REG - Taylor Wimpey PLC - Taylor Wimpey plc Full Year Results
02/03/2023 07:00
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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 £250 million, annually throughout the cycle."
Group financial highlights:
2022 2021 Change
Revenue £m 4,419.9 4,284.9 3.2%
Operating profit* £m 923.4 828.6 11.4%
Operating profit margin(*†) % 20.9% 19.3% 1.6ppt
Profit before tax £m 827.9 679.6 21.8%
Profit before tax and exceptional items £m 907.9 804.6 12.8%
Profit for the year £m 643.6 555.5 15.9%
Basic earnings per share pence 18.1 15.3 18.3%
Adjusted basic earnings per share pence(††) 19.8 18.0 10.0%
Ordinary dividend per share pence(1) 9.40 8.58 9.6%
Tangible net assets value per share pence(†) 126.5 118.1 7.1%
Net cash (‡) £m 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 £352k
(2021: £332k) with the overall average selling price up 4% to £313k (2021:
£300k)
· 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.£20 million with a c.£8 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 £455 million to local communities in which we build across
the UK via planning obligations (2021: £418 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 £2,154
million (2022 equivalent period: £2,899 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 £367k
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 (http://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 (https://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
£923.4 million, a record for Taylor Wimpey (2021: £828.6 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 £352k (2021: £332k) with the overall average selling price increasing by
4% to £313k (2021: £300k). 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 £367k.
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 £643.6 million (2021: £555.5 million).
Our forward order book as at 31 December 2022 was valued at £1,941 million
(31 December 2021: £2,550 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 £863.8 million (2021: £837.0 million), after returning £473.8
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 £20 million, with
an anticipated cost to achieve these of c.£8 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 £165 million to remediation work, we
voluntarily signed the Government's Building Safety Pledge for Developers in
April 2022, and made an additional £80 million provision, bringing our total
financial commitment to £245 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 £245 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
£250 million annually throughout the cycle. This policy has been stress
tested to withstand conditions beyond what we would consider a normal
downturn, including up to a 20% fall in house prices and 30% decline in
volumes.
In line with our 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 £332 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
Land
Land cost as % of ASP on approvals 19.0% 16.1% 2.9 ppt
Landbank years c.6.0 c.6.1 (1.6)%
% of completions from strategically sourced land 52% 50% 2.0 ppt
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 166 214 (22.4)%
contractors) rolling 12 months(†***)
Employee engagement (annual survey) 93% 91% 2.0 ppt
Sustainability
Customer satisfaction 8-week score 90% 92% (2.0) ppt
'Would you recommend?'
Customer satisfaction 9-month score 78% 79% (1.0) ppt
'Would you recommend?'
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 £352k
(2021: £332k) with the overall average selling price increasing by 4% to
£313k (2021: £300k).
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 £319k (2021: £283k).
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 £300k
from April 2023.
We ended the year with an order book valued at £1,941 million (31 December
2021: £2,550 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
£322k (2021: £302k).
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 our 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.£66k and second time buyers of c.£89k. 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 £455 million to local communities in which we build
across the UK via planning obligations (2021: £418 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 (Scopes 1 and 2), has decreased by 15%
against our 2019 baseline. In 2022, emissions intensity was 1.37 tonnes of
Achieve our science-based carbon reduction target: CO(2)e (Scopes 1 and 2) per 100 sqm of completed homes (2021: 1.41).
- Reduce operational carbon emissions intensity by 36% by 2025 from a 2019 The Scope 3 element of our target was updated this year as part of the
baseline development of our net zero commitment. It has been submitted for validation
to the Science Based Targets initiative. We will report progress against our
- Reduce Scope 3 emissions by 52.8% per 100 sqm of completed floor area from a Scope 3 target from next year.
2019 base year (based on a reduction of 46.2% in absolute emissions against
the base year). (New Target)
Nature Some of our sites are already integrating a biodiversity net gain approach and
this will be rolled out to all new sites in England and Wales from late 2023.
Increase natural habitats by 10% on new sites from 2023 and include our We are now integrating hedgehog highways and bug hotels or bee bricks on new
priority wildlife enhancements from 2021. 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 (2021: 97%).
Cut our waste intensity by 15% by 2025 and use more recycled materials. We have reduced waste intensity by 12% against our 2019 baseline, on track to
meet our target of 15% reduction by 2025.
By 2022, publish a 'Towards Zero Waste' strategy for our sites.
We have developed our Towards 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 1.5° 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.£1 million for registered charities (2021: c.£1
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 £4,419.9 million in 2022 (2021: £4,284.9 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
£352.4k (2021: £332.2k), primarily due to house price inflation. The
increase in total UK average selling prices was 4.3% to £312.8k (2021:
£299.8k) as a result of the greater proportion of affordable housing in 2022
(21%) than the prior period (2021: 18%).
Group gross profit increased to £1,132.4 million (2021: £1,027.0 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 £304.9 million (2021: £328.8 million) includes
£80.0 million (2021: £125.0 million) of exceptional costs relating to the
cladding fire safety provision, which is detailed below. Excluding these
exceptional costs the net operating expenses were £224.9 million (2021:
£203.8 million), which was predominantly made up of administrative costs of
£220.7 million (2021: £211.0 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 £827.5 million (2021: £698.2
million), £907.5 million (2021: £823.2 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 £15.9 million (2021: £5.4 million). When including this in
the profit on ordinary activities before net finance costs the resulting
operating profit was £923.4 million (2021: £828.6 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 £26 million (31 December
2021: £74 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 £125.0
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 £80.0 million being recorded as an
exceptional charge.
The net finance expense of £15.5 million (2021: £24.0 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 £827.9 million (2021:
£679.6 million). The pre-exceptional tax charge was £201.9 million (2021:
£147.9 million). This represents an underlying tax rate of 22.2% (2021:
18.4%) which includes a £1.7 million credit (2021: £2.6 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 £17.6 million was recognised in respect of the exceptional charge (2021:
£23.8 million). This resulted in a total tax charge of £184.3 million (2021:
£124.1 million), a rate of 22.3% (2021: 18.3%).
As a result, profit for the year was £643.6 million (2021: £555.5 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 €383k (2021: €417k),
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 £32.6 million (2021: £14.6 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 £89.8 million (31 December 2021: £108.9 million).
Balance sheet
Net assets at 31 December 2022 increased by £188.1 million (4.4%), to
£4,502.1 million (31 December 2021: £4,314.0 million), with net operating
assets increasing by £168.9 million (4.9%) to £3,619.5 million (31 December
2021: £3,450.6 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 £42.6 million in the year to £3,428.3
million as the short term owned number of plots increased. Land creditors
decreased to £725.6 million (31 December 2021: £806.4 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 £43.0 million of UK land overage commitments (31 December 2021:
£59.0 million). £395.0 million of the land creditors is expected to be paid
within 12 months and £330.6 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 £2.9 billion (31 December
2021: £2.9 billion). Short term owned land comprised £2.8 billion (31
December 2021: £2.8 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 £311 million (31 December
2021: £298 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 £61 billion in the year (31
December 2021: £59 billion).
Work in progress (WIP)
Total WIP investment, excluding part exchange and other, increased to
£1,725.9 million (2021: £1,548.1 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 £6.4 million (31 December 2021: £6.5 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 £290.3 million (31 December 2021: £245.1 million)
due primarily to the £80.0 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 £26.0 million (31 December 2021: £26.2
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 £20.0 million per annum into an escrow
account between April 2021 and March 2024. Following an initial contribution
totalling £10.0 million all further payments into the escrow account are
subject to a quarterly funding test, effective from 30 September 2021. Should
the TWPS Technical Provisions funding position at any quarter end be 100% or
more, payments into the escrow account are suspended and would only restart
should the funding subsequently fall below 98%. The funding test at 30
September 2021 showed a funding level of 103% and has remained above 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 (£2.0
million per year) and also makes contributions via the Pension Funding
Partnership (£5.1 million per year). Total Scheme contributions and expenses
in the year were £7.1 million (2021: £17.4 million) with no further amounts
paid into the escrow account (2021: £10.0 million). Further payments into
escrow are subject to quarter-end funding tests and would amount to an
additional £5.0 million being paid into escrow each quarter if the funding
test is not met at the respective quarter end. The most recent funding test at
December 2022 showed a surplus of £26 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
£76.6 million (31 December 2021: £149.9 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 £29.9 million at 31 December
2022 (31 December 2021: £37.3 million) comprise a defined benefit pension
liability of £29.6 million (31 December 2021: £37.0 million) and a
post-retirement healthcare liability of £0.3 million (31 December 2021: £0.3
million).
The Group continues to work closely with the Trustee in managing pension
risks, including management of interest rate, inflation and longevity risks.
Net cash and financing position
Net cash increased to £863.8 million at 31 December 2022 from £837.0 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 £595.7 million (31 December 2021: £788.1 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 £639 million of
which £550 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 €100 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 £150.0 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 (http://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 £250 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 £150 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 £952 million and access
to £550 million from a fully undrawn revolving credit facility, which is
expected to be replaced during the forecast period, together totalling £1,502
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
(http://www.taylorwimpey.co.uk/corporate) .
The Principal Risks, their mitigations and key risk indicators are detailed
below:
Description Residual risk rating Risk appetite Example key risk indicators, mitigations and opportunities
A. Government policies, regulations and planning Moderate Low Example key risk indicators
The industry in which we operate is becoming increasingly regulated. Failure
to adhere to Government regulations could impact our operational performance
and our ability to meet our strategic objectives. - New Government regulations (e.g. around planning and climate)
Changes to the planning system or planning delays could result in missed - Delays in planning
opportunities to optimise our landbank, affecting profitability and production
delivery. - Sentiment towards the industry (e.g. Cladding fire safety remediation)
Accountability Key mitigations
Group Technical Director - Research conducted to update technical specification of our new house type
range, in preparation for changes to Building Regulations Parts L & F and
Director of Planning the Future Homes Standard (FHS), including a trial of five FHS-compliant plots
Regional Managing Directors - Engagement with national and local government
- Working with HBF and other stakeholders
- Consultation with Government agencies
- Member of Future Homes Hub
- Ground Rent Review Assistance Scheme and agreement reached with CMA and
majority of freeholders
- Cladding fire safety remediation and signing of the Government's Building
Safety Pledge for Developers
Opportunities
To build enhanced collaborative networks with stakeholders and peers, to
monitor the implications of regulatory change.
Lead the business in addressing pressing environmental issues, including
reducing our carbon footprint and targeting biodiversity.
Description Residual risk rating Risk appetite Example key risk indicators, mitigations and opportunity
B. Mortgage availability and housing demand Moderate Low Example key risk indicators
A decline in the economic environment, driven by sustained growth in interest - Interest rate increases
rates, increased cost of living, low wage inflation or increasing levels of
unemployment, could result in tightened mortgage availability and challenge - Levels of unemployment
mortgage affordability for our customers resulting in a direct impact on our
volume targets. - Volume of enquiries/people visiting our developments
- UK household spending/levels of disposable income
Accountability - Loan to value metrics
UK Sales and Marketing Director
Regional Sales and Marketing Directors Key mitigations
- Increase outlets to provide greater customer choice and flexibility to
respond quickly to changing market conditions
- Review of pricing and incentives offered
- Monitoring of external data (e.g. HBF, mortgage lenders)
- Strong relationships with mainstream lenders
- Work with Financial Services industry to ensure customers receive
appropriate advice on mortgage products
Opportunities
To continue to develop stronger working relationships with established
mainstream lenders and those wishing to increase volume in the new build
market.
Description Residual risk rating Risk appetite Example key risk indicators, mitigations and opportunity
C. Availability and costs of materials and subcontractors Moderate Low-moderate Example key risk indicators
Increase in housing demand and production or a breakdown within the supply - Material and trade shortages
chain may further strain the availability of skilled
- Material and trade price increases
subcontractors and materials and put pressure on utility firms to keep up with
the pace of installation resulting in increased costs and - Level of build quality and waste produced from sites
construction delays. - Longer build times
- Number of skilled trades
Accountability
Key mitigations
Supply Chain Director - Central procurement and key supplier agreements
Procurement Director - Supplier and subcontractor relationships
Group Commercial Director - Contingency plans for critical path products
- Direct trade and apprenticeship programmes
- Key commodity risk assessment matrix
- Regular checks on all key suppliers
- Monitoring of the supply chain
Opportunities
To develop and implement different build methods as alternatives to
conventional brick and block.
Description Residual risk rating Risk appetite Example key risk indicators, mitigations and opportunity
D. Attract and retain high-calibre employees Low Moderate Example key risk indicators
An inability to attract, develop, motivate and retain high-calibre employees, - Employee engagement score
together with a failure to consider the retention and succession of key
management could result in a failure to deliver our strategic objectives, a - Number of, and time to fill, vacancies
loss of corporate knowledge and a loss of competitive advantage.
- Employee turnover levels
Accountability
Key mitigations
Group HR Director
- Production academy and production manager succession development programme
Every employee managing people
- Site skills project
- Collaboration with major organisations to jointly address skills shortage
- Graduate and apprenticeship programmes
- Management training
- Enhanced remote working procedures
- Educational masterclasses
- Salary benchmarking
Opportunities
To further develop in-house capability, expertise and knowledge.
Description Residual risk rating Risk appetite Example key risk indicators, mitigations and opportunity
E. Land availability Low Moderate Example key risk indicators
An inability to secure land at an appropriate cost, the purchase of land of - Movement in landbank years
poor quality or in the wrong location or the incorrect timing of land
- Number of land approvals
purchases in relation to the economic cycle could impact future profitability.
- Timing of conversions from strategically sourced land
Accountability
Key mitigations
Divisional Chairs
- Critically assess opportunities
Regional Managing Directors
- Land quality framework
Regional Land and Planning Directors
- Engagement with national and local government
Managing Director Group Strategic Land
- Review of land portfolio
UK Business, Land and Development Director
- Obtaining specialist environmental and legal advice
Opportunities
A strong balance sheet allows us to invest when land market conditions are
attractive.
Description Residual risk rating Risk appetite Example key risk indicators, mitigations and opportunity
F. Quality and reputation Moderate Low Example key risk indicators
The quality of our products is key to our strategic objective of being a - Customer satisfaction metrics (9-month and 8 -week)
customer-focused business and in ensuring that we do things right first time.
- Number of NHBC claims
If the Group fails to deliver against these standards and its wider
development obligations, it could be exposed to reputational damage, as well - Construction Quality Review (CQR) scores
as reduced sales and increased costs.
- Average reportable items per inspection found during NHBC inspections at key
stages of the build
Accountability
Customer Director Key mitigations
UK Head of Production - Customer-ready Home Quality Inspection (HQI)
Director of Design - Consistent Quality Approach (CQA)
- Quality Managers in the business
- Training on the New Homes Quality Code
- Ombudsman readiness
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.
Description Residual risk rating Risk appetite Example key risk indicators, mitigations and opportunity
G. Health, safety and environment Low Low Example key risk indicators
The health and safety of all our employees, subcontractors, visitors and - Increase in near misses and fatalities
customers is of paramount importance. Failure to implement and monitor our
stringent health, safety and environment (HSE) procedures and policies across - Health and safety audit outcomes
all parts of the business could lead to accidents or site-related incidents
resulting in serious injury or loss of life. - Number of reportable health and safety incidents
Accountability Key mitigations
Head of Health, Safety and Environment - Embedded HSE system
Regional Managing Directors - HSE training and inductions
- Mental health training and support for all employees
Opportunities
To lead the industry in health and safety and to reduce the amount and level
of incidents.
Description Residual risk rating Risk appetite Example key risk indicators, mitigations and opportunity
H. Natural resources and climate change Moderate Low Example key risk indicators
An inability to reduce our environmental footprint, the challenges of a - Energy use & Greenhouse gas emissions
degraded environment including the impacts of climate change, nature loss and
water scarcity on our business, supply chain scarcity due to environmental - % Biodiversity net gain
change and the increasing desire of our customers to live more sustainably
could impact our reputation, ability to attract investment and obtain planning - Construction waste generation & waste to landfill
permission and the delivery of our strategic targets.
Accountability
Key mitigations
Director of Sustainability
- Net Zero Transition plan
Regional Managing Directors
- Published Environment Strategy
- Adoption of Science Based Targets
- Climate change governance, including LEAF committee
- Achievement of Carbon Trust Standard
- HBF & investor liaison
- Training and development in house and in our supply chain
- Collection and interpretation of data to drive relevant actions
Opportunities
Sustainable homes and developments
attractive to customers.
A sustainable business of choice for investors.
Advantageous planning positions.
Description Residual risk rating Risk appetite Example key risk indicators, mitigations and opportunity
I. Cyber security Moderate Low-moderate Example key risk indicators
The Group places increasing reliance on IT to conduct its operations and the - Number of devices with critical
requirement to maintain the accuracy and confidentiality of its information
systems and the data contained therein. A cyber-attack leading to the and high open vulnerabilities
corruption, loss or theft of data could result in reputational and operational
damage. - Number of devices without latest
patching in place
Accountability - Phishing test results
IT Director - Cyber training completion statistics
- Number of users with administrative privileges to critical systems
Key mitigations
- Complex passwords policy and multi-factor authentication for remote access
- 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
£ million Note Before Exceptional items Total Before Exceptional Total
exceptional
2022
exceptional
items
2021
items 2022
items
2022
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 907.5 (80.0) 827.5 823.2 (125.0) 698.2
before net finance costs
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 7 18.1p 15.3p
Diluted earnings per share 7 18.0p 15.2p
Adjusted basic earnings per share 7 19.8p 18.0p
Adjusted diluted earnings per share 7 19.7p 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
£ 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
£ 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
£ million Note Share Share Own Other Retained earnings Total
capital
premium
shares
reserves
Total equity at 1 January 2021 292.2 773.1 (11.5) 543.7 2,419.3 4,016.8
Other comprehensive (expense)/income - - - (2.1) 32.5 30.4
for the year
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
£ 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 £150
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 £952 million and access
to £550 million from a fully undrawn revolving credit facility, which is
expected to be replaced during the forecast period, together totalling £1,502
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:
£ 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
£ 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
£ 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
£ 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):
£ 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 £87.2 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:
£ 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 £125.0 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 £80.0 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:
£ million 2022 2021
Cost of inventories recognised as an expense in cost of sales 3,155.7 3,135.0
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
£ million 2022 2021
Interest receivable 8.6 2.4
8.6 2.4
£ 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:
£ 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
£17.6 million (2021: £23.8 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:
£ 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.
£ 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
£ million Share- based payments Capital allowances Losses Retirement benefit obligations Other Total
temporary
differences
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:
£ 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 £2.4 million
(2021: £1.9 million) in the UK and £23.8 million (2021: £27.4 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 £269.5
million (2021: £269.5 million). No deferred tax asset has been recognised in
respect of the capital losses at 31 December 2022 (2021: £nil) because the
Group does not believe that it is probable that these capital losses will be
utilised in the foreseeable future.
9. Inventories
£ 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 £16.0 million (2021: £19.3 million) and £35.5 million in Spain (2021:
£35.5 million).
The table below details the movements on the inventory provision recorded in
the year.
£ 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 £29.9 million (2021: £37.3 million)
comprise a defined benefit pension liability of £29.6 million (2021: £37.0
million) and a post-retirement healthcare liability of £0.3 million (2021:
£0.3 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
£36.0 million.
In March 2021, a new funding arrangement was agreed with the TWPS Trustee that
committed the Group to paying up to £20.0 million per annum into an escrow
account between April 2021 and March 2024. The first six months of
contributions (£10.0 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 £5.1 million per
annum from the Pension Funding Partnership and £2.0 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 £10.0
million (31 December 2021: £10.0 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 £76.6 million (2021: £149.9 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 £106.2 million (2021:
£186.9 million), resulting in an IFRIC 14 deficit of £29.6 million (2021:
£37.0 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 £100.0 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 £5.1 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
£75.2 million of property and £39.8 million of cash held within the
structure (2021: £81.8 million of property and £31.0 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 £100.0 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.
Assumption Change in assumption Impact on Impact on scheme liabilities (%)
scheme liabilities
Discount rate Decrease by 0.5% p.a. Increase by £89m 5.3
Rate of inflation* Increase by 0.5% p.a. Increase by £51m 3.0
Life expectancy Members live 1 year longer Increase by £65m 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.
£ million Present Fair value Asset/(liability) recognised on balance sheet
value of obligation
of scheme assets
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)
£ million Present value of obligation Fair value Asset/(liability) recognised on balance sheet
of scheme assets
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 £151.3 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
£ million Cash and cash Bank and Total net
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
£ 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.£169.0 million based on the number of shares in issue at the end
of the year (2021: £160.9 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 (£m) 827.5 698.2
Adjusted for:
Share of results of joint ventures (£m) 15.9 5.4
Exceptional items (£m) 80.0 125.0
Operating profit (£m) 923.4 828.6
Revenue (£m) 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 (£m) 4,502.1 4,314.0 4,016.8
Adjusted for:
Cash (£m) (952.3) (921.0) (823.0)
Borrowings (£m) 88.5 84.0 103.6
Net taxation (£m) (18.8) (26.4) (32.6)
Accrued dividends (£m) - - -
Net operating assets (£m) 3,619.5 3,450.6 3,264.8
Average basic net assets (£m) 4,408.1 4,165.4
Average net operating assets (£m) 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 (£m) 923.4 828.6
Average net operating assets (£m) 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 (£m) 4,419.9 4,284.9
Average net operating assets (£m) 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 (£m) 4,502.1 4,314.0
Adjusted for:
Intangible assets (£m) (4.2) (6.6)
Tangible net assets (£m) 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 (£m) 705.0 574.7
Operating profit (£m) 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 (£m) 952.3 921.0
Loans (£m) (88.5) (84.0)
Net cash (£m) 863.8 837.0
Land creditors (£m) (725.6) (806.4)
Adjusted net debt (£m) 138.2 30.6
Basic net assets (£m) 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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