Hello, and welcome to the Barratt Developments 2020 full- year results call. My name is Courtney, and I will 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. However, you will have the opportunity to ask questions. This can be done by pressing star one on your telephone keypad to register your question. If you require assistance at any time, please press star zero and you will be connected to an operator. I will now hand you over to your host, David Thomas, Chief Executive Officer, to begin today's conference. Thank you.
Thank you, good morning, everyone, and welcome to our full- year results presentation. By way of a running order, I will start with an overview of our performance and the impact of COVID-19. I will revisit our medium-term targets, their deliverability, and our areas of focus in the coming 12 months. Steven 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. I will then review the industry fundamentals, sustainability, and finally, current trading and outlook. Turning to slide three. Our strong progress on both volume growth and margin improvement was clearly impacted by COVID-19 and the resultant lockdown.
However, the controlled and disciplined restart of our operations allowed us to begin the new financial year with all of our sites reopened. As you will see later, we are in a strong position in terms of both reservations and construction activity. Our first priority throughout this turbulent period has been the 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 GBP 308 million of net cash, and we expect this cash position to improve through FY 2021.
Whilst 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 expected to be highlighting a record set of financial results with strong completion growth, margin improvement, and another year with our ROCE pushing towards 30%. COVID-19 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 four 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 Help to Buy scheme and the encouraging market recovery seen to date. We are aiming to grow wholly owned completions by 20%-25% in FY 2021, to deliver between 14,500 and 15,000 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 be supported through land purchases at a minimum 23% gross margin. Clearly, as we rebuild construction activity, we will also maintain our industry-leading standards of quality and service.
Finally, our return on capital employed will improve through both the rebuild of 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 six. We've produced a good performance to deliver a sales rate for the year of 0.6 reservations per outlet per week, 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 first 38 weeks of the year, some 7.4% ahead of the same period in the prior year. Sales were dramatically impacted by the lockdown period from the 23rd of March through to the 21st of 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 six weeks through to the year end, with an improving trend. While the sales rate post-lockdown was 8.7% below the same six weeks 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 seven. For the year, we achieved 12,604 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 were 8.1% ahead year-on-year. The lockdown and its impact significantly affected delivery in the second half.
The reduction in JV completions followed a similar path but was helped by the stronger completion delivery in the first half. Taking a look at our buyer types on slide eight. The completion profile is very similar to last year. Help to Buy remains an important customer proposition and 35 [inaudible] completions used the scheme. As everyone is aware, the existing Help to Buy scheme is being replaced by a new Help to Buy scheme for first-time buyers only, with regional price caps for completions from April 2021 until March 2023. The government has extended the build completion date on the current scheme to the end of February next year, but legal completion, in all but exceptional circumstances, will need to be completed by the 31st of March.
Assuming the new scheme is adopted as currently drafted, 16% of our total completions in 2020 would have been affected under the 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 replotted and adjusted our sales mix on certain sites, the regional price caps will prove more restrictive for first-time buyers, particularly in the North and Midlands. For restricted first-time buyers and existing homeowners, we are working with lenders to develop alternative mortgage products and promoting the use of our highly effective Part Exchange offer. Look at pricing on slide nine. Regionally, the private ASP of just under GBP 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 ASP was materially higher at GBP 755,000, reflecting the trade- through 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 two 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 safety of our employees, subcontractors, customers and suppliers, and how to restart operations in a safe manner. We spent a considerable time developing enhanced COVID-19 working 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-19 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 waves to achieve a controlled and disciplined restart, while 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 of June. Restoring our construction activity 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 trades to our sites.
As you can see, from the 14th of May, when we were preparing sites for reopening with around 1,500 heads on site, we mobilized to more than 14,000 by the 2nd of July. We had more than 16,300 on site in the last recorded week to the 20th of August. This remobilization of both site management and subcontractors was driven by, firstly, the phased reopening of our sites, which began on the 11th of May in England and Wales, and on the 1st of 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. To the removal of assembly imposed limits from the 25th of June.
Thirdly, the broadening of construction activity on site from our initial focus on finishing trades to meet forward sales commitments, to control build across all stages of our defined build process. Turning now to slide 12. 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 first 38 weeks up to 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 FY 2021 and highlighted with the green line at 295, 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 290 and 300 units across FY 2021, 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 to optimize construction activity, which include extended site operating hours, improved build scheduling to reduce the time any unit is not being worked on, increasing the proportion of site startup and infrastructure construction where group sales performance and working capital controls allow. The adoption of our standard house 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 more timber frame construction. Now an update on our house type range roll 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 improve 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 85% 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.
Some 21% of our completions used MMC in FY 2020, compared with 20% the prior year. We remain on track to increase usage to 25% 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. To land, 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 owned and controlled plots. As you are aware, we suspended unconditional land buying back in March with the onset of COVID-19. The temporary suspension continued until mid-August. As a result, land approvals in the year were limited to 9,441 plots across 51 sites, only slightly ahead of the position we reported for the half year.
With the COVID-19 and lockdown impact on our completions, our land bank length has extended to 5.7 years of owned land and one year of controlled land. We remain committed, however, to our shorter land bank model. Over the medium term. We intend to return to our targeted operating framework of three and a half years of owned and one year of controlled land through a combination of completion volume recovery and reduced land spend. We have now recommenced selective land buying, maintaining our disciplined approach where we see attractive opportunities. Turning now to the land bank 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-19. 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 and spread of sites coming to the market this autumn as agents and land vendors return to active site marketing. Turning to build cost in slide 17. As you are 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% 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-19, but also the sharp drop in energy costs. We have fixed price agreements in place for 95% of our materials to December 2020 and 62% for the full year to June 2021.
Labor cost inflation has eased with previous areas of inflationary pressure impacted by the changed economic backdrop and the desire to secure work from reputable developers with a record for prompt payment. This puts us in a strong position looking forward. We now expect build cost inflation of between 1% and 2% in FY 2021, broadly in line with the cost inflation experienced in FY 2020. 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.
With that, I'll hand over to Jessica.
Thank you, Steven, and good morning, everyone. As David and Steven have said, FY 2020 has been a challenging year, with the disruption of COVID-19 having a substantial impact on our financial performance. Turning to our headline numbers on slide 20. Our revenue was GBP 3.4 billion. This was down 28.2% from last year, driven by reduced completion volumes in our fourth quarter. Our profit for the year was impacted by the unprecedented restrictions for sales and build 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 GBP 493.4 million and an operating margin of 14.4% for the year. Our profit before tax was GBP 491.8 million, of which GBP 68.8 million came from the second half, reflecting our reduced completion volume and the significant additional costs incurred. We closed the year with a healthy net cash position of GBP 308.2 million, demonstrating the resilience of our business and the benefit of the decisive actions that we took. Our ROCE was 15.6%, a metric impacted twofold by COVID-19, firstly through reduced profitability, and secondly through our higher closing capital employed as COVID-19 came at our peak WIP investments and we were geared up expecting to deliver a significant number of completions during our final quarter. Turning to revenue on Slide 21.
Our wholly owned home completions were 12,034 and total home completions including joint ventures were 12,604, down 29.4%. In the period to the 22nd of March, prior to lockdown, we had delivered 10,364 home completions, up almost 10% on the prior year. Private average selling price reduced by 0.4% to GBP 310,600, reflecting geographical mix changes as we delivered a lower proportion of private units in London.
Our overall average selling price was similar to last year at GBP 280,300. The small increase was driven by affordable completions with a higher proportion of London affordable completions up from 7% last year to 18% this year, including 179 homes at our site in Hayes, Middlesex. On guidance, we expect around 20% of completions to be affordable in FY 2021. In addition, we expect around 650 joint venture completions. Now looking at the impact of COVID-19 and exceptional or adjusted items and what they've had on our gross profit and margin on slide 22. Our gross profit for the year was GBP 614.3 million, and we had an 18% gross margin. This was after incurring GBP 39.9 million exceptional costs in relation to legacy properties. GBP 17.8 million of this was charged in the first half.
In January, we announced that we expect to incur a further GBP 70 million of costs related to Citiscape and the related review. Of this, GBP 22.1 million was incurred in FY 2020, and we expect to incur the balance of GBP 48 million in FY 2021. We also temporarily benefited from exceptional income from the government's CJRS grant of GBP 26 million. We have now repaid this in full, and it will be an exceptional charge in FY 2021. GBP 22.8 million of the grant is allocated against cost of sales and so adjusted against gross profit, and the remaining GBP 3.2 million is within administrative costs. Before these items, our adjusted gross profit was GBP 631.4 million and adjusted gross margin was 18.5%. We also incurred GBP 45.2 million of COVID-19- related non-recurring costs in the year.
These costs related to non-productive site overheads extended 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. We also incurred a GBP 8.2 million inventory provision, primarily in relation to the commercial site of one of our London sites, which contains a cinema, restaurant, and retail unit. Adjusting for these non-recurring costs would result in a gross margin of 20% in FY 2020. We also incurred COVID-19- related costs in relation to the expected site durations. Sites have been extended due to COVID-19 by approximately six months due to their temporary closure and a period of reduced productivity post-lockdown. As a result, the increase in cost is reflected in our site margins.
In line with our long-standing accounting policy of site margin equalization, margins were reduced on ongoing sites throughout the year, resulting in a charge of GBP 29.1 million in FY 2020. Clearly, we'll be seeking to improve against this as our production levels improve further. The chart on slide 23 breaks down the components of our operating margin movement year on year.
As I outlined last year, we had non-recurring items in FY 2019, which benefited margin by 40 basis points, giving an underlying operating margin of 18.5%. The almost 30% reduction in completion volumes caused by the COVID-19 lockdown meant that we didn't recover our cost base as efficiently as we would have liked, as we are geared to deliver a much higher volume. This caused 190 basis points of margin deterioration. Our margin initiatives continue to drive underlying improvement 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 house price inflation, which didn't offset our build cost inflation. We also saw a 90- basis- point reduction reflecting the expected six-month extension in site durations that I previously outlined. There was an adverse movement of 60 basis points in relation to mix and other items. Our reduced admin expenses had a positive impact of 120 basis points. This was mainly driven by a decision that there will be no payments to any director or employee under the FY 2020 bonus scheme and a reversal of past charges on share incentives as the majority of schemes didn't vest. The combination of these resulted in a year-on-year reduction of GBP 59 million.
As I previously detailed, we had a non-recurring 20- basis- point impact due to the inventory provision charge and 130- basis- point impact from the non-productive site overheads. As a result, FY 2020 adjusted operating margin was 14.8%. The costs associated with legacy properties offset by furlough grant income reduced operating margin to 14.4%. 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 cost to target level and introducing a medium-term target for the minimum year-end total indebtedness level. These changes will further strengthen our business looking forward.
We closed the year above our operating framework level on land bank length, which is a much lower level than expected of completions in the year, with 5.7 years owned land. We will bring this back in line with our framework of around three and a half years through both increasing volumes and limiting land additions over the next couple of years. We have met our targets to reduce land creditors to the lower end of our previous 25%- 30% framework at 25.4% of the owned land bank, 590 basis points lower than last year. Going forward, we'll expect to operate within 15%- 25% of the owned land bank.
In FY 2021, we expect land creditors to further reduce, reflecting the timing of payments due to existing land creditors, with GBP 493 million falling due for payment this year. We closed FY 2020 with a healthy net cash position of GBP 308 million, and we operated with an average net cash balance of GBP 348 million 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 GBP 484 million. We continue to maintain appropriate financing facilities for our business and have significant headroom against them. During FY 2020, we didn't draw our GBP 700 million RCF, which further demonstrates our strong cash flow management and our balance sheet resilience.
Given the uncertainties caused by COVID-19, the Board made the difficult decision to cancel the interim dividend and not to propose an ordinary dividend or the intended special dividend in respect of FY 2020. The Board continues to recognize the importance of dividends to all its shareholders. However, given the unprecedented impact of COVID-19 and the importance of resilient balance sheets, it will no longer propose the FY 2021 special dividend of GBP 175 million. Going forward, the Board believes it is in the best interest of shareholders to have a long-term predictable dividend income stream. At the appropriate time, it will implement an ordinary dividend policy with a defined level 2.5x cover. Now I turn to our balance sheet on slide 25. In March, we acted quickly to pause land buying due to the uncertainties of the economic backdrop.
Our land bank therefore increased by only GBP 41 million to GBP 3.1 billion. As I've already outlined, our land creditors have continued to reduce as targeted and are GBP 169 million lower than last year. Trade payables were much lower than last year, reflecting our reduced level of site activity, and that we continue to pay our suppliers and subcontractors as normal. The net working capital liability was higher than the prior year, mainly due to trade and other receivables being GBP 139 million lower than normal due to lower trading activity in the last quarter, and this includes a reduction in government Help to Buy receivables.
The reduction in other assets and liabilities is due to a reduction in tax liability at the year end of GBP 112 million due to the changes in the government tax payment regime, offset by pension asset downward revaluation following the full buy-in of our defined benefit scheme this year. Our balance sheet remains strong, with net assets at the 30th of June of GBP 4.8 billion. Moving on to our cash flow on slide 26. We continue to demonstrate a disciplined approach to cash management, as shown by our cash holdings. Our operating profit was GBP 493.4 million, offset by investments in our business. We made net cash interest and tax payments of GBP 195.5 million, as we paid six quarter installments in the year due to the government change in the corporation tax payment regime, as I outlined last year.
This timing change resulted in us paying around GBP 27 million more in tax payments than last year. We invested GBP 163 million in WIP and Part Exchange as the COVID-19 lockdown came at the point of our peak investment in WIP. Net land investment increased by around GBP 220 million in the period. This achieved our targeted reduction in land creditors.
Our total land spend during the year was GBP 780 million. As a point of guidance, we expect land spend in FY 2021 to be around GBP 850 million. Our operating cash outflows for the year were GBP 52 million. We made GBP 373 million in dividend payments in respect of FY 2019 and invested GBP 32 million in other investing and financing activities, leading to a net cash outflow of GBP 458 million. Our year-end cash position was strong at GBP 308 million. On guidance for FY 2021 on slide 27, I will cover the guidance areas not already given.
We expect to deliver around 14,500-15,000 whole-year completions. We also expect administrative expenses to return to normal levels at GBP 195 million. Our interest costs are expected to be around GBP 30 million, comprising GBP 10 million of cash interest and GBP 20 million of non-cash interest. Our year-end net cash position is anticipated to be around GBP 550 million for June 2021, with an average net cash position of GBP 300 million during the year.
To summarize on slide 28. We delivered a resilient financial performance this year and have a strong balance sheet with significant financing facilities. We achieved our target of reducing land creditors and through our disciplined approach to cash management, ended the year with a healthy cash position. Our refined 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 underlined with their presentations, clearly we have a strong investment proposition, and I would like to pick this up on slide 30. We aim to operate with one of the shortest land banks in the industry. This clearly improves our return on capital employed and reduces our longer-term risk. We've demonstrated that we have a resilient balance sheet, and we are naturally cash generative. We have a strong and highly experienced build and sales team who are rightly proud of the standards that they deliver, and they are clearly focused on improving efficiency and driving out ways that we can improve our margin. Our quality and service performance is key to the strength of our business. 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. 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 for all of our stakeholders. Prior to COVID-19, I highlighted how these differentiators help us grow volumes, deliver margin improvement, and generate strong cash returns. Our investment proposition remains unchanged, but our operational targets have to recognize the rebuilding task ahead. Looking at the market fundamentals in slide 31, there clearly remains strong demand for new homes across the country, evidenced 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 Steven 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 32, 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 risk. 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 rates borrowing, both reducing risk and volatility. The qualification hurdles for a 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% and 90% loan-to-value products for new build home buyers, which has happened since the commencement of COVID-19. Help to Buy, as a result, remains an important tool for those aspiring to home ownership. Changes in mortgage lender behavior, particularly with the removal of access to Help to Buy for existing homeowners, is something which we will continue to monitor, as well as maintaining our ongoing dialogue with mortgage lenders. Turning now to slide 34. Our overriding focus for the year ahead is rebuilding our volumes, our margins, and our return on capital employed. Clearly our longer-term priorities remain. We published our vision six years ago to lead the future of house building by putting 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 four strategic priorities. We passionately believe that we need to put customer first to ensure that we build a responsive and resilient business for the longer term. We also have to build great places, communities where people are proud to live. We aim to lead construction, striving for excellence and embracing modern methods of construction. 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 value for all of our stakeholders. Supporting our vision, our priorities, and our principles enables us to deliver excellent financial and operational performance and build a resilient, 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 U.K.'s most sustainable house builder. In January, we set new science-based targets, aiming to reduce carbon emissions across our operational footprint. We are targeting a shift to 100% renewable energy sourcing for our own operations by 2025. New standard house type designs will be net zero carbon in use from 2030, and that we will become a net zero carbon emissions business across all of our direct operations by 2040. We are also aiming 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. 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. Our private sales rate per outlet per average week since the 1st of July has been 0.94, more than 38% ahead of the equivalent period last year. Bear in mind that we had a strong comparative period. Coupled with lower outlet numbers, this results in net private reservations per week of 314, almost 26% ahead of the prior year.
Our forward sales position, including joint ventures, is also very strong at just over GBP 3.7 billion, 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 1,439 through to the 23rd of August, 62% ahead of the equivalent period last year, which totaled 886 completions through to the 25th of August. In conclusion, turning to slide 37. We are clearly operationally strong. Our controlled return to site has provided a platform for sustained construction output 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 are looking forward to rebuilding the business in FY 2021. The industry fundamentals clearly remain very attractive. Whilst we are mindful of the economic uncertainties, including Brexit, we are in a strong position, and we are confident in our business going forward. Our vision, priorities, and principles 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 take your questions, and I will hand back to the conference coordinator.
Thank you. As a reminder that if you would like to ask a question on today's call, please press star one on your telephone keypad. Please ensure your line isn't muted locally, and you will be advised when to ask your question. Star one on your telephone keypad. Okay. Our first question comes in from the line of Will Jones, calling from Redburn. Will, please go ahead.
Thank you. Good morning. Can you hear me okay?
Will, yes. Good morning.
Great. Thanks. Three, if I could, please. The first, maybe if we could just explore the recent weeks of trading, that strong sales rate for July and August. There's a reference in the statement, obviously, to the Help to Buy deadlines prompting some action. Have your percentages, I guess, of customers using Help to Buy, has 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, please. The second was just around build rates. The roughly 350 equivalent units you built, I think, last week, and the guidance of building at closer to 300 for the year as a whole.
Is there a reason why that 350 does step down from here, or are you 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 just effectively the build rate guidance. Then the last one was just perhaps if we could go back to the margin bridge on slide 23. Is it possible just to explain to us specifically 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 two?
In terms of their improvement going forward, presumably we can do the math on any volume improvement against the 190, the site extension, do we just have to trade out of those sites now over time, or do you revisit that every six or 12 months and if volumes go up this year, that gets a better benefit? I don't know. Any more understanding really around those two items would be great. Thank you.
Okay, Will. Hi, good morning. Yeah, you're definitely coming through loud and clear. Just on question three, the margin bridge. That all sounded quite tricky to me. Jessica will cover that. Then on build rates, Steven will talk about build rates. If I start off and then we'll move to Steven. Just in terms of trading for July and August, I think first of all, Will, when we announced in July with the trading update, we were clearly seeing good trading trends coming through June. I think it's been, Steven touched on, it's been kind of consistent trading across the country. I wouldn't call out any particular area. Just say 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 and August.
That is probably the other side of loan-to-value availability dropping a little. 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, I think we said that for FY 2020, there was very little movement in terms of pricing. For July and August, I would describe pricing as very firm. I don't think we could give any figures because it's just too short a period of time. I would say pricing is very firm through July and August. Steven, do you want to pick up on build?
Yes, David. Good morning, Will. It's exactly as you say in terms of the 347. That 347 was week eight. We put on slide 12, a sort of green line sort of indicating where we need to be to deliver our guidance, 14,500-15,000 for the year. Week eight, we've got all our trades back on site now as we indicated on the preceding slide. We've got highly productive weather. The guys are working long hours, extended hours on site and weekends. We have to bear in mind that over the 50-week average, that obviously takes into account the two weeks off in Christmas, over the 50-week average, there will be some sort of lesser working hours, particularly when you get to November, December, January, February, when days are shorter and they don't tend to work the weekends.
We're probably at 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 one.
Yeah, got it. Thank you.
Thanks, Steven. Jessica will pick up on the margin.
Hi, Will. In terms of the two elements of the bridge, the volume impact is simply going through the effect of 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 six 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, whilst we've been building our productivity back up. When thinking about the GBP 29 million, that's clearly related to the completion volumes in the year. If you take the GBP 29 million on the 12,000 wholly owned completion, when looking forward, you can extrapolate that over the 14,500- 15,000 completions. If you take the 15,000, that would be an impact of around GBP 36 million on FY 2021.
Clearly, we're going to be looking to improve against that as we go forward and dependent upon where we turn out on production levels.
Thank you. That run rate of GBP 29 million is more a reference point against last year's output as opposed to necessarily what you're guiding for for the year ahead. As you reassess that, is what I'm saying, could that number be better because you're at your worst point at the moment, or you have been? Is that not the right way to interpret it? Sorry.
The GBP 29 million is a full- year impact across all of our completions in FY 2020 because we recognize margin on an equalized margin basis. We had a 90- basis- point reduction on margin. If our assumptions around six months continue, we will continue to see that 90 basis points continue while those sites trade through. If we do better than that, clearly we'll see an improvement on that position. As always, we will assess that every time we do our valuation, which is every month, we look at a proportion of our cycle.
Got it. That's great. Thank you.
Okay, Will, thank you very much.
The next question comes in from the line of Aynsley Lammin calling from Canaccord. Please go ahead.
Hi, morning, everybody. Just three questions from me, please. 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 tapers down in March, you being a bit more conservative in your land buying or kind of what you're expecting the impact of that tapering to be on Help to Buy. Second question, just on special dividends. Just wondering if you could give us a bit more of your thinking behind that. Obviously, you've got the macro risk, and the earnings could be quite volatile, but is there anything structurally where you've kind of not particularly like to be paying out special dividends? I don't know if income funds prefer just an ordinary dividend. Anything that you could add to that would be great, please.
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 or local lockdowns, has that had any impact recently on build rates, sales rates or anything, or is it pretty minimal? Thank you.
Aynsley, hi, good morning. I'll have a go at the first two 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. In terms of Help to Buy, I think the key thing to flag is that the tapering in March 2021, as you know, is not new news, and therefore we've said previously that we have looked at our land buying assumptions in light of that tapering. Broadly, that has meant that we've said, first of all, we would expect to see a pickup in terms of Part Exchange activity, and therefore some increase in incentives as a incentive cost as a result of more Part Exchange.
Secondly, we would expect to see a slowing in the rate of sale as we move past that March 2021 position. That's something that we factored into our land buying certainly over the last couple of years. Obviously, we'll see what happens when we move through to March 2021. In terms of special dividends, we've announced in this announcement today and in our previous announcement that the November 2020 and the November 2021 special dividends 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 surplus cash, we then added the special dividend on the basis that it was a mechanism by which we could distribute our surplus cash. 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, we recognize there can be some difference in terms of treatment if the special dividend is not set out over a long period of time, typically three- plus years. We'll take account of that, but I think we're some way away from those kind of discussions at this point. Steven?
Morning, Aynsley. Yes, in terms of impact of the local lockdowns, yes. We've sites in Leicester and the North West, which were in those areas where there were local lockdowns, and there was no noticeable impact on build or sales activities. Our activities weren't restricted by the lockdowns. No noticeable impact from those lockdowns.
Great. Just to follow up, David. On the special dividends, you're not kind of abandoning them forevermore, it's just in the near term, you don't see any prospect of specials, but they could come back on the table later on if recovery continues and cash flow improves, et cetera?
Yeah, in the same way as I said it evolved originally. We don't have any philosophical problem with special dividends. We saw that there was a place for it in our dividend strategy previously. 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 six-monthly basis.
All right. Thanks very much.
Thank you.
The next question comes in from the line of Andy Murphy calling from Panmure Gordon. Please go ahead.
Morning, David, Steven, and Jessica. I hope you're well. I've got two questions and they're a little bit interrelated. Just thinking about the COVID-19 and working from home, which has been a key element of working practice over the last six months. I was just wondering to what extent you're seeing pressure from people coming in saying that, "I need a bit more space in a house I'm looking for," and whether you're reacting to that in terms of redesigning and what that might impact on costs?
I guess the flip side to that, which is really the second question, thinking about Help to Buy. I'm imagining, I'm assuming that with the restrictions coming in, that Help to Buy is going to encourage maybe an increase in smaller houses, which surely is a sort of counterbalance to my first question. I was wondering how you're thinking about adjusting your output to the Help to Buy restrictions. Finally, I was wondering, you said earlier on that 16% of your output last year would not have been eligible for Help to Buy. I'm wondering if you'd given any thought to what proportion of that 16% could have actually bought, they just chose to use Help to Buy? Would they have had, or what proportion would have had the capacity to make the purchases without Help to Buy? Thank you.
Okay. Andy, I think I'll just try to run through that. As you said, they're probably kind of interrelated. I think first of all, in terms of house type design, certainly Steven and I, and Steven and his team have talked about the extent to which there are implications on house type design in light of COVID-19. I think we 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 Rightmove and coming through from Zoopla is that people are looking for flexible space. I don't think they're necessarily looking for more space, because I think people recognize that a larger house costs more money.
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 schoolwork and so on. That flexible space rather than, say, a dedicated office, I think is high up on people's priority list. The other area is open space. Clearly there's been search trends that have been more about houses than about apartments. That's something that Rightmove have flagged really right back since April, May time. In terms of Help to Buy, I don't think per se that Help to Buy creates a move towards smaller homes. Arguably, presently, quite the reverse, because of the relatively high cap at GBP 600,000. As we move to regional caps, we flagged that perhaps in Midlands and Northern, that the regional caps look reasonably tight.
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. I think you've got to bear in mind that for us planning the business, we are also planning beyond 2023 when Help to Buy will stop. I think the most important thing we see is that you've got to have a balanced portfolio. With Barratt and David Wilson, we clearly have the opportunity to present a very balanced portfolio in terms of one-bedroom through to five-bedroom homes. 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 two or three years from different parties, that there are a lot of people who are using the Help to Buy program who may have the financial means to go for a more conventional mortgage. The reality is that perhaps people do have savings, but given Help to Buy, they don't need to use all of their savings for the deposit. Secondly, Part Exchange for the second- time or subsequent mover, has always been a very important part of the market for the house builder. We would expect to see an increase in Part Exchange as we move beyond March 2021, and go back to perhaps more normal levels of Part Exchange, as we saw prior to the launch of Help to Buy.
Great. Just ask one follow-up question. Thank you for those answers, by the way. Just on Help to Buy, what chance do you ascribe the government might change its mind and defer the changes or continue with the existing Help to Buy arrangements as they are, just to sort of help the housing market along at this time?
Well, I think, Andy, very simply, the sort of view that I would have on it would be two 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. I think largely government have done what you would ask them to do, which is to give us visibility, firstly. 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 as set out by government. I can speculate all day long, but that's not the way we're going to run the business.
In terms of our land buying and our strategy, it's 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. 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 in from the line of John Fraser-Andrews, calling from HSBC. Please go ahead.
Thank you. Good morning, everybody. I'll have three as well, please. The first one is on your forward order book. The GBP 3.7 billion is higher than your sales of last year. Clearly, those are going to increase quite a bit. Could you just set out how much of that forward order book you think is for the current financial year and how much for the year after? That's the first question. The second is on outlets. The decline in the first eight weeks of this year, the 9% lower outlets. What's the plan there, please, in terms of your profile and particularly starting up outlets to drive the volume growth that you're projecting? The third and final question is on the land spend you projected at GBP 850 million. Can you just set out 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. Going into this autumn land market, what have you seen over the summer in terms of land prices, and what are the indications on availability to meet your objectives? Thank you.
Okay. Hi, good morning. Thank you for those. Jessica will just talk in terms of the forward order book and what's for FY 2021, what's for FY 2022, just in broad terms. Then in terms of outlets, and I think Steven will just pick up a general view in relation to outlets. I think what I'll do on land spend is we'll just split that between Steven and myself. I'll just give an overall view in terms of land spend, and then Steven can talk maybe about some of the opportunities and what we see in terms of the land market. As we've said this morning on land, clearly the steps that we're taking back into the market are obviously fairly tentative. If I just start off in terms of land spend.
As you know, we've historically guided to land spend, and we've been at land spend levels that have been close to GBP 1 billion. In the current year on land spend, Jessica gave the guidance, and a big part of that expenditure of GBP 850 million is in relation to the brought forward land credit position. Circa GBP 490 million-GBP 500 million of spend in that area. The incremental spend, some of it is already committed, but there is a fair amount of it will be committed through us stepping back into the market. Perhaps if Steven wants to just outline what we're doing in these tentative steps back into the market.
Yeah. Thanks. Morning, John. Yes. As David said, in fact, we've recently just gone back into the land market, middle of August, and we've signed off 9- 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 product. They've got strong planning credentials where we expect on site pretty soon, and they're generally deals in the size of 100, 150 plots on average. Obviously maintaining a very disciplined approach where we see these attractive opportunities that either meet or exceed our hurdle rates. In terms of forward visibility of land, we're in touch with all the agents and landowners that you'd expect. We have good relationships, and we have good visibility of land coming into the market in the next six, nine months.
We're expecting a number of sites to come through onto the market in autumn and the early part of 2021. We're pretty happy with the way of things. A lot of good prospects and good availability going forward on land.
Thanks, Steven. Just in terms of outlets, Steven again will expand a little, but what I would say on outlets, clearly there has been delays. 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 relation to COVID. Steven, do you want to maybe just outline?
Yeah. Again, there has been delays, as Dave touched on. There is a bit of a lag coming through the planning system. A number of sites that were expected in March, April are now coming through July, August, September. No doubt the numbers will be coming out in due course on the planning achievement in terms of sites approved. On average, we've got about 9,800 sites to start in the next 12 months. We'd hope to be holding the outlets around about the level we're currently operating on and moving forward on that business. Certainly, the sites are selling very well, which is another factor which impacts our outlets.
Okay. Jessica, on the forward order book.
We had a strong forward order book at the 23rd of August at GBP 3.7 billion, which is 15,660 homes. We've seen good completion delivery over the first eight weeks of the year. I think when looking at the split, it's best to look at it by type of product. We had wholly owned private homes within the forward order book of almost 6,600.
Because of how we sell, the majority of those will be delivered in the current year. Of affordable homes, of nearly 8,250, some of those will be delivered this year, some of those will be delivered next year because affordable contracts tend to be entered into towards the start of the site. On affordable, the best way to look at things is around 20% of our completion volumes this year. Around 20% of our 14,500-15,000 wholly owned completions will be affordable units.
Okay. Jessica, thank you. Thank you, John.
Thank you.
The next question comes in from the line of Chris Millington calling from Numis. Chris, please go ahead.
Thank you. Morning, everybody. It seems a shame to move away from the three, so I will stick with that. Can you just talk quickly about build inflation on new contracts? I understand the 1%, 2% guidance you have given, but obviously, that carries forward a contract signed some time ago. Maybe just current trends there. Also, you touched on pricing earlier, saying it has been very firm. I presume with the sales rate feeding through at the level it is doing, you may be looking to actually change pricing. Perhaps any comment there. The last one I wanted to touch on really is fire safety. It really does feel like it is a moving feast at the moment.
Perhaps you could just give us your updates and thoughts and whether or not you feel like you're well covered from a provision point of view, both really on legacy properties which have been completed, I'm talking about there.
Okay. Chris, hi, good morning. I think in terms of the build inflation in relation to contracts, Steven will pick that up in terms of the position. On sales pricing, I'll pick that up, fire safety, I'll cover. Just in terms of sales pricing, Chris, I think all I would say is it's a very short period. June through July and August. Clearly the initial part of it is the extent to which we're having to do deals. Previously, if you went back three or four months ago, you'd see deals in the market, prior to lockdown, where there would be stamp duty deals, clearly there's now a stamp duty holiday, there's not stamp duty deals. That would clearly be the first thing to happen before prices actually move.
Overall, I think it's a very positive environment in terms of pricing, given the levels of demand. When we get to the half year, we'll obviously update in terms of our experience across the first half. In terms of fire safety, I would say overall that clearly the cladding solutions for buildings has obviously been the subject of intense scrutiny since the tragic events around Grenfell. 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. We've clearly seen a number of changes to regulation over the last couple of years. I think for everyone, it is just an ongoing position. 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 fire safety, but cladding in particular. Steven, you want to pick up there?
Yes. Morning, Chris. Yeah. In terms of build cost inflation, whether it be on supply and fix contracts or direct materials and direct labor, we approach it on a similar basis. We're taking fixed prices generally 6- 12 months, deliberately a short-term strategy to take any advantages as things change. In terms of our own materials, a lot of the materials we agree prices on also applies to our contracts as well, our subcontractors. 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 fix or materials. It's been helped by some energy reduction costs in the last six months or so. I think the other factor, which obviously big influence on our build cost inflation, is labor rates.
Again, we're not seeing any real pressure on labor increases. The trades increase, which was due in June, July, was pushed back to September. We understand that is now likely to be pushed back until June 2021. There's plenty of trades availability. We're seeing reasonably consistent rates geographically around the group. No real pressure points, and achieving good levels of fixed pricing. We're happy on that 1%-2% for the year.
Okay. Steven, just to push you a little bit further. I've just heard one or two house builders talk about a bit of deflation. You're probably at the more efficient end, 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.
Yeah, that's where we'd feel. The area where we're getting a bit of pressure would be on timber, but that's due to world market. Generally, the materials are holding, as is the labor. No real big thing.
Very clear. In fact, thanks so much.
Chris, thank you very much.
The next question comes in from the line of Clyde Lewis, calling from Peel Hunt. Clyde, please go ahead.
Morning, David, Jessica, Steven, and I suspect John is lurking around in the background there as well. I think if I can also stick with three as well. Probably the first one's a sort of a linked one with, I suppose, it'd be interesting to hear your view, your comments on how you think you're going to have to manage your WIP, I suppose, given the distancing issues you've got and the sort of build pressures you've got. Do you think you're going to have to run with a bigger WIP on the ground just so that you can give yourself a degree of comfort to make that 295 sort of build completions per week? I suppose linked to that is, probably one for Steven. 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 was probably 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%-25% range. You've flagged, obviously, the 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 very laudable.
How do you think the group benefits financially? Do you think right now, you're getting a premium price for the better product and the design, or do you think you're getting more of a higher sales rate?
Clyde, okay. Thank you. I think that's almost three and a half questions, Clyde. Okay. In terms of just splitting them up, work in progress. I'll start very briefly and pass across to Steven, and he'll be able to explain what keeps him up at night. I think land creditors, Jessica can talk about that, including the context of our operating framework, and I'll pick up in terms of the environmental side. If I kick off on the environmental side first, and then I'll come back to the work in progress. Just on the environmental side, I think 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 into context, but when you look at a carbon agenda in terms of carbon reduction or a biodiversity agenda, there is very clear regulations that will be coming down the track. If you look out over the next two years, particularly for biodiversity, the next five years in terms of the Future Homes Standard, and the next 10 years in terms of the carbon agenda. I think we would recognize that regulation is coming, and it is going to affect all house builders. We feel that the 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.
On the Environment 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. We feel that we're really at the front edge of that, which is important. As you know from many years ago, we were genuinely, with some other house builders, we were at the front edge of delivering zero carbon homes, all of that got pushed to one side, we are now going to need to get back to delivering zero carbon homes. I think the reality is that the advantages for us is to be able to innovate, to adopt technology, to adopt processes early, which means that we have a good commercial position when we come to have to do it under regulation.
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. In terms of work in progress, just briefly, 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 FY 2022. That has to be a backdrop in terms of what we're looking at with regard to work in progress. Steven?
Yeah. The only thing to add to that, David, would be—M orning, Clyde. In terms of managing the work in progress, no real major difference. We have very strict disciplines in place where we restrict the number of units being worked on at any point in time. In terms of the current issues, fortunately, the vast majority of what we're building is low-rise product, semi-detached houses, where we allow three or four people maximum per property work in that unit. There's not any significant difference from that perspective for us. There's obviously the different impact in terms of welfare facilities on site, otherwise, in terms of managing the WIP, no significant difference. In terms of keeping me awake on the night, I've struggled with that one actually, 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 would worry me would be another full lockdown, but that probably would be unusual in light of all the evidence coming out today, how we would deal with that. That's the only thing what would worry me.
Okay, great. Thanks, Steven. Jessica will just pick up in terms of land credit for us.
Morning, Clyde. We are very pleased to have achieved our target this year and reduced our land credits into our previous range of 25%-30%. Clearly set out today a refinement in terms of our operating framework and to keep land credits within the 15%-25% range going forward. When looking at land credits for FY 2021, there will be an outflow of GBP 493 million in terms of committed land credits. Clearly that is going to reduce where we sit within the range. On land purchasing, it purely comes down to hurdle rates. Our hurdle rates are clear and unchanged, so a minimum of 23% gross margin and a minimum 25% return on capital employed, and all our land purchasing has to achieve those levels.
Thank you.
Clyde, thank you very much. We'll move on to the next call.
The next question comes in from the line of Gregor Kuglitsch, calling from UBS. Gregor, please go ahead.
Hi, good morning. Can you hear me well?
Yes, Gregor, very loud and clear.
Good. Excellent. A few questions, please, and maybe some of them are just trying to tie together some of the answers so far. Maybe firstly on cash generation, I suppose, a little bit unclear on some of the moving items. Land is clear. WIP, I'm not really clear if you're saying it's going to grow. It looks quite high as a level in terms of WIP turn, well, low as WIP turn, high-end level, and some of the exceptions. If you could just maybe flesh out maybe three bits. The WIP investment, the exceptional cash cost that we have to think about this year, maybe JV investments, anything you'd like to flag, I guess, for the cash generation into FY 2021, that would be most appreciated. The second question is just going back to the margins.
I understand from what you're saying is that your starting point is 20% gross in 2021, and you'd hope to improve on that. I think that was the wording. If you could just give us maybe essentially what, from your perspective, is a realistic prospect for improvement against that 20%? Is it a few bits or can you get close to where you were, I guess a couple of years ago, maybe it's a bit ambitious. Just maybe help us out a little bit, what drives a little bit of change against that? Maybe it's the site extension, maybe it's pricing. Then maybe finally, obviously we had the white paper over the summer holidays on proposed planning changes. I presume you've reviewed it. If you could give us any thoughts, what you think about it.
Obviously, it's, I think, under consultation. Anything you'd like to give us your perspective on those pretty, I think, radical changes to the planning system would be helpful. Thank you.
Gregor, hi. Good morning. 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, yes, clearly we've seen the government proposals, and it is a significant change. 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. We highlighted this morning, that when you look at planning approvals over the last two or three years, we've seen record levels of planning approvals coming through. 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 two main things to highlight, really.
One is clearly it's subject to consultation, and there will obviously be a lot of discussion and consultation. We understand the underlying principles of local authorities designating land for different forms of use. The government themselves have said that they believe it will be a three to four-year implementation process. I think it's going to be quite a slow burn in terms of implementation, and we'll obviously keep it under review. Jessica, could you want to pick up in terms of cash generation and margin?
In terms of cash, Gregor, we're expecting cash out-turn at the end of the year at around GBP 550 million. Key items to think about in that is the land creditor outflow of GBP 493 million for the committed items. In terms of the exceptionals, we came into this year with a GBP 28 million provision on legacy properties, and I've outlined that we expect a further GBP 48 million in terms of legacy properties. Clearly that needs to be taken into consideration when looking at cash. There is the repayment of the GBP 26 million furlough grant, which we have already repaid. In terms of work in progress, which 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 as we came into this year because of the timing of the lockdown and the level of work in progress we had for our then expected pre-COVID-19 completion volumes. 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 2022. We obviously have to have appropriate work in the ground to do that. In terms of margin, yeah, 20% in terms of gross margin from non-recurring costs is the right starting point to thinking about it. I think when looking at it, we need to take account of the fact that that 20% clearly included a full first half of full efficiency in there. That's the piece I would say.
Looking forward, our site overhead costs are fixed in terms of site managers, assistant site managers, forepersons, [inaudible] whether we're delivering 12,000 completions or 15,000 completions. Clearly our level of overhead recovery will not be at the level we would have been experiencing prior to lockdown.
Okay. Sorry, just to be clear, are you saying that that puts downward pressure on the 20% or you think despite everything?
No. Not that much.
It should be 20%+?
Yeah, 20%+ . Yeah. Provided there's 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 Glynis Johnson calling from Jefferies. Please go ahead.
Morning, everybody. I'm surprised at myself in saying that 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 on the land bank is GBP 276,000. Clearly, London, Central London has sold out. Should we be using that land bank ASP in our forecast for the full year of FY 2021, or is there a mix effect? In terms of the margin guidance, actually. If I start at gross, you've done 22% first half FY 2019, second half FY 2019, first half FY 2020. The COVID margin impact for the extra duration is 85, 90 basis points. I'm struggling a little bit to understand why we shouldn't be aiming for above 21% rather than starting at the 20%, because the overhead leverage, that's the EBIT margin of gross.
Just focusing on the gross, what other things do we need to put in? Lastly, just guidance for cash tax this year, given that the last year had those six payments, given the dip in the timing of profitability through the year, what should we expect for this year?
Glynis, good morning. Thank you for restricting yourself to three. Just to say, Glynis, 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, yeah, absolutely. We would generally point at the ASP in the 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. I think that will be absolutely fine. Jessica, did you want to pick up on margin and cash tax?
Yeah. In terms of margin, Glynis, 20% is the right starting point to go from. Clearly, that takes out all of the non-recurring COVID items that we experienced last year and the other exceptional items. Absolutely use the 20%. As I outlined, we do have a fixed level of costs in terms of running our sites, whether we're delivering the 12,000 units or the 14,500- 15,000 units. In terms of cash tax, we're back to four quarterly payments this year. Last year was obviously a one-off with the six payments. In terms of effective tax rates, we'd expect to be around the statutory rate of 19%.
Thank you, Jessica. Sorry, Glynis.
To come back on the gross margin. The 90 basis points of COVID extra duration, what you're saying is that's not taking into account the extra overheads you have for running your sites given other elements of COVID? I'm struggling to understand from the 22% you were at why 20% is the starting point, going forward, I can't see why it's anything more than that COVID drag of that 90 basis points.
Clearly within gross margin, we've got site costs in terms of running the sites, but there are also other elements of cost within gross margin that are fixed, Glynis, and those obviously have an impact when looking at a business that was previously gearing up to deliver around 18,000 completions a year to a business that is now expecting to deliver 14,500- 15,000 completions a year.
Thank you.
Okay. Glynis, thank you very much. Moving on. If I could just flag that time-wise, we've probably got another 10 minutes. I know there's a few calls to come through. We'll go to the next call. Thank you.
The next question comes in from the line of Arnaud Lehmann, 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%-5% volume growth per annum. I guess it's the same answer to two different ways to present the same target, or I guess you were worried that people were expecting you to deliver more than 20,000 completions? Related to that, looking forward, there are some obvious macro risks, the taper of Help to Buy that you discussed, the end of the stamp duty holiday. If you had to choose between volumes and margins in a potentially more challenging, let's say, macro environment, what would be your target? Would you stick with the 20,000 completions or would you focus on the margin improvement?
Lastly, just maybe I misunderstand, you give a year-end net cash guidance for fiscal year 2021 at GBP 550 million, which is quite helpful. What are the underlying implications in terms of dividend payments? Because at the moment, you're not committing to any meaningful dividend payments for now. What does it include, or it's excluding any dividend payments? Thank you.
Arnaud, hi. Good morning. Jessica will pick up in terms of the cash guidance and the position regarding dividend. Just in terms of our medium-term target. I think there are two slightly different points. Historically, as you say, we've guided to volume growth at around 3%- 5%. 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 completions. Without adding further divisions, we felt that we had that capacity to grow up to about 20,000. I think the difference now is really mainly that we are flagging a much faster rate of growth for FY 2021.
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 grow back to, as we outlined, 14,500-15,000 completions. In terms of margin and volume, I think the simple answer is we want both. We've set out very clearly over the last two or three 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%. 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% as a minimum. 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.
Just in terms of cash. Yes, we're expecting GBP 550 million of cash at the end of FY 2021. Key components within that is clearly land credit outflow, the exceptional items, and the working capital items such as trade creditors and trade payables coming back in terms of normal levels. We've clearly set out today that at the right time, the Board will implement an ordinary dividend cover of 2.5x, and the Board will obviously consider current trading and the macroeconomic environment as it makes that decision.
That's very clear. Thank you very much.
Thank you.
The final question comes in from the line of Dudley Shanley calling from Goodbody. Dudley, please go ahead.
Good morning. You'll be glad to know I just have one question. The question is to do with the weekly unit production where you're targeting 295- 300. Obviously, in 2019 and in early 2020, that was running at 361. Can you talk us through the building blocks over the next few years to get back to that sort of level? I'm thinking in the context of your 20,000 target further out.
Yeah, certainly. Steven will talk through that. Clearly, one of the key points there will be about site numbers. I'll pass over to Steven.
Yeah. Hi, Dudley. Yes. As you can see on slide 12, in fact, 2019/2020, throughout the 50 weeks average of those two years, we produced 361 equivalent units per week for those years. You can see at week eight of the current year. We've got to what? To 347. Clearly, we need some way yet to go to get back to that average. One of the building blocks we need to see is more outlets come on stream. As I mentioned earlier, we've got about 98, 100 outlets to start this year. In fact, we've already started something like 25 of those outlets in the last two months. The key will be more outlets, and that will get us back to that average we were achieving in 2019 and 2020. We've got adequate labor now on our sites.
We've did a slide showing the labor content, and we've got our labor and management on site at 16,000 now, and there's good availability. We should be getting back to that level over the next year, 18 months as more sites come on stream.
Thank you, Steven. Dudley, thank you very much.
Thank you.
For everyone, that concludes our call. We have no more questions on the line. 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.