Release Date: July 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Taylor Wimpey PLC (TWODF, Financial) expects full-year completions to be towards the upper end of their guidance range of 9,500 to 10,000 units.
- The company has a strong landbank of 79,000 plots, supported by a mature strategic land pipeline.
- Customer service scores have improved significantly from 90% to 96%, reflecting a focus on customer satisfaction.
- The company has maintained a stable pricing environment with only low single-digit erosion of house prices since September 2022.
- Taylor Wimpey PLC (TWODF) has a strong balance sheet with net assets of GBP4.4 billion and a net cash position of GBP584 million.
Negative Points
- The order book is down slightly, and building it remains a key priority for future growth.
- The company faces challenges with planning approvals, which have fallen to record lows, impacting future land supply.
- High mortgage rates continue to impact affordability, particularly for first-time buyers.
- The housing association sector is facing significant headwinds, potentially impacting affordable housing completions from 2025 onwards.
- The company has increased its fire safety provision by GBP88 million due to inflation in remediation costs and additional buildings identified for remediation.
Q & A Highlights
Q: Can you explain the increase in plot cost to selling price in your landbank approvals?
A: Jennie Daly, CEO: The increase is due to a mix of factors, including a reduction in strategic land conversions, which typically have lower land costs. Some sites are "oven ready," meaning they are fully serviced, which tends to increase land prices. However, the average land cost remains healthy at around 15.5%.
Q: What is your strategy regarding capital allocation and leverage?
A: Christopher Carney, CFO: Our strategy is to maintain a strong balance sheet and provide consistent returns through our dividend policy. We are currently in a negative adjusted gearing position, and with a robust short-term landbank, we have significant flexibility before considering any changes in capital allocation priorities.
Q: How do you view the current land pricing environment, and are you seeing opportunities that meet your hurdle rates?
A: Jennie Daly, CEO: Land prices have remained stable due to constrained supply. We are opportunistic and selective in our land acquisitions, ensuring they meet our quality and financial criteria. We expect land supply to gradually improve, which may influence pricing.
Q: What are your expectations for build cost inflation, and how are you managing it?
A: Christopher Carney, CFO: Build cost inflation is currently flat on new tenders. Historically, a stable market would see house price inflation of 1-2% and build cost inflation of 3-4%. We are managing costs through efficiency improvements and strategic supplier relationships.
Q: How is the planning environment affecting your outlet openings, and what are your expectations for the future?
A: Jennie Daly, CEO: The planning environment remains challenging, but we have good visibility on outlets for 2025. We expect to open more outlets next year than this year, assuming supportive market conditions. The government's planning reforms could improve the situation, but it will take time to see significant changes.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
