to previous periods? If possible, you can tell us what proportion of those Help to Buy volumes are the non-first time buyers. That would be helpful. The second question was about margins and the focus about returning to 21%-22% operating margin.
Appreciate you don't want to be too specific at this point. Is that something you aspire to achieving in 2021, or should we be assuming that that's a 2022 aspiration?
Yeah, no. I think in terms of the Help to Buy stamp duty deadlines, we've been of the view through the last six months that the impact of stamp duty was not huge. Particularly if I look at economist commentary and press commentary, there's almost an assumption, well, I say almost an assumption, there is an assumption that stamp duty holiday has been the reason why the housing market has been much stronger in the second half of 2020 than everybody thinks. I just think that's wrong. I think every bit of data that we look at in terms of actual performance and the anecdotal data of our conversations with our customers says that it's a component, but it's not anything like the most significant component. Therefore, I am unconvinced that it has had a big impact in driving demand into a particular period.
I think that's the underlying market, people's desire to move, low interest rates, mortgage availability. Help to Buy is much more impactful, I think, in that you can see in our sales rates, it clearly has an impact on phasing, when one scheme runs out and another one comes in. The biggest piece of evidence that I can give you for that view on stamp duty is what we said to you in November, and is true in spades now, that we don't see a disjoint between our sales performance on rate and price. When we move from selling product that we'll complete in March 2021 to product that we'll complete in April 2021.
We try to be very clear with customers on what that timing impact is likely to be like, because obviously, it will make customer relationship management very difficult if we tell people we can deliver a product and they're going to benefit from that and then we can't. We've been very careful with that. We do not see a price reduction in the sales we're taking in the second quarter, and we're pretty well sold for the second quarter already and into the third quarter. I think we have clear evidence on that it's continued to head in the same direction. I think you asked about the proportion of Help to Buy in the second half sales and proportion of first time buyers. It will be lower because of the period where we didn't have Help to Buy.
I haven't got the numbers because we tend to look at it on a completion basis, and we haven't got the full data yet. I would imagine that the Help to Buy sales, the reservations in the second half as we look back will be low 40s or even high 30s rather than high 40s. It will have dipped just because of the period of unavailability and the catch up in December wasn't a complete catch up. I would think if we look back, once Help to Buy 2 has got its full capacity, and we look at it on a completion basis as we look back at 2020 and 2021, it won't have dipped very much. Your question about what proportion of first time buyers and the extension to that question, and they're about proportion with affording outside the price caps, about 20%.
I still think that the underlying demand from first time buyers within the price caps is enough that it will keep Help to Buy in that sort of 40% range through this year. It's an important part of the sales piece, and it's why I would play down the impact of stamp duty on the market in 2020 and 2021, but I wouldn't play down the importance of Help to Buy. We look forward at 2023 and what government decides to do around first time buyers post then. That I think continues to be a material debating question for the housing market. Stamp duty, if I'm honest, is a bit more about noise and I don't think it's had a big distorting effect. I know there's a question on margins, Chris, but does that answer the overall question you're asking around Help to Buy?
Yeah
Stamp duty impact? Okay. I think on margins, we have never said, and we will continue to say that we get back to that 21%-22% level in 2021. We won't have a fully normal level of volume. That brings a bit of inefficiency. Some of the overhead cost saving we brought in last year will impact this year, but there's still noise around the business. We're not back to normality this year. We're heading there and our plan and our goal is to get as close as we possibly can. Our guidance is absolutely not for that range this year and never has been. It's not necessarily to get into that range for 2022, but I'd say that's the first year where it's feasible, but we certainly will be disappointed if 2022 didn't start with a two in terms of margin.
We'll come back and give you a bit more guidance on how we expect that to progress through the next couple of years in February and then during the course of the year, because obviously there's a lot of water to go under the bridge. We expect to see material progression this year against obviously a very weak 2020, and to be able to continue to map out that path back to that 21% to 22% margin in the short, medium term, if that makes sense.
Very helpful. Thank you.
Thank you. The next question comes from the line of Gregor Kuglitsch of UBS. Your line is now open.
Hi. Good morning. Thanks for taking my questions. I hope you're doing well. Maybe on ASP, if I may. Obviously your private ASP was quite high, I think, relative to history, and you kind of flagged mix. I guess the question that I have is, it sounds like as if this year there's not going to be much change in that regard. Correct me if I'm wrong, but as we think about sort of medium term and looking at the land that you're buying, is there a mix online I guess we should be thinking about? Or putting the question differently, if you printed nearly GBP 290,000 of ASP, how does that compare to your land bank ASP as you kind of stand here today, maybe factoring in as well the land acquisitions that obviously aren't necessarily in the land bank yet?
That's question one. Question two is on volumes. I think previously you sort of said 85, 90 for this year, if we take 2019 as a benchmark for this year, right?
Yeah.
Then can you just remind us how you map that into 2022 and beyond? Do you think in 2022 you can already match the 2019 level? I appreciate the new sites only contribute later. I get that.
Yeah.
Those were, I think, incremental. If you could just maybe map out for us the volume path as well as you see it today. I will leave it there. I have one other question, those are the two main questions, yeah.
Yeah. Gregor, I'm going to sort of go through those questions and I'm happy to answer them, but we're starting to stray into things I think I've better talked about in February. I'll cover those. Probably if people want to expand on those, I'm probably going to kick them back and say, "We'll come back to you in a couple of months." I think on the average selling price unwind, no, we don't expect a material average selling price unwind. I think whilst there was a improvement in mix through this year was that those higher priced properties We start to see more traction. I see that as more of a normalization to what we would ordinarily expect it having been held back rather than a totally temporary thing. Now, there's a bit of a judgment in that.
It's hard to know how the strength of these different parts of the market will behave. If you look at our land bank, I don't think our average selling price in our land bank at the end of 2020 is fundamentally different to the average selling price on completions delivered in 2020. It will vary a bit from period to period, depending on the exact mix. I don't think it's that we're guiding you to it going backwards. Of course that's sort of helped a bit by some of that is an inflationary shift. It's not the bigger component, but it is in there. Sort of there's that in there as well. In terms of volume unwind, yes, we guided you to 85%-90%. We're not changing that. We feel increasingly more confident about that.
We haven't got formal guidance for 2022, but I think we would say 2019 is a good place to start, but probably slightly below 2019 rather than slightly above if we had to cut it today. Not a long way off. Then as you say, sort of starting to see volume growth past 2019 and 2023 and 2024. I wouldn't want to be drawn on anything more numerical than that at this stage. By the end of this year, I think we'll be mapping out for you as those outlets flow through a fairly clear trajectory on both margin and on volume. I think at this point we've given you, I think, pretty clear guidance about the overall direction. Given the amount of uncertainty and change going on, that feels like a pretty fair place to give you in terms of planning certainty.
Thank you. Maybe just on the Help to Buy side. I think if I look back, your completion mix was on private historically, I don't know, maybe I think in 2019 was like 45%. With the new scheme, what do you think is realistic? Like half that level or more or less?
No, definitely significantly more than half. Against 45%, 40%. It's a bit less, but it's not massively less, I don't think. You'll see every developer will have regions where they're very unaffected by the price caps and regions where they've got a couple of sites that have product just over the price caps and the effect is greater. Overall, as I look nationally, I don't see it having a dramatic impact. There continues to be good demand for it within the price caps and with the first time buyer limitation.
Okay. That's really clear. Thanks a lot.
No worries.
Thank you. The last question comes from the line of Ami Galla of Citigroup. Your line is now open.
Yeah, good morning, guys. Just one question for you.
Hi.
I was wondering if you could give us some color on the demand trends that you're seeing in the London market and how is planning really progressing in that market?
Yeah, I think on the demand side, it's been probably encouragingly and probably mildly surprisingly resilient. I know people talk a lot about an exodus from London. I think if you're looking at the rental market, you've clearly got less people moving into London, obviously because the rental market is short-term. I think most people's house buying decisions are longer term than that, and so we haven't seen a material drop-off in demand in London relative to the rest of the country. I think on the planning side, though, we continue to see a reasonably challenging environment with the interplay between national government strategy and the mayor's strategy. We continue to see, particularly for central London, a more challenged planning environment than elsewhere than historically. As we said in November, we've shifted our focus in London.
We don't expect to be adding in new sites to what would be historically our central London business. We still remain committed to London, and we have bought sites in London and in the immediate surrounding areas. It is slightly different to the picture elsewhere, but I think particularly if you look at demand, it remains reasonably robust.
Thank you.
Thank you. That concludes our Q&A session for today. I will now hand over back to Pete Redfern for his closing remarks.
Thank you, and thank you for the questions. Thank you for keeping them largely pretty tightly around the trading update. We're looking forward to February and talking a bit more forward-looking, a bit longer term. We sit here at the beginning of 2021 and feel good about where the business is. I think 2020 gave us a chance to adjust some things on cost to make a big step forward in land purchase and having not driven for the absolute maximum construction completions at the end of the year WIP and the forward-looking part of the business, it feels in a healthy place. Clearly, some broader uncertainty, but I think we feel we sit pretty strongly within that. Look forward to catching up properly in a couple of months' time. Thanks very much.
Thank you for joining the Taylor Wimpey PLC trading update call. This call is being recorded and will be available to listen on demand on Taylor Wimpey's website later today. Thank you.