Taylor Wimpey Plc · LSE:TW.
Taylor Wimpey — Investor Day (May 2022)
74 slides from Taylor Wimpey's investor day presentation, May 25, 2022
Slide 1: Building a stronger and more resilient business
Building a stronger and more resilient business 25 May 2022
Slide 2: Disclaimer
Disclaimer For the purposes of this notice, this “presentation” shall include these slides and any question-and-answer session that follows oral briefings by representatives of Taylor Wimpey plc. This presentation is for information purposes only and is not intended to, and does not constitute or fo
Slide 3: What you will hear today
What you will hear today ● Great shape ● Sector leading landbank ● Strong balance sheet ● Great people culture ● Current guidance reconfirmed for operating profit* margin and outlet-led volume growth But there is more potential to unlock through 1. Future focused approach and sharper operational exe
Slide 4: Introducing today's presenters
Introducing today’s presenters Jennie Daly Stephen Nick Wright Lee Bishop Chris Carney CEO Andrew Group Supply Group Group Finance Group Chain Director Managing Director Technical Director Director Strategic Land 30 years in 22 years in 34 years in 38 years in 15 years in industry and 8 industry and
Slide 5: Agenda
Agenda Building a stronger and more resilient business 14:00-14:30 Operational excellence and fit for the future 14:30-15:10 Q&A 15:10-15:30 Coffee break 15:30-15:50 Land: optimising value 15:50-16:30 Targets and capital allocation 16:30-16:50 Closing remarks 16:50-17:00 Q&A 17:00-17:30 Drinks recep
Slide 6: Strong and experienced operational management team
Strong and experienced operational management team Ingrid Nigel Shaun White Ian Andrew Lee Bishop Osborne Holland Drummond Wilkinson Divisional Chair Divisional Chair Divisional Chair Divisional Chair Divisional Chair Group Managing London and South Central, South Midlands and Scotland, North North
Slide 7: Building a stronger and more resilient business
Building a stronger and more resilient business Jennie Daly CEO
Slide 8: On track to deliver our 2022 and 2023 priorities
On track to deliver our 2022 and 2023 priorities ● Operating margin ● Operational excellence and discipline driving increase in operating margin ● Outlet growth ● Progressing recent land acquisitions through planning to facilitate outlet growth in late 2022 and volume growth in 2023 ● Great stakehol
Slide 9: A strong purpose
A strong purpose To build great homes and create thriving communities 9 Building a stronger and more resilient business 25 May 2022
Slide 10: Taylor Wimpey is a strong business
Taylor Wimpey is a strong business ● Sector leading landbank and strategic pipeline positions us for delivery of near term growth ● Highly engaged and skilled employees and experienced management team ● Five-star customer service and best quality volume housebuilder in terms of independently measure
Slide 11: Focusing on our value chain
Focusing on our value chain Creating 1. Making the right land investments Continuous business improvement Enhancing 2. Managing the planning process Stakeholder value Protecting 3. Managing the regulatory environment Optimising 4. Development and procurement 5. Safe and efficient production, selling
Slide 12: Creating more value by having a clearer operational focus
Creating more value by having a clearer operational focus What stays the same Where there is more potential to unlock - Health and safety - Sharper operational focus - Landbank strength - Ensuring we are ‘future fit’ - Focus on strategic land - Approach to modern methods of construction (MMC) - Cust
Slide 13: Well positioned to deliver for customers
Well positioned to deliver for customers Location Affordability Space Underpinned by great customer service 13 Building a stronger and more resilient business 25 May 2022
Slide 14: Sector fundamentals remain robust
Sector fundamentals remain robust ● Resilient housing market due to unmet demand / continued and consistent undersupply ● Affordability remains robust although we are mindful of future economic impacts ● Competitive lending environment with accessible affordable lending for customers ● Inflation hea
Slide 15: Sector fundamentals remain robust
Sector fundamentals remain robust Household bank deposits Annual unemployment Cost of buying a home attractive compared to rental 1,800 10.0 1000 8.0 800 1,700 6.0 600 1,600 % £ 4.0 400 1,500 2.0 200 1,400 0.0 0 Jun-19 Feb-20 Oct-20 Jun-21 Feb-22 2010 2014 2018 2022E 2026E Dec-09 Dec-12 Dec-15 Dec-1
Slide 16: Well placed to face new build market challenges
Well placed to face new build market challenges ● Political environment for housebuilding ● Customer and New Homes Ombudsman ● Generational step change in regulatory environment ● Emerging land supply and planning challenges ● Nutrient neutrality ● Skills and resource availability ● ESG and climate
Slide 17: Cornerstones of value and a clear strategic focus
Cornerstones of value and a clear strategic focus 2. Operational 4. Capital 1. Land 3. Sustainability excellence allocation To deliver superior returns for shareholders through our sector leading landbank and enhance value through sharper operational focus 17 Building a stronger and more resilient b
Slide 18: Operational excellence and fit for the future
Operational excellence and fit for the future Stephen Andrew, Group Technical Director Nick Wright, Group Supply Chain Director
Slide 19: What you will hear
Enhancing Protecting What you will hear Optimising Realising ● Fit for the future – Stephen Andrew, Group Technical Director ● Significant regulatory changes in medium term ● On track to meet Part L and F and O requirements for Energy, Ventilation and Overheating ● Trialling solutions to meet Future
Slide 20: Adapting to meet changing regulations and protect margin
Adapting to meet changing regulations and protect margin 1 April 2022 31 October 2022 15 June 2023 2025 UK – Ban on Red Scotland – Regulations in England – End of transition Future Homes Standard (England & Wales) Diesel in force construction Part L – Energy - 75-80% reduction in CO2 Section 6 Part
Slide 21: Current Taylor Wimpey home
Current Taylor Wimpey home 21 Building a stronger and more resilient business 25 May 2022
Slide 22: Part L&F compliant home
Part L&F compliant home 22 Building a stronger and more resilient business 25 May 2022
Slide 23: Future Homes Standard home
Future Homes Standard home Squares not greyed out represent additional solutions in response to the Future Homes Standard 23 Building a stronger and more resilient business 25 May 2022
Slide 24: Planning and preparing for changing regulations
Planning and preparing for changing regulations ● In preparation for the Future Homes Standard (FHS) we will trial a shortlisted range of fabric and technology solutions on a live site ● Aim to create a robust, deliverable, customer focused and design friendly specification for FHS 2025 ● The trials
Slide 25: Holistic approach to net zero carbon
Holistic approach to net zero carbon Planning and site design Homes in Sustainable operation procurement Road to zero carbon working group Construction The customer skills Business operations - sustainability 25 Building a stronger and more resilient business 25 May 2022
Slide 26: Sudbury – the heat network
Sudbury – the heat network ● The network utilises plastic pipe at 60°C flow and 30°C return ● Laid in standard utility trench ● Three Air Source Heat Pumps provide heat which heats water in two 40,000L stores ● Supplemented by six 500kw electric boilers for peak demand (c.5% of annual heat load) ● F
Slide 27: Simplification, standardisation and innovation
Simplification, standardisation and innovation ● In 2021, nearly 90% of Taylor Wimpey UK homes used some form of MMC sub-assemblies and / or componentisation Usage of MMC sub assemblies / componentisation 2021 Timber frame kits 2,737 Roof cassettes 1,350 Timber floor cassettes 2,197 Spandrel panels
Slide 28: Driving value from timber frame
Driving value from timber frame Why timber frame? Timber frame as a % of total completions ● Drive value from increased standardisation and simplification combined with our new house type range 20.0% ● Offsite manufactured products improve the accuracy, quality and consistency of on-site works ● Inc
Slide 29: Procurement – standardisation, simplification and supply chain security
Procurement – standardisation, simplification and supply chain security ● TW procurement strategies support and benefit from business operational imperatives of standard build, technically assessed, quality products ● Simplification of product ranges (SKU rationalisation) improve forecasting and mat
Slide 30: SKU reduction – internal doors and appliances (examples)
SKU reduction – internal doors and appliances (examples) Kitchen appliances ● Reduced SKUs from 185 models to 44 models ● Introduced a two brand strategy with offering aligned to market trends ● Fewer model variants ● Reducing supply risks in a volatile market ● Improved and easier forecasting ● Imp
Slide 31: Managing supply chain risk
Managing supply chain risk ● Understanding and managing risk across ● Brexit ● Pandemic ● Conflict ● Suppliers are asked numerous questions around supply chain security including: ● For products purchased from outside of the UK, has your organisation identified an alternate UK source? ● Does your or
Slide 32: A robust onboarding process for new products
A robust onboarding process for new products Profile Category & Supply Market (who and what is out there?) Planning Design Supply Chain Technical Production H&S Customer Gate sign off Multi-functional teams progress all aspects of new product introduction to ensure seamless onboarding through every
Slide 33: Sustainability – Taylor Wimpey and supplier actions
Sustainability – Taylor Wimpey and supplier actions ● We engage our suppliers to understand their ESG strategy ● We use our sustainability questionnaire to engage with suppliers ● We make sustainability targets and actions part of regular reviews between TW and the supplier ● We engage on elements s
Slide 34: Supplier training programme
Supplier training programme ● Collaborating with supply chain partners to deliver training and upskilling in conjunction with Quality Managers, installers and trades ● To deliver consistency and right first-time installation of suppliers’ building products ● The supplier training initiative aims to
Slide 35: TW Logistics
TW Logistics ● TW Logistics procures, receives, consolidates and dispatches supplies to our sites ● It provides benefits including: ● Security of supply ● Reducing delivery complexity ● Greater visibility ● Financial benefit ● Supporting the business ● Compliance ● Future strategy ● Relocated to lar
Slide 36: TW Logistics build packs
TW Logistics build packs Lintels Build Arc Build Commence Pack 01 Meter Boxes Stage 09 Superstructure Brickwork Sundries Build Fascia & Soffit Build Brickwork to Pack 03 Arc Stage 40 Wall Plate Sawn Timber Build CLS Build Roof Tile Pack 04 Window Board Stage 45 Complete Sheet Material Skirting & Arc
Slide 37: Operational excellence and fit for the future summary
Enhancing Protecting Operational excellence and fit for Optimising the future summary Realising ● Well prepared for upcoming regulations ● Cross functional working group to manage and deliver our Roadmap to Zero Carbon ● Trials well underway for 2025 Future Homes Standard ● Timber frame activities s
Slide 38: Q & A
Q & A 38 Building a stronger and more resilient business 25 May 2022
Slide 39: Land: optimising value
Land: optimising value Jennie Daly, CEO Lee Bishop, Group Managing Director Strategic Land
Slide 40: What you will hear
Creating Enhancing Protecting What you will hear Optimising Reinvesting ● Land: the key driver of value and returning ● Significant land bought over last two years puts TW in a strong position ● Well placed with excellent portfolio and highly experienced land and planning teams ● Agile approach in c
Slide 41: Land market and planning environment
Land market and planning environment Current conditions: ● Competitive land market – therefore replacing land selectively across all geographies ● Frustrating planning environment, means beneficial to have a slightly longer landbank ● Localised impacts from water and nutrient neutrality issues Mediu
Slide 42: Consents and delivery
Consents and delivery Proportion of homes consented on site size in England 70% 60% 50% 40% % 30% 20% 10% 0% Q4 2015 Q2 2016 Q4 2016 Q2 2017 Q4 2017 Q2 2018 Q4 2018 Q2 2019 Q4 2019 Q2 2020 Q4 2020 Under 50 plots 50-150 plots Over 150 plots Q2 2021 Source: Savills Research using DLUHC and Glenigan 42
Slide 43: We benefit from a stronger land position, providing more options
We benefit from a stronger land position, providing more options 43 Building a stronger and more resilient business 25 May 2022
Slide 44: Land – a robust governance process
Land – a robust governance process ● Our approach to land is vital in delivering our purpose ● Proactively consider impacts on the environment and local communities and deliver any mitigation required throughout development process ● An embedded approach to community engagement ● Land must be a good
Slide 45: What makes a good short term landbank
What makes a good short term landbank Assessing a landbank Measured in years with reference to prior full year completions or on a rolling Length basis Weight Land cost % of ASP in owned landbank Shape Measured in range of site sizes and geographical distribution Efficiency RONOA, overall time to ou
Slide 46: Length and weight
Length and weight UK short term landbank and land cost as % of ASP 90,000 20.0% 80,000 18.0% 70,000 16.0% Land cost as % of ASP 14.0% 60,000 12.0% 50,000 Plots 10.0% 40,000 8.0% 30,000 6.0% 20,000 4.0% 10,000 2.0% - - 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 UK short term owned landbank (pl
Slide 47: Shape – short term land
Shape – short term land Small (1-200) Medium (201-375) Large (376-750) Super large (751+) Total Q1 2022 Plots Plots Plots Plots Plots Owned 40% 33% 15% 12% 100% Controlled 17% 16% 15% 52% 100% Total 34% 28% 15% 23% 100% Average plots 73 185 414 1,031 148 47 Building a stronger and more resilient bus
Slide 48: Efficiency
Efficiency ● Remain very focused on progressing new acquisitions through the planning and technical stages and opening quality outlets ● We monitor all the elements which contribute to efficiency including sales, WIP deployment and production efficiency ● Specially trained Project Managers in each r
Slide 49: Quality landbank key to success
Quality landbank key to success ● Quality of location key to selling in Micro location – position within macro all market conditions location Quality area (plots) ● Land quality improved over this Q1 2022 cycle A B C D Total ● Continue to target high quality locations both in the short term market a
Slide 50: What makes a good short term landbank
What makes a good short term landbank Assessing a landbank Measured in years with reference to prior full year completions or on a rolling Length basis Weight Land cost % of ASP in owned landbank Shape Measured in range of site sizes and geographical distribution Efficiency RONOA, overall time to ou
Slide 51: Strategic land a key differentiator
Strategic land a key differentiator ● Key attributes of strategic land are plot security and improved margins over the open market ● Control of land supply is the key to plot security and optionality and allows us to respond to current market conditions ● A strong strategic pipeline supports and enh
Slide 52: Strategic land at Taylor Wimpey
Strategic land at Taylor Wimpey “Land which does not have any form of residential planning consent at the time we take a commercial interest” ● Can be owned outright, owned with uplift, or controlled via an option or hybrid agreement ● Overall aim is to provide future opportunities for TW at enhance
Slide 53: Benefits of industry leading strategic land pipeline
Benefits of industry leading strategic land pipeline ● Less reliant on short term land – provides alternative land supply ● Discount to open market value – options within the portfolio have an average discount opportunity of c.13% ● Greater control over the quality and readiness of the planning perm
Slide 54: Value added from strategic land
Value added from strategic land 1 2 3 4 5 Stakeholder Engagement Identification of Planning Process opportunity Full vision for Strong demographics, development Allocation in local plan likely deliverable and Assess opportunities in a Full consent viable locations localised circumstance Transfer to
Slide 55: What makes a good strategic land pipeline
What makes a good strategic land pipeline Assessing a strategic land pipeline Measures how we secure the various opportunities in our portfolio as a ratio Control of the percentages by: owned / optioned / promotion Maturity is measured by reference to the improving planning provenance of Maturity /
Slide 56: Strategic land pipeline (control and maturity / depth)
Strategic land pipeline (control and maturity / depth) Operational delivery 31 Dec Q1 2022 2021 7% Plots Owned Controlled Total Total Allocated 4,045 9,764 13,809 13,077 strategic* 23% Non-allocated 33,500 97,732 131,232 132,157 strategic* Strategic 37,545 107,496 145,041 145,234 70% Options Freehol
Slide 57: Strategic land pipeline (shape and spread)
Strategic land pipeline (shape and spread) Distribution of strategic land plots Q1 2022 % Scotland, North East and North Yorkshire 22.9% North West and Yorkshire 11.9% Midlands and Wales 20.8% Central and South West 27.1% London and South East 17.3% 57 Building a stronger and more resilient business
Slide 58: Scale of strategic land opportunity
Scale of strategic land opportunity 30000 25000 20000 15000 10000 5000 0 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022E* 2023E 2024E 2025E 2026E Completions Strategic conversions Potential pipeline ● We have a strong track record of delivery ● Strategically sourced land makes up c.50% of our ann
Slide 59: Efficient: case study – West Scotland
Efficient: case study – West Scotland The site ● 198 homes ● Option agreement signed in 2014 ● Detailed planning application submitted June 2019 ahead of Local Development Plan adoption with support of Local Authority ● Formal adopted allocation in November 2019 ● Full planning permission granted in
Slide 60: Patience: case study – Buckinghamshire
Patience: case study – Buckinghamshire The site ● 3,000 homes (30% affordable housing) ● Community facilities including: two primary schools, c.110 hectares of public open space sports facilities, parks and play provision, allotments and community orchards ● 2003 option agreement ● Outline planning
Slide 61: Freehold: case study – Manchester
Freehold: case study – Manchester The site ● 220 homes ● Land purchased freehold in July 2016 ● Secured housing allocation in December 2021 ● Outlet expected June 2023 ● Sales from November 2023 Deal background ● Promoted through Local Plan – secured draft allocation just three years after site purc
Slide 62: Summary
Creating Enhancing Protecting Summary Optimising Reinvesting ● Land remains the key driver of value and we and returning continue to focus on optimising the landbank ● Highly skilled teams with extensive industry experience in land market ● Good progress on recent land acquisition giving us increase
Slide 63: Targets and capital allocation
Targets and capital allocation Chris Carney Group Finance Director
Slide 64: A growing business with further potential
A growing business with further potential UK short term owned landbank and land cost as % of ASP 65,000 20.0% ● At Q1 2022, we had 63,005 plots in the 18.0% short term owned landbank, which is a Plots in short term owned landbank 60,000 16.0% 10 year high Land cost as % of ASP 55,000 14.0% 50,000 12
Slide 65: A highly cash generative business
A highly cash generative business Operating cashflow and Group legal completions Shareholder returns and total land cost (£m) Cash Shareholder Group land cost Completions returns £m generated £m £m 1,000 20,000 800.0 4,000 15,000 600.0 3,000 500 10,000 400.0 2,000 - 2012 2013 2014 2015 2016 2017 201
Slide 66: Our capital allocation priorities
Our capital allocation priorities Highly cash generative business allows for investment for growth and attractive shareholder returns 1 2 3 4 Investment in land and Maintain a strong Sustainable ordinary WIP to drive future Return excess cash balance sheet dividend growth Maintain low adjusted geari
Slide 67: Reliable shareholder returns across the cycle
Reliable shareholder returns across the cycle ● Ordinary Dividend Policy ● 7.5% of net assets (at least £250 million) ● More reliable than earnings measures ● Stress tested and payable through a ‘normal’ downturn ● Excess cash returns ● Continue to return cash generated in excess of that needed to f
Slide 68: Targeting operational and financial excellence for all stakeholders
Targeting operational and financial excellence for all stakeholders ● Priority lies with two key financial metrics: ● Operating profit margin of 21-22% ● Return on Net Operating Assets (RONOA) of 30% ● Operating margin improvement driven by: ● Higher volumes ● Embedded margin in the landbank ● Opera
Slide 69: Summary
Creating Enhancing Protecting Summary Optimising Realising Reinvesting ● Business in great shape underpinned by excellent and returning land position ● Strong cash generation through the cycle delivering compelling shareholder returns ● Current guidance for operating margin and outlet-led volume gro
Slide 70: Closing remarks
Closing remarks Jennie Daly Chief Executive
Slide 71: Q & A
Q & A 71 Investor and analyst update 25 May 2022
Slide 72: Appendices
Appendices Building a stronger and more resilient business 25 May 2022
Slide 73: Cornerstones of value and a clear strategic focus
Cornerstones of value and a clear strategic focus KPI Land cost as % of average selling price on approvals 1. Land: optimising value from our owned and controlled landbank and our sector leading strategic Landbank years land pipeline % of completions from strategically sourced land Construction Qual
Slide 74: Definitions
Definitions ● Operating profit is defined as profit on ordinary activities before net finance costs, exceptional items and tax, after share of results of joint ventures. ● Net operating assets is defined as net assets less net cash, excluding net taxation balances and accrued dividends. ● Return on