Okay. Good morning everyone, and welcome. I'm gonna start with an overview of the first half, then move on to current trading and have a look at our priorities. Stephen will then take you through our operational performance, and Mike will cover our financial performance in the half. I will then come back to look at industry fundamentals, sustainability, and to conclude. First, to reflect on the first half of the year that we're reporting. We delivered a very strong operational and financial performance in the first half, with almost 7% completion growth to 8,626 homes. Adjusted pre-tax profit of GBP 521 million, a record first half profit for the group. Also, a further improvement in Return on Capital Employed to 29.6%.
This performance reflected the strength of the forward order book coming into the financial year, as well as the really excellent build performance across all of our sites during the period. I would just like to take a moment to acknowledge the tremendous contribution from our employees, our subcontractors, and our supply chain. We recognize the stark contrast with the very challenging reservation backdrop we have faced in the half, particularly from the end of September. When we move on to look at current trading, I mean, encouragingly, we have seen better trading activity in January relative to the last quarter of 2022. We also recognize that it is very early days with just four weeks trading so far in 2023. Bringing you up to date on the current trading picture, our reservation rates, outlet, and order book are summarized here.
Our private sales outlet rate per week over the period through to the 29th of January has been at 0.49. This is clearly a pleasing uplift on the 0.3 we experienced from our AGM update in October. It is still 45.6% below the 0.9 we saw in the same period last year. Our average active outlet position at 373 is significantly stronger and ahead nearly 15%, which is helping to support the absolute level of reservations. We are clearly substantially forward sold with respect to our FY23 private completion guidance. Just take a moment to look ahead. I mean, we have a very experienced management team, we clearly understand the levers that we can pull depending on how the market evolves over the coming months.
We've already outlined that we've stepped away from the land market, and we've introduced a temporary freeze on recruitment. Our clear priority against this backdrop is to trade the business on a week-to-week basis, and our teams across the country are focused on driving reservations and future revenues. Our operating costs, in any event, are under constant review, and we will adjust our cost base as necessary. We also need to keep in mind that the long-term fundamentals remain strong. We face a continued supply demand imbalance across the country. The mortgage lenders have an appetite to lend, and our homes have clear advantages for our customers, most notably around energy efficiency and the ability to drive down running costs and reduce carbon emissions.
Assuming we continue to see the improved reservation activity we have experienced since the start of the new calendar year, we expect to deliver between 16,500 and 17,000 total home completions in FY 23. I'm very confident that we will make the right decisions as the market evolves over the coming months to support our business performance in the short term, and also to ensure that we are fit for purpose to deliver our continued outperformance in the longer term. I will now hand over to Stephen, who will take you through our operational performance.
Thank you, David. Good morning, everyone. Today, I'll take you through the usual operational updates and then provide some additional detail around our land bank position as we manage through the market uncertainty. Our sales performance is detailed here on Slide 7. Our wholly owned reservation rate at 0.4 net private reservations per outlet per week was 44.3% below the 0.79 generated in the first half of FY 22, with reservations showing sequential weakening as we've already detailed through the half. Total average sales outlets were 7% higher at 360. Outlet growth reflected two factors. Firstly, we opened 52 new sales outlets. Secondly, the slower reservation rate has naturally extended the duration of our sales outlets.
Looking to the second half, we now expect total average sales outlets in FY 23 will be around 8% higher than the 332 average in FY 22. Turning now to completions on Slide 8. In the half, we delivered 8,626 total completions, almost 7% ahead of the prior first half. The benefit of our strong order book helped support delivering the first half, as well as the tremendous efforts of our employees, subcontractors, and supply chain partners. For the full year, reflecting our revised completion guidance, we now expect a reversal of this normal phasing with the second half now likely to generate between 48% and 49% of total home completions for the year. On pricing, our private average selling price improved by 13.6%.
Applying our analysis of like for like matching house types and sites, we estimate annual house price inflation was around 8.8%. In terms of the bridge from 8.8% to the reported 13.6% increase in the private sales price, we had a positive impact from the step up in home completions from London, and this added 3.2% and the balance related to a shift in product mix towards larger family homes in our regional operations. Our estimate of annual house price inflation at around 8.8% was also remarkably uniform across the UK. With our West, Scotland, and Southern regions ahead of the group average, and London the weaker region.
Our affordable average selling price at just over GBP 170,000 increased by 8.5%. This also reflected a shift in mix with more London completions. In the second half, we expect the affordable average selling price will move back to the average reported in FY22 at around GBP 159,000, reflecting a return to a more normal mix of anticipated completions. Our total wholly owned average selling price improved by 14.6%, reflecting the lower proportion of affordable homes at 21% of completion mix in the half compared to 23% in the prior period. This will reverse in the second half. A look at the profile of our home buyers on Slide 9. Not surprisingly, the Help to Buy share of completions has fallen materially from 21% to 16%.
This has been taken up by both an increased share from traditional private buyers at 52% as well as a significant increase in investor buyers, which grew to 8% of completions in the first half. The geographic mix of completions with increased London content was naturally one driver of increased investor share of completions. We continue to promote our homes to the private rental sector, which is likely to represent a growing share of completions, given the more uncertain market backdrop for traditional private buyers and in particular, first-time buyers. Help to Buy reservations ended on the 31st of October 2022, and as a result of the closure of the scheme in England, will only contribute to completions through to the 31st of March.
In Wales, we welcome the devolved Labour government's decision to continue Help to Buy at an enhanced price cap of GBP 300,000. Its impact will be far reduced for the group as a whole going forward. It's worth noting that whilst part exchange supported a stable share of completions at 3%, this share is expected to increase. Barratt pioneered part exchange more than 50 years ago. It's an important sales tool when the wider market slows and is used in a controlled and disciplined way. Part exchange was typically 15%-16% of our completion mix in the three years preceding Help to Buy. We expect it will grow towards this historic norm over the next couple of years.
Now turning to Slide 10, I want to update you on our build performance, customer service, and build quality. On build, our teams have done a tremendous job in the first half. We began the year looking to grow our construction output to meet our customer commitments, we constructed 365 equivalent homes per week in the first quarter, more than 10% ahead of the same period in FY 22. Reflecting the changes in the market in late September, our site-based teams moved quickly to adjust construction activity through the second quarter. Through careful management of build programs and material supply scheduling, helped by our strong supplier relationships, we managed to slow construction output by almost 14% year-on-year in the second quarter to 302 equivalent homes and 333 for the first half of FY2 3.
Across the half, total legal completions equated to an average of 332 per week. Whilst the value of WIP has increased, which Mike will cover, this is a reflection of build cost inflation rather than volume on the ground. On HBF customer satisfaction scoring, building on our 13-year record, I can report we remain comfortably 5-star year to date. The one area where our performance dipped in calendar 2022, and where we need to improve, was our injury incidence rate, which increased in the year to 301. Whilst the increase centered on minor slips and trips, we are challenging all our divisions to find new ways to change behaviors. We've also recently engaged with our employees to help instigate further targeted plans to drive our injury incidence rate lower.
The 2022 NHBC Pride in the Job Awards program concluded in January. Back in the autumn, at the regional awards, our site managers secured 34 Seals of Excellence, as well as five of the nine regional awards. In January, our site manager at Doseley Park in our Mercia division was named supreme winner in the large builder category, and Barratt has secured this award in six of the last eight years. Industry-leading build quality was maintained throughout calendar 2022. We consistently ranked first amongst the major house builders group with average Reportable Items, RIs, at 0.16, the most frequent and independent measurement of build quality. Looking ahead, we are aiming to align construction activity with reservations as they evolve over the coming months to ensure we maintain an efficient but responsive build position on our sites and on our balance sheet.
Turning now to Slide 11 and build cost inflation. Here you have the usual breakdown of our costs on the left. As a reminder, based on delivery of a 23% gross margin in line with our land acquisition target and a 19% operating margin. On total build cost inflation, our view for FY 23 has not changed, with inflation estimated at between 9% and 10%. Our centralized procurement teams have been particularly busy managing the slowdown in material scheduling to sites, and they continue to manage around 90% of our build materials from foundation level to finishing trades across our standard house type ranges. On material pricing, we still see upward pressure on a number of materials, with energy and labor being the ongoing cost pressure for our suppliers. Rates of increase have slowed considerably from those we've been experiencing over the past 18 months.
We have seen deflation in timber products, particularly CLS, our Canadian Lumber Standard. In steel-related products, we're seeing prices broadly held and in products using plastics, price escalation is now single-digit. Again, rates of inflation have slowed. Looking at labor costs. As you'd expect, we are seeing some signs of softening, particularly in trades at the front end of new site development where activity is clearly declining. Subcontractors, reflecting their desire to secure future workload, are becoming more flexible and we do expect in a number of new-build-dominated trades like ground workers and bricklayers to see some further softening in labor rates.
We still see 9%-10% as very much the range for our total build cost inflation in the current year, and we'll have a clearer view on FY 24 with our May update. Turning now to our land bank on Slide 12. As you're aware, we've pulled back from almost all our land buying activity and reported negative net approvals in the half of 290 plots. Reflecting both growth in completions and the pause in our land buying activity, our owned and controlled land bank however remains strong at four point four years supply. In contrast, our strategic land bank has grown and now sits at 16,221 acres. This we believe can unlock some 93,600 plots in the coming years.
We also hold almost 94,000 promotional plots through Gladman. We now expect minimal land approvals in FY23, reflecting current market conditions. Given our pause in land approvals and land buying, I wanted to lay out our thinking around our land bank position, its length, and what this may mean in different scenarios looking forward. This is charted here in Slide 13. The sustainable reservation rate for both ourselves and the industry remains uncertain with the end of Help to Buy and the resulting deposit constraints for first-time buyers, along with mortgage availability and wider affordability constraints. To provide a range, we've modeled reservations and completions on steady-state scenarios at either 0.4 or 0.6 private sales per site per week, and assume no further land buying, almost equidistant from our latest rate at 0.49.
You can see, in the upbeat scenario at 0.6, we still hold four years of land supply at the end of FY24, and arguably only need to consider land buying some 12 months from now. On the downbeat scenario, at 0.4, we will see our trailing landbank length extend well above our target with six and a half years and five and a half year s respectively at the end of FY24 and FY25. Where we do have specific divisions operating with more constrained landbank positions, we have the ability to transfer sites between adjacent divisions, given our nationwide coverage, to ensure adequate landbank supply. Alternatively, we can also look at the potential drawdown of strategic landbank plots into our current landbank, where planning and site purchase makes commercial sense.
We are monitoring both the new build housing market and land market on a weekly basis, but we certainly do not have any operational pressure to step back into the land market. To summarize on Slide 14, we have delivered an excellent operating performance in the first half in terms of both managing our construction activity quarter by quarter and delivering strong home completion growth. Our customer satisfaction and build quality continue to lead amongst industry majors. The health and safety of anyone with whom we interact is always our first priority, and we are redoubling our efforts as well as seeking out employees' input for further targeted actions. Build cost inflation remains a challenge, but we are seeing inflationary pressures easing, most notably in labor-related costs and specific areas in build materials.
Whilst we've paused our land buying, we feel under no pressure to resume land purchases given our current land bank position, the plot drawdown potential from our growing strategic land bank, our site pipeline, and the uncertainties faced. The coming months will see some degree of balance established between a sustainable private reservation rate for the industry and new home pricing. Until this becomes clearer, we will look to optimize our existing land banks. Finally, we have an incredibly strong management team steeped in house building experience, whom I have no doubt will make the right operational decisions as we manage through the months ahead. Thank you, everyone. With that, I'll hand over to Mike.
Thanks, Stephen. Morning, everybody. Let me take you through some of the key aspects of our financial performance in the half. A look at the numbers on Slide 16, and they show that we've delivered a strong financial performance in the first half as we work through the order book that we had in place at the end of last year. Group revenue was GBP 2.8 billion, up 23.9%, driven by both the volume and pricing improvements touched on by Stephen earlier. Adjusted Gross Profit was GBP 648 million, up 15.2% on H1 2022. Our Adjusted Gross Margin was 170 basis points lower at 23.3%, partly reflecting the very strong margin delivered last year and as we guided more in line with our medium-term target.
Adjusted OperatingP rofit was GBP 512 million, 13.8% ahead of the prior year, with the Adjusted Operating Margin at 18.4%. Administrative expenses were GBP 22 million higher than last year. I'll come back to that in more detail in a few minutes. Our H1 results include adjusted items, mainly relating to our reinforced concrete frame review. That totals GBP 20 million due to updated costings and some changes in the scope of that review. Adjusted EPS was 39.2 pence. That's 9.2% ahead of the 35.9 pence we delivered last year. Based on our dividend policy of cover of 2x adjusted earnings, we'll pay a dividend of 10.2 pence for the first half.
That's in line with our recent practice of paying 30% of the dividend in the first half based on full year consensus adjusted earnings. Our balance sheet remains very strong, and we closed the half with a net cash position of GBP 969 million. Finally, our return on capital saw a significant improvement to 29.6%, reflecting both tight working capital control and the increase in profits delivered in the half. Moving on to Slide 17, this is a familiar slide and breaks down the movements in our Adjusted Operating Margin. You can see here the impact of our 7.7% volume growth, which contributed 40 basis points to margin in the half.
The impact of net inflation contributed a further 40 basis points with sales price inflation at 8.8%, more than offsetting total build cost inflation at around 10%. Our London developments equated to 12% of completions in the half, compared to only 3% last year. This reduced margin by 70 basis points, as some of these completions came from developments that we'd previously impaired. We saw a further reduction of 80 basis points from other costs, which largely arose from increased sales and marketing expenditure and some abortive land costs as we made proactive decisions on land buying, given market conditions. Finally, increased administrative expenses reduced the operating margin by 90 basis points. With these and a combination of mix and other smaller movements, we delivered H1 adjusted operating margin of 18.4%.
Moving on to Slide 18, we've broken out some of the key components of the administrative expenses and the adjusted items. Administrative expenses increased by GBP 22.4 million to GBP 136.9 million in the half. Around a third of this increase relates to the incremental costs of Gladman, which we acquired in the second half last year, including amortization costs. The operating costs of our dedicated building safety unit increased by around GBP 6 million as we increased activity on the remediation of historical buildings. Our people costs increased by around GBP 10 million, reflecting an increase in headcount, the 5% salary increase that we announced in April, and the GBP 1,000 cost of living supplement that we announced for all of our employees below senior management level. This was offset by some reductions in forecast incentive payments.
We also incurred additional costs related to the new divisions that we announced in Sheffield and Anglia. They became operational in the second half of the prior year. Looking forward to the full year, we now expect total administrative costs of around GBP 285 million, reflecting lower incentive payments in line with expected performance and some reduction in headcount coming from our recruitment freeze. As I mentioned earlier, we incurred a further GBP 20 million charge in adjusted items, predominantly related to reinforced concrete frame remediation costs. Moving on now to our cash flow on Slide 19. This chart highlights the strength of our operating cash generation in the half. If I take you through the detail from left to right, starting with operating profit of GBP 494.2 million.
We invested GBP 144 million in WIP and part exchange properties, reflecting the increase in active outlets, and as Stephen said, the impact of build cost inflation. We've broken out the net land spend in more detail, and you'll see that cash land spend in the half was GBP 440 million, driven by the payment of land creditors and land approvals from the previous year, which we moved through to completion in the half. We made interest in tax payments of GBP 109 million, which together with some other small net movements, resulted in GBP 210 million being generated from operations. This cash flow performance means that our balance sheet is well placed as we head into a more uncertain market in the rest of the year.
We invested GBP 20 million in our new timber frame facility in Derby, and after the payment of GBP 260 million in dividends and buying back shares worth GBP 100.5 million, we saw a net cash outflow of GBP 169.5 million in the half. Looking forward, we now expect cash land spend of between GBP 900 million and GBP 1 billion for the full year, and expect a closing net cash balance of around GBP 800 million-GBP 900 million. If I turn now to the balance sheet on Slide 20 and some of the notable changes. First of all, our gross land bank has decreased by GBP 86 million since June, and that really reflects land consumed in completions and the pause in land buying activity.
Land creditors have decreased by GBP 111 million, again reflecting payments made in the half of GBP 222 million and lower levels of land activity. Our work in progress was GBP 126 million higher than the end of last year. Again, that was mainly driven by build cost inflation and a modest increase in outlet numbers. We're moving to align the build rate to lower sales rates during the second half, but that will take a little bit of time to be reflected in the balance sheet. Gladman's work in progress has remained broadly flat, with activity slowing due to reduced activity in the land market at large. The net cash movement I've already covered, and the reduction in trade payables essentially reflects the reduction in build activity on site.
Finally, our legacy property provisions increased by GBP 5.8 million, with the GBP 20 million additional provision offset by spend incurred during the half. Our net asset position at the end of December was GBP 5.7 billion, and that's up GBP 25 million over the six months, with our retained profit offset by the impact of dividend and the share buyback. We've had quite a lot of questions over recent months about the land bank, and in particular, the portfolio impairment risk as house prices begin to fall, as well as the distribution of gross margin across our developments. We put a new slide in here at 21 to give you some additional color on that land bank and the distribution of margin.
As you would expect, the profile is a relatively normal distribution across the portfolio. You can see that around 80% of the owned landbank plots are carried with an estimated gross margin in excess of 20%. Just 5% of our plots are carried with an estimated gross margin of 15% or less. The estimated gross margin across the whole landbank was in excess of our target level of 23% at the end of the H1. In the context of the carrying value of the gross landbank at GBP 3.2 billion, we believe the impairment risk to be relatively low. For example, a 5% fall in house prices would generate an impairment cost of around GBP 16 million, and that's only 0.5% of the carrying value of the landbank.
If I can move on to Slide 22. Our business remains focused on some very clear operating guide rails, which you'll be familiar with and we've set out again here on Slide 22. The operating framework drives discipline in the business, and it's helped us to deliver our strong financial performance this H1, whilst retaining the financial strength and flexibility to react to challenges and opportunities in the market. Our landbank has moved more in line with the framework, reflecting the pullback from additional land buying in the face of the more challenging backdrop. This is also seen the land creditor level reduced further to 19.1% at the end of December. Depending on reservation activity and resulting completions looking forward, as Stephen highlighted, our landbank length is likely to extend further in the near term.
As already discussed, the business remains in a strong position with a healthy cash balance and a total indebtedness net surplus of nearly GBP 350 million at the H1. During the half, we also extended our GBP 700 million revolving credit facility out to November 2027, with two further one-year extensions to November 2029, if agreed between the group and our lenders. We're also pleased that this extended RCF now includes annually verified sustainability linked performance measures which align with our Building Sustainably strategy. Just to move on to some changes to guidance for FY23, and we've detailed those on the slide. Based on current trading levels and assuming a normal uplift in the spring selling season, we now expect to deliver between 16,500 and 17,000 total home completions for the year.
The affordable share of our wholly owned completion mix is expected to be around 24%, with fewer private completions expected to be delivered. Alongside a successful sales outlet opening program, the slowdown in our reservation rate is extending the average life of our sales outlets. As a result, average outlets for the year are now expected to be around 8% higher than FY 22 at around 360. Our guidance on admin expenses has reduced, as I mentioned earlier, and we now expect our net interest costs to be lower as well at around GBP 20 million, with some benefit coming from the higher interest rate on our cash balances. As I mentioned also earlier, we now expect net cash to end the year at around GBP 800 million-GBP 900 million.
As we said earlier, we intend to recommence the share buyback shortly as we exit the closed period today. Now, this guidance is clearly dependent on how the market evolves over the coming few months, and as David touched on, we'll continue to monitor the market closely and react to those circumstances accordingly. Just to summarize on Slide 24, our business delivered a strong financial performance in the first half, supported by the order book entering the year, and excellent execution on build. We're in a very robust financial position with just under GBP 1 billion of net cash balances at the H1 and GBP 700 million of undrawn facilities secured through to at least 2027. We also have a strong landbank with limited exposure to house price declines should they materialize over the months ahead.
We continue to monitor market conditions closely and have a range of detailed action plans to manage our operations and cost base as the market evolves over the coming months. Thank you, and I'll now hand back to David.
Thanks, Mike. Thanks very much, Mike. Turning now to the market fundamentals, the long term undersupply of housing across the country is clearly significant. Whilst successive governments have put increased house building and home ownership at the center of their policy agenda, the planning system, in particular, has meant that the fundamental challenge of inadequate housing supply still remains. Consumer confidence remains low, but does appear to be stabilizing. As Stephen has outlined, we have essentially paused all land approvals. The land market is now in a period of hiatus, running parallel to a more uncertain planning backdrop, which I will come back to in a moment. On the mortgage market backdrop, the next slide will give some additional flavor. Here are the charts that you've seen before.
On the left from Halifax, showing the proportion of average post-tax income spent on monthly mortgage interest and capital payments. The affordability of mortgages following recent rate rises has been impacted and is now around 42% of post-tax earnings. Overall mortgage lending has been more disciplined in recent years, particularly around mortgage qualification and affordability testing. Mortgage payments today also carry a higher capital repayment, which is reducing the gearing effect of interest rate increases. We can clearly see that affordability has become a constraint for home buyers, in particular for first-time buyers. On the right-hand side of this slide, this chart details average mortgage rates at 85% and 95% loan-to-value from February 2022. Few things just to draw out.
I mean, first of all, the dramatic increase in mortgage rates from September through to November 2022, along with a moderation in mortgage rates since then. You can also see that the spread between the 85% and 95% loan-to-value lending, which tightened through to October, which helped higher loan-to-value borrowers, that has since widened again. This spread is something that we are monitoring as it creates affordability challenges for first-time buyers, but it does also offer scope for further improvement. Looking in more detail at planning and the land market, this slide shows planning consents and net new build additions in England alongside the Savills Greenfield Development Land Index. Planning consents on an annual basis, the light green line, have remained ahead of new build additions.
As you can see here, annualized consents peaked in June 2021 and are running some 15% below this level through to September 2022. nutrient neutrality remains a significant issue and is blocking planning on many sites across 74 local planning authorities. We are monitoring the planning situation closely, particularly with the government progressing the Levelling-up and Regeneration Bill, as well as the proposed changes to the planning system. Whilst consented land supply and supply chain capacity are unlikely to be constraining factors on the industry in the coming months, in the medium and longer term, consented land supply will become a constraining factor if it is not addressed effectively by government. It will become a significant constraint on future housebuilding activity, home ownership, and the country's economic growth. Turning to our pillars around sustainability.
Around people, I'm pleased to report that we've extended our cost of living support to all of our employees below senior management level for a second six months. We have also introduced enhanced family-friendly policies which have extended maternity, paternity, and carer leave. These measures all help us to develop, support, and retain a more diverse workforce. Around places, we are ready for the full adoption of new building standards across all of our developments, which will come into full effect from mid-June. We have also launched our Energy House project and more on this in a moment. With regard to nature, our recognition on CDP Climate Change A List is the standout in the period, a first for a UK house builder.
I'm pleased to confirm that all of our developments are now submitting planning applications seeking to deliver biodiversity net gain of at least 10%, well ahead of the legislation coming into force in November. Moving on to the Energy House 2.0 project. Our aim with this project is to ensure that our zero carbon home designs are future-proofed for climate change while cutting energy and water usage for our homeowners. This is a partnership with the University of Salford and Saint-Gobain, and is a further milestone in our research and development of zero carbon homes, which we are going to be building as we move into the next decade. The Energy House chamber allows our teams and our partners to test the effects of climate change.
We are testing across a range of temperatures and climatic conditions from minus 20 degrees to 40 degrees centigrade, all of which can be created within a 24-hour time frame, along with a simulation of wind, snow, rain, and sun. We are pushing boundaries and we're getting our whole business and our supply chain focused on the transition to net zero. As Stephen have, and Mike have outlined, and we've previously discussed, we have a strong investment proposition. We aim to operate with one of the shortest land banks in the industry. We view land as a raw material on which to build homes for our customers, and we have no desire to hold more land than our business requires. This improves our return on capital employed and reduces our risk profile.
Reflecting our existing land bank, we are clearly under no pressure to resume land buying, and we can see how the market evolves. We have an incredibly strong balance sheet, and through disciplined operational controls, we are highly cash generative. We have strong management teams throughout the group who have the experience to manage through these more uncertain times. We also lead the industry on customer service and build quality. We operate across the country, building all product types and appealing to all buyer types. Finally, we lead the industry on sustainability because we understand how important this is for both our business operations and for all of our stakeholders. These attributes put us in a very strong position to support our business performance, both in the short term and to ensure that we can continue to outperform in the long term.
In conclusion, we have delivered a fantastic operational and financial performance in the first half. We have to recognize that this was against a very challenging reservation backdrop for our future sales. Our reservations have shown a pleasing uplift since the start of January, helped by relative political and economic stability, the tempering of energy cost expectations, as well as the introduction of more competitive mortgage rates. The sustainability of this recovery does, though, remain uncertain, particularly with respect to the continued challenges faced by first time buyers. You can see that we are in a robust financial position with substantial net cash. We have a really excellent land bank, and we are trading the business week- to- week as the market finds its level, and we are focused on driving our reservations and our future revenues.
We have stepped away from the land market and placed a temporary freeze in recruitment, and we know the future levers to pull. We clearly have an experienced management team, and we will make the right decisions and take the right actions as the market evolves over the coming months. We're going to ensure that we're supporting our business performance, both in the short and long term. Thank you very much, and we'll now be happy to move on to questions. I think the mics are going to come round, and if you could just shout out your name and so on for the webcast, that would be helpful.
Yes. It's Cedar Ekblom from Morgan Stanley. I've just got a couple of questions. When you comment around an improvement in sales rates from here, when you think about your volume guidance for the full year, can you give us a little bit of context around what kind of improvement you're thinking about? Secondly, can you talk a little bit about incentives and when it comes to headline price reductions, how you're thinking about that and squaring that off with obviously the volume impacts of not moving house prices sooner? Thank you.
Okay. So if I start off in terms of incentives and just how we're thinking about that and more generally pricing, and then Mike can pick up in terms of sales rates and what underlies the guidance that we're giving. I think we touched on this in January, that if you looked at the, say, the six months through to June 2022, we would have been running incentives at around 2%-3% as a sort of incentive level. That would obviously vary across the country, but at a group level, around 2%-3%. We're now seeing incentive levels at around 5%-6%.
The reality is that there is a limit to the amount of incentives that can be used because the mortgage lenders understandably will only allow a certain amount of incentive to be used, so around 5% being the limit. Therefore, once incentive levels move beyond 5%-6%, you've got to see a reduction in the headline price. I would say if you look over the last three or four months, there has been relatively little reduction in headline price. That's not to say there's been no reduction, but relatively little reduction in headline price. I think there's two drivers there. One is that there's no point in reducing headline price if the customer is not going to convert.
As we came through the final quarter, there was just an absence of conversion, and we saw very, very low sales rates. So that's the first point. The second point is, I think we've just got to see where is the equilibrium, absent reductions in headline price, so by pushing incentives. We've seen a pleasing uplift in January. I mean, I've emphasized that it's very early days. That trading between volume and price is gonna carry on as we move through February and March. We would hope that over the first quarter, we can establish some sort of equilibrium in terms of volume.
Just picking up on the volume guidance here. Normally, when we look at sales rates, and we talk about the spring selling uplift, historically, if you look back, that's worth about 0.2 on the sales rate from the exit of 1 calendar year into the spring. Where we were at 0.3 at the end of last year, you'd expect that to come up to, you know, broadly 0.5. We said in January that that 0.5 would be enough to allow us to maintain guidance. What we've seen in January at 0.49, actually, some of those sales are now for FY24, the reported sales rate isn't all for completions in this coming year. We've just trimmed the guidance very slightly to reflect that.
You know, we would expect a normal spring uplift to deliver somewhere around 0.5.
Thank you. Gregor Kuglitsch from UBS. I've got a few questions. If we could go back to Slide 13. I mean, maybe I'm over-interpreting this, but you seem to implicitly guiding in the footnote there to further 8% site growth in 2024, if my math is correct. Wanted to confirm that. Then the math, I guess, based on that range, just to be clear, is basically between 10,000 and 15,000. Obviously a wide range, but 10,000 and 15,000 wholly-owned completions for 2024, I guess, is the implied number I get to. Maybe just a clarification question.
Related to that, the land bank length, I think the slide shows including your pipeline or the controlled plots, whereas the target of 3.5 is just wholly-owned . I just want to make sure that we're squaring or that's consistent, please. Maybe moving on to Slide 21, where you sort of helpfully talk about the impairment. Can you just give us, I'm sure you've done it, but it's not here. What would that number be, let's say if house prices dropped 10%? I mean, obviously it's not linear. Presume it's exponential. If you could just give us a steer there, please. The final question is, you're saying your land bank gross margin is 23.5% as of December.
For clarification's sake, does that already include sort of the incremental incentives that have taken place in calendar 23, or is that sort of the position you were in at the end of the period? To just give us a sense where in reality, sort of at spot things are trading, please. Thank you.
Thanks, Gregor. The small print is generally exclusions. You don't need to read the small print. Okay. Maybe, look, if I just try and pick those off, and if you don't feel we've covered it then, just come back. I think we've said that we do expect site numbers to grow. You know, I think around that 8% growth we're expecting in site numbers, that's what we're guiding for average site numbers in terms of growth.
A year further. That's for this year. This one is for FY, just two times eight.
I think we're just guiding at eight presently, so one times eight.
Yeah.
We'll come back on the small print for the further year. I mean, in terms of the land bank depth, I mean, 3 and a half is we've always said that, you know, that's our kinda target depth in terms of the land bank. The JV side of it, I think is less important. There's far less in the JVs now than there have been historically. Michael will talk in a moment about the impairment. In terms of the view of gross margin in the land bank, I mean, we're updating valuations on an ongoing basis. There's a regular cycle in terms of valuation updates.
It will reflect what's happening in terms of incentives, and that, and that will just continue to be updated as we move forward.
Yeah, just on the impairment risk, Gregor. I mean, you're right, there would be slightly, it's not entirely linear between 5 and 10, so there would be more to come. We're not sort of detailing exactly where we are, otherwise we'd end up giving you the whole margin of each of the plots, but it's not entirely linear. Just on the guidance on 2024, I think just to be clear, we're not really guiding anything for 2024 at this point, I think because we want to see how things develop through February, March. We'll come back at the update in May with some more guidance on where we think things will go for 2024.
Thank. Will Jones from Redburn. I'll try three as well, please. I'm sorry to be short term, if we just look at the pattern through January and early Feb, has it been following the usual seasonal?
Trends, I guess, building through the weeks, or would you describe it as a bit more bumpy underlying week- to- week? I just wonder if there's a, if there's a trend there or not. Just to be totally clear on incentives, the 5%-6%, was that a level you'd reached at the end of last year, and that's still the case today rather than it building up to 5%-6% through January? Second, just, bigger picture around sales rates. Appreciate you managing week- to- week at the moment, but when you think about Barratt, the business on a annualized basis, what would be the minimum sales rate, I guess, you'd hope to achieve over time? I know we've had, always had 0.7 in our mind, but perhaps that's been flattered by Help to Buy and other stuff.
Would you be happy at 0.6, theoretically, for example? Just the last one was around labor. You mentioned the gains made on some of the early trades around groundworkers and bricklayers. Could you put any numbers around that? Is there any reason to think that the later trades wouldn't follow the same pattern as when you get there? Thanks.
Okay. Will, thank you. I think that was about five questions. Stephen will pick up in terms of labor and talk through on the labor rates. If I just talk through briefly in terms of what we've seen. I mean, I think we're reluctant to really start to get into further segmentation of a four-week period. I think I'd be comfortable to say that the four-week period was broadly stable, so it wasn't the case that it started very weak and grew. I would say it was broadly stable. Actually, we saw the 11 or 12-week period up to December, where we traded at 0.3, was kind of broadly stable. We weren't seeing dramatic movements on a week-to-week basis.
In terms of the incentive levels and saying that we were moving from 2 to 3 to 5 to 6, the reality is that has been a gradual progression in terms of incentive levels. We have particularly in the period around about November and then again in January, we've launched consumer offers, which have increased the incentive levels. I think we are at a point where, as I touched on, there's not a huge amount more we can do in terms of those incentive levels. In terms of sales rates, we touched on this a little bit in January.
I think if we were just asked the question about what have we seen as being long-run averages, you know, if you're looking over a 10 or 15-year period, and whether that's pre-2008 or post-2008, something like 0.6-0.65, I think you could say was a long-run average. We saw post-2008, which I think we touched on in January, that we saw a 5-year period where although there was quite a bit of volatility over a 5-year period, we averaged 0.5. The reality is that we're pleased with what we've seen in January, which gets us to almost 0.5, but we would certainly be aspiring to something that would be more like 0.6 or 0.65 as, you know, somewhere to settle. We've just got to see what there is in the market. Stephen?
Yeah. Morning, Will. In terms of labor, it's something we've seen these last sort of four, five weeks since Christmas, where we've seen trades keener to secure long-term work. You have to bear in mind some of these sort of trades in the last couple years have had 30%, 40% cost increases in terms of particularly the bricklayers. On those trades, we are starting to see reductions. We're also seeing reductions, as you say, on groundworkers, typically sort of 5%-10% where they're renegotiating current phases to maintain continuity. Probably the other trades haven't had as much of an increase in the last couple of years as those two particular trades. We'll have to see what happens in the next couple of months.
I guess as work reduces, workload reduces, and we've reduced our headcount on site from about 20,000 to about 15,000 now. We expect to see further reductions coming through. That's how it's working out at the moment.
Glynis.
I'm gonna be sneaky. Glynis Johnson, Jefferies. Three, if I may, but with a Will all sorts of number of parts. Firstly, just in terms of delivery for full year 2024 and how you're thinking about strategy, given what you're seeing in terms of the private selling rate, will we see a pickup in terms of social delivery? Can you do that without, you know, opening new sites? Are we gonna see more bulk sales? Particularly with the investors you talk about, are they bulk sales or are they individuals who are spending their pension pots? First question.
Second question in terms of land strategy, again, if you can just give us a little bit more color, given what Gove has done in terms of planning targets and how that might impact planning in the South, will we see you come back into the Southern market before we see you come in elsewhere? Strategic conversions, are they dependent on planning, or do you control when they might come through? I'm just truly trying to understand when you will, you know, how you'll think about when you come back into the market and how. Lastly, in terms of part exchange, forgive me, I didn't know that you pioneered it. Can you tell us a little bit more about it, though? 'Cause if it is gonna get to 15%-16%, it's renowned as being the most expensive of the incentives.
How should we be judging you on it? Is it about the turn of the asset? Is there about a certain price that we need to see you be buying those homes off the customers? A little bit more color would be super helpful.
Okay. If I just try to walk through those, and then I'll pass over on part exchange to Stephen. First of all, in terms of delivery, you know, I said and Stephen touched on it that it's probably very obvious, but as a business, we're just hugely focused on what we can do to drive reservations and what we can do to drive revenues. I understand broadly, but not the same thing as your question goes to. In terms of reservations, I think we've talked about incentives and finding equilibrium in the market, and so on, and naturally our private sales. We are absolutely looking at whether we can deliver more affordable housing across our sites. Something that we saw happen in 2008, 2009.
I think it's possible, we're exploring that. In terms of PRS, we announced last year that we had signed an agreement with Citra Living, Citra Living being Lloyds Banking Group subsidiary. Therefore, in any event, we were doing more PRS, and we see an opportunity for PRS. This is not really for apartments. It's more for single-family housing, is where the focus on the market is. In terms of the investor buyer, there are always going to be investor buyers out there, but not I sense in the way that there was in 2008, 2009. I think the tax changes for individuals just mean it isn't such an attractive proposition. I think our captioning of investor is investor/PRS.
I think most of that will come through on the PRS side of things. In terms of FY 24 volumes, I mean, I think when we come back in May, we will give a little bit more thought in terms of guidance for FY 24 volumes, because we should have a better feel as to what the other delivery in terms of affordable PRS could potentially be. In terms of land strategy, I mean, I think really just two comments on that. One, that we are really very much out of the market in terms of transactions just now. Clearly, our land teams are staying very close to the market. They're looking at strategic land. They're looking at replanning. The other area that Stephen's been driving through is our ability to dual brand.
To go back over sites and say, "Well, actually, on balance, we can carve out part of this site to be David Wilson," or, "We can carve out part of this site to be Barratt." I think we still have potential to create sites through that process. I think beyond that on land strategy, I wouldn't really say much more. I think we would rather just continue to review it and decide on our own strategy. Just on part exchange, before I pass over to Stephen, I mean, this has changed a little because when we ran Help to Buy and the second home buyer was allowed to use Help to Buy, you couldn't combine part exchange with Help to Buy. part exchange was something that really dropped out the market almost entirely for a period of time.
Part exchange is a very, very important tool for the housebuilders, particularly absent Help to Buy, because it allows us to compete very effectively with the second-hand market. I mean, the second-hand market is our biggest competitor. Most people buy homes in the second-hand market. They don't buy new build. It allows us to offer the consumer a much more seamless experience in terms of selling their home and buying one of our homes. I think it's a powerful tool. It has generally been set up on a no profit, no loss basis. you know, that's the way that we feel the model should operate is somewhere close to breakeven. Stephen, do you want to just.
Yeah. Yeah. Yep. Certainly we've used part exchange for many years, particularly in times when the market's tougher. It's one of the many tools we use. You know, there's various tools suit different purchaser types. If you've got someone wanting to trade up, then part exchange is the ideal tool where they're able to move pretty quickly. Typically, we buy on a eight to 10 week sale price, which is determined by two independent valuations. We don't buy at more than 70% of the new price. There's also a minimum 30% differential. If you look at that sort of that rate, it tends to give us about a 5% incentive cost. If there's part exchange, then there's no other incentives.
There wouldn't be a, sort of, bills paid or a mortgage subsidy. It's part exchange, and that's it. The business is pretty, you know, used to dealing with part exchange and successfully trades throughout the part exchange. We've got, you know, the mechanisms in place to monitor and the disciplines in place to regulate the intake. We're quite happy to use that tool. It's been successfully used in the past. As I said, I think typically we'd be about up to 20% of our reservations were part exchange, and we're happy to sort of turn that dial back up to increase our sales rates.
Okay, thanks, Stephen.
Thank you. Clyde Lewis at Peel Hunt. I think three again, if I may. Firstly, on finished stock, I mean, I'm expecting we're gonna start to see some increasing numbers there. If you can maybe just help us a little bit as to what sort of scale we might see coming through over the next six to 12 months. Second one coming back to, again, the sort of January commentary that you've made, it'd be really useful to sort of understand a little bit more about how much variation there has been between the first-time buyer, so typical sales rate and, you know, the trade-uppers versus the sort of bigger properties. It'd be useful to understand the differences there. The last one was on, I suppose the regional offices.
You've talked about, David, I think you mentioned do you know what to do if things get tougher? I suppose how close are you in terms of sort of starting maybe to trim some of those regional offices, you know, when you look at the overheads and the sort of structure of the business?
Okay. Clyde, thank you. I think on finished stock, we'll pass that over to Stephen, just to talk about it generally. The only thing I would say on finished stock is that you would recognize that in June 2022 as an example, we would have been at incredibly low levels of stock. There's gonna be some sort of normalization of stock levels for sure. In terms of January, all buyer types in the market are down on a year-on-year basis apart from investors. I mean, the reality is that there are buyer types, whether you're a second-time buyer or a first-time buyer, we've got less of them. We were seeing in January we're 45% down on a year-on-year basis.
Predominantly, it is first-time buyers who have been impacted. I think when you look at the way the mortgage costs have risen and the availability of high loan-to-values, then you can understand why the first-time buyer has been most impacted, and we're obviously trading without Help to Buy, so that's going to impact on the first-time buyer. In terms of the trends across the country, I mean, I would say broadly London and the South East is weaker than the rest of the country, and I think that's primarily driven from the affordability equation. You know, when we were putting up the affordability chart on Halifax in the presentation, and I do understand that, you know, that chart has some limitations. It's based on single income and so on.
The reality is whatever that chart says on a national basis, it's clearly much more extreme in terms of London and the South East. I think affordability is a big part of the challenge there. In terms of the cost side of the equation, look, we understand our cost base, obviously. We understand the cost components. The reality is that much better that our principal focus is in terms of revenues. You know, finding this equilibrium and what is possible in terms of private sales, PRS, affordable, looking at all of those revenue avenues is a much better thing for us to do. It's our principal area of focus, and we're not concentrating in terms of what levers we should pull on cost at this point in time.
I think it's right that we should at least get a quarter of trading under our belts and then understand where we go from there. Stephen, do you want to pick up in terms of finished stock?
Yeah. Okay, yeah. In terms of finished stock and advanced build-up, you know, we've been saying for the last few years, clearly we haven't had any so to speak, and personally, I quite welcome having some stock and some advanced build, which enables our purchasers to move sooner. In some cases, we lose out buys because we don't have advanced build to sell. The process we work to in every division on every site is we regulate the amount of unsold units we have on any site. There's a maxima that can work to in terms of any unsold stock houses. There's a maxima in terms of any units we take beyond roof, and there's a maxima in terms of how many unsold units in progress they can have on any site. All that is controlled by our regional managing directors.
We see the stock and roof to complete element increasing, which will help our sales rate. We don't see a massive problem in terms of being out of control in terms of stock or unsold work in progress. We'll just slow down construction effectively.
Hi, Sam Cullen from Berenberg. Just jump in on 2 more, 2 clarifications really. In terms of the January trading and the pickup in reservation rates, what's changed? Is that more visits and similar conversion rates, or are you seeing an increase in conversion than you saw in December? If you are seeing more conversion rates, kind of what's driving that? Is it just confidence improving? Is it rates coming back, what you're feeling is there? Then secondly, just a clarification really on the, on slide 21, again, the kind of impairment risk. You say a further 5% fall in house prices. Obviously, yours are going up. What's that starting point, I guess?
Are we looking at kind of peak to trough, kind of August or September, whenever it was last year that the national indices peaked or 5% from where we stand now in terms of your prices?
Okay. Sam, thanks. Mike will pick up in terms of the impairment slide, 2021. In terms of January trading, I think really in a nutshell, it's about better conversion. You know, that's really the bottom line. I think for the consumer, the position has changed quite substantially since the end of October. The reality is that we've seen a situation where interest rates spiked dramatically, and the banks have reduced interest rates clearly at different times, but broadly during December and January. That's a positive position.
You know, we saw the two-year fix peak at around 6.9% and then dropping back down to maybe 5.5%, 5.6%. I mean, that's some quite big movements in a short period of time. I think the outlook in terms of cost of living and energy costs has perhaps tempered a little. It's been a little bit less pessimistic. Finally, the outlook in terms of house prices, whilst in October you would have easily seen commentaries about falls in house prices of 15%-20%. I think that commentary has become again, a bit more muted. We have seen, as we've touched on, we've seen increases in incentives in new build, and overall the market has seen falls in house prices. Those falls in house prices have been relatively small.
I mean, I think the January fall was really actually closer to flat. I think it was down less than GBP 100 or something. These are small falls. I think that helps a lot in terms of consumer confidence, particularly for the first time buyer. Because the first time buyer has got challenges around affordability. I know you can't easily generalize, but a lot of first time buyers will be taking advice from parents or friends, and if they're reading a commentary that says house prices could fall 15%-20%, they're just gonna say, "Look, stay renting, stay at home." Which is obviously not good for conversion confidence. Hopefully we will see more, but more confidence in terms of conversion. We've also got to see how we trade as we move through February and March.
Just on the impairment side. I mean, all of our sites are valued on a regular basis on rotation, so they're sort of kept up to date in terms of current selling prices, current view of costs. And the chart that we put in the deck this morning is based on that view as at the 31st of December. It's got, you know, current levels of incentive, it's got our current view of pricing that we're achieving today on the sites. And it's got our current view of build cost. We're not assuming any sort of build cost savings and so on through price deflation. That's the starting point. Therefore the 5% fall in sales prices would be from what we're seeing today with current prices and incentive levels.
I think, I mean, the key takeaway for me on that slide is the strength of that land bank. You know, you have to see sales price falls well in excess of 10% before you get into, you know, really meaningful impairment. I think it's just demonstrating the strength of the land bank that sits there.
Aynsley Lammin from Investec. Just three from me as well, please. Firstly, I think saw some headlines this week that Barratt and a few of the other house builders are going to be meeting with Government. I think it was Jeremy Hunt. I don't know if that's true. Just wondered if, you know, what your sense was of how kind of concerned the Government is around the new housing market. Should we expect any kind of? Is there appetite to support it a bit further ahead, you know, in the Budget? Secondly, on the request that's been made to sign the kind of Developer Pledge into a legally binding contract. Just interested where you are with that. Is that essentially just kind of formalizing what's in the Developer Pledge? Is there any risk to provisions?
Just a quick one on the January trade-in again. Have you already seen a big increase in the Part Ex, I think, you know, from the 3% level as that moves significantly over the last four or five weeks? Thanks.
Okay. Fine. Well, I'll just talk to those. In terms of the Chancellor meeting, we had a meeting with the Chancellor on Tuesday morning. There was the HBF and a number of house builders were present. I mean, I was at the meeting on behalf of Barratt. You know, it was a relatively short meeting, and it was really to discuss current trading conditions. The Chancellor just wanted to understand trading and planning. That was the two areas that were discussed. It was a very constructive meeting, and he was on listening mode, and he was obviously there with his team. From my point of view, you know, we've had good engagement with government. We had a meeting with Michael Gove.
We had I know the housing minister has changed, but we had a couple of meetings with Lucy Frazer, one before and one after Christmas. There's been good engagement all around in government. I think they're just trying to understand what are the different drivers in the marketplace. Clearly, our main message to government is that it's the challenge on first-time buyers and on affordability. That's the main message. In terms of the contract and the Pledge, look, we've been very clear that we don't believe that leaseholders should have to pay for the remediation of buildings. We've been clear about that over a long period of time. We signed the Pledge in April 2022 with an understanding that it would be turned into a legal agreement.
For various reasons, that's taken quite some time to come to fruition. The government quite recently published the Legal Agreement in its final form. So our board will look at that Agreement in due course. Clearly, when we signed up to the Pledge, we expected to sign up to the Legal Agreement. You know, there's nothing that we are seeing in the Legal Agreement that would make us change our view in terms of provisions and what's required from a provisioning point of view. Sorry, Aynsley, can you just clarify on January trading?
Exchange been running at 3%.
Oh, you're saying, Stephen will pick that up.
Yeah, we have seen an increase in part exchange activity in January period. Certainly it's higher than 3%, as I guided in the presentation, we'd expect it to grow in the next year to sort of 18%. Yeah, one of the things I should have made clear on the part exchange, in a lot of cases, we don't actually take the units into ownership because, you know, 40% to 50% of what we sell, we sell them before legal completion. We're selling the unit while the purchaser is still in occupation. A lot don't come into ownership at all.
Is it already up to 10%?
It's sort of getting towards that level in certain parts of the country, yeah. Certainly the Southeast isn't as high as that, or London 0. It varies by region.
Thanks. Aynsley's passed it to me. It's John Fraser-Andrews, HSBC. I'll continue the trend if I may. The first one is, on that pickup, Mike, that you mentioned there that you traditionally expect a 0.2 in spring versus I think you were saying Q4. Perhaps if you could clarify that and perhaps tell us what pickup you'd normally expect January to spring. And whether in that 0.49 in January, you feel that you had some conversions of some of the pent-up demand from Q4 that didn't convert. Just to get an understanding around that is the first one. The second is, could you just set out what Gladman did in terms of sales in the period?
I imagine it wasn't a lot in the second quarter, but just what the profits were from Gladman in the first half and the outlook on those. Finally, on build cost inflation, Stephen, that's very helpful, your color there. It seems that material inflation is still coming through in this new year. So if prices hold, I assume that, and I realize you don't wanna be drawn too much on what build cost inflation is for 2024, but if prices on materials hold at their increased levels, I imagine you'll be taking some not insignificant materials inflation into 2024, certainly the first part of it anyway, offset obviously by some labor declines potentially.
Perhaps you could clarify if you're still seeing increases in materials and whether that's right, material inflation looks like it's gonna start 2024 higher than it's finished a year. Thank you.
Okay. If I just start in terms of the January position and then pass that across to Mike, and Mike will pick up in terms of Gladman's profits, and Stephen will pick up in terms of build cost inflation. I think just in terms of January trading, I mean, we, you know, we also recognize how important this is. Important for us and important for everyone looking at our business and the market.
We've said it's a pleasing uplift, but I think we've also said, look, we've got to be cautious about it because, as you touched on, there is potentially some spillover from November, December, and therefore, we want to see how we trade through in terms of February and March. Mike talked about the 0.2 as being our sort of guide, but clearly, that's been off higher levels of reservations historically. I think we've just got to be a bit cautious about what we're extrapolating forward. Therefore, really, we're just taking the 0.49 and saying, if you look at the collectible reservations, that will get us to 16 and a half, you know, 16 and a half kind of level. Mike, do you want to pick up on that and then move on to Gladman?
Yeah, sure. I think that's absolutely right, David. Not much more to add on that, to be honest. In terms of Gladman, I mean, Gladman are still, you know, active. They're still selling land to some of the smaller and medium-sized developers in particular. We said that, you know, the sort of typical run rate profit for Gladman was about GBP 20 million a year. Clearly, it's a little bit less than that at the moment, just given levels of activity in the land bank. We're not, you know, don't wanna sort of start calling that out at this stage. I think we'll, you know, we'll come back on that at the full year.
I think just in general terms with Gladman, you know, we still think that that's a very good acquisition, because as we said at the time, you know, we think it's a long-term play. We didn't buy Gladman for sort of short-term profitability. This is a much longer play into land promotion market. You can see the number of plots that, you know, that it adds, you know, to the business over the long run. I think I wouldn't be measuring the performance of Gladman in a six or a 12-month period. It's much longer life than that.
We're still very pleased and they're clearly very engaged, looking at new opportunities for land and looking at planning in particular, so that when the land market opens up, they've got, you know, the full shop window to be able to bring that land back to the market.
Yeah. Thank you.
In terms of materials for 24, I think it's a bit too early yet to start predicting what 24's gonna come out at, and, as I say, we'll come back in May on that. To give a bit of more background, whereas we were sort of seeing our sort of material suppliers only being able to give us fixed prices for certain components, a lot of components on a month-by-month basis, more recently we've seen them offering six months or even 12 months fixed prices. That is certainly a change. At the current solar prices we're agreeing. We're still seeing material cost increases in products, cement-based products, concrete roof tiles are under a lot of pressure. Plasterboard is an area of big increase, with energy related costs.
Having said that, the energy related costs aren't as high as they expected some of those costs. I think it's gas currently is around about GBP 1.60 a therm. At one time, they were expecting it to be GBP 2.53 a therm. Gas isn't as bad as that. That in turn has cascaded into the steel pricing. Steel pricing pre-Ukraine was about GBP 575 a ton. Went up to GBP 1,250 a ton. Currently, it's around about GBP 950 a ton. Before we start taking the steel in from the steel manufacturers, it takes about three months to filter through into our lintel suppliers and garage door suppliers. We won't start seeing the benefits of those for three, four months yet.
There is a lot of price movement, some going up, some coming down. A bit early to start calling it for 2024 yet. I hope that helps.
Hi, Anthony Manning from Bank of America here. Could I just ask a couple of questions on margins and what to expect going forward? Kind of looking at the buckets on your bridge, you know, how much should we expect from the London mix impact? I know you say the majority is worked through. Thinking about volumes as well as they start to come down, what's the operating deleverage effect there that we should see? Also on the net inflation, how does your comments on build cost and kind of increasing levels of Part Ex and incentives impact that? Any color you can give on what to expect with margins going forward.
Mike?
Yeah. If I pick that up, Anthony. I think when you look at margins generally, clearly there are 3 unknowns in the equation, right? The first is on what happens to sales prices in the second half. We can see pricings coming down and, you know, incentive usage going up. We need to see how that sort of unwinds. On build cost inflation, we've said we're more or less locked in on pricing for the second half. You know, Stephen said a minute ago, the outlook for 2024 is less certain. On overheads, it's going to depend on, you know, how we feel about trading and whether we take any further action on overheads beyond just the pure recruitment freeze.
I think in terms of the specific building blocks, some of that London mix effect will unwind in the second half because it is about the mix of developments that we're selling on in London. I'd expect to see some of that come back. You know, obviously in terms of operating leverage and so on, it will depend on where our revenue number ends at the end of the year, which is, you know, and I appreciate a slightly unhelpful answer. Net inflation, I think we've been quite clear on the guidance that, you know, we'd seen in the order book, we'd seen inflation of about 7%, but clearly the exit rate on that was much lower, about 3.5%. Incentive use has increased.
We just need to see how that sort of settles as we go through the spring selling season. I think we'll come back in May with, you know, more of a view of how we see that settling for this year and then how we think the evolution into 2024 will come through as well.
Okay, fine. There's quite a bit of anticipation building.
If you would like to ask a question, please signal by pressing star one on your telephone keypad. We will take the first question from Andy Murphy from Edison Research. The line is open. Now please go ahead.
Good morning, everybody. I'm gonna break with tradition and just go for a couple of questions, if I may. First of all, just thinking about Help to Buy when it was in full flow, and where you're getting to now with a combination of Part Exchange and other support for first-time buyers. At first, the Help to Buy, when you sort of net out perhaps people that were using it that perhaps didn't need it, and then you think about all the other plans you've got in place, whether, you know, net, you're in a sort of similar place in terms of the support in the market. That's my first question to think about. Secondly, interested in your Energy House, and what that means longer term.
I mean, it's a great idea, and I think, you know, the right thing to be doing. I was just thinking about the additional costs of that and whether, you know, some sort of idea of what the additional costs might be longer term given that we want to gear it up as a society, whether the market would actually take a higher price for a more efficient house.
Okay. Andy, thank you. I think I got most of that. If I just deal with both of them. In terms of Help to Buy, I mean, I think there's, you know, an important point that you raised there is that, you know, we need to go back and bear in mind that the government's view when they tapered the scheme broadly, I mean, they obviously had to generalize, and their generalization was twofold. One, they did not believe, based on the evidence that they had, that the second time buyer needed equity support to participate in the market.
Therefore, they excluded the second time buyer from 2021 and the industry continued to see strengthening sales rates. To some extent that was probably not an unreasonable proposition. The second thing they said was that they saw that the first time buyer probably did need some support, but they didn't need support at the GBP 600,000 price point. They introduced the regional caps. Again, for a period of time I think the market performed well even with the regional caps. I think net-net what we've suffered from in terms of the combination of very high or very short term increase in interest rates and Help to Buy finishing has been for the first time buyer, who clearly has struggled from an affordability perspective.
It was becoming a smaller part of our overall mix as you can see in our numbers if you track back over the last couple of years. Nonetheless it's still a significant segment, i.e., affordability challenged first time buyer. I think that is the main gap that we have now, absent Help to Buy. In terms of the Energy House, I mean it is a showcasing both the Zed House which I know some of you have visited. The Zed House at the University of Salford and the Energy House it, you know, is a showcase. We're showcasing different construction methods. We're showcasing different products from our supply chain. The publicity around it for ourselves or the University of Salford sing about is important.
The most important thing is getting the supply chain aligned in the fact that we've got to make changes to our production methodology if we're going to hit the targets for 2026 and for zero carbon homes in 2030. I feel that we have a real momentum around that. I know that energy price increases clearly are a bad thing generally, so I'm not saying that's a good thing. The reality is that the more expensive energy is the more the consumer thinks that having a low energy use home is valuable. You know just to try to sort of shorten the answer is to say that if you generalize you probably look at the consumer capitalizing things at four or 5x .
The reality is if they see the energy saving as being GBP 300 or GBP 400 a year they're clearly not prepared to pay much more for the property even if it's zero carbon and very efficient. If they see the energy savings as being we would put them now at maybe GBP 2,000 for a typical new build compared to a Victorian property, then you're starting to see some meaningful valuable, values that the customer may capitalize and the mortgage lenders may take account of within a green mortgage product. I think it's a good backdrop for the industry and certainly for Barratt to really push ahead in terms of achieving lower carbon and lower running cost homes as quickly as possible. Thanks, Andy. Okay, right. That's all of our questions, so thank you very much.
If you have any other questions we'll be around for a short while. Thank you.