Barratt Redrow plc (LON:BTRW)

Earnings Call: H2 2020

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Sep 2, 2020

Hello, and welcome to the Barrick Development's 2020 Full Year Results Call. My name is Courtney, and I'll be your coordinator for today's event. Please note that this conference is being recorded and for the duration of the call, your lines will be on listen only. You. I will now hand you over to your host, David Thomas, Chief Executive Officer to begin today's conference. Thank you. Thank you and good morning everyone and welcome to our full year results presentation. By the way of a running order, I will start with an overview then I will revisit our medium term targets, their deliverability and our areas of focus in the coming 12 months. Stephen will then take you through our operational performance with a particular focus on our site construction activity and production recovery. Jessica will then cover our financial performance in detail and the changes to our operating framework. And I will then review the industry fundamentals sustainability and finally current trading and outlook. Turning then to Slide 3. Our strong progress on both volume growth and margin improvement was clearly impacted by COVID19 and the result of lockdown. However, the controlled and disciplined restart of our operations allowed us to begin the new financial year with all of our sites reopened. And as you will see later, we are in a strong position Our first priority throughout this turbulent period has been health and safety of our employees our subcontractors and our customers. This led us to implement our controlled shutdown and was front and center of our site restart program. Through decisive action in lockdown and recovery, we ended the year with a strong balance sheet with GBP308 1,000,000 of net cash, and we expect this cash position to improve through FY 2021. While dealing with the challenges in the year, we have maintained our industry leading position in quality and service. Receiving the HBF 5 star customer satisfaction award for the 11th year in a row. And collecting more NHBC pride in the job awards than any other house builder for the 16th year in a row. Before the pandemic and lockdown, I expect it to be highlighting a record set of financial results with strong completion growth, margin improvement and another year with our Rocky pushing towards 30%. COVID-nineteen and the lockdown clearly changed all of this. Now the overriding focus across our business is on rebuilding completion volumes and improving margin and return on capital employed. This table on Slide 4 helps lay out our operational targets in the current environment. Our first target is rebuilding completion volumes. We have maintained our infrastructure and capacity to build back to 20,000 completions provided market demand is there Improving site based construction activity is vital and will help us to make the most of the current health buy scheme and the encouraging market recovery seen to date. We are aiming to grow wholly owned completions by 20 to 25% in FY 2021 to deliver between 14,500,151,000 homes. Our second target is delivering margin improvement. Here the recovery is our site based construction activity is key along with a tight control of our material and labor costs. Our margin improvement will also at a minimum 23% gross margin. Clearly, as we rebuild construction activity, we will also maintain Finally, our return on capital employed will improve through both the rebuild profitability and a tight control of working capital and selective land spend in the year ahead. These operational targets are the absolute priorities for our team I will now hand over to Steven who will look in more detail at our operational performance. Thank you, David, and good morning everyone. I'd now like to take you through the operational aspects of the business. Starting with sales on slide 6, we've produced a good performance to deliver a sales rate for the year of 0.6 reservations per outlet PoE given the challenging backdrop for the latter part of the year. As a group, we achieved a strong net private sales rate of 0.73 for the 1st 38 weeks of the year, some 7.4% ahead of the same period in the prior year. Sales were then dramatically impacted by the lockdown period from the 23rd March through to 21st May. The date we effectively began the phased reopening of our sales offices. Since the restart, we have seen a strong recovery across the entire country in terms of demand and delivered a sales rate of 0.63 in the 6 to weeks through to the year end with an improving trend. While the sales rate post lockdown was 8.7% below the same 66 in 2019. It included all of our active sites, where most notably in Wales and Scotland, sales offices only opened for physical appointments in June. Turning now to completions on Slide 7. For the year, we achieved 12600 and 4 completions, including joint ventures. This 29.4% decline on the prior year is all attributable to the impact of the lockdown, disrupting both sales and construction activities at essentially the peak period in the year. Completions in the first half and its impact significantly affected delivery in the second half. The reduction in JV completions for this similar path but was helped by the stronger completion delivery in the first half. Now taking a look at our buyer types on slide The completion profile is very similar to last year. Helped Avaya remains an important customer proposition and 35 for completions used the scheme. As everyone is aware, the existing Help device scheme is being replaced by a new Help to Buy for first time buyers only with regional price caps for completions from April 2021 until March 2023. The government has extended the bill completion date from the current scheme to the end of February next year, but legal completion in all but exceptional circumstances will need to be completed by 31st March. Assuming the new scheme is adopted as currently drafted, 16% of our total completions in 2020 would have been affected with new Help to Buy scheme rules. This reflects first time buyers purchasing above regional price caps and existing homeowners, both of which will no longer qualify under the new scheme. To mitigate the impact of these changes, we have re plotted and adjusted our sales mix on certain sites, but the regional price cuts will prove more restrictive for first time buyers, particularly in the North And Midland. For restrictive first time buyers and existing homeowners, we are working with lenders to develop alternative mortgage products and promoting the usual highly effective package change offer. Now look at pricing on Slide 9. Regionally, the private ASP of just under £304,000 was 2.2 ahead of the prior year. The main driver of this was a change in geographic mix. During the year, the London private SP was materially higher at £755,000, reflecting the death of a small number of high value central London completions as well as mix changes in Outer London. We have now essentially traded out of Central London with just one wholly owned unit remaining to complete and 2 JV units left to sell. Across the group, we achieved a modest level of underlying house price inflation. Turning now to Slide 10. During the lockdown period, our focus centered on the health and state of our employees subcontractors, customers and suppliers, and how to restart operations in a safe manner. We spent a considerable time developing enhanced COVID-nineteen work in practices and protocols, which have proved invaluable as we then started the phased reopening of our site operations. We received an assurance statement from the British Safety Council certifying that our COVID-nineteen workplace safety, health and environmental arrangements are in accordance with current guidance and best practice, demonstrating our absolute commitment to providing a safe and healthy workplace. Sites were reopened in ways to achieve a controlled and disciplined restart, whilst also factoring in different government guidance, and timing in England, Scotland and Wales. All operational sites were restarted with our employees returned to work by the 30th June. Restoring our construction activities is a critical issue for ourselves and the industry. Highlighted in Slide 11, the first step in this process has been the safe and controlled return of management and traced our sites. As you can see from 14th May, when we were preparing sites for reopening, with around 1500 heads on-site, We mobilized to more than 14,000 by the 2nd July, and we have more than 16,300 on-site in the last recorded week to 20th August. This remobilization of both site management and subcontractors was driven by firstly, the phase reopening of our sites began on 11th May in England and Wales, and on 1st June in Scotland. Secondly, the controlled increase in trades allowed on-site from an initial limit of 25 to 40 with health and safety approval in late May, then to the removal of assembly imposed limits from the 25th June. And thirdly, the broadening of construction activity on-site. From our initial focus of on finishing trades to meet forward sales commitments to control build across all stages of our defined build Our focus is now centered on optimizing construction on each and every one of our sites. To get activity back to the levels prior to lockdown. What I hope will be more informative, however, is to look at the actual output of equivalent units or homes across our build active sites. The chart details the average equivalent number of units constructed each week in FY 2019 for the 1st 38 weeks of the lockdown in FY 2020 and FY 2020 as a whole. We have also then included the weekly production of equivalent units since the start of FY21 and highlighted with the green line at 2 95, the midpoint of our guidance on average weekly completions assuming 50 weeks of build and sales activity. As you can see, we've seen a pretty consistent recovery in equivalent units produced each week. Seasonality will have an impact, but absent any further lockdown restrictions or particularly inclement weather conditions in the months ahead. We believe we can build to deliver a weekly average output of between 2.90 and 300 units across FY21 in line with our completion guidance of between 14,500 and 15,000 Homes for the year. There are a number of areas where we are working top to nice construction activity, which include extended site operating hours, improve build scheduling to reduce the time any unit is not being worked on, increasing the proportion of site start up and infrastructure construction where group sales performance and working capital controls allow The adoption of our standard half types is also a key ingredient creating greater simplicity, repeatability, and efficiency gains. We are also continually looking at ways we can incorporate more MMC in our site build. With Oregon playing an important role given the build speed advantages available with Martin Timberframe Construction. Now an update on our house type range for all out in Slide 13. As you know, in 2016, we launched new product ranges for both our brands to support margin growth. We are continuously reviewing our product designs and refining them to both improve the use of space and generate further build efficiencies. Both of which ultimately support demand and improved margin. The progress from the rollout has continued with 60% of all regional completions delivered from the new ranges up from 36% in 2019. Currently, 79% of our outlets are using the new product ranges with the remaining sites either trading out of our previous range or non standard schemes including our London projects. We expect over the next couple of years that the new range will be used across 90% of our outlets and account for around 80 5 percent of group completions. Turning to Slide 14. We also remain committed to MMC development as part of our drive to improve both the homes we build and our performance. And 21% of our completions used MMC in FY 2020 compared with 20% the prior year. We remain on track to increase usage to 25 percent target by 2025. Oregon remains a key part of this strategy and we're very pleased with both the integration and the opportunities Oregon is delivering. Nauterland and firstly, Slide 15. Our land banking plot terms is very similar to the position reported at the end of last year and remains strong at over 80,000 earned and control plots. As you are aware, we suspended unconditional land buying back in March with the onset of COVID-nineteen and the temporary suspension continued until mid August. As a result, land approvals to 9441 plus across 50 one sites, only slightly ahead of the position we reported for the half year. With the COVID-nineteen and lockdown impact on our completions, our landbank length has extended to 5.7 years of Roandland and 1 year of controlled land. We remain committed, however, to our shortened land bank model, Over the medium term, we intend to return our targeted operating framework of 3 0.5 years of owned and 1 year of controlled land through a combination of completion volume recovery and reduced land spend. We've now recommenced selected land buying maintaining our disciplined approach where we see attractive opportunities. Turning now to the landmark and supply on Slide 16. As the chart highlights, there continues to be a very good flow of annual planning consents at almost 370,000 through to March this year. Clearly, this position will evolve in the coming months post COVID-nineteen. Greenfield land prices have also shown only modest price growth, reflecting the better supply situation. To date, we have not seen significant distressed land opportunities. We are, however, expecting a greater choice in spread of site coming to the market this autumn as agents and land vendors return to active site marketing. Turning to build costs in slide 17. As you're aware, we actively manage our supply chain to support the delivery and quality of our finished homes. We have a centralized procurement team, which manages 90 percent of our build materials from foundation level to completion across our standard product. On materials, we have experienced modest inflationary pressure, which has eased through the second half. This easing reflects not only the impact of demand from COVID-nineteen, but also there's sharp drop in energy costs. We have fixed price agreements in place for 95 percent of our materials to December 2020 62% for the full year to June 21. Labor cost inflation has eased with previous areas of inflation refresher impacted by the changed economic backdrop and the desire to secure work from reputable developers with a record of the prompt payment. This puts us in a strong position looking forward. We now expect build cost inflation of between 1% 2% in FY21 broadly in line with the cost inflation experienced in FY20. Now to summarize in slide 18. We have delivered a resilient performance in the year. Our sales rate has shown a strong recovery with a positive trend. Our construction activity is now very close to pre lockdown levels, and we are confident in our ability to build out on our completion guidance. We remain committed to delivering industry leading quality and customer service. Above everything, will be our continued focus on health and safety of our employees, subcontractors and customers. And with that, I'll hand over to Jessica. Thank you, Steven, and good morning, everyone. David and Steven have said FY 2020, it doesn't challenge the year, with the disruption of COVID-nineteen having a substantial impact on our financial performance. Turning to our headline numbers on Slide 20. Our revenue was 3,400,000,000 This was down 28.22 percent on last year, driven by reduced completion volumes in our 4th quarter. Our profit for the year will be impacted by the unprecedented construction for sales and bills, whilst our sites were closed. And we include additional exceptional costs on legacy properties as announced in July. I will cover these in more detail shortly. We delivered an operating profit of $493,400,000 and an operating margin of 14.4 percent for the year. Our profit before tax was $491,800,000, of which $68,800,000 came from 2nd half reflecting our reduced completion volumes and significant traditional costs incurred. We closed the year with a healthy net cash position of GBP 380,200,000 demonstrating Brazilian car business and the benefits of the decisive actions that we took Our repeat was 15.6 percent, a metric impacted twofold by COVID-nineteen, vertically through reduced profitability and secondly, through our higher flows in capital employed, as COVID-nineteen, chemical peak risk investments on what geared up expecting to deliver a significant number of completions during our final autumn. Turning to revenue on Slide 21. Our holiday at home completions were 12,134 and total home completions, including joint ventures, were 12,304. Down 29.4%. However, in periods to the 22nd March, prior to lockdown, we can deliver 10,364 handpieces of almost 10% from the prior year. Private average selling price reduced by 0.4% to GBP 310,600,000, reflecting geographical mix changes to be delivered a lower proportion of private units in London. Our overall average selling price was similar to last year at GBP 280,300 Small increase was driven by affordable completions with a higher proportion of limited affordable completions, up 7 from 7% last year to 18% this year. Including 17900 and 79 homes at our site in Hays Middleton. On guidance, we expect around 20% of completion to be affordable in FY20 1. And in addition, we expect around 650 joint venture completions. Now looking at the impact of COVID-nineteen, and exceptional or adjusted items and what they've had on our gross profit and margin on Slide 22. Our gross profit year was GBP 614,300,000, down 18% gross margin. This was after incurring GBP 39,900,000 exceptional costs in relation to legacy properties. $17,800,000 of this is charged in the 3rd half, And in July, we announced that we expect to incur further GBP 70,000,000 of costs related to Sidoti and the related review. Of this, $22,100,000 was incurred in FY20 and we expect to incur the balance of $48,000,000 in FY21. We also temporarily benefited from exceptional income from the government CJS grant of 26,000,000. We have now repaid this in full, and it will be an exceptional charge in FY 2021. 22,800,000 the grants allocated against cost of sales and so adjusted against gross profit and the remaining $3,200,000 is within administrative costs. Before these items, our adjusted gross profit was 631,400,000 and adjusted gross margin was 18.5 percent. We also incurred 45,200,000 of CoVee 19 related nonrecurring costs in the year. These costs related to nonproductive site overhead expend due to the absence of activity during the lockdown period, costs in relation to safety measures and site based employee costs, which would normally be capitalized to WIP. And we also incurred an 8,200,000 inventory provision, primarily in relation to the commercial site of one of our London sites which contained in the market restaurant and retail units. Adjusting for these nonrecurring costs would result in a gross margin of 20% in FY 2020. We also incurred COVID-nineteen related costs in relation to the expected and expected price duration. Dights have been extended due to COVID 19 by approximately 6 months due to the temporary closure and the period of reduced productivity post lockdown. As a result, the inputting cost is reflected in our site margins. In line with our long standing accounting policy, site margin equalization, Margins were reduced on ongoing sites throughout the year, resulting in a charge of $29,100,000 in FY 2020. Clearly, we'll be seeking to improve against this, as our production levels improved further. Adjustment Slide 23 breaks down components of our operating margin movements year on year. As I outlined last year, we had nonrecurring items in FY90, which benefited margin by 40 basis points, giving an underlying operating profit, operating margin of 18.5 percent The almost 30% reduction in completion volumes caused by the COVID-nineteen lockdown meant that we didn't recover our cost base as efficiently as we would fly as we agreed is to deliver a much higher volume. This caused a 190 basis points of margin deterioration. Our margin initiatives continue to drive underlying improvements with a 50 basis point benefit from the transition to new sites although clearly reduced volumes affected this transition. There was a negative impact of 50 basis points in relation to inflation as we saw modest health price inflation, which didn't offset our bill cost inflation. We also saw a 90 basis point reduction, reflecting the expected 6 months vendors inside durations that our previously outlined. There was an adverse movement of 60 basis points in relation to mix and chloride Our reduced admin expenses had a positive impact of 120 basis points. This is mainly driven by decisions that there will be no payments to any director or employee under the F-four twenty bonus schemes and a reversal of past charges on share incentive as the majority of schemes didn't affect. The combination of these resulted in a year on year reduction of $59,000,000. As I previously detailed, we had a nonrecurring 20 base point impact due to inventory provision charge and our 150 basis point impact from the non productive start out events. As a result, F-four twenty adjusted operating margin was 14.8 percent. The costs associated with legacy properties offset by further grant income reduced operating margins of 14.4 percent. We have a clear well embedded operating framework as shown on Slide 24. This is underpinned by a strong balance sheet, which has been fundamental during these turbulent times. Reflecting the recently changed economic and trading backdrop, I'm pleased to announce today some refinements to our operating framework. We are reducing our land pressure target level and introducing a minimum term, medium term target the minimum year end exceptional indebtedness. These changes will further strengthen our business in on land pipeline lengths, which is a much lower level than expected of completions in the year, with 5 point 7 years owned land. We will bring this back in line with our framework of around 3.5 years through both increasing volumes and limiting land additions over the next couple of years. We have met our targets to reduce non creditors to the lower end of our previous 25% to 30% for anyone at 25.4% for the owned land bank. By a 290 basis points lower than last year. Going forward, we'll expect to operate within 15% to 25% of the income tax In FY 2021, we expect land creditors to further reduce, reflecting the timing of payments due to existing land creditors. To GBP 493 1,000,000 for induced payments this year. We closed FY20 with a healthy net cash position of GBP308 1,000,000 and we operated with an average net cash balance of $348,000,000 over the full year. Year end total indebtedness is now included in our operating framework which we expect to be minimal in the medium term. Our year end indebtedness position was 484,000,000 We continue to maintain appropriate financing facilities for our business and have significant headroom against them. During FY 2020, we didn't draw our $700,000,000 RCS which further demonstrates our strong cash flow management and our balance sheet with Williams. Given the uncertainties caused by COVID-nineteen, the board made a difficult decision to cancel the interim dividend and not to propose an ordinary dividend for the intended special dividend, respectively, for 2020. The board continues to recognize the importance of dividends to all its shareholders. However, given the unprecedented impact of COVID-nineteen, and the importance of resilience balance sheet, it will no longer propose the F-four twenty one special dividend of 175,000,000 Going forward, the Board believes this is in the best interest of shareholders to have a long term predictable dividend income stream. At the appropriate time, it will influence an ordinary return policy with a defined level 2.5 times cover. Now turning to our balance sheet on Slide 25. In March, we acted quickly to pause landline due to the uncertainties of the economic backdrop. Our land price therefore increased by only 41,000,000 $3,100,000,000. As I've already outlined, our land creditors have continued to reduce its target and are $169,000,000 lower than last year. Freight payables were much lower than last year, reflecting our reduced level of site activity and that we continue to pay up the license of contracted as normal. For the net working capital liability was higher than the prior year, mainly due to trade and other receivables being $139,000,000 lower than normal, due to lower trading activity in the last quarter, and this includes a reduction in government health by receivable. The reduction in other assets and liabilities is due to a reduction in tax liability at the year end of $112,000,000 due to the change in the government's tax payment regime, offset by pension asset down with revaluation following the full buy in acquired defined benefit scheme this year. Our balance sheet remains strong, but net asset of 1,000,000,000. Moving on to our cash flow on Slide 26. We continue to demonstrate the disciplined approach to cash management, touching our cash holding. Our operating profit was 493,400,000 offset by investments in our business. We made net cash interest and tax payments of 195,500,000 As we paid 6 court installments in the year due to the government changes, corporate and tax payment regime, as I outlined last year. This timing change resulted in those paying around GBP 27,000,000 more in tax payments than last year. We invested 100 and $3,000,000 in WIP And Path Exchange as the COVID-nineteen lockdown came at the point of our peak investment in WIP. Net land investments increased by around $220,000,000 in the period, as we seek our targeted reduction in land creditors. And total land spend during the year was $780,000,000. As a point of guidance, we expect land spend in FY 2021, around GBP 850,000,000. Our operating cash outflow for the year was GBP 52,000,000. We made GBP 373,000,000 dividend payments in of FY2019 and invested GBP 32,000,000 in other investing and financing activities, leading to a net cash outflow of GBP 458,000,000. Our year end cash position was strong at $308,000,000. On guidance for FY 2021 on Slide 27, I will cover the voluntary is not already given. We expect to deliver around 14,500 to 15,000 wholly owned completions. And we also expect administrative expenses to return to normal levels at $195,000,000. Our interest costs were expected to be around $30,000,000 processing GBP 10,000,000 of cash interest and GBP 20,000,000 of non cash interest. Our year end net cash position is anticipated be around GBP 550,000,000 in June 2021 with an average net cash position of GBP 300,000,000 during the year. Now to summarize on Slide 28, we delivered the resilient financial performance this year and have a strong balance sheet with significant financing Summities. We achieved our target for producing land creditors and through our disciplined approach to cash management, ended the year with a healthy cash position. Our referring operating framework is clear, and we are well positioned for the future. Thank you. And I'll now hand over to David. Thank you, Jessica. As Jessica and Steven have both on the line with their presentations, clearly we have a strong investment proposition. And I would like to we aim to operate with 1 of the shortest land banks in the industry. This clearly improves our return on capital employed and reduces our longer term risk. We demonstrated that we have a resilient balance sheet and we are naturally cash generative. Who are rightly proud and driving out ways that we can improve our margin. Our quality and service performance is key to the strength of our business. And we recognize that it is our license to operate in communities, the length and breadth of the country. Our broad geographic spread gives us a diversified business that creates a balanced market exposure. And finally, we lead the industry on sustainability because we clearly understand how important that it is for our business operations, both now and in the future. These differentiators put us in a strong position to deliver I highlighted how these differentiators help us grow volumes, deliver margin improvement and generate strong cash returns. Now our investment proposition remains unchanged, but our operational targets have to recognize the rebuilding fundamentals in Slide 31. There clearly remains strong demand for new homes across the country. Evidence both in the past few years and since the lockdown ended. The government has a target of building 300,000 homes per year to address years of undersupply. And clearly, the government housing policy remains very supportive of that target. As Stephen outlined, the land market remains attractive The recent extension of Help to Buy build completion deadline is welcomed and the tapering to the scheme from 2021 continues as expected. Mortgage interest rates remain very attractive and affordable. The lending environment has, however, seen lending criteria tighten most notably around higher loan to value lending. Looking at the mortgage environment in more detail in Slide 30 2. Here are two charts which you have seen before and which clearly remain important indicators. On the left hand chart, you can see that average mortgage rates both for the 85% loan to value and for Help to Buy remain attractive. Mortgage providers have pushed mortgage rates higher in recent weeks. Partly to control new mortgage demand given the capacity challenges faced, but also a reflection of perceived lending risks. The chart on the right shows the proportion of average income spent on monthly mortgage interest and repayments. This Halifax data shows that affordability of mortgages still remains good. With mortgage costs as a proportion of earnings well below the long run average due to ongoing low borrowing costs some wage inflation and very modest house price inflation. Mortgage affordability is clearly supported by low mortgage interest rates and a shift towards fixed rate borrowing, both reducing risk and volatility The qualification hurdles for our mortgage have, however, become more challenging since the onset of the pandemic. This chart on Slide 33 highlights the removal by certain banks of both 95% 90% loan to value products. For new build home wires, which has happened since the commencement of COVID-nineteen. Help to advise a result remains an important tool for those aspiring to homeownership. Changes in mortgage lender behavior particularly with the removal of access to help the buyer existing homeowners is something which we will continue to monitor as well as maintaining our ongoing dialogue with mortgage lenders. Our overriding focus for the year ahead is rebuilding our volumes, our margin and our return on capital employed. But clearly our longer term priorities remain. We published our vision 6 years ago to lead the future of house building by creating customers at the heart of everything we do This defines our culture, our actions and the way that we do business. That vision continues to be underpinned by 4 strategic priorities. We passionately believe that and resilient business for the longer term. Communities where people are proud striving for excellence and embracing modern methods of construction. And investing in our people is vital. Deploying successful strategies for retention and recruitment will help us to meet the longer term skills challenge that will be faced by the entire industry. We aim to be the leading national sustainable house builder to create long term enables us to deliver excellent financial sustainable business, creating long term value for all stakeholders. I want to talk briefly on Slide 35, about a key principle on which we have made significant progress this year. Safeguarding the environment. This is essential to building a sustainable business which delivers value for stakeholders. In December last year, we appointed a new group sustainability director who is leading our efforts to be the UK's most sustainable house builder. And in January, we set new science based targets aiming to reduce carbon emissions across our operational footprint. To 100 percent renewable energy sourcing for our own operations by 2025. New standard house type designs will be net 0 carbon in use in 2030. And that we will become a net 0 carbon emissions business across all of our direct operations by 2040. We are also aim to create a positive impact for Ecology and biodiversity across all of our developments. In leading the industry in sustainability, we will innovate and run ahead of regulations. This is clearly the right thing to do. It will strengthen our consumer proposition and it will make our business fitter and more resilient for the long term. So let me now bring you up to date on current trading, which is summarized on Slide 36. It has clearly been an encouraging start to our new financial year. Has been 0.94, more than 38% ahead of the equivalent period last year. And bear in mind that we had a strong comparative period. Coupled with lower outlet numbers, This results in net private reservations per week of 3 14, almost 26% ahead of the prior year. And our forward sales position including joint ventures is all so very strong at just over 1000000000, 22% ahead of this point last year. Finally and importantly, I would highlight that this forward sales position is also stated after a strong start to the year with total completions including joint ventures at 14 39 through to the 23rd August, 62% ahead of the equivalent period last year, which totaled 886 completions due to the 25th August. In conclusion, turning to Slide 37, We are clearly operationally strong. Our controlled return to site has provided platform for sustained construction, outgroup recovery, absent further lockdowns. We are clearly financially strong with net cash at year end, significant unused facilities available, and we expect to generate additional cash in FY 2021. Our operational and financial strength are great assets and we will continue to focus on margin improvement, return on capital employed, and disciplined completion growth. We will also continue to lead the industry on quality and service. Our current trading and strong forward order book means we are cautiously optimistic on our outlook and we're looking forward to rebuilding the business in FY 2021. The industry fundamentals clearly remain very attractive. And whilst we are mindful of the economic uncertainties, including Brexit, we are in a have served us well in FY 2020 and remain as important now as we rebuild Barratt as a strong resilient business for the future. Thank you and we will now be happy to Thank you. You. Okay. And our first question comes from the line of Will Jones calling from Redburn. Will, yes, good morning. Great, thanks. 3, if I could, please. The first, maybe if you could just explore the recent weeks of trading that strong sales rate for July August. It was a reference in the statement obviously to the Help to Buy deadlines, prompting some action. Have your have your percentages, I guess, of customers using Help Device, that changed a lot over the last couple of months versus say the full year average for 2020. Just perhaps if you could just comment on the pricing you're achieving against those recent sales leads. The second was just around build rates the roughly 350 equivalent units we can develop, I think, last week and that guidance of building that closer to 300 for the year as a whole. Is there a reason why that 350 does step down from here or you're just allowing for winter or some setbacks maybe or whatever it might be? Just wondering about the gap between the two there in terms of the just effectively the build rate guidance. And then the last one was just perhaps if we could margin bridge on Slide 23. Is it possible just to explain to us, certainly the difference between if we look at the volume impact decline of 190 basis points for gross margin and extended site durations of 90. Can you just help me understand the difference between those too. And then in terms of their improvement going forward, presumably, we can do the maths on any volume improvements against 190, but the site extension, is that we just have to trade out of those sites now over time, or do you revisit that every 6 or 12 months? And if funds go up this year, that gets a better benefit. I don't know. Just any more understanding really around the 2 items would be great. Okay, Will. Hi, good morning. Yeah, you're definitely coming through loud and clear. So just on question, see the margin bridge, that all sounded tricky to me. So Jessica will cover that. And then on build rates, Stephen will talk about build rates. So if I start off and then we'll move to Stephen. So just in terms of trading for July August, I mean, think first of all, Will, that when we announced in July with the trading update, we were clearly seeing good trading trends coming through June. And so I think it's been, Stephen touched on, you know, it's been kind of consistent trading across the country. I wouldn't call out in particular an area, just so that overall we've seen good trends. In terms of Help to Buy, the Help to Buy participation has ticked up a little in July August. And that is probably the other side of loan to value availability dropping a little. And therefore, I think Help to Buy is becoming even more attractive given what I would imagine are temporary reductions in loan to values from lenders. In terms of pricing, think we said that for FY 2020, there was very little movement in terms of pricing. For July August, I would describe pricing as very farm. I mean, I don't think we could give any figures, but it's just it's just too short a period of time, but I would say pricing is baked from through July August. Stephan, you want to pick up on deals? Yes, David, and good morning, Will. Yes, exactly as you say in terms of the 3+7 that 3+7 was weak, 8 we put on slide 12 as sort of a green line sort of indicating where we need to be to deliver our guidance 14,000 after 15,000 for the year. We've got all our trades back on-site now as we sort of indicate on the seeding slide. We've got highly productive whether the guys are working long hours, extended hours on-site and weekends. We have to bear in mind that, over the 50 week average and that obviously takes into account the 2 weeks off in Christmas. That over the 50 week average, there will be some sort of lesser working hours, particularly when you get to sort of November, December, January, February, when days are shorter and they don't tend to work the weekends. So we're probably our most productive time of the year. So we need to be doing those sort of numbers to deliver the average throughout the year. Hopefully that explains that. Yes, great. Thank you. Thanks. Thanks, Steven. And Jessica will pick up on the margin Hi, Noelle. In terms of the two elements of the bridge, the volume impact is simply going through the effect the decrease in completion volumes year on year. The site extension, as I said, we expect that our sites will be extended on average by around 6 months. Clearly, that's a conservative judgment but we have already, had a period of time where we've been on-site for longer than we would have anticipated pre COVID, what we've been building our productivity backup. When thinking about the GBP 29,000,000, that's clearly related to the commission volumes in the year. So if you take the $29,000,000 on the $12,000 wholly owned completion, when looking forward, you can extrapolate that over the 14,500 to 15,000 completions. So that would if you take the 15,000, that would be an impact of around GBP 36,000,000 on FY 2021. And clearly, we're going to be looking to improve against that. As we as we go forward and dependent upon where we turn out on production levels. Thank you. The reference, the 20 that run rate 29 is reference point against last year's output as opposed to necessarily what you're guiding for for the year ahead. So do you reassess with that? So I'm saying, could that number be better because you've you're worst point at the moment or you have been, you know, is that not the right way to interpret it? Sorry. Yes, the $29,000,000 is a full year impact across all of our completions in FY 2020. Because we've recognized margin on an equalized margin basis. So we had a 90 basis point reduction of margin. If our assumptions, around 6 months continue, then we will continue to see that 90 basis points continue all those sites trade through. If we can see better than that, then clearly we'll see an improvement on that position. But as always, we will assess that every time we do our evaluations, which is every month, we look at a proportion of our sites. Got it. That's great. Thank you. The next question comes from the line of Ingsedi Lammin calling from Canaccord. Please go ahead. Hi, good morning, everybody. And just three questions for me, please. So first of all, just on Help to Buy and the impact kind of what you're doing in the land market, just to preempt what obviously as it papers down in March? Are you being a bit more conservative in your landline or kind of what you expect in the impact of that tapered to be unhelped by? And then second question, just on special dividends. I'm just wondering if you could give a bit more of your thinking behind that. Obviously, you've got the macro risk and earnings could be volatile, but is there anything structurally where you've kind of not optically like to be paying out special dividends? I don't know if income funds prefer just ordinary dividend, anything that you could add to that would be great, please. And then just on the kind of, obviously, volume guidance dependent on no more kind of full national lockdowns, but just where you've seen recent regional local lockdowns, has that had any impact recently build rates, sales rates or anything? Or is it pretty minimal? Thank you. Ainsley, hi, good morning. So I'll have a vote for too in terms of Help to Buy and special dividends. And then Steven will pick up in relation to local lockdowns and we obviously have some experience of that. So in terms of Help to Buy, I mean, I think the key thing to flag is that the tapering in March 21, as you know, is no new news. And therefore, we've said previously that we have looked at our land buying assumptions in light of that tapering. And broadly, that has meant that we've said, 1st of all, we would expect see a pickup in terms of part exchange activity and therefore some increase in incentives, incentive cost as a result of more part exchange. And secondly, we would expect to see a slowing in the rate of sale, as we move past that March 21 position. So that's something that we fact into our land buying, certainly over the last couple of years, and obviously we'll see what happens when we move through to March 21. In terms of special dividends, I mean, we've announced in this announcement today in our previous announcement, but the November 'twenty and the November 'twenty one special dividend will no longer be proposed. I think when you look at the evolution of our dividends, we started with an ordinary dividend And then when we saw that we had surface cash, we then added the special dividend on the basis that it was a mechanism by which we could distribute our surplus cash. So in resetting our dividend, I think we're saying that an ordinary dividend is appropriate we'll obviously continue to monitor the performance of the business going forward, but there is simply no special dividend on the table at this point. In terms of the difference for funds, I mean, we recognized or can be some difference in terms of treatment if the special dividend is not set out over a long period of time, typically 3 plus years. We will take account of that, but I think we're some way away from those kind of discussions at this point. In terms of modeling, Italy, yes, in terms of impact of the local lockdowns. Yes, we've sites in the left there in the northwest, which were in those areas where there were local lockdowns. And there was no noticeable impact on build our sales activities. Our activities were restricted by the lockdowns. So no noticeable impact from those lockdowns. Great. Just to follow-up, Mendo, so on the special dividends, you're not kind of bandon them forever more. It's just in the near term, you don't see any prospect of specials that they could come back on the table later on if recovery continues and cash flow improves, etcetera? Yes, I mean, in the same way, as I said, it evolved originally. I mean, we don't have any philosophical problem with special dividends. I mean, we saw that there was a place for it in our dividend strategy previously, but at this point, we're very much on the basis that we go forward with ordinary dividends and the board will just continue to assess that on a 6 monthly basis All right. Thanks very much. Thank you. The next question comes in from the line of Andy Murphy calling from Pan Your Gordon. Please go ahead. Good morning, David, Steven, Jessica. I hope you're well. I've got two questions and a little bit interrelated. Think about the COVID 19 and working from home, which has been a a key element, of of working practice over the last 6 months. I was just wondering to what extent you're seeing pressure from people coming in saying that, you know, I need a bit more space you know, in in the house I'm looking for, and, whether whether you're reacting to that in, in terms of of of redesigning and what that might impact on costs. Guess the flip side to that, it's really the second question thing that I helped to buy. I'm imagining that I'm assuming with the restrictions coming in that's, helped to rise a new courage, maybe an increase in smaller houses, which obviously this is sort of a counterbalance to my first question. So I was wondering how you're thinking about adjusting your output to do for the Help to Buy restrictions. And then finally, I was wondering, you said earlier on that 16% of your output last year without being eligible for help to buy. I'm wondering if you'd given any thought to what proportion of, like, 16% could have actually bought. They just chose to use Help to Buy. I don't think it would they have had or what proportion was about the capacity to make the purchases without Help to Buy. Thank you. Okay. And I think I'll just try to run through that. As you said, they're probably kind of interrelated So I think 1st of all, in terms of house hype design, certainly, Stephen and I and Stephen and his team have talked about the extent to which there are implications on house type design in light of COVID-nineteen. But I think we'd have to recognize it is early days. We've been very focused on restarting the business and clearly getting back to reservations and getting back to build. What you see in terms of the search information coming through from right move and coming through from zoopplot is that people are looking for flexible space So I don't think they're necessarily looking for more space because I think people recognize that a larger house costs more money. But what people are looking for is the flexibility of space, whether it be for people to undertake home working, whether it be for children to undertake school work and so on. So that flexible space rather than say a dedicated office I think is high up on people's priority list. And the other area is open space. So clearly there's been search trends that have been more about houses than about apartments and that's something that right moved a flag really right back since April, May time. In terms of Help to Buy, I mean, I don't think per se that help to buy creates a move towards smaller homes. I mean, arguably, presently quite the reverse, because of the relatively high cap at 600,000 as we move to regional caps, you know, we flagged that perhaps in midlands and northern that the regional caps look reasonably tight. So that may cause some movement towards smaller houses for Help to Buy users, but that's obviously on a very regional basis. For the majority of the country, the caps don't present any particular challenge. And I think you've got to bear in mind that for us planning the business, we're also planning beyond 2023 when Help to Buy World stopped. So I think the most important thing we see is that you've got to have a balanced portfolio. And with Barrett and David Wilson, we clearly have the opportunity to present a balanced portfolio in terms of one bedroom through to 5 bedroom homes. So I think that's important. When you look at people who can and can't, use the Help to Buy program, two things really to highlight. I think there's been a reasonable amount of commentary over the last 2 or 3 years from different parties that there are lots of people who are using the Help to Buy program who may have the financial means to go for a more conventional mortgage. So the reality is that perhaps people do have savings, but given Help to Buy, they don't need to all of their savings for the deposit. And secondly, part exchange for the second time or subsequent mover has always been a very important part of the market for the house builder. So we would expect to see an increase in part exchange as we move beyond March 21 and go back to perhaps more normal levels of part exchange as we saw prior to the launch of help to buy. Great. Let's ask one follow-up question. Thank you. That was answered by the way. On that, just on on Help to Buy. What's what's, chance do you describe the government might change its mind and and defer the changes or, you know, continue with the existing health of our arrangements as they are just to sort of help the housing market along this at this time? Well, I think innovation from the sort of view that I would have on it would be 2 things. First of all, I think the government have given us good visibility of the tapering and then the termination of the scheme. As you know, this visibility was put in place some time ago. So I think largely government done what you would ask them to do, which is to give us visibility firstly. And secondly, we've got to plan our business on the basis that the tapering and then the ending of the scheme run-in line with the timetable has set out by government. So I can speculate all day long, but that's not the way we're going to run the business. So in terms of our land buying and our strategy is very much about putting the business in a place for 2021 and then for 2023, where we've got a balanced portfolio of products that's the key thing we need to focus on. Keep talking to the banks, keep looking at the loan to value. That's obviously what government will do as well. And I'd be very confident that as the banks want to lend that the banks will provide the loan to values to allow the markets to operate normally. Okay. Thank you very much. Thanks, Andy. The next question comes from the line of John Fraser Andrews calling from HSBC. Please go ahead. Thank you, and good morning, everybody. I'll have 3 as well, please. The first one is on your forward order book the 3,700,000,000 is higher than your sales of last year. Clearly, those are going to increase quite a bit. But could you just set out how much of that forward order book you think is for the current financial year and and how much for the year after? That's the first question. The second Eilon outlets, the decline in the 1st, 8 weeks of this year, the the 9% lower outlets. What's the plan there, please, in terms of of your profile? And particularly, starting up outlets, to drive the volume growth that you're projecting. And the 3rd and final question is on the land spend. You projected at 1,000,000. Can you just set out sort of where you stand in terms of spending that money, it sounds like you haven't spent too much so far. You said you've been selective. But going into this autumn land market, what have you seen over the summer in terms of of land prices and what are the indications on availability to meet your objectives? Okay. Hi, good morning. Thank you for those. So Jessica will just talk in terms of the forward order book and what for FY 'twenty one, what's for FY 'twenty two, just in broad terms. And then in terms of outliers, I mean, Steven will just pick up a general view in Oyesha and II think what I'll do on land spend is we'll just split that between Steven and myself. So I'll just give an overall view in terms land spend and then Steven can talk maybe about some of the opportunities and what we see in terms of the land market. But as we've said this morning, our man, clearly the steps that we're taking back into the market are all see fairly tentative. So if I just start off in terms of land spend, I mean, As you know, we've historically guided to land spend and we've been at land spend levels that have been close to 1,000,000,000 in the current year on land spend, Jessica gave the guidance and a big part of that expenditure of in relation to the brought forward land creditor position. So circa $49,500,000,000 of spend in that area. And therefore the incremental spend, some of it is already committed, but there is a fair amount of it will be committed to us stepping back into the market. So perhaps as Stephen wants to just outline what we're doing in these sort of tentative steps back into the Yes, thanks. And good morning, John. Yes, as David said, we in fact, we've recently just come back until the market middle of August. And we signed off 9 to 10 deals in the last couple of weeks, which are proceeding on a short term basis. Generally some of the sites we're looking at are locations of strong proven demand where we can build standard products. They've got strong planning credentials where we expect some site pretty soon. And that generates other deals in the size of 100, 150 plus on average, obviously maintaining a very disciplined approach where you see these attractive opportunities that either meet or exceed our hurdle rates. In terms of far visibility of land, We're in touch with all the agents and land owners this is to expect. We have good relationships and we have good visibility of land coming into the market. In the next 6, 9 months. And we're expecting a number of sites to come through onto the market in autumn and early part of 2021. So we're pretty happy with the way things, a lot of good prospects and good availability, going forward on land Thanks, Steven. And just in terms of outlads, I mean, Stephen, again, we'll expand a little, but what I would say in outlets, I mean, clearly there has been delays So delays for us in terms of getting sites ready to commence and or commencing on-site that's clearly been part of what's happened in Ovation to, COVID. But Stephen, do you want to move just to outline? There has been delays, as I've touched on, and there is a sort of a bit of a lag coming through the planning systems and number of sites that were expected in sort of March. Earlier now sort of coming through, July, August, September. No doubt the numbers will be coming out in due cost. On the on the planning achievement in terms of sites approved. But on average, we've got about 9800 sites starting the next 12 months. And we'd hope to be sort of holding the outlets around about the level we're currently operating on and move moving forward on that business. Certainly the sites are selling very well, which is another factor which impacts our outlets. Okay. And just going forward order book, Yes. So we have a strong forward order book at the 23rd August at 3,700,000,000, which is 15,660 homes. And we've seen good completion delivery over the 1st 8 weeks of the year. I think when looking at the split, it's best to look at it by type of products. So, we had wholly owned private homes within the board order book of almost 6600 and because of how we sell the majority of those will be delivered in the current year. Of affordable homes, of nearly 8250. Some of those will be delivered this year, some of those will be delivered next year, because as affordable contract tend to be entered into towards the start of the site. So on affordable, the best way to look at things is around 20 percent of our completion volumes this year, so around 20 percent of our 14500 to 15000 wholly implementations will be affordable units. But thank you. The next question comes in from the line of Chris Millington calling from Numis. Chris, please go ahead. Thank you. Good morning, everybody. It seems a shame to kind of move away from the free. So I stick with that. Can you just talk quickly about build inflation on new contracts? I understand the 1%, 2% guidance you've given, but obviously that carries forward contract signed some time ago. So maybe just kind of current trends there. Also, you you you touched on pricing earlier. Saying it's been very firm, but I presume with the sales rate feeding through at the level it is doing, you may be looking to actually change pricing. So perhaps any comment there And then the last one I wanted to touch on really is fire safety. I mean, it really does feel like it's a moving, feast at the moment, but perhaps you could just give us your updates thoughts and whether or not you feel like you're well covered from a provision point of view, you know, both really on legacy properties are being completed, I'm talking about that. Okay. Chris, hi, good morning. So I think in terms of the build inflation in relation to contracts, I mean, Stephen will pick that up in terms of the position. On sales, pricing, I'll pick that up and then far safety, I'll cover So just in terms of sales pricing, I mean, Chris, I think all I would say is it's a very short period just through July August. So clearly, the initial part of it is the extent which we're having to do deals, previously, if you went back 3 or 4 months ago, you'd see deals in the market, prior to lockdown, where there would stamped duty deals and clearly there's now a stamp duty holiday, so there's not stamp duty deals. So the reality is that there is less deals being done. And that would clearly be the first thing to happen before prices actually move. But overall, it's a very positive environment in terms of pricing given the levels of demand. And when we get to the half year, we'll obviously update in terms of experience across the first half. I would say overall that clearly the clouding solutions for buildings has obviously been the subject of intense scrutiny since the tragic events around Grenfell. And we've said previously that we've undertaken a review of all of our buildings we've demonstrated as a business that where we feel that there is a requirement for us to step up to deal with things whether we are legally liable to do so or not, we have been comfortable to take on the commitment to step up. Everything that we are aware of that we would be required to undertake, we have made provision for But we recognize that the position is evolving because regulations are being altered, and we've clearly seen a number of changes to regulation over the last couple of years. So I think for everyone, it is just an ongoing position, but we we've been quite transparent And we've clearly, as Jessica touched on, we've had substantial costs over the last couple of years, relating to far safety, but cladding in particular. Stephen, good morning, Chris. Yes, in terms of cost inflation, whether it be on the supply and contracts are direct materials and direct labor. We're involved in, we sort of approach it on a similar basis for tenants sort of fixed price is generally 6 to 12 months, deliberately sort of a short term strategy to take any advantages as things change. In terms of our own materials and a lot of the materials we agreed prices on also applies to our contracts as well. Subcontractors. So 90% of our materials are fixed for the first half and 62% for the second half. We're seeing good levels of competitive tension across the market, whether it be on supply and fixed or raw materials. It's been helped by some energy reduction costs in the last 6 months or so. And I think the other factor, which obviously, big influence on our bill cost inflation is labor rate. And again, we're not seeing any real pressure on labor increases. The trade increase, which was due in June, July was pushed back to September. And we understand that it's not likely to be pushed back until June 21. So there's plenty of trace availability. We've seen reasonably consistent rates geographically around the group, no real pressure points, and achieving good levels of fixed pricing. So we're happy on that 1% to 2% for the year. Okay. And Steve, just to push you a little bit further, So I've just heard 1 or 2 house builders talk about a bit of deflation there. Now you're probably at the more efficient end, but but that's not what you're seeing at the moment. It's kind of little to a slight upward movement is kind of your feel. Yes, that's where we'd feel. I mean, the area where we're getting a bit of would be on timber, but that's due to world market, but generally the materials are holding as is the labor. Very clear. In fact, thanks so much. The next question comes in from the line of Clyde Lewis calling from Peel Hunt. Clyde, please go ahead. Morning, David. Jessica's team, and I suspect John is lurking around in the background there as well. I think if I can, I'll also stick with 3 as well and probably the first one is a sort of a linked one with, I suppose you'll, it'd be interesting to hear your view, your comments on how you think you're going to have to manage your whip, I suppose, given the sort of the distancing issues you've gotten, the sort of build pressures you've got. Do you think you're going to have to run with a bigger whip, on the ground just so that you can do yourself a degree of comfort to make that 2.95 sort of build completions per week. I suppose linked to that is you want for Stephen, what's the thing that's going to keep you up at night worrying most about that build rate? Is it weather? Or are you sort of more twitchy about some of the sort of trades or materials within the process? The second one had was probably on, sort of one for Jessica, probably, I suspect, in terms of sort of land creditors. And again, thinking about the land buying, clearly, you set that sort of 15% to 25% range. I mean, you flagged obviously a pretty good market for land buying. Are you tempted to try and squeeze the price down and push that gross margin up a little bit more or are you sort of happier certainly shorter term to be looking more at continuing to use land creditors and maybe not drive it down that aggressively in terms of that percentage number. The last one I had was probably a lot of the environmental work you flagged David, I think, is obviously sort of very laudable. How do you think the group benefits financially. Do you think you're right now, you're getting a premium price for better product and the design or do you think you're getting more of higher sales, right? Clyde, okay. Thank you. I think that's almost 3.5 questions, Clive. But, okay, I mean, look, in terms of just splitting them up, I mean, work in progress, I mean, I'll start very briefly and pass across Stephen, and he'll be able to explain what keeps him up at night. I think, land credits as Jessica can talk about that, I mean, clearly in the context of our operating framework. And I'll pick up in terms of the environmental side. So if if I kick off on the environmental side first and then I'll come back to the work in progress. Now just on the environmental side, I think we we set out in previous announcements probably at the half year and at the full year results last year. We spent more time on it. I think we have to put this in the context, but when you look at a carbon agenda in terms of carbon reduction or, biodiversity agenda, there is very clear regulations that will be coming down the track. If you look out over the next 2 years, particularly for biodiversity, the next 5 years in terms of the future home standard and the next 10 years in terms of the carbon agenda So I think we would recognize that regulation is coming and it is going to affect all house builder We feel that the really advantage for us as a business and for our stakeholders is for us to be at the forefront of that so that we are able to influence, shape, adopt what is coming down the line. So on the environmental bill, which will become the act. We've done a lot of work in terms of how we can improve the position in terms of being net positive from a biodiversity perspective. And we feel that we are we're really at the front edge of that, which is important. As you know, from many years ago, we were genuinely with some of our house builders, we were at the front edge of delivering 0 carbon homes. And all of that got pushed to one side and we are now going to need to get back delivering 0 carbon homes. So I think the reality is that the advantages for us is to be able to innovate to adopt technology, to adopt processes hourly, which means that we have a good commercial position when we come to have to do it under regulation. And that's why we've said that we have to run ahead of regulation so that we can clearly see and experience what is coming down the pipeline. Terms of work in progress, just briefly, I mean, one of the things that we have to recognize on work in progress is that we are growing the business substantially and we expect to grow the business through FY 2021 and clearly into FY22. So that has to be a backdrop in terms of what we're looking at regard to work in progress. That's the only thing to add to that, David, would be a monocleider. In terms of managing the work in progress, no real major difference. Obviously, we have very strict discipline in place where We reiterate the number of units being worked on at any point in time. In terms of the current issues, Unfortunately, the vast majority of what we're building is chloride product, semi detached houses, where we allow 3 or 4 people maximum per property work in that unit. And there's not any significant difference from that perspective for us. There's obviously the different impacts in terms of welfare facilities on-site. But otherwise in terms of managing the WIC, no significant difference. In terms of keeping me awake, Conanide. I'm thrilled to be that one actually, but it's certainly not the trades. I think we've got good availability of trades better than we've had for some time in fact materials have no real issues. I guess the major thing, what worry me would be another full lockdown, but that probably would be from usual in light of all the evidence coming out today, how we would deal with that. So that's the only thing Okay, great. Thanks. Thanks, Steven. And, Jessica, would you pick up in terms of land creditors? Good morning, Clive. I mean, we're very pleased to have achieved our target this year and reduced our land creditors into our previous range of 25% to 30%. Clearly set out today a refinement in terms of our operating framework and to keep land creditors within the 15% to 25% range going forward. When looking at land creditors for FY 2021, there will be an outflow of GBP493,000,000 in terms of committed land creditors. So clearly that's going to reduce where we sit within the range. And on land purchasing, it purely comes down to hurdle rates. Our hurdle rates are clear and unchanged. So a minimum 23% gross margin and a minimum 25% return on capital employed and all our land purchasing has to achieve those levels. Clyde, thank you very much. We'll move on to the next call. The next question comes in from the line of Gregor Coolidge calling from UBS. Gregor, please go ahead. Hi, good morning. Can you hear me well? Yes, Gregor, very loud and clear. Good, excellent. So a few questions, please. And maybe some of them trying to tie together some of the answers so far. So maybe firstly on cash generation, I suppose a little bit unclear on some of the moving items. I mean, land is clear. Width, I'm not really clear if you're saying it's going to grow. It looks quite high as a level in terms of winter, well, low as winter and high end level. And some of the exceptions. So if you could just maybe flesh out maybe 3 bps of the width investment the exceptional cash cost that we have to think about this year and maybe JV investments, anything you'd like to flag, I guess, for the cash generation into FY 'twenty one that would be most appreciated. The second question is just going back to the margin. So I understand from what you're saying is that your starting point is kind of 20% growth in 2021 and you'd hope to improve on that. I think that was kind of the wording. So can you just give us maybe essentially what drive what from your perspective is sort of a realistic prospect for improvement against that 20. I mean, is it a few bits or can you get close to where you were I mean, I guess a couple of years ago, maybe it's a bit ambitious, but just maybe help us out a little bit what drives a little bit of change against that maybe a society extension, maybe pricing. And then maybe finally, obviously, we had the white paper, over, the summer, summer holidays. On proposed planning changes. So I don't know if you've, I presume you've reviewed it. If you could give us any thoughts when you think about it. Obviously, it's I think, under consultation. So anything you'd like to sort of give us your perspective of, on that on those pretty I think radical changes to the planning system would be helpful. Thank you. Gregor, hi, good morning. Okay. So if I pick up in terms of planning and, Jessica will pick up for cash generation and also the margin, just to give some thoughts on margin. In terms of planning, I mean, yes, clearly we've seen the government proposals and it it is a significant change. And I think we recognize that we're in an environment just now where changes that went in in 2012 have clearly made a huge change to the planning backdrop. And we highlighted this morning that when you look at planning approvals, over the last 2 or 3 years, we've seen record levels of planning approvals coming through. So we're in a very, very good environment in any event from a planning perspective and that continues to improve. I think on the white paper, probably 2 main things to highlight really. 1 is clearly subject to consultation, and there will obviously be a lot of discussion and consultation. We understand that the underlying principles of local authority designating land for different forms of use. But the government themselves have said that they believe it will be a 3 to 4 year implementation process. So I think it's going to be quite a slow burn in terms of implementation and we'll obviously keep it under review. Jessica, do you want to pick up in terms of cash generation or margin? Yes. So in terms of cash growth, we're expecting cash outflows at the end of the year. That's around 1,000,000. Key items to think about in that is the land creditor outflow of GBP 493 1000000 for the committed items. In terms of the exceptional, we came into this year with a $28,000,000 provision on legacy properties and I've outlined that we expect a further $48,000,000 in terms of legacy properties, so clearly that needs to be taken into consideration when we get cash. And also there is then the repayment of GBP 26,000,000 grant, which we have already repaid. In terms of work in progress, which we you picked up on specifically. We'd expect that to be at a similar level at the half year. Clearly, it was slightly higher than normal that we came into this year because of the timing of the lockdown and the level of pre COVID completion volumes. And we'd expect a slight reduction in terms of work in progress at the end of next year because clearly as David outlined, we will be looking to grow our completion volumes through into 2020 too. So we obviously have to have appropriate within the grounds to do that. In terms of margin, yes, it's 20% in terms of gross margin from nonrecurring costs is the right starting points of thinking about it. I think when looking at it, we need to take into account of the fact that that 20% clearly included a full first half of, full efficiency in there. So that's the piece I would say. And looking forward, our site overhead costs are fixed in terms of site managers, assistant site managers, booking truck drivers, whether we're delivering 12,000 completions or 15,000 completions. So clearly our level of overhead recovery will not be at the level we would have been experiencing prior to Loxer. Sorry, just to be clear, are you saying that that puts downward pressure on the 20 or you think despite I think it should be 20 plus Yes, 20 plus, yes, provided us no further lockdowns or deterioration in the market. Good. Thank you. That's excellent. Thank you. Great. Thank you, Gregor. The next question comes in from the line of calling from Jefferies. Please go ahead. Good morning everybody. I'm surprised by myself saying I've still got three questions to go as well. The first one is just in terms of, average selling price. The average selling price in the land bank is 276, clearly, London, Central London is sold out. Should we be using that land bank, ASP, in our forecast for the full year of 21 or is there a mix effect? Second of all, in terms of those, the margin guidance, actually, if I start at growth, you've done 22% first half 'nineteen, second half 'nineteen, first half 'twenty. The COVID margin impact for the extra duration is 85.90 basis points. Struggling a little bit on on why we shouldn't be aiming for above 21% rather than starting at the 20 because the overhead leverage, you know, that that's the EBIT rather than the gross. So just focusing on the gross, what other things do you need to put in? And then lastly, just kind of some cash tax this year, given that the last year had those 6 payments, given the dip in timing of profitability through the year, what should we expect for this year? Launice, good morning. Thank you for restricting yourself to 3 Just to say, Glenn, this is that, on ASP, I'll deal with that one. And, Jessica will pick up in terms of margin and the cash tax. Just on ASP, I mean, yes, absolutely. We would generally point to the ASP in land bank because there isn't going to be a big mix effect coming from London that perhaps we've seen in some previous years when we've had a lot of Central London exposure. So I think that will be absolutely fine. Jesse, do you want to pick up a margin and cash tax? Yes, I mean, in terms of margin, Glynis, 20% is is the right starting point to go from. Clearly, that takes out all of the nonrecurring COVID items that we experienced last year and the other exceptional items. So absolutely use the 20% and as I outlined We do have the fixed level of cost in terms of running our sites, whether we're delivering the 12,000 units or the 14,500 to 15,000 units. In terms of cash tax, we're back to 4 quarterly payments this year. Last year was obviously a one off with with the 6 payments. And in terms of effective tax rate, we'd expect to be around the statutory rate of 19%. Thank you, Jessica. Sorry, Grant. I'll just come back on the gross margin. So the 90 basis points of COVID extra duration, what you're saying is that not taking to account any extra overheads you have for running your site given other elements of COVID? I'm struggling to understand the 22% you were at, why 20% is the starting point? Because going forward, I can't see why it's anything more than that COVID drag of that 90 basis point Clearly, within gross margin, we've got site costs in terms of running the sites, but there are also other elements of growth costs within gross margin. That are fixed limits and those obviously have an impact when looking at a business that was previously gearing up to deliver around in the year. Okay. Thank you very much. Moving on. If I could just flag the time wise, we've probably got another 10 minutes. I know there's a few calls to come through. So, we'll go to the next call. Thank you. The next question comes in from the line of Arnold Lemmon calling from Bank of America. Please go ahead. Thank you very much. Good morning, everybody. Just probably two questions from my side. Firstly, on your medium term targets. Now you're talking about 20,000 completion, previously you used to talk about 3% to 5% volume growth per annum. I mean, I guess it's the same answer, it's the same answer 2 different ways to present the same target? Or I guess you were worried that people were you to deliver more than 20,000 completions. And related to that, I mean, looking forward, there are some, well, obvious macro risks, the potential to buy that you discussed at the end of the stability holiday. If you have to choose between volumes and margins potentially more challenging, let's say, macro environment, what would be your target? Would you stick with the 20k completions or would you focus on the margin improvement? And lastly, just maybe I misunderstand that you give a year end net cash guide on for fiscal year 2021 at 1,000,000, which is quite helpful. But what are the underlying implications in terms of dividend payments because at the moment, I'm not committing to any meaningful any dividend payments for now. But so what does it include? Or excluding any dividend payments? Thank you. So Jessica will pick up in terms of the cash guidance and the position regarding dividend. So just in terms of our medium term targets, so I think there are 2 slightly different points. So historically, as you say, we've guided to volume growth at around 3% to 5%. But what we've also said over the last couple of years is that we see that we have the capacity to grow up to around 20,000 completion So without adding further divisions, we felt that we have that capacity to go up to about 20,000. So I think the difference now is, really mainly that we are flagging a much faster rate of growth. For FY 2021, because we recognize that we have the capacity and we have the infrastructure, we can control the growth in terms of quality and service. And therefore, we're going to go back to as we outlined, 14,500 to 15,000 completions. In terms of margin and volume, I think the simple answer is we want both I mean, we've set out very clearly over the last 2 or 3 years that improving the margin was central to our strategy and we moved our gross margin land intake from a minimum of 20 to a minimum of 23. So we've been very clear that we want to improve margin. We're now focused on recovering margin and continuing to bring land in at 23 percent as a minimum, but we also want to grow volume and we feel that we can deliver both, from where we are presently which is a good balance for our stakeholders. In terms of cash So yes, we're expecting $560,000,000 of cash at the end of FY 2021. And key components within that is it's clearly land credit for outflow, the exceptional items and the working capital items such as trade credit and trade payables coming back in terms of normal level. We've clearly set out today, This is by the time the board will implement an ordinary dividend cover of 2.5 times and the board will obviously consider current trading and the macroeconomic environment is it makes that decision. Thank you. The line of Dead Lee Schanley calling from Goodbody. Good morning. I'm glad to know I just have one question. The question to do with the weekly unit production where you're targeting $295,000,000 to $300,000,000 obviously in 'nineteen and in early 'twenty, that was running at $3.61. Can you talk us through the building blocks over the next few years get back to that sort of level? I'm thinking in the context of your 20,000 target further out. Yes, certainly. I mean, Stephen will talk through that. I mean, clearly, one of the key points there will be about site numbers, but I'll pass over to Stephen. Yes, as you can see on slide 12, in fact, 1920 throughout the 50 weeks average of those 2 years, we produced 3 B61 equivalent units per week for those years. We started very clear week after the current year. We've got to 3.47. Clearly, we need some way yet to go to, to get to that average. But one of the building blocks we need to see is more hours come on screen. And as I mentioned earlier, we've got about 9800 outlets to start this year. In fact, we've already started somewhere like 25 of those outlets in the last 2 months. And the key will be more outlets and that will get us back to that average we were achieving in 2019 2020. We've got adequate labor now on our sites to bit of slash currently the labor content. And we've sort of got labor and management on-site at 12,169,000 and there's good availability. So we should be getting back to that level over the next year, 18 months. There's no mark size coming on stream. Thank you, Steven, and Leslie, thank you very much. And that, for everyone that concludes our call. We have no more questions on the line. So thank you very much for everyone for dialing in and thank you for your questions. Thank you for joining today's conference. You may now disconnect.

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