2 August 2023

Taylor Wimpey plc

Half year results for the period ended 2 July 2023

Resilient first half performance with completions slightly ahead of our expectations

Jennie Daly, Chief Executive, commented:

"The first half of the year has been characterised by variable market conditions including substantially higher mortgage rates. While this has inevitably impacted our results, I am pleased that we have delivered a resilient performance with first half completions slightly ahead of our expectations. This performance is testament to the hard work of our teams on the ground and our strong focus on operational excellence and tight cost management.

As we move into the second half of the year, our focus remains on optimising all areas of our operations as we continue to support our customers during this uncertain period. With a healthy orderbook and strong underlying interest for our well-located, high-quality homes, we expect full year UK completions excluding joint ventures to be in the range of 10,000 to 10,500, the upper end of our previous guidance.

Taylor Wimpey is a strong, sustainable and agile business underpinned by a robust balance sheet and an excellent landbank. We remain well positioned to manage the business through near term challenges while maximising value in the medium to long term."

Group financial highlights:

Key highlights:

·    Group completions of 5,120 homes (H1 2022: 6,922)

·    Group operating profit margin of 14.4% (H1 2022: 20.4%), reflecting a lower level of completions and the impact of build cost inflation which was not fully offset by house price inflation for the period

·    Announced 2023 interim dividend of 4.79 pence per share (H1 2022: 4.62 pence per share) amounting to £169 million (H1 2022: £163 million), in line with our stated Ordinary Dividend Policy to return 7.5% of net assets annually

·    Full year UK completions excluding JVs now expected to be in the range of 10,000 to 10,500, at the upper end of our previous guidance with full year Group operating profit including JVs expected to be between £440 million and £470 million

·    Ended the period with net cash of £654.9 million (H1 2022: £642.4 million)

·    Renewed revolving credit facility in July 2023, increasing it to £600 million and extending maturity to July 2028. The new facility includes sustainability linked performance measures

First half UK operational highlights:

·    Delivered a net private sales rate of 0.71 (H1 2022: 0.90) for the first half, which was 0.62 excluding bulk deals (H1 2022: 0.88)

·    Total order book representing 7,866 homes, excluding joint ventures, with a value of £2,147 million as at 2 July 2023 (3 July 2022: 10,102 homes with a value of £2,800 million)

·    Total UK average selling price increased by 6.7% to £320k (H1 2022: £300k), reflecting house price growth and positive mix impacts

·    Operated from 244 average outlets during the period (H1 2022: 228) and ended the period with 235 outlets (H1 2022: 233) 

·    Short term landbank as at 2 July 2023 of c.83k plots (31 December 2022: c.83k plots) in high-quality locations where customers want to live

·    Strategic land pipeline of c.140k potential plots (31 December 2022: c.144k potential plots)

·    Further improved quality with average Construction Quality Review score of 4.90 (H1 2022: 4.77)

Sustainable, responsible business:

·    Published our Net Zero Transition Plan in March 2023 outlining the steps we will take to be net zero by 2045, five years ahead of the Government's target

·    Successfully launched our zero carbon ready homes trial in Sudbury, the first of its kind on a live development site

·    Continued focus on health and safety with rolling 12 months^†*** Injury Incidence Rate (per 100,000 employees and contractors) of 136 (H1 2022: 212)  

·    Highly experienced build teams with 51 of our Site Managers winning NHBC Pride in the Job Quality Awards 

·    Major contributor to the regions in which we operate generating employment and investing £210 million in local communities via planning obligations (H1 2022: £218 million)

·    Five-star builder and 90% of customers would recommend Taylor Wimpey according to the Home Builders Federation (HBF) 8-week customer satisfaction survey (H1 2022: 92%) and retained a 4 out of 5 star rating on Trustpilot

·    Continued to work on fire safety remediation and signed the Scottish Safer Buildings Accord. Our existing total provision of £245 million remains unchanged

Resilient performance against a variable market backdrop

In the first half, we continued to drive performance across the business and have delivered completions slightly ahead of our expectations, against a variable market backdrop. We saw an encouraging start to the year with demand in the traditionally strong spring selling season recovering from the low levels of Q4 2022 and with mortgage rates reducing from the highs of late 2022.

However, market conditions weakened in the second quarter as the Bank of England responded to higher than expected inflation by increasing the base rate from 4.5% to 5% in June, which drove an increase in the cost of mortgages towards the end of the half. We are working to proactively support our customers through changing market conditions, utilising our Microsoft Dynamics customer relationship management system (CRM) to drive further enhancements in the sales process. 

Against a challenging market we have delivered a robust sales rate of 0.71 (H1 2022: 0.90) reflecting our high-quality locations, the hard work of our teams, and our focus on effective customer engagement. Excluding bulk deals, our net private sales rate for the first half was 0.62 (H1 2022: 0.88). 

We have maintained our commitment to operational excellence, tightly controlling costs whilst continuing to invest in the long term sustainability of the business, for example in developing zero carbon ready homes.

UK current trading and outlook

For the four weeks ended 30 July 2023, at the start of the seasonally quieter third quarter, our net private sales rate was 0.47 per outlet per week (2022 equivalent period: 0.57). The cancellation rate for the same period was 24% (2022 equivalent period: 19%).

As at the week ended 30 July 2023, our total order book value was £2,175 million (2022 equivalent period: £2,893 million), excluding joint ventures, representing 7,900 homes (2022 equivalent period: 10,392 homes), of which 77% are exchanged (2022 equivalent period: 77%).

Whilst increased mortgage costs are impacting affordability for our customers, we continue to see strong underlying interest. However, reservations are below the levels we have experienced in recent years. Pricing has remained resilient, and the level of down valuations continues to be low. Our focus remains on building as strong an order book as possible to allow us to optimise price going into 2024.

In terms of costs, we have seen some moderation in the rate of material and labour cost inflation, with prevailing annualised build cost inflation on new tenders now around 6% compared to around 9-10% at the start of the year. We expect to continue to see inflation moderate as the year progresses.

Planning remains extremely challenging and is likely to impact the future delivery of new homes across our industry. Our experienced teams continue to work hard to progress our land through the planning stages.

We expect full year UK completions excluding joint ventures to be in the range of 10,000 to 10,500, at the upper end of our previous guidance and we expect Group operating profit including joint ventures to be in the range of £440 million to £470 million. Our 2023 year end net cash balance is anticipated to be in the range of £500 million to £650 million.

Looking ahead, we remain well positioned with a strong balance sheet, high-quality landbank in desirable locations where our customers want to live, and strong and experienced teams. Our differentiated Ordinary Dividend Policy based on returning 7.5% of net asset value is also designed to give investors increased certainty of a reliable income stream throughout the cycle.

- Ends -

A presentation to investors and analysts will be hosted by Chief Executive Jennie Daly and Group Finance Director Chris Carney at 8:30am on Wednesday 2 August 2023. This presentation will be webcast live on our website: www.taylorwimpey.co.uk/corporate

An on-demand version of the webcast will be available on our website in the afternoon of 2 August 2023.

For further information please contact:

Taylor Wimpey plc                                                               Tel: +44 (0) 1494 885656

Jennie Daly, Chief Executive

Chris Carney, Group Finance Director

Debbie Archibald, Investor Relations

Andrew McGeary, Investor Relations

FGS Global                                                                            [email protected]

Faeth Birch

Anjali Unnikrishnan

James Gray

Notes to editors:

Taylor Wimpey plc is a customer-focused homebuilder, operating at a local level from 22 regional businesses across the UK. We also have operations in Spain.

For further information please visit the Group's website: www.taylorwimpey.co.uk

Follow us on Twitter @TaylorWimpeyplc

Overview: optimising performance in a challenging market

The UK housing market experienced changing conditions during the first half of 2023. In the early months, there were signs of stabilisation with mortgage rates reducing from the highs of late 2022 and an encouraging improvement in our sales rates compared to the prior quarter. In the second quarter, higher than expected inflation led the Bank of England to raise interest rates. Against this backdrop, lenders raised their mortgage rates impacting the cost of borrowing for our customers.

Throughout this period, we have maintained a strong operational focus and delivered a resilient financial performance for the first half of 2023 with Group completions slightly ahead of our expectations. Group completions, excluding joint ventures, were 5,082 (H1 2022: 6,790), with total Group revenue of £1,637.1 million (H1 2022: £2,076.8 million). Group operating profit was £235.6 million (H1 2022: £424.6 million), with an operating profit margin of 14.4% (H1 2022: 20.4%), reflecting lower completions and the impact of increased build cost inflation which was not fully offset by house price growth in the period. Profit for the half year was £175.7 million (H1 2022: £260.7 million).

We ended the period with net cash of £654.9 million (H1 2022: £642.4 million), after returning £168.8 million in cash to investors by way of dividend.

As previously announced, we underwent a change programme at the start of the year which will reduce annualised overheads by £19 million, and we maintain tight control on discretionary spend across the business.

We continue to work hard to support our customers in these uncertain times, responding proactively with our customer proposition and to the change in circumstances for first time buyers. We have also trained our staff to enable them to operate more effectively in a challenging landscape which has positioned us well for the current market.

In particular, our teams have worked closely with our customers utilising our CRM system to better understand their requirements. This has enabled higher quality lead generation and greater ability to respond to customer preferences by our sales teams.  

More of our customers are adapting to the challenging backdrop by extending their mortgage terms. For example, according to data provided by an independent financial advisor relating to H1 2023, 27% of our first time buyers are taking mortgage terms of over 36 years compared to 7% in 2021. For second time buyers, those taking out mortgages with durations of over 30 years has increased to 42%, compared to 28% in 2021.

We are closely monitoring the market and while incentives are at around 5%, we have maintained pricing discipline.

The planning backdrop remains extremely challenging and is likely to impact industry delivery of new homes. There continues to be widespread bottlenecks in an under resourced planning system leading to a significant backlog of applications. Our experienced teams continue to work hard to progress our land through the planning stages.

We remain active in reviewing opportunities, though highly selective in our land additions and, as a result, approved c.1.4k plots during the first half of 2023 (H1 2022: c.7k plots).

We operated from an average of 244 outlets during the period (H1 2022: 228), ending the period with 235 outlets (H1 2022: 233). Going forward, outlet numbers will reflect the planning backdrop, and our appetite to add new land.

As we look further ahead, we continue to operate our business to create and protect long term stakeholder value, enhancing and developing value from our strong landbank and developing the homes of the future to ensure we are playing our part in tackling climate change. During the period we have developed the industry's first research concept testing low carbon technologies through multi-specification prototype homes on a live development site.

We continued to progress our timber frame factory in Peterborough during the first half, which is currently being fitted out, with production due to commence later in the year with first kits delivered to sites early next year. We also continue to seek further cost efficiencies in central procurement through our strategy of standardisation and simplification and by leveraging Taylor Wimpey Logistics (TWL).

There remains a major supply and demand imbalance in UK housing, with significant underlying demand for new homes. Taylor Wimpey has an important role to play in addressing the shortfall in housing and the medium to long term market opportunity remains highly attractive. Taylor Wimpey is a strong, sustainable and agile business with a sharp operational focus, strong balance sheet and an excellent, well-located landbank. We are well positioned to manage the business through near term challenges while maximising value in the medium to long term.

Four cornerstones of strategy

As previously stated, our strategy is built on four strategic cornerstones ensuring an agile response to market conditions and investment in the long term sustainability of the business:

1.   Optimising value from our high-quality owned and controlled landbank and strategic land pipeline

2.  Driving operational excellence through our business to improve efficiency, protect value and ensure Taylor Wimpey is fit for the future

3.   Embedding sustainability across the Group for the benefit of all our stakeholders

4.  Delivering reliable investor returns with a clear and disciplined framework, balancing investment for future value creation with returning value to shareholders

Delivering on our 2023 priorities

In our full year announcement in March, we outlined our priorities for 2023. These have been communicated to all our employees by our Chief Executive and members of the senior management team in a Company-wide roadshow, and are understood throughout the business:

·    Continue to develop and evolve our customer offering ensuring an appropriate balance between sales rate and price, whilst further improving customer service

·    Continue to ensure tight cost management and work in progress (WIP) control, aligning build to sales rates on a site-by-site basis

·    Focus on building a strong order book to allow us to optimise price going into 2024

·    Further step up our efforts and focus on implementation and communication of our Net Zero Transition Plan across our business

Customers

Delivering build quality consistently remains key to customer satisfaction and we improved our average CQR score to 4.90 (H1 2022: 4.77) and had the highest compliance score of the volume housebuilders. Our site teams have continued to perform strongly against a challenging backdrop in recent years and we are proud that in June 2023, 51 of our Site Managers won NHBC Pride in the Job Quality Awards.

We were pleased to have been recognised as a five-star builder in the latest 8-week customer satisfaction survey by the HBF in March 2023, covering the 12 months from October 2021 to September 2022. Our average 8-week customer satisfaction survey score for the first half of 2023 was 90% (H1 2022: 92%). We recognise that there are areas where we can do better and improving our customer service continues to be a key area of focus for us this year, in particular targeting improvements in our responsiveness to customer issues.

We encourage customers to leave reviews on Trustpilot and have maintained our 4 out of 5-star status on Trustpilot with a TrustScore of 3.9 out of 5 as at 30 June 2023.

Our continuous improvement initiative for our sales and customer service activities, includes optimising the use of our CRM system to target benefits for sales and customer service such as improved monitoring and responsiveness as well as enhanced management information in relation to our customer service.

In the interests of improved delivery for our customers we have also agreed new scope of work  contracts with all our subcontractors that establish higher standard service level agreements (SLAs). This will ensure that there is greater clarity and consistency of service levels from our subcontractors that aligns with our values and should result in a better level of service and responsiveness for our customers. This will free up time for our site teams, improve quality assurance and cost savings, along with providing greater certainty of budgets, enabling our teams to focus on the absorption of additional workload associated with legislative changes and transition of early customer care responsibility.

Through the first half we proactively engaged with the Competition and Markets Authority (CMA) on its housing market study.

Operational discipline and cost management 

Since last year we have tightened the thresholds for the release of working capital to ensure that we are aligning our investment to current levels of demand in order to protect value. This has been communicated throughout the business and all our employees understand the need to minimise costs in the current environment. 

Our focus on operational excellence and cost efficiency spans all areas of our operations, including design, procurement, production, and sales. We have worked to continually improve management information for our teams to ensure we are benchmarking costs across the business and have a consistent approach and guidance on price negotiations. This includes increased checks and automatic notifications at various stages of our processes.

We continue to target savings in procurement through standardisation to help offset build cost increases as well as the consolidation of stock keeping units, resulting in savings from stock efficiency, benefits in installation, and increasing economies of scale and are working hard with our partner suppliers on value improvement initiatives. This includes driving synergies with our internal logistics business, TWL.

We launched our suburban standard apartment range at the beginning of May 2023 that will drive savings over the next three to four years. These will also result in improved quality, a more consistent customer offering, more efficient use of land and better planning outcomes.

Taken together, small incremental changes in our operations are driving meaningful efficiencies throughout the business and we are constantly assessing new products and ways of working across our sites. For example, we now use a proprietary reusable stairwell system (which covers the gap in the stairwell to safely allow work to be completed on upper floors at early build stages) which reduces timber waste and delivers efficiencies.

Building a strong order book    

Our focus remains on building as strong an order book as possible to allow us to optimise price going into 2024. While our teams are focused on optimising sales, they understand the importance that price discipline and building our forward order book play in protecting value.  

Net zero

For Taylor Wimpey, sustainability is a business imperative. In March, we delivered our Net Zero Transition Plan and this year we are prioritising its communication and implementation across the business. The plan will see us become net zero in our operations by 2035 and across our value chain by 2045, five years ahead of the Government's target.

A key stage of this plan is delivering zero carbon ready homes in time to meet Future Homes Standard regulation due in 2025. The regulation will see us delivering a 75-80% carbon reduction from homes in use, compared to the previous standard.

We recently launched our pilot homes testing possible solutions for the Future Homes Standard on a site in Sudbury. This is the industry's first research concept testing low carbon technologies through multi-specification prototype homes on a live development site. The prototypes are helping identify new ways to increase the energy efficiency of our homes as well as identifying and overcoming the challenges to achieve this at scale. The homes were completed by Taylor Wimpey employees and our subcontract partners to allow us to best capture the lessons learned in making our homes net zero ready. These homes are providing invaluable insights into the best methods for incorporating the requirements of the Future Homes Standard well ahead of its implementation.

In June 2023, we were pleased to host investors and analysts on a site visit to the Sudbury trial plots and a series of further stakeholder visits are taking place over the coming weeks. There will then be a period of assessment and testing before the homes are marketed for sale to customers later this year. The performance of the homes will continue to be monitored following sale, allowing us to collate valuable data and customer feedback.  

We will continue to innovate and work with our supply chain partners, trialling new low carbon products and fabrics as part of our coordinated R&D approach to preparing our business for the 2025 Future Homes Standard.  

Returns to shareholders

We have an established, differentiated Ordinary Dividend Policy aimed at providing investors with visibility of the income stream they can expect throughout the cycle including during a normal downturn, via an ordinary cash dividend. Our Ordinary Dividend Policy is to pay out 7.5% of net assets or at least £250 million annually throughout the cycle. This policy has been stress tested to withstand conditions beyond what we would consider a normal downturn, including up to a 20% fall in house prices and 30% decline in volumes. In line with our Ordinary Dividend Policy, we today announce a 2023 interim dividend of 4.79 pence per share payable in November. 

Operational review

Our operational review is for the UK only as the majority of metrics do not apply to our Spanish business. A short summary of the Spanish business follows in the Group financial review. The financial analysis is presented at Group level, which includes Spain, unless otherwise indicated.

Joint ventures are excluded from the operational review and Group financial review, unless stated otherwise.

Our key performance indicators (KPIs)

N.B. The 8-week 'would you recommend' score for H1 2023 relates to customers who legally completed between October 2022 and March 2023 with the comparator relating to the same period 12 months prior. The 9-month 'would you recommend' score for H1 2023 relates to customers who legally completed between October 2021 and March 2022, with the comparator relating to the same period 12 months prior.

Resilient first half operational performance against mixed backdrop

Total home completions (excluding joint ventures) were 4,854 (H1 2022: 6,587). This included 1,111 affordable homes (H1 2022: 1,450), equating to 22.9% of total completions (H1 2022: 22.0%).

Our net private sales rate for the first half of the year was 0.71 homes per outlet per week (H1 2022: 0.90). The cancellation rate in the first half was 16% (H1 2022: 15%). Average selling prices on private completions increased by 8.6% to £366k (H1 2022: £337k), reflecting house price inflation and positive mix impacts. Our total average selling price increased by 6.7% to £320k (H1 2022: £300k), reflecting a slightly higher proportion of affordable sales in the total than the comparable period.

We have a wide range of products from one-bedroom apartments to five-bedroom homes. First time buyers accounted for 35% of total private reservations in the first half of 2023 (H1 2022: 43%). Investor sales continued to be at a low level at 3% (H1 2022: 6%).

As at H1 2023, our order book represented 7,866 homes (H1 2022: 10,102 homes) with an order book value of £2,147 million (H1 2022: £2,800 million), excluding joint ventures. Our affordable order book stood at 4,190 homes at H1 2023 (H1 2022: 4,528 homes).

During the first half of 2023 we opened 13 new outlets (H1 2022: 50), reflecting our reduced land buying and owing to the difficulties in the planning system.

A strong and differentiated landbank

We have an excellent short term landbank and strategic land pipeline.

Land market conditions remain challenging, and we continue to be cautious in our approach.

As at 2 July 2023 our short term landbank stood at c.83k plots (H1 2022: c.88k plots). The average cost of land as a proportion of average selling price within the short term owned landbank remains low at 13.3% (H1 2022: 14.3%). The estimated average selling price in the short term owned landbank in H1 2023 was £343k (H1 2022: £311k).

Our strategic pipeline stood at c.140k potential plots as at 2 July 2023 (31 December 2022: c.144k potential plots). During the first six months of 2023 we converted a further c.6k plots from the strategic pipeline to the short term landbank (H1 2022: 847 plots). In the period, 46% of our completions were sourced from the strategic pipeline (H1 2022: 47%).

Land cost as a percentage of average selling price on approvals decreased to 12.9% in the period (H1 2022: 20.8%) reflecting our highly selective approach to land acquisition.

Planning remains extremely challenging and is likely to impact industry delivery of new homes. There continue to be widespread bottlenecks in an under resourced planning system leading to a significant backlog of applications.

Our teams continue to work hard to progress our land through the planning stages. We are in a strong position to navigate these challenges given the strength and depth of our landbank and high visibility of our future pipeline.

Employees

The health and safety of individuals on our sites will always be our number one priority. Our Injury Incidence Rate (IIR) for reportable injuries per 100,000 employees and contractors to 2 July 2023 on a rolling 12 month basis was 136 (2022 equivalent period: 212). We continue to seek ways to further improve our safety performance across all sites and functions.

Our highly engaged and talented employees are key to driving our business forward. Our industry is facing a skills shortage so attracting and retaining high calibre people is a strategic imperative.

We have continued to focus on good communication throughout the business, a priority identified by our employees in the latest employee survey, building on our culture and making sure all teams are fully up to date on our progress and aligned on our goals. In May, our Chief Executive conducted an all-employee roadshow to update on progress against the business priorities and focus areas to improve operational and financial performance.  

We continue to improve the accessibility of our learning and development (L&D) resources for all employees and actively encourage their development. The L&D resources are available to all employees on our Intranet alongside details of the opportunities and resources that are available for different career pathways, and how to access them. We have launched a Line Manager Development Programme, offering a wider range of development pathways, for various career stages.

Following the release of our first Equality Diversity and Inclusion (EDI) report in March, we conducted our fourth annual EDI conference in July, which was held virtually to allow all employees to attend. The theme of the conference was 'Action Changes Things' and internal and external presenters covered a wide range of topics to provide real and practical information that employees could take away and action.

Creating thriving communities

Our purpose is to build great homes and create thriving communities. Achieving our purpose means building homes and places that enhance people's quality of life, foster local community relationships and which bring economic growth and skilled employment. The housebuilding sector is a key creator of jobs and economic activity throughout the country. We make a major contribution to the regions in which we operate directly through the employment created on our sites and indirectly through the economic benefit our activities generate for the wider supply chain such as shops, leisure, places of employment and other industries that benefit from our operations.

We prioritise engaging with local communities as part of the planning and construction process and strive to make a positive impact in the wider community. In the first half of 2023, through our planning obligations, we have contributed £210 million to the local communities in which we build (H1 2022: £218 million) which provides vital local infrastructure, affordable homes, public transport and education facilities. In H1 2023 we donated and fundraised over £0.6 million for charities and local community causes.

Fire safety

The safety of our customers is of paramount importance, and we have always been guided by this principle. It is our long held view that leaseholders should not have to pay for the cost of fire safety remediation and our priority has always been to ensure that customers in Taylor Wimpey buildings have a solution to cladding remediation. We took early and proactive action, committing significant funding and resources to address fire safety and cladding issues on all affected Taylor Wimpey apartment buildings.

In 2022, we signed up to the Government's Building Safety Pledge for Developers and the Welsh Government Building Safety Developer Remediation Pact which reaffirmed our commitment that leaseholders should not have to pay for fire safety remediation. In the first half of 2023 we also signed the Scottish Safer Buildings Accord.

Prior to signing these, we had already begun working on affected Taylor Wimpey buildings and we have provided a total of £245 million for fire safety remediation works on buildings constructed by Taylor Wimpey since 1992. 

During the first half we continued to progress work with building owners, management companies and leaseholders and we remain committed to resolving these issues as soon as practicable for our customers.

Group financial review 

Income statement  

Group revenue was £1,637.1 million in the first half of 2023 (H1 2022: £2,076.8 million), with Group completions, excluding JVs, being 25.2% lower at 5,082 (H1 2022: 6,790) following a slow down in the UK housing market during the latter half of 2022. UK average selling price on private completions increased by 8.6% to £366k (H1 2022: £337k), due to both house price inflation and positive mix. The increase in total UK average selling price was 6.7% to £320k (H1 2022: £300k) as a result of the greater proportion of affordable housing in H1 2023 (23%) than the prior period (H1 2022: 22%), and a decrease in the UK average selling price on affordable housing to £166k (H1 2022: 169k).

Group gross profit decreased to £353.9 million (H1 2022: £524.5 million), representing a gross margin of 21.6% (H1 2022: 25.3%) with fixed build and selling costs being absorbed across fewer completions.

Net operating expenses were £118.0 million (H1 2022: £189.9 million), the comparative including £80.0 million of exceptional costs relating to the cladding fire safety provision following the signing of the Government's Building Safety Pledge for Developers in April 2022, with no such amount in the current half. Excluding exceptional costs the net operating expenses were £118.0 million (H1 2022: £109.9 million), which was predominantly made up of administrative costs of £116.5 million (H1 2022: £111.3 million). The increase in administrative costs over the comparative period was driven mainly by the non-recurring costs associated with the change programme announced earlier in the year, which totalled £8 million, and the annual pay review process, partially offset by a portion of the savings associated with the change programme. This resulted in a profit on ordinary activities before financing of £235.9 million (H1 2022: £334.6 million), £235.9 million (H1 2022: £414.6 million) excluding exceptional items.

During the period, completions from joint ventures were 38 (H1 2022: 132). The lower level was a result of both the current market and the status of the joint ventures' developments. As a result of the decreased joint venture completions our share of joint ventures' results in the period was a £0.3 million loss (H1 2022: £10.0 million profit). When including this in the profit on ordinary activities before financing the resulting operating profit was £235.6 million (H1 2022: £424.6 million), delivering an operating profit margin of 14.4% (H1 2022: 20.4%). The total order book value of joint ventures as at 2 July 2023 decreased to £22 million (31 December 2022: £26 million), representing 40 homes (31 December 2022: 56).

The net finance income of £2.1 million (H1 2022: £10.1 million expense) principally includes imputed interest on land acquired on deferred terms, bank interest and interest on the pension scheme, all being more than offset by interest earned on deposits following the increase in interest rates.

Profit on ordinary activities before tax decreased to £237.7 million (H1 2022: £334.5 million). The total tax charge for the period was £62.0 million (H1 2022: £73.8 million), a rate of 26.1% (H1 2022: 22.1%), the prior period included a credit of £17.6 million in respect of the exceptional charge recognised in that period and a £1.7 million credit arising from the remeasurement of the Group's UK deferred tax assets following the introduction of the new Residential Property Developer Tax. The pre-exceptional tax charge was £62.0 million (H1 2022: £91.4 million) representing an underlying tax rate of 26.1% (H1 2022: 22.1%).

As a result, profit for the period was £175.7 million (H1 2022: £260.7 million).

Basic earnings per share was 5.0 pence (H1 2022: 7.2 pence). The adjusted basic earnings per share was 5.0 pence (H1 2022: 9.0 pence).

Spain  

Our Spanish business primarily sells second homes to European and other international customers, with a small proportion of sales being primary homes for Spanish occupiers. The business completed 228 homes (H1 2022: 203) with average selling price reducing to €374k (H1 2022: €391k), due to regional mix. The total order book as at 2 July 2023 increased marginally to 451 homes (31 December 2022: 448 homes).

Gross margin was flat at 29.8% (H1 2022: 29.7%), this flowed through to an operating profit of £19.7 million (H1 2022: £18.0 million) and an operating profit margin of 26.6% (H1 2022: 26.7%).

The total plots in the landbank stood at 2,350 (31 December 2022: 2,544), with net operating assets** at £80.7 million (31 December 2022: £89.8 million).

Balance sheet 

Net assets at 2 July 2023 increased marginally to £4,509.2 million (31 December 2022: £4,502.1 million), with net operating assets increasing by £223.2 million (6.2%) to £3,842.7 million (31 December 2022: £3,619.5 million). Return on net operating assets decreased to 19.7% (3 July 2022: 24.4%) following the reduction in Group operating profit in the period coupled with the increase in average net operating assets over the 12 month period ended 2 July 2023, compared with the prior 12 month period. Group net operating asset turn^†* was 1.07 times (3 July 2022: 1.23).

Land 

Land as at 2 July 2023 decreased by £66.2 million in the period to £3,362.1 million as the cautious and opportunistic approach to acquiring new land continued throughout the period resulting in land creditors decreasing to £588.0 million (31 December 2022: £725.6 million). Included within the gross land creditor balance is £44.0 million of UK land overage commitments (31 December 2022: £43.0 million). £356.1 million of the land creditors is expected to be paid within 12 months and £231.9 million thereafter.

As at 2 July 2023 the UK short term landbank comprised 83,411 plots (31 December 2022: 82,830), with a net book value of £2.9 billion (31 December 2022: £2.9 billion). Short term owned land comprised £2.9 billion (31 December 2022: £2.8 billion), representing 62,726 plots (31 December 2022: 63,088). The controlled short term landbank represented 20,685 plots (31 December 2022: 19,742).

The value of long term owned land decreased to £245 million (31 December 2022: £311 million), representing 34,344 plots (31 December 2022: 36,646), with a further total controlled strategic pipeline of 105,990 plots (31 December 2022: 107,739). Total potential revenue in the short and long term owned and controlled landbank increased to £62 billion in the period (31 December 2022: £61 billion).

Work in progress (WIP) 

Total WIP investment, excluding part exchange and other, increased to £1,906.6 million (31 December 2022: £1,725.9 million) due to build cost inflation and completions weighted to the second half of the year. This also resulted in average WIP per UK outlet to increase to £7.8 million (31 December 2022: £6.4 million).

Provisions and deferred tax 

Provisions decreased to £288.0 million (31 December 2022: £290.3 million) following utilisation of the cladding fire safety provision (£6.9 million) as works have been carried out as well as utilisation of the Ground Rent Review Assistance Scheme ('GRRAS') provision (£1.1 million). Provision utilisation was partially offset by increases in other provisions which largely relate to remedial works on a limited number of sites around the Group.

Our net deferred tax asset of £22.6 million (31 December 2022: £26.0 million) relates to our pension deficit, UK provisions that are tax deductible when the expenditure is incurred, and the temporary differences of our Spanish business, including brought forward trading losses.

Pensions 

As a result of the 31 December 2019 triennial valuation, a funding arrangement was agreed with the Trustee of the Taylor Wimpey Pension Scheme ('TWPS') that committed the Group to paying up to £20.0 million per annum into an escrow account between April 2021 and March 2024. Following an initial contribution totalling £10.0 million all further payments into the escrow account are subject to a quarterly funding test, effective from 30 September 2021. Should the TWPS Technical Provisions funding position at any quarter end be 100% or more, payments into the escrow account are suspended and would only restart should the funding subsequently fall below 98%. The funding test at 30 September 2021 showed a funding level of 103% and has remained above 100% since then and therefore escrow payments were suspended on, and from, 1 October 2021.

The Group continues to provide a contribution for Scheme expenses (£2.0 million per year) and also makes contributions via the Pension Funding Partnership (£5.1 million per year). Total Scheme contributions and expenses in the period were £6.1 million (H1 2022: £6.1 million) with no further amounts paid into the escrow account (H1 2022: nil). Further payments into escrow are subject to quarter-end funding tests and would amount to an additional £5.0 million being paid into escrow each quarter if the funding test is not met at the respective quarter end. The most recent funding test at 30 June 2023 showed a surplus of £51 million and a funding level of 103% and as a result no payment into escrow is due in the third quarter of 2023.

At 2 July 2023, the IAS 19 valuation of the Scheme was a surplus of £95.6 million (31 December 2022: £76.6 million). Due to the rules of the TWPS, any surplus cannot be recovered by the Group and therefore a deficit has been recognised on the balance sheet under IFRIC 14. The deficit is equal to the present value of the remaining committed payments under the 2019 triennial valuation. Retirement benefit obligations of £25.3 million at 2 July 2023 (31 December 2022: £29.9 million) comprise a defined benefit pension liability of £25.1 million (31 December 2022: £29.6 million) and a post-retirement healthcare liability of £0.2 million (31 December 2022: £0.3 million).

The Group continues to work closely with the Trustee in managing pension risks, including management of interest rate, inflation and longevity risks. The triennial valuation of the TWPS with a reference date of 31 December 2022 is in progress.

Net cash and financing position 

Net cash decreased to £654.9 million at 2 July 2023 from £863.8 million at 31 December 2022, due to the reduction in land creditors and payment of the 2022 final dividend. Average net cash for the period was £633.4 million (3 July 2022: £660.0 million, 31 December 2022: £595.7 million).

Whilst cash generated from operations decreased in the period, a strong second half of 2022 resulted in a cash conversion^‡‡ of 70.1% of operating profit for the 12 months ending 2 July 2023 (12 months to 3 July 2022: 45.2%).

Net cash, combined with land creditors, resulted in an adjusted gearing^‡‡‡‡ of (1.5)% (31 December 2022: (3.1)%).

At 2 July 2023 our committed borrowing facilities were £636 million of which £550 million was undrawn throughout the period. In December 2022 the Group entered into an agreement to refinance the €100 million 2.02% senior loan notes due June 2023 with €100 million 5.08% senior loan notes due June 2030. In July 2023 the Group renewed its revolving credit facility, increasing it to £600 million with a maturity of July 2028 and the option to request an extension for two further years. The weighted average maturity of the committed borrowing facilities at 2 July 2023 was 2.3 years (31 December 2022: 1.9 years), taking into account the new facility this increases to 5.3 years. The new revolving credit facility includes three sustainability linked performance measures, which only have an impact on finance costs. The three performance measures are: (1) science-based target aligned scope 1 & 2 emissions reductions; (2) waste intensity reduction; and, (3) improving the sustainability of our homes.

Dividends  

On 12 May 2023, we returned £168.8 million to shareholders by way of a 2022 final ordinary dividend of 4.78 pence per share. The Board has declared that a 2023 interim dividend of 4.79 pence per share is to be paid on 17 November 2023 to shareholders on the register at the close of business on 13 October 2023. The dividend will be paid as a cash dividend, and shareholders have the option to reinvest all of their dividend under the Dividend Re-Investment Plan (DRIP), details of which are available on our website www.taylorwimpey.co.uk/corporate.

Going concern  

The Directors remain of the view that the Group's financing arrangements and balance sheet strength provide both the necessary liquidity and covenant headroom to enable the Group to conduct its business for at least the next 12 months. Accordingly, the financial statements are prepared on a going concern basis, see note 1 of the financial statements for further details of the assessment performed.

Principal risks and uncertainties

As with any business, Taylor Wimpey's operational performance and ability to achieve its strategic objectives are subject to several potential risks and uncertainties. The Board takes a proactive approach to the management of these and regularly reviews both internal and external factors to identify and assess their impact on the business. These risks and uncertainties are then managed through effective mitigating controls and the development of action plans, with the continual monitoring of progress against agreed KPIs as an integral part of the business process and core activities. 

The Board assesses and monitors the Principal Risks of the business regularly. Set out in the Group's Annual Report and Accounts for the year ended 31 December 2022 are details of the Principal Risks and uncertainties for the Group and the key mitigating activities used to address them at that time.

Principal Risks

Whilst a degree of stability has returned during the past six months, the current climate continues to present challenges, with increasing regulatory focus and ongoing political and economic uncertainty. We continue to assess all relevant factors as part of our risk management process and have determined that there have been small increases in the inherent and residual risk profiles of three of our Principal Risks; 'Mortgage Availability and Housing Demand', 'Quality and Reputation' and 'Cyber Security'. As with all our Principal Risks, we continually monitor them to ensure they remain appropriate, and to ensure that we implement any additional mitigations deemed necessary in order to effectively manage them within our risk tolerance levels.  

Except for those referenced above, no other changes have been made to the Group's Principal Risks as reported at 31 December 2022. Further details of the Principal Risks and the mitigations in place are outlined on pages 75 to 79 of the 2022 Annual Report and Accounts, published in March 2023, which is available at 2022 in review ‧ Taylor Wimpey

Emerging Risks

The Group faces a number of emerging risks which have the potential to be significant to the achievement of our strategy. Due to their nature, their impact cannot be fully understood but where possible we have put in place or are planning to put in place mitigations to reduce the level of potential risk. Emerging risks are considered as part of our established risk management process and reviewed and approved by the Board on a regular basis.

Cautionary note concerning forward looking statements

This announcement includes statements that are, or may be deemed to be, 'forward-looking statements'. These forward-looking statements can be identified by the use of forward-looking terminology, including the terms 'believes', 'estimates', 'plans', 'projects', 'anticipates' or 'expects'. Such statements are based on current expectations and assumptions and are subject to a number of risks and uncertainties that could cause actual events or results to differ materially from any expected future events or results expressed or implied in these forward-looking statements.

Accordingly, there are or will be important factors that could cause Taylor Wimpey Plc's actual results to differ materially from those indicated in these statements. Persons receiving this announcement should not place reliance on forward-looking statements. Forward-looking statements speak only as of the date they are made and, except as required by applicable law or regulation, Taylor Wimpey Plc undertakes no obligation to update these forward-looking statements. Nothing in this statement should be construed as a profit forecast.

Definitions

* Operating profit is defined as profit on ordinary activities before financing, exceptional items and tax, after share of results of joint ventures.

*^† Operating profit margin is defined as operating profit divided by revenue.

** Return on net operating assets (RONOA) is defined as rolling 12 months operating profit divided by the average of the opening and closing net operating assets of the 12 month period, which is defined as net assets less net cash, excluding net taxation balances and accrued dividends.

^† Tangible net assets per share is defined as net assets before any accrued dividends excluding goodwill and intangible assets divided by the number of ordinary shares in issue at the end of the period.

^†† Adjusted basic earnings per share represents earnings attributed to the shareholders of the parent, excluding exceptional items and tax on exceptional items, divided by the weighted average number of shares in issue during the period.

^†* Net operating asset turn is defined as 12 months rolling total revenue divided by the average of opening and closing net operating assets of the 12 month period.

^†*** The Injury Incidence Rate (AIIR) is defined as the number of incidents per 100,000 employees and contractors, calculated on a rolling 12 month basis, where the number of employees and contractors is calculated using a monthly average over the same period.

^‡ Net cash is defined as total cash less total borrowings.

^‡‡ Cash conversion is defined as operating cash flow divided by operating profit on a rolling 12 month basis, with operating cash flow defined as cash generated by operations (which is before income taxes paid, interest paid and payments related to exceptional charges).

^‡‡‡‡ Adjusted gearing is defined as adjusted net debt divided by net assets. Adjusted net debt is defined as net cash less land creditors.

A reconciliation of alternative performance measures to statutory measures is disclosed in note 17 of the financial statements.