Taylor Wimpey (LSE:TW.) Q3 2026 Earnings Call

0:00 Hello everyone and thank you for joining the Taylor Wimpey Trading Update. My name is Molly and I will be coordinating your call today. During the presentation you can register a question by pressing star followed by one on your telephone keypad. If you change your mind please press star followed by two. I will now hand over to your host Chief Executive Jenny Daly to begin. Jenny please go ahead.

0:22 Thank you Molly. So good morning everyone and thank you for joining. As usual, I'm joined by Chris and I'll start with a brief update before opening for questions. As you know, we are operating in a challenging macro environment. We've seen progressive weakening in market conditions through the year, evidenced by lower mortgage approvals, higher borrowing costs and higher costs of living, impacting customer affordability and confidence. While we continue to see robust underlying customer interest, we have not seen the traditional uptick in the important autumn sales period and conversion to sales are taking longer. Our half-to-net private sales rate to the 8th of November was 0.6 per week, down 5% on the comparable period, with the cancellation rate unchanged.

1:12 Excluding bulk deals, the net private sales rate was 0.54, down 11% year-on-year. As a result of this we now expect 2026 UK completions to be around 10,500 homes below our previous guidance range with group operating profit expected to be around the bottom end of the consensus range. The softer sales environment is also reflected in our order book which stands at 6,839 homes compared with 7,253 at this point last year. with a value of around 2 billion compared with 2.1 billion last year. Pricing continues to vary by region and by site and incentives remain an important part of securing customer commitment.

1:59 Overall, net pricing has softened a little further from the 2% decline we referenced at our last update. Bill cost inflation remains in line with our expectations at around 3 to 4% for the year. As we've set out previously, Our focus has been to continue to tightly control the areas we can. In this regard, we continue to be proactive and have renewed our focus on driving efficiencies across the business to protect value and execute against our strategy. Following detailed cost scrutiny, we are progressing targeted mitigation and reduction measures across procurement, commercial and technical activities, including product substitutions and improvements to site design and house types. I am pleased to see progress in some key areas and particularly pleased on the progress we have made on outlet openings. We told you we would be opening more this year than last and we are well on track to do so which has resulted in an increase in outlets to 225 compared to 206 at this point last year.

3:03 We are also in a very good place for outlet openings in 2027. Whilst planning continues to present its challenges, we are also seeing success from our early action to capture the opportunity from planning reforms over the last couple of years and have made further progress in our strategic conversions which rose to around 5,000 plots, more than double the 2,000 plots we converted at this point last year. Overall, the short-term land bank has reduced as we are cautious on new land investment and move towards a smaller land bank, reflecting our focus on capital efficiency. It is also encouraging that the government recognise the need for support for the first-time buyer with its Your First Home scheme. While the level of funding is lower than that available under the prior Help to Buy scheme, and we await further details of scheme registration and on allocations, the income and regional price caps create opportunity. With our strong first-time buyer proposition and growing outlet base, we are well positioned to participate as the scheme develops.

4:09 So in summary, it has been a challenging year in the housing market and we've been focused on protecting value against this backdrop. We are executing our strategy in a disciplined manner. We will pull every available lever to improve efficiency and remain very confident in the long-term fundamentals of the UK housing market with its pressing need for new homes. So with that, I'll now open up for questions. Thank you very much, Jenny. Our first question comes from Zain Bikawa at JP Morgan. Zain, your line is now open.

4:44 Morning, thank you for taking my question. Maybe the obvious one to start with, and thank you for the sort of commentary you've given on your first home. Do you have any sort of idea in terms of how much incremental volumes this might be able to drive when it's running at full capacity? And then secondly, connected to that, As we wait for the enactment of it, are you concerned about the sales rates softening further and do you think you'll have to offer more incentives to those first-time buyers to get them over the line in advance of that? Thank you.

5:17 Okay, thank you for that, Sam. From your first home's perspective, we've got quite a bit of the eligibility detail that's been filled out through the budget and in the following days on the price caps. But I think you're well aware from the phrasing of your question, the first year funding is relatively tight at 700 million. And so that's one of the reasons that I'm referring to allocation, just understanding how the scheme implementation and funding allocation is going to play out. I mean it's very welcome, it's a real positive to see your government responding to the concerns that we've expressed and that we can see in the customer for first-time buyers but it is hard at this point given the funding envelope and with the absence of some of that detail to say just exactly what the incremental benefit would be.

6:19 What I would stress is that you know eligibility and pre-registration on the platform are expected from December. Customer reservations from February but really first completions at the very earliest in April so it's likely to be sort of second half waited before we see that. I do think those you know looking through our site and plot opportunity for 2027 that we have good that we would have good availability. I think then it just depends how all of those variables I've mentioned play out. On the sales rate softening and sort of first-time buyer maybe waiting in anticipation, I mean it's less than ideal to have a scheme announced and for there to be such a delay on its implementation and so I think it's a genuine area for concern. We've been watching our first-time buyers in the order book.

7:19 Our teams have been very engaged with our first-time buyers on the ground. We've seen to date very little cancellation behaviour from first-time buyers and we've been driving the message. They've got the plot they want, the deal they want, at the rate they want and we're continuing to see those customers moving through to exchange What I can't speak to is customers earlier in the pipeline who are potentially delaying on reservations. That's much more difficult for us to see. But it's certainly an area that we'll continue to watch very closely.

7:59 Great. Thank you very much. Thank you very much, Sam. Our next question comes from Amy Gala at UBS. Amy, your line is now open.

8:10 Thank you. A few questions from me. The first one was on trading. If you could give us some more color in terms of what are you seeing in terms of exit trends and the quality of buyers who are reserving in the current market. And the second one was on pricing. Can you give us some color as to the price softness that you're seeing? Is that more concentrated across fewer sites or is it more broad-based? Regionally, is this more London and Southeast driven dynamic? and any color as to when do we think we can see some sort of stability in the sort of pricing dynamic on underlying pricing. And the last one, if I may, is on cost savings that you touched upon. When do we expect benefit of the procurement changes that you are talking about?

8:56 When you think about 2027 and the bill cost headwind that could potentially be there, are we really looking at a neutral price cost spread next year? Thank you.

9:08 Okay well maybe Chris if you could pick up the cost savings and I'll pick up trading. I mentioned sort of in my narrative Ami that you know we're continuing to see you know good or robust sort of customer interest in the early parts of the funnel and we are still seeing you know good engagement around you know customers coming to site There is a hesitancy. We are seeing the time from first inquiry to reservation in almost all of our operational regions, so that's including the north, extend as customers became more cautious as interest rates climbed.

9:56 We're hearing maybe a little bit more concern, although it's anecdotal, greater concern around the cost of repayments and that making customers feel more hesitant and maybe putting them into the let's wait sort of category. So still really good levels of engagement, good levels of inquiries and appointments but just that real sort of hesitancy and uncertain nature of customer sentiment at the moment. On pricing, as we say, pricing softened. and another sort of increment since the summer. I mean, it's fair to say that London is particularly challenging. I'd set that apart from sort of the wider southeast, which is challenging, but less so than London.

10:55 And then, as we've been talking about actually for quite a while now, Gradually improving the further north, but pricing softness is still an issue. We're seeing a lot of competition across the existing stock and in new home sales. You asked about stability and underlying pricing. Those are really in the macro, in mortgage interest rates, customer confidence. The sense at the moment is that there's a lot of There's a lot of stock available and customers have every reason to wait whilst they continue to shop and wait for things to settle.

11:40 So we would probably also expect to see a reduction in overall available inventory in order to get to that stabilized pricing environment.

11:51 Yeah, and then on cost. We do recognise the pressure on profit and margin and returns and as Jenny said we're actively responding to it. A key part of that is structurally reducing the cost of building our homes through tighter commercial controls, more standardisation and just taking the if unnecessary cost out of spec. We've already implemented a number of changes, we've got further pipeline across a number of areas but the key for us is delivery. We're putting controls in place to make sure that those savings actually flow through the orders, the CVRs, and ultimately to the bottom line. But looking ahead to next year, suppliers will clearly look to convert some of the current surcharges into underlying price increases, while energy and fuel costs still remain elevated.

12:48 We'll be doing everything we can to resist those increases. I've mentioned in the past, you know, competitive tendering, e-auctions, benchmarking. We'll also be doing index tracking and there's always rigorous validation of any cost increases, whatever form they take. But in current market conditions actually creating I think a bit greater commercial flexibility with some suppliers prepared to absorb or remove surcharges as they compete to secure future volumes. To go to the basis of your question, which I think was neutral price cost for next year, the extent of the mitigation we can get from that, those negotiations with the suppliers will depend on how energy and fuel and wider commodity markets develop. But obviously we believe that the actions that we're taking should help us offset some of the inflationary pressure that we're likely to see coming through the supply chain.

13:51 and on the pricing side you know we reported underlying pricing down one and a half percent in the first half and by July we were running at around two percent below last year since then as Jenny said market conditions have progressively weakened and we're currently running at around about two and a half percent below this time last year.

14:15 That's helpful thank you. Thank you Amy. Thank you, Amy. Our next question comes from Will Jones from Rothschild & Co. Will, your line is now open.

14:29 Thanks, morning. Three, please. First, just coming back to your first home, now that we know the price caps, I wonder if you've run any numbers on how much of your product might be eligible or how potentially it compares just to your general first-time buyer pricing? Second was around bill costs and just within the mix I think a few of the companies have been referring to somewhat less labour cost inflation. Is that your experience too? And then the last one just around outlets, clearly good progress year to date. I think up 12 and it sounds like there's more coming. Any sense for whether that 12 could be matched again a year forward or should we be thinking about a lower growth rate? I appreciate there's a sales rate element to that view as well.

15:15 Okay, I mean, yes, we have, you know, we have been sort of running our sort of future plots through the local price caps. And, you know, I'm happy that we've got sort of good eligibility, you know, for the first time buyer. I mean, we continue to see, as I mentioned to an earlier question, we continue to see activity from first time buyers. And, you know, we have a A good cohort of first-time buyers in the Taylor Wimpey product range. So as I mentioned earlier, the allocation and how the allocation is going to be managed, well, I think is the question. It's a tight funding envelope at $700 million.

16:05 And to compare for the whole of the program that's been announced at $4.7 million, Billion over those years you know that's almost exactly comparable to the last two years of help to buy so understanding how that's going to be managed I think is the biggest issue for us.

16:29 Sorry Jenny just to jump in there just on that point but when it opens the registration in December if it is I don't know three times oversubscribed or something like that has government given any indication on how they might react to that or is it just too early?

16:43 No I mean that's exactly you know what I'm you know what I'm sort of leading to we haven't we haven't got any visibility of how sort of funding will be will be allocated well and you know and I think that the you know the expectation is at the funding level that it will be over allocated or will be oversubscribed and therefore understanding how that's going to be managed I think is going to be it's going to be key but I'm very comfortable We've got good representation and good eligibility for the scheme. On bill costs, yes, we're seeing less on labour. We've managed to hold really strong lines through the labour side of bill costs through the year. And then on outlets, yeah, I'm pleased with progress and as you say, there's a There's a little bit of lower sales rates but we've had a strong showing this year. I'm not going to guide into 2027 and I'm sure that you didn't expect it but I'm feeling actually quite positive where we sit for 2027 openings.

18:03 I think it's probably you know fair to say we haven't been although we've done well I think in our planning execution you know we're not immune to the planning delays that you know that we and others you know refer to you and so outlet openings you know probably a bit more weighted to the second half for 2027 as I see it today.

18:25 Thank you. Thank you very much Will. Our next question comes from Lewis Roxburgh from Goodbody. Lewis your line is now open.

18:37 I just have one question please. Just as we think about next year from a margin standpoint it looks like a challenge in terms of build cost inflation and visibility on pricing and volumes but sort of parking that to one side what can you do or what measures should we be looking at from a self-help perspective to help mitigate that maybe from a rocky perspective is it Higgins, and many more. Can you progress on freeing up more whip and land? Is the land back evolution going to give you a better cost base? Just want to get a flavour of how you're viewing that, maybe on a longer horizon. Thanks.

19:13 Yeah, thanks, Lewis. So, as you know, we don't give guidance for the following year, our Q3 update, but Clearly there's plenty in the statement for you to process the softer autumn selling season, the change we've made to our 2026 volume and profit going. It's obviously irrelevant as you think about 2027. And yes, there's plenty that we can be doing and you can see that evidence also in the statement as we approach 2027. particularly on outlets you know being more efficient with our capital so driving that outlet number without net investment in land you know as we previously set out as well you know we are being very tight on our whip and then you know really looking at every area of our business to make sure that we are We are very clear that we continue to operate in a challenging market and remain really focused on tight cost and capital discipline and against that backdrop we are working very hard to ensure that the organisation is appropriately

20:43 aligned with the current activity levels.

20:48 In respect of WIP, we have talked about how closely managed WIP is within the business and we seek to align it to sales rates and there's a range of management actions and processes all the way down through the business and those are monitored and measured really regularly and Chris and I had the various MDs through the doors for our budgeting process last week and WIPP control, cost control were very clear elements of the discussion then.

21:29 That's great, thanks. Thank you Lewis. Our next question comes from Chris Millington at Deutsche Bank. Chris, your line is now open.

21:41 Thank you. Morning, Jenny. Morning, Chris. I'll keep the usual thing going and ask a few. First one I just wanted to ask you is on margins. I mean, it does appear, you know, from a position of being one of the stronger margin players, yours are unwinding a little bit quicker than peers. Now, I wouldn't expect you to comment on the peer group, but do you think there's something in TW which is driving that differential? Is there something in geography, maybe London this year? But just curious about your thoughts on that. Next one's just on bulk sales. Really kind of any change in demand, discount rates you're offering there. And then finally on fire safety, just curious about what spend this year is going to be and how robust you feel the provision is at the moment. Thank you.

22:23 Okay, thank you. I mean, I'll start with bulk just for you. I mean, the demand has been variable as interest rates have increased significantly. There's clearly some pricing pressure in the stack for a number of the bulk BTR operators. So that is I think weighing on appetite and the pricing of bulk. I think into the more strategic partnership following the announcement of the social and affordable housing, A bit of variability there. The strategic partner allocations, some of the RPs, the CAD allocations probably didn't get quite as much as they'd hoped for.

23:23 We can see that they're reshaping, rethinking, moving pieces around a bit more than they had anticipated. So, you know, that's clearly sort of affecting some of their sort of short-term behaviour, I think, as they just get their head around that also. Chris, on... Yeah.

23:45 So, Chris, on the cladding spend, we're expecting, within this goings, a cladding spend of around about £70 million for the year. And in terms of the provision, you know, it continues to reflect our current best estimate of the costs of completing the programme. Of course, certainty is continuing to improve, as you would expect as we sort of complete assessments of tens more buildings. And we'll continue to update the provision as that work progresses. And then just on the margin point, you know, there's no question really that our margin has reduced significantly from the levels that we were earning, say, back in 2022.

24:30 and we're very transparent about what has driven that and every half year and full year obviously we provide a detailed bridge explaining the movement in the margin and I think we've reported that basis consistently for well over a decade. I think if you look at those bridges the majority of the reduction comes from bill cost inflation, lower underlying selling prices, the operational gearing effect of lower volume and those have clearly been significant pressures across the sector. I think you know if you look at our specific circumstances then obviously we have a geographical spread that is right across the country and yes that means we are exposed to the weaker markets in the south And also the other thing is, you know, we tend to have a longer land bank than others perhaps.

25:35 And the length of that land bank does mean it just takes a little bit longer for new lands to flow through.

25:45 That's very clear. Thank you, Chris. Thank you, Jenny.

25:48 Thanks. Thank you, Chris. Our next question comes from Rebecca Parker at Goldman Sachs. Rebecca, your line is now open.

25:58 Hi, thanks for taking my questions. First one on marketing incentives with them remaining elevated across developments and then also underlying pricing continue to experiencing marginal pressure. How can we think about this dynamic I guess feeding through to down valuations? Secondly, on the your first home developer Fee, that 4% with homes over 250. How do you expect that to play into current incentive levels? Do you see scope for margin expansion by rolling some of those incentives back? And then thirdly, on the margin side and thinking about land bank evolution into 2027, Can we expect an uplift as you do cycle through some of those lower margin sites and start getting more of that higher margin land bank?

26:58 Yeah.

27:00 Oh, okay. Thank you, Rebecca. I'll sort of your first, your first and maybe Chris on the land bank evolution. I mean, incentives, you know, have remained at the elevated levels, you know, between sort of six, six and a half. I present that we've been sort of reporting for a while and it's the same sort of story, elevated levels of inventory available across both the new and existing homes market. A cautious customer with a degree of caution and not really feeling sort of the need to make a decision. There's very little in terms of push factors for customers at the moment and so incentives become really important as part of that process.

27:53 Down valuations by lenders are actually relatively low but I think that that's more reflective of the level of competition, the fact that our teams are watching and you know managing sort of pricing across the across the markets as they see them and ensuring that you know once we're not trying to lead the market that we're following the market closely and and therefore you know we're not we're not seeing many sort of down valuations as a as a result but but they are they are there and you know and you know a degree of a degree of attention on the four percent developer contributions I mean certainly you know it's a bit higher than we might have hoped you know it will sort of play into the how we would look at sort of both the pricing and sort of the incentives that are sort of available for the first time buyer but it will also be a reflection of how the market operates from here.

29:06 So, you know, something that, you know, would be very much sort of under scrutiny and something that we'd be looking to manage or to optimise as best we can, given the broader market conditions. And to sort of your first homes and, you know, margin expansion, you know, if there is sort of additional sort of volume as a result of the scheme, then, you know, that would be, that would technically be very helpful.

29:36 Yeah, and just on land bank evolution, I mean, the timing of that benefit is very much linked to sales rates. So high sales rates mean we closed out the old sites more quickly and bring the newer, higher margin land through the P&L faster. And with sales rates low this year, that benefit has effectively been pushed out a little bit. It was zero in the first half. I wouldn't expect much in the second half. The overall shape I described in October last year I think is still broadly right. You know, limited benefit in 2026, building in 2027 with a majority in 2028 and 2029, but obviously the slow sales rate this year just means that the 2027 benefit is likely to be more muted than we previously anticipated and the precise impact will depend on the sales rate next year.

30:30 Great, thank you. Thank you very much, Rebecca. Our next question comes from Sam Cullen from Peel Hunt. Sam, your line is now open.

30:41 Yeah, morning, everyone. We've got a couple. The first one's back on your first time. I'll take your point around you've got good eligibility. Are you doing any or much replanning of sites coming down the fight to ensure you've got... Good levels of availability in all regions. He's at the margin trying to move more fours into three beds and threes into two beds.

31:03 Yeah, I mean, look, I think the first thing that I would say is, you know, 2027 is pretty, you know, pretty written. From a mix perspective, Sam, but, you know, even on that basis, I'm, you know, comfortable that we've got a good, you know, good level of eligibility. Part of the cost and efficiency value improvement measures that we're actioning across the business are reviews, replans, trying to optimize mix where we think that the market has moved and we could introduce slightly different balance of mixes where appropriate.

31:48 There are limitations of time through the planning process that the teams will come across, but that's something that we're actively involved in. In future years, depending on how the scheme allocations operate, we would be optimistic that if it is successful, the government would feel able to extend the spending envelope in future years. and then potentially you know we could look to sort of just gravitate you know parts of our mix towards it to support increased volume so that's something that we'll continue to watch but you know even from a standing start I'm happy that we've got good eligibility.

32:36 Okay thank you and I guess second question which is partially related to the last part of that answer is Clearly backdrop's challenging and you've got probably less support from the government than people would have hoped, particularly around the fee that you have to pay to access your first home. So even if it was extended, how do you think about the potential uplift of volumes? And given it's going to be less than people might have hoped, does it make you think again about the regional footprint of the business and the cost structure you're approaching with?

33:12 That's something that we're constantly reviewing. In some of the areas that are more challenged around local authority caps, I know there are markets that we don't really participate in, even though we've got really good coverage because they're not treated with the markets or potentially there's viability challenges. Some of the caps aren't that generous further north, but we would still see that as a really strong market with comparatively good affordability measures. It is an area that we will continue to review, but in the areas that we're actively operating in and where we've got our lands investment, I think that there's good representation.

34:10 In terms of our regional structure, we are comfortable with our coverage across those regions. Our regions, as you know, Sam, are slightly bigger than the many of our peer group in house builders and therefore it does give us more access to better and more resilient markets and I think that's a positive for the business.

34:41 Okay, thank you. Thank you very much, Sam. Our next question comes from Peter Adyogun from Morgan Stanley. Peter, your line is now open.

34:53 Thank you. Morning, Jenny. Morning, Chris. Jenny, I just wanted to get your thoughts a bit more on your first home. Just in terms of the customers who inquire but can't proceed today, could you give a flavor of how many of those are constrained by the deposit versus Mortgage availability, sorry, affordability. And the reason I ask is because I guess, do you think there's a risk that this scheme may subsidize purchases that just would have happened anyway? And then the second question was just around with sales rates falling, at what point does it make sense to maybe slow down opening more sites? You know, what would trigger the decision to potentially slow that down to protect returns at some point?

35:37 Thank you. Thanks Peter. In terms of customer engagement at this point, we've had some customers inquiring. Affordability I think will potentially still be an issue. If you look at the interest rates for a 75% LTV, it's still over 5% when I looked earlier in the week. So there's still a potential issue there for some. But the deposit of 2.5% will be very attractive and it will open the scheme to a significant number of purchasers. But with any scheme, even with the eligibility criteria that government have placed around it, there's always the potential for those who could have partaken in the market anyway to use it. But I think that the design of the local authority price caps is one of the ways the government are seeking to control that a bit better than they may have perceived in the help to buy scheme.

36:51 So I think that the overall local authority house price cap is the method of trying to ensure that people aren't using it just to sort of grade up as we might have seen in help to buy. Does that make sense, Peter?

37:06 It does, thank you, Jenny.

37:08 Okay, and in terms of sort of sales rates and our approach to opening, where we've already committed to land and invested, then we are committed to opening the site in an efficient and disciplined way because we see benefits to being represented across a broader spread of markets and even more so in more difficult times. We talked a little bit earlier about web control and other things. We would be very disciplined in the way that we would do that.

37:50 Maybe just a quick follow-up, Jenny. Maybe just on the sales rates. Is it possible at all to maybe separate the performance of outlets already open maybe say more than a year versus newly opened? I guess I'm just trying to I think it's a bit of a mixed bag. In a market where there's hesitancy and looking for a customer or a bit more hesitant, then it's probably fair to say that

38:31 They prefer to see a bit more of a maturity on a site opening to make sure that they're confident in their purchase. On the other hand, there are some long established sites that maybe just given Some of the wider issues, whether it's employer driven or other issues can struggle. So it is a mixed bag. But we work hard to drive a good quality of place and to open our sites well to get as good a start as we can.

39:13 Thanks, Jenny.

39:15 Thank you. Thank you very much, Peter. We currently have no further questions, so I'll hand back to Jenny Daly for closing remarks.

39:24 Thank you, Molly. So look, thank you all for your time this morning. It's appreciated. While market conditions remain challenging, we are focused on the areas we can control, driving efficiencies, protecting value and improving capital discipline. So alongside our confidence in the long-term fundamentals of the UK housing market, our progress on outlet openings and strategic land conversions, I think, position as well. So thanks again and we'll speak to you in the new year. This concludes today's call. Thank you for joining. You may now disconnect your lines.