Taylor Wimpey consults on £20m cost-cutting measures

Taylor Wimpey consults on £20m cost-cutting measures

Jennie Daly, CEO

In light of the ongoing house buying market uncertainty, Taylor Wimpey has proposed a series of changes that it hopes will save £20 million in annual costs.

A trading update issued ahead of its full year results for the year ended 31 December 2022 revealed the housebuilder has started a consultation on the changes, which it said incorporates proposed changes identified as part of its ongoing drive to increase operational efficiency and others that, if implemented, would reduce overheads to reflect market

“The proposed changes would neither 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,” the firm said. 

Taylor Wimpey believes the costs to achieve these would be c.£8m.

The trading update also highlighted improved operating margins last year.

The business said it performed well in 2022 due to its tight operational controls and selling price discipline leading to an improved operating margin. As guided in November, group completions for the full year were broadly in line with the prior year and we expect to report 2022 full year operating profit in line with expectations.

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%). Its 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%). In the second half of 2022, the net private reservation rate was 0.48 homes per outlet per week (2021: 0.85) and the cancellation rate was 23% (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). Taylor Wimpey ended the year with an order book valued at £1,941m (31 December 2021: £2,550m), excluding joint ventures, which represents 7,499 homes (31 December 2021: 10,009 homes).

In the UK, the housebuilder traded from an average of 232 outlets in 2022 (2021: 225). As guided, the firm increased its total number of outlets to end the year with 259 (31 December 2021: 228).

Taylor Wimpey added: “Although we have strengthened our outlet position during 2022 as planned, the ongoing market uncertainty means that sales remain significantly below levels seen prior to the rise in mortgage rates in Q3 2022.

“Accordingly, we enter 2023 with a lower private order book than in recent years and we expect overall volumes to reduce in 2023. We continue to focus on sales and supporting customers through their purchasing decisions.

“Pricing in the land market is yet to reflect the changing market environment and with a strong land position and high quality outlets, we will continue to operate on a highly selective basis.”

Jennie Daly, CEO, said: “The business performed well in 2022, as our tight operational controls and price discipline led to an improved operating margin. Despite the economic and political backdrop through the second half, I am pleased that we expect to report full year operating profit in line with expectations.

“As previously reported, we have acted quickly and decisively to address changing market conditions and continue our efforts to maximise efficiency.

“Taylor Wimpey is a strong and agile business benefitting from a high quality and well located landbank, a strong balance sheet and unwavering focus on operational execution as we continue to manage the business with discipline to deliver value for all our stakeholders. Despite near term uncertainty we remain confident that the medium to long term fundamentals of our business remain highly attractive.”

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