Taylor Wimpey plc (TW.L) Earnings Call Transcript & Summary

Good morning, everyone, and welcome to today's Taylor Wimpey Trading Update Call. My name is Seth, and I'll be the operator for your call today. [Operator Instructions] I will now hand the floor to Jennie Daly, Chief Executive, to begin the call. Please go ahead.

Many thanks. So good morning, all, and thanks for joining Chris and I this morning. I know you have all seen the statements. So as usual, I'll just take a few minutes to run through the key areas before opening up for your questions. So the high-level story is that we are executing well on the priorities we set out in October, including a focus on efficiency, driving planning progress forwards and opening outlets. In terms of the market, given the uncertainty for customers as they await the budget and also the trajectory of further interest rate cuts from the Bank of England, sentiment continues to be cautious and affordability remains stretched for many, particularly first-time buyers. As a result, there's a lack of urgency with customers as they wait and see the outcome, and gaining customer commitment is a key focus for our sales teams. As we've previously stated, incentives remain an important part in this. And while underlying pricing is broadly flat, pricing in the southern parts of the country is more challenged. This, together with the low single-digit build cost inflation we have previously flagged is creating a headwind. All of this is reflected in trading for the second half to date with a net private sales rate of 0.63 compared to 0.71 last year, and a cancellation rate of 17%, the same as the comparable period last year. Excluding the impact of bulk deals, the net private sales rate was 0.61 compared to 0.68 for the comparable period. For the year-to-date, we have achieved a net sales rate of 0.72 , so very similar to the 0.73 at the same stage in 2024, with a cancellation rate of 16% compared to 15%. Excluding the impact of bulk deals, our net private sales rate for the year-to-date was 0.68 against 0.68 last year. The order book, excluding joint ventures as of the 9th of November is lower at -- sorry, 7,253 homes compared to 7,771 at this point last year with a value of around GBP 2.1 billion compared to around GBP 2.2 billion in 2024. As you know, we are focused on growing outlet numbers. So I'm pleased that, as you will see in the statement, we are on track with outlet openings for the year. In the second half to date, we operated from an average of 210 sales outlets compared to 208 in 2024, having opened 51 this year-to-date compared to 34 at this stage last year. Turning to planning. As we told you in October, we are seeing positive signs and a shifting more positive sentiment in many local authorities responding to the changes introduced by the NPPF. The NPPF has reestablished a much needed tension between house builder and decision-maker by reintroducing housing delivery targets and the need for a 5-year housing land supply. And as a result, we are seeing councils respond more favorably to our applications, though timing and resourcing challenges remain. But we have an example in the Northwest. We've had a site for 340 homes where our first principal application was submitted in May 2023. We have progressed well with engagement but have been frustrated by delays in determination. Confirmation of the NPPF strengthened the principle of this site, and we saw a marked improvement in the engagement with officers and achieved a determination for beneficial development in September this year. This is only possible because of the actions we have taken in the early submission of applications and the tension housing delivery requirements are placed on local planning authorities via the NPPF changes. We continue to closely monitor and track progress and local authority sentiment on all of our early applications and are continuing to see a shift from red to amber and green. Of course, this isn't universal. So we're not there yet, but the progress we are seeing is consistent with what we expected at this stage. As a result, we continue to believe that the NPPF and the upcoming Planning and Infrastructure Bill will provide the basis for us to accelerate progress in outlet openings, particularly given our proactive and assertive approach that we've been undertaking over the last couple of years. So we've said today that we continue to expect to deliver full year 2025 U.K. completions and group operating profit in line with our guidance. The current market sentiment is challenging, and we are working hard to build the order book into the year-end. I will update you on the order book as usual in January and then confirm our guidance for 2026 with our prelims in March with the benefit of some early spring trading. And looking further ahead, we remain very confident in the underlying fundamentals of the U.K. housing market with this pressing need for new homes and our strategy for the business to deliver profitable growth and attractive shareholder returns in the medium term. So with that short overview, I'll open it up for questions.

[Operator Instructions] The first question is from Will Jones at Rothschild & Co Redburn.

I might try three quick ones, if I can, please. First, around, I guess, your lead indicators away from the sales appointments, website visits. Are they tracking similarly to the sales rate? Second was around pricing. You've maintained a broadly flat year-on-year comment. But just wondering if any change sequentially since the summer and just potentially how you're thinking about possibilities into the new year as affordability potentially improves for customers. And then the last is around build costs and whether from your suppliers, you've had any early indications on their expectations or hopes for next year?

Okay. Thanks for those, Will. In terms of sort of lead indicators overall, I mean we have sort of significantly sort of uplifted our sort of marketing activity, as you would expect. There's a range. I mean organic inquiries are sort of down year-on-year, but we are seeing a little bit of improvement. Appointments held sort of broadly flat. Website appointments actually sort of looking fairly strong. So we've got decent leads, we're seeing sort of decent levels of inquiries and visits. What's really coming up from the sales teams there are that customers are not committing, that they're really sort of holding back and waiting to see the outcome of the budget and I think of interest rate trajectory. In respect of pricing, I mean it has got a little bit tougher. But I mean I think it's still fairly consistent with what we've been saying for a while now. The north is a bit better. We see some improvement in pricing, both the site remains sort of a real challenge from an affordability perspective. We're seeing quite a challenge around chains, a lot of which can be linked back into sort of first-time buyer sort of challenges. So I think the dynamics are very much similar to our discussions in the past. I think you were asking about sort of the incremental or the sequential possibilities going into the new year. I think the budget event is proving to be sort of quite a pause, whether it's a hiatus or in customer sentiment. We will need to see what the budget sort of elements and the likely impact on sort of customer, and a lot of those impacts could be very individual. But if we believe that, that's a sort of a clearing moment or an opportunity, and particularly, if there's an interest rate cut alongside that in December as many are penciling in, then you will be certainly trying to get on the front foot and lean into the early part of 2026 trading and into the spring budget. And in respect of build cost, we're still in that sort of low single-digit sort of period, a few sort of ups and downs. We're just entering the period where we would be starting to negotiate with our suppliers well. So it's something I probably can give you a bit more color on in January. But really, even then, there'll still be very live negotiations on our calendar.

Our next question is from Allison Sun of Bank of America.

So two questions from my side. First is, if you can give us some color on your long-term projects, which we understand has been pushed from first half to second half. Is there still progress as expected? And the second question is, I mean, I don't know if you have any case scenario on what might happen in the budget? Do you hear anything on the stamp duty removal potential? What do you think? And if it has been removed for the Taylor Wimpey existing outlets pipeline, do you think you can accommodate all the new demand potentially?

Okay, Allison. Just on the London projects, I wasn't quite clear, I apologize, on the question. Progress on?

Yes. Yes, I think you mentioned in the first half, there are some big, large projects going on in London, it's expected to -- I don't know, maybe completed in the first half, which has some impact on your pricing, if I remember it correctly. But it looks like the project has been now pushed to the second half? So we wonder if there was an update there.

Yes, yes. Got it. Sorry. Thank you for that. Yes, we did have some delays with the building safety regulator. I know the team have worked exceptionally hard, and that scheme is now moving. So that's very, very pleasing. In terms of the budget sort of various scenarios, I mean, there's a wide range. I mean clearly, there's a lot of speculation sort of in the market. In respect to stamp duty land tax, many of you will know my view in stamp duty land tax, it's a tax on mobility and it has a distortive effect on the market. I think that we can see that clearly in both ends of the market, at the lower end of the market where we've got effectively overcrowding and the top end of the market where we've got sort of under occupancy and economic and social mobility I think are hampered by stamp duty. I'd add to that, while I'm on my soapbox, a little bit that I do think that the treasury receipts from stamp duty could be more than recovered just through the level of economic activity from a more free-flowing housing market. That said, Allison, I'll come off my soapbox now. I haven't heard any sort of significant sort of commentary other than speculation in the press around stamp duty removal. But if there were to be any form of demand side, sort of stimuli or removal of some of the friction points then, I think that the scorecard of sites that we have, which includes many sort of multiphase and larger sites, which have the ability to step up delivery should there be a sort of a rebound or a stimulus to demand. It very much depends on the timing of any announcement as to how much of that can be captured in any 1 year. But I think that we would be in a very good position to capture that were it to happen.

Our next question is from Zaim Beekawa from JPMorgan.

Just two on my side is coming back to London, much of a positive impact you see for the business given the affordable housing quota being reduced. And then secondly, if I could push on the potential landfill tax. Is this something that you're still expecting could go through? And is there sort of any indication you could give on how much this would impact your business?

Okay. I mean, I think in terms of the package of measures consulted on our -- going into consultation from the GLA, the reduction in affordable housing from 35% to 20%, sort of reduction in sale and other things, look, these are sort of incrementally welcome. I'm not convinced that they are sufficient to address the significant sort of amount of issues that are weighing on housing delivery in London, which are both supply and sort of demand upside. As we discussed in October, we are effectively building out of our London schemes. We remain sort of present and open in the market, but we're not seeing anything that we think would materially change our position, and we have a very limited sort of pipeline in London. So I believe a more radical approach to stimulating London house building is required. In respect of land tax, it's a consultation. That's still -- we haven't had any response. So we've had no closure to that. And there are concerns that a landfill tax could have an impact right across the sector. It's a very substantial potential uplift, and because the impacts are different depending on the topography, the geology, the nature of the scheme, including the level of sustainable urban drainage or protective land like biodiversity net gain that's included, it's quite hard to calculate. But I would point you to the HBF document that they issued some weeks ago, and they're recording a figure of about GBP 15,000 a plot.

Our next question is from Ami Galla of Citigroup.