Later on. Just before I start the formal parts of the proceedings, just have a look at the image of that. That, believe it or not, is an industrial unit, and that's our development at Rainham. And it overlooks the Thames. You can see how. It's a computer-generated image, but it will look like this. You can see how green it is. It almost looks like an R&D technology park, doesn't it? That was being built in the 1990s, and that is net zero carbon. So that's the sort of quality of development that we're developing, even on the industrial market. Nice to see a picture of what we do, isn't it? So morning, everybody. So we're gonna do the normal running order, with me covering our operational highlights.
I'll then give a brief overview of our strategic targets. Then Darren's going to update on financials and land promotion, and then I'll go through development, construction, and finish off with outlook. So you can guess what I'm going to do. First of all, I'm going to talk you through our investment case, and I know you're all familiar with this, but again, I think that it's useful. We focused on three long-term markets with positive structural long-term trends, and while our markets have slowed, I think that these results show that due to the quality of our sites, the quality of the schemes that we promote, and the premium homes that we build, that you can maintain encouraging levels of demand. It gives you resilience. More importantly, nothing that we've seen over the last 12 months shakes our belief in our three markets.
We've continued our long record of managing our balance sheet effectively, and you can see from the bar graph that the NAV just continues to remorselessly grow. With 97,000 plots and a development pipeline of GBP 1.26 billion, all held at cost, we've also got ample opportunity as markets improve, to hit our growth and return targets. And all this means we're confident enough to increase our dividend by 10%, which is 4.8 x covered, and our TSR in the long term remains attractive. Over half one, we made an operating profit of GBP 25.7 million, and I'm gonna go through it by subsidiary. On land promotion, the business sold 1,900 plots at an increased profit per plot of GBP 11,400, driven by a very profitable sale, a freehold sale at Tonbridge.
Darren is gonna go through that in more detail in a minute, but just to say, for the right sites, there continues to be demand, and we currently have nine sites under offer. We're also growing our land portfolio. It's now at 97,000 plots, and as planning gets tighter, we believe these plots will be in demand. Turning to property and development, we completed on GBP 70 million worth of development, our share. 100% of that has been profitably, profitably pre-sold, and we've maintained a high level of committed developments. Again, our share at GBP 186 million. Nearly half of that is in industrial. Our investment portfolio has grown to GBP 112 million through retaining completed developments. It's again outperformed the CBRE index.
Stonebridge, our joint venture house builder, has achieved sales rates close to our target, including over July and August, at just under 0.5 houses per week per outlet, and is on track to hit its target of 250 homes this year. And that's showing an increase in volume of 40% from last year. On construction, operating profit of GBP 4.4 million is below budget, but that follows and is in line with the general slowdown in the industry. And all this means, once you've deducted GBP 4.2 million of central operating costs, group operating profit, as I say, is GBP 25.7 million. And before leaving this slide, we also sold Banner Cross Hall at a premium to book, and we'll be moving to our new head office in November, and that's in Sheffield city centre .
These resilient results mean we still deliver on our medium-term objectives. Excuse me. Capital employed is nearly at GBP 413 million and is on track to grow to our GBP 500 million target. ROCE, at 6.3%, is expected to finish the year within our stated range. Our five-year running average is now at 3,175 plots, so it's getting close to the 3,500 plots medium-term target. To achieve development completions of circa GBP 200 million, you need to maintain a development program, and in a slowing market, I think HBD has done well to maintain a committed program of GBP 186 million. As markets improve, we'll be able to scale the business up by drawing down on its GBP 1.26 billion pipeline.
In terms of investment portfolio, we made GBP 42 million of accretive sales over the last couple of years. And there will be opportunities to grow the portfolio back up to the GBP 150 million target by retaining completed developments, but we're gonna be patient in doing that. The demand for Stonebridge's premium homes endures. We expect to complete 250 homes in 2023, and we're planning for more in 2024, therefore, on track to scale the business up to 600. We continue to make good progress against our responsible business strategy, including our NZC, equality, diversity, and inclusion targets. And what I will do at the full year is I'll give you a more detailed presentation on that. And in the interim, there are details in the appendices of your pack.
But what I wanted to do today was just to show you a quick image of our new head office, and the move from a large listed hall to a modern, efficient, open plan building with great ESG credentials, that's helping us in our ambition to be more progressive, more open, more diverse, and a more environmentally responsible business. And with that, I'm going to hand you over to Darren.
So thanks, Tim, and good morning, everyone. I can now take you through our financial highlights. Despite challenging market conditions, revenue still grew 25% to GBP 180 million in the period, reflecting the continued completion of strategic land transactions, delivery of our committed development program, and growth of our house builder, Stonebridge Homes. On the back of this, gross profit remained resilient at GBP 40.8 million, only marginally down on that of the prior year. With the prior year having had the benefit of a significant one-off joint venture residential land disposal, the group achieved an underlying profit before tax of GBP 23.3 million. And whilst earnings per share has decreased 42% to GBP 0.14, we have increased the interim dividend by 10% to GBP 0.0293, in line with our progressive dividend policy, and still almost 5x covered.
With operating profit down 34%, our return on capital employed for the six months of 6.3% sees us on track to achieve the lower end of our medium-term strategic target of 10%-15% this year. In 2023, we've continued to focus on delivering existing opportunities in our key markets, with selective investments in new opportunities and tactical disposals from our investment property portfolio occurring since the half year. Within the portfolio, including investment properties held in joint ventures, values remained stable following the downward valuation movement seen towards the end of 2022. The increase of GBP 9 million in the period, therefore, being derived from the retention of an industrial asset from our development at Luton.
Following the half year, we've since disposed of three properties for just over GBP 11 million at an average 19% premium to their December book value. We've continued to invest in our growing house builder's land bank and work in progress, adding some GBP 11 million to inventory and having invested GBP 4 million to delivering speculative developments, inventories increased around GBP 6 million overall, following disposals of GBP 9 million from strategic land. Net debt increased to GBP 70.8 million from these investments, and also due to increased working capital requirements resulting from land sales on deferred payment terms to the major house builders. With gearing at 17.5%, we remain within our target range of 10%-20%.
We've got a secured borrowing facility of GBP 105 million, and we will look to commence refinancing activities towards the end of this year, with a view to having a revised facility in place early next year, well ahead of the facility renewal date in January 2025. Early discussions with all of our banking partners, one of which we've banked with for over 100 years now, have all been very positive. Finally, our net asset value per share increased 3% to 303 pence, or 298 pence, excluding the pension surplus. In terms of cash generation and the movement in net debt, the cash flow sees us recycle retained profits and funds from operating activities into continued investment for the future.
We started the year with net debt of GBP 48.6 million, having then achieved an operating profit of GBP 25.7 million, adjusting for non-cash items of GBP 2.1 million, and paying interest costs of GBP 0.7 million, corporation tax of GBP 0.9 million, and dividends of GBP 8 million. We ended with a cash inflow from operations of GBP 14 million overall. Our interest costs have remained low, with our facility having a 1.4% margin over SONIA. Each 1% of interest gives rise to a charge of around GBP 700,000 at current average debt levels. However, overall, our net interest cost benefits from funding returns on investments in joint ventures.
We then made overall investments of GBP 30.4 million across all areas of our business, including adding to our investment property portfolio, growing inventories relating to the land bank, and work in progress within Stonebridge Homes, and delivering our committed development program. With working capital and other items increasing by GBP 15.8 million, again, reflecting land disposals on deferred payment terms, we ended the period with net debt of GBP 70.8 million. If I can move on now to the operational review and start with land promotion.
At 1,900 plots, low volumes in Hallam have been offset by a significant increase in gross profit per plot to GBP 11,400, allowing them to maintain their level of operating profit at GBP 17 million, aided by a significant freehold disposal of land at Tonbridge, mentioned by Tim, which I'll give you more of an insight into shortly. While land values are reportedly softening, down almost 3% in the year, we continue to see good demand for smaller sites in prime locations. Having taken three such sites to market in recent months, we've seen demand from up to 16 interested parties, and despite the larger players now appearing some way down the list, values remain very sensible.
We've continued to add to the portfolio, securing sites with the potential to deliver over 3,000 plots, and ending with over 97,000 potential plots within the portfolio. While current period sales have reduced plots in the portfolio with planning permission, having 8,335 plots still in stock equates to almost 2.5 years' worth of sales, and over 2,000 of those plots are currently under offer on nine sites, as Tim mentioned. With our portfolio all held at cost, no valuation gain on securing the planning permission on those plots is recognized until the land is sold. We anticipate demand for these plots will continue to increase as we see minimal relaxation in the planning system, evidenced by recent announcements to tackle Nutrient Neutrality through the Levelling Up Bill, which would have been good news.
Again, the politics seems to have got in the way. We also have over 12,000 plots currently working through the planning system. Having achieved determination on 804 plots, this is already almost twice that achieved in the prior year, but remains lower than expected, also demonstrating the continued difficulties in the planning system. Looking at this slide, we can see the geographic spread of our portfolio, which continues to be one of the largest strategic land portfolios in the country amongst the listed house builders. 78% of the portfolio is in the Midlands and south of the country, where values tend to be higher in general, and 25% of the portfolio is in the Golden Growth Triangle of London, Oxford, and Cambridge.
We continue to see demand for quality sites in these prime locations, albeit, as expected, smaller 100-200 unit sites are in the highest demand in the current climate. The chart of plots sold shows we are now getting closer to achieving our medium-term target of selling 3,500 plots per annum, with the five-year average now at 3,175, despite the low volume achieved in the year to date. The average gross profit per plot has increased in the period on the back of the freehold disposal at Tonbridge, and demonstrates how this metric continues to vary with tenure, volume sales, land price inflation, and location of sales within the UK. Finally, just looking here, we can see the benefits of having an element of freehold land within the portfolio.
In 2021, at our site in Tonbridge, we managed to acquire the freehold of the site, which we'd held under option since 2004. Having secured planning in 2022, we sold the site in two phases to Cala Homes. First phase being this year, the second phase to conclude early next year. On conclusion of that final sale next year, the site will have returned an impressive internal rate of return of 27% per annum, as well as delivering new ecological habitat areas and wider community benefits, including cycle ways and a contribution to public transport infrastructure. And now I hand you back to Tim, who will continue with property investment and development.
Yeah, thanks, Darren. Property and development, which comprises HBD and Stonebridge, you can see it made an operating profit of GBP 8.5 million. HBD completed on GBP 70 million our share of developments, and that's all been successfully pre-sold. We maintained a high level of committed development at GBP 186 million. 98% of the development costs are fixed. Included in our GBP 1.26 billion pipeline is GBP 50 million for the first phase of our mixed-use campus, Golden Valley, which is next door to GCHQ at Cheltenham.
We expect to sign a funding agreement for this first phase with the council over the next half, and then we expect to also put a planning application in, and we hope to be on site in the summer of 2023, or 2024, sorry, on the first phase. The investment portfolio has outperformed with a capital return of 0.81%, as a result of growing rental values in industrial, and also the investment markets stabilizing. Our total property return over the six months of 3.3% was better than the index at 2.5%. The portfolio is made up primarily of high-quality retained developments, but with some investments which have clear development potential held on shorter leases. So despite that mix, we benefit from a healthy weighted average lease length of 10.6 years.
Past half one, as Darren said, and I mentioned, we sold three smaller assets, plus Banner Cross Hall, for GBP 11 million at an average premium of 19% to the December 2022 valuation. Now, looking at the committed program in more detail. First of all, you can see that we've committed to three industrial schemes, totaling 700,000 sq ft, the majority of which has been pre-sold. The only speculative scheme is at Rainham, and I'm gonna go through that on the next slide. On industrial, generally, whilst occupier take-up has slowed from the record levels seen during the pandemic, demand does remain resilient due to structural drivers. Rental growth, for example, over half one, at the index level, has been 3.6%. Consequently, we do expect to commit to more industrial developments over the second half. Next, we've got urban, residential, and commercial.
Post half one, we completed on TDT, and that is the fourth phase of our successful The Chocolate Works development at York. You have Setl and Island, and I'm going to update you again on those on the next slide. Total estimated profit on all of the schemes is GBP 24 million, equivalent to an average profit on cost of 15%, of which only GBP 4 million has been taken, and that's been taken on SPARK in Walsall. It's been taken as we carry out the local authority funded remediation works. Once those works are completed next year, we expect to exercise our option to buy that site, which is right in the heart of the U.K.'s national motorway network. I said I'd just talk to you a bit more detail on some of the schemes.
Excuse me, this, this also, I think, slide gives us an example of how we create value, and I think it also shows the quality of the development that we're promoting. So from left to right, I think I've got that right, Power Park, Nottingham. Might not have got that right. First on Power Park, Nottingham. We acquired the site, got planning and secured forward funding, completing it recently, and it crystallized a 22% profit on cost. On Rainham, that's a high-quality NZC scheme. It's the photograph that I started the presentation with, serving London, and it's made up of four units, ranging in size from 40 to 170,000 sq ft. It's in an 80/20 JV with Barings, so our share of GDV is GBP 24 million. And we're currently following up 750,000 sq ft of requirements.
Typically, we'd expect to do lettings on a scheme like this, either side of PC, and PC is early next year. Our appraised rents are GBP 15 per sq ft. I think that that's great value for industrial within Greater London, and I'm encouraging the team to beat those rents. On Setl, as originally planned, we'll be looking to sell around a quarter of the 102 apartments pre-Christmas, with the majority released when customers can inspect the completed building in April next year. This is a high-quality building with communal services situated in the trendy Jewellery Quarter in the center of Birmingham. Our agents, Knight Frank, believe we will be able to sell those apartments in line with our GBP 32 million GDV, and that's GBP 475 per sq ft. Potential profit, 15%. Finally, Island.
This is another prime NZC scheme in the center of Manchester, in a 50/50 JV, this time with the Greater Manchester Pension Fund, and our share is GBP 33 million of GDV. It offers 91,000 sq ft of Grade A office accommodation, and it will complete in Q3 of next year. Although we're already talking to occupiers, the real launch of the building was only in July of this year, and currently, we're following up 400,000 sq ft of requirements. There is interest in buildings with good ESG credentials. Turning to Stonebridge, our premium house builder, it's achieved sales rates close to our target through half one and over the summer months.
During half one, sales rates averaged 0.48 against a target of just over 0.5, and in July and August, it was actually running at 0.52. Sales price against budget in half one was +1.2%. Against a slow market, we're pleased with this performance, and I believe the demand is because of the premium quality of homes that we offer and the well-located sites that we're developing. Supply chain restraints and cost inflation at 8% is easing, although we do think that it will continue to eat into our margins. Up to the end of August, 97% of this year's target is effectively sold, so no surprise, we believe we're going to hit our target of building 250 homes this year.
Now, we're not insensitive to market conditions, but our plan, based on the present level of demand, is to increase volume again next year. We're therefore taking the opportunity to buy some more sites. In this regard, the level of bidding in sites has become less aggressive, and vendors are definitely interested in dealing with people like Henry Boot with a great reputation. We're finding sensible deals; we are not finding cheap deals. In terms of margins, our gross margins remain in the mid to high teens, although cost inflation, as I say, might eat into that as the year goes on. In the medium term, as the slide shows, as we scale up the business, we expect our gross margins to be at 20%.
The construction segment, like the rest of the industry, has it been impacted by cost inflation and supply constraints, yet has remained profitable. Remember, this is just a small part of the group, accounting for just 2% of capital employed. As I reported last time, construction has experienced challenges on two of its large urban development sites in Sheffield. That's Kangaroo Works and Block H. Kangaroo Works completed in August, and Block H should fully complete in the next month, so we will be able to draw a line under those challenging schemes. Our GBP 47 million refurbishment, The Cocoa Works in York, is on budget and on track for completion in early 2024. There is work around, but we remain selective on what work we will do, so we expect our turnover to be below our target for this year.
Banner Plant is trading marginally below expectation, although it has had a pretty good summer, and Road Link continues to perform well. And that gets me to outlook. Now, there's no doubt that the rapid increase in short-term rates is reducing demand across all three of our markets, and there is more uncertainty around the timing of strategic land sales. And, of course, the cost of funding all development schemes has risen. More positively, we're seeing cost pressures ease, and signs suggest this will continue, at least for the rest of the year. Planning, I'm afraid to say, remains very difficult. While we're not immune to these pressures and difficulties, I believe our focus on high-quality real estate affords us a degree of resilience. Hallam promotes high quality, significant sites, the majority in the South of England, many of them around the Golden Growth Triangle.
As planning gets tighter, these sites are gonna be in demand. HBD delivers institutionally quality development with an increasing emphasis on strong ESG. The majority of our pipeline is industrial, where we believe demand will endure, and SBH builds premium homes in affluent locations. In a tough market, we're pleased that, in effect, 97% of this year's target has been sold, and we will increasingly turn our attention to carrying on the scaling up of the business in 2024. Our balance sheet offers the same quality and resilience, so this is going to allow us to continue to invest in land, both for Hallam to promote and to scale up Stonebridge. It'll also allow us to continue to commit to HBD's quality development program.
All of this means we have the confidence to increase the dividend by 10%, and we also remain confident that we'll hit our medium-term strategic growth objectives. Thank you. We're going to start off with any questions from the room, please. And Chris is first off.
Thank you. Chris Millington from Numis. Three questions from me, if that's okay. So the first one, just on land. I know that business has done a good job historically of underpinning sort of future profitability through exchanges, et cetera. Obviously, you pointed to the plots and sites under offer, but just what more can be done as we progress through the rest of the year to underpin 2024 results in Hallam, given the tougher backdrop? The second one is just in property development and just, I suppose, the confidence around the shape of the pipeline, given the macro situation, and just how quickly those sort of projects can be pulled down.
I assume the key issue is funding for a lot of them, but just. Yeah, exactly right. Then I suppose the final one, just on the medium-term targets. It's been, you know, a few years since you set them. Just when you think GBP 500 million of capital employed should be achievable, and what you would need to see to deliver a ROCE at the top end of the range? Thank you.
Okay. All right. So, I'll have a go on the last two.
Yeah.
And you have a go on what we've got in store for land.
Yeah.
So, I suppose the quick question to ask is the medium-term targets. We set those out in 2021. I'm pleased with the progress, and there's nothing that we've seen that suggests that we won't hit those medium-term targets. Chris, you've asked me this before, and I've always a bit coy, aren't I, on the exact date? Because it feels a bit too contrived, doesn't it, for me to give you a specific date. But when we set them out in 2021, we were doing a five-year business model. Now, I'd, you're not gonna see anything printed saying, we expect to hit these dates in March 2026, but that's broadly our ambition.
It's the medium term, and I think of the medium term being around five years, and we are on target for doing that. Which I think, if you think about the environment that we've seen since the beginning of 2021, is no mean feat. Now, in terms of the pipeline, and I think that you, you're also picking the funding of it. I think development is definitely going to be more challenging. And development is gonna be more challenging because the funding markets are gonna be more selective over what they fund, and the cost of funding has gone up. And you all know that. Now, I think that we are at an advantage to many of our competitors.
One, because of the quality of the schemes that we promote, and two, the fact that 2/3 of our development pipeline is in industrial, and you can still get funding for an industrial development. So I think that we will be able to carry on our model of some developments being funded by institutions. I think that we will also draw down over the next year or so, and do more industrial developments, and actually, a lot of that will be funded by occupiers who are buying those schemes off us. And then you all know how resilient the Henry Boot balance sheet is, and as Darren's known one of the banks for over 100 years, which is truly remarkable. Yeah, yeah, 'cause I could have sworn he was in his forties.
We'll be able to draw down on our facilities. So I think, Chris, we will navigate our way through some of the difficulties of the funding market, but we've definitely got a good pipeline, and as you well know, but it's more for perhaps people who are listening in, it's all held at cost. Darren, on the land.
Yeah. So then on the underpinning of, of land, clearly we've not got the level of exchanges we've seen for 2024 currently, as we perhaps had in previous years moving forward. But you have just heard me talk about the Tonbridge site, which Phase II is currently set to land in next year, which is an incredibly profitable scheme at 27% IRR. Really nice part of the world for that one. We've also just heard in recent days, not quite time to redraft the announcement, but, we've just exchanged on 100 plots, on another scheme. We've got the nine sites that are under offer, with 2,000 plots in total working through, and we believe we've just got another site under offer for another 500 plots. So there are a lot of moving parts, as always.
The team are also working up several sites to take to market for next year, including 1,000 plots at our Coventry development, where we sold 250 plots this year. Another fantastic scheme. So you know, we're, we're still very hopeful that by the time we get to the year end, we will have more exchanged going into next year, but also that we've got already a good underpin from a, a few sites to start next year with, and plenty more in the, the tank to, to be pulling forward to, to come through for next year. I think it's a really credible result, actually, that Hallam have achieved in this first half year, compared to, for example, what others are, are kind of saying in the market.
It also goes to, you know, the three that we put in the market in the last, last few months, where, you know, 16 bids on one site, for me is absolutely phenomenal, especially given the market conditions we're, we're currently in. So the appetite is still there for, for decent locations, prime sites.
Brilliant. Thank you.
All right. Adrian?
Adrian Kearsey, Panmure Gordon. I'll just leave it at one, if I may. You've got the banking facility sort of in negotiation. The pricing will be what the pricing will be. But in terms of the way that you're talking to the banks, in terms of the structure and.
Should we expect it to be a similar type of facility in terms of how it is put together?
I think so, Adrian. I mean, it's early days in terms of the conversations at the moment. We're not out in the market. We're just really teeing them up to start thinking about that. We're about to embark on the group strategy review, which will give us a guide into kind of medium-term requirements for debt funding within the business. I think initial conversations are suggesting that five-year money might be as cheap or broadly similar at the moment to three-year money, so we might consider locking in for a bit longer than we have done in previous times, but that will be, to some extent, driven by the rate. And I think we will, again, look to not take the full facility up front.
We'll have some kind of accordion arrangement to allow for the projected growth in the group, so that we're not paying for everything on day one. And I think one thing that we will have a little more focus on this time round and how it's structured is potentially to introduce an element of hedging into the group's facility. So historically, we've probably been in a position where we might have returned to cash, minimal debt. I think going forward with the development pipeline, we've got the investments we're making in Stonebridge Homes. We can perhaps have a bit of visibility on an underlying debt level that we can then put some hedging on the top of.
Okay.
Clyde Lewis at Peel Hunt. I think I've got three, if I may. Two really around land. One on the sort of balance of option versus freehold land coming through. Clearly, Tonbridge is freehold land, but beyond that, is there gonna be a sort of shift in mix one way or the other, over the next sort of 12, 18 months? Second one around land was, I suppose, the attitude of landowners at the moment to sell. Where are they in their thought processes? Are they more or less active? Obviously, land prices, you're indicating it sounds like they're not moving very much at the moment, certainly not downwards. So we'll see on that front. And then the last one was probably really around sort of construction and sort of tender levels.
You've indicated revenue is gonna be down on previous expectations, but I'm just trying to sort of work out whether that's just because you can't make the margins work.
Yeah.
Or whether there is less work out there to do as well.
Okay, right. Well, we're gonna really mix it up. I'm gonna do the land promotion questions and you're gonna do the construction. We completely cover the business, don't we? So, first of all, in terms of the shift in the portfolio mix, I think that it's gonna stay. We've got about 10% freehold, and then the rest is obviously promotion and options. And, yeah, you're analysts. You can model all of that. And again, we've modeled it, and we like the mix because the freehold every so often, but actually, if you look at the stats consistently, gives us a boost to the profit, so we like that, but it's quite capital intensive.
So we've gotta manage our capital because we're a growing business, and we've got competing opportunities to invest. So that mix, we think can give us a good return on capital employed, and also, it means that we're not going to be using up too much of the group's capital. And then, in terms of the landowners' attitudes, I think the pricing has come down, and we co-quote Savills. And Knight Frank have got a different figure. Knight Frank's is a more volatile index, isn't it? So we consistently give you Savills. So their land prices are nearly 4% down over six months.
I think that what's also happened is, although that might be at headline level, we, when we're buying, and the house builders, when they're buying off us, they're definitely pushing out the payment profile. So the net effect is that the prices are falling. In terms of landowners, they remain a pretty stoic bunch, and they can see that demand for land has softened, but they can also see that we are making a real meal of the planning system. So if they've got land with planning, they rightly believe that that is a precious commodity, so they will not just sell it at knockdown prices.
So, you're not getting a flood of land coming on the market, and because you're not getting a flood of land coming on the market, because of landowners' views and planning difficulties, I think that that is the thing that means that you're not having the volatility in land price that you might have seen 20 years ago. And then construction.
Yes, so in terms of construction tender levels, I think, as a nation, the UK has seen a slight decline in the amount of activity that's being reported out there in the construction markets. However, I think it's fair to say, we, as a business, are still seeing a good level of opportunities coming forward. But in recent times, 12, 18 months, we've seen a big shift towards pre-construction service agreements as a method to tender, which effectively is there's a quick tender to pick a chosen partner, and then you spend a lot more time working up the detailed design, cost plan, de-risk to a great extent, the project before starting.
And what we've seen over the last 12 months that has driven the impact to our revenues is that our clients are taking much longer to get through those PCSAs, and actually, to a start on site, and that's been impeding us to a degree. Ordinarily, once you're in a PCSA, you've got to get to the right budget, but there's much more likelihood of you doing the work. So I think we've got about GBP 84 million to GBP 85 million currently working through PCSAs that we will hope to be starting imminently and into next year. I think more recently, what we're now seeing as well is almost a shift away from that PCSA model, and it does go in cycles. We've seen it before, we'll see it again, but we're moving back to a kind of single-stage tendering opportunity.
Much more competitive, but much quicker to get to a position where you can actually start on site and delivering the work.
Okay, Sam?
Yeah, morning, Sam Cullen from Peel Hunt also. I've got three also. I guess, kind of related to your point around freehold land, can you talk a bit about the challenges you might face in kinda continuing to grow Stonebridge in a softer market, and the level of capital you'd wanna invest to kind of grow the volumes with probably inherently lower sales rates than you might have seen 18 months ago? So kind of how much whip in the ground, et cetera. And then Tim, can you give some numbers, maybe, and it's probably an impossible example, but the spread of values between good and bad ESG buildings. You kind of mentioned it in your, in your, spiel that there's high demand for, for good rated buildings, basically.
And then lastly, Darren, just if you could just remind. I didn't get all the numbers in terms of the moving parts with the sensitivity to rate moves, in terms of the interest costs you're paying and then getting back also on some of your leases.
Thanks, Sam. Sam, just so I'm answering the right question. Just go through the Stonebridge, you want to know how.
The freehold land, you're kind of saying it's profitable, but it's more capital intensive.
Yeah.
’Cause you have to hold on to it longer.
Yeah.
You, you wanna grow Stonebridge.
Yeah.
But sales rates in the market have fallen from.
Yeah.
0.6 to 0.4, 0.5.
Yeah.
Therefore, to grow the business as rapidly.
Yeah, yeah.
As you wanted in the past.
Yeah, yeah.
You need more land and width, basically.
Yeah, good question. So with Stonebridge, perversely, well, no, actually logically, we tend not to buy freehold. So the freehold is in the Hallam part of the business. And, you know, we will buy a piece of land at a reduced value. It's not agricultural value, and then we might hold it for 10, 12 years.
Yeah.
Tonbridge was not a good example of that, was it? Because we bought that in 2021?
2021, 2022.
Yeah, yeah, yeah.
But we'd had an option for.
Yeah.
A long time by last.
So there we either played a blinder.
Yeah.
Or we got a bit lucky. A bit of both, right? But with Stonebridge, on the whole, we are doing conditional deals on getting planning. We work towards getting planning, and then we will buy the site once we've got planning, and we're almost ready to go on site. And again, to help our capital work harder, they will be typically phased purchases. And that's how we manage it. And by its nature, Sam, because we are. So at the moment, the land bank will give us probably 2.5 years of sales. We have to feed that business with more immediate sites, but they will still be conditional on planning. And then in terms of ESG, well, it's difficult to be categorical.
So some of the agents have talked about getting a 10% premium on rental values, but there's not a lot of data. So if you look at Manchester, there will probably be two true NZC buildings that are in the market at the moment. I don't know how many there are in London now, but there might be half a dozen. And then, as you go away from the Londons, the Birminghams, and the Manchesters of the world, there will not be many. Instinctively, I think that there will be that sort of premium on the rents. I think that what is just as interesting is that the funds have definitely got targets to buy ESG quality buildings, and because of the low level of stock that's being developed, they are finding it hard to buy.
So I think that if they meet those targets, then they'll have to be bidding competitively to get the product. So I think that there will be a double premium. You'll get a premium on the rent. Might be around 10%, that's what the agents think at the moment, and then there'll be a premium on the yield. And then, I think that moreover, I think that the ESG-rated buildings will be more liquid, they'll be in more demand. And to give you an idea, on Island, the construction costs were 10% more because you obviously try to diminish the footprint of the building, and you diminish the operating emissions from the building. And that's just the costs, doesn't flow through to the land.
So if you can even get a 10% premium on the rents and the yield stays the same, you are more than covering your costs of developing the building.
Okay, and then just finally on, on kind of interest costs.
Mm-hmm.
The sensitivity there. So 1% increase in base rates at our current average debt levels would cost us about GBP 700,000. Given where SONIA is currently at, we've got a 1.4% margin on that. Call the all-in rate about 7%. Means that we've probably got an annual interest cost of around GBP 5 million at this point in time. But around 50% of our debt is then used to fund joint ventures, where we have funding arrangements in place. So we get about 50% of our interest cost back and covered through that arrangement.
All right.
Yeah, Alistair?
Alastair Stewart from Progressive. Two sort of interrelated questions. You mentioned the 16, up to 16 bidders on a site. Roughly what size was the site? And you said that the volume house builders were towards the bottom. Can you just give a sort of indication of, you know, how many volume builders are near the bottom? Are the rest housing associations, mid-sized, regional.
Mm.
Private builders, et cetera? And also, the deferred terms you mentioned. You know, are they kind of deferred in, say, two or three big chunks over the life of the site, or is it really, you know, drip, paying on the drip.
Mm.
Literally, you know, plot by plot? Oh, and, also.
Yeah, yeah.
Yeah, yeah, yeah.
Is that. Yeah, so, and related to that, you know, is there a quid pro quo from your part that you, you can get an extra few quid out of them on that land sale?
In terms of that particular one, the site was just below 100 units, so, look, still a fair size site, but down the bottom end of what we're seeing the appetite is for at the moment. In terms of the volume house builders, they were all on the list. I think one was in the top five, one was in the mid area, and the rest were all in the bottom five in terms of the bids that were coming forward from them. I don't recall there being any social housing.
No.
Providers on the list.
Regional house builders.
So they were all, yeah, mid-sized.
Yeah.
Regional house builders that were bidding in the competition. And then on the deferred payment terms, I'd say historically, yes, you get a little bit of a premium built in upfront for the deferred payment terms, and I think they will still be doing that in terms of how they're putting their bids together from a competitive perspective. But given where interest rates are, I certainly think that's, you know, coming at a bit more of a discount to us, particularly as they then push the time out and, you know, you've seen the movement in working capital that we're having to then potentially, arguably fund, because of the way that they're behaving.
Yeah.
In terms of the actual deferral process , is.
It's more like three chunks. It's not.
Yeah.
It's not on kind of like, you know.
Yeah.
Groups of plots and.
And again, it's down to the size.
Yeah.
Of the schemes. You might, it might be two chunks on a smaller site, 100 units.
Good. Okay. So have we got any questions on the phone or the web?
To ask a question over the phone, please signal by pressing star one. There are currently no questions on the phone. Okay, no questions on the webcast either, so back to you, Tim, for closing remarks.
Yeah. Yeah, okay. Well, no, no, just good to see you all. Thank you very much.
Thank you.