Principal Risks and Uncertainties - Part 1
As with any business, Taylor Wimpey faces a number of risks and uncertainties in the course of its day to day operations. By effectively identifying and managing these risks, we are able to improve our returns, thereby adding value for shareholders.
Economic and market environment |
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| Description of risk | Relevance to strategy | Potential impact on KPIs | Mitigation | |
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Demand for our homes can be adversely affected by weakness in the wider economy. This includes factors such as unemployment levels, interest rates and the availability of credit, which are outside of the Group's control. |
The majority of the homes that we build are sold to individual purchasers who take on significant mortgages to finance their purchases. As such, customer demand is extremely sensitive to economic conditions. |
The global economy has exhibited some volatility during 2010 arising from concerns regarding the sovereign debt of some countries. Credit availability and consumer confidence remain below normal levels. As a result, the level of effective demand for new homes continues to be significantly reduced, impacting both profitability and cash generation. |
Our local teams select the locations and home designs that best meet the needs of the local community and customer demand. We continue to evaluate new outlet openings on the basis of local market conditions and regularly review the pricing and incentives that we offer. We also minimise the level of speculative build that we undertake. |
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Government regulations and planning policy |
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| Description of risk | Relevance to strategy | Potential impact on KPIs | Mitigation | |
Governments issue a wide variety of requirements for new housing, particularly in the UK, covering areas such as design, quality, sustainability and product mix. The UK general election in 2010 resulted in a change of government and new planning regulations are being progressed through Parliament. |
In addition to our short term land portfolio we have a strategic land portfolio of 77,060 potential plots in the UK. Our ability to obtain the planning permission required to develop communities on this land is dependent on our ability to meet the relevant regulatory and planning requirements. |
Inability to obtain suitable consents could impact on the number or type of homes that we are able to build. We could also be required to fund higher than anticipated levels of planning obligations, or incur additional costs to meet increased regulatory requirements. All of these would have a detrimental impact on the contribution per plot. |
We consult with the UK government on upcoming legislation, both directly and as a member of industry groups, to highlight potential issues. At a local level, our land specialists work closely with the relevant planning authorities, consult with local communities and structure purchase agreements to mitigate such risk. |
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