Hello, everyone, and thank you for joining the Taylor Wimpey Trading update. My name is Molly, and I will be coordinating your call today. During the presentation, you can register a question by pressing star followed by one on your telephone keypad. If you change your mind, please press star followed by two. I will now hand over to your host, Chief Executive Jennie Daly, to begin. Jennie, please go ahead.
Thank you, Molly. Good morning, everyone, and thank you for joining. As usual, I am joined by Chris, and I will start with a brief update before opening for questions. As you know, we are operating in a challenging macro environment. We have seen progressive weakening in market conditions through the year, evidenced by lower mortgage approvals, higher borrowing costs, and higher costs of living, impacting customer affordability and confidence. While we continue to see robust underlying customer interest, we have not seen the traditional uptick in the important autumn sales period, and conversion to sales are taking longer. Our half two net private sales rate to the 8th of November was 0.6 per week, down 5% on the comparable period, with the cancellation rate unchanged. Excluding bulk deals, the net private sales rate was 0.54, down 11% year on year.
As a result of this, we now expect 2026 U.K. completions to be around 10,500 homes, below our previous guidance range, with group operating profit expected to be around the bottom end of the consensus range. The softer sales environment is also reflected in our order book, which stands at 6,839 homes, compared with 7,253 at this point last year, with a value of around GBP 2 billion compared with GBP 2.1 billion last year. Pricing continues to vary by region and by site, and incentives remain an important part of securing customer commitment. Overall, net pricing has softened a little further from the 2% decline we referenced at our last update. Build cost inflation remains in line with our expectations at around 3%-4% for the year. As we have set out previously, our focus has been to continue to tightly control the areas we can.
In this regard, we continue to be proactive and have renewed our focus on driving efficiencies across the business to protect value and execute against our strategy. Following detailed cost scrutiny, we are progressing targeted mitigation and reduction measures across procurement, commercial, and technical activities, including product substitutions and improvements to site design and house types. I am pleased to see progress in some key areas. I am particularly pleased on the progress we have made on outlet openings. We told you we would be opening more this year than last, and we are well on track to do so, which has resulted in an increase in outlets to 225 compared to 206 at this point last year. We are also in a very good place for outlet openings in 2027.
While planning continues to present its challenges, we're also seeing success from our early action to capture the opportunity from planning reforms over the last couple of years and have made further progress in our strategic conversions, which rose to around 5,000 plots, more than double the 2,000 plots we converted at this point last year. Overall, the short-term landbank has reduced as we are cautious on new land investment and move towards a smaller landbank, reflecting our focus on capital efficiency. It is also encouraging that the government recognized the need for support for the first-time buyer with its Your First Home scheme. While the level of funding is lower than that available under the prior Help to Buy scheme, and we await further details of scheme registration and on allocations, the income and regional price caps create opportunity.
With our strong first-time buyer proposition and growing outlet base, we are well-positioned to participate as the scheme develops. In summary, it has been a challenging year in the housing market, and we've been focused on protecting value against this backdrop. We are executing our strategy in a disciplined manner. We will pull every available lever to improve efficiency and remain very confident in the long-term fundamentals of the U.K. housing market, with its pressing need for new homes. With that, I'll now open up for questions.
Thank you very much, Jennie. Our first question comes from Zaim Beekawa at JPMorgan. Zaim, your line is now open.
Morning. Thank you for taking my question. Maybe the obvious one to start with, and thank you for the commentary you've given on Your First Home. Do you have any idea in terms of how much incremental volumes this might be able to drive when it's running at full capacity? Secondly, connected to that, as we wait for the enactment of it, are you concerned about the sales rate softening further, and do you think you'll have to offer more incentives to those first-time buyers to get them over the line in advance of that? Thank you.
Okay. Thank you for that, Zaim. From a Your First Home perspective, we've got quite a bit of the eligibility detail that's been filled out through the budget and in the following days on the price caps. I think you're well aware, and from the phrasing of your question, the first year funding is relatively tight at GBP 700 million. That's one of the reasons that I'm referring to allocation, just understanding how the scheme implementation and funding allocation is going to play out. I mean, it's very welcome. It's a real positive to see the government responding to the concerns that we've expressed and that we can see in the customer for first-time buyers.
It is hard at this point, given the funding envelope, and with the absence of some of that detail, to say just exactly what the incremental benefit would be. What I would stress is that eligibility and pre-registration on the platform are expected from December, customer reservations from February, but really first completions at the very earliest in April. So it's likely to be second half weighted before we see that. I do think though, Zaim, looking through our site and plot opportunity for 2027, that we would have good availability. I think then it just depends how all of those variables I've mentioned play out. On the sales rate softening and first-time buyer maybe waiting in anticipation, I mean, it's less than ideal to have a scheme announced and for there to be such a delay on its implementation.
I think it's a genuine area for concern. We've been watching our first-time buyers in the order book. Our teams have been very engaged with our first-time buyers on the ground. We've seen to date very little cancellation behavior from first-time buyers, and we've been driving the message. They've got the plot they want, the deal they want, at the rate they want, and we're continuing to see those customers moving through to exchange. What I can't speak to is customers earlier in the pipeline who are potentially delaying on reservations. That's much more difficult for us to see, but it's certainly an area that we'll continue to watch very closely.
Great. Thank you very much.
Thank you very much, Zaim. Our next question comes from Ami Galla at UBS. Ami, your line is now open.
Thank you. A few questions from me. The first one was on trading. If you could give us some more color in terms of what are you seeing in terms of exit trends and the quality of buyers who are reserving in the current market? The second one was on pricing. Can you give us some color as to the price softness that you are seeing? Is that more concentrated across fewer sites, or is it more broad-based? Regionally, is this more London and Southeast-driven dynamic? Any color as to when do we think we can see some sort of a stability in the sort of pricing dynamic on underlying pricing? The last one, if I may, is on cost savings that you touched upon. When do we expect benefit of the procurement changes that you were talking about?
When we think about 2027 and the build cost headwind that could potentially be there, are we really looking at a neutral price cost spread next year? Thank you.
Okay. Well, maybe Chris, if you could pick up the cost savings and
Yeah
I will pick up trading. I mentioned in my narrative, Ami, that we are continuing to see good or robust customer interest in the early parts of the funnel. We are still seeing good engagement around customers coming to site. There is a hesitancy. Saying that, we are seeing the time from first inquiry to reservation in almost all of our operational regions, so that's including the North, extend as customers became more cautious as interest rates climbed. We are hearing maybe a little bit more concern, although it's anecdotal, greater concern around the cost of repayments, and that making customers feel more hesitant and maybe putting them into the let's wait category.
Still really good levels of engagement, good levels of inquiries and appointments, but just that real hesitancy and uncertain nature of customer sentiment at the moment. On pricing, as we say, pricing softened another increment since the summer. I mean, it's fair to say that London is particularly challenging. I would set that apart from the wider Southeast, which is challenging, but less so than London. Then, as we have been talking about actually for quite a while now, gradually improving the further north. But pricing softness is still an issue, and we are seeing a lot of competition across the existing stock and in new home sales. I mean, you asked about stability and underlying pricing. I mean, those are really in the macro, in mortgage interest rates, customer confidence.
The sense at the moment is that there is a lot of stock available, and customers have every reason to wait whilst they continue to shop and wait for things to settle. We would probably also expect to see a reduction in overall available inventory in order to get to that stabilized pricing environment.
Yeah. Then, on cost, we do recognize the pressure on profit and margin and returns. As Jennie said, we are actively responding to it. A key part of that is structurally reducing the cost of building our homes through tighter commercial controls, more standardization, and just taking the unnecessary cost out of spec. We have already implemented a number of changes. We have got further pipeline across a number of areas. But the key for us is delivery. We are putting controls in place to make sure that those savings actually flow through the orders, the CBRs, and ultimately to the bottom line. But looking ahead to next year, I mean, suppliers will clearly look to convert some of the current surcharges into underlying price increases, while energy and fuel costs still remain elevated. We will be doing everything we can to resist those increases.
I've mentioned in the past, competitive tendering, e-auctions, benchmarking. We'll also be doing index tracking, there's always rigorous validation of any cost increases, whatever form they take. Current market conditions actually are creating, I think, a bit greater commercial flexibility with some suppliers prepared to absorb or remove surcharges as they compete to secure future volumes. To go to the basis of your question, which I think was neutral price cost for next year, the extent of the mitigation we can get from those negotiations with the suppliers will depend on how energy and fuel and wider commodity markets develop. Obviously, we believe that the actions that we're taking should help us offset some of the inflationary pressure that we're likely to see coming through the supply chain.
On the pricing side, we reported underlying pricing down 1.5% in the first half, by July, we were running at around 2% below last year. Since then, as Jennie said, market conditions have progressively weakened, we're currently running at around 2.5% below this time last year.
That's helpful. Thank you.
Thank you, Ami.
Thank you, Ami. Our next question comes from Will Jones from Rothschild & Co. Will, your line is now open.
Thanks. Morning. Three, please. The first just coming back to Your First Home. Now that we know the price caps, I wonder if you have run any numbers on how much of your product might be eligible, or how potentially it compares just to your general first-time buyer pricing. Second was around build costs and just within the mix there, I think a few of the companies have been referring to somewhat less labor cost inflation. Is that your experience too? And then the last one just around outlets. Clearly good progress year to date, I think up 12, and it sounds like there is more coming. Any sense for whether that 12 could be matched again a year forward, or should we be thinking about a lower growth rate? Appreciate there is a sales rate element to that view as well. Thanks.
Okay. I mean, yes, we have been sort of running our sort of future plots through the local price caps. I am happy that we have got sort of good eligibility for the first-time buyer. I mean, we continue to see, as I mentioned to an earlier question, we continue to see activity from first-time buyers, and we have a good cohort of first-time buyers in the Taylor Wimpey product range. As I mentioned earlier, the allocation and how the allocation is going to be managed, Will, I think is the question. It's a tight funding envelope, it's GBP 700 million. To compare for the whole of the program that has been announced, GBP 4.7 billion over those years, that's almost exactly comparable to the last two years of Help to Buy. So, understanding how that's going to be managed, I think, is the biggest issue for us.
Maybe, sorry, Jennie, just to jump in there just on that point, but when it opens the registration in December, if it is, I don't know, 3x oversubscribed or something like that, has the government given any indication on how they might react to that, or is it just too early?
No. I mean, that' s exactly what I am leading to. We haven't got any visibility of how funding will be allocated, Will. I think the expectation is at the funding level that it will be over-allocated or will be oversubscribed, and therefore, understanding how that's going to be managed, I think, is going to be key. But I am very comfortable that we have got good representation and good eligibility for the scheme. Yeah, on build costs, yes, we are seeing less on labor. We have managed to hold through really strong lines through the labor side of build cost through the year. On outlets, yeah, kind of pleased with progress. As you say, there is a little bit of lower sales rates, but we have had a strong showing this year.
I am not going to guide into 2027, and I am sure that you didn't expect it, but I am feeling actually quite positive where we sit for 2027 openings. I think it's probably fair to say we haven't been, although we have done well, I think, in our planning execution, we are not immune to the planning delays that we and others refer to. So, outlet openings probably a bit more weighted to the second half for 2027, as I see it today.
Thank you.
Thank you very much, Will. Our next question comes from Lewis Roxburgh from Goodbody. Lewis, your line is now open.
Just have one question, please. Just as we think about next year from a margin standpoint, it looks like a challenge in terms of build cost inflation and visibility on pricing and volumes. But parking that to one side, what can you do or what measures should we be looking at from a self-help perspective to help mitigate that, maybe from a ROCE perspective? Is it outlet growth to increase turn? Can you progress on freeing up more WIP and land? Is the landbank evolution going to give you a better cost base? Just want to get a flavor of how you're viewing that, maybe on a longer horizon. Thanks.
Yeah. Thanks, Lewis. We don't give guidance for the following year at our Q3 update, but clearly there is plenty in the statement for you to process. The softer autumn selling season, the change we have made to our 2026 volume and profit guidance, obviously of relevance as you think about 2027. Yes, there is plenty that we can be doing, and you can see that evidence also in the statement as we approach 2027, particularly on outlets, being more efficient with our capital, so driving that outlet number without net investment in land. As we previously said at [inaudible], we are being very tight on our WIP, and then really looking at every area of our business to make sure that we are efficient through every function and every operation.
Yeah, we are very clear that we continue to operate in a challenging market and remain really focused on tight cost and capital discipline. Against that backdrop, we are working very hard to ensure that the organization is appropriately aligned with the current activity levels.
Yeah. In respect of WIP, Lewis, we have talked about how closely managed WIP is within the business, and we seek to align it to sales rates. There is a range of management actions and processes all the way down through the business, and those are monitored and measured really regularly. Chris and I had the various MDs through the doors for our budgeting process last week, and WIP control, cost control were very clear elements of the discussion then.
Great. Thanks.
Thank you, Lewis. Our next question comes from Chris Millington at Deutsche Bank. Chris, your line is now open.
Thank you. Morning, Jennie. Morning, Chris. I will keep the usual theme going and ask a few. First one I just wanted to ask is on margins. I mean, it does appear, from a position of being one of the stronger margin players, yours are unwinding a little bit quicker than peers. I wouldn't expect you to comment on the peer group, but do you think there is something in TW which is driving that differential? Is there something in geography, maybe London this year? Just curious about your thoughts on that. Next one is just on bulk sales. Really kind of any change in demand, discount rates you are offering there. Then finally, on fire safety, just curious about what spend this year is going to be and how robust you feel the provision is at the moment. Thank you.
Okay. Thank you. I mean, I will start with bulk, just for ease. I mean, the demand has been variable as interest rates have increased. There is clearly some pricing pressure in the stack for a number of the bulk BTR operators. That is, I think, weighing on appetite and the pricing of bulk. I think into the more strategic partnership, following the announcement of the social and affordable housing program, a bit of variability there, to the strategic partner allocations, some of the RPs, the SAHP allocations probably didn't get quite as much as they had hoped for. Needing, we can see that they are reshaping, rethinking, moving pieces around a bit more than they had anticipated.
That' s clearly affecting some of their short-term behavior, I think, as they just get their head around that also. Chris on-
Yeah. Chris, on the cladding spend, we are expecting within this guidance, cladding spend of around GBP 70 million for the year. In terms of the provision, it continues to reflect our current best estimate of the cost of completing the program. Cost certainty is continuing to improve, as you would expect, as we complete assessment of tens more buildings. We will continue to update the provision as that work progresses. Then, just on the margin point, there is no question really that our margin has reduced significantly from the levels that we were earning, say, back in 2022. We are very transparent about what has driven that. Every half year and full year, obviously, we provide a detailed bridge explaining the movement in the margin, and I think we have reported that basis consistently for well over a decade.
I think if you look at those bridges, the majority of the reduction comes from build cost inflation, lower underlying selling prices, the operational gearing effect of lower volumes. Those have clearly been significant pressures across the sector. I think, if you look at our specific circumstances, then obviously we have a geographical spread that is right across the country. Yes, that means we are exposed to the weaker markets in the south. Also, the other thing is, we tend to have a longer land bank than others perhaps. The length of that land bank does mean it just takes a little bit longer for new lands to flow through.
That is very clear. Thank you, Chris. Thank you, Jennie.
Thanks.
Thank you, Chris. Our next question comes from Rebecca Parker at Goldman Sachs. Rebecca, your line is now open.
Hi, thanks for taking my questions. First one on marketing incentives, with them remaining elevated across developments and also underlying pricing continues to experience marginal pressure. How can we think about this dynamic, I guess, feeding through to down valuations? Secondly, on the Your First Home developer fee, that 4% with homes over 250, how do you expect that to play into current incentive levels? Do you see scope for margin expansion by rolling some of those incentives back? Thirdly, on the margin side and thinking about land bank evolution into 2027, can we expect an uplift as you do cycle through some of those lower margin sites and start getting more of that higher margin land bank? Yeah.
Okay. Thank you, Rebecca. I will answer your first two and maybe Chris on the land bank evolution. Incentives have remained at those elevated levels, between 6%-6.5% that we have been reporting for a while. It' s the same story, elevated levels of inventory available across both the new and existing homes market. A cautious customer with a degree of caution and not really feeling the need to make a decision. There is very little in terms of push factors for customers at the moment, and so incentives become really important as part of that process. Down valuations by lenders are actually relatively low.
I think that that's more reflective of the level of competition, the fact that our teams are watching and managing pricing across the markets as they see them and ensuring that whilst we are not trying to lead the market, that we are following the market closely, and therefore, we are not seeing many down valuations as a result. But they are there and a degree of tension. On the 4% developer contributions, I mean, certainly, it's a bit higher than we might have hoped. It will play into how we would look at both the pricing and the incentives that are available for the first-time buyer. But it will also be a reflection of how the market operates from here.
Something that would be very much under scrutiny and something that we would be looking to manage or to optimize as best we can, given the broader market conditions. To Your First Home and margin expansion, if there is additional volume as a result of the scheme, then that would technically be very helpful.
Yeah, and just on landbank evolution, I mean, the timing of that benefit is very much linked to sales rates. Higher sales rates mean we close down the old sites more quickly and bring the newer, higher margin land through the P&L faster. With sales rates lower this year, that benefit has effectively been pushed out a little bit. It was zero in the first half. I would not expect much in the second half. The overall shape I described in October last year, I think, is still broadly right. Limited benefit in 2026, building in 2027, with majority in 2028 and 2029. But obviously, the slower sales rate this year just means that the 2027 benefit is likely to be more muted than we had previously anticipated, and the precise impact will depend on the build rate next year.
Great. Thank you.
Thank you very much, Rebecca. Our next question comes from Sam Cullen from Peel Hunt. Sam, your line is now open.
Yeah. Morning, everyone. Just got a couple. The first one's back on Your First Home. I'll take your point around you've got good eligibility. Are you doing any or much replanning of sites coming down the pipe to ensure you've got good levels of availability in all regions? Are you at the margin trying to move more fours into three beds, and threes into two beds?
Yeah. I mean, look, I think the first thing that I would say is, 2027's pretty written from a mix perspective, Sam. But even on that basis, I'm comfortable that we've got a good level of eligibility. Part of the sort of cost and efficiency, value improvement measures that we're sort of actioning across the business, our reviews, replans, trying to optimize mix where we think that the market has moved and we could sort of introduce slightly different balance of mixes where appropriate. There are limitations at times through the planning process that the teams will come across, but that's something that we're actively involved in. I mean, in future years, depending on how the scheme allocations operate, we would be optimistic that if it is successful, the government would feel able to extend the spending envelope in future years.
Then potentially, we could look to sort of just gravitate parts of our mix towards it to support increased volume. So, that's something that we will continue to watch. But even from a standing start, I'm happy that we've got good eligibility.
Okay, thank you. I guess second question, which is partially related to the latter part of that answer, is clearly backdrop's challenging, and you've got probably less support from the government than people would have hoped, particularly around the fee that you're having to pay to access Your First Home. So, even if it was extended, how do you think about the potential uplift to volumes? Given it's going to be less than, as I say, less than people might have hoped, does it make you think again about the regional footprint of the business and the cost structure you're pricing with?
Oh, well, look, that's something that we're constantly reviewing. In some of the areas that are more challenged around local authority price caps, either they are markets that we don't really participate in, even though we've got really good coverage because they're not traded with the markets, or potentially there's viability challenges. Further north, some of the caps aren't that generous further north, but we would still see that as a really strong market with good, or comparatively good affordability measures. So, it is an area that we will continue to review. But in the areas that we're actively operating in and where we've got our land investment, I think that there's good representation. And in terms of our regional structure, we're comfortable with our coverage across those regions.
Our regions, as you know, Sam, are slightly bigger than many of our peer group in housebuilders, and therefore it does give us more access to better, a more resilient market. And I think that that's a positive for the business.
Okay, thank you.
Thank you very much, Sam. Our next question comes from Peter Ajose-Adeogun from Morgan Stanley. Peter, your line is now open.
Thank you. Morning, Jennie. Morning, Chris. Jennie, I just wanted to get your thoughts a bit more on Your First Home. Just in terms of the customers who inquire but can't proceed today, could you give a flavor of how many of those are constrained by the deposit versus mortgage affordability? The reason I ask is because, I guess, do you think there's a risk that this scheme may subsidize purchases that just would have happened anyway? The second question was just around, with sales rates falling, at what point does it make sense to maybe slow down opening more sites? What would trigger the decision to potentially slow that down to protect returns at some point?
Okay.
Thank you.
Yeah. Thanks, Peter. I mean, look, in terms of customer engagement at this point, we've had some customers inquiring. Affordability, I think, will potentially still be an issue. If you look at the interest rates for a 75% LTV, it's still over 5%, the last when I looked earlier in the week. So, there's still a potential issue there for some. But the deposit at 2.5% will be very attractive, and it will open the scheme to a significant number of purchasers. But with any scheme, even with the eligibility criteria that the government have placed around it, there's always the potential for those who could have partaken in the market anyway to use it.
But I think that the design of the local authority price caps is one of the ways the government are seeking to control that a bit better than they may have perceived in the Help to Buy scheme. So, I think that the overall local authority house price cap is the method of trying to ensure that people aren't using it just to trade up, as we might have seen in Help to Buy. Does that make sense, Peter?
It does, yeah. Thank you, Jennie.
Okay. In terms of sales rates and our approach to opening, where we have already committed to land and invested, then we are committed to opening the site in an efficient and disciplined way, because we see benefits to being represented across a broader spread of markets, and even more so in more difficult trading conditions. But we talked a little bit earlier about WIP control and other things, so we would be very disciplined in the way that we would do that.
Maybe just a quick follow-up, Jennie. Maybe just on the sales rates. Is it possible at all to maybe separate the performance of outlets already open, maybe say more than a year, versus newly opened? I guess I am just trying to establish if the kind of established outlets are losing sales or the lower group rate maybe is a consequence of the opening program?
Yeah, I mean, it's a good question, Peter, and the answer is, I think it's a bit of a mixed bag. In a market where there is hesitancy and looking for customer are a bit more hesitant, then it's probably fair to say that they would prefer to see a bit more of a maturity on a site opening to make sure that they are confident in their purchase. On the other hand, there are some long-established sites that maybe just given some of the wider issues, whether it's employer-driven or other issues can struggle. So, it is a mixed bag. But look, we work hard to drive a good quality of place and to open our sites well, and to get as good a start as we can.
Thanks, Jennie.
Thank you.
Thank you very much, Peter. We currently have no further questions, so I will hand back to Jennie Daly for closing remarks.
Thank you, Molly. So, look, thank you all for your time this morning. It's appreciated. While market conditions remain challenging, we are focused on the areas we can control, driving efficiencies, protecting value, and improving capital discipline. So, alongside our confidence in the long-term fundamentals of the U.K. housing market, our progress on outlet openings and strategic land conversions, I think position us well for the future. So, thanks again, and we will speak to you in the new year.
This concludes today's call. Thank you for joining. You may now disconnect your lines.