Earnings Call: H2 2011

Sep 14, 2011

Well, good morning, everyone, and welcome to our annual results presentation. In a moment, I am going to hand over to Mark, who will describe how we are delivering on our strategy and will also give you an update on current trading. David will then take you through the detailed numbers, and at the end, we will, of course, as always, be delighted to take your questions. However, I just want to make a couple of very important points. Although trading conditions have improved since the autumn of 2010, we cannot yet point to an improvement in the overall housing market. Macroeconomic risks remain, and I am sure they are front of mind for everybody in this room this morning, and there has only been a marginal improvement in the availability of mortgage finance for our customers. Nevertheless, there is some welcome stability in the market, and we have made very real progress in our objective of rebuilding profitability. We have successfully pursued our strategy of value, not volume, and during this year have brought on stream new sites delivering enhanced returns. Importantly, this new land is meeting our margin expectations. At the same time, we have made significant improvements in our operations, lowering costs and improving the quality of everything we do. That, combined with the refinance business, provides a solid platform for the business going forward. I would now like to hand over to Mark, who will talk you through our progress in greater detail. Mark. Thanks, Bob. Well, thanks, Bob, and good morning, everyone. I am going to start by looking at the market trends for FY11, review our sales performance, and show you how we are driving profitability across the group. I then want to give you some more detail on four specific areas: product development, planning, progress on partnerships, and an update on Wilson Bowden Developments. Then finally bring you up to date on current trading and outlook. First, I would like to highlight the group's achievements over the period by considering the key data for the last three years. As Bob has said, it has been a challenging period, and there is still uncertainty in the macro environment. But despite this, the management team has delivered significant operational improvements. Private ASPs have increased by nearly 20% over this period, driven by mix and replanning, the introduction of new products, and an absolute focus on delivering the best price for every home we sell. Operating margins have increased more than fourfold, albeit from a very low base. Our second half house build margin of 8% sits well against most competitors and reflects real business performance. As a result, we returned to profitability at a pre-tax level last year. As new land has come forward, outlet numbers have grown, and this has and will help drive margin recovery. Finally, net debt is reduced to a gearing level of just 16%. Whilst land creditors have increased as a result of new full margin land purchases, it reflects our strategy to align the payment for the raw material we buy with the sales that we achieve. Our refinancing in May has improved the efficiency of our balance sheet. Turning to market trends, as Bob said, it was a very challenging autumn last year. We saw some recovery in sales rate and price stability in the spring, and this has continued into the new year. We are, however, seeing greater regional variation with London and the South East outperforming the rest of the U.K., delivering stronger pricing trends. That said, volume performance across the country has been broadly consistent. While there's no doubt that the market remains challenging, the ability of our customers to secure mortgage finance remains the key constraint to further recovery. Here's a slide you're all very familiar with. Looking at the blue bars, you can see the level of mortgage approvals has been relatively static now for the past 18 months at an average of 47,000 per month. We've seen some increased competition in lending. Swap rates have fallen. Buy-to-let mortgages are increasing, and some of the smaller lenders have re-entered the market. Fixed rate mortgages have come down, and according to Moneyfacts, the average five-year fixed rate is down to 4.99% from 6.24% two years ago. Of course, the proportion of this increased activity is being seen at the lower risk end of the market. But for me, any competition is good. For the new build sector, the availability of higher loan-to-value mortgages remains critical to driving industry growth. Again, the slide you've seen before highlighting the discrepancy on LTVs offered on new build as compared to secondhand properties. We've seen some movement upwards, but typically from the smaller players. A step up from the remaining major lenders would provide a potential upside for the industry. Now turning to our sales performance, here you can see the trends in net private reservations for FY11 against the prior year. Trading in Q1 last year was relatively robust, helped by the delivery of HomeBuy Direct completions as the scheme came to an end last October. We saw consumer confidence dip in the run-up to the government CSR, and there was no real recovery before Christmas. During this period, we had to be very disciplined to focus on price and not volume. The second half was more stable in terms of sales and pricing, and we've seen those trends carry on into this financial year. Just to bring you right up to date on sales, the new year has started well, with private sales up over 10%, driven mainly by outlet numbers up 8%. Turning to buyer type, here you can see an analysis of our completions. Social increased from 17% to 24%, reflecting new site openings. Let me take you through the other elements in a little more detail. Shared equity completions fell from just over 3,000 in the prior year to 2,400. This decline largely reflects the ending of the government's HomeBuy Direct scheme. As you can see on the slide, 75% of our shared equity completions last year were using our own product, as compared to 43% in the prior year. So we were pleased to see the launch of the government's new FirstBuy scheme in June. This provides a loan of up to 20%, funded equally by the HCA and ourselves. For us, the cost and capital tied up in the scheme is lower than if we were using our own product. It has got off to a good start, and we were the first of the house builders to launch a comprehensive marketing campaign. We currently have around 400 units going through the sales process, with our first completions already delivered. In the absence of higher loan-to-value mortgages, shared equity will continue to be a significant sales tool. I am encouraged to see an increase in the level of PX last year, as it shows that the market is starting to free up. 15% still remains low compared to historic norms, where it could represent up to 25% of total completions. It is a relatively low-cost tool for the group, and we run a tightly controlled PX operation and manage our balance sheet exposure closely. Our intent is to work hard to keep the momentum going and grow its usage further. Turning to investor sales. Whilst they were down in the year overall, we did see a reversal of the trend in the second half. We have seen rental yields becoming increasingly more attractive, in particular in London and the Southeast. This is driven by the shortage of houses for rent, an increase in demand from buyers who cannot raise a deposit, and the return of buy-to-let mortgages. A one-bed apartment in Dalston, the London site where we held our event earlier in the year, achieves a yield of just over 6%, up from 5.6% 12 months ago. Similarly, at our Spencer Park development in Basingstoke, a two-bed apartment can achieve a yield of around 6.6%, up from 5.8% 12 months ago. It is an attractive proposition, and we are developing specific marketing campaigns to grow this channel further. Our priority has and continues to be rebuilding profitability. To do this, we are focused on three key areas: optimizing the selling prices we achieve, improving our operational efficiency, and targeting high-return land purchases. With operating profits before exceptional items increasing by 50% last year, we are making progress. Our management teams have continued to focus on maximizing the value from each and every sale. Here we highlight the underlying movement in prices over the year. It shows the cumulative difference between the price achieved on completion against the expected selling price set in our systems at the 1st of July 2010. Price momentum was strongest in the first quarter, driven by better sales volumes, and then fell back as we encountered the headwinds in the second quarter. If we look at this on a regional basis, you would see greater variation with a stronger performance in the Southeast and London. That said, we did achieve modest underlying price growth despite the market building on the successes of the previous year. Not quite at the level we had hoped, but given the market backdrop of falling second-hand prices in many areas, I believe a very credible performance. Given the greater than anticipated pressure on pricing, we worked hard on cost to deliver the improved profitability targeted. Overall, we delivered cost reductions in the year despite upward pressure in a number of areas. Let me look at some of the key areas of focus. We now procure 80% of the group's materials centrally, and we are continuing to drive for more. Last year, despite some significant pressure in certain product areas, we managed to deliver a small reduction in procurement cost. We continued to increase the use of standard products across the group and to benchmark our costs across all divisions regularly. As a result of these actions, we've been able to reduce our build cost by about GBP 17 million last year. This is in addition to the substantial savings made over the last 3 years. We continue to replan sites, and in the year completed a total of 60. This has enabled us to reduce costs and drive up sales revenues on those sites. During the year, we realized around GBP 20 million of value, which will come through as additional profits as the units are delivered. We've seen a reduction in admin costs, excluding sundry income of around GBP 4 million, reflecting savings from the implementation of our new systems and a continued focus on efficiency. Looking at the year ahead, we're targeting to hold overall build costs flat despite the continued pricing pressures. Turning to land buying, we continue to take advantage of attractive land opportunities that are available. Since reentering the land market in May 2009, we've committed to purchase over 22,000 new plots. In the year, we secured just under 9,000 at a cost of GBP 450 million. In addition to these numbers, we have over 2,000 plots through the JVs we now have in place. On the north-south split, you will appreciate for us that Milton Keynes is actually in the north. That said, we have continued to buy land outside the southeast of England because, A, we are a national house builder, and B, land prices are more attractive in the north. Key to this is that every piece of land we buy is required to meet our minimum hurdle rate of a trading margin of 24%. Now, while it is good to see commitments being made, the proof of the strategy is in the conversion into land we can build on, and delivering the returns targeted. As you can see, 63% is now owned and a further 30% is in contract and awaiting detailed planning. The average number of plots per site on this new land is 121, allowing us to turn the asset quickly. Of the 107 new sites in the owned land bank, 74% are already in production. The key takeaway is that this new land is coming through very quickly. We monitor the returns on every piece of land approved, and I can confirm that the returns forecast are in line with the approvals given. Here, we've updated the segmentation of our land bank split between impaired, old land, and new land. Across the top, we've detailed the expected trading margins in each category of land. Impaired plots have reduced from nearly 15,000 a year ago to around 10,000, and now represents just under 17% of the owned, conditional, and approved land bank. Old land now represents 37% as compared to 45% a year ago. So now nearly 50% of the land bank is made up of new land, where the average trading margin is around 24% based on current prices. To be clear, whilst the delivery of our new land is important to drive profitability, our focus on old and especially impaired land is very high. We must continue to move through this part of the estate as fast as is practical to deliver the cash locked up in the balance sheet and provide the funds for new investment. Here, we forecast the delivery of each segment over the next 3 years. For this financial year, we anticipate around 25% of completions will come from the impaired land, 40% from old land, and 35% from new land. Looking further out, we expect the percentage of completions from new land to increase, whilst that from impaired to reduce significantly, and in FY14 anticipate that two-thirds of our completions will come from new, high-margin land. What this chart does show is that margin growth over the next few years is not fundamentally constrained by a lack of future price inflation or our impaired land. Turning to sites, as we bring this new land into production we expect outlets to increase during the financial year, with expected average for the next 12 months of around 400 versus 364 in FY11. I said that we monitor every one of our new sites to ensure that they are performing, and I would like to take this opportunity to update you on the new land case studies that we presented this time last year. Firstly, The Limes in West Sussex, which opened just 12 months ago. The site is now 65% sold, having achieved a sales rate of 0.8 private reservations per week since launch. The average selling price has increased to GBP 337,000 from GBP 312,000, up 8%. It is an outstanding development in an excellent location and close to transport links, and that is a key selling point in today's market. Here you can see Shard End, our regeneration project in Birmingham. 45% of the site is now sold. The sales rate is 0.5 net private reservations per week since launch. The ASP remains in line with original expectations, but costs have reduced. Finally, Renaissance, a flagship project to regenerate the heart of Lewisham. First completion was in June this year. We have now sold 27% with a sales rate of 1.2 net private reservations per week. ASP again is in line with original expectations. The most important thing for me to highlight is on all three of these sites, we are outperforming in terms of profitability. They are all forecast to achieve margins ahead of the original viability plans. Now let me turn to product development. Having the best product for our customers has never been more important. It is what drives sales rates and better prices. 2011 sees the relaunch of the Barratt house range across the country, our first entirely new range since the Barratt Premier Collection 17 years ago. We know from last year's launch of the David Wilson range that this is likely to have a positive effect on both sales and prices. We also expect the new range will drive improved efficiency across the group by increasing the use of standard product, as the new range uses standard floor plans with numerous external design solutions. Here are the new show homes at Royal Parade in Quidsule, a site that opened at the end of July. We have taken our best-selling house types and given them a radical overhaul. The less popular ones have been dropped and replaced by new ones. The new designs have been heavily influenced not only by our own experience, but from substantial input from customers. It is the interiors that have seen the biggest change as we move to more open plan living. Kitchen breakfast rooms with light pods bringing the garden into the home. Bedrooms with greater use of Velux windows. In total, we have 100 sites planned delivering around 10,000 units, and we will replan more sites with the new range wherever possible. You will be aware that there are big changes being proposed to our planning system. This has sparked substantial public debate about whether it is right to make it easier to build new homes. The debate has become very polarized, and to be clear, there is not going to be a planning free-for-all. What was clear to us over a year ago is that house builders are going to have to work much more closely with local stakeholders to get the homes we need built. That has already delivered many examples of wins that we would otherwise not have seen. Our approach today is one where we start by considering carefully how we deliver high quality, well-designed communities that take account of local needs and views wherever we can. Our focus on quality, design, and service is promoted through the process, and here our credentials are second to none amongst our national competitors. In many places, we have been more successful buying land because landowners believe our credentials are better. We have many more local authorities and communities that are choosing to work with us. Of course, some local authorities will never change, and this is the reason why government needs to stick to its guns and deliver the changes proposed. Another area of major change is the way we are doing business through partnerships. The prime reason for taking this approach is very simple. We can get better access to developable land by working this way. So far, we have chosen partners who bring something very specific. L&Q on our two new London developments is one of the most respected and successful RSLs. The Wates Group on four schemes in the Southeast, which as a private company, has very strong credentials with local authorities and landowners. More recently, Peel Holdings, who have one of the largest residential land holdings in the country. Importantly, we are finding our quality, service, and cost credentials are a strong differentiator. This is particularly true of public sector, where we have started well. As one of the few house builders on all three delivery partner panels, we now have five major sites awarded to us. As the public sector land release program progresses, we expect to do well going forward with this initiative. After the markets turned down, we moved to a strategy for Wilson Bowden Developments to effectively turn their balance sheet investment into cash as efficiently as they could, to work closely with our house building operations to secure additional opportunities for them. When the time was right, to bring the retail developments forward where we have preferred developer status, but without requiring any material finance from the group. As you can see from the slide, they had a pretty good year on the first objective: reducing our investment in land and WIP by 20%, whilst turning the business to a small profit. They have been successful in working with the house build teams to bring forward two large mixed-use schemes, which should benefit both parties in the business, and of acquiring a number of development sites for houses whilst cashing in on other housing assets sold to retailers keen to expand their estates. During FY 2012, we hope to bring two of the five preferred developer retail sites forward with GDV of around GBP 200 million, providing the basis for increased profitability over the next five years. Finally, the current trading and outlook. Average weekly private reservations for the first 11 weeks of the new financial year were 183, up over 10% on the previous year. This represents a sales rate of 0.49 sales per week per active site against 0.48 last year. In total, we're operating off of 375 active sites, up just over 8% from last year. A reasonable start to FY 2012, largely driven from higher outlet numbers, which should deliver an increase in volumes for the year as a whole. ASPs are expected to increase further as the percentage of houses increases to around 70% in FY 2012 from 66% last year. Margin growth will reflect volume progression and the benefit of a greater percentage of higher margin new land coming through into production. With new land forecast to go up from just 12% last year to around 35% ish. We will continue to pursue a value-based strategy targeting price progression where we can, controlling costs despite the pressures that now exist. I'd now like to hand over to David, who will take you through the detail of our financial performance. David. Thank you, Mark. Good morning, everyone. Let's have a closer look at the numbers for the year to the 30th of June. Our revenues were GBP 2.035 billion, flat on last year. Completions were marginally down, whilst average selling prices were up. Operating profit before exceptional items increased by 50% to GBP 135 million, with an operating margin before exceptional items of 6.6% and 7.9% in the second half. Administration expenses were GBP 92.8 million, compared to GBP 94.7 million in the prior year. The group returned to profitability with PBT of GBP 42.7 million before exceptionals. Exceptional items of GBP 54.2 million, predominantly relating to the refinancing, were incurred in the second half. The tangible net asset value per share at the 30th of June was 211 pence. Net debt at the 30th of June was GBP 323 million, with gearing at 16%. Let's take a look at the revenue drivers. Total completions, excluding joint venture completions, were 11,078, down from 11,325 in the prior year. Social mix was 24%, up from 17% in the prior year. This increase reflects the delivery profile of social housing on existing sites and the opening of new sites where we typically take the social content early. Going forward, we would expect the percentage from social to drop back to around 20%, which should be the long-run average. Total average selling price increased by 2.3% to GBP 178,300. Private ASP increased by 7.4% to GBP 198,900. This increase was predominantly driven by changes in mix. We are building and selling more houses and more large family homes. As Mark explained, the underlying selling price was marginally up, but there was variation by region. Social ASP decreased by 6% in the year, reflecting product mix and an increase in social completions in the North. Let's drill further into the revenue. Here you can see the split of completions between houses and flats. On the left-hand chart, we show total units. You'll see that houses represented 66% of total completions, up from 60% in the prior year. On the right-hand chart, you can see that excluding London, where typically our product is flatted, the mix of houses rises to 74%, compared to 66% in the prior year. On our new land purchases, you'll have seen that the mix is broadly 80% houses and 20% flats, which gives an indication of the long-term trends. Drilling down into the product mix in more detail, here you can see the completions for the last three years by product type. There has been a dramatic reduction in non-London flats, down from 45% of completions in FY 2009 to 23% in FY 2011. Larger homes, three bedrooms and upwards, have increased from less than 21% of completions in FY 2009 to almost 28% this year. But we've also seen an increase in smaller one, two, and three-bedroom houses, up from 26% to 38%. This in part reflects the replanning of our sites, where our aspirations range of smaller houses has been used to replan what would otherwise have been flatted. Let's take a look at price segments for private completions. In the top two bands, you can see the market shift in product selling at above GBP 200,000, up to 39% last year from 26% in FY 2009. Conversely, the percentage of units sold with a value of GBP 100,000 or below has significantly reduced from 20% to 7%. The result in private ASP has increased from GBP 166,500 in FY 2009 to GBP 198,900 in FY 2011, a two-year increase of around 20%. Turning to our performance by region, you've seen before our six operating regions, with the red line highlighting our north-south divide. We are a national house builder, and you can see that the five regions outside of London remain of a similar size in terms of completion volumes. The south, including London, delivered 47% of total units and 52% of revenues. Let's look at the trading statistics in more detail. Land cost through the P&L has reduced from 23.4% to 23%. That is consistent with the plot cost to ASP ratio embedded in the land bank as at the 30th of June 2011. Build cost percentage has reduced as a result of underlying cost reductions, as outlined by Mark, and an increase in completions from new higher margin land. In the year, gross margin increased from 9.1% to 11.2%. As Mark highlighted, we focused on containing and where possible, reducing our administrative costs. For the year, they totaled GBP 92.8 million and represented 4.6% of revenues. On guidance for FY 2012, we expect administrative expenses to be around GBP 95 million. The operating margin was 6.6% for the full year, up from 4.4% in the prior year. In the second half it was 7.9%. We expect to see further gross and operating margin progression in the current year. The first and second half trend on margin will be similar to prior years, reflecting the higher percentage of completions traditionally delivered in our second half, and the weighting of London private completions also to the second half. Now looking at cash flow. This year I have altered our cash flow presentation to provide more granularity and to clearly identify cash generation from operations pre and post-land expenditure. It is important to recognize that we are a cash generative business, and we can choose the amount of land that we purchase. The profit from operations was GBP 127.3 million, an increase of GBP 53 million on the prior year. The cash inflow for land from plot completions was GBP 468.5 million. The other cash flow movements are shown, but I would like to highlight the investment in WIP of GBP 41.8 million for new site openings. The utilization of payments on account in the year relating to affordable housing contracts and Wilson Bowden projects of GBP 27.7 million. A reduction in accruals relating both to our East London business and an overall reduction in accruals within the business to give a total reduction of GBP 30.2 million. The total cash flow from operations before land acquisition was GBP 398 million. Moving on to the bottom of the cash flow, you can see that land expenditure was GBP 261 million. Then we have expenditure for land and WIP on joint venture activities of GBP 23 million. Other land movements, including land sales, giving a total inflow of GBP 40 million. The total cash flow from operations was GBP 154 million. After adjusting for interest tax and exceptional items, the reduction in net debt was GBP 44.3 million. On guidance, we would expect that the total cash spend on land in FY12 will be around GBP 550 million, with around GBP 350 million on land creditors and the balance on other land expenditure. Turning now to the balance sheet, I will pick out the headline numbers. The deferred tax asset stands at GBP 143.2 million. The GBP 30.1 million reduction in the year primarily reflects the changes in the rate of corporation tax, plus a reduction in the pension scheme and deferred tax asset for hedging. Available for sale assets of GBP 169.4 million is the shared equity on our balance sheet. Other non-current assets of GBP 114.1 million includes the investment in joint ventures of GBP 102.8 million and other receivables of GBP 11.3 million. The gross land bank value is GBP 2.19 billion, which net of land creditors of GBP 700 million gives a net land bank value of GBP 1.49 billion. Stock and WIP increased by GBP 42 million to GBP 1.023 billion. This is in line with our site openings, and there is a slide in the appendix which includes a further breakdown of this. Looking at shared equity in more detail. Here is a breakdown of the GBP 169.4 million book value of shared equity at the 30th of June. On average, we provide for 40% of the value of shared equity at the time of sale. Our loss experience to date is extremely low and our provisioning remains very prudent. As you can see in the year, net additions totaled GBP 40.4 million. We would expect the average first time buyer to own their house for approximately six years. As the portfolio matures, the level of redemption should increase. As we confirmed in a statement last month, we are looking at possible options to monetize part of our shared equity portfolio. Lending to our customers is not our core business, and with the right deal, it would make sense to reinvest some of the capital committed in the reduction of net debt and buying new land. We are exploring our options, but there is no certainty of any transaction being concluded. On guidance and excluding the effect of any monetization in FY 2012, we expect shared equity to be between 25% and 30% of completion volumes, and the net balance sheet investment to increase by around GBP 30 million. Moving on to the land bank. The total number of plots in the land bank is 60,000. The owned and unconditional plots are just under 48,000. The average cost of plots acquired in the period was GBP 42,200. The substantial increase on the prior year reflects the change in the overall mix of plots acquired, with a larger weighting of higher ASP plots gaining planning permission and moving into the owned land bank. The average cost of plots charged to the income statement was GBP 41,100. The average carrying value of plots in the balance sheet now stands at GBP 43,600. We have 4.3 years supply of owned and unconditional land based on FY 2011 volumes. We have 1.1 years supply of conditional contracts. On guidance, we anticipate reducing the overall land bank over the next couple of years to around four years supply, and the conditional land bank will be around one year. This will be based on prior year completion volumes. Turning to look at the land bank valuation in a little more detail. Total owned land stood at just over GBP 2 billion as at the 30th of June. The average plot cost on the owned land is GBP 43,600. As I've outlined previously, Barratt has tended to have a higher land plot cost than many of our peers, as we have focused more on operational land than strategic land. We also have a much heavier weighting to London and the South. This is reflected in our higher ASP. As you can see, the average selling price at current prices on owned land is GBP 183,000, higher than the GBP 178,300 achieved in FY 2011. This gives you an indication of future ASP trends. The owned land bank plot cost to ASP ratio is 23%. On conditional and approved land, the ASP steps up quite significantly to GBP 201,000 and GBP 215,000 respectively, which highlights the ongoing change in the product mix. The plot cost to ASP ratios on these sites is 21%. Let's have a look at impairment provisions. In the table across the top, you can see the impairment provisions that have been primarily charged as exceptional items through the profit and loss. You should note that we have charged GBP 5 million in the current year to normal trading, compared to GBP 7 million charged in the prior year. The cumulative charge for house building is GBP 601.5 million and GBP 124 million for commercial developments. As at the 30th of June 2011, we have a remaining balance of GBP 194.8 million, split GBP 175.7 million for house building and GBP 19.1 million for commercial. The group conducts at least a six monthly site-by-site review of the net realizable value of land and WIP. The key inputs are forecast sales rates, expected sales prices, and estimated cost to complete. Also on this slide, we have a table to illustrate the impairment sensitivity. The calculation assumes a uniform and immediate fall in house prices across the U.K. from those prevailing at the 30th of June 2011. It also assumes no mitigation in terms of replanning, cost reduction, or any deferred tax benefit. As you can see, on this basis, a 5% fall in house prices would lead to impairment of around GBP 300 million, or GBP 0.30 a share. A 10% fall in house prices would be around GBP 490 million of impairment or GBP 0.50 a share. I remind you that our tangible net asset value per share is GBP 2.11. Moving on to strategic land. Barratt has a significant strategic land bank. The majority of this was acquired with the Wilson Bowden acquisition in 2007. We have around 11,400 acres or just over 200 sites, which have a potential to deliver up to 62,500 plots. The portfolio is maturing. In FY11, we gained consent for just over 900 plots on four sites. In the next few years, we are targeting planning consents for around 15,000 plots. However, as you are aware, the planning environment is at present a little uncertain, particularly on large strategic proposals. In addition, the delivery from strategic land tends to be for individual sites with a large number of plots. This necessitates either a phased land drawdown, land sales, or a substantial investment in a large site. We will continue to balance the relative benefits of operational and strategic land. Moving on to the liability side of the balance sheet, there are a few points to highlight. The refinancing, which we completed in May, improved the efficiency of the balance sheet with a reduction in the fully drawn term loan and a corresponding reduction in cash balances. Net debt at the 30th of June was GBP 323 million. On guidance, I am revising our net debt guidance down slightly to a range of GBP 650 million-GBP 700 million at the 31st of December 2011, and GBP 400 million-GBP 450 million as at 30th of June 2012. This revised guidance is a result of greater certainty with regard to the timing of land payments. Trade creditors are in line with last year. We continue to manage our trade creditors to ensure that we balance the dynamic between supplier relationships and cash management. Our creditors and accruals have reduced by GBP 62.5 million, which I have already covered in the cash flow review. The net swap liability reduced by GBP 34.7 million, primarily due to the cancellation of interest rate hedges as part of the refinancing. This slide summarizes our financing arrangements following the refinancing completed in May this year. At present, we have total facilities of GBP 1.5 billion, consisting of GBP 1.2 billion RCF, 211 private placement notes, and GBP 100 million through M&G term loan. This then steps down to GBP 1.081 billion at April 2012, when we replace the old RCF with a new RCF facility totaling GBP 770 million. The suite of covenants for the new facilities is very similar to those previously in place and gives us a flexible package providing both scope for growth and downside protection. We have significant headroom on all covenants. For the year, we had a cash interest cost of GBP 70.4 million. I have broken down the cash interest into its major components. On guidance, we expect the cash interest cost in FY 2012 to be around GBP 70 million. The average monthly net debt in FY 2011 was around GBP 650 million. This will increase to around GBP 800 million in FY 2012 as we make payments in the year for our new higher margin land. Turning to non-cash interest, again, I have analyzed the constituent elements with the total charge being GBP 22 million in the year. On guidance for FY 2012, we expect non-cash interest cost to be around GBP 20 million, and therefore the total interest cost for the full year to be around GBP 90. Land creditors at June were in line with guidance at GBP 700 million, reflecting the deferred terms secured on new land acquired since re-entering the land market. On the payment profile, GBP 349 million is payable in the next 12 months with the balance thereafter. On guidance, we expect land creditors to remain around GBP 700 million as at December 2011 and to June 2012, but the precise values will depend on the timing of our land approvals and gaining planning permissions. On forward sales, the order book at the 30th of June was GBP 590 million, broadly in line with the prior year. As at the 11th of September, the forward order book was GBP 856 million compared to GBP 865 million in the prior year. Private forward orders were GBP 544 million, up 3.3% on the prior year. To summarize some of the key points for guidance, we do expect volume growth in FY 2012, driven by an increase in sales outlet, not sales rate. We will drive further ASP improvements as the move from flats to houses continues. As I said, the ASP in the land bank at current prices is GBP 183,000 compared to our ASP achieved in FY 2011 of GBP 178,300. Our completion volumes from new higher margin land will increase to around 35%, and we are targeting to offset any underlying increase in the cost of certain materials and subcontract labor. Thank you. We will now be pleased to take questions. Thanks. Good morning, David. Good morning, Mark. Before we start the questions, we have Steve and Clive here as well, so that if there is any operational questions, they will be delighted to answer them. When you ask your question, given we are filming this, could you just announce your name and firm as normal, please? The floor is yours. Gregor, and then we will get to you, Harry, in a minute. Morning. Gregor Kuglitsch from UBS. Two questions just on the gross margin side of things. One of your slides with the bar charts, if you do the math, I think you come out with an 11.5% margin or thereabouts. Obviously, you've just done 11.2%, I believe, in this year. I suppose the question really is, should we be assuming a greater increase than sort of a marginal increase? I mean, are we more talking about a 200 basis point delta year on year as that new land comes through. Just a bit of clarification on that to reconcile that with the chart. The second one is really on capital turn. I think your WIP, you're turning in about 2 times a year at this point. I'm not sure whether there's any scope to improve that. There's obviously a relatively wide range in the market, or certainly amongst your peers, in terms of how quickly that can be turned. Secondly, in that regard, on your land bank, you're obviously guiding for that to shrink, although relatively modestly. Do you think there's any scope that you can do more potentially if the planning system does become more favorable? We'll start and hand over to landlord. Yeah, certainly. Okay. Well, I think first of all on gross margin, Mark obviously outlined as we've done previously, I think the chart that we refer to as the cylinders in terms of the delivery of the different types of land impaired and impaired, non-impaired over the next 2 or 3 years. First of all, I would emphasize, it is illustrative and we're not trying to provide a forecast per se. Secondly, in relation to gross margin or trading margin, it is important that you bear in mind that the first half, second half differential that will exist. So we have tended to deliver far more of our London private completions into the second half of the year, and therefore the gross margin in the second half of the year has been elevated as a result of that. We would expect that trend to continue in FY12. Thirdly, in terms of the slide, the slide is presenting trading margin, and therefore you do need to deduct costs to move from trading margin to gross margin. We have given guidance previously that probably something between 3% and 3.5% is the kind of deduction that you need to make to move from trading margin to gross margin. Yeah. Will. Sorry, Mark. I was just going to say, in terms of WIP, I understand the comparison in terms of WIP to revenue. Couple of areas where I think that you need to make some adjustment. First of all, we carry some value in WIP relating to Wilson Bowden, our commercial business. Secondly, I do not think that that is an appropriate measurement in terms of our London business, and we clearly have a very significant London business relative to many of our peers. I think I would give a general statement that our build controls around WIP are very tight. So we have a clear authorization process, and we believe that our WIP is appropriate. If you roll out over the next 2 or 3 years, we are giving guidance that we are opening new sites, and we will see an increase in WIP as we open new sites. However, we have got 3 or 4 particularly large London sites, which we will start to move towards completion on those sites, and that will free up some WIP as we move through over the next 2 or 3 years. Finally on that, of course, as I indicated, a lot of the new sites that we have bought are much smaller in size, and we are really focusing on those smaller sites, therefore faster asset turns. I guess as we move towards that being the bulk of our delivery, then you would expect those WIP levels to come down as a result of that because we are obviously turning the sites much more quickly. Just on the planning process, the bottom line is we are not going to see a planning process that suddenly frees up. Whatever we might read in the Telegraph every morning, I think the proposals that this government have, which are proposals that we absolutely support, simply deal with the fact that there are local authorities today that are not necessarily allowing development to go ahead as it should. That has always been the case. I think this whole presumption in favour is really to deal with those local authorities that have not got plans in place. Otherwise, my expectation is the planning system will pretty much continue to run as it does at the moment. In the short term, it is all about mortgage availability and the number of buyers that can get access to the mortgage market. It is not actually about planning. Our own position on planning is, we believe, quite strong at the moment. Harry at the back there, please. Thanks, Wendy. Harry Goad from Credit Suisse. Just following up on that point, clearly there has been some focus on government attempts to free up the supply side, but do you suspect there might also be some initiatives about stimulating the demand side, whether that is an incremental shared equity scheme or any other initiatives from the government as you know? Yeah, we're going to continue to lobby for it. I think we've done reasonably well in terms of getting house building on the growth agenda. It should be part of the growth agenda. I think what we saw, the actions that government have taken in terms of FirstBuy, in terms of land release programs, in terms of trying to fix the private rental market, jury's out on that one. I think these are all things which are helpful. The key thing in the short term, as I say, is around the mortgage market. Now, it would be nice to think they could strong-arm the banks to change their loan to values. That's not going to happen. I think really it's about FirstBuy, and yes, we would certainly be lobbying for an extension of FirstBuy because we think it's worked incredibly well. I think the land release program becomes much more important as the market gets going because we all know that when we all start buying land, then prices will start to increase. Again, we are seeing more stuff coming through the delivery partner panel, but of course, the momentum's got to build quite a lot. I think the other thing that we may be asking government to look at is this whole stamp duty piece, because obviously the arrangement for first-time buyers does come off next year. Again, I think that's something where you'd expect them to probably intervene again, given certainly the Conservatives are very pro helping first-time buyers. I think it's more of those things. I think the planning thing, as I say, I don't think it's going to make a very big difference, to be honest. We'll still have the most complex planning system in the world, even with all this stuff that's gone through. But at least it feels like perhaps the bar has moved slightly in our favor. Certainly, it's a lot better outcome than the original localism concepts, I think that we were hearing before we really got into the detail. Any other questions? Chris, yeah. Yes. Welcome. Chris Millington, Numis. Just a few if I may, please. Firstly, can you just comment on whether there's much more re-planning potential within the land bank? It was quite a big contributor in the current year, so just some more on that. Whether or not you could just give us a feel as to what the relative profile of profitability is in the north and the south. You gave us the revenue profile, whether you can mention anything on that. The final one is just the detail one, and that's profit from land sales in the period. Re-planning potential, it's continuous. I don't think it ever stops. When you're working in a market that is as challenging as this one is, I think you have to keep looking at each phase as to whether you've got the right mix of product going forward. Therefore, I expect re-planning to continue. I think the impact is going to be less as we go on because everything will have been replanned perhaps once or twice. The only exception will be the new Barratt house range, because we really do expect that to make a considerable difference. We have two developments where we have the show homes up, but of course, that is going to grow very fast. As soon as we get the experience there, that we expect that that will support the fact that we should accelerate more re-planning going forward. There is more potential, but it's not going to be a growing number, I suspect. In terms of north-south profit, we've not given any detail, and strangely enough, unless David overrides me, we're probably not going to give any more detail. What I would say is that, as per the normal cycle, profits compress more in the north in a downturn than the south. But then when actually you get recovery, it reverses, and you tend to see the north recovering more quickly. Therefore, I suspect we're in exactly the same mode at the moment. What was the third one, sorry? In terms of land sales, I just touched on it in my presentation that we had cash in relation to land sales for house building and the commercial business total of around GBP 40 million. Profit through the P&L in relation to land sales, just a little less than GBP 2 million. Thank you. Yeah. We will be over there, Glynis. We will come. Yeah, one moment. We will take the Thanks. It's Will Jones from RBS. Three please, if I could. The first is just around London, whether in FY 2012, we're expecting a greater or similar contribution from London completions, and just anything around how that may impact margins, please. The second is on the 3.5%, I think, trading margin from the impaired plots. Can you just confirm, is that today's margin or is that on the assumption that you get the small house price growth and small build cost growth that originally went into that impairment assumption, a couple of years back? Lastly, just around the GBP 200 million or so of non-land creditor land spend this year. How much of that is for plots that you've already agreed that just haven't hit the balance sheet, and how much is for kind of the discretionary stuff that will still come? I guess my question is how much of the land spend this year do you think will be land creditor funded in terms of the new stuff? Thanks. Okay. Well, first of all, in terms of London, we do expect some increase in terms of completion volumes for London. We provided information in the presentation for the current year. It will be more weighted into the second half of the year, as I touched on earlier. Our London developments are typically running at higher than average gross margin, and therefore, that will pull through into the second half of the year. In terms of the trading margin on these cylinders in respect of impaired land, so the kind of 3.5% trading margin, I think that's just what we're expecting to achieve based on current prices. We've said previously in relation to our impairment assumptions that we would make varying assumptions depending on geography in terms of future selling prices. That's current prices set in the system. In relation to the land payment profile, I'm not sure I could really characterize that. We obviously have an ongoing approvals process since the 1st of July. We've approved additional land. Everything that we're approving is clearly on a subject to planning basis. So it's really dependent on the timing of the planning as to whether it will go into land creditors for June 2012 or whether it will be cash spend pre-June 2012. I don't think I can give you much more guidance than that. Thanks. Glenys. Hello, yes. Glynis Johnson, Deutsche Bank. A few, if I may. First of all is just on ASP. Talked about the land bank ASP of 183, but obviously depending on the completions in London, that can vary year on year. Can we maybe pin you down for 2012 and maybe even 2013 on ASP? Second of all, on strategic land, you gave us a number of plots you looked to come through in the next few years. Can we maybe just get a number, what actual number of years that is over? Thirdly, just in terms of the mortgage market, you had one of your peers talking about a potential MIG product at the end of the year. What are you seeing? Are you seeing the return of Halifax to lend more? Are you seeing more MIG products potentially coming through? On the Barratt house range, the new range coming in, will that achieve you a better margin? Are the cost savings you've done in terms of your pallet and raw materials, should we expect that to boost the margins? Then lastly, in terms of your land buying, you talked about spending GBP 550 million, your land creditors staying effectively stable. Last year, you got land benefit through the cashflow for 68. That seems to imply actually, potentially going to be buying more this year than you're using up in value terms. Maybe if you can just give us what you think it'll be like in plots. Are you going to do replacement? Are you looking to do slightly more? Well, I think we need to have a separate meeting. We'll see you afterwards, Julie. Okay. Maybe if I touch on, and Mark will pick up in terms of the mortgage market and the new range. If I just touch on the others. In terms of ASP, no, we're not going to give further guidance. We've said that the land buying ASP is 183. We have disclosed that on six monthly periods over the last 2 and a half years. I think we've given enough guidance in terms of the P&L, without spelling out ASP. In terms of strategic, couple of comments. We've said 15,000 over the next 3 years. I think we would see that as being a sort of 3 or 4-year timeframe. The second point would be that, do bear in mind that one site could deliver 1,500, 2,000 plots. There can be material movements across a 12-month period. That would be the second thing. In terms of land buying, again, not really specific guidance. We've given guidance on net debt, and we've given guidance on land creditors. If you look at the last 10 weeks, for example, we've approved about 2,000 plots. I think that gives you some indication as to what we're seeing in terms of pace of approvals. Okay. I'll cover mortgages, and I'm going to ask Steven just to deal with the Barratt house range. The answer is yes, we do expect margins to improve because of it, but Steven can give more detail. On the mortgage side of things, we have seen a lot of small changes in the last 12 months. We have seen the smaller building societies coming back into the market, and they now represent over 10% of our supply, whereas they were less than 5% a year ago. We've seen people like the National Australia Bank moving back to 90% loan to values. They've obviously followed the lead to some extent of Santander. Even Nationwide have moved slightly for existing account holders, they will go to 90%. We've not seen Lloyds Banking Group move their loan to value, and clearly they are the biggest player in the market. They are one of the major lenders who I think would make a considerable difference if they did move. We've not seen that yet. There is a wealth of alternative products out there. A good percentage don't work, but they look good in the adverts, I guess. Some of them are starting to work. The top-up loan, as we describe it, is probably one group of products where there is a separate lender that's lending a 15% chunk on top of the main lender. There are a number of those. The volumes are very small, I have to say. The costs are quite high, both for the company and for the customer. In that respect, they're not particularly attractive. If we got to a situation where mortgage lending became more difficult, they may become more attractive. Sitting against FirstBuy, they're not very attractive at all. The MIG idea really should be one of the solutions in the longer term, I guess, given we relied on it for so long historically. It does come down to financial regulation and what is acceptable in terms of insurance. The bar has been moved very, very high in that respect. I think U.K. government would probably just get above the bar, but at the moment, they're not prepared to stand behind the insurance product. That's just the sort of solution you could see in the future, perhaps. It obviously happens elsewhere. There are discussions, as you know, going on between the CML and the HBF, trying to find a solution. I think the positive is that the discussions are still going on. The negative is the discussions are still going on. The positive is that actually both parties do want to find a solution, because actually both parties want to see more volumes coming through, and I think that's where the driver will be. The issue is getting the balance between the cost of going to a 90% or 95% mortgage perhaps, to the customer and to the house builder, and how that's split then with the lender. I think those discussions will continue. I think we're sort of edging in the right direction. Subject, obviously, to what's going on in the macro financial world, which casts a little bit of a cloud over any short-term change, I suspect. It's going in the right direction. I would say we were seeing a thaw before we saw what happened in July and August. Therefore it may take longer, I guess. Steven, on the new house range. Yes, on the build costs, we'd expect the new range, or we have confirmed the new range will be very similar cost per square foot as the existing range, when taking into account the extra features. What we'd hope to achieve is more standardization. For example, the bathrooms are very similar in each of the house types, so that will give us greater efficiencies in our build. Additionally, we'd expect greater usage of the standard house type range, which again, will give us a greater margin across the group. That's it. Yeah. Thank you. It's important to remember, because I said we replaced, this is the first time in 17 years. That doesn't mean that the Barratt range hasn't moved in between. What you have is a lot of variation to the standard. That's where the cost is. Now, obviously, what this does is it takes all that variation out because it says, well, there's the new product, and as Steven was alluding to, you're going to get much more standardization as a result of that. Thank you. Right, take this one here, and then we'll come. Thank you. Clyde Lewis at Citigroup. I've got three, I think, and probably all for David, I'm afraid. Firstly, in terms of the land creditor profile, you've obviously set out the payments you expect to make. Can you give us an idea as to how much flexibility there is in that payment profile if market conditions are different from what you're expecting and what we're currently seeing? That was the first question. Second question, coming back to shared equity. I think you mentioned that you've reported some small losses so far in your experiences in terms of the redemptions. Does that encourage you to go back and maybe revisit that 40% as part A? Part B was, in terms of the approaches and bids that you've had for the book, can you maybe give us a bit of an idea as to how close it's got to the current carrying value that you've got in the books? The third one was on the impairment sensitivity table that you put on page 46. I was surprised to see that the write-down for 5% was GBP 300 million and the write-down for 10% was only GBP 490. I was expecting a more exponential curve than that, so I'm just wondering if you can help me with the maths and what's different to my expectation there. Yes. Okay. Right. In terms of land creditors, I think I would start by saying that there is limited flexibility in terms of land creditors. However, we obviously have relationships with all of our land creditors, and we can discuss and amend the payment profiles by mutual agreement. Over the last 2 or 3 years, we have made significant changes to payment profiles, in agreement with the vendors. That's an ongoing process, during FY11, and I'm sure it will be during FY12. In terms of shared equity, the redemptions on shared equity have really been small. Last year, I think the redemptions were around about GBP 8 million or GBP 9 million. So I think it's difficult for us to do anything other than provide for it on a very prudent basis until we have more experience in terms of redemptions. We've benchmarked our provisions, with assistance from third parties, and we're comfortable that the provisioning is pretty prudent. In terms of the ongoing process, clearly, it would be inappropriate for me to give any comment on the ongoing process in terms of bids that we've received. With regard to impairment sensitivity, yes, it is interesting. It isn't linear. We obviously have a site-by-site calculation, and the reason why I think it's not linear is because each site is not the same size, and therefore, if you have a particularly large site that is close to being impaired, i.e., a 5% fall will impair it, you obviously impair a lot of plots. So it's very much more to do with the site sizes and the composition of the land bank and the gross margin or the trading margin contained within the individual sites. I can't send you our calculations, but I can assure you, it's not linear. I wasn't expecting it to be linear, but I was expecting it to be bigger because I would've thought more sites with a 10% write-down would've been brought into the NRV process rather than fewer plots. Yes, well, in absolute terms, it is clearly a- The NRV process rather than fewer plots. Yes, well, in absolute- The NRV process rather than fewer plots. Yes, well, in absolute terms, it is clearly a bigger number in that we're moving from the 300 through to the 490 at 10%. I had better catch up with you later. Thanks, Clyde. John Messenger at RBS. Actually, sorry, David, it is back on two of the ones you have just had. Maybe just on that 300 to 490, would it be right to think that actually the reason why it does not go up more, because I am sort of in Clyde’s camp, is that actually it is brownfield sites where the land plus the WIP that you might actually have on the balance sheet has been wiped out, and therefore there is nothing else to actually write down? Because just in very simple terms, more would come into the NRV calc, more that actually had a cushion at 5 wouldn't have a cushion at 10 and would also then come into that calculation exercise. Is it just that actually you get to the point where some sites that are brownfield would be in negative territory and they would not require a write-down because there would be nothing carried? That was just the first one. Yes. I think that's fair. Clearly, as I outlined on the slide, we've obviously taken historic impairment, in total, some GBP 600 million of historic impairment, and that would have been applied on a site-by-site basis. We aren't starting from zero. We're starting from having made previous impairment provisions, and we can't go lower than zero. Fair. Second one was just Barratt is probably the most prudent on shared equity because you write it down by the 40. The GBP 16.3 impairment that's actually happened this year, how much of that is borrower default? How much of that is just the pricing? Because I look at it and think, well, actually, is that a helpful way of potentially clearing the decks to make that disposal? Borrower default is a very, very small portion of it. The discounting at 40% is not really to do with borrower default. It's more to do with when the money will be received back, and the fact that there is zero coupon on the loan, so it's more to do with time value of money rather than borrower default, and clearly a view in terms of HPI. It is just that the fact that house prices haven't moved up effectively is just about all of that GBP 16 million, is that fair? Um- Well, some of it is we've gone back to customers and we've offered them a small discount, but nothing like the provision we've taken. Oh, to get them away. All right. We started to do that to see what would happen. Of course, there's a lot of customers whose situation changes, and what they're saying is, "Actually, I'd rather own that piece than you have it and get the gain in the future." For a small discount, you can then get that away. I think that's probably a bigger proportion of it. Great. Just a final one, and it may be for Mark or David. Just in terms of clearing up, on land creditors and other kinds of ways of funding land, can you just confirm, does the group use any kind of promissory note structure? If you do, are they effectively captured in the land creditor numbers we see here? Fine. I would have thought, given your credit status, you probably don't use them. But if you do, just to understand, is that all captured in the land creditor mechanics we see in here? Yeah. No, we do use promissory notes. I mean, for a long time, I think Barratt have used promissory notes. It is captured within the land creditor. Any promissory note position will be caught within the land creditor. Thank you. Thanks, John. Sorry, yes, please. Thanks, Gary. I cannot see who it is. Sir. Kevin Cammack at Cenkos. Just a bit of help really on what is happening in the joint ventures. Do the plot numbers appear in the land bank? As the revenue start to flow, will you account purely as a JV, or do you actually draw the land down wholly owned? I guess it varies from JV to JV. But just to recognize what is in there, what is not in there, and the structures that may appear on the P&L in due course. Fine. Okay. Yeah, the conventional JV structure where it is a 50/50 deadlock joint venture. So for example, the existing joint ventures that we have with Wates Group have been reported through our accounts over the last few financial years. So we separately identify the joint venture completions, but the revenue is not flowing through the group P&L. And the investment in relation to the joint venture is held on the balance sheet. I think I outlined in the presentation that our investment in joint ventures in total is around about GBP 100 million. That is house building and commercial investment in joint ventures. And then what we do is we bring our share of the profits and our share of the interest charge through the joint venture line on the P&L. Now, joint ventures in terms of the P&L impact presently, is quite small. The completions increased in the year. They didn't quite double, but they were substantially up in the year. We're not yet seeing the third and fourth joint venture for the Wates Group coming through the P&L or the two joint ventures with London and Quadrant that Mark outlined in relation to London, which clearly have very significant gross development values. I would imagine as we move forward over the next probably couple of reporting periods, we'll then start to have a slide for joint ventures as the values coming through will be that much more substantial. The London and Quadrant, that is a standard 50/50 Correct venture or not? That's a 50/50 deadlock joint venture. We provided some information previously, but Ailey Street, which is the first one that we signed with London and Quadrant, London and Quadrant will be providing funding into that joint venture. The second one, which is next to the Emirates Stadium, is presently ungeared, so it will be equity funded by ourselves and London and Quadrant. Right. The GBP 100 million gross that you are showing at June 2011, does that include any attendant loans that are carried with the JV, or is that just physically the equity investment that you have put in? That is the equity investment that we have put in. That includes the investments in terms of Wates that we have made in relation to joint ventures, and it also includes the initial payments in relation to Ailey Street. Okay. Thank you. Just lastly, in terms of the land, the land bank, they would include the numbers? No. The numbers are not included within the land bank. The joint venture land bank in relation to Wates or London and Quadrant is held separately from the land bank. You said we had about 2,000 plots. 2,000 plots. Yeah. In the JVs that exist to date. Thank you. Thank you. I think we've got time for one more if there is one. Sorry, one in the front here as well. Thanks. It's Charlie Campbell of Liberum. Just one from me really, and a big picture question really. I just wanted to sort of thinking about the way the share price has reacted over the last couple of months and obviously some nervousness around the stock market. I sort of wonder why you don't want to get the land bank down a bit quicker just to show a better cash profile over the next couple of years. Just to understand the thought process of getting that down to four in, say, two years rather than perhaps one, if that would be a bit bolder, and use a bit less cash in the process. I mean, clearly our biggest driver is to get profitability back up again, and we know that the thing that's going to deliver that is new land coming through, and we're clearly seeing the benefits of that quite quickly. This year, 35% of our land will be new land and therefore will be at full margin. We are delivering the full margin. It feels like it's exactly the right strategy to keep pursuing that, albeit bringing the average land bank down gently. Obviously, as operating profits recover as that land comes through, then your debt will tend to fall anyway, and we think that that's the right strategy. Of course, you could go more quickly in terms of taking debt down, and it's the sort of thing you would do if the market changed dramatically. It's what we did in 2008, and we demonstrated how fast we can do that. I think at the moment it is that balance, and we think the balance is that we should grow the land overall but shrink the land bank. Drive that new land through as fast as we can and drive the profits up. But also just stay very aware of what is happening in the marketplace. At times like this, while our trading is actually quite reasonable for the first 11 weeks, we are very aware of what's happening out there. So watching very closely what's happening to consumer sentiment, what is happening to mortgage availability, because that I think could be the bigger issue for us. If the direction of travel of those things reverses, then obviously we can change them very quickly. Okay. Well, thank you very much indeed. As a final message, can I leave you with, remind you of the Barratt trinity? Best in class value. We're going to mercilessly drive our costs, deliver exceptional value, and therefore create sustainable and improving profit stream. Thank you very much indeed, and thanks again for all the questions.