TIDMTW.
RNS Number : 6061R
Taylor Wimpey PLC
02 March 2023
2 March 2023
Taylor Wimpey plc
Full year results for the year ended 31 December 2022
Delivering strong results and well positioned to manage a range
of market conditions
Jennie Daly, Chief Executive, commented:
"We have delivered a strong financial and operational
performance in 2022 with full year operating profit in line with
expectations. We are particularly pleased to have delivered a
strong operating profit margin as a result of tight operational
controls and price discipline."
"In a year marked by two distinct halves, we acted quickly and
decisively to address rapidly changing market conditions in the
second half of the year and continued to focus on operational
excellence and efficiency. While the weaker economic backdrop
continues to impact the near-term outlook, customer interest in our
homes remains good and, whilst it is still early in the year,
trading has shown some signs of improvement compared to Q4
2022."
"Looking forward, we have a strong proposition that is clearly
recognised and valued by our customers, supported by our sharp
operational focus and highly experienced teams. We have a
high-quality, well located landbank and a strong financial position
which underpins our Ordinary Dividend Policy of paying out 7.5% of
net assets, or at least GBP250 million, annually throughout the
cycle."
Group financial highlights:
2022 2021 Change
Revenue GBPm 4,419.9 4,284.9 3.2%
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Operating profit* GBPm 923.4 828.6 11.4%
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Operating profit margin (*) % 20.9% 19.3% 1.6ppt
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Profit before tax GBPm 827.9 679.6 21.8%
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Profit before tax and exceptional
items GBPm 907.9 804.6 12.8%
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Profit for the year GBPm 643.6 555.5 15.9%
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Basic earnings per share pence 18.1 15.3 18.3%
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Adjusted basic earnings per share
pence 19.8 18.0 10.0%
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Ordinary dividend per share pence
(1) 9.40 8.58 9.6%
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Tangible net assets value per share
pence 126.5 118.1 7.1%
-------- -------- -------
Net cash (++) GBPm 863.8 837.0 3.2%
-------- -------- -------
(1.) 2022 Final ordinary dividend of 4.78 pence per share,
subject to shareholder approval and 2022 Interim dividend of 4.62
pence per share.
N.B. Definitions can be found at the end of the Group financial
review
Operational Highlights:
-- Group completions (including JVs) of 14,154 (2021: 14,302)
-- Net sales rate for the year of 0.68 homes per outlet per week (2021: 0.91)
-- UK average selling prices on private completions up 6% to
GBP352k (2021: GBP332k) with the overall average selling price up
4% to GBP313k (2021: GBP300k)
-- Proactive and early response to changing market conditions
from H2 2022: reduced land spend, tightened control of work in
progress (WIP) and cost action announced in January 2023 expected
to generate annualised savings of c.GBP20 million with a c.GBP8
million one-off cost to implement
-- Delivered planned increase in outlets to total of 259 (31
December 2021: 228), providing flexibility and choice in the year
ahead
-- Establishing a new timber frame facility in Peterborough in
2023 to drive efficiencies and security of supply
Responsible business and leader in Sustainability:
-- Developed our Net Zero Transition Plan and announced our
target to reach net zero carbon emissions across our value chain by
2045, ahead of regulation
-- Recognition of ESG progress: Dow Jones Sustainability Index
and Sustainability Yearbook inclusion, rated A- by CDP Climate
Change, highest scoring housebuilder in the Responsibility100
Index
-- We are in final discussions with the Department for Levelling
Up, Housing and Communities (DLUHC) in relation to the long form
agreement with a view to signing, and continue to progress our
remediation schedule
-- Rated five-star for customer service in the Home Builders
Federation (HBF) survey
-- Contributed GBP455 million to local communities in which we
build across the UK via planning obligations (2021: GBP418
million)
-- Launching our Future Homes Standard trials in first half of
2023
Current trading and Outlook
Whilst still early in the year at the start of the Spring
selling season, current trading shows some signs of improvement
from the fourth quarter of 2022. The year-to-date net private sales
rate (w/e 26 February 2023) is 0.62 per outlet per week (2022
equivalent period: 1.02) with the four week average running at 0.66
per outlet per week. This improved sales rate follows recent
reductions in mortgage rates, early signs of stabilised customer
confidence, usual seasonal trading patterns and the benefit of our
focused promotional activity. The cancellations rate was 17% (2022
equivalent period: 14%). The level of down valuations remains
low.
While it is encouraging to see an uptick in sales and ongoing
robust customer interest in our homes, as previously announced, our
reservation rate is significantly lower than in recent years as
affordability concerns weigh, particularly for first time buyers,
and we have reflected this in our build programmes for the
year.
As at 26 February, our total order book excluding joint ventures
was GBP2,154 million (2022 equivalent period: GBP2,899 million),
comprising 8,078 homes (2022 equivalent period: 10,934 homes).
Accordingly, assuming prevailing market conditions continue and
given a challenging planning backdrop, we currently expect 2023
completions to be in the range of 9,000 to 10,500, broadly
equivalent to a net sales rate assumption of 0.5 to 0.7, with
completions more weighted to the second half, reflecting the lower
sales rate since Q3 2022.
Based on the quality of our order book we expect average pricing
for private completions in the first half of 2023 to be at a
similar level to the GBP367k achieved on completions in H2 2022. We
remain focused on building a strong order book to optimise value as
we look ahead.
Looking forward, our business is well positioned with a clear
strategy focused on operational excellence, delivering value from
our high-quality landbank and strong financial position. While we
remain highly selective in our land acquisition and focused on
continued tight cost and work in progress management, we remain
agile and ready to respond quickly to changing market
conditions.
-Ends-
A presentation to analysts will be hosted by Chief Executive
Jennie Daly and Group Finance Director Chris Carney, at 9am on
Thursday 2 March 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 March 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 TaylorWimpey@fgsglobal.com
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. Our purpose is to deliver great homes and
create thriving communities.
For further information please visit the Group's website:
www.taylorwimpey.co.uk/corporate
Follow us on Twitter @TaylorWimpeyplc
Overview: Built on resilience
Taylor Wimpey is a strong and resilient company. We have a
high-quality landbank with a significant strategic land pipeline, a
strong balance sheet and experienced and dedicated employees. Given
the cyclical nature of our industry, central to our strategy is our
ability to navigate changing economic conditions and we are
committed to creating value for all our stakeholders throughout the
cycle.
During 2022 we maintained strong operational focus and delivered
an excellent financial performance in line with expectations with
Group operating profit of GBP923.4 million, a record for Taylor
Wimpey (2021: GBP828.6 million), and an operating profit margin up
160bps to 20.9% (2021: 19.3%).
2022 was a year of two distinct halves. In the first half of the
year, trading conditions continued to be resilient despite
inflationary pressures in the wider economy and rises in the Bank
of England base rate. Following the mini budget of 23 September
there was a sharp and significant increase in mortgage rates and
this, materially reduced customer confidence and affordability,
which inevitably impacted new home sales across the sector.
Despite these challenges we delivered 2022 full year results in
line with expectations. Total Group completions (incl. JVs) were
14,154 (2021: 14,302). UK home completions (incl. JVs) were 13,773
(2021: 14,087), which included 2,920 affordable homes (2021: 2,501)
equating to 21% of total completions (2021: 18%). UK average
selling prices on private completions increased by 6% to GBP352k
(2021: GBP332k) with the overall average selling price increasing
by 4% to GBP313k (2021: GBP300k). Pricing discipline was a core
focus for the Group throughout the year, especially given the
inflationary backdrop and continuing planning constraints, and we
saw continued pricing strength in the second half with average
selling prices on private completions in the UK at GBP367k.
Overall, year on year house price inflation of 8% for 2022, more
than offset the 8% build cost inflation experienced in our
operations. Profit for the year was GBP643.6 million (2021:
GBP555.5 million).
Our forward order book as at 31 December 2022 was valued at
GBP1,941 million (31 December 2021: GBP2,550 million), excluding
joint ventures, which represents 7,499 homes (31 December 2021:
10,009 homes).
Given our strong financial position and a high-quality and
well-located landbank, the Group has been able to be highly
selective in landbuying in the last six months. We continue to be
highly cash generative with year end net cash of GBP863.8 million
(2021: GBP837.0 million), after returning GBP473.8 million to
investors by way of dividend and share buybacks. This strong
performance, ahead of expectations, reflected the proactive actions
taken amidst changing market conditions.
Operational focus
As outlined at our investor and analyst update in May 2022, we
have intensified our focus on driving operational excellence
throughout the business. As the economic backdrop evolved, this
focus positioned us well to increase the pace of implementation,
remain agile and adapt amidst changing market conditions and
mitigate risk through the levers available to us. We further
tightened all areas of operations with a particular focus on work
in progress control and restricting discretionary spend and
recruitment as well as significantly reduced landbuying.
As announced in our January 2023 trading update, we entered into
consultation on a series of business changes to optimise our
performance and in response to market conditions, targeting
annualised savings of around GBP20 million, with an anticipated
cost to achieve these of c.GBP8 million.
The consultation processes across the regional businesses have
now either closed or are anticipated to conclude in the near
future. This process has unfortunately resulted in some
redundancies and where this has been the outcome, we have put
additional support in place for the individuals concerned and the
wider teams.
This has also resulted in changes to our business structure,
with the closure of our Oxfordshire business and the transfer of
land and outlets to neighbouring businesses. The proposed changes
will not affect our existing market coverage or ability to deliver
volumes from our landbank, nor our ability to deliver high-quality
product and service to our customers.
Given the difficult planning backdrop, we are pleased to have
delivered our planned increase in outlet numbers following the
accelerated landbuying of prior years, which gives us flexibility
and choices that will be of significant value. We have aligned our
build schedules to reflect the lower anticipated sales rates in the
near term. Our teams are aligned and engaged in adapting to the
changing market and we have trained our Sales Executives to operate
in a tougher selling environment.
In the year, 52% of our completions were sourced from the
strategic pipeline (2021: 50%). Despite continuing delays in
plan-making across the country, our high-quality strategic land
pipeline remains a key strength both as an important input to the
short term landbank and in providing an enhanced supply of land
with greater control over the planning permissions we receive.
However, we expect the pace of strategic land conversions to be
impacted by the current planning backdrop.
We anticipate that the planning environment will remain
difficult for the foreseeable future with a shortage of resources
and delays in both the strategic and development management areas
of the planning system. Proposed changes to the National Planning
Policy Framework announced by the Government in December 2022 are
likely to lead to a reduced land supply and less homebuilding in
future years. Our strong landbank and pipeline of sites already in
planning is a key competitive advantage in this challenging
planning environment.
The Competition and Markets Authority (CMA) this week confirmed
that it is to launch an independent market study of housebuilding.
We look forward to engaging constructively with the CMA as the
study progresses.
Priorities for 2023
We will continue to develop and evolve our customer offering to
ensure an appropriate balance between sales rate and price in all
our markets, whilst also working to further improve our customer
service.
Given prevailing build cost inflation of 9-10%, we will continue
to ensure tight cost management and WIP control, aligning build to
sales rates on a site-by-site basis.
Our focus on building a strong order book will allow us to
optimise price going into 2024, and as a result, not all
reservations taken between now and the end of September will be for
completion in 2023.
Having announced our net zero target backed by a detailed
transition plan, we will further step up our efforts and focus on
its implementation and communication across our business.
Commitment to sustainability
Cladding fire safety
It is our long held view that leaseholders should not have to
pay for the cost of 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 actions, first
committing funds to remediation of ACM cladding in 2017. Having
already committed GBP165 million to remediation work, we
voluntarily signed the Government's Building Safety Pledge for
Developers in April 2022, and made an additional GBP80 million
provision, bringing our total financial commitment to GBP245
million.
We are in final discussions with Department for Levelling Up,
Housing and Communities (DLUHC) with a view to signing the Long
Form Agreement which makes the principles of the Building Safety
Pledge legally binding. Throughout recent industry negotiations
with Government regarding the contract, we have continued to
remediate affected buildings as planned and we will continue to
progress our remediation schedule in line with the terms of the
final contract.
A total of 207 buildings are within the scope of our existing
provision, around a quarter of which require only the replacement
of wooden balcony beams, which are relatively inexpensive to
replace. The GBP245 million we have provided remains our best
estimate of the cost of our commitments to bring these buildings
into compliance with current fire safety standards.
We have a dedicated team in place to manage our remediation
programme and while we are progressing this as quickly as possible
our programme will take several years to complete given the
availability of qualified advisors and contractors.
Environment and net zero by 2045
We developed our target to reach net zero carbon emissions in
our operations by 2035 and across our value chain by 2045, which
will be five years ahead of regulation. We have submitted our
targets to the Science Based Targets initiative (SBTi) for
independent validation.
We have been included in the Dow Jones Sustainability Index and
Sustainability Yearbook, rated A- by CDP Climate Change and are the
highest scoring housebuilder in the Responsibility100 Index that
assesses FTSE 100 companies on their commitment to key social,
environmental, and ethical objectives.
Timber frame
We plan to expand our timber frame activities with a new
facility in Peterborough that will help fulfil our goals to
increase timber frame usage on our sites and improve visibility and
security of supply, offering both operational and environmental
benefits.
Strategy
Our strategy, as set out in our investor and analyst update in
May 2022, is built on the following 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.
We operate the business with the cycle in mind and benefit from
always prioritising a strong balance sheet. We have and will remain
agile in our approach to land spend and will continue to adjust
build plans to meet anticipated demand to ensure we remain well
prepared for a changing market. The UK has a recognised imbalance
in the supply and demand of new housing and, notwithstanding
shorter term conditions, we continue to see strong structural
medium to long term demand for our homes.
Capital allocation framework
Our priority is to maintain a strong balance sheet with low
adjusted gearing. We use cash generated by the business to fund our
investment in land and work in progress to support and drive future
growth. Our aim is to provide an attractive and reliable income
stream to our shareholders, 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 GBP250 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 policy, we have today announced a final
Ordinary Dividend payment of 4.78p per share, which is subject to
shareholder approval at the Annual General Meeting. With the 2022
Interim Dividend payment of 4.62 pence per share, the total
Ordinary Dividend for the year is 9.40p per share or approximately
GBP332 million.
Our policy remains to return to shareholders surplus cash
generated by the business and which is in excess of that needed by
the Group to fund land investment, working capital, taxation and
other cash requirements, and after the ordinary dividend.
Given the current levels of market uncertainty the Board is not
proposing any return of excess capital at this time but will
continue to review this position throughout the year.
Board changes
At the AGM in April 2022, Pete Redfern stepped down from the
Board following almost 15 successful years as Chief Executive.
Jennie Daly, formerly Group Operations Director, was appointed to
the role of CEO following the AGM. She has almost 30 years of
experience in the housebuilding and land and planning industries,
with excellent relationships across all stakeholders. Jennie joined
Taylor Wimpey in 2014 from Redrow Plc where she was Managing
Director of its Harrow Estates business.
As previously announced, Irene Dorner will step down from the
role of Chairman following the 2023 AGM in April. Irene will stay
on the Board as a Non Executive Director following the conclusion
of the AGM. Robert Noel will succeed Irene as Chair, following the
AGM. Rob joined the Board as an Independent Non Executive Director
in October 2019 and subsequently became the Senior Independent
Director in April 2020 and for the last year has been the Board's
Employee Champion, responsible for championing the employee voice
in the boardroom and strengthening the link between the Board and
employees. His appointment follows a thorough search process which
considered both internal and external candidates. He has over 30
years' experience in the property sector, including eight years as
the CEO of Land Securities Group PLC. Rob is also Chair of
Hammerson plc. His vast experience provides excellent commercial
experience and continuity of leadership as we face a changing
market environment.
With effect from 1 June 2022 Mark Castle and Clodagh Moriarty
were appointed as Independent Non Executive Directors. Mark has
significant operational experience in all aspects of the
construction sector and Clodagh has 20 years of varied
customer-focused experience across retail, strategy, digital
transformation and e-commerce.
Operational review
Our operational review focuses on the UK (unless stated
otherwise) as the majority of metrics are not comparable in our
Spanish business. There is a short summary of the Spanish business
in the Group financial review. The financial review is presented at
Group level, which includes Spain, unless otherwise indicated.
Joint ventures are excluded from the operational review and are
separated out in the Group financial review, unless stated
otherwise.
Our Key Performance Indicators (KPIs)
Our key performance indicators align to our strategic
cornerstones.
UK 2022 2021 Change
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Land
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Land cost as % of ASP on approvals 19.0% 16.1% 2.9 ppt
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Landbank years c.6.0 c.6.1 (1.6)%
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% of completions from strategically
sourced land 52% 50% 2.0 ppt
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Operational excellence
----------------------------------------------- ------ ------ --------
Construction Quality Review (average
score / 6) 4.81 4.67 3.0%
----------------------------------------------- ------ ------ --------
Average reportable items per inspection 0.32 0.26 0.06
----------------------------------------------- ------ ------ --------
Health and Safety Injury Incidence
Rate (per 100,000 employees and contractors)
rolling 12 months (***) 166 214 (22.4)%
----------------------------------------------- ------ ------ --------
Employee engagement (annual survey) 93% 91% 2.0 ppt
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Sustainability
----------------------------------------------- ------ ------ --------
Customer satisfaction 8-week score (2.0)
'Would you recommend?' 90% 92% ppt
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Customer satisfaction 9-month score (1.0)
'Would you recommend?' 78% 79% ppt
----------------------------------------------- ------ ------ --------
Reduction in operational carbon emissions
intensity (measured at end of year) 15% 13% 2.0 ppt
----------------------------------------------- ------ ------ --------
N.B. The 8-week 'would you recommend' score for 2022 relates to
customers who legally completed between October 2021 and September
2022, with the comparator relating to the same period 12 months
prior. The 9-month 'would you recommend' score for 2022 relates to
customers who legally completed between October 2020 and September
2021, with the comparator relating to the same period 12 months
prior.
2022 sales, completions and pricing
Total Group completions (including joint ventures) were 14,154
(2021: 14,302). UK home completions (including joint ventures) were
13,773 (2021: 14,087), which included 2,920 affordable homes (2021:
2,501) equating to 21% of total completions (2021: 18%). Our net
private reservation rate for 2022 was 0.68 homes per outlet per
week (2021: 0.91). The cancellation rate for the full year was 18%
(2021: 14%).
UK average selling prices on private completions increased by 6%
to GBP352k (2021: GBP332k) with the overall average selling price
increasing by 4% to GBP313k (2021: GBP300k).
We estimate that market-led house price growth for our regional
mix was c.8% for completions in the 12 months to 31 December 2022
(2021: c.4%).
During 2022, approximately 12% of total sales used the Help to
Buy scheme (2021: 19%) at an average price of GBP319k (2021:
GBP283k).
Help to buy closed for applications in England in the period,
however in Wales the scheme will be extended up to March 2025, with
a new price cap of GBP300k from April 2023.
We ended the year with an order book valued at GBP1,941 million
(31 December 2021: GBP2,550 million), excluding joint ventures,
which represents 7,499 homes (31 December 2021: 10,009 homes). In
the UK, we traded from an average of 232 outlets in 2022 (2021:
225). As guided, we increased our total number of outlets to end
the year with 259 (31 December 2021: 228).
Underlying build cost inflation in 2022 was c.8% (2021: c.4%).
At the start of 2023 prevailing build cost inflation is running at
around 9-10%.
Land
Land is the key driver of value for any housebuilder, and we are
confident we have a high-quality landbank. We measure this by
length, weight, shape, efficiency and quality. Our strategic
pipeline is a competitive advantage in its own right, giving
increased optionality and opportunities to protect value. This
enabled us to reduce our spend as the land market became more
competitive and demand weakened.
The optionality and flexibility provided by our strategic land
portfolio will remain a key differentiator.
Our focus is on progressing planning in our short term landbank
to open new outlets and securing delivery from our strategic land
pipeline, transferring assets to the operational business.
Land prices have not yet moved to reflect current market
conditions. We benefit from a high-quality land position of c.83k
plots as at 31 December 2022 (31 December 2021: c.85k) located in
quality and resilient locations and a strategic pipeline of c.144k
potential plots (31 December 2021: c.145k). Therefore, we can
continue to be highly selective in our landbuying.
As a result of our highly selective landbuying in the second
half of the year, 2022 approvals were c.7k plots, in line with the
half year 2022 position as we reduced our land commitments in light
of market conditions.
A total of 50% of our short term landbank has been strategically
sourced (2021: 49%). During 2022 we acquired 7,716 plots (2021:
14,450). As at 31 December 2022, we were building on or are due to
start in the first quarter of 2023 on 98% of sites with
implementable planning.
The average cost of land as a proportion of average selling
price within the short term owned landbank remains low at 14.0%
(2021: 14.6%). The average selling price in the short term owned
landbank in 2022 increased by 7% to GBP322k (2021: GBP302k).
During 2022, we added a net c.3k new potential plots to the
strategic pipeline (2021: c.14k) and we converted a further c.4k
plots from the strategic pipeline to the short term landbank (2021:
c.8k plots).
Central and local government
The planning environment continues to be challenging with delays
and resource pressures impacting housing land supply. Proposed
amendments to the National Planning Policy Framework announced by
the Government in December 2022 include positive measures to
support improved quality of design and placemaking.
However, other changes including amendments to the approach to
housing numbers locally, a relaxation of the soundness test for
plan-making and the removal of the need for planning authorities to
maintain a five-year supply of deliverable housing sites could
result in further delays and a shortfall in the supply of
sites.
In addition, the transitional arrangements proposed are likely
to result in a meaningful hiatus in plan-making which is likely to
further constrain the availability of land for housing. We welcome
proposed amendments to the Levelling Up and Regeneration Bill to
help address Nutrient Neutrality constraints that affect more than
74 local authorities in England.
We are engaging with industry, water authorities and central and
local government on the issue of Nutrient Neutrality. We have
established our internal Nutrient Working Group to help our
regional businesses develop effective responses to this issue.
With the introduction of Biodiversity Net Gain requirements in
England later this year, we have published guidance and run
training sessions for our regional businesses and land teams to
support them to manage the risks, costs and opportunities
associated with net gain. An internal working group with
representatives from strategic land, planning, sustainability and
technical functions is helping to guide our approach and we are
collaborating with others in the sector through the Future Homes
Hub.
Customers
Our customer proposition is closely tied to our purpose to build
great homes and create thriving communities. In a more challenging
market, understanding our customer is more important than ever.
We track customer satisfaction using the Home Builders
Federation (HBF) 8-week and 9-month survey results.
In 2022, 90% of customers in the 8-week survey would recommend
us to a friend (2021: 92%). This means we met our target to
maintain a five-star rating. We recognise that o ur score was
slightly lower than last year, and customer service will continue
to be an area of focus for our teams.
We believe that a wider range of customer care and quality
measures are necessary to ensure we are delivering for our
customers. Our 9-month satisfaction scores give us insight into how
customers feel about the homes and places we build over the longer
term. Our score for 2022 was 78% (2021: 79%).
We encourage customers to leave reviews on Trustpilot. At the
end of 2022, with 7,669 reviews, we had a 4 out of 5 star rating
(end of 2021: 4 out of 5) with a trust score of 3.9 out of 5 (2021:
3.9 out of 5).
We have stepped up our sales training and increased our
marketing spend in light of the weaker demand environment. This
includes targeted and personalised incentives for our customers
such as help with deposit or energy bills and more normal option
upgrades.
Our Dynamics customer relationship management system is fully
integrated into our business, allowing us more data insights than
ever to better support and align to the needs of our customers. The
improved data capture is giving us increased insight allowing us to
better target our marketing and have more informed conversations
with our customers.
A typical Taylor Wimpey customer will visit our website a number
of times and is likely to visit the sales centre several times
before reserving a property.
We estimate that in 2022, our first time buyers had an average
joint income of c.GBP66k and second time buyers of c.GBP89k. We
also estimate, the average loan to value for first time buyers was
c.78% without Help to Buy and the majority of our customers were
choosing five-year fixed rate mortgage products in 2022.
New Homes Ombudsman
We signed up to the New Homes Quality Code in November 2022 and
aligned our processes to its requirements. These include enabling
customers to complete a pre-completion inspection and providing a
statement of any incomplete works at move-in as well as details
about service charges and likely maintenance costs for their new
home.
Build quality
Since the introduction of the measure we have led the volume
housebuilders in build quality as measured by the NHBC CQR score,
which measures build quality at key build stages. In 2022, we
scored an average of 4.81 (2021: 4.67) from a possible score of
six, once again the highest score for a volume housebuilder. This
compares with an industry benchmark group average score of 4.6.
We aim to improve this further by ensuring our quality assurance
processes are embedded at every stage of the build. We invest in
training and process improvements to ensure consistently high
standards and we prevent quality issues through inspections
throughout the build process.
Quality is incentivised from the top of the organisation with a
proportion of our Executive Incentive Scheme linked to customer
service and build quality, and this is also one of our Principal
Risks. We also integrate customer service and quality into our all
employee bonus scheme.
Placemaking
Good placemaking ensures our teams plan, design, layout and
deliver schemes that become successful and sustainable new
communities, where our customers can enjoy a good quality of
life.
We have clear placemaking standards based on Building for a
Healthy Life and aligned with the National Design Guide and
National Model Code. All new schemes are reviewed during design
development and then signed off by our Director of Design (a
qualified architect and urban designer) before they can proceed to
planning application to ensure consistent design quality.
In 2022, we contributed GBP455 million to local communities in
which we build across the UK via planning obligations (2021: GBP418
million). This funded a range of infrastructure and facilities
including affordable housing, green space, community, commercial
and leisure facilities, transport infrastructure, heritage
buildings and public art. We aim to install infrastructure at an
early stage of the build process to enhance our schemes and help
the new community become established quickly. We also invest in
public and community transport, walkways and cycle paths. In 2022,
67% of our UK completions were within 500 metres of a public
transport node and 90% were within 1,000 metres .
Employees
Health and safety
Health and safety is the number one priority at Taylor Wimpey
and we will never compromise on this commitment to our people and
everyone who works on and visits a Taylor Wimpey site. We embed a
safety culture through training, awareness and visible health and
safety leadership and we work closely with our subcontractors on
this.
Our Annual Injury Incidence Rate (AIIR) for reportable injuries
per 100,000 employees and contractors was 166 in 2022 (2021: 214),
remaining well below both the HBF Home Builder Average AIIR of 239
and the Health and Safety Executive construction industry average
AIIR of 333. However, we will continue to seek to improve this.
Around 31% of accidents are slips, trips and falls. Our AIIR for
major injuries per 100,000 employees and contractors was 68 in 2022
(2021: 73).
Culture and people
We have a very strong culture at Taylor Wimpey at every level of
the business, with the core principle to 'do the right thing'. We
continue to benefit from a talented and engaged workforce, as
reflected in our 2022 employee survey with an overall employee
engagement score of over 93% (2021: 91%), with a 54% response rate.
Our voluntary employee turnover rate was 17.7% (2021: 19.0%).
We are pleased to report that Taylor Wimpey was once again
recognised in the NHBC Pride in the Job Awards, achieving a total
of 62 Quality Awards (2021: 72), 15 Seal of Excellence Awards
(2021: 25) and three Regional Awards in 2022 (2021: three).
Skills
During 2022, we directly employed, on average, 5,140 people
across the UK (2021: 5,271) and provided opportunities for on
average a further 11.1k operatives (2021: 11.1k) on our sites.
Building the skills of our current and future workforce is
essential to address current and potential future skills gaps in
our industry and subcontractor base. We are working closely with
subcontractors, suppliers, peer companies, industry associations
and educational organisations to identify and address skills gaps
and upskill our workforce.
During 2022, our Future Skills Group has been exploring the
skills profile our business will need over the medium to long term,
as well as developing a demographic profile for our key trades to
identify any potential gaps in the skills available to meet our
strategic objectives.
We offer a range of entry-level roles such as apprenticeships,
traineeships and graduate programmes to encourage people into our
business, with these positions making up c.9% of our workforce
(2021: 9%). We support our regional businesses to develop local
links with colleges, universities and schools and encourage a
diverse range of candidates to consider careers in housebuilding.
We currently directly employ 675 key trades including apprentices
(2021: 743).
Equality, diversity and inclusion (ED&I)
Equality, diversity and inclusion (ED&I) continues to be a
focus for Taylor Wimpey and we made tangible progress with our
Equality, Diversity and Inclusion Strategy in 2022. We recognise we
have further to go and in 2023 will be publishing the Company's
first Diversity Report, ahead of regulation.
Our aim is to create a workplace where colleagues feel
championed and supported regardless of their background and
identity. By truly embracing our colleagues' diverse perspectives
we can deepen our understanding of our customers and stakeholders,
enhance innovation and creative thinking and continue to drive the
business forward and achieve success.
We have established support structures such as our system of
employee networks sponsored by senior management, to support
employees and actively promote diversity. We have made changes to
our recruitment processes and are training our managers to be aware
of issues such as cultural bias, inclusive leadership and creating
a respectful workplace.
However, although good progress has been made, we and the
housebuilding industry, can and need to do more. We have set
ourselves a number of stretching diversity targets, which are
focused on increasing our female and ethnic representation at
various levels of the business, and which build on our important
early entry programmes. These will help accelerate measurable
change and drive accountability, and will be included in our
Diversity Report.
Our workforce is not yet reflective of the UK's ethnic diversity
with 5% of our employees from a Black, Asian or other minority
ethnic background (2021: 5%) and 2% at regional business management
level. Progress has been made at entry level, with 21% of new
management trainees and 20% of our graduate recruits in 2022 from a
Black, Asian or other minority ethnic background.
In line with the Gender Pay Gap regulations, we calculated our
2022 gender pay gap based on data at the 'snapshot date' of 5 April
2022 and bonuses paid over the preceding 12 months. The
calculations cover all staff employed by Taylor Wimpey UK Ltd plus
the Executive Directors employed by Taylor Wimpey plc as at 5 April
2022. Our mean gender pay gap was 2% still in favour of women (5
April 2021: 6% in favour of women), and the median pay gap also
remains small at 1% in favour of men (5 April 2021: 5% in favour of
women).
As at 31 December 2022, we had a gender mix of 67% male (2021:
68%) and 33% female (2021: 32%) across the Company. Our GMT was 38%
female (2021: 36%) and our Board of Directors was 44% female (2021:
50%).
While we are nearing gender balance at Board and GMT level, we
have more work to do in our regional business management teams.
Women made up 31% of these roles in 2022 (2021: 24%). Our pipeline
is strong with females accounting for 64% of graduate recruits
(2021: 46%) and 38% of management trainees in 2022 (2021: 34%).
More information on the programmes and our road map to further
improvement can be found in our Diversity Report on our
website.
Employee engagement
We are proud of how committed our employees are to the long term
success of the Company and we seek feedback from and engagement
with all employees. This includes regular email updates from the
Chief Executive as well as updates from the GMT and other senior
management. It is important that management is accessible and
visible so in addition to regular visits to the regional businesses
we operate a National Employee Forum (NEF) and Local Employee
Forums (LEF) in our regional businesses where employee
representatives are able to feedback to and ask questions of
members of the Board and other senior management directly.
Sustainability
Our purpose is to build great homes and create thriving
communities. We will do so sustainably, making sure those
communities are themselves sustainable for the future.
We recognise the importance of sustainability which is
integrated throughout our business and has been incorporated as one
of our four key cornerstones of strategy. Our approach encompasses
environmental, social, economic and governance aspects.
Our Environment Strategy is our response to the environmental
crisis and the physical and transition risks posed by climate
change. It sets out how we will play our part in creating a
greener, healthier future for our customers, colleagues and
communities, with ambitious targets up to 2030 focusing on climate
change, increasing nature on our developments, cutting waste and
improving resource efficiency.
Environment Strategy performance update
Our strategic objectives Performance update
Climate change Our operational emissions intensity
Achieve our science-based carbon (Scopes 1 and 2), has decreased
reduction target: by 15% against our 2019 baseline.
- Reduce operational carbon In 2022, emissions intensity
emissions intensity by 36% by was 1.37 tonnes of CO(2) e (Scopes
2025 from a 2019 baseline 1 and 2) per 100 sqm of completed
- Reduce Scope 3 emissions by homes (2021: 1.41).
52.8% per 100 sqm of completed The Scope 3 element of our target
floor area from a 2019 base was updated this year as part
year (based on a reduction of of the development of our net
46.2% in absolute emissions zero commitment. It has been
against the base year). (New submitted for validation to
Target) the Science Based Targets initiative.
We will report progress against
our Scope 3 target from next
year.
---------------------------------------
Nature Some of our sites are already
Increase natural habitats by integrating a biodiversity net
10% on new sites from 2023 and gain approach and this will
include our priority wildlife be rolled out to all new sites
enhancements from 2021. in England and Wales from late
2023. We are now integrating
hedgehog highways and bug hotels
or bee bricks on new sites.
We have prepared guidance on
bee hives, bat boxes and bird
boxes for launch in 2023.
---------------------------------------
Resources and waste 98% of construction waste recycled
Cut our waste intensity by 15% (2021: 97%).
by 2025 and use more recycled We have reduced waste intensity
materials. by 12% against our 2019 baseline,
on track to meet our target
By 2022, publish a 'Towards of 15% reduction by 2025.
Zero Waste' strategy for our We have developed our Towards
sites. Zero Waste Strategy and Action
Plan and will publish more details
in our Sustainability Supplement.
This includes a plan for capturing
data on use of recycled materials.
---------------------------------------
A full summary of our Environmental Strategy and progress
against targets will be published in our Annual Report and Accounts
2022 and Sustainability Supplement and ESG Addendum 2022.
Climate change and net zero
We are proud to announce that from 2045 Taylor Wimpey will be a
net zero business.
Our approach to climate change aims to reduce emissions from our
business and value chain, to manage the business risk, and to
prepare for the future impacts of climate change on our business,
supply chain and customers. We take a science-based approach and
aim to continually review and improve performance.
We were one of the first UK homebuilders to set science-based
targets across our value chain, including a target for our
operational emissions that is consistent with reductions required
to keep warming to 1.5 degrees. We are the only volume homebuilder
to hold the Carbon Trust Standard for our approach to carbon
management.
In 2022 we went further to develop our short and long term
science-based targets, net zero dates and Net Zero Transition Plan
committing to reduce our climate footprint ahead of the UK's 2050
target. The two key commitments in our strategy are to achieve:
- Net zero emissions in our operations by 2035 (Scopes 1 and
2)
- Net zero emissions across our value chain by 2045 (Scope 1, 2
and 3) (comprising at least a 90% absolute reduction and
neutralising residual emissions).
Our target was developed with the Carbon Trust in line with the
requirements of the SBTi Corporate Net Zero Standard. It has been
submitted for validation by the Science Based Targets initiative
and we expect to receive this during 2023.
Our Transition Plan comprises a four-stage roadmap detailing the
actions we will take to achieve our overall commitment and
supporting targets, incorporating both new and existing workstreams
such as the construction of low and zero carbon homes, increasing
the use of low carbon construction materials including timber
frame, transitioning to 100% renewable electricity, reducing or
replacing fossil fuels and decarbonising our fleet.
Our net zero target and roadmap will enable us to reduce
emissions in line with the 1.5deg ambition of the Paris Agreement.
It will support the wider transition to a low carbon economy
through the changes we are making to our homes, enabling customers
to reduce their emissions, and through our collaboration with
suppliers to reduce embodied carbon in the homes and developments
we build.
Further details of our plan will be included within our Annual
Report and Accounts 2022.
Other actions in 2022 included:
-- Reduced operational emissions intensity (Scopes 1 and 2), by
15% against our 2019 baseline with absolute operational emissions
falling by 26% over the same period
-- Undertook detailed scenario analysis to inform our Transition
Plan which considered our level of exposure to 15 transition risks
in a low carbon economy as well as modelling the physical impacts
of climate change on our assets and supply chain
-- Linked our executive bonus scheme to our emissions reduction
target and development of our net zero strategy
We report against the recommendations of the Taskforce on
Climate-related Financial Disclosures (TCFD) in our Annual Report
and Accounts. We also publish a Sustainability Supplement and ESG
Addendum with additional data and the Sustainability Accounting
Standards Board (SASB) recommended disclosures for our sector.
ESG credentials
We participate in several global and sectoral benchmarks. We are
a constituent of the Dow Jones Sustainability Europe Index and
included in the S&P Sustainability Yearbook 2022. We are a part
of FTSE4Good, have an AA rating from MSCI and have received an ESG
Risk Rating of Low from Sustainalytics and are included in its 2023
Top-Rated ESG Companies List. We are a member of Next Generation,
the sustainability benchmark for UK housebuilders, and ranked
fourth in 2022. We disclose our performance to CDP and received the
following scores: CDP Climate Change A- (2021: A-), CDP Water B
(2021: B), and CDP Forests B- for deforestation and forest risk
commodities (2021: B-).
Opportunities in green building
Over the next five years there will be significant changes to
new build homes in the UK reflecting the UK's climate change
targets. Our target is to reduce emissions from customer homes in
use by 75% by 2030, and we are testing a range of technologies and
enhanced fabric standards to achieve this.
With the phasing in of the new Part L, F & O regulations in
England from June 2022, Parts L & F in late summer 2022 for
Wales and Section 6 in Scotland from October 2022, our homes will
have enhanced fabric standards with additional features that may
include wastewater heat recovery systems, triple glazing and PV
panels. Collectively, this will achieve a 31% reduction in carbon
emissions compared with our previous specification.
We are also preparing for the phase-out of gas central heating
systems from 2025 in England and Wales (2024 in Scotland) and, in
2023, will complete five pilot plots to Future Homes Standard (FHS)
at our site in Sudbury to better understand the challenges and
opportunities presented by the FHS.
Investing in the long term through expansion of timber frame
activities
Timber frame can have a lower carbon footprint than traditional
'brick and block' building techniques due to the materials and use
of off site manufacture (OSM) techniques. Other potential benefits
include less waste, improved transport efficiency, and more
airtight components. We have an internal target to increase our use
of timber frame.
We are opening our own timber frame production facility in
Peterborough, that will help fulfil our goals to increase timber
frame usage on our sites, improve visibility of supply and offer
operational and environmental benefits.
We view timber frame as a low risk approach to supporting our
environmental aims and our own timber frame factory will support
our work to achieve our net zero target. The first delivery from
the factory is expected in late 2023. The facility is future
proofed to allow for both volume and product expansion.
This is a cost effective solution for establishing internal
control and visibility and security of supply and will improve
process and logistics efficiencies. This will also slightly reduce
our reliance on bricklaying resources and build timeline, with
early commencement of all follow-on trades.
Nature and resource efficiency
Our Environment Strategy targets include Biodiversity Net Gain
requirements and go beyond regulation to deliver priority wildlife
enhancements, including hedgehog highways, bug hotels, bird boxes
and wildlife friendly planting.
We developed our Towards Zero Waste Strategy and action plan in
2022, which sets out a three year programme of action and capacity
building in relation to resource use and waste across all stages of
development. We are working with our suppliers to reduce waste from
packaging, increase recycling and identify opportunities to
increase use of sustainable and recycled materials.
Managing supply chain risk
We have worked on improving our supplier risk process for a
number of years and as a result our visibility and understanding of
our supply chain has increased considerably. This encompasses risks
across the whole supply chain, rather than just our first-tier
suppliers.
Supplier risk is measured as instability in the supply chain and
can cover any number of scenarios such as, global or national
shortages of products, supplier insecurity such as financial issues
or supplier quality and delivery problems. Our supply chain
strategy is to understand the risks at the various stages of the
supply chain and put in place accordant strategies.
This work has resulted in a change to a number of our supply
chain routes to improve material availability.
We are also developing our approach to environmental and social
risks in our supply chain, integrating disclosure requirements into
our tender processes for key group suppliers.
Taylor Wimpey Logistics (TWL)
TWL provides value added services to our regional businesses by
primarily providing pre-kitted build packs of products when they
are needed at each build-stage of production on-site.
This aids production, improves speed of build and significantly
reduces site traffic. In addition to delivery of pre-kitted
products to site, it provides services that support our regional
businesses including:
-- Take off and scheduling services
-- Strategic stock holding with annual pricing to safeguard
against fluctuating supplier performance and price volatility
-- Ensuring adherence and alignment to our standardisation /
stock keeping unit reduction procurement strategy
Charity partnerships
We focus on three priorities that are connected to our business:
aspiration and education in disadvantaged areas, tackling
homelessness and local projects that have a direct link to our
regional businesses and developments.
During 2022, we continued our partnership with our national
charities as well as local charity partners across the UK,
including The Youth Adventure Trust, End Youth Homelessness,
Crisis, CRASH, and St Mungo's. In total, during 2022, we donated
and fundraised c.GBP1 million for registered charities (2021:
c.GBP1 million). This included supporting St Mungo's Construction
Skills Training Centres to help people recovering from homelessness
to gain new skills and find employment in the construction
industry.
Group financial review
Income statement
Group revenue was GBP4,419.9 million in 2022 (2021: GBP4,284.9
million), with Group completions, excluding JVs being 1.5% lower at
13,932 (2021: 14,144). The small volume reduction was offset by
increases in average selling prices as UK average selling prices on
private completions increased by 6.1% to GBP352.4k (2021:
GBP332.2k), primarily due to house price inflation. The increase in
total UK average selling prices was 4.3% to GBP312.8k (2021:
GBP299.8k) as a result of the greater proportion of affordable
housing in 2022 (21%) than the prior period (2021: 18%).
Group gross profit increased to GBP1,132.4 million (2021:
GBP1,027.0 million), representing a gross margin of 25.6% (2021:
24.0%). The increase in margin over the prior year was driven
primarily by house price inflation, which more than offset build
cost inflation in the year.
Net operating expenses of GBP304.9 million (2021: GBP328.8
million) includes GBP80.0 million (2021: GBP125.0 million) of
exceptional costs relating to the cladding fire safety provision,
which is detailed below. Excluding these exceptional costs the net
operating expenses were GBP224.9 million (2021: GBP203.8 million),
which was predominantly made up of administrative costs of GBP220.7
million (2021: GBP211.0 million). The increase in administrative
costs over the comparative year was driven mainly by the annual
salary review and the pay benchmarking exercise undertaken in the
prior year, and associated on-costs, being in place for the full
year. This resulted in a profit on ordinary activities before net
finance costs of GBP827.5 million (2021: GBP698.2 million),
GBP907.5 million (2021: GBP823.2 million) excluding exceptional
items.
During the year, completions from joint ventures were 222 (2021:
158). As a result of the increased joint venture completions, at a
greater average selling price and gross margin than 2021, our share
of joint ventures' profits in the year was GBP15.9 million (2021:
GBP5.4 million). When including this in the profit on ordinary
activities before net finance costs the resulting operating profit
was GBP923.4 million (2021: GBP828.6 million), delivering an
operating profit margin of 20.9% (2021: 19.3%). The total order
book value of joint ventures as at 31 December 2022 decreased to
GBP26 million (31 December 2021: GBP74 million), representing 56
homes (31 December 2021: 151).
In March 2021, we announced that we would cover the costs to
bring all Taylor Wimpey apartment buildings going back 20 years
from 1 January 2021, irrespective of height or whether we retain a
legal interest, in line with EWS1 guidance. As a result of this the
Group recorded an additional GBP125.0 million provision to fund
cladding fire safety improvement works which was charged to
exceptional items in line with our policy. In April 2022, we signed
the Government's Building Safety Pledge for Developers, extending
this period to cover all buildings constructed by Taylor Wimpey
since 1992, as well as committing to reimburse any funds allocated
or used for Taylor Wimpey buildings over 18 metres from the
Building Safety Fund. An increase in the provision was recognised
in the year, with GBP80.0 million being recorded as an exceptional
charge.
The net finance expense of GBP15.5 million (2021: GBP24.0
million) principally includes imputed interest on land acquired on
deferred terms, bank interest and interest on the pension scheme,
less interest received.
Profit on ordinary activities before tax increased to GBP827.9
million (2021: GBP679.6 million). The pre-exceptional tax charge
was GBP201.9 million (2021: GBP147.9 million). This represents an
underlying tax rate of 22.2% (2021: 18.4%) which includes a GBP1.7
million credit (2021: GBP2.6 million credit) arising from the
remeasurement of the Group's UK deferred tax assets following the
introduction of the new Residential Property Developer Tax. A tax
credit of GBP17.6 million was recognised in respect of the
exceptional charge (2021: GBP23.8 million). This resulted in a
total tax charge of GBP184.3 million (2021: GBP124.1 million), a
rate of 22.3% (2021: 18.3%).
As a result, profit for the year was GBP643.6 million (2021:
GBP555.5 million).
Basic earnings per share was 18.1 pence (2021: 15.3 pence). The
adjusted basic earnings per share was 19.8 pence (2021: 18.0
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 local residents. The business had a strong
year, completing 381 homes (2021: 215) with average selling price
reducing to EUR383k (2021: EUR417k), due to regional mix. The total
order book as at 31 December 2022 increased to 448 homes (31
December 2021: 324 homes).
Gross margin increased to 29.7% (2021: 24.3%), due to the
increased level of completions and timing variances on the
recognition of sales commissions. This flowed through to an
operating profit of GBP32.6 million (2021: GBP14.6 million) and an
operating profit margin of 26.2% (2021: 19.0%).
The total plots in the landbank stood at 2,544 (31 December
2021: 2,779), with net operating assets ** at GBP89.8 million (31
December 2021: GBP108.9 million).
Balance sheet
Net assets at 31 December 2022 increased by GBP188.1 million
(4.4%), to GBP4,502.1 million (31 December 2021: GBP4,314.0
million), with net operating assets increasing by GBP168.9 million
(4.9%) to GBP3,619.5 million (31 December 2021: GBP3,450.6
million). Return on net operating assets increased to 26.1% (2021:
24.7%) following the increase in operating profit over the year,
compared with the prior year. Group net operating asset turn (*)
was 1.25 times (2021: 1.28).
Land
Land at 31 December 2022 increased by GBP42.6 million in the
year to GBP3,428.3 million as the short term owned number of plots
increased. Land creditors decreased to GBP725.6 million (31
December 2021: GBP806.4 million) as the Group was highly selective
in purchasing land across all geographies, particularly in the
second half of the year. Included within the gross land creditor
balance is GBP43.0 million of UK land overage commitments (31
December 2021: GBP59.0 million). GBP395.0 million of the land
creditors is expected to be paid within 12 months and GBP330.6
million thereafter.
At 31 December 2022 the UK short term landbank comprised 82,830
plots (31 December 2021: 85,376), with a net book value of GBP2.9
billion (31 December 2021: GBP2.9 billion). Short term owned land
comprised GBP2.8 billion (31 December 2021: GBP2.8 billion),
representing 63,088 plots (31 December 2021: 62,660). The
controlled short term landbank represented 19,742 plots (31
December 2021: 22,716).
The value of long term owned land increased to GBP311 million
(31 December 2021: GBP298 million), representing 36,646 plots (31
December 2021: 37,425), with a further total controlled strategic
pipeline of 107,739 plots (31 December 2021: 107,809). Total
potential revenue in the short and long term owned and controlled
landbank increased to GBP61 billion in the year (31 December 2021:
GBP59 billion).
Work in progress (WIP)
Total WIP investment, excluding part exchange and other,
increased to GBP1,725.9 million (2021: GBP1,548.1 million)
following the opening of 104 new outlets in the UK in the year
(2021: 84) and the total number of outlets increased compared with
31 December 2021. The average WIP per UK outlet was largely
consistent at GBP6.4 million (31 December 2021: GBP6.5 million). As
sales rates slowed towards the end of the year controls around new
WIP releases were tightened.
Provisions and deferred tax
Provisions increased to GBP290.3 million (31 December 2021:
GBP245.1 million) due primarily to the GBP80.0 million additional
cladding fire safety provision recognised in the year, partially
offset by utilisation as works have been carried out. In addition,
utilisation of the Ground Rent Review Assistance Scheme ('GRRAS')
provision has continued as claims have been received and processed,
and payments made following the agreement of voluntary undertakings
with the CMA in December 2021.
Our net deferred tax asset of GBP26.0 million (31 December 2021:
GBP26.2 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 GBP20.0 million per annum into an escrow account between
April 2021 and March 2024. Following an initial contribution
totalling GBP10.0 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 98% since then and therefore escrow payments were suspended
on, and from, 1 October 2021.
For the purposes of assessing the TWPS funding level, the
liabilities are measured relative to the yield on government bonds.
Due to the volatility seen in financial markets over the year, the
value placed on the IAS 19 liabilities (pre-IFRIC 14) has changed
significantly, reducing by 32% over the course of the year.
However, the Trustee of the TWPS manages this volatility by
investing assets in a way that's intended to broadly match the
movement in the value of the liabilities. As a result, the net
funding position of the TWPS has remained in an IAS 19 and
technical provisions surplus.
The Group continues to provide a contribution for Scheme
expenses (GBP2.0 million per year) and also makes contributions via
the Pension Funding Partnership (GBP5.1 million per year). Total
Scheme contributions and expenses in the year were GBP7.1 million
(2021: GBP17.4 million) with no further amounts paid into the
escrow account (2021: GBP10.0 million). Further payments into
escrow are subject to quarter-end funding tests and would amount to
an additional GBP5.0 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 December 2022 showed a surplus of GBP26
million and a funding level of 101.5% and as a result no payment
into escrow is due in the first quarter of 2023.
At 31 December 2022, the IAS 19 valuation of the Scheme was a
surplus of GBP76.6 million (31 December 2021: GBP149.9 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 GBP29.9 million at 31
December 2022 (31 December 2021: GBP37.3 million) comprise a
defined benefit pension liability of GBP29.6 million (31 December
2021: GBP37.0 million) and a post-retirement healthcare liability
of GBP0.3 million (31 December 2021: GBP0.3 million).
The Group continues to work closely with the Trustee in managing
pension risks, including management of interest rate, inflation and
longevity risks.
Net cash and financing position
Net cash increased to GBP863.8 million at 31 December 2022 from
GBP837.0 million at 31 December 2021, due to the improved operating
profit in the year, as well as the more selective approach to
landbuying that reduced spend in the second half of the year and
the tight controls on WIP investment put in place towards the end
of the year as sales rates started to slow. Average net cash for
the year was GBP595.7 million (31 December 2021: GBP788.1
million).
Cash generated from operations increased in the year and as a
result led to cash conversion (++++) of 76.3% of operating profit
(2021: 69.4%).
Net cash, combined with land creditors, resulted in an adjusted
gearing (++++++++) of (3.1)% (31 December 2021: (0.7)%).
At 31 December 2022 our committed borrowing facilities were
GBP639 million of which GBP550 million was undrawn. The average
maturity of the committed borrowing facilities at 31 December 2022
was 1.9 years (31 December 2021: 2.9 years). In December 2022 the
Group entered into an agreement to refinance the June 2023 EUR100
million maturing loan notes. The new loan notes will be issued in
June 2023, maturing June 2030. Including the new loan notes the
weighted average maturity is 2.9 years.
Dividends
Subject to shareholder approval at the AGM scheduled for 27
April 2023 the 2022 final ordinary dividend of 4.78 pence per share
will be paid on 12 May 2023 to shareholders on the register at the
close of business on 31 March 2023 (2021 final dividend: 4.44 pence
per share). In combination with the 2022 interim dividend of 4.62
pence per share this gives total ordinary dividends for the year of
9.40 pence per share (2021 ordinary dividend: 8.58 pence per
share). In addition, the Group returned GBP150.0 million in capital
by way of a share buyback in the year, buying back 116,942,362
ordinary shares, of which 25,000,000 have been retained in Treasury
with the remainder cancelled.
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 Condensed Consolidated Financial Statements for
further details of the assessment performed.
Assessment of prospects
We consider the long-term prospects of the Group in light of our
business model. Our strategy to deliver sustainable value is
achieved through delivering high-quality homes for our customers,
in the locations where people want to live, whilst carefully
managing our cost base and the Group's balance sheet.
In assessing the Group's prospects and long-term viability due
consideration is given to:
-- The Group's current performance, including the impacts from
the decline in customer confidence and disposable income arising
during the latter half of 2022, the output from the annual business
planning process that takes these impacts into consideration and
the Group's financing arrangements;
-- The wider economic environment and mortgage market, as well
as changes to Government policies and regulations, including those
influenced by sustainability, climate change and the environment,
that could impact the Group's business model;
-- Strategy and business model flexibility, including build
quality, customer dynamics and approach to land investment; and
-- Principal Risks associated with the Group's strategy and
business model including those which have the most impact on our
ability to remain in operation and meet our liabilities as they
fall due.
Further detail is provided in our Annual Report and Accounts
2022.
Viability disclosure
In accordance with the 2018 UK Corporate Governance Code, the
Directors and the senior management team have assessed the
prospects and financial viability of the Group for a period longer
than the 12 months required for the purpose of the 'going concern'
assessment.
Time period
The Directors have assessed the viability of the Group over a
five-year period, taking account of the Group's current financial
position, current market circumstances and the potential impact of
the Principal and Emerging Risks facing the Group. The Directors
have determined this as an appropriate period over which to assess
the viability based on the following:
- It is aligned with the Group's bottom-up five-year budgeting
and forecasting cycle; and
- Five years represents a reasonable estimate of the typical
time between purchasing land, its progression through the planning
cycle, building out the development and selling homes to customers
from it.
Five years is also a reasonable period for consideration given
the following broader external trends:
- The cyclical nature of the market in which the Group operates,
which tends to follow the economic cycle;
- Consideration of the impact of Government policy, planning
regulations and the mortgage market;
- Long term supply of land, which is supported by our strategic
landbank; and
- Changes in technology and customer expectations.
Principal Risks
The Principal Risks, to which the Group are subject, have
undergone a comprehensive review by the GMT and Board in the
current year. Consideration is given to the risk likelihood based
on the probability of occurrence and potential impact on our
business, together with the effectiveness of mitigations.
The Directors identified the Principal Risks that have the most
impact on the longer-term prospects and viability of the Group, and
as such these have been used in the modelling of a severe but
plausible downside scenario, as:
-- Government policies, regulations and planning (A);
-- Mortgage availability and housing demand (B);
-- Availability and costs of materials and subcontractors (C);
-- Quality and reputation (F); and
-- Cyber security (I)
A range of sensitivity analyses for these risks together with
likely mitigating actions that would be adopted in response to
these circumstances were modelled, including a severe but plausible
downside scenario in which the impacts were aggregated
together.
The impact from "Natural resources and climate change" (H) is
not deemed to be material within the five year forecast period, as
costs associated with the regulatory changes have been included in
the modelling (e.g. updates to Parts L&F of the building
regulations in England and Wales and Future Homes and Buildings
Standard).
Assessment of viability
The Group adopts a disciplined annual business planning process
involving the management teams of the UK regional businesses and
Spain, and the Group's senior management, and is built on a
bottom-up basis. This planning process covers a five year period
comprising a detailed budget for the next financial year, together
with a forecast for the following four financial years
('forecast').
The financial planning process considers the Group's
profitability and Income Statement, Balance Sheet including
landbank, gearing and debt covenants, cash flows and other key
financial metrics over the forecast period. These financial
forecasts are based on a number of key assumptions, the most
important of which include:
- Timing and volume of legal completions of new homes sold,
which includes annual production volumes and sales rates over the
life of the individual developments;
- Average selling prices achieved;
- Build costs and cost of land acquisitions, including the
impact from the updates to Parts L & F of the building
regulations in England and Wales and the Future Homes Standard;
- Working capital requirements; and
- Capital repayment plan, where we have assumed the payment of
the ordinary dividend in line with the current policy, which is a
minimum of GBP250 million or 7.5% of the Group's net assets,
throughout the period.
Stress testing our risk resilience
The assessment considers sensitivity analysis on a series of
realistically possible, but severe and prolonged, changes to
principal assumptions. In determining these we have included
macro-economic and industry-wide projections as well as matters
specific to the Group.
The severe but plausible downside scenario reflects the
aggregated impact of sensitivities, taking account of a further
decline in customer confidence, disposable incomes, and mortgage
availability than has been experienced during the second half of
2022. To arrive at our stress test we have drawn on experience
gained from managing the business through previous economic
downturns and the COVID-19 pandemic.
We have applied the sensitivities encountered at those times, as
well as the mitigations adopted, to our 2023 expectations in order
to test the resilience of our business. As a result, we have stress
tested our business against the following severe but plausible
downside scenario which can be attributed back to the Group's
Principal Risks that have been identified as having the most impact
on the longer-term prospects and viability of the Group.
Volume (Principal Risk: A, B, C, F) - a decline in total volumes
of 30% from 2022 levels, remaining at these reduced levels across
2023 to 2025 before recovering from 2026 back to 2022 levels by
2027.
Price (Principal Risk: B) - a reduction to current selling
prices of 20%, remaining at these levels across 2023 to 2025 before
recovering from 2026 to 2022 levels by 2027.
One-off costs (Principal Risk: A, F, I) - a one-off exceptional
charge and cash cost of GBP150 million for an unanticipated event,
change in Government regulations or financial penalty has been
included in 2023.
Within the scenario build costs are forecast to reduce across
2024 and 2025 with lower volumes reducing pressure on the
availability of materials and resources and land cost remaining
broadly flat as the possible increase in availability due to lower
volumes is offset by a restriction in supply. An estimate for the
cost of the Future Homes and Buildings Standard has been
assumed.
The mitigating actions considered in the model include a
reduction in land investment, a reduction in the level of
production and work in progress held and reducing our overhead base
to reflect the lower volumes.
If this scenario were to occur, we also have a range of
additional options to maintain our financial strength, including: a
more severe reduction in land spend and work in progress, the sale
of assets, reducing the dividend, and or raising debt.
At 31 December 2022, the Group had a cash balance of GBP952
million and access to GBP550 million from a fully undrawn revolving
credit facility, which is expected to be replaced during the
forecast period, together totalling GBP1,502 million. The
combination of both of these is sufficient to absorb the financial
impact of each of the risks modelled in the stress and sensitivity
analysis, individually and in aggregate.
Confirmation of viability
Based on the results of this analysis, the Directors have a
reasonable expectation that the Group will be able to continue in
operation and meet its liabilities as they fall due over the
five-year period of their assessment.
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.
* 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 Annual 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 or loss 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.
The Group uses Alternative Performance Measures (APMs) as
important financial performance indicators to assess underlying
performance of the Group. The APMs used are widely used industry
measures and form the measurement basis of the strategic financial
metrics (operating margin, return on net operating assets, and cash
conversion). A portion of executive remuneration is also directly
linked to some of the APMs. Definitions and reconciliations to the
equivalent statutory measures are included in note 14 of the
Condensed Consolidated Financial Statements.
Shareholder information
The Company's 2023 Annual General Meeting (AGM) will be held at
10:30am on 27 April 2023 in the Gerrards Suite at the Crowne Plaza
Gerrards Cross, Oxford Road, Beaconsfield, HP9 2XE.
Copies of the Annual Report and Accounts 2022 will be available
from 22 March 2023 on the Company's website
www.taylorwimpey.co.uk/corporate. Hard copy documents will be
posted to shareholders who have elected to receive them and will
also be available from our registered office at Gate House,
Turnpike Road, High Wycombe, Buckinghamshire, HP12 3NR from 22
March 2023.
A copy of the Annual Report and Accounts 2022 will be submitted
to the National Storage Mechanism and will be available for
inspection at:
https://data.fca.org.uk/#/nsm/nationalstoragemechanism
Directors' responsibilities
The responsibility statement below has been prepared in
connection with the full Annual Report and Accounts for the year
ended 31 December 2022. Certain parts thereof are not included
within this announcement.
We confirm to the best of our knowledge that:
-- the Group financial statements, which have been prepared in
accordance with UK-adopted international accounting standards, give
a true and fair view of the assets, liabilities, financial position
and profit of the Group; and
-- the Strategic report includes a fair review of the
development and performance of the business and the position of the
Group and Company, together with a description of the Principal
Risks and uncertainties that it faces.
This responsibility statement was approved by the Board of
Directors on 1 March 2023 and is signed on its behalf by:
Irene Dorner, Chairman
Jennie Daly, Chief Executive
Principal Risks and uncertainties
The Board has overall responsibility for risk oversight, for
maintaining a robust risk management and internal control system
and for determining the Group's appetite for exposure to the
Principal Risks to the achievement of its strategy. Our Annual
Report and Accounts 2022 details the full governance procedures and
processes for identification and subsequent monitoring of the risks
undertaken by the Group.
The Audit Committee supports the Board in the management of risk
and is responsible for reviewing the effectiveness of the risk
management and internal control processes during the year.
The Chief Executive is primarily responsible for the management
of the risks with the support of the GMT and other senior managers
located in the business. In line with the 2018 UK Corporate
Governance Code, the Board holds formal risk reviews at least half
yearly and routinely considers risk at each Board meeting as
appropriate. The formal assessment includes a robust consideration
of the Principal Risks to ensure they remain appropriate as well as
a review of the key and emerging risks identified by the business,
their risk profile and mitigating factors. During the year, seven
of our Principal Risks have seen an increase in their inherent or
inherent and residual profile; 'Government policies, regulations
and planning', 'Mortgage availability and housing demand',
'Availability and costs of materials and subcontractors', 'Land
availability', 'Quality and reputation', 'Natural resources and
climate change' and 'Cyber security'. Our Principal Risks are
described in more detail in the tables below.
In addition, the Board also considers emerging risks which could
impact on the Group's ability to deliver its strategy. The emerging
risks are those where the extent and implications are not yet fully
understood but consideration has been given to the potential
timeframe of occurrence and velocity of impact that these could
have on the Group. As part of our risk management process, these
are monitored and reviewed on an ongoing basis and discussed and
agreed by the Board.
Our emerging risks are grouped into the categories listed in the
table below, which also contains some narrative description against
each category indicating example focus areas into which the
identified emerging risks fall.
Category Example focus area
Environmental/climate Unpredictable weather patterns
Operational/build Adaption of building methodologies
Political/economic Geopolitical uncertainty
Technological Artificial intelligence
Social Customer demographics and preferences
Governmental Changing Government policies
The Group considers other specific risk areas recognising the
increasing complexity of the industry in which it operates and
which are in addition to its identified Principal Risks. We
continue to monitor and mitigate the impacts on our supply chain
and labour force and the overall economic market impacting mortgage
availability and demand.
Our Sustainability and Climate Change Risk and Opportunity
Register highlights the material risks and opportunities facing the
Company in relation to sustainability and climate change. In
addition, our climate change-related risks and opportunities are
available as part of our 2022 CDP submission. More information is
available at www.taylorwimpey.co.uk/corporate .
The Principal Risks, their mitigations and key risk indicators
are detailed below:
Residual risk Risk Example key risk indicators,
Description rating appetite mitigations and opportunities
A. Government Moderate Low Example key risk indicators
policies,
regulations - New Government regulations
and planning (e.g. around planning
The industry and climate)
in which - Delays in planning
we operate is - Sentiment towards the
becoming industry (e.g. Cladding
increasingly fire safety remediation)
regulated.
Failure to Key mitigations
adhere - Research conducted to
to Government update technical specification
regulations of our new house type
could impact range, in preparation
our for changes to Building
operational Regulations Parts L &
performance F and the Future Homes
and our Standard (FHS), including
ability to a trial of five FHS-compliant
meet our plots
strategic - Engagement with national
objectives. and local government
Changes to the - Working with HBF and
planning other stakeholders
system or - Consultation with Government
planning agencies
delays could - Member of Future Homes
result Hub
in missed - Ground Rent Review Assistance
opportunities Scheme and agreement reached
to optimise with CMA and majority
our landbank, of freeholders
affecting - Cladding fire safety
profitability remediation and signing
and production of the Government's Building
delivery. Safety Pledge for Developers
Accountability Opportunities
Group To build enhanced collaborative
Technical networks with stakeholders
Director and peers, to monitor
Director of the implications of regulatory
Planning change.
Regional Lead the business in addressing
Managing pressing environmental
Directors issues, including reducing
our carbon footprint and
targeting biodiversity.
--------------- ------------ -----------------------------------------------------------------------
Residual risk Risk Example key risk indicators,
Description rating appetite mitigations and opportunity
--------------- ------------ -----------------------------------------------------------------------
B. Mortgage Moderate Low Example key risk indicators
availability - Interest rate increases
and housing - Levels of unemployment
demand - Volume of enquiries/people
A decline in visiting our developments
the economic - UK household spending/levels
environment, of disposable income
driven - Loan to value metrics
by sustained
growth Key mitigations
in interest - Increase outlets to
rates, provide greater customer
increased cost choice and flexibility
of to respond quickly to
living, low changing market conditions
wage inflation - Review of pricing and
or increasing incentives offered
levels - Monitoring of external
of data (e.g. HBF, mortgage
unemployment, lenders)
could - Strong relationships
result in with mainstream lenders
tightened - Work with Financial
mortgage Services industry to ensure
availability customers receive appropriate
and challenge advice on mortgage products
mortgage
affordability Opportunities
for To continue to develop
our customers stronger working relationships
resulting with established mainstream
in a direct lenders and those wishing
impact to increase volume in
on our volume the new build market.
targets
.
Accountability
UK Sales and
Marketing
Director
Regional Sales
and
Marketing
Directors
--------------- ------------ -----------------------------------------------------------------------
Residual risk Risk Example key risk indicators,
Description rating appetite mitigations and opportunity
--------------- ------------ -----------------------------------------------------------------------
C. Moderate Low-moderate Example key risk indicators
Availability - Material and trade shortages
and - Material and trade price
costs of increases
materials - Level of build quality
and and waste produced from
subcontractors sites
Increase in - Longer build times
housing - Number of skilled trades
demand and
production Key mitigations
or a breakdown - Central procurement
within and key supplier agreements
the supply - Supplier and subcontractor
chain may relationships
further strain - Contingency plans for
the critical path products
availability - Direct trade and apprenticeship
of skilled programmes
subcontractors - Key commodity risk assessment
and matrix
materials and - Regular checks on all
put key suppliers
pressure on - Monitoring of the supply
utility chain
firms to keep
up with Opportunities
the pace of To develop and implement
installation different build methods
resulting in as alternatives to conventional
increased brick and block.
costs and
construction
delays
.
Accountability
Supply Chain
Director
Procurement
Director
Group
Commercial
Director
--------------- ------------ -----------------------------------------------------------------------
Residual risk Risk Example key risk indicators,
Description rating appetite mitigations and opportunity
--------------- ------------ -----------------------------------------------------------------------
D. Attract and Low Moderate Example key risk indicators
retain * Employee engagement score
high-calibre
employees
An inability * Number of, and time to fill, vacancies
to attract,
develop,
motivate - Employee turnover levels
and retain
high-calibre Key mitigations
employees, - Production academy and
together production manager succession
with a failure development programme
to - Site skills project
consider the - Collaboration with major
retention organisations to jointly
and succession address skills shortage
of - Graduate and apprenticeship
key management programmes
could - Management training
result in a - Enhanced remote working
failure procedures
to deliver our - Educational masterclasses
strategic - Salary benchmarking
objectives, a
loss Opportunities
of corporate To further develop in-house
knowledge capability, expertise
and a loss of and knowledge.
competitive
advantage.
Accountability
Group HR
Director
Every employee
managing
people
--------------- ------------ -----------------------------------------------------------------------
Residual risk Risk Example key risk indicators,
Description rating appetite mitigations and opportunity
--------------- ------------ -----------------------------------------------------------------------
E. Land Low Moderate Example key risk indicators
availability - Movement in landbank
An inability years
to secure - Number of land approvals
land at an * Timing of conversions from strategically sourced land
appropriate
cost, the
purchase
of land of Key mitigations
poor quality - Critically assess opportunities
or in the - Land quality framework
wrong location - Engagement with national
or the and local government
incorrect - Review of land portfolio
timing - Obtaining specialist
of land environmental and legal
purchases in advice
relation
to the Opportunities
economic cycle A strong balance sheet
could impact allows us to invest when
future land market conditions
profitability are attractive.
.
A
ccountability
Divisional
Chairs
Regional
Managing
Directors
Regional Land
and
Planning
Directors
Managing
Director
Group
Strategic Land
UK Business,
Land
and
Development
Director
--------------- ------------ -----------------------------------------------------------------------
Residual risk Risk Example key risk indicators,
Description rating appetite mitigations and opportunity
F. Quality and reputation Moderate Low Example key risk indicators
The quality of our - Customer satisfaction
products is key to metrics (9-month and 8 -week)
our strategic objective - Number of NHBC claims
of being a customer-focused - Construction Quality Review
business and in ensuring (CQR) scores
that we do things - Average reportable items
right first time. per inspection found during
If the Group fails NHBC inspections at key
to deliver against stages of the build
these standards and
its wider development Key mitigations
obligations, it could - Customer-ready Home Quality
be exposed to reputational Inspection (HQI)
damage, as well as - Consistent Quality Approach
reduced sales and (CQA)
increased costs. - Quality Managers in the
business
A ccountability - Training on the New Homes
Customer Director Quality Code
UK Head of Production - Ombudsman readiness
Director of Design
Opportunities
To better understand the
needs of our customers enabling
increased transparency of
our build profile.
To lead the industry in
quality standards (our CQR
score) and reduce the number
of reportable items identified
through monitoring defects
at every stage of build.
------------- ------------ --------------------------------------
Residual risk Risk Example key risk indicators,
Description rating appetite mitigations and opportunity
------------- ------------ --------------------------------------
G. Health, safety Low Low Example key risk indicators
and environment - Increase in near misses
The health and safety and fatalities
of all our employees, - Health and safety audit
subcontractors, visitors outcomes
and customers is of - Number of reportable health
paramount importance. and safety incidents
Failure to implement
and monitor our stringent Key mitigations
health, safety and - Embedded HSE system
environment (HSE) - HSE training and inductions
procedures and policies - Mental health training
across all parts of and support for all employees
the business could
lead to accidents
or site-related incidents Opportunities
resulting in serious To lead the industry in
injury or loss of health and safety and to
life. reduce the amount and level
of incidents.
A ccountability
Head of Health, Safety
and Environment
Regional Managing
Directors
------------- ------------ --------------------------------------
Residual risk Risk Example key risk indicators,
Description rating appetite mitigations and opportunity
------------- ------------ --------------------------------------
H. Natural resources Moderate Low Example key risk indicators
and climate change - Energy use & Greenhouse
An inability to reduce gas emissions
our environmental - % Biodiversity net gain
footprint, the challenges - Construction waste generation
of a degraded environment & waste to landfill
including the impacts
of climate change, Key mitigations
nature loss and water - Net Zero Transition plan
scarcity on our business, - Published Environment
supply chain scarcity Strategy
due to environmental - Adoption of Science Based
change and the increasing Targets
desire of our customers - Climate change governance,
to live more sustainably including LEAF committee
could impact our reputation, - Achievement of Carbon
ability to attract Trust Standard
investment and obtain - HBF & investor liaison
planning permission - Training and development
and the delivery of in house and in our supply
our strategic targets. chain
A ccountability - Collection and interpretation
Director of Sustainability of data to drive relevant
Regional Managing actions
Directors
Opportunities
Sustainable homes and developments
attractive to customers.
A sustainable business of
choice for investors.
Advantageous planning positions.
------------- ------------ --------------------------------------
Residual risk Risk Example key risk indicators,
Description rating appetite mitigations and opportunity
------------- ------------ --------------------------------------
I. Cyber security Moderate Low-moderate Example key risk indicators
The Group places increasing - Number of devices with
reliance on IT to critical
conduct its operations and high open vulnerabilities
and the requirement - Number of devices without
to maintain the accuracy latest
and confidentiality patching in place
of its information - Phishing test results
systems and the data - Cyber training completion
contained therein. statistics
A cyber-attack leading - Number of users with administrative
to the corruption, privileges to critical systems
loss or theft of data
could result in reputational Key mitigations
and operational damage. - Complex passwords policy
and multi-factor authentication
A ccountability for remote access
IT Director - Regular security patching
and penetration testing
- Risky logins check
- Intrusion detection and
prevention systems
- Suspected phishing emails
process
- Mandated cyber training
for all staff
- Cyber insurance
- Head of Cyber Security
appointed
- Cyber security KPIs
- Blocked traffic originating
from countries deemed a
threat to the UK
Opportunities
Together with our service
partners, provide a level
of security to reinforce
our reputation as a trusted
partner.
------------- ------------ --------------------------------------
Cautionary note concerning forward looking statements
This report contains certain forward-looking statements. These
statements are made by the Directors and include statements
regarding their current intentions, beliefs and expectations, based
on the information available to them up to the time of their
approval of this report and unless otherwise required by applicable
law, the Company and its Directors undertake no obligation to
update or revise these forward looking statements, nor do they
accept any liability should the future results actually achieved
fail to correspond to the forward-looking statements included in
this report.
By their nature these forward-looking statements involve
uncertainty (including both economic and business risk factors) and
are subject to a number of risks since future events and
circumstances can cause actual results and developments to differ
materially to those anticipated. As such, these forward-looking
statements should be treated with caution.
Nothing in this report should be construed as a profit forecast
and does not constitute or form part of, any offer, invitation or
the solicitation of an offer to purchase, otherwise acquire,
subscribe for, sell or otherwise dispose of, any securities in
Taylor Wimpey plc or any other invitation or inducement to engage
in investment activities and does not constitute a recommendation
to sell or buy any such securities.
Consolidated Income Statement
for the year to 31 December 2022
Before Before
exceptional Exceptional exceptional Exceptional
items items Total items items Total
GBP million Note 2022 2022 2022 2021 2021 2021
========================= ==== ============ =========== ========= ============ =========== =========
Continuing operations
Revenue 2 4,419.9 - 4,419.9 4,284.9 - 4,284.9
Cost of sales (3,287.5) - (3,287.5) (3,257.9) - (3,257.9)
========================= ==== ============ =========== ========= ============ =========== =========
Gross profit 1,132.4 - 1,132.4 1,027.0 - 1,027.0
Net operating expenses 4 (224.9) (80.0) (304.9) (203.8) (125.0) (328.8)
========================= ==== ============ =========== ========= ============ =========== =========
Profit on ordinary
activities
before net finance
costs 907.5 (80.0) 827.5 823.2 (125.0) 698.2
Finance income 5 8.6 - 8.6 2.4 - 2.4
Finance costs 5 (24.1) - (24.1) (26.4) - (26.4)
Share of results of
joint ventures 15.9 - 15.9 5.4 - 5.4
========================= ==== ============ =========== ========= ============ =========== =========
Profit before taxation 907.9 (80.0) 827.9 804.6 (125.0) 679.6
Taxation (charge)/credit 6 (201.9) 17.6 (184.3) (147.9) 23.8 (124.1)
========================= ==== ============ =========== ========= ============ =========== =========
Profit for the year 706.0 (62.4) 643.6 656.7 (101.2) 555.5
========================= ==== ============ =========== ========= ============ =========== =========
2022 2021
========================== ===== =====
Basic earnings per
share 718.1p 15.3p
Diluted earnings per
share 718.0p 15.2p
Adjusted basic earnings
per share 719.8p 18.0p
Adjusted diluted earnings
per share 719.7p 18.0p
========================== ===== =====
All of the profit for the year is attributable to the equity
holders of the Parent Company.
Consolidated Statement of Comprehensive Income
for the year to 31 December 2022
GBP million Note 2022 2021
================================================== ==== ===== =====
Items that may be reclassified subsequently
to profit or loss:
Exchange differences on translation of foreign
operations 6.6 (6.9)
Movement in fair value of hedging instruments (3.5) 4.8
Items that will not be reclassified subsequently
to profit or loss:
Actuarial gain on defined benefit pension schemes 10 3.2 37.9
Tax credit/(charge) on items taken directly
to other comprehensive income 8 0.7 (5.4)
================================================== ==== ===== =====
Other comprehensive income for the year 7.0 30.4
================================================== ==== ===== =====
Profit for the year 643.6 555.5
================================================== ==== ===== =====
Total comprehensive income for the year 650.6 585.9
================================================== ==== ===== =====
All of the comprehensive income for the year is attributable to
the equity holders of the Parent Company.
Consolidated Balance Sheet
at 31 December 2022
GBP million Note 2022 2021
=============================== ==== ========= =========
Non-current assets
Intangible assets 4.2 6.6
Property, plant and equipment 17.3 21.7
Right-of-use assets 26.3 26.5
Interests in joint ventures 74.0 85.4
Trade and other receivables 12.2 27.5
Other financial assets 10 10.0 10.0
Deferred tax assets 8 26.0 26.2
=============================== ==== ========= =========
170.0 203.9
=============================== ==== ========= =========
Current assets
Inventories 9 5,169.6 4,945.7
Trade and other receivables 191.2 168.2
Tax receivables - 1.0
Cash and cash equivalents 952.3 921.0
=============================== ==== ========= =========
6,313.1 6,035.9
=============================== ==== ========= =========
Total assets 6,483.1 6,239.8
=============================== ==== ========= =========
Current liabilities
Trade and other payables (1,130.8) (901.9)
Lease liabilities (7.3) (7.0)
Bank and other loans (88.5) -
Tax payables (7.2) (0.8)
Provisions (106.7) (125.4)
=============================== ==== ========= =========
(1,340.5) (1,035.1)
=============================== ==== ========= =========
Net current assets 4,972.6 5,000.8
=============================== ==== ========= =========
Non-current liabilities
Trade and other payables (407.3) (629.3)
Lease liabilities (19.7) (20.4)
Bank and other loans - (84.0)
Retirement benefit obligations 10 (29.9) (37.3)
Provisions (183.6) (119.7)
=============================== ==== ========= =========
(640.5) (890.7)
=============================== ==== ========= =========
Total liabilities (1,981.0) (1,925.8)
=============================== ==== ========= =========
Net assets 4,502.1 4,314.0
=============================== ==== ========= =========
Equity
Share capital 291.3 292.2
Share premium 777.9 777.5
Own shares 11 (43.1) (14.6)
Other reserves 545.6 541.6
Retained earnings 2,930.4 2,717.3
=============================== ==== ========= =========
Total equity 4,502.1 4,314.0
=============================== ==== ========= =========
Consolidated Statement of Changes in Equity
for the year to 31 December 2022
Share Share Own Other Retained
GBP million Note capital premium shares reserves earnings Total
===================================== ==== ======== ======== ======= ========= ========= =======
Total equity at 1 January
2021 292.2 773.1 (11.5) 543.7 2,419.3 4,016.8
===================================== ==== ======== ======== ======= ========= ========= =======
Other comprehensive (expense)/income
for the year - - - (2.1) 32.5 30.4
Profit for the year - - - - 555.5 555.5
===================================== ==== ======== ======== ======= ========= ========= =======
Total comprehensive (expense)/income
for the year - - - (2.1) 588.0 585.9
New share capital subscribed - 4.4 - - - 4.4
Own shares acquired - - (4.2) - - (4.2)
Utilisation of own shares - - 1.1 - - 1.1
Cash cost of satisfying
share options - - - - (1.9) (1.9)
Share-based payment credit - - - - 13.2 13.2
Tax credit on items taken
directly to statement
of changes in equity 8 - - - - 0.2 0.2
Dividends approved and
paid 13 - - - - (301.5) (301.5)
Total equity at 31 December
2021 292.2 777.5 (14.6) 541.6 2,717.3 4,314.0
===================================== ==== ======== ======== ======= ========= ========= =======
Other comprehensive income
for the year - - - 3.1 3.9 7.0
Profit for the year - - - - 643.6 643.6
===================================== ==== ======== ======== ======= ========= ========= =======
Total comprehensive income
for the year - - - 3.1 647.5 650.6
New share capital subscribed - 0.4 - - - 0.4
Own shares acquired and
cancelled (0.9) - (33.8) 0.9 (117.5) (151.3)
Utilisation of own shares - - 5.3 - - 5.3
Cash cost of satisfying
share options - - - - (5.5) (5.5)
Share-based payment credit - - - - 14.0 14.0
Tax charge on items taken
directly to statement
of changes in equity 8 - - - - (1.6) (1.6)
Dividends approved and
paid 13 - - - - (323.8) (323.8)
Total equity at 31 December
2022 291.3 777.9 (43.1) 545.6 2,930.4 4,502.1
===================================== ==== ======== ======== ======= ========= ========= =======
Consolidated Cash Flow Statement
for the year to 31 December 2022
GBP million Note 2022 2021
====================================================== ==== ======= =======
Profit on ordinary activities before net finance
costs 827.5 698.2
Adjustments for:
Depreciation and amortisation 14.5 15.6
Pension contributions in excess of charge to
the income statement (4.8) (15.2)
Share-based payment charge 14.0 13.2
Loss on disposal of property, plant and equipment 0.3 -
Increase in provisions excluding exceptional
payments 90.9 130.0
====================================================== ==== ======= =======
Operating cash flows before movements in working
capital 942.4 841.8
Increase in inventories (280.4) (293.2)
(Increase)/decrease in receivables (9.9) 32.1
Increase/(decrease) in payables 52.9 (6.0)
====================================================== ==== ======= =======
Cash generated from operations 705.0 574.7
Payments related to exceptional charges (45.9) (15.1)
Income taxes paid (176.9) (123.0)
Interest paid (4.7) (4.7)
====================================================== ==== ======= =======
Net cash generated from operating activities 477.5 431.9
====================================================== ==== ======= =======
Investing activities:
Interest received 6.9 2.1
Dividends received from joint ventures 3.1 8.1
Proceeds on disposal of property, plant and
equipment 1.5 -
Purchase of property, plant and equipment (1.7) (2.5)
Purchase of software (0.4) (2.1)
Investment in pension scheme escrow - (10.0)
Amounts repaid by/(invested in) joint ventures 24.2 (5.9)
Net cash generated from/(used in) investing
activities 33.6 (10.3)
====================================================== ==== ======= =======
Financing activities:
Lease capital repayments (7.6) (6.9)
Proceeds from the issue of own shares - -
Cash received on exercise of share options 0.3 3.6
Purchase of own shares (151.3) (4.2)
Repayment of borrowings - (12.7)
Dividends paid (323.8) (301.5)
====================================================== ==== ======= =======
Net cash used in financing activities (482.4) (321.7)
====================================================== ==== ======= =======
Net increase in cash and cash equivalents 28.7 99.9
Cash and cash equivalents at beginning of
year 921.0 823.0
Effect of foreign exchange rate changes 2.6 (1.9)
====================================================== ==== ======= =======
Cash and cash equivalents at end of year 12 952.3 921.0
====================================================== ==== ======= =======
Notes to the Condensed Consolidated Financial Statements
for the year to 31 December 2022
1. Basis of preparation
These results do not constitute the Group's statutory accounts
for the year ended 31 December 2022 but are derived from those
accounts. Statutory accounts for 2021 have been delivered to the
Registrar of Companies and those for 2022 will be delivered
following the Company's Annual General Meeting. The external
auditors have reported on those accounts; its report was
unqualified, did not contain an emphasis of matter paragraph and
did not contain any statements under section 498 of the Companies
Act 2006.
The consolidated financial statements are prepared in accordance
with UK-adopted international accounting standards. The statutory
accounts have been prepared based on the accounting policies and
method of computations consistent with those followed in the
preparation of the Group's annual financial statements for the year
ended 31 December 2021.
Going concern
Group forecasts have been prepared that have considered the
Group's current financial position and current market
circumstances. The forecasts prepared assess the performance of the
Group over a five year period. The forecasts were subject to
sensitivity analysis together with the likely effectiveness of
mitigating actions. The assessment considers sensitivity analysis
on a series of realistically possible, but severe and prolonged,
changes to principal assumptions. In determining these the Group
has included macro-economic and industry-wide projections as well
as matters specific to the Group.
The severe but plausible downside scenario reflects the
aggregated impact of sensitivities, taking account of a further
decline in customer confidence, disposable incomes, and mortgage
availability than has been experienced during the second half of
2022. To arrive at the stress test the Group has drawn on
experience gained managing the business through previous economic
downturns and the COVID-19 pandemic. As a result, the Group has
stress tested the business against the following severe but
plausible downside scenario which can be attributed back to the
Group's Principal Risks that have been identified as having the
most impact on the longer-term prospects and viability of the
Group. The impact of the Principal Risk "Natural resources and
climate change" is not deemed to be material within the forecast
period, as costs associated with the regulatory changes have been
included in the modelling (e.g. updates to Parts L&F of the
building regulations in England and Wales and Future Homes and
Buildings Standard).
-- Volume - a decline in total volumes of 30% from 2022,
recovering by the end of the forecast period
-- Price - a reduction to current selling prices of 20%,
recovering by the end of the forecast period
-- One-off costs - a one-off exceptional charge and cash cost of
GBP150 million for an unanticipated event, change in Government
regulations or financial penalty has been included in 2023
Within the scenario build costs are forecast to reduce with
lower volumes reducing pressure on the availability of materials
and resources and land cost remaining broadly flat as the possible
increase in availability due to lower volumes is offset by a
restriction in supply. An estimate for the cost of the Future Homes
and Buildings Standard has been assumed.
The mitigating actions considered in the model include a
reduction in land investment, a reduction in the level of
production and work in progress held and reducing our overhead base
to reflect the lower volumes. If this scenario were to occur, we
also have a range of additional options to maintain our financial
strength, including: a more severe reduction in land spend and work
in progress, the sale of assets, reducing the dividend, and or
raising debt. At 31 December 2022, the Group had a cash balance of
GBP952 million and access to GBP550 million from a fully undrawn
revolving credit facility, which is expected to be replaced during
the forecast period, together totalling GBP1,502 million. The
combination of both of these is sufficient to absorb the financial
impact of each of the risks modelled in the stress and sensitivity
analysis, individually and in aggregate.
Based on these forecasts, it is considered that there are
sufficient resources available for the Group to conduct its
business, and meet its liabilities as they fall due, for at least
the next 12 months from the date of these consolidated financial
statements. Consequently the consolidated financial statements have
been prepared on a going concern basis.
Notes to the Condensed Consolidated Financial Statements
for the year to 31 December 2022
2. Revenue
An analysis of the Group's continuing revenue is as follows:
GBP million 2022 2021
==================== ======= =======
Private sales 3,886.1 3,890.3
Partnership housing 476.4 363.1
Land & other 57.4 31.5
==================== ======= =======
4,419.9 4,284.9
==================== ======= =======
3. Operating segments
The Group operates in two countries, the United Kingdom and
Spain.
The United Kingdom is split into five geographical operating
segments, each managed by a Divisional Chair who sits on the Group
Management Team; there are also central operations covering the
corporate functions and Strategic Land. The Group aggregates the UK
operations into a single reporting segment on the basis that they
share similar economic characteristics. In addition each Division
builds and delivers residential homes, uses consistent methods of
construction, sells homes to both private customers and local
housing associations, follows a single UK sales process and
operating framework, is subject to the same macro-economic factors
including mortgage availability and has the same cost of capital
arising from the utilisation of central banking and debt
facilities. As a result, the disclosure reflects the two reportable
segments of the UK and Spain. Revenue in Spain arises entirely on
private sales.
2022 2021
============================= ========= ====== =========
GBP million UK Spain Total UK Spain Total
=============================== ========= ======= ========= ========= ====== =========
Revenue
External sales 4,295.5 124.4 4,419.9 4,208.1 76.8 4,284.9
Result
Profit before joint ventures,
finance costs and exceptional
items 874.9 32.6 907.5 808.6 14.6 823.2
Share of results of joint
ventures 15.9 - 15.9 5.4 - 5.4
=============================== ========= ======= ========= ========= ====== =========
Operating profit (Note 14) 890.8 32.6 923.4 814.0 14.6 828.6
Exceptional items (Note
4) (80.0) - (80.0) (125.0) - (125.0)
=============================== ========= ======= ========= ========= ====== =========
Profit before net finance
costs 810.8 32.6 843.4 689.0 14.6 703.6
Net finance costs (15.5) (24.0)
=============================== ========= ======= ========= ========= ====== =========
Profit before taxation 827.9 679.6
Taxation charge (184.3) (124.1)
=============================== ========= ======= ========= ========= ====== =========
Profit for the year 643.6 555.5
=============================== ========= ======= ========= ========= ====== =========
2022 2021
============================= ==============================
GBP million UK Spain Total UK Spain Total
=============================== ========= ======= ========= ========= ====== ===========
Segment operating assets 5,222.9 207.9 5,430.8 5,013.6 192.6 5,206.2
Joint ventures 74.0 - 74.0 85.4 - 85.4
Segment operating liabilities (1,767.2) (118.1) (1,885.3) (1,757.3) (83.7) (1,841.0)
=============================== ========= ======= ========= ========= ====== ===========
Net operating assets 3,529.7 89.8 3,619.5 3,341.7 108.9 3,450.6
Net current taxation (7.2) 0.2
Net deferred taxation 26.0 26.2
Net cash 863.8 837.0
=============================== ========= ======= ========= ========= ====== ===========
Net assets 4,502.1 4,314.0
=============================== ========= ======= ========= ========= ====== ===========
Notes to the Condensed Consolidated Financial Statements
for the year to 31 December 2022
3. Operating segments (continued)
2022 2021
=================== ===================
GBP million UK Spain Total UK Spain Total
================================ ===== ===== ===== ===== ===== =====
Other information
Property, plant and equipment
additions 1.6 0.1 1.7 2.4 0.1 2.5
Right-of-use asset additions 7.1 0.1 7.2 6.1 0.6 6.7
Software additions 0.4 - 0.4 2.1 - 2.1
Property, plant and equipment
depreciation (4.2) (0.1) (4.3) (4.6) (0.1) (4.7)
Right-of-use asset depreciation (7.2) (0.2) (7.4) (7.1) (0.2) (7.3)
Amortisation of intangible
assets (2.8) - (2.8) (3.6) - (3.6)
================================ ===== ===== ===== ===== ===== =====
4. Net operating expenses and profit on ordinary activities
before net finance costs
Profit on ordinary activities before net finance costs for
continuing operations has been arrived at after
charging/(crediting):
GBP million 2022 2021
======================== ====== =======
Administration expenses 220.7 211.0
Other expenses 70.1 100.3
Other income (65.9) (107.5)
Exceptional items 80.0 125.0
------------------------ ------ -------
Net operating expenses 304.9 328.8
======================== ====== =======
The majority of the other income and other expenses shown above
relates to the income and associated costs arising on the sale of
part exchange properties. These are shown gross with the
comparatives updated to be disclosed on the same basis (grossing up
each by GBP87.2 million for 2021). Also included in other income
and other expenses are profit/loss on the sale of property, plant
and equipment, the revaluation of certain shared equity mortgage
receivables and abortive land acquisition costs.
Exceptional items:
GBP million 2022 2021
============================================== ==== =====
Provision in relation to cladding fire safety 80.0 125.0
============================================== ==== =====
Exceptional items 80.0 125.0
============================================== ==== =====
Cladding fire safety
In 2018 the Group established an exceptional provision for the
cost of replacing ACM on a small number of legacy developments,
which was increased in 2020 to reflect the latest estimate of costs
to complete the planned works. Following the guidance issued by
RICS in 2021 the Group announced an additional GBP125.0 million
provision to fund cladding fire safety improvements and, in line
with Group policy, recognised it as an exceptional item.
In April 2022 the Group signed up to the Government's Building
Safety Pledge for Developers, extending the period covered to all
buildings constructed by the Group since 1992, as well as
committing to reimburse any funds allocated or used for Taylor
Wimpey buildings over 18 metres from the Building Safety Fund. In
the year to 31 December 2022 the Group recognised an increase in
the provision of GBP80.0 million, as an exceptional expense.
Notes to the Condensed Consolidated Financial Statements
for the year to 31 December 2022
4. Net operating expenses and profit on ordinary activities
before net finance costs (continued)
Profit on ordinary activities before net finance costs has been
arrived at after charging:
GBP million 2022 2021
================================================ ======= ======
Cost of inventories recognised as an expense in 3, 135
cost of sales 3,155.7 .0
Property, plant and equipment depreciation 4.3 4.7
Right-of-use asset depreciation 7.4 7.3
Amortisation of intangible assets 2.8 3.6
================================================ ======= ======
5. Finance income and finance costs
GBP million 2022 2021
==================== ==== ====
Interest receivable 8.6 2.4
8.6 2.4
==================== ==== ====
GBP million 2022 2021
======================================================== ====== ======
Interest on bank and other loans (4.8) (5.0)
Foreign exchange loss - (0.8)
======================================================== ====== ======
(4.8) (5.8)
Unwinding of discount on land creditors and other items (18.3) (19.2)
Interest on lease liabilities (0.4) (0.4)
Net interest on pension liability (Note 10) (0.6) (1.0)
======================================================== ====== ======
(24.1) (26.4)
======================================================== ====== ======
Notes to the Condensed Consolidated Financial Statements
for the year to 31 December 2022
6. Taxation charge
Tax (charged)/credited in the income statement is analysed as
follows:
GBP million 2022 2021
===================================================== ======= =======
Current tax:
UK: Current year (179.3) (122.0)
Adjustment in respect of prior years 0.5 2.3
Overseas: Current year (5.4) (2.5)
Adjustment in respect of prior years (0.5) (0.1)
==================================================== ======= =======
(184.7) (122.3)
==================================================== ======= =======
Deferred tax:
UK: Current year 0.4 (2.7)
Adjustment in respect of prior years (0.1) (0.3)
Overseas: Current year (1.7) 1.2
Adjustment in respect of prior years 1.8 -
==================================================== ======= =======
0.4 (1.8)
==================================================== ======= =======
(184.3) (124.1)
==================================================== ======= =======
Corporation tax is calculated at 22.0% (2021: 19.0%) of the
estimated assessable profit for the year in the UK. This includes
corporation tax at the rate of 19.0% for the year and the new 4.0%
residential property developer tax (RPDT) on profits arising from
residential property development activities. RPDT was enacted
during the year with effect from 1 April 2022. Taxation outside the
UK is calculated at the rates prevailing in the respective
jurisdictions. The tax charge for the year includes an exceptional
credit of GBP17.6 million (2021: GBP23.8 million) relating to the
cladding fire safety provision.
The charge for the year can be reconciled to the profit per the
income statement as follows:
GBP million 2022 2021
=============================================================== ======= =======
Profit before tax 827.9 679.6
=============================================================== ======= =======
Tax at the UK corporation tax rate of 22.0% (2021: 19.0%) (182.1) (129.1)
Net over provision in respect of prior years 1.7 1.9
Net impact of items that are not taxable or deductible (5.6) 2.6
Recognition of deferred tax asset relating to Spanish business 1.0 2.2
Other rate impacting adjustments 0.7 (1.7)
=============================================================== ======= =======
Tax charge for the year (184.3) (124.1)
=============================================================== ======= =======
Notes to the Condensed Consolidated Financial Statements
for the year to 31 December 2022
7. Earnings per share
2022 2021
=========================================================================== ======= =======
Basic earnings per share 18.1p 15.3p
Diluted earnings per share 18.0p 15.2p
Adjusted basic earnings per share 19.8p 18.0p
Adjusted diluted earnings per share 19.7p 18.0p
Weighted average number of shares for basic earnings per share - million 3,564.8 3,639.3
Weighted average number of shares for diluted earnings per share - million 3,576.5 3,649.0
=========================================================================== ======= =======
Adjusted basic and adjusted diluted earnings per share, which
exclude the impact of exceptional items and any associated net tax
amounts, are presented to provide a measure of the underlying
performance of the Group. A reconciliation of earnings attributable
to equity shareholders used for basic and diluted earnings per
share to that used for adjusted earnings per share is shown
below.
GBP million 2022 2021
==================================================================== ====== ======
Earnings for basic and diluted earnings per share 643.6 555.5
Adjust for exceptional items (Note 4) 80.0 125.0
Adjust for tax on exceptional items (Note 6) (17.6) (23.8)
==================================================================== ====== ======
Earnings for adjusted basic and adjusted diluted earnings per share 706.0 656.7
==================================================================== ====== ======
8. Deferred tax
Other
Retirement benefit temporary
GBP million Share- based payments Capital allowances Losses obligations differences Total
====================== ===================== ================== ====== ====================== ============ =====
At 1 January 2021 2.9 2.0 5.9 16.9 6.0 33.7
Credit/(charge) to
income 0.9 0.4 1.2 (2.7) (1.6) (1.8)
Charge to other
comprehensive income - - - (5.4) - (5.4)
Credit to statement of
changes in equity 0.1 - - - - 0.1
Foreign exchange - - (0.4) - - (0.4)
====================== ===================== ================== ====== ====================== ============ =====
At 31 December 2021 3.9 2.4 6.7 8.8 4.4 26.2
(Charge)/credit to
income (1.7) 0.4 1.0 (0.9) 1.6 0.4
Credit to other
comprehensive income - - - 0.7 - 0.7
Charge to statement of
changes in equity (1.6) - - - - (1.6)
Foreign exchange - - 0.3 - - 0.3
====================== ===================== ================== ====== ====================== ============ =====
At 31 December 2022 0.6 2.8 8.0 8.6 6.0 26.0
====================== ===================== ================== ====== ====================== ============ =====
Closing deferred tax on UK temporary differences has been
calculated at the tax rates that are expected to apply (based on
currently enacted law) for the period when the asset is realised,
or the liability is settled. Accordingly, the temporary differences
have been calculated at rates between 25% and 29% (2021: between
19% and 25%), depending on when the asset will unwind.
Notes to the Condensed Consolidated Financial Statements
for the year to 31 December 2022
8. Deferred tax (continued)
The net deferred tax balance is analysed into assets and
liabilities as follows:
GBP million 2022 2021
========================= ===== =====
Deferred tax assets 27.4 27.6
Deferred tax liabilities (1.4) (1.4)
========================= ===== =====
26.0 26.2
========================= ===== =====
The new 4% residential property developer tax (RPDT) was enacted
during the year effective from 1 April 2022 and the measurement of
the Group's UK net deferred tax asset at 31 December 2022 reflects
this change. From 1 April 2023, the UK Corporation Tax rate is
legislated to increase to 25%. This increase in rate had been
enacted before 31 December 2021 so has also been reflected in the
measurement of the Group's UK deferred tax asset in both years.
The Group has not recognised temporary differences relating to
tax losses carried forward and other temporary differences
amounting to GBP2.4 million (2021: GBP1.9 million) in the UK and
GBP23.8 million (2021: GBP27.4 million) in Spain. The UK temporary
differences have not been recognised as they are predominantly
non-trading in nature and insufficient certainty exists as to their
future utilisation. The temporary differences in Spain have not
been recognised due to uncertainty of sufficient taxable profits in
the future against which to utilise these amounts.
At the balance sheet date, the Group has unused UK capital
losses of GBP269.5 million (2021: GBP269.5 million). No deferred
tax asset has been recognised in respect of the capital losses at
31 December 2022 (2021: GBPnil) because the Group does not believe
that it is probable that these capital losses will be utilised in
the foreseeable future.
9. Inventories
GBP million 2022 2021
=================================== ======= =======
Land 3,428.3 3,385.7
Development and construction costs 1,725.9 1,548.1
Part exchange and other 15.4 11.9
=================================== ======= =======
5,169.6 4,945.7
=================================== ======= =======
The markets in our core geographies, which are the primary
drivers of our business, continue to trade positively. At 31
December 2022, the Group completed a net realisable value
assessment of inventory, considering each site individually and
based on estimates of sales price, costs to complete and costs to
sell. At 31 December 2022 the provision held in the United Kingdom
was GBP16.0 million (2021: GBP19.3 million) and GBP35.5 million in
Spain (2021: GBP35.5 million).
The table below details the movements on the inventory provision
recorded in the year.
GBP million 2022 2021
================= ===== =====
1 January 54.8 64.4
Net utilised (5.1) (7.0)
Foreign exchange 1.8 (2.6)
================= ===== =====
31 December 51.5 54.8
================= ===== =====
Notes to the Condensed Consolidated Financial Statements
for the year to 31 December 2022
10. Retirement benefit obligations
Total retirement benefit obligations of GBP29.9 million (2021:
GBP37.3 million) comprise a defined benefit pension liability of
GBP29.6 million (2021: GBP37.0 million) and a post-retirement
healthcare liability of GBP0.3 million (2021: GBP0.3 million).
Defined benefit pension scheme
The Group's defined benefit pension scheme in the UK is the
Taylor Wimpey Pension Scheme (TWPS). The TWPS is a funded defined
benefit pension scheme which provides benefits to beneficiaries in
the form of a guaranteed level of pension payable for life. The
level of benefits provided depends on an individual member's length
of service and their salary in the final years leading up to
retirement or date of ceasing active accrual if earlier. Pension
payments are generally increased in line with inflation. The TWPS
is closed to new members and future accrual.
The Group operates the TWPS under the UK regulatory framework.
Benefits are paid to members from a Trustee-administered fund and
the Trustee is responsible for ensuring that the TWPS is
well-managed and that members' benefits are secure. Scheme assets
are held in trust.
The TWPS Trustee's other duties include managing the investment
of scheme assets, administration of scheme benefits and exercising
of discretionary powers. The Group works closely with the Trustee
to manage the TWPS. The Trustee of the TWPS owes fiduciary duties
to the TWPS' beneficiaries. The appointment of the Directors to the
Trustee Board is determined by the TWPS trust documentation.
During 2020, the Group engaged with the TWPS Trustee on the
triennial valuation of the TWPS with a reference date of 31
December 2019. The result of this valuation was a Technical
Provisions deficit at 31 December 2019 of GBP36.0 million.
In March 2021, a new funding arrangement was agreed with the
TWPS Trustee that committed the Group to paying up to GBP20.0
million per annum into an escrow account between April 2021 and
March 2024. The first six months of contributions (GBP10.0 million)
between 1 April 2021 and 30 September 2021 were guaranteed. From 1
October 2021, payments into the escrow account are subject to a
quarterly funding test with the first funding test having an
effective date of 30 September 2021. Contributions to the escrow
are suspended should the TWPS Technical Provisions funding level at
any quarter-end be 100% or more and would restart only if the
funding level subsequently falls below 98%. The funding test at 30
September 2021 showed a funding level of 103% and it has remained
above 98% since then and therefore escrow payments were suspended
on, and from, 1 October 2021. The Group continues to contribute
GBP5.1 million per annum from the Pension Funding Partnership and
GBP2.0 million per annum to cover scheme expenses.
The escrow account, over which the TWPS Trustee holds a fixed
charge, is recognised in other financial assets and at 31 December
2022 was GBP10.0 million (31 December 2021: GBP10.0 million).
Transfers out of the escrow account (either to the TWPS or the
Group) are subject to the 2019 triennial funding arrangement
entered into between the Group and the Trustee and as such the
funds are restricted from use by the Group for other purposes and
are therefore not classified as cash or cash equivalents. Interest
earned by the escrow account is retained within the escrow
account.
On an IAS 19 accounting basis the underlying surplus in the TWPS
at 31 December 2022 was GBP76.6 million (2021: GBP149.9 million).
The terms of the TWPS are such that the Group does not have an
unconditional right to a refund of surplus. As a result, the Group
recognised an adjustment to the underlying surplus in the TWPS on
an IAS 19 accounting basis of GBP106.2 million (2021: GBP186.9
million), resulting in an IFRIC 14 deficit of GBP29.6 million
(2021: GBP37.0 million), which represented the present value of
future contributions under the funding plan.
Notes to the Condensed Consolidated Financial Statements
for the year to 31 December 2022
10. Retirement benefit obligations (continued)
In 2013, the Group introduced a GBP100.0 million Pension Funding
Partnership that utilises the Group's show homes, as well as six
offices, in a sale and leaseback structure. This provides an
additional GBP5.1 million of annual funding for the TWPS. The
assets held within the Pension Funding Partnership do not affect
the IAS 19 figures (before IFRIC 14) as they remain assets of the
Group, and are not assets of the TWPS. At 31 December 2022 there
was GBP75.2 million of property and GBP39.8 million of cash held
within the structure (2021: GBP81.8 million of property and GBP31.0
million of cash). The terms of the Pension Funding Partnership are
such that, should the TWPS be in a Technical Provisions deficit at
31 December 2028, then a bullet payment will be due to the TWPS
equal to the lower of GBP100.0 million or the Technical Provisions
deficit at that time.
The Group continues to work closely with the Trustee in managing
pension risks, including management of interest rate, inflation and
longevity risks. The TWPS assets are approximately 96% hedged
against changes in both interest rates and inflation expectations
on the scheme's long term funding basis that is currently used for
investment strategy purposes. The TWPS also benefits from a bulk
annuity contract which covers some of the largest liabilities in
the scheme, providing protection against interest rate, inflation
and longevity risk.
Accounting assumptions:
The assumptions used in calculating the accounting costs and
obligations of the TWPS, as detailed below, are set by the
Directors after consultation with independent actuaries. The basis
for these assumptions is prescribed by IAS 19 and they do not
reflect the assumptions that may be used in future funding
valuations of the TWPS.
2022 2021
===================================== =========== ===========
At 31 December
Discount rate for scheme liabilities 4.95% 1.85%
General pay inflation n/a n/a
Deferred pension increases 2.30% 2.50%
Pension increases 2.10%-3.65% 2.15%-3.70%
===================================== =========== ===========
The table below shows the impact to the present value of scheme
liabilities of movements in key assumptions.
Impact on
Assumption Change in assumption scheme liabilities Impact on scheme liabilities (%)
=================== =========================== ==================== ================================
Discount rate Decrease by 0.5% p.a. Increase by GBP89m 5.3
Rate of inflation* Increase by 0.5% p.a. Increase by GBP51m 3.0
Life expectancy Members live 1 year longer Increase by GBP65m 3.9
=================== =========================== ==================== ================================
* Assumed to affect deferred revaluation and pensioner increases
in payment.
Notes to the Condensed Consolidated Financial Statements
for the year to 31 December 2022
10. Retirement benefit obligations (continued)
The table below details the movements in the TWPS pension
liability and assets recorded through the income statement and
other comprehensive income.
Present Fair value Asset/(liability) recognised on
GBP million value of obligation of scheme assets balance sheet
==================================== ==================== ================= ====================================
At 1 January 2022 (2,482.3) 2,445.3 (37.0)
Administration expenses - (2.3) (2.3)
Interest (expense)/income (44.9) 44.3 (0.6)
===================================== ==================== ================= ====================================
Total amount recognised in income
statement (44.9) 42.0 (2.9)
===================================== ==================== ================= ====================================
Remeasurement loss on scheme assets - (746.1) (746.1)
Change in demographic assumptions ( 20 .0) - (20.0)
Change in financial assumptions 758.8 - 758 .8
Experience loss (73.6) - (73.6)
Adjustment to liabilities for IFRIC
14 84.1 - 84.1
===================================== ==================== ================= ====================================
Total remeasurements in other
comprehensive income 749.3 (746.1) 3.2
===================================== ==================== ================= ====================================
Employer contributions - 7.1 7.1
Employee contributions - - -
Benefit payments 102.0 (102.0) -
===================================== ==================== ================= ====================================
At 31 December 2022 (1,675.9) 1,646.3 (29.6)
===================================== ==================== ================= ====================================
Fair value Asset/(liability) recognised on
GBP million Present value of obligation of scheme assets balance sheet
================================= =========================== ================= ================================
At 1 January 2021 (2,493.4) 2,404.3 (89.1)
Administration expenses - (2.2) (2.2)
Interest (expense)/income (31.7) 30.7 (1.0)
================================== =========================== ================= ================================
Total amount recognised in income
statement (31.7) 28.5 (3.2)
================================== =========================== ================= ================================
Remeasurement gain on scheme
assets - 102.9 102.9
Change in demographic assumptions 29.3 - 29.3
Change in financial assumptions 131.6 - 131.6
Experience loss (39.0) - (39.0)
Adjustment to liabilities for
IFRIC 14 ( 186.9 ) - (186.9)
================================== =========================== ================= ================================
Total remeasurements in other
comprehensive income (65.0) 102.9 37 .9
================================== =========================== ================= ================================
Employer contributions - 17.4 17.4
Employee contributions - - -
Benefit payments 107.8 (107.8) -
================================== =========================== ================= ================================
At 31 December 2021 (2,482.3) 2,445.3 (37.0)
================================== =========================== ================= ================================
Notes to the Condensed Consolidated Financial Statements
for the year to 31 December 2022
11. Own shares
During the year the Group purchased 116,942,362 of its own
ordinary shares, of which 25,000,000 were transferred to be held in
treasury and the remainder cancelled. The average share price of
the purchased shares was 128.27 pence for a total cost, including
expenses, of GBP151.3 million.
12. Notes to the cash flow statement
Cash and cash equivalents comprise cash at bank and other short
term highly liquid investments with an original maturity of three
months or less.
Movement in net cash
Cash and cash Bank and Total net
GBP million equivalents other loans cash
============================ ============= ============ =========
Balance at 1 January 2021 823.0 (103.6) 719.4
Net cash flow 99.9 12.7 112.6
Foreign exchange (1.9) 6.9 5.0
============================ ============= ============ =========
Balance at 31 December 2021 921.0 (84.0) 837.0
Net cash flow 28.7 - 28.7
Foreign exchange 2.6 (4.5) (1.9)
============================ ============= ============ =========
Balance at 31 December 2022 952.3 (88.5) 863.8
============================ ============= ============ =========
13. Dividends
GBP million 2022 2021
============================================== ===== =====
Proposed
Interim dividend 2022: 4.62p (2021: 4.14p)
per ordinary share of 1p each 162.9 150.8
Final dividend 2022: 4.78p (2021: 4.44p) per
ordinary share of 1p each 169.0 162.0
============================================== ===== =====
331.9 312.8
============================================== ===== =====
Amounts recognised as distributions to equity
holders
Paid
Final dividend 2021: 4.44p (2020: 4.14p) per
ordinary share of 1p each 160.9 150.7
Interim dividend 2022: 4.62p (2021: 4.14p)
per ordinary share of 1p each 162.9 150.8
323.8 301.5
============================================== ===== =====
The Directors recommend a final dividend for the year ended 31
December 2022 of 4.78 pence per share (2021: 4.44 pence per share)
subject to shareholder approval at the Annual General Meeting, with
an equivalent final dividend charge of c.GBP169.0 million based on
the number of shares in issue at the end of the year (2021:
GBP160.9 million). The final dividend will be paid on 12 May 2023
to all shareholders registered at the close of business on 31 March
2023.
In accordance with IAS 10 'Events after the Reporting Period',
the proposed final dividend has not been accrued as a liability at
31 December 2022.
Notes to the Condensed Consolidated Financial Statements
for the year to 31 December 2022
14. Alternative performance measures
The Group uses a number of alternative performance measures
(APMs) which are not defined within UK-adopted international
accounting standards. The Directors use these measures in order to
assess the underlying operational performance of the Group and, as
such, these measures should be considered alongside the statutory
measures. The following APMs are referred to throughout the year
end results.
Profit before taxation and exceptional items and profit for the
period before exceptional items
The Directors consider the removal of exceptional items from the
reported results provides more clarity on the performance of the
Group. They are reconciled to profit before tax and profit for the
period, on the face of the Consolidated Income Statement.
Operating profit and operating profit margin
Throughout the statement, operating profit is used as one of the
main measures of performance. Operating profit is defined as profit
on ordinary activities before net finance costs, exceptional items
and tax, after share of results of joint ventures. The Directors
consider this to be an important measure of the underlying
performance of the Group. Operating profit margin is calculated as
operating profit divided by total revenue.
2022 2021
================================================= ======= =======
Profit on ordinary activities before net finance
costs (GBPm) 827.5 698.2
Adjusted for:
Share of results of joint ventures (GBPm) 15.9 5.4
Exceptional items (GBPm) 80.0 125.0
================================================= ======= =======
Operating profit (GBPm) 923.4 828.6
Revenue (GBPm) 4,419.9 4,284.9
================================================= ======= =======
Operating profit margin 20.9% 19.3%
================================================= ======= =======
Net operating assets
Net operating assets is defined as basic net assets less net
cash, excluding net taxation balances and accrued dividends.
Average net operating assets is the average of the opening and
closing net operating assets of the 12 month period. With return on
net operating assets, the Directors consider this to be an
important measure of the underlying operating efficiency and
performance of the Group.
2022 2021 2020
==================================== ======= ======= =======
Basic net assets (GBPm) 4,502.1 4,314.0 4,016.8
Adjusted for:
Cash (GBPm) (952.3) (921.0) (823.0)
Borrowings (GBPm) 88.5 84.0 103.6
Net taxation (GBPm) (18.8) (26.4) (32.6)
Accrued dividends (GBPm) - - -
==================================== ======= ======= =======
Net operating assets (GBPm) 3,619.5 3,450.6 3,264.8
==================================== ======= ======= =======
Average basic net assets (GBPm) 4,408.1 4,165.4
==================================== ======= ======= =======
Average net operating assets (GBPm) 3,535.1 3,357.7
==================================== ======= ======= =======
Return on net operating assets
Return on net operating assets is defined as rolling 12-month
operating profit divided by the average of opening and closing net
operating assets. The Directors consider this to be an important
measure of the underlying operating efficiency and performance of
the Group.
2022 2021
==================================== ======= =======
Operating profit (GBPm) 923.4 828.6
Average net operating assets (GBPm) 3,535.1 3,357.7
==================================== ======= =======
Return on net operating assets 26.1% 24.7%
==================================== ======= =======
Notes to the Condensed Consolidated Financial Statements
for the year to 31 December 2022
14. Alternative performance measures (continued)
Net operating asset turn
This is defined as 12 month rolling total revenue divided by the
average of opening and closing net operating assets. The Directors
consider this to be a good indicator of how efficiently the Group
is utilising its assets to generate value for shareholders.
2022 2021
==================================== ======= =======
Revenue (GBPm) 4,419.9 4,284.9
Average net operating assets (GBPm) 3,535.1 3,357.7
==================================== ======= =======
Net operating asset turn 1.25 1.28
==================================== ======= =======
Tangible net assets per share
This is calculated 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. The Directors
consider this to be a good measure of the value intrinsic within
each ordinary share.
2022 2021
====================================== ======= =======
Basic net assets (GBPm) 4,502.1 4,314.0
Adjusted for:
Intangible assets (GBPm) (4.2) (6.6)
====================================== ======= =======
Tangible net assets (GBPm) 4,497.9 4,307.4
Ordinary shares in issue (millions) 3,557.0 3,648.6
====================================== ======= =======
Tangible net assets per share (pence) 126.5 118.1
====================================== ======= =======
Net cash
Net cash is defined as cash and cash equivalents less total
borrowings. This is considered by the Directors to be the best
indicator of the financing position of the Group. This is
reconciled in Note 12.
Cash conversion
This is defined as cash generated from operations, which
excludes payments relating to exceptional charges, divided by
operating profit on a rolling 12 month basis. The Directors
consider this measure to be a good indication of how efficiently
the Group is turning profit into cash.
2022 2021
====================================== ===== =====
Cash generated from operations (GBPm) 705.0 574.7
Operating profit (GBPm) 923.4 828.6
====================================== ===== =====
Cash conversion 76.3% 69.4%
====================================== ===== =====
Adjusted gearing
This is defined as adjusted net debt divided by basic net
assets. The Directors consider this to be a more representative
measure of the Group's gearing levels. Adjusted net debt is defined
as net cash less land creditors.
2022 2021
========================= ======= =======
Cash (GBPm) 952.3 921.0
Loans (GBPm) (88.5) (84.0)
========================= ======= =======
Net cash (GBPm) 863.8 837.0
Land creditors (GBPm) (725.6) (806.4)
========================= ======= =======
Adjusted net debt (GBPm) 138.2 30.6
========================= ======= =======
Basic net assets (GBPm) 4,502.1 4,314.0
========================= ======= =======
Adjusted gearing (3.1)% (0.7)%
========================= ======= =======
Adjusted basic and diluted earnings per share
This is calculated as earnings attributed to the shareholders,
excluding exceptional items and tax on exceptional items, divided
by the weighted average number of shares in issue during the
period. The Directors consider this provides an important measure
of the underlying earnings capacity of the Group. Note 7 shows a
reconciliation from basic and diluted earnings per share to
adjusted basic and diluted earnings per share.
Notes to the Condensed Consolidated Financial Statements
for the year to 31 December 2022
15. Post Balance Sheet Events
There were no material subsequent events affecting the Group
after 31 December 2022.
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END
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March 02, 2023 02:00 ET (07:00 GMT)
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