Okay. Well, good morning, everyone. I think we're ready to ready to roll. I'm sorry. I think there was a bit of a queue to get everybody past security this morning. Thank you very much for joining us. As you can see, I'm joined, as usual, by Chris, and I hope that at least the majority of you managed to have time for a coffee and to catch up with all of the management team who I'm pleased are here with us this morning. 2022 was a very interesting year to say the least. I'm really pleased that we delivered an excellent overall financial and operational performance where we increased profitability and margin despite the market backdrop, particularly in the final quarter.
We demonstrated through proactive action that we are a strong, agile business with a clear operational focus, performing well in challenging and changing market conditions. A performance supported by our fully integrated dynamic CRM system, which is now fully embedded across the business, giving us more customer insights than ever before. I'll start by giving you an overview of the year, and then Chris will take you through the detailed financials, and I'll come back to talk about our strategy, priorities, and outlook. In May last year, I set out focus areas, and I'm pleased that this greater operational focus has positioned us well and helped deliver a really strong 2022 performance. We delivered operating profit in line with expectations.
On margin, we delivered a significant improvement in group operating margin to 20.9%, very close to our 21%-22% target range. You'll hear more on this from Chris, but this clearly demonstrates the focus we've had on driving price over volume, operational excellence, and very tight operational cost control. While we are rightly focused on managing short-term conditions, we run the business for the long term and have continued to invest in areas that will yield future value. For example, you'll hear more today around our approach to net zero and our investment in timber frame. Given the challenging planning environment, I'm absolutely delighted that our teams opened 104 outlets in the year.
This gives us the best outlet position that we've had in years, importantly provides increased flexibility and sales opportunity as we start 2023 and face into uncertain market conditions. We talked previously about levers available to managing market change, I believe that by moving early and decisively, reducing lands activity, introducing a recruitment freeze, maintaining that sharp operational focus, tightening controls, and taking additional cost action, we are well prepared for the near-term market, and we are well positioned to recover strongly. A few other areas to comment on quickly, CQR score and customer service. As you know, fundamental quality has been a major driver for us, I'm pleased to say that we continue to lead the volume house builders in this measure and have done so since its introduction. I'm also pleased that we've retained our five-star builder status.
Both these areas, quality and service, will remain a key focus for us, going forward. Last, but certainly not least, we have a differentiated, dividend policy within the industry, and our priority is to provide a reliable return to shareholders across the cycle. As you can see by our announcement this morning, we are delivering on this. Without being a football pundit, 2022, was a year of two halves. Our sales rate, I think, best demonstrates the very different market, environment in the first compared to the second half of the year. We pushed, very hard on price, in the first half, but still achieved a sales rate of 0.9, and we benefited from this, in the second half.
As you know, the second half was heavily impacted by increased economic uncertainty, significant increases in mortgage interest rates, and the resulting deterioration in customer confidence and affordability. The sales rate for the second half was 0.48, giving a sales rate overall for the year of 0.68. Whilst you can see our sales and cancellation rates deteriorating, I do want to highlight the private H2 completions price for 2022 increasing, which shows the focus on price discipline. We recorded a private sales price on completions of GBP 367,000 in the second half of 2022, up from GBP 337,000.
I know you'll be keen to have more color on current trading, and how we're managing the business in the current environment, and I'll talk you through that detail later on. For now, I'll hand over to Chris to take you through the financials. Thank you.
Thanks, Jennie. Good morning, everyone. This time last year, I said margin and quality of earnings would remain our focus over volume in 2022, that's exactly what we delivered. Our disciplined focus on operational excellence has helped us deliver an excellent set of results, I'm particularly pleased with the improvement in our operating margin at 20.9%. This is a whisker away from our 21%-22% target range substantially above the 19.6% we reported in 2019 prior to COVID, it was achieved despite rising build costs. That margin performance means that Taylor Wimpey generated more operating profit in 2022 than it ever has before. Over GBP 40 million more than our previous best in 2018.
This demonstrates the quality and embedded margin in our land bank and the strong operational platform of the business which will support us in a more uncertain market in 2023. Driven by our strong operating result and assisted in part by the buyback, we delivered a 10% increase in adjusted EPS in the year despite the introduction of the Residential Property Developer Tax, which increased the effective tax rate to 22% for the year. As you've already heard from Jennie, we've successfully increased our outlet numbers at the end of the year, and the investment in, increased our operating assets by 5%. To deliver an improvement in the overall return on our operating assets is very pleasing. Wholly owned U.K. Completions reduced by 3% year-on-year due to increased uncertainty across the housing markets in the second half.
The growth in overall average selling prices year-on-year at 4% was a function of mix with a greater proportion of affordable homes. The increase in private prices at 6% is driven by underlying inflation, offset partially by slightly smaller plots on average. The 12% increase in affordable pricing in 2022 was largely driven by geographical mix, with more plots from higher price point locations in London and the South East. JV completions peaked in 2022, and we completed the final phase of the Olympic Park scheme, and we're expecting profit from joint ventures to fall back to around GBP 2 million in 2023 as JV volumes reduce. Before I move on to margin, I thought it would be helpful to demonstrate how our focus on pricing discipline delivered for the group in 2022.
We reported underlying year-on-year price inflation in H1 of 6.5% after adjusting for mix. In H2 , that underlying inflation increased to more like 9%-10%, giving 8% for the full year, which you'll see on the next slide. The step-up in inflation, along with positive mix, accounts for the increase in private average selling prices between H1 and H2 . In the first half of 2023, I'm expecting the private average selling price to be similar to the GBP 367,000 average from the second half of last year, with mix compensating for reductions to underlying prices. Similarly, for affordable homes, I'm expecting average prices in the first half of this year to be broadly similar to the GBP 162,000 average we reported for H2 last year.
That should help you understand how we are thinking about the half 1 pricing dynamics for 2023 based on our year-to-date delivery and order book position. In 2022, completions were very well weighted between H1 and H2 as the market softened and cancellations increased in the second half. In 2023, I'd expect us to return to a 45-55 H1, H2 split reflecting the slower sales rate since Q3 last year. Lastly, there was a greater mix of affordable homes in 2022 at 21%. Looking forward, we expect the mix of affordable homes in 2023 to be slightly higher, dependent on the private sales rate performance in the year. Back to our margin performance in 2022.
House price inflation running at the same rate as build cost inflation was a significant net contributor to the increase in operating margin. Given 2022 was more than any other year, a year of two halves, it's worth noting that just under half of 2022's private legal completions, were reserved in 2021, and most of the balance were reserved in H1 , 2022. The fact that we had a very strong order book through 2021 and the first half of 2022 allowed us to focus on price optimization. It's therefore no surprise to see underlying price inflation on these completions averaging 8% for the for the period.
Build cost inflation on H 1 legal completions was 6.5%, an increase to 9%-10% in H2, averaging out at around 8% for the full year. Whilst the net impact of inflation on the 2022 income statement was a very clear benefit, that position is going to reverse in 2023 because prices on reservations peaked in Q3 last year and have lost ground since then as incentives have increased. In addition, the prevailing rate of annualized build cost inflation remains at around 9%-10%, with energy and wage inflation being the primary drivers. I'm not expecting it to stay there because there are already some signs of moderation. As volumes reduce, that will play through to costs, particularly those that have increased the most in recent years.
A deterioration in fixed cost recovery will also weigh on margins in 2023 as volumes reduce, though this will be mitigated slightly by the efficiency improvements we announced in January. Typically, at this time of year, in normal market conditions, I would aim to give you a degree of margin guidance, but given the level of uncertainty, we are not in a position to give guidance on that at this point in the year. What I can say, though, is that 2023 will continue to see us focus on margin and quality of earnings over volume. A key element of that will be rebuilding our order book this year to provide a platform to optimize price in the medium term.
Our selective approach to land acquisition throughout 2022 resulted in a relatively modest increase in land value on the balance sheet, which is consistent with a similarly modest increase in the number of owned plots in the short-term land bank. You can also see that land creditors reduced by GBP 81 million as the flow of new sites and creditors slowed. WIP increased as planned as a result of achieving growth in outlet numbers towards the end of the year. Where WIP goes from here will be a function of sales and the size of the business. Given the reduced order book and tougher trading conditions, it's likely that WIP will reduce as we tighten our approach to WIP investment right across the business to ensure that we don't build too far ahead of sales.
Higher trade creditors are the driver of the increase in other creditors with more work being done in the lead-up to the year-end, opening those new outlets. Provisions have increased due to the additional GBP 80 million fire safety provision booked in the first half of the year, which takes me on to the next slide. You will have heard us say this before, and I will say it again. It is our firm belief that leaseholders should not have to pay for necessary fire safety remediation works to their homes. That is why we acted very early and proactively well in advance of signing the Developer Pledge last year, setting aside significant funding to remediate our affected buildings for leaseholders. We have a clear view on the number of TW buildings requiring remediation works.
As you can see on the chart on the left, we are well underway with our ongoing program of works. Of the 207 buildings identified for works, 25 have been fully remediated, 14 are in progress, and 39 are expected to start on site in 2023. It's pleasing to see this progress continue thanks to the efforts of the dedicated remediation team that we have in place. In terms of the Developer Remediation Contract, our signing of this will change very little for leaseholders living in buildings that we construct because we've already committed to do the right thing and make those buildings safe.
Our GBP 245 million provision remains our best estimate of the cost of the required remediation work and is underpinned by our experience of having remediated or being in the process of remediating 39 of the 207 buildings. On durations, you know, I expect that the bulk of these works will be completed in the next three to four years, s o the five to six years referenced on the slide reflects the timeline to complete the projects with the greatest complexity. In 2022, we continued our track record of strong cash generation driven from earnings. This time last year, I was guiding to year-end cash of about GBP 600 million on the assumption that we would spend GBP 1 billion in land.
The increasingly selective approach that we took on land acquisitions as we progressed through 2022 meant that our net land spend in the year ended up at just under GBP 700 million. That reduction in spend, along with the excellent profitability, were the main drivers of the increase in our closing cash balance. The introduction of the Residential Property Developer Tax in April 2022 resulted in additional tax payments of GBP 23 million last year. The increase in corporation tax rate in April this year will see our effective rate increase further to 27.5% in 2023. As you're also aware, we returned GBP 474 million to shareholders by way of both dividends and the share buyback.
I've shown you this slide in presentations over the last 12 months. It outlines our differentiated approach to capital allocation. The first and most important pillar of our approach is to maintain a strong balance sheet. The measures we took on land in 2022 demonstrate this and position us well to navigate more uncertain markets in 2023. In terms of future land investment, we will maintain our disciplined approach, being selective and opportunistic, which is something we're able to do because of the quality and profile of our land holdings. Our ordinary dividend policy is to pay approximately 7.5% of net assets each year in two equal installments in May and November. That policy is intentionally based on our net asset position in order to provide increased dividend stability for shareholders compared to an earnings cover based policy.
Today, we have declared the final dividend for 2022 at GBP 0.0478 per share, which is due for payment in May, subject to shareholder approval. We have stress tested our ordinary dividend policy, and accordingly, the board continues to expect to pay the ordinary dividend throughout the cycle, including through a normal downturn and a scenario where average selling price is reduced by 20% from the peak and volumes reduced by 30%. The board also remains committed to returning excess capital to shareholders, and we have a track record of doing that at the appropriate times. Given the current levels of market uncertainty, the board is not proposing any return of excess capital at this time. However, we will continue to review that throughout the year. Given the uncertain market outlook, we are providing a range for 2023 volumes.
The business is capable of delivering volumes significantly in excess of this range, but delivery in 2023 will depend on the level of customer demand. The lower end of the range at 9,000 U.K. completions equates broadly to a 0.5 sales rate, and the upper end at 10,500 U.K. completions is around 0.7, which is a plausible range of outcomes based on what we know at this point in the year. There are a few things to bear in mind when considering the range. You know, 2023 completions are dependent on both the current order book and the future sales rate in 2023 for homes that will be completed in the current year. Our priority is to maximize value for shareholders in the medium and long term, not volume in the short term.
Building an order book which allows us to optimize price as we go into 2024 is important. It means that not all of the reservations that we take now, between now and the end of September, will be for completion in 2023. Given the increase in outlets at the end of last year and the sales rate of 0.4 in Q4, if we end up towards the middle of the volume range, that is likely to generate the normal H1, H2 split with 45% of completions in H1. As I mentioned earlier, we expect the mix of affordable homes in 2023 to be slightly higher than 2022's 21%, dependent on the private sales rate performance in the year.
On cash, we will aim to preserve our strong position, and I expect that we will remain in a net cash position throughout the year at all points within the volume guidance range. I'm not putting any specific cash guidance out there at the moment because that would involve laying sort of price and cost uncertainty on top of the volume range, but I will aim to provide cash guidance later in the year. On land, we intend to remain cautious but opportunistic with new land purchases. I'm expecting 2023's net finance charge to be less than 2022's, probably somewhere around the GBP 10 million mark. Lastly, as I mentioned earlier, we are expecting a reduction in contribution from JVs this year with our share of JV profit at around GBP 2 million.
To conclude, you know, we delivered an excellent set of results in 2022. Going into 2023, we've got a balance sheet that's never been stronger, with no gearing and an excellent land bank. We've seen a pickup in sales rates from Q4, and although it's still pretty hard to call how the housing market will continue to evolve from here, we're confident that we're in a strong position to navigate the challenges posed by the market. Lastly, we have a dividend policy that supports reliable and transparent returns for shareholders. We have a very experienced management team, and that combination together leaves us well placed to deliver value for all our stakeholders.
Thanks, Chris. Whilst there are undoubtedly challenges in the near term, we see UK home building as an industry underpinned by supportive long-term trends. Overall, new home building in the U.K. has not kept pace with demand and household formation over many decades. As a result, we expect demand to continue to outstrip supply in the future, particularly given the planning environment, which I'll come onto a little later. At a fundamental level, the U.K. has a housing deficit, and we anticipate that this will underpin demand for our homes over the long term, creating an attractive market for Taylor Wimpey. Demand is also supported by low levels of unemployment, which is forecast to stay relatively low by historic comparison and is well below the levels we saw in previous downturns.
In the near term, availability and pricing of mortgages continues to improve, following significant disruption and rate increases in 2022, albeit costs are expected to remain higher than we're used to in the last decade or so. What we're hearing and seeing is that lenders continue to have a good appetite to provide mortgages, and there's a healthy level of competition between lenders in mortgage rates available to customers. We know that first-time buyers have been particularly affected by increased rates, and as I said in November, there's a period of adjustment for customers to this new reality. Overall, our market remains fundamentally attractive, and some of the near-term headwinds are stabilizing.
It is still early in the year, and the spring selling season has started better than we might have expected in just a few months ago, with sales rates improved relative to the weaker environment in quarter four. The sales rates for this year so far is 0.62. There are, however, continuing uncertainties in the year ahead, and we will continue in our agile approach. When I visited sites over the last few weeks, I have heard from our sales teams that customers are grappling with issues related to affordability, general cost of living increases, and cost of mortgages. The most common reasons for cancellations, they tell me, are now change of mind, usually linked to economic concerns, the ability to access a mortgage or chains collapsing.
As we came into January with lower forward sales in the year, it won't come as a surprise that it's likely as a result that 2023 completions will be more weighted towards H2 . Chris reminded you that our priority is to maximize value over volume, and we continue to manage the business for maximum shareholder value creation over the medium and long term. We have the sites and the build capacity to deliver to the top of our volume range, but subject to market conditions. Our teams are focused on meaningful and maintaining a careful balance between sales price and sales rate in the short term. As I said, in both November and in January, our approach to pricing is to monitor the market carefully and respond to prevailing market conditions, not to lead the market down.
We do continue to use incentives in a targeted way, utilizing a bespoke approach to address individual customer needs. Incentives across the sector increased in late autumn, but it is a reflection, I believe, of the robustness in pricing in most markets that down valuations thus far have not been a factor. Prices are reasonably firm overall. However, as we respond to the market, it does vary plot to plot and location to location. We are maintaining discipline, and as you can see, we're achieving a reasonable sales rate as a result. Overall, I don't believe there is a need for prices to fall. However, in the next few months, as the market continues to evolve, we will monitor this closely and respond appropriately. We're taking proactive action to stimulate customer interest and sales leads through all the tools available to us.
Knowing and supporting our customers has never been a higher priority for the business, and we'll continue to focus here, especially given that challenging backdrop. We've increased our media and promotion activities within target demographics to support customer engagement. While organic web visits have fallen and web traffic is lower, we've supported overall interest by increased media spend. Whilst pre-booked appointments via our website have fallen, we have adapted our operating model from appointment only to appointment preferred. Visits to our sales centers actually remain healthy when compared to previous years, supported by walk-ins. Our sales teams have been working the database, and our dynamic system enables them to match customer needs on affordability, house type, and proceed ability with homes on sales release.
This has also enabled the teams to increase the number of appointments that they're booking directly with the customer. This has been really successful and I think demonstrates the skills and expertise of our sales teams. It also speaks to the levels of underlying customer interest, though conversion does, of course, remain key. Understanding our customer is the single most important thing to enable us to drive sales through providing the right type of support. We have a clear priority to understand and support our customer base, even better, to affect a conversion to sale. I spend as much time as possible visiting our sites, and I'm very pleased with how they are looking. Our teams consistently tell me that they feel well prepared for the market challenges and have the right tools to do their job.
From up-skill training, enhanced product knowledge, and really importantly, driving the value of our fantastic database. We can also see this coming through in the increase in manual appointments booked by our sales teams. Here you can see some stats taken from our Dynamics platform and also from our panel brokers, which demonstrates that our customers are in a good income bracket, they tend to favor a five-year fixed rate mortgage, and are first-time buyer of 22%. Typically, customers visit our website a number of times and are likely to visit sales centers several times before reserving a property, so it's important that our sites, and the website, our virtual shop window, if you will, look as good as they possibly can.
The majority of our customers have not taken financial advice when they come through our door, which reinforces the importance of experienced sales teams to supporting customers through their buying decisions, directing them to various sources of independent and qualified financial advice so that they can understand what they can afford. I believe we have an attractive offer for our customers. From our high quality locations, the quality of our build, and the energy savings of new homes, right through to the support that we will provide throughout the customer journey.
You'll now be familiar with the cornerstones of our strategy, which I first set out in May: land, operational excellence, sustainability, and capital allocation. These foundations of our strategy are essential in ensuring that we have a strong, resilient business that can deliver for all our shareholders throughout the cycle. I remain convinced that these are the right areas of focus and have set us up well for a changing market, allowing us to be agile across all market conditions. I'll take you through some of the initiatives of these cornerstones. Starting first with land. The quality of our land bank is a clear differentiator, which becomes even clearer in an uncertain market.
The quality is graded by macro and micro location, and is a key part of our customer proposition. Quality locations are more resilient. A key differentiator for Taylor Wimpey is that in 2020 and 2021, we took a different view of land acquisition to many of our peers, investing opportunistically at good intake margins, taking advantage of a slowdown by others, to buy sites in excellent locations and ensuring we had a variety of sites in terms of size. I believe that you can see the benefit of this. Given this strong position, since early in 2022, we have been increasingly selective in the land market.
With the benefit of 83,000 plots in our short-term land bank and a strategic pipeline of 144,000 potential plots, we were early to signal a significant reduction in land spend given increased market risk. The primary focus of our land teams is progressing our existing land assets through the planning system and getting outlets open because whatever the market, more outlets prudently managed gives us more choices. Our short-term land bank also has the added advantage of being anchored in that mature strategic pipeline.
Forecast conversions from strategic land have a tendency to move to the right. You might remember that our Group Strategic Land Managing Director Lee Bishop, who's here with us this morning, telling you in May that strategic land required patience. You're likely to see this exacerbated by the recent uptick in planning challenges, especially those impacting local plan progression.
It remains a clear benefit and allows us to be flexible in our approach to the short-term land market while providing us with ongoing visibility of future supply. Of course, we benefit from a discount to open market value, and a degree of flexibility in the timing of its conversion to our short-term land bank. We've not seen the land market reflect current market conditions, and given our incredibly strong land bank and strategic pipeline, we can continue to be highly selective. We are, however, continuing to monitor the market and have the ability to act opportunistically in appropriate circumstances.
I do now want to spend a few minutes of your time talking about the extremely challenging planning environment that we and indeed the whole sector are grappling with. In particular, I want to be clear that I am very confident that Taylor Wimpey is well-positioned. As you know, I have over 30 years' land and planning experience, and I honestly can't remember a time when it has been so difficult. As a result of the confusion in the strategic planning environment in recent years, the progress of local plans has slowed meaningfully and near paralysis of the planning strategic planning system has worsened since the parliamentary debate on the proposed changes in the Levelling-up and Regeneration Bill, and more recently, the consultation of changes to the NPPF announced prior to Christmas.
These strategic challenges also come at a time when the development management system, that's the process of determining planning applications at a local level, is also under extreme stress. Application backlogs, significant staff vacancies, and an absence of investment in resources. These changes are having a visible impact on our sector, which is illustrated in the graph from Savills, where you can see planning approvals dipping. In the medium term, the supply of new homes looks set to be constrained. The number of homes gaining planning consent has dropped to pre-2016 levels. Savills indicate in their research that in 2022, every English region saw fewer new homes gaining planning permission than in 2021.
For a number of years, we've been keeping an absolute record of the number of sites and resulting plots for which we are seeking first principle planning approval as at the 31st of December each year. To clarify, this excludes reserve matters applications, replans and the like. Our average run rate for the years from 2017 to 2021 has been remarkably stable at around 16,500 plots across a range of site numbers. The highest in the period being 85 sites in 2021. As of the 31st of December, 2022, we had 25,500 plots in the planning system for first principle determination, an increase of over 50% over a five-year run rate.
These plots were spread over 122 sites. Whilst this number reflects for sure the increased land activity that you saw at Taylor Wimpey in 2020 and 2021, believe it's also a compelling illustration of the level of opportunity both for Taylor Wimpey and investment into the wider economy that is being frustrated by the difficulties in our national planning system. I do want you to bear in mind that you shouldn't think of those sites as outlets just yet. It takes a long time to get from here to there these days. Briefly on nutrient neutrality, this remains a significant issue. However, encouragingly, so a positive, there's been a step up in government engagement on the subject.
Whilst comprehensive solutions are likely to take some time to emerge, a more collaborative approach is very welcome. Despite these very real and quite tangible frustrations, we are in a good place. It was with much hard work and focus that our teams progressed as many outlets as we did in 2022, and this was possible because we were in a good place and quite advanced given the additional land we had bought. We have stayed focused on pushing hard on planning. We've got a significant amount in the planning system. As you've just heard, we are locked and loaded for anticipated 2023 completions, in a good place for 2024. On to operations. I know that we spoke about these levers over the course of the trading updates at the back end of last year and the early part of this.
As a management team, we acted quickly, decisively to mitigate risk and ensure that we protect the business in uncertain terms. Build and infrastructure WIP releases are being closely managed as we align build progress to prevailing sales rates on a site-by-site basis. As announced in our January trading update, we entered into consultation on a series of business changes to optimize our performance, and in response to market conditions, targeting annualized savings of around GBP 20 million, with an anticipated cost of around GBP 8 million. The consultation processes across the regional businesses has now either closed or are anticipated to conclude in the near future.
This process has, unfortunately, resulted in some redundancies, and where this has been the outcome, we have put additional support in place for the individuals concerned and for our wider teams. This has also resulted in a change to our business structure with the closure of our Oxfordshire business and the migration of land and outlets to neighboring businesses. The proposed changes will not affect our existing market coverage or ability to deliver volumes from our land bank, nor the ability to deliver high-quality product and service to our customers. Sticking with operations, you know, I believe that Taylor Wimpey is a great business, and for us, operational excellence is about tightening all the nuts and bolts as much efficiency as possible.
I told you in May last year that we were doubling down on this, and together with the work that we've put in in the last few years, we are well prepared for uncertain market conditions. However, we continue to test and challenge ourselves, particularly around cost control. We continue to find opportunities to drive efficiency through simplification and standardization.
Some examples of this can be seen in a new standard apartment range and the addition of a small number of higher density house types to aid plotting. We have also improved and simplified guidance on earthworks, foundations and retaining walls, which has reduced technical excesses and improved workmanship. Work has progressed on commercial excellence activities too, with improved reporting and subcontractor engagement.
These actions and others increase transparency, quality, and support cost reductions. I told you back in May that we would take an innovative approach to MMC. I'm pleased to confirm today that we've secured a lease on a timber frame production facility located in Peterborough, very close to our Taylor Wimpey Logistics business, which will support our aim to increase timber frame usage on our sites, improve visibility of supply and offer operational and environmental benefits. The first delivery from the factory is expected in the second half of 2023. Full capacity is targeted for 2025-2026.
The facility is also future-proofed to allow both volume and product expansion. I do, though, want to be very clear, this is a cost-effective step that is evolutionary, not revolutionary, with a low capital investment profile. It does move us on considerably. Importantly, it gives us options to scale up and expand into other related areas of componentry in due course. We're also well prepared for Future Homes changes. We are in advanced stages of build on five different prototype houses in our site in Sudbury, which will test an array of solutions for Future Homes, including air source heat pumps, solar panels, and infrared ceiling panels.
Customers will live in properties and give live feedback of their experience, and that will enable us to understand how our customers feel about the new technologies and work, what works best for them. We'll finalize these prototypes in the spring, and we look forward to inviting you along to see them in action along with some of our group management team. I mentioned this right up front, and we are really pleased to have published our net zero target of 2045, which is five years ahead of regulation. Our intention is to be net zero in our operations in homes in use by 2035 and net zero emissions across our value chain by 2045.
We wanted to ensure a credible plan, that we can stand behind and deliver, and work is ongoing in our businesses to ensure that this is the case, with specific targets on energy, carbon and waste, together with guidance and training. Our targets have been submitted to the Science Based Targets initiative for independent assessment. Some businesses are early adopters of Future Homes principles, and we are very proud of the recently announced agreement with the Defence Infrastructure Organisation to deliver 176 new carbon zero-ready homes for soldiers and their families at our Whittle Gardens development.
Our environment targets include biodiversity net gain requirements that go beyond regulation to deliver priority wildlife enhancements, as well as our Towards Zero Waste strategy developed in 2022. During the year, we carried out some specific sustainability research with 500 people who have purchased, or intend to purchase a home either in the last or in the next, three years and, with a preference, for new homes. There were some useful insights. Sustainability now features far more highly, when selecting a home builder than it did even a few years ago. It's also pleasing to see that our approach to, is gaining traction. We are seeing our customers identifying us as more green than other house builders.
Customers are motivated to be green, predominantly because it's the right thing to do, but also to save money, though, the biggest barrier to being green, is cost. There's also, of course, the financial benefit of owning a new, more energy-efficient home, which is a key differentiator for the new homes market, and we believe this is only likely to grow of importance in the long term. We're almost there. Onto outlook and priorities. We've seen some positive improvements in the sales environment since quarter four last year, supported by a gradual reduction in mortgage interest rates, particularly from January, and a continuing appetite by U.K. lenders to lend into the new homes sector.
There's a well-documented disconnect between the demand for new homes in the U.K. versus supply and other fundamentals, such as low levels of unemployment remain supportive. Despite this, however, the market and the year ahead remains uncertain, and concerns remain over customer confidence and affordability, particularly for first-time buyers. We've taken early action and have been, and will continue to be laser-focused on those key operational areas of driving an efficient sales rate, aligning our WIP commitments, and the prevailing sales rate, and running the business with tight cost control.
We set out a number of near-term priorities, most of which I've already touched on today. In any environment, but especially in a challenging sales environment, it is essential that we stay close to our customers and understand their requirements fully. We've shared with you some insights, but it's early days, and we'll continue to develop and evolve our customer offering. Getting this right will ensure that we achieve the appropriate balance between sales rate and price in all our markets and run the business for best value overall.
We'll be working to improve our customer service further to ensure that our customer experience is everything we and our customers expect it to be when buying a Taylor Wimpey home. We will continue to ensure tight cost management and WUP control discipline, aligning build to sales rates on a site-by-site basis. We run the business to maximize shareholder value in the medium and long term, as opposed to driving volume in the short term, and that means building an order book, which allows us to optimize price going into 2024. As a result, not all reservations we take between now and the end of September will be for completion in 2023. Finally, whilst we are very pleased to have announced our environmental targets and transition plan to net zero, this is a marathon, not a sprint.
We'll therefore be bringing forward implementation and communication plans right across the business, and I look forward to updating you in the future. To round up then, we've delivered a really strong 2022 performance. Whilst market uncertainty remains, we are focused on controlling all aspects that we can to drive the best outcomes. Our balance sheet is extremely strong. We have an excellent land bank, experienced management teams, and a clear focus on sales performance and operational excellence. We are in the best shape possible to navigate the market backdrop we currently face and to deliver value for all our shareholders. Thank you. We can move on to questions.
Thanks very much. Aynsley Lammin from Investec. Just three, please. First of all, on your volume guidance, wondered if you could share with us the assumptions you made about average site numbers for this year versus the 232 you had last year. Secondly, just on incentives, are you using part exchange more? What % has that got to? Thirdly, just on the building safety provision, are you as you work through that long-form contract, are you still very confident that that number, you know, isn't at risk of materially changing? Thanks.
Thanks, Aynsley. I'll come back to the volume guidance in just on part exchange. I think levels of part exchange within the business over the last few years has been extremely low. I think in 2022, it was about 2%. We have seen it increase. We're now at about 5% on sales year to date. It's dealt with in a very managed way within Taylor Wimpey. You know, we ensure that the quality of the product that we're buying in is attractive in the second homes market.
We have a requirement that there's at least a 30% differential between the home coming in and the new home being sold, and that they're valued to sell. Our average target sales is between six and eight weeks, and we're hitting that pretty squarely at the moment. Carrying on historic terms, still quite light on the balance sheet. On the sort of outlets, in the volume guidance, we're not going to give guidance on outlets. I mean, not least for some of the sort of planning reasons that I mentioned previously.
You do need to consider that there's some land not purchased in there at Aynsley, which we mentioned at the start of the year. Importantly, you know, there'll be some variability of outlets depending on whether sales rates are low or higher. I'll pass over to Chris to pick up, you know, anything on that volume guidance point and the building safety provision.
Yeah. Just continuing on from what Jennie said, and just to give you a sort of bit more detail on how that full year guidance is calculated. At week eight, we had an order book of 8,078 units, with approximately 65% of that for delivery in 2023, which I think amounts to about 5,250 units. Year-to-date legal completions, about 736 units. Total delivery in 2023 from year-to-date completions and week eight order book is about 6,000 units. If you assume a sales rate of, and I'll take the middle of the range, 0.6 for 31 weeks, that generates about another 4,500 units.
You need to bear in mind that in a tight market it's unlikely that all of those sales would be for 2023 completion. We would consciously, as we've said, want to go into 2024 with a strong order book to optimize price. If you assume 0.5 of the 0.6 deliver in 2023 and 0.1 deliver in 2024, that leaves you with about 3,750 plots to add to the 6,000, which then gets you bang into the middle of the range. I did all that without saying outwards. Sort of can you just remind me on the building safety question? I didn't quite...
As you're working through the kind of long form contracts, you know, how confident are you there won't be any material change to that provision? Is it sufficient for what you see?
Yeah. We are absolutely confident that, you know, we've got a very detailed analysis of that provision. It remains our best estimate at this point in time. I've said this before, I'm not going to give you a, you know, a gold-plated, this number will never change just because of the durations and the complexity. Yeah, that's our best estimate at this point in time.
Yeah. Ami Galla from Citi. Just two questions from me. When we think about the land market, and you talk about being very selective and opportunistic here, what sort of hurdle rates would you be really looking at in this market? Structurally, how much do build costs increase as we think about delivery beyond 2025? The second one is really on build cost inflation. What sort of conversations are you having with material suppliers? How long are you getting fixed contracts from them here? When we kind of think about the labor cost side of things, do subcontracted trades that you deal with essentially work in the new build, or do they participate in other end markets in construction? Do we need to see more declines there to get more preferential rates?
Okay. Chris, maybe if you would take the sort of the build cost questions. On, on land market, you know, I mean, opportunity is exactly that, as it, as it arrives. You know, we have the benefit of, you know, an excellently and well bought land bank, and so we can, we can be selective. Our teams continue to, you know, operate in the market, conversations are continuing to take place. Because of, you know, some of those moving parts that you've just covered, build cost being one of them, we are taking a cautious, a cautious view. We will look at, you know, higher hurdle rates than we have in the past.
I'm not really going to get into the detail of that. I've previously said, you know, an appraisal has to start somewhere, and the somewhere is, you know, based on current price, current cost, but with a view to ensuring then that we're scenario planning around some of those moving bookends on house prices and and build costs. You know, planning risk is also now something that, you know, I think given the environment that I've just painted for you, is, you know, something that we're reflecting on much more much more carefully. You know, I want to be clear that we're being very disciplined and we have a live conversation, you know, with our businesses on an ongoing basis.
Given those moving parts, cautious, but remembering that if opportunity came, we'd be keen and we have the firepower to take advantage of it. Chris, on build cost.
Yeah. Just to reiterate, today, we're saying the spot for annualized build cost inflation is still at 9%-10%, and I am not expecting it to stay there. Certainly not for very long because we're already seeing some signs of moderation. As volumes reduce, that will play through to, you know, costs and particularly, as I said in the presentation, those that have increased the most in recent years are the ones that are easiest to target. Part of the reason, you know, it's not particularly plain sailing is you've got lots of factors going on. Obviously, you know, HS2 is driving quite a lot of demand for cement and sand, and that plays through to some extent to elements like blocks. I previously mentioned a bit of frustration in terms of energy.
You know, 'cause although those costs have come down, we're not necessarily seeing all of the benefit of that because of supplier hedging policies and conversations along the lines of, you know, the spot rate still being ahead of the hedge price that has come to an end. You know, needing to work through that. Then there's still, to some extent, some wage inflation to flow through. It's not all doom and gloom. You know, we are seeing price reductions. They've started to come through relatively few to date.
They tend to be sort of, quite dependent on the dynamics of who you're negotiating with in terms of how, well-stocked their order books are and, you know, and whether they are financed, privately or with bank finance. Lots of dynamics going on there. You know, what I would say is that we are very active at this point in time. That's why I'm not necessarily expecting it to, that spot rate to stay there for very long. Anecdotally, to give you an example, you know, our central procurement team over the last, I think, week to 10 days, has met with 22 of our largest suppliers to look at driving value, in the materials that we purchase from them. Value not just limited to a discounted price.
Yeah, so I think, I mean, you asked about the length of, contracts as well. I think, you know, if you went back to more stable times, then typically, you know, you'd be looking at annual price agreements. I think that, you know, it got to be shorter term over recent years, but we wouldn't see anything less than sort of three months, and typically more like six months, and we still have some that are on annualized.
Yeah. I think I'd just add to that, you know, where we are seeing some of those early signs, it's in the earlier trades, where, you know, that sort of build sales rate alignment is starting to become more visible for them. Really just to underpin Chris' comment about our central procurement and meeting with suppliers, not just around cost, but driving long-term efficiencies and, you know, continuing that sort of operational excellence, engagement with our supply chain. Thanks, Ami.
Clyde Lewis at Peel Hunt. Two if I may, Jennie. One on land prices. I think you referred to you're not seeing any reductions yet in land prices. I'd just like to ask why not? You know, given the backdrop and softer demand. The second one was a sort of a bit of a theoretical one, but if you remove the demand constraints at the moment, and if we look forward to the next three or four years, what do you think is the maximum response that Taylor Wimpey could deliver in terms of growth in volumes? You know, partly thinking ahead 'cause obviously we've got an election next year.
What will the government do to pump prime? It's gonna have to try and do something, pull some rabbit out of the hat somewhere along the line. You know, that demand softness that we're seeing at the moment, could there be a big shot in the arm? What could you do as a business to ramp up volumes?
Thanks, Clyde. Well, on land price, I mean, look, I'm not entirely surprised at this point not to see-
Yeah
sort of meaningful, you know, or recognizable price movements. There is, there is always a lag. And we haven't actually seen an awful lot new coming to the market, and that's landowners and agents just holding off on their own uncertainty too. Look, there's always, there's always something and, you know, which is why we include the opportunistic element. You know, if a landowner needs to move, you know, if they're sitting on a significant investment or, you know, have a cash flow issue. So, you know, there are always some exceptionals. But setting those aside, you know, we're not seeing, not seeing that movement yet.
I think that there's a degree of landowners and agents just waiting to see if this is a persistent issue. I think that that is now more likely to be the case that they're looking at the year ahead. On the demand constraints, I mean, look, crystal ball gazing, you know, isn't my strong point. You know, to an extent, we have made sure, and, you know, the first thing would be to reassure that, in the changes that we have made, that we have retained, we've retained our ability to grow.
If the conditions are right in the market and the planning environment and supply chains after the last few years, I, you know, retain every confidence that Taylor Wimpey has the ability to partake in that growth and to drive our business on.
Can I just follow that up? Do you ever think, though, you could deliver a year-over-year 20% increase in volumes, or do you think a sort of 10%, 12% number is probably the maximum that the business could handle, you know?
We're getting into the realms of theoreticals and, you know, you're very aware of how many moving parts and ducks that have to sort of line up for that. You know, even with all the fair winds, 20% year on year on year growth is a, you know, is a big ask of, you know, of a business with the sort of runways that we require. You know, we can still have year on year sort of growth, of a meaningful level of growth, but that's a big, that's a big, big lump, I think.
Thank you. Will Jones from Redburn. Three if I can, please. First, if we could just understand in a bit more detail the overall price experience in the, say, the last year. If you were to, say, index your prices overall, I know it's difficult, net of incentives, where are they today versus start of year versus peak in autumn and versus this time last year? Best judgments, please. The second was just on the indicated charts. I think your inquiries are usefully higher than 2020, but other indicators are in line or lower. I just wondered why the two might differ there. Finally, just around the land bank.
In the last few years, you've been willing to talk about the number of plots you'd like to carry, and I think give or take the 80,000 mark has been a number you've mentioned, and I think you're just over that at the end of last year. I guess it will be a function of demand from here, but how are you thinking about that number on a two to three- year view in terms of where it might need to be in the, in the new world? Thanks.
Okay. Well, Chris, if I can come back to you on the, I like the price experience. From an inquiries perspective, you know, there's a change in the way that we're sort of driving inquiries through 2021 and certainly the first half of 2022. There was a very high level of organic inquiries that we weren't having to motivate in the market. Our, you know, our web visits have fallen only a little, but you'll see that our organic inquiries have come off, you know, quite a lot, I think about 35%.
How we're making up the difference is in that targeted, media targeting and specifically around, you know, demographic, sort of locations. You know, someone was asking me earlier about sales strategy. Sales strategy starts from, you know, the site level. We do have a strategic, sales strategy within the business, but then, you know, we're targeting on a site-by-site, plot-by-plot, basis. On land bank, you know, you answered your own question. It's a function of demand, and also, you know, a nature of that sort of intake.
We've said that we're going to be cautious, though opportunistic, in the market, that means that, you know, we're likely to be below replacement levels this year. Then really it's a function of how we gauge the market beyond that. Chris, that's pricing.
Yeah, pretty tricky question to answer on an absolutely underlying basis, but I'll have a go. If we went from your baseline of sort of 12 months ago today, then, you know, what I would be expecting is, you know, we saw price growth from that point through to the peak that I mentioned in, let's say, the beginning of September. It's probably about 3%. And I think, you know, we're probably about 2% down from that peak based on, you know, the increase in incentives. That would get you to around about 1% year on year or something like that. That's my gut feel.
Okay.
Thank you. Ragesh Patki from JP Morgan. two questions from me, please. Appreciate you don't wanna give any guidance on margins, but, if you could provide some building blocks. Is the transition from 2019 to 2020 a good indicator, to think about margins? Because the volume drop we're looking at is similar to those levels. Secondly, maybe within the build cost inflation, some idea on wage inflation, what you're looking at at the moment. Thank you.
Okay. Chris?
Yeah. Yeah, that's fine. I mean, you're absolutely right. We are not giving margin or profit guidance. What I have tried to do through today is to give you much more visibility on H1. You know, I've identified that, you know, the private average selling price in H1, we're expecting to be in line with the selling price for the second half of last year. Obviously, the mix changes slightly in between affordable, the individual components, very similar. I think, you know, I've also said recently that you could broadly assume about GBP 300 million of fixed costs with about 25% of those in gross margin.
It's probably a little bit more than GBP 300, and it's probably a bit more weighted towards cost of sales, but for modeling purposes, perfectly accurate. Admin expenses in the first half. You know, we've got the cost of the change scheme that will be incurred in the first half that you need to bear in mind. They will be partially offset by some of the savings start to come through in Q2. You would expect there to be a bit of an increase year-on-year. All of that gives you quite a lot of pretty good insight into where the first half would land.
Your question, I think is a good one, in terms of, you know, what can you learn from the dynamics of operating leverage, I think, going through from, you know, 2019- 2020- 2021. You'll remember that, you know, we have given you an operating margin rec slide all the way through that period. So, you know, directing you back to those slides where we, you know, and specifically, I think 12 months ago on that slide, I pulled out the operating leverage impact, and it was a benefit, wasn't it? 'Cause we were going back from 2020- 2021. If my memory serves me right, I think volumes in 2020 were about 9,400 in the U.K.
Yeah, I mean, a pretty reasonable proxy, I think, to, for you to then use as an assessment.
Wage inflation, please.
Oh, yeah. Sorry, wage inflation. A reasonable proxy, I think, for you to then use an assessment.
Wage inflation, please.
Oh, yes. Sorry. Wage inflation. Certainly, you know, in that spot rate that I talked about, you know, materials would be higher, than the 9%-10%, and wages would be, lower. Yes, you know, we would expect, and Jennie mentioned, you know, that, you know, the earlier trades are where the conversations are being had at the moment. That's because, you know, they feel the reduction in volumes fastest.
Thank you.
Thank you. Morning, Chris Millington at Numis. Totally understand your reticence, Chris, on guidance, but I'm gonna ask you a different question, which is not guidance, and that's your order book margin at the moment, and how that's changed, maybe at the gross level. The second one, just to understand a bit more about your policy on incentives. You know, how are you rolling it out? You know, how selective are you being? Is it out there on all sites at the moment? Just a little bit more color around the incentives, if possible.
Okay. Well, I'll take the incentives if you take the margin on the order book. I mean, we continue to talk about targeting of incentives. I did mention that, you know, the market moved on incentives quite meaningfully at sort of the final quarter in particular for the incentive market. I think the sort of levels that we were running at in 2021 and 2022 first half were excessively, you know, were extremely low than that we would be used to. I think overall in 2022, our incentive level was about 2.4%. Like, coming into this year, we're more around 4%-5%.
Around a policy, you know, we've set a campaign up, Let us take care of it, that we talked about during the trading update. It's, you know, established to be fairly bespoke, to give our sales teams tools, rather than a single solution, to work with their customers around building an incentive that gets them as an individual to the point of affordability or effecting that sale. It's managed very carefully. You know, our management team that are here today, you know, we're having conversations right down through their businesses, you know, to ensure that we're using it prudently. In the end, you know, an incentive is something that we use to get a conversion.
Are we getting the conversion, which actually, Will, to your point around the differences in some of the indicator metrics. We're talking a lot about conversion at the moment, but the one thing that I missed in interpreting that is, of course, we needed less inquiries a few months ago to effect a sale. The lead multiple is a bit higher. That guidance on margin.
I mean, on the basis that we're 87% forward sold for H1, I think if I was to give you that, I would be giving you exactly profit and margin guidance. I'm gonna resist that. What I will say, Chris, is that, you know, if you look at the individual components of the order book, you know, the average pricing in the order book is up double digit on this time last year, which is why we can sort of confidently give you the guidance that we offer H1 prices.
Mm-hmm.
Good morning. It's John Fraser-Andrews, HSBC. Three for me, please. The first one is on land. Just noticing the tick up in the proportion of sales coming through in land approvals. Is there anything strategic in that? Is that smaller sites that you're turning quicker? Or, you know, it's quite a 300 bips jump. It's quite significant. That's the first one. Secondly, on the GBP 20 million cost save, can you give the headcount reduction in that and even if that's a percentage of sales?
Coming back to Clyde's point on that, and perhaps drawing one figure from the past, I appreciate it's a long way off at where we sit today, but 17,000-18,000 completions, do you have the headcount and operating structure to achieve those if the market allows? Then finally, Spain, can we have an update how that market's looking, how reliant it is on mortgages, sort of British versus local buyers, that kind of thing. Thank you.
Okay. Just on that, sort of cost, land cost as a % of GDV on approvals, we talked about that actually, at half year last year. You'll see it's actually come in a bit from half year last year. It was a mix of a number of things, some of which you mentioned, John. You know, site size, and there were a larger community of smaller sites. There was also a number of sites in there that were serviced. You would expect as a % of GDV that land costs would be a bit higher because you're not carrying quite so much infrastructure costs, and some geographical mix in there as well.
There's a number of elements flowing through. On the Change program. John, because we've still got parts of the change program that are open, it's not, I'm afraid, appropriate for me to really go into that level of detail. You know, very happy to pick it up with you in the future when it does. Around the 17,000-18,000 completions, we were always going to have to grow into that, not in terms of our underlying business structure, but in terms of a capability, and that remains the case.
I mean, what I am confident of is that the efficiencies that we've made, some of them, you know, were for operational efficiencies that would have been made in any event, as well as some to reflect the market. That, you know, the shape of the business and the structure of the business is more than capable of growing, of growing back and, you know, to deliver increased volumes going forward. You know, that structure remains, I think, capable of delivering the 17,000-18,000. On a headcount basis, you know, there would obviously be some increases there. Then from a Spain perspective, I mean, our British buyers is actually a relatively small proportion.
We have, you know, a very broad, I have to say, a surprisingly broad spectrum of nationalities buying homes in our Spanish business. The majority of them don't require a mortgage. You know, I'd probably remind you that our Spanish business is predominantly a second home facing market, and they tend to be cash buyers. Okay.
Just on Spain, any comments on the local market there in terms of demand, pricing, build costs?
Build cost movements look considerably better than they have for us here in the U.K. I think probably running at around 3% over the last year. They did have some supply challenges sort of early in the pickup post-COVID, but they resolved themselves relatively quickly. Sorry, the other question, John?
It was demand and pricing trends, recent ones.
I mean, we came into this year with a really strong position for Spain, and I'm looking to Chris. About 400 in the order book for Spain, you know, we're in a very good place. We don't tend to sell homes in Spain to the domestic Spanish business. They are predominantly a second home to, you know, a wide range of nationalities.
Thank you.
Thank you. Anthony Manning, Bank of America. Good morning. Just a couple, if I may. On the fixed costs, just to go back to that, is that all we can expect from the changes made so far, or were any further identified that could be achieved later on? Secondly, just your thoughts on the CME study that's recently been announced. Finally, on your new net zero strategy, should we expect just a steady decline with that, or are there any specific larger incremental gains that will be coming?
Okay. In, in terms of, sort of other actions, I mean, incremental actions, through that, you know, consistent, reviewing and refining, yes. You know, on an individual element basis, you know, they'll just incrementally, sort of work through. I'm confident that the change program, that we have, that we've introduced, is all that we need to do, at this point. You know, certainly if the market remains, roughly where it is, I'm very, very comfortable. On the CME study, you know, we just had confirmation of the scope, in the last, few days. You know, the Secretary of State has invited, the CME, to undertake a housing study.
You know, these studies come with quite a lot of sort of demand for information. You know, we look forward to meeting with the CME and, you know, partaking in the sort of submission of evidence. There's no doubt it can also be quite distracting and time-consuming. You know, at a time when there's plenty of other issues to be dealt with within the housing sector, you know, that's a little bit of a concern. You know, we will work with the CME through the process. To net zero, yeah, I mean, actually there are a number of event-driven sort of requirements.
The Part L, which is already in effect, obviously, is a, you know, is a tailwind there. We've got Future Homes Standard, in 2025. I think there's a consultation that's ongoing, you know, government consultation that will give us a little bit more of an indication, and that would take homes to sort of 75% carbon reduction. You know, very pleasingly, and, you know, Chris mentioned our supply chain engagement with suppliers. You know, a lot of work, on going with our supply chain around what they can do, for net zero as well, and ensuring that, you know, they're keeping pace with us, and that we're benefiting from any of the innovations that they're bringing forward.
Cheers. Thank you.
Thank you. Glynis Johnson, Jefferies. Three if I may. Actually, the first one just to you, Chris, can you help us with other cash outs? You've kindly talked through line creditors and conditional land, but what about cladding this year? What about pensions? What about WIP? How should we be thinking about how you might end 2023? If you're taking orders for 2024, is that WIP number by the end of the year actually not gonna show a huge amount of movement? That's all one question. Second of all, in terms of, Jennie, when you talk about vertical integration, you talked about the potential for other components. What do we mean? Do we mean concrete bricks and roof tiles? Do we mean, you know, closed panel timber frames? Any kind of help there would be useful. Engagement with...
Well, I was gonna say government, but political parties, I think I'll phrase it as. Can you just talk us through what engagement you've had? What have been the topics they've wanted to talk about? What topics that you've wanted to talk about have they been willing to listen on?
Okay. Chris, do you want to head out first on the cash?
Yeah. Fine. On sort of fire safety remediation, we probably target around about GBP 50 million of spend this year. Leasehold, relatively slow burn these days, so probably GBP single digit millions. The pension's likely to be GBP 7 million again, but obviously is subject to the quarterly test, and there's detail on that in the appendices. On WIP, and I think I said it in my presentation, you know, I'd probably expect the WIP balance over the course of the year to reduce. So yeah.
Any quantification of what WIP might do, either build equivalent units going into next year or?
I mean, it's a bit like the volume guidance, isn't it? It's entirely dependent on the sales rate and therefore then your expectation of what the market's gonna be, going in. I think, it's not really something that I can be, giving you too much guidance on at this point in time.
Right. I'm gonna answer on three so that you can't ask Chris anymore. Well spotted on the potential for other componentry. Look, we want to get up and running and make sure that we're doing everything right. We have a great advantage with our the experience through our logistic business. We've got a really good connection around call-offs and understanding build progresses there. We do have aspirations to, you know, to keep sort of stretching out. Although I said evolutionary not revolutionary, that shouldn't be seen as a cap on, you know, our aspiration to keep moving the business forward. Floor cassettes would be a start.
Glynis, you know, staircases, other elements, particularly sort of timber based elements that can be added to timber frame. You mentioned, you know, sort of closed panel. There's a, you know, there's a range of getting from open panel all the way through to closed panel width. You know, those do remain options. We're keen that we make sure that we're in control of the cost environment, that it's additive to the business, and that we're doing it well. You know, I think on the political engagement, I mean, the first thing that I'd say is that there's been more meaningful and regular government engagement over the last few months, which is very pleasing.
I mentioned the neutrality. I'd say there's not a meeting that happens anywhere that that's not on the agenda for discussion. Other topics, you know, getting to understand the dynamics of the market, you know, how we're reading it. You know, some of the feedback that we would be giving is around that particular concern. First-time buyer, you know, affordability, access to mortgage and planning in all its technicolored glory of all types and discussion, and that's right across the political parties. Okay. Thank you very much. I appreciate your patience. It's been longer than usual this morning. I hope that you found it helpful. It's been good to see you all, and look forward to seeing you again next time.