Taylor Wimpey plc (TW) Earnings Call Transcript & Summary

Good morning, and welcome to the Taylor Wimpey plc Half Year Results Presentation. Today's presentation will be hosted by Chief Executive, Pete Redfern; Group Finance Director, Chris Carney; and Divisional Chair of London and the Southeast, Ingrid Osborne followed by a Q&A session. I will now turn the call over to Pete Redfern. Please go ahead when you're ready.

Thank you. Thank you, everybody, for joining us. If I sort of just give you a quick overview of what we're going to cover today. My section will probably be a little shorter than usual to give time to hear from Ingrid, who runs our London and Southeast division. Ingrid will also cover sort of an update on our environmental strategy, which she has been working on and also an update on some of our employee measures. Chris will then go on to his normal financial review, and I'll sum up with some priorities and outlook at the end. Moving on to my first slide proper with a half 1 overview. I'll probably spend a fraction longer on this slide than usual and touch on more of the statistics. We think it's a great first half performance. You can see us prioritizing margin growth. And you will see us talk about, and I will particularly focus on towards the end, our focus on outlook-led growth from 2023 onwards. You can see the margin performance. We'll talk through the presentation about what we've seen on selling price and cost a little. I don't think the underlying dynamics will surprise you. But obviously, our company-specific position on that is important. We are seeing selling price inflation fully offsetting the pressure on build costs. I would say if you look at it today, there's probably net upside there. But I think it's important just to sort of be cautious as we look ahead about the balance, but we expect it to continue to at least offset. But obviously, the 2 dynamics that was exactly in line quarter by quarter even if they are quite closely linked. Picking up some of the stuff, sort of updating on land approvals in the year, to the fourth of July, we approved 32,000 plots. That's roughly twice sort of normal completion run rate at the moment or a bit more. If I went back to the sort of area of post-equity raise and included the last few weeks of the previous period, which obviously was a period of peak approvals, we're at about 36,000, 37,000 plots approved since we reentered the land market ahead of our peers. The operating profit margin in the first half of 19.3%, as I say, we're particularly pleased with, but also some of the underlying measures. At 92%, we're solidly in the 5-star category on customer service. And a measure that we believe continues to be underreported and discussed, our Construction Quality Review Score has again shown a step forward with 4 years of improvement. We think that is a good way of measuring our underlying construction quality, which will impact both our future customer service to the performance and our customer satisfaction with that home and also our own cost base and control going forward. So we think it's particularly important. Moving on to the first half market backdrop slide. I don't pick up every point on this particular slide, but looking at the customer and the market together, overall, we see continued strong demand across all regions. So we've seen some normalization in what were pretty extreme conditions in the first half over the last few weeks. We continue to see a pretty good performance, and we will sort of talk through the stats. I think what will be unusual at the moment, if you talk to any one of our regional heads, they would say, the market today in July, August 2021 is materially better still than it was in 2018 and 2019. So although we're not quite in extreme conditions at the first half in terms of forward interest, it remains at an elevated level and we remain very positive about the market conditions. And as we've said many times, we look to connect that more with low interest rates, decent mortgage availability and a strong level of real demand from people who want to change their life and move on to a new home rather than just the short-term measures. And we say on a couple of the slides, sort of primary repeat it once, we're continuing to see very good reservation rates and customer interest for a period that is beyond any of the Stamp Duty windows. And we have not seen through any of the changes in that duty any material downward shift. So we do not see that as expected , a meaningful risk. On the regulatory side, clearly still a lot going on. Again, I don't comment on all of these elements. I think on the Building Safety Bill, since we don't see it affecting our cost base going forward materially. Things like that, real focus on the Construction Quality Review, for instance, we think that's in a strong place, things around our focus on [indiscernible] would be standard. It makes it easier for us to sort of adapt to a world with a new hand on some particularly. On cladding provision, I would just reiterate that we are very confident that the provision we have made is enough for us to do the work that we believe is right for our customers. We're the only major developer that told our customers that we will do any necessary capital work to bring sort of historic stock of apartments up to current EWS1 standards. I would say, more recent announcements since we cited our provision in February have been positive and are more likely to reduce that scope slightly, rather than to grow it, but we remain very confident that we're in the right place both financially on that division, and more importantly, in terms of enlighting our customers. On the CMA leasehold process, difficult to comment. There's not a new conversation there. It's issues that we've talked about in the past, but difficult to comment on an ongoing process. And on land, I think -- and I will come back to this in my second section, we do see increased competition in the land market in the first half of this year. And I'm very pleased with the number of sites that we acquired over the last 12 to 15 months. Moving on to the market performance slide. I think obviously inevitably everybody's eyes will go straight to the left-hand side, we've continued to see a strong sales rate, a very normal cancellation rate, sort of normalized really from early on this year and remained very stable. I think it's worth picking up a couple of the sort of bullet points in particular. That shift in Help to Buy sort of level in the first half, only 27% of completions, roughly half what it was sort of in the first half of last year. First half of last year renovated, so 45% perhaps might be a more normal number, but still running well below what we've seen in any year of Help to Buy. A big chunk of that is because of the transition from Scheme 1 Scheme 2. And we've obviously navigated that with a long order book without any impact on completion performance. But I do think there is also an element of it, which is to do with the strength of the secondhand market, which I do believe is likely to continue into the medium term, meaning that we're little less dependent upon Help to Buy going forward than we have been, although 27%, I'm sure we'll see a low point. But it gives me a little bit more confidence as we look ahead to 2023 and beyond. I think also worth highlighting, as of today, we're about 99% forward sold for completions for this year. That obviously gives us a high grit of confidence in this year's performance. Sort of as we look forward, we would normally expect to get to that point late September. Moving on to just some forward-looking indicators on sales. You can see, and it's not sort of a huge shift, if you look at the red line on appointments, you can see strong first quarter and then normalizing. If you compare sort of the last few weeks to the early period of 2020 before the pandemic hit, you can see that we're still running above that sort of more normal level. And that first sort of 8 or 9 weeks of 2020 would be a reasonable reflection of the level through 2017, 2018, 2019. From a customer point of view, and we've been doing a lot of work on our digital sales processes, we've learned a lot over the last year, we felt we had the IT system support and the staff who were quick to adapt to selling remotely and selling digitally, -- but we've been very focused on not losing that benefit, both in terms of flexibility for our teams, flexibility for our customers, efficiency for the business. We've just launched over the last few weeks a new customer-facing website with significantly improved development pages for block listings, totally reenergized, search function, very different user experience. It also ties in, which Chris might touch on, to the internal systems that we have on the CRM side, gives us significantly better data, better able to understand our customer base and enables us to make the sales process more scientific and far more efficient at the same time. I will stop there and hand over to Ingrid and then at the end I'll come back and cover our priorities and the outlook. Ingrid.

Thanks, Pete, and good morning, everyone. My name is Ingrid Osborne. I'm the Divisional Chair for London and Southeast. I've held that post for a little over 3 years now, previous to which I was the Divisional Managing Director for Central and East London, and before that, the Managing Director of Central London for almost 7 years. In total, I've been with the company for just shy of 20 years, having originally joined George Wimpey's Graduate Trainee Scheme. So during my section of the presentation today, I'm going to provide you some detail on the London and Southeast division and also give you a brief update on our environment and social strategy with a particular insight into our recent employee survey. So moving on to the first slide. The map on the left there gives you a sense of the operating area and how it's divided. We operate from 5 business units covering Inner London, greater London and the wider Southeast. They are a mixture of growing businesses, well established, mature businesses. And just putting out a few points for context for you, our product is roughly 70% housing and 30% apartments across the patch. The proportion of completion from Greater London is between 15% to 25% across the medium-term outlook. And to split that down a bit further into Outer and Inner London, we currently have only 1 large active outlet in Zone 1, being our Postmark scheme, which is the old post office site located between Kings Cross and Barrington. In Q4 last year, we undertook an overhead review across the division, which is now complete and embedded. We rationalized our structure as a result of that review and created TW London from the operations which were previously based in East London and Central London. This is working well, and we're definitely seeing the benefit of combined skill sets across our teams alongside greater efficiencies. If I move on to the next slide. Again, I'll highlight a few key notable areas from this slide for you. We've had a strong first half, assisted to some extent by the Q4 2020 hangover, but also from a real focus from our teams on smoothing. We are currently operating some 43 outlets and all the teams are extremely focused on driving the engine room processes to get new outlets open on time and on budget. It's been a busy year for us in that respect, and we've already opened 14 outlets in the first half and we're on track to open another 19 outlets in the second half. Our operating margin is, of course, another key focus, now starting to normalize from last year, with all the teams working hard with a key focus on cost management and price optimization to drive this higher. You can see from the slide that our sales rate shows the market has been very strong at 1 a week year-to-date as per our budget, with a comparatively low cancellation rate this year at 13%. As you would expect, we have very live discussions across all our outlets regularly to focus on the balance between price and rate. Our order book is strong at GBP 588 million. We're 94% sold for the year and continue to see strong momentum going into next year. We have not seen any material change in the market as a result of either the change in Help to Buy caps nor the end of the SDLT holiday, with inquiry levels remaining high and appointment level is actually the highest this week since week 19. 65% of the value of our order book is post the final removal of the Stamp Duty holiday at the end of September, demonstrating resilience of the market. Pleasingly, both our 8-week and 9-month customer satisfaction scores are trending upwards, and both the teams and I have been especially pleased with the improvement in our Construction Quality Review score, which you can see by the green line on the graph currently standing at 4.5. If I continue on to the following slide, I thought it would be useful to provide a bit more insight for you into the London and Southeast sales market. It's certainly something which I often get asked about. And as you would imagine, we've been keeping a very close eye on what's happening and whether or not we see any shift in buyer behavior moving out of London. On the ground, we are not seeing that fundamental shift. I think that the idea of deurbanization is somewhat oversimplified. In fact, by considerations on space, on life stage, on lifestyle and so on are not particularly different to what they have always been. In fact, sales rates year-to-date from our 3 largest Greater London schemes are higher than our overall divisional sales rate. For example, our Chobham scheme in Stratford tends over 2 year-to-date, our Greenwich Millennium Village scheme is just shy of 2 year-to-date, and our Waltham scheme in Hackney is at 1.25 year-to-date, but is trending to 2 in the last 4 weeks. So the notable attraction of these schemes is proximity to open space. Chobham sits directly next to the Olympic Park. And having visited only a couple of weeks ago, I've really noticed how much of the park is maturing, with great examples of well executed flower planting alongside lots of play areas and amenities. Greenwich is the same. The Ecology Park in the middle of the most recent phase is often quoted as a big attraction. And speaking to customers who live there, they really enjoy the walk along the river to the O2 center and the transport facilities. Speaking to some of our sales executives, they told me that, in fact, a number of customers have relayed their appreciation for being so close to essential facilities during lockdown. Likewise, at Wick Lane, our London teams tell me that the buyers priced out of Chobham are prepared to walk that a bit further to get to the Olympic Park and the Westfield Center. It's around a 10- to 15-minute walk for a lower price point, whilst still being close to what they see is a more emerging neighborhood with price growth and proximity to the station and some funky pubs alongside the river there. So for me, I do think our customers are more interested than they have ever been in open space and also amenities, but I don't think that this means a decision between urban areas and nonurban areas, because the 2 are not mutually exclusive. Our customers are showing us with their ongoing purchasing behavior that the popularity of London living is enduring. We are, of course, both conscious of other priorities that we hear, our customers regularly ask about homeworking options and especially connectivity. So this is, of course, very high on our agenda. I should also note to that the inner London market is different again, being much more investor-focused. Here, we have seen -- here, we have seen lower rates, but currently not to stop. Our London scheme at post-mark is over 50% sold. And in fact, over the last few weeks, we have really started to see increased interest and secured a number of deals. Anecdotally, the return of the university to something more like normal is driving this renewed interest and rentals at Postmark are extremely popular for overseas students. This, coupled with the current undersupply in inner London, suggests positive prospects going forward for well-located quality schemes like Postmark. If I turn now to the land market on the next slide. The divisional teams have been very active in the past 12 to 15 months, and I've been extremely pleased with the performance, which sets us up strongly for the medium term, across a broad range of really excellent sites. We have approved 7,700 plots in the division, 94% of which are under contract already, investing over GBP 500 million. And we have visibility of a strong pipeline of deals still coming through the system, around 2,000 plots close to GBP 2 million. I've been involved in land throughout my career at TW. And I can honestly say that the number and caliber of sites that we've been able to acquire before the current competitive tightening of the market is really very significant. We were able to stay active in the market when our competitors were either absent or not performing, and that was a big advantage to us at the time. But, just as importantly I think, it enabled us to build a reputation for professionalism and reliability which has stayed with us and given us a stronger position in a more competitive market. We are very selective about where we spend our time, and our current position means we can afford to continue this approach into the future and retain attractive KPIs. At the same time, the teams work extremely hard with local authorities and communities, getting planning through the system and getting ready to start on site and get our outlets open. The next slide gives you just a couple of examples of the sites we have secured. So the first one at the top is Gilston Village at Harlow. That's a very large site that we will share between 2 of our businesses. We secured that above standard benchmark rates. And our activity in that respect enabled us to secure this off-market and provides us with an excellent backbone site that we intend to open by the end of 2023. The second scheme at the bottom there is in Hassocks. Again, a lovely scheme, 500 units, about several miles north of Brighton, has planning, so relatively low-risk sites. We secured that as a result of one of our competitors failing to perform. And we're currently on track to get that outlet open early in 2023, as planned. I'd like to turn now to our environment strategy, a key part of the sustainability of the business, of course, and I've really enjoyed working with the team on this topic over the past 18 months. We are very proud of what we've already been doing in this space, having recently been included in the Financial Times' inaugural list of Europe's Climate Leaders. But that said, with our drive to continuously improve, earlier in the year, we launched our new strategy, which focuses on the 3 key pillars you can see here: carbon reduction, nature and waste and resources. We wanted the strategy to be clear and easy to understand, but at the same time have challenging and clear targets with which to measure ourselves. The rollout across the business has progressed well, with internal training having been provided and ongoing master class sessions happening across the business now. We have also launched a business unit innovation grant initiative to encourage good ideas and sharing of best practice. On carbon reduction, we have now committed to science-based targets. These are an externally calculated and assessed measure of what we should be doing in order to play our part in achieving the ambitious aim of the Paris climate change agreement, which is to keep global warming at less than 1.5 degrees. We have a number of plans afoot, as you would imagine, to achieve these targets. On nature, we are committed to increasing natural habitat, and we are working with Buglife and Hedgehog Street, for example, to make our properties more wildlife-friendly. We are implementing bulk hotels, Bricks and Hedgehog highways across appropriate sites already this year. Bug life championing the B line, which they describe as a transport infrastructure across the U.K. for insects, which is a great phrase -- And we're working with them to identify the sites that we control, which sit on the B line in order to join them with this fantastic initiative. On waste and resources, we continue our focus on protecting the environment and improving efficiency with a number of trials underway and a commitment to working closely with partners and supply chain to do more. We're really proud of what we are doing and teams continue to embrace the challenge. And to bring some of this to life for you, I have some examples on the following slides. So the first one, this is our site at Bordon in Hampshire, which is a joint venture with Dorchester Group. As you can see, this is an extremely large piece of land, and we've sought to make the most of this opportunity. And the slide here gives just a couple of bullets of the types of things we've achieved. But to note, really, I think it's been such a great opportunity to create new green spaces and encourage active lifestyles. And having visited myself recently, I have to say it was lovely to see the area being well used and enjoyed by families, by residents and other members of the community. And in addition, as you'll see on one of the bullet points there, it's been great that the new types of bird sightings have been noted in the area than have been seen previously. On the next slide, there's a couple of images there just to show you what a bug hotel looks like, in case you didn't know. The top slide there shows you the smaller version of the bug hotels. There are actually larger versions which can be used on areas of public open space. But these smaller ones can be used in gardens and much smaller areas. The pollinators use, the cavities and the tubes you can see in the picture there to nest and labor eggs. And the bottom image there is just an example of wild flower planting, which we are seeking to use a lot more readily across a number of our developments. On the next slide, a couple of examples on carbon reduction. The top scheme there is our development at Coronation Square in Leyton, which we've actually just got started on. This will turn into a District Heating Network, which will incorporate neighboring developments as well, something that was really important to the local counsel, Waltham Forest, who are our joint venture partner on that scheme. And the image at the bottom is our Chobham Manor scheme at Stratford. This was a development where we have constructed townhouses that use -- achieve 0 regulated CO2 emissions. And by -- in doing that, we've used only on-plot measures, which is pretty unusual. And those images are real. So those houses are there in use and being well used at present. So turning finally to our social focus. We have been committed to engaging and supporting our employees over a number of years now to build a sustainable culture and an inspiring working environment. And we're really proud of the results of this recent employee survey which we conducted in March. We had a 91% engagement level across the business, which we thought was excellent given the backdrop of the previous 12 to 18 months and demonstrates the resilience of our workforce. That said, we're committed to keep improving, and I'll highlight some of the areas on the slide here which are of particular importance as we focus on the new post-lockdown normal. We are unwavering on our commitment to health and safety practices, which is reflected in the responses here. 96% of our employees believe we take health and safety in the workplace seriously. As a business, we understand the importance of creating diverse and inclusive teams, but most importantly, it's about how our employees feel whilst they're at work. And we're making steady progress here, which is reflected in 96% of our employees seeing employees from all cultures and backgrounds being respected and valued. In addition, we were particularly pleased with the 96% saying they can be their authentic self at work without the need to cover identity. And this is something we felt really strongly about, that really matters. We also know we have further to go. And this year, we have launched new policies such as the menopause policy. We've introduced 3 employee networks, the Menopause Affinity Group, LGBTQ+ and Working Parents to add to our main network. And we're in the process of rolling out respectful workplace training to continue to build awareness across the business of inclusive behaviors. So finally, with the challenges of the last 18 months as we get used to a new normal, we remain committed to building the resilience of our employees and particularly focusing on well-being and mental health. We have set out guidance on our continued commitment to agile and flexible working. We continue to offer awareness training for all employees and mental health first aiders, all of which is reflected in our survey with 93% of employees knowing how to access support for mental health and well-being at work, if wanted. I have to say, I've seen some fantastic ideas and participation in my businesses, and I'm really proud of the commitment that our senior teams have to our people so that we ensure we attract and retain the very best. And on that important note, I will hand over to Chris.

Thanks, Ingrid, and good morning, everyone. In keeping with the Olympic vibe, these results are a record performance for half 1 revenue and operating profit, reflecting the hard work and dedication of our team, as Ingrid has just touched on. The operating margin at 19.3% is better than expected, better than the first half of 2019, and it demonstrates both our ability to control costs and the underlying quality of our land bank, and we're very pleased with the margin performance, and I'll provide more detail on that in a minute. After deducting the dividend period in May, the profit generated over the last 12 months has increased the tangible net asset value per share to GBP 1.13, which is a very healthy 10% increase on this time last year. The return on net operating assets shown at the bottom of the slide is calculated on a 12-month rolling basis. And it's great to see that recover to 23%. And bear in mind, that return is after taking into account the drag impact of the continued investment in land to drive growth in 2023 and beyond. Looking at the detail of the U.K. performance, it is no surprise that the record revenues have been driven by record completion volumes. As you will recall this time last year Peter and I were very clear about the closures pushing completions originally intended for Q4 of 2020 into Q1 of this year, and that is exactly what you are seeing in these numbers. Affordable completions are running at 16% in the first half and our guidance for the full year is unchanged at 17%. So a slightly higher mix of affordable in the second half. Close to half of the 11% increase in average selling price is driven by the lower affordable mix in the period compared to the first half of last year when affordable completions made up 23% of the total. Private average selling prices increased by 6.5% since the same period last year, 3% of that is price inflation and the balance is mix, including a larger share of completions from grade A quality locations. The affordable average selling prices also increased due to improved site quality and a slightly larger average unit size. This slide shows the main components of the recovery in operating margin compared to the first half of 2020 and demonstrates why we think this is a sustainable performance and set us up for further growth in margin in the future. The biggest improvements come from the areas I flagged back in March, which you can see in the 2 boxes. The first box includes the reversal of the GBP 39 million of COVID-related costs booked in the first half of last year and the cost savings catch this year from the restructuring we undertook at the end of last year. The second box shows the impact from the return to more normal levels of fixed cost recovery as volumes have improved. In addition, the margin delivered by completions in the first half benefited on average from a net market impact of 1% compared to the first half of 2020. Since the start of this year, pressure on build cost has increased due to the strength of the market and supply constraints, but that pressure is being fully offset by house price inflation, as Pete mentioned earlier. Back in March, I set out a bridge to achieving our medium-term 21% to 22% margin target, and I'm pleased to confirm that we remain on track with those plans. The restructuring is complete, and the savings have been realized as planned. Our excellent order book position at 99% sold for the year is helping fund the fin selling prices. The land bank continues to evolve, and you can see 50 bps of improvement from that in this reconciliation and our strong land investment over the last 12 months puts us in a position to deliver a step-up in volume in 2023. At the prelims, Jennie and I gave you some color on our new house type range and CRM system, the rollout of both are progressing in line with our expectations. And our procurement strategy and engagement with suppliers to understand their product road map is ensuring we set ourselves up to procure products that are available and whose costs remain as low as possible. So hopefully, that gives you a sense of what's underpinning our confidence in achieving our medium-term operating margin target of 21% to 22%. Turning to the balance sheet. I think it really shows how we are setting the business up to deliver growth over the coming years. Unsurprisingly, the biggest change to the balance sheet compared to 12 months ago and something I'm very pleased to report is the increase in land cost of GBP 455 million, following the deployment of the proceeds of the equity raise. Work in progress was artificially high this time last year as a result of the site closures. So the reduction comes as no surprise, especially given the strength of the first half delivery and reduction in outlets. Our WIP per outlet is actually pretty much flat year-on-year. Now bearing in mind those outlet numbers and the well-publicized constraints on materials and resources, our expectations for 2022 volumes are unchanged, we are expecting modest volume growth in 2022. On top of that, as you know, we are expecting the land investment, I mentioned a minute ago, to deliver outlook growth from late 2022 which will in turn deliver significant volume growth in 2023. Net cash at the half year was GBP 907 million which is higher than we've reported in the past. But I think it's important to avoid looking at cash in isolation. For me, it should always be considered together with land creditors, which you will note are also higher due to the increased land investment. Our philosophy on land creditors is that we don't believe it's appropriate for them to finance land assets because they have fixed maturities in the short to medium term. So we aim to keep adjusted gearing at low levels to ensure we maintain resilient and financial strength throughout the cycle. It's also worth remembering that we are still at the relatively early stages of the growth phase and the pipeline of land approvals is still to be fully reflected on the balance sheet. Lastly, there is some detail in the appendices on the latest funding agreement with the pension scheme trustees which was agreed in March. And worth noting that the scheme has a surplus of GBP 51 million at the end of June on a technical provisions basis and GBP 59 million on an IAS 19 basis. This slide shows another period of strong cash generation for the group. The largest outflow on the slide is land, which is shown net of land recoveries on completions. The total land spend in the period amounted to GBP 588 million. You can also see that the 2020 final ordinary dividend of GBP 151 million, which was paid in May. Today, consistent with our ordinary dividend policy, we're declaring an interim dividend for this year to be paid in November of a further GBP 151 million or GBP 4.14 per share, and this means we will return GBP 301 million to shareholders in 2021. Turning to guidance. We've previously guided U.K. completions in 2021 to being in a range from 13,200 to 14,000, and given the performance in the first half, the strength of our order book and ongoing build we are now in a position to guide completions to be towards the top end of that range, with half 2 slightly lower than half 1 and with 17% of the full year total being affordable homes. And as I noted earlier, assuming stable market conditions and no additional disruption to the supply chain, we're expecting U.K. completions to show modest growth in 2022. Given the strong profit performance in half 1, we have upgraded our guidance for full year group operating profit, including joint ventures, to be around GBP 820 million, which is above the top end of consensus. And as a result of the increase in volume guidance and strong cash generation to date, we've updated our guidance for the year-end net cash to be similar to the end of 2020 at around GBP 700 million. And as ever, that is subject to the timing of land spend. And given the pipeline of land that we're processing, it is possible net cash could end up a couple of hundred million less than that, but we will update on that in November. And there are no changes to the interest and JV guidance. So the last thing for me to do is remind you, just in case you missed it, that our priority is getting the operating margin to 21% to 22% and positioning the business for accelerated outlet-driven volume growth from 2023. We have a plan to do that. the components of that plan are on track and the early results are evident in the numbers we are presenting today. And I think I'll hand over to Pete.

Thank you, Chris. If I move straight on to my sort of first slide, which highlights 4 key priorities. And Chris has mentioned the first 2 and touched on them, and I will spend a bit longer on them and will give you a slightly different perspective, that on the margin focus, the balancing spending price and cost and our focus on growth, particularly from 2023 onwards. The other 2 priorities relate to broader measures within the business, our desire to deliver strong and consistent customer service, a very consistent, reliable, right first-time build quality and a great employee experience and our broader social and governance sort of focus, particularly the environmental strategy. I won't spend very long on the last year, as Ingrid has covered them in some detail. And then I'll talk at the end about how we see the outlook. So moving on to my first full slide on margin delivery. This obviously has been a big area of focus for the group both internally and externally. We have said several times that we feel we've got the balance of this slightly wrong in 2019. It's not a big shift, but we were probably 3% to 4% too high on volume and 1.5% to 2% level margin. And although the 2 are not entirely directly related to risk, obviously a relationship. That changed in late 2019. And although it's obscured by the pandemic, our focus through the last 18 months has very much returned to margin-led, and as Chris put it, and I would reinforce, outlet-led volume growth. We believe volume growth creates value, and it's the right thing for us to do from a broader social point of view, but actually it has to be for a balance in the right way. Our cost control focus and systems improvements are in place, and we can really see the fruits of them in the first half. We were confident that we went through last year that we could make those changes, we could see the benefits. I think the restructuring we completed in late 2020 made a difference to our cost base, but most importantly, it just streamlined and simplified our management roots. So ownership of course, is much clearer within the business. we believe a long order book and obviously, the positive selling environment helps us. But that long order book let's us focus on price optimization to maintain a very solid sales rate. The balance of our sales rate will depend on trading conditions. But we believe that although 2019 is the peak, but it's still appropriate to run at a sales rate that tends to be slightly ahead of the sector given the quality of our outlook, the fact that we don't double head out this. So when we're talking about an outlook, there is just 1 [ tailwind ] on that, and that shows good lot of sites drive high numbers. Just to give you a sense of sort of the balance that we've seen sort of on cost and sales, we've said that they have sort of the cost inflation has been fully offset by sales price and I touched earlier that I would say, as of today, slightly more than that. And I think that's quite important to understand. I think it's appropriate to be cautious as we look at the balance over the next 6 months. Therefore, that's slightly more than built in, some contingency against that, but we continue to believe that we can achieve our margins within this environment and are highly confident. And I would say, more confident than 6 months ago, given the performance that we've seen. If I move on to land, we said it's on the equity raise that we believe that our land bank would grow by around 10,000 units. The result of the last equity raise in our investments in land, that was from a level at that instance about 77,000 units. We continue to be very confident that, that will happen as deals that we have already done flow through into the land bank. You see 5,000 sort of path growth happened in the first half of the year, you would see a substantial further addition in the second half of the year. At the moment, we believe that the land bank in total will probably grow by more than 10,000 units that we had at that point in time. And we have continued to be active to date. Although as Ingrid said, I think good comment on land about the quality and quantity of deals that we have done over the course of the last 12 months will be reflected by all of our division chairmen, as we see a more competitive market at the moment. We continue to be active for a much more of a sort of that replacement basis. We're very pleased with the quality of those sites. We have managed to rebalance sort of the average site size, so it gives us more flex. And we're also very pleased with the geographic spread, with all of our businesses making land positions over the last 12 months and putting us in a position where sort of all of our businesses are in a strong position as they look at the next 2 to 3 years to deliver it. I think the key focus today though should be on outlook progression. You know over the last sort of 10 years, I've been very wary of giving out the forecast. For the fact that I'm giving one today should give you confidence, that we have sites and the capacity to at least achieve this number. We expect our outlook to grow by around 60 over the next 2 months, which sort of adds something around 22%, 23% to our current outlook number. So it's a very sort of significant growth number. That is not assuming that we hit every single outlet, so we get it through the planning process at the level that we expect to have an individual outlook level that builds in some sort of contingency. And that, for our outlet numbers, should grow a little during this year, and we continue to believe we'll end this year at more or less the same level as we began it. They'll grow a little in the first half of next year, but they will really start to accelerate in the second half of 2022, which is very much in line with the guidance that we gave at the time the equity made. So we ended 2023 with a significantly elevated number of outlets. And actually, with those outlets already up and running and rebuilding completion in place, which is why we expect it to be material volume growth in 2023. So in 2022 for the material growth we expect in 2023 and ourselves outlet driven. And we continue to believe that, that will let us deliver consistent underlying volumes of 17,000 to 18,000, at least 2,000 ahead at a level that we were running out before the equity raise before the pandemic. Moving on to sort of the third bullet point, which I'm not going to spend a long time on, Ingrid spent some time on the sort of broader softer issues. But I do think as I touched on right at the beginning, the focus across the business on underlying build quality is particularly important that I believe stands out in the sector. You can see customer service performance. And the whole industry is still pretty much more effectively on customer service than it was, but I think we're unique in the level of focus. And the investments that we've made over the course of the last 3 to 4 years in build quality. And across the board, our investments in systems and processes, in training our people and in modernizing the business in many ways, I think, are now starting to pay off and an always deliver immediately, but we're already starting to see the benefits. And I would touch very briefly on employees. Ingrid touched on some of our customer service around employee survey results. But also, we do see a real opportunity, particularly for our employees or business to do some of the lessons learned around flexibility and remote working to make the business more efficient and to give a better sort of overall experience for our employees. So moving on finally to a summary slide. Our sense is that market conditions remain good. We believe that the resilience we've seen over the course of the last 12 months demonstrates the underlying demand in the U.K. and the long-term low level of interest rates and good mortgage availability more than it illustrates the impact of shorter-term measures. And that gives us continued confidence that the market will continue to perform well over the course of the next few years. Our strong half 1 performance really does show the underlying quality of our number. And that although we acknowledge that 2019 didn't like go as planned, but actually, the business is in good shape, and our assets are in good shape and that we are fertile or managing price and cost balance and showing improvements in the business. We have upgraded 2021 expectations today with a very derisked H2. I do want to be clear that you should not expect material volume growth in 2022. We expect that to deliver the guidance that we have given you. But we are very focused on our volume growth being driven by outlook growth, and so not returning to 2019 sort of very high sales rates. But significant potential to build in 2022 from 2021 performance with some volume growth and margin improvement and then real potential in 2023 to show material growth and beyond that as well. We believe that our land investment gives us very significant potential ahead of the sector to outperform in terms of volume but also to underpin that margin improvement. And lastly, just bringing together all of the other points, we believe our sustained investment in customer service, build quality and our people places the business in a strong and sustainable position. We can move to questions, please.

[Operator Instructions] Our first question comes from Brijesh Siya from HSBC.

And I have two questions, if I may. The first one is on the house price inflation. So first half was close to 3%. Considering how the market is right now, do you expect that house price inflation to nudge up further in H2? And just putting into context the 99% you are already forward sold for this year. So how the order book you think could step up in second half on house price inflation. And on the second question is on the build cost part. You helpfully pointed out that the first half, you kind of offset that with house price inflation as well as cost savings. But looking at how much pressure on the material side, could you please give any kind of guidance for the full year, what kind of full cost inflation you expect?

So Brijesh, I mean, on selling prices, it's obviously spend massively on both questions, what time period you take. And the 2% to 3% effect is that coming through completions rather than that point-to-point movement in house price inflation. And I would say that the point-to-point movement sort of from sort of mid to late last year through to today, it's more like 5% to 6% on house price inflation. And we see that, sort of in our order book. Given the length of the order book, it averages out at a slightly lower number than that, but it's certainly above the 2% to 3%. I think on cost price inflation, similar sort of piece, you've got to be very careful of the time scale. Cost inflation, we would say, over the last 12 months, has been in the range of 4% to 4.5%. But that's been weighted towards the last 6 months more than the house price inflation. We are seeing some softening of those cost price sort of movement, but it's early days for that yet -- big year. And it's been particularly driven as I don't think will surprise you by materials. There is inflation in subcontract costs but if nothing makes significant. So we're seeing that often. And I think as we look at the second half of the year, I expect to see positive cash price inflation. I don't expect it to be as sort of much house price inflation over the last 6 to 9 months. I expect to see some cost price inflation, but at the sort of level by the end of the year. Probably when we've got to a fully normal level, but we'll come back more into sort of normal band. But I'm not -- I think it's hard for us to give a forecast on them, but we can give you a [ brief review for it], what is running out on the line.

Okay. Can I just ask 1 more question on London. It's very helpful that the market is kind of booming and going back to a normal level. But can you just give us a little more color about how that market is stepping up in terms of apartments and this largest single-family home? So but the space is kind of -- is a new norm and people are kind of moving from apartment to these larger homes. So I'm just trying to understand whether there is any kind of pressure points in the apartment segment which hasn't yet picked up compared to your business, which is kind of returning back to normal.

Yes. I think sort of if you are asking if we think there is a particular future price pressure to come on apartments in the London market, I don't think that's the case. I think 2 main reasons. One, I don't really believe, as Ingrid said, we don't really believe that there is this sort of massive exodus from either urban areas or from apartments into nonurban areas. And very difficult actually for somebody who is choosing to be based in London to make a switch from apartment to a house, just finances, just don't allow that to be a sort of a large-scale movement. But I think it's also important to have in mind that the level of construction of new apartments in London is running at a much lower level. And so for reasons around planning and sort of relative weakness in that market before the pandemic. So actually, if you look forward at the next 5 years, certainly probably there's an argument for some recovery in relative prices. I'm not sure that's going to happen in the next 12 months, but I certainly don't see a big relative risk on apartment prices. I mean Ingrid, anything you would add to that? Or would you broadly agree.

Completely agree, yes. The supply point is well made. I think that's very personal. But equally, yes, as I said, I just don't think it's as simple as everybody wanting to move out of apartments into houses. That's just not what we see happening at the moment, and there's no reason to suggest that, that will be a fundamental shift in the near term.

Our next question comes from Will Jones from Redburn Partners. .

Three, if I could, please, as well. Maybe you could talk, please, just a bit more around speed of build rates. Obviously, we've seen lots of talk of material shortages, more recently, the pandemic issues. Just any anecdotes around that would be great. And just how you think about measuring that. Some of your peers talk to us about equivalent units in build or build rate per week, but is there a particular metric that you like to keep on top of there? The second, maybe just if you could update us more generally about your availability or per site in terms of product to sell and just how you're managing the issue of such a long order book. I think you said 99% sold for the year, so I would imagine having customers in August, that pretty much everything for January onwards is fairly uncharted territory for the business. So how they're, I guess, reacting to that proposition? And then the last one, just a clarification around the approvals you've made. I noticed that the plot cost of the approvals is about 14% of sales versus 20% last year, which obviously quite a big drop down. I expect you'll answer reference to net margin, but just in terms of how that should differ so much, I guess, on a yearly basis would be just interesting to learn around.

You start answering the questions before you have even asked them well, then sort of So we won't give you any information. Just on that last one. I mean, I think if you look at a long-term trend, plot cost is an interesting trend, if you look at any period. And obviously, we could argue that this year is better than last year's. I think that's various argument. There's the reality of the volatility depending on the mix of sites is significant, both by geography and particular the balance between sort of large sites with infrastructure and small sites that are ready to run. And the 20% reflected the most uncompetitive sort of land buying that we've done in the last sort of 15 years, nobody else in the market. And we were very much very openly targeting small sites that were quick to market at a point when others were out the market completely. So you ended with a higher plot cost of sales, but actually stronger performance on those. The mix you've got in the first half of this year is more normalized, so it includes a normal mix of strategic land, lower plot cost to sales, but on average larger sites. So you really see that the early post-capital raise sort of accelerated return to market for Taylor Wimpey, sort of changing the plot cost but also changing the speed and the mix the site were able to find. Taking all the others together because they're all kind of related to construction. I think we are very pleased with the way our teams are delivering. And what is a challenging environment for them on the build side. So we are getting the products that we need. We have little bottlenecks, but they are little. So it causes a lot more work for our site managers. They have to be on it the time. The connection between, and you will remember that we are fairly unique in having a sort of central sort of distribution function but by the secured materials for the group and distribute them as Bill passed, we have found that has been hugely helpful because it gives us good group level information and a good dialogue. So we've got a team that can back up our local sourcing sort of with suppliers if we have any constraints. That is working for us, and we are pleased with where our build and our construction is. But it does mean that if you wanted to step up construction by 15% to match sales demand, it will be net cost your risk to cost quality and the pressure on the team would be quite high. So it is a limiting factor, there is no doubt. So it is being delivered well. And I would say we're at, at least normal build rates at site. We don't tend to use build rate and equivalent unit measures because they can hide a lot of [ sales ]. We look at it side by side and we look at outliers. So we're looking -- we look at construction stages relative to sort of where we are with the sales completion. We look at overall construction stages for sites. But if you focus your teams purely on, are they make a certain number of ticks in boxes, you can find you've got a large number of houses, all of which are 30% complete and none that you can actually sort of sell. So we don't use one overall metric. We occasionally use it from an external point of view. So I would say this time last year, we were showing you the statistics on build rates. I would say today, we are running per site above what we would consider a normal level of construction per site, not massively but 5% to 10% above, sort of matching the long order book and the high sales rates. So -- but it's hard for the team. Pleased with the performance, but I don't want to take away from the fact that everybody in the team is having to work hard. And we're using the systems and the deals that we've got. And in terms of the impact of that on availability, we are largely, on most of our sites, since January and February last year, it's territory we've been charging for a little while now. So I think we have response to managing the communication of the dialogue with our customers. And if you look at the customer service performance, we've seen historically normally an impact on customer service scores. Those customer service scores at 92% for the first half, obviously people many of whom reserved at different stages of the lockdown. And so had an extended period of time regulation is complete and a delay. So I think that's good evidence that we're managing communication and information with our customers well, and we are much better than we were 4 or 5 years ago if we're selling 6 or 7 months ahead to know that the build program can deliver. The number of sites where the build program sort of gets delayed at that point is significantly less than the delay of that I think that the management and the control sort of -- and the systems that we've got to make sure that our forecast states are reasonable, much more reliable. And if I go to the sales rate, I think it is interesting that the sales rate we have today for this year is exactly our targeted budgeted sales rate. We are managing the price and putting into the market that's there. We are where we want to be.

Great. And just sorry, just tying back up on the original land point. I don't think the bubble chart is in the way it has been before and perhaps it's in the release, apologies. But those approvals in the first half of this year, would you -- are they still, in theory, creating a similar level of returns of those day to day [ assessments ].

Yes. I think I said a couple of times, we were going to remove the bubble chart over the course of the last couple of years and we finally done it. But yes, they are very much at the same level repeat the upper end of that 21% to 22% margin.

Our next question comes from Gregor Kuglitsch from UBS.

Couple of questions, please, or maybe 3, actually. So just coming back on the volume ramp-up, you've kind of given some indication clearly for this year. Next year, I think you're seeing modest maybe 5%. And then you kind of reiterate to 17,000, 18,000. So if you could just give us a line of sight how meaningful the step-up is, I guess, in '23 before we kind of reach that ambition, which I guess is beyond '23, but correct me if I'm wrong. The second question is on land, you kind of called it out, I think numerous times, which has increased competition. So can you give us a sense, compared to maybe 6 months ago, how the intake margin is evolving and what the degree of pressure is there? And then finally, maybe it's just sort of generic question, you obviously decided to make London an emphasis of today. And I just wondered why that is specifically? Was it just because you thought it was interesting? Or are you specifically calling or trying to call out that London is coming back?

Yes. Let me deal with the -- the last one first, Gregor. And I don't think we were particularly aiming to make London an emphasis from a strategic point of view. We think it's important for you to see sort of a broad base of the team. Jennie has presented a number of times, Jennie is on holiday this week. Ingrid is a key part of our team. And it felt like a good opportunity for you to hear from her, and I'm conscious we haven't done a Capital Markets Day in a while and probably want to wait until we can do one properly face-to-face. And so it's more driven by wanting you to hear from the broader team and to give Ingrid a chance to sort of talk to you, than it is that we're making a strategic stake in London. We have reduced the scale of our Central London business, but we still continue to believe that London at southeast is a good market and a market we want to be in and that we're continuing to invest in. But that shouldn't be used sort of more about people than it is about London. So Chris, I'll go back to you at the end to pick up Gregor's volume question. And if I then pick up the land question and then hand it over to you on volume. You're right, we have called out the increased competition. I doubt that will surprise you sort of -- and it certainly doesn't surprise us to -- I think what we believe is we saw sort of competitors return to the land market much more gradually. 1 or 2 actually, including 1 larger private business came into the market actively at the same time as we did 12 or more months ago. But others sort of were slower, getting into late 2020, very early 2021 and then are trying to catch up. And so as house prices have risen, you have seen an increase in land prices. I wouldn't flag, answering your specific question, I wouldn't flag a decrease in intake margin, but I would flag the land prices that we were paying 12 months ago, which is still coming through on to our balance sheet now are materially lower than in prices today, land prices today reflecting a meaningful movement in house prices, as they normally would. But I think it does obviously make us particularly pleased with those acquisitions. And Chris can go. Yes, back to you on the volume and the sort of volume of 2023 question.

Yes, of course. And just to sort of be clear about the sort of trajectory. So in 2021, we said we previously guided completions in the range from 13,000 to 14,000, and we're now guiding completions to be towards the top end of that range. And then what we're saying is for 2022, there will be modest growth on those 2021 upgraded volumes. It's still too early, obviously, to be providing any sort of formal guidance for 2023. But you can see from what we're saying in terms of the outlets and the fact that we're giving you an indication on outlet growth over the next 24 months, I think that sort of underpins an indication of what that number in 2023 would be. And I think consensus currently sits at something like [ 59 72 ].So I'd be very comfortable with that number.

All I would add is we're sort of flagging to 4% or 5% completion growth in 2022. And the fact that we're seeing the bigger growth comes in 2023, Chris is right, it's early for formal guidance on the number. Of course, it was kind a bit on the market. but the potential and the scale. And again, it's one reason we've given you the net outlet growth number, not just the number of additions we like -- a number of new openings you might have, but a net additions number, is to give you some sense of the potential that for 2023. But it is early to make a specific number.