Earnings Call: H1 2021

Mar 24, 2021

Good morning, and welcome to Bellway's Half Year Results. My intention this morning is to firstly provide an overview of the business. Operational matters, together with an update on current trading. I'm pleased to report that productivity levels are now returning to normal as the impact from COVID reduces. Whilst December January were understandably challenging months. I've been hugely impressed with the response and resilience from our build and sales teams, whose collective performance has resulted in a record half year volume of 5,656 homes. And despite the restrictions imposed from the current lockdown, the selling environment has been surprisingly robust. Sales rates have generally held up well. Private reservations were 3% ahead in the first half. And in the 1st 6 weeks in H2, too, behind by 9%, but that's against a strong postelection comparator period in 2020. So overall, it gives me calls for optimism for the spring selling period. And that optimism is further strengthened by the health of our order book, totaling around 6,000 homes. You will also have noticed our record investment in land. In the 6 month period from the 1st August, we have contracted on nearly 9,000 plots at attractive rates of return. And that appetite continues, driven by our desire to increase outlets and also to deliver volume growth. And that front footed approach to land investment We'll naturally promote margin recovery as trading margins tend to improve and the higher volumes allow us to naturally absorb our overheads. Now before I hand over to Keith, there are a few key highlights that I would like to mention. Notably, we are building a stronger platform and a deeper land bank to deliver volume growth in the years ahead. And despite that investment in land, we still have a strong net cash position of around £350,000,000 And that gives me the capacity to continue with our investment program if the opportunities arise. And finally, you will see from our statement that the strength of the market has enabled us to upgrade profit guidance for the current financial year. Thank you. I'll now hand over to Keith. Thank you, Jason, and good morning, all. The strength of the brought forward order book, the open investment and work in progress and better than expected trading conditions have all supported a strong first half performance. Housing revenue grew by 12.5% beyond last half year's pre COVID outturn to a record £1,700,000,000 and the operating profit was similar to last half year at £298,000,000 The underlying profit before tax rose by 3% to over £300,000,000 Return on capital remained high at 19.3%, with the reduction in operating margin mostly offset by an improved asset turn driven by the strong revenue growth. We incurred a further net expense of £20,000,000 in relation to fire safety on legacy apartment buildings, which I will elaborate on later. After taking this into account, earnings per share fell by 4.4% to 185.9p. In the second half of the prior financial year, We concentrated our WIP investment on housing units that were in the latter stages of the production process. The intention was that this would facilitate better cash collection at a time of heightened uncertainty. In addition, we have been mindful of the April have therefore been directed towards accelerating the completion of higher value homes, which would not qualify under the new rules. Together, these actions have resulted in the number of private homes sold rising by 8.8% to 4,435, And the number of total homes sold rose by 6.3% to 5,656. A reduced WIP position at the start of the second half will mean that volume growth is expected to moderate for the full year to around 10,000 homes. The overall average selling price rose by 5.8 percent to £303,000 driven partly by the emphasis towards higher value private homes. As well, there was also a greater proportion of higher value social completions arising in Southern divisions such as Thames Gateway and Thames Valley. For the full year, Anticipated mix changes mean that the average selling price is likely to moderate slightly, but it will still be in excess of 2 100 and £95,000 Our share of completions from joint ventures was 105 Homes, with the rise reflecting the phase in of completions on our London apartment block. The associated profit from all joint ventures was almost £8,000,000 And for the full year, I expect the total JV profit to approach £10,000,000 The growth in volume was most pronounced in the south, mainly reflecting construction progress as opposed to any material difference in trading conditions. In addition, our new Eastern Counties division is gathering momentum and provided an additional 78 homes in the period and has ambitious growth plans for the future. For the full year, the north south split is likely to be similar before output begins to catch up again in the North and H1 of the following year. London accounted for 7% of completions with a private average selling price of £440,000 This reflects our investment in more affordable outlet commuter zones such as developments at Bechton, Bexley Heath and Hornchurch, where demand is strong. A total of 334 homes The sold using our Asbury brand, accounting for almost 6% of output, continues to provide a valuable second selling outlet for some of our larger sites. In relation to building safety, MH CLG issued guidance in 2020, which clarified their interpretation in respect of the previous 2010 building regulations. There are various aspects, complications and interpretations of this guidance. In broad terms, Rather than focus solely on aluminum cladding, this consolidated advice note considered whole wall systems. Importantly, this requires an assessment of the combination of materials used to determine whether they adequately prevent the spread of fire. Taken into account this guidance and as a result of further assessments undertaken by building owners and warranty providers in the half year, We have provided a further £34,000,000 in the period. We've also recovered £14,000,000 from those in the supply chain, including architects and subcontractors, resulting in a net legacy building safety expense of £20,000,000 As a result, we've built up a total provision of £132,000,000 since 2017. Amounts relating to this were first disclosed separately on the face of the income statement in FY 'twenty as the issuance of the revised government guidance in that financial year resulted in a larger material amount being required. After utilization, the remaining provision at the 31st January was £92,000,000 Going forward, building owners and their agents remain responsible for undertaking regular fire risk assessments. There's therefore a risk that further issues could arise as they perform ongoing investigative work. In addition, establishing fully costed solutions for known issues is difficult as we have found that the scope and cost of work often increases once on-site. So while we have taken a prudent and a responsible approach In line with normal accounting requirements, there could be a further build and safety expense in the second half of the financial year. I would stress, however, that we believe the vast majority of potential liabilities are now provided for. We continue to actively pursue recoveries from third parties, but this process is complicated. And in many cases, that will take several years to resolve. Before net fire safety costs, The operating profit was £298,000,000 and the operating margin was 17.3%. Drawing out larger items in the operating profit bridge and the extra volume and average selling price added a total of 40 £3,000,000 to the operating profit. This was partially offset by a downward movement of £34,000,000 and the underlying gross margin. And to explain this a little more, the gross margin in the period was 20.8%. This is around 2% below the expected outturn based on our land intake margin of around 23% over recent years. The difference is made up of a cost of £12,000,000 in relation to extended site durations because of COVID. This is not an additional cost over and above that reported last year, but it is instead the proportion of the extra COVID costs, which have traded through the income statement in the period. The remaining shortfall of some £22,000,000 is the site based drag caused by previously reported historical cost increases. These include fire safety requirements on new properties and supply chain cost rises. The margin drag from both COVID and historical cost rises will begin to diminish. However, the affected sites will continue to bear a lower margin until we trade out of them. For the second half, the gross margin will begin to improve, but with a lower H2 volume output, The absorption of administrative selling and marketing overheads will not be as efficient. I therefore expect a full year operating margin of around 17%. Beyond this year, the additive effect of new land, together with several commercial cost control initiatives, which remain underway, will continue to help the margin recovery. Our balance sheet is robust and transparent. I will cover larger items separately, but briefly, our fire provision of 90 £2,000,000 is shown on a separate line. Land creditors, which we use only when cost to do so remain low in the context of the balance sheet at £372,000,000 Looking at cash in more detail, the growth in completions supported by the unwinding of the bought forward investment in WIP meant that we were able to generate £428,000,000 from operations. The cash tax bill was £41,000,000 and after paying this, last year's final dividend of £62,000,000 and obtaining other receipts of £19,000,000 primarily from joint venture partners, we ended the period with net cash of £346,000,000 Including land creditors, adjusted gearing was negligible at 0.8%. Going forward, we have committed bank facilities of £495,000,000 and have now fully drawn our recently issued USPP loan notes, which totaled £130,000,000 Before considering land creditors, this provides a total debt capacity of £625,000,000 In this context, not only do we have a very robust liquidity position, but we retain significant financial and resource to invest in compelling land opportunities, while maintaining the underlying strength of the balance sheet. For the year end, net cash is likely to reduce to over £100,000,000 depending, of course, on the final outturn and the overall investment in land. Moving on to the top tier of Alarm Bank. There are 27,000 plots with an implementable detailed planning permission at an associated cost of £1,700,000,000 Additions in the period have an anticipated average Selling price of £270,000 Looking forward, this section of the land bank has a carried forward expected average selling price in excess of £285,000 So while this year the average selling price may be more than £295,000 in FY 'twenty two, I expect the average selling price will be around £290,000 followed by a further moderation in FY 'twenty three. The reduce in average selling price is a deliberate strategy to maintain sales rates as the health of our rules change and the scheme ultimately expires. Our pipeline of owned and controlled land where DPP is business. This means because of our land buying activity in the period, The overall owned and controlled Lam Bank has risen to some 49,000 plots, which is around 4.9 times this year's anticipated volume output. This strength in landbank is healthy for the business and will ultimately lead to more outlets to help achieve future growth. Land contracted in the period has an expected gross margin of around 23%. And as already mentioned, This will help to drive margin improvement in the years ahead. Our strategic landholdings have risen to almost 28,000 plots as we continue to supplement this additional tier of alarm bank. In total, The owned and controlled land bank together with our investment in strategic land has a balance sheet value of £2,200,000,000 and provides Belway with access to around 77,000 plots. Investment in construction based work in progress stands at £1,300,000,000 a reduction of £187,000,000 compared to the 1st August. In addition, plots are in earlier stages of production compared to 6 months ago. This will therefore be a constraint to completions in the second half of the financial year. The investment in part exchange stock was just £10,000,000 a £43,000,000 reduction compared to the last half year. Initially, this reduction was because we curtailed the use of part exchange after last year's lockdown in order to protect the balance sheet. Since then, trading has been strong. And as such, we have had a reduced need to offer this incentive and hence the balance remains low. I expect it to increase in the next financial year as the changes in Help to Buy and SDLT come into effect. We are delighted to be able to restore the interim dividend at £0.35 per share, which follows the payment of last year's Final dividend of 50p per share. The full year dividend payment will be weighted towards the second half and we broadly expect to maintain a full year dividend cover of around 3x earnings. It is right to allocate the majority of earnings back into the business given the attractive land opportunities in the market and the continuing growth potential. So to summarize today's presentation. Firstly, substantial revenue growth was achieved in the first half as a result of the positive market, strong brought forward order book and opening WIP investment. Secondly, our strength in Larm Bank will drive further improvement in the gross margin and we retain significant financial resource to continue investing in new sites. Thirdly, we have restored the interim dividend and we Expect to maintain a full year dividend cover of around 3 times earnings. And finally, the long term industry fundamentals are positive. The business is in good health and the capacity for Bellway to grow remains strong. I will now pass it back over to Jason. Thank you, Keith. I want to start by taking a closer look at the sales market. As I mentioned in my introduction, sales of held up well. If I could refer you to the slide on the screen. You can see despite the ups and downs over the past 6 months, Private sales are still ahead by 3%. And I also think it's useful to see what Help to Buy is doing now we've transitioned into the new scheme. Since the 1st January, new Help to Buy sales have made up a lower proportion of total sales compared to the period between August December, but for me, still very encouraging. My feeling is that they won't continue at this rate, but the key point here is there has not been a material reduction in numbers. And I am similarly encouraged by the prospect of competitive 95% mortgages. And whilst there is a bit more work to do, it does fuel confidence for life without Help to Buy. And with regard to the SDLT holiday and the recently announced extension, I think the real Benefit with SDLT has been to kick start the whole housing market, and government intervention has been very effective. However, I would caution about the prospect of returning to the original scheme rules. The success of the SDLT holiday has been to revitalize that whole housing market, new or old, big or small. It frees up that housing ladder. To return to a system that heavily focuses on first time buyers with higher taxes on larger properties seems to me to be a backward step. In terms of house price inflation, we have experienced price rises of 1% or 2% on some housing sites across the U. K, although I would say that apartment prices tend to be a little more rigid in value. Turning now to land. As I mentioned earlier, we've had a very successful period, having contracted on nearly 9,000 plots and at a time where there have been fewer competitors in the market. We have invested in some really good quality housing sites in Strong locations such as Cherry Hinton in Cambridge, Sniperly Park in Durham and Kingshill in Kent. And that appetite continues for the second half. We hope to acquire around 16,000 plots for the full year, albeit I do recognize the market is becoming a little more crowded. And as ever, we're very much focused on outlet growth. And you may also note that our ASP on recent transactions is a little lower as we deliberately target the lower end of the market. Now for production. We do still have some cost pressures, but they are modest, 1% or 2% per year. We do have the extra costs of the new building regulations planned for 2023 and designed to reduce carbon emissions, although these costs are already included in our viabilities. Our focus has really been on improving efficiency as the use of our artisan house type range expands across the group. Aside from the obvious cost benefits that I've mentioned previously, such as reduced design fees, lower site overheads and lower customer care costs. The bigger gain has been on the reassessment of site layouts at preplanning stage. We have taken on a new group resource to optimize layouts to complement the approach taken by our divisions, and we have been very encouraged by the benefits. And those benefits are particularly pronounced on larger sites. Notably, we've been able to improve not only margin and coverage but also create a better place to live and a more saleable product. And we also continue with our Back to Basics campaign, which is all about improving margin through a variety of initiatives such as Groundworks design and cost reviews, margin improvement plans and, of course, optimizing layouts. Turning now to the customer. I'm pleased to report that we have retained our 5 star rating for the 5th consecutive year and achieved our highest score to date of 93 0.5%. But we plan to take that further through our customer first project, which launches next month with much enthusiasm across the group. The purpose is to improve quality and service and put the customer at the center of everything we do. Relationships with our customers can often last up to 3 years, and we engage at several key stages: planning, building, selling right through to after sales service. And every one of our colleagues will be part of that customer journey with our purpose and our ambition to be a 5 star house builder with a 5 star service. Moving on to the environment. We are working towards embedding a new sustainability strategy across the group and have established a 0 carbon team at head office. We have also appointed the Carbon Trust to help us establish science based target reductions. Meeting net 0, together with other environmental goals, will clearly have a significant impact on how we plan and build our homes. We have started that journey and are very much committed to creating sustainable and enjoyable places to live. We have identified sites to trial new technologies to develop lower carbon solutions, and we're also working with the Future Homes task force to work collaboratively on common solutions. I also want to talk about the issue of building safety. We have made good progress on ACM cladding replacement works on buildings above 18 meters. Our attention now is very much focused on the wider issue of building envelopes on legacy buildings. And remediation strategies can be complex and are subject to an evolving view of expert interpretation of a safe building. The issue is further exacerbated by the introduction VWS forms, where lenders may have their own view on a fire safe building. That said, Bellway takes the issue very seriously, and we have adopted a responsible approach to the issues. We have established a fire safe team to engage with building owners, local authorities, fire engineers and of course, the residents. And as Keith has mentioned, we have set aside a total of £132,000,000 over recent years and have a remaining provision of €92,000,000 to support affected residents. Now for current trading. If I could refer you to the slide on the screen. The 1st 6 weeks since the 1st February, we have achieved a weekly sales rate of 263, overall a reduction of 5.4% but to be expected given lockdown. Outlets have marginally decreased from 2.77 down to 2.67, and we have the benefit of a strong order book of around £1,600,000,000 Finally, outlook. As we emerge From lockdown, Bellway is in an excellent position to continue its long term disciplined growth strategy. There is still strong customer appetite to purchase new homes, supported by a recovering economy, 2 more years of help to buy and the prospect of competitive 95% mortgages. And I think that backdrop, coupled with our stronger land position and our operational strength, creates a very good business case going forward. And finally, we plan to upgrade volumes to around 10,000 homes for the current financial year. And as a reminder, we still have the capacity to deliver up to 14,000 homes. Thank you. I'll now hand over to the moderator for questions. Business. Our first question today Comes from Will Jones from Redburn. Please go ahead. Thank you. Good morning. 3, if I could, please. I think they're unrelated. But the first one is just exploring the recent sales trends, that dip of around 5% since February. I'm just looking at the final slide you just showed and I think the outlets are down by a similar percentage, so perhaps it's really an outlet issue rather than the line. But I just wondered within that, when you think about product availability compared to this time last year, given the work in progress position at January, has that been a slight constraint on the last Couple of months and does it improve going forward? I appreciate again it was against a tough comp. The second one was just around, I guess, just Drawing the interplay of, I guess, dividends and land buying. But with your 3x cover, when you forecast forward and look at how you think the budget might evolve for the Kind of 2 or 3 years. Do you see net cash building up quite sharply with that kind of dividend cover policy? Or actually, is the message here that The added land investment will be the balance back down again. And then the last one was just a technical one, but looking at your medium term pipeline, I think the plot count has gone up by over 5,000 from July to January, that 21,700 number today. Is there a definitional change in the way you think about the pipeline? Or is that just literally some of the some new sites coming in? Thank you. Good morning, Will. Bill, I'll just start on the sales rate. I hear what you say on The outlets are down 5% and so are volumes. But the figures being compared to this time last year for me Most incomparable. There's such disruptive periods. It's difficult to make anything out of the Statistics really for me. All I can say is that I'm very optimistic about the spring selling season because I can Obviously, a little bit further ahead than we've reported. We're almost sold out for this year. So The next sort of 18 or 19 weeks of our financial year is all about building our order book. So we're going to be in a very strong position from an order book point of view at the start of next financial year. And on top of that, Will, I expect outlet numbers to grow again in H1 of next year. So I've put all that in a pot and I just think, well, sales are pretty strong at the moment and I'm comfortable with it. So Sales at the moment don't keep me up at night. Well, I hope that answers your question. I'll refer to Keith to the dividend. Yes. I mean on the cost I do expect the year end cost position to moderate. Obviously, it depends on the final completion number And what we ultimately spend on land. But if we assume we spend something like €850,000,000 to €900,000,000 on land, which is quite ambitious, That cash balance at the end of the year could moderate to somewhere in excess of GBP 100,000,000 let's say. Now thereafter, you get a little bit into the unknown, but I think the point I'm trying to make is we still see opportunities for growth. So it's not yet top of our priority list to pull down that dividend because we still feel the best return is to invest in loans. Now the bigger we get, The harder the growth rates are to achieve and then ultimately the dividend has a longer term potential to moderate. But for the foreseeable future, I think around 3 times is the right answer. And I don't envision building up big cash balances in Brazil with us. Well, I'll do the land bit. And I'll try not to be too vague. But increasing our Pipeline is certainly by design. Historically, we've had we've always wanted a land bank 4 to 5 years. And it's all worth often tended to be lower than that scale. And Keith will say that's very efficient and I would say it's quite modest. So our ambition certainly last Some of us to grow the land bank, sort of, for more depth and probably to be at the 5 year end of that scale as opposed to the forend Because we very much believe in the medium term prospects that are housing. So we see it as a good time for investment. And just to add to that very quickly, well, there hasn't been a definitional change in the pipeline. It does, of course, A few movements in that which originate from the strategic land portfolio and you just so happen to begin to see and are you giving Some planned gains from various things move from that strategic element of the land bank over to the pipeline, so there's part of that in the figures as well. Business. We now move on to our next Question which comes from Aynsley Lamond from Canaccord. Please go ahead. Good morning, both. Just 2 for me, quick ones. Maybe if you could just give a bit more color on the land market. You said it's becoming a little bit more crowded. Just wondered if that the bigger volume house builders, are you seeing a bit Competition from the small and medium sized players and what pricing is doing in the market. And then secondly, just on the ASP As you move that down a touch, is that more driven by kind of house size or is it regional mix is changing The underlying structure change there going forward? Thanks. Yes. In terms of the land market, Certainly, the land that I'm buying in the month of March is probably land that we've got agreed in December or January, so we're fine at the moment. But the market is, I would say, exceptionally busy At the moment, so if you're bidding on land now, I'd say all Cast builders are back in the market. So you've got big ones, small ones and medium sized ones. The only people we're not seeing in the land market at the moment is housing associations. They still seem to appear to be a bit quiet. So I'm not sure I'd call it frenzied. It's very active. There's sort of The surge in activity where everyone's come back to the market, I would expect it to settle down again, but just at the moment it's quite busy. Business. And on the movement in the average Southern price at Ainslie, I would say that was driven primarily by product mix. So our aim is to have a good choice of product on any given site, but focusing on those affordable 3, 4 bedroom houses around 1,000 square feet is a typical ambition we have when we're buying sites. Now that's not to say we won't go into higher value areas, And that's not to say we don't have a mix of product which goes beyond those sizes. I think it's right to have a choice. But as a generalization, It's that sort of sweet spot in terms of the target which we aim towards, which is driving down that return price. We now move on to Gavin Jagiel from Barclays for our next question. Please go ahead. Business. If you could, please. The first one is on outlook numbers. I'm just wondering if you could A bit more explicit maybe, Jason, how you expect these to maybe trend over the next 12, 18 months. And then the second one is on margin, if I Please. Just thinking about moving towards that 23% level and I guess what drag there is over the next few years still from And COVID and the extended site durations. And then just one on the JV. I think it's been pretty negligible over the last few years, but CHF 10,000,000 for this year. Is that kind of a one off? Or are these going to be carrying on over the next few years as well? Thank you. All right. On outlets, look, outlet numbers will move hugely in this current financial year. On average, there might be, I I know flat to 1% up just because we've completed so many units and we've got to get new sites through the planning system. But in the next financial year, we're hoping to see growth of 4%, 5% in average outlet numbers. So hopefully, you'll begin to see that from through then. In terms of the margin progression, there were 3 things I would say affecting The margin. And if we talk about in a gross level, obviously, we're aspiring to get back towards the kind of fixed end gross margin Yes, the operational benefits, which is what we're currently buying land at. And the 3rd round on that are COVID costs, Historical cost rises and I suppose a little bit about absorbing selling overhead efficiency just until we get I could go on to some size. I think the historical cost rises will affect this current financial year, Maybe £30,000,000 or so in terms of the job which still sits in on-site. Will that be much lower impact next year, maybe £5,000,000 to £10,000,000 and then the COVID costs that we said we incurred £12,000,000 in H1, That might be €20,000,000 to €25,000,000 for the full year. Next year, it could be €15,000,000 to €20,000,000 And then I think it will begin to diminish thereafter. And then the last one, look, in terms of efficiency of selling overheads, until we get back, we'll talk to them and now we'll put that maybe 10 or 20 basis points drive. So yes, it's hard to be really precise on all of those different aspects. But hopefully it gives you some ballpark figures in terms of what's Holding that progression at the moment. And then lastly, on joint ventures, Around £10,000,000 this year. I would say £5,000,000 to £10,000,000 in the next couple of years just because that London Rockford of Covance We'll obviously fall away, we'll be replaced by other schemes, but I still think the overall profit will be £5,000,000 to £10,000,000 business. That's great. Thanks. I'm sorry, I'm just wondering if I just have one quick follow-up. Have you been consulted at all yet or you or any others in the On the potential tax that Mr. Genrik announced to, I guess, pay for the cladding Remediation. Yes. No, we haven't had any direct contact. We were in Discussions with MHCLG on specific developments, but no debate about tax. And we're So we're getting doing our own thing at the moment in terms of planning replacement works. But we're happy to engage when appropriate. We do have a context that we go through via the HBF, but nothing substantial going at the moment. We probably do the same part, Patrick, as you in terms of looking at the overall tax burden and what the valuation could be. And it's not No, I won't say I haven't got any more details. They're not huge figures. If you just extrapolate the government's ambition, there is €2,000,000,000 I think it is. Thank you. From Jefferies, we have Glynis Johnson with our next question. Please go ahead. I have 2, if I may. The first one is just pushing you a bit more in terms of house price inflation. The ONS numbers have just come out and they are very substantially ahead of both what you say and actually what your industry peers say as well. I wonder if you can talk about any sort of Regional or product price differences that may account for why your house price inflation doesn't match What we're being told from the sort of industry figures? And then secondly, just in terms of those recoveries that you talk about In terms of the 5 safety, I wonder if you can just elaborate a bit more on that. Do you think there will be substantial amount that you'll be able to claim? And Are we talking about you talked about the contractors forgive me, I didn't get the second part. Are we also talking about the supply chain as well? I'll just start on house price inflation. I mean It's quite encouraging. I couldn't hear what you said at the start in terms of I think you said I'm lower than someone else. We're seeing 1% or 2% on housing sites on a number of housing sites across the U. K. I wouldn't suggest It's any stronger than that. Sometimes some of the figures that Vande did about include 2nd hand houses, so it matches the waters a little bit. And I would add that we find that Department prices tend to be a little bit more rigid in value, whereas the buyers are a bit more cautious in terms of Valuation. And then on if you look at the recoveries, it's An incredibly complicated process, not only assessing remediation, which is required, Never mind getting the complexities and recoveries. And to give you an example about the CHF 40,000,000 we covered in the period. So that we've been working on for a number of years. So it's taken a long time to come through. I wouldn't like to predict Any sort of figure in terms of recoveries going forward, suffice to say, we'll obviously work diligently through any issues and try and recover what we can, and we feel there's an I need to do so, but I wouldn't bake any new companies into our figures. The sorts of people we're working with range from architects to subcontractors to material providers in various components of the ore system. So there's a whole range of A different third parties who we're looking to work with to make a contribution to the works in the years ahead. And if I may, just a quick follow-up in terms of the outlook. You've given us outlook to the potential outlook growth for the full year 'twenty two. Should we be assuming the land that you're buying in the last 6 months actually doesn't come through quite enough for year 2022? Should we be assuming that full year 2023 sees a bigger pickup Because the land buy step up that you've done? Yes. I think you're spot on there, Deane. It's only a few sites that we've managed to capture for 'twenty two. The majority of the benefit comes in FY 'twenty three and beyond. Business. We now move on to a question from John Bell from Deutsche Bank. Business. I think I've got 3. The first one is on supply chain, any bottlenecks that you're seeing right now. And the second one is on potentially growing your regional footprint. Where do you feel in very broad terms that you might be underrepresented or not represented at all across the country? And the third one really is, If you've seen this increase in competition for land of late, is that impacting the availability of deferred terms at all? Thank you. If I start on the supply chain, I wouldn't Say that there are any more difficulties than we had at the end of last year really. There's a few hiccups, a few problems, whether it's route tiles of timber products, but nothing that we can't manage and nothing that gives me too much cause for concern. I think in terms of the regional footprint that you mentioned, which is quite an interesting point, but There is a little change in the dynamic of where people are keen to live. So even in our existing territory, and I'll use the South Coast as an example, John. Historically, we've been Cautious, reluctant to do too much on the South Coast because our experience is when the market changes, those places can be a bit Tough to sell, but now there is a fair bit of enthusiasm for people to relocate A bit further afield as lots of employers start to introduce flexible working solutions. So we're just finding new patches within our existing territory that are a bit busier. So we quite like that. The only part of our geography, John, I'd say that we haven't covered fully. For me, it's probably South Yorkshire at the moment. So just having a look around there, South of Leeds, Sheffield, Mansfield, Doncaster, those sorts of places, I think we could there's a bit more to do there. So I'll have I think about that and maybe we'll do something towards the end of the calendar year. And on the availability of deferred terms, I don't think we really experienced it like that. I think more competition in the land market. I don't think it's affecting prices or Payment terms, I think it might just affect the number of sites that you're able to require. So that is what I see is the pressure point as opposed to whether we're able to Negotiate the deferral, if that's right for that particular deal. Yes, very helpful. Thank you very much. Thank you. We now move on to Sam Cullen from Peel Hunt for our next question. Please go ahead. Business. Just got one left, if possible. Just on Ashbury, obviously, I think you said 6% of completion was from Ashbury. How do we think about that growing in the next 3 to 5 years? And where do you want to get that business? Well, we said our 3 years delivered Very consistently around 5% of output of that sort of level for the past few years. And because it's a product Which is limited to use on larger sites. It's designed entirely to improve sales rates where those larger sites can accommodate us and therefore It will be term on capital employed. It will have a limited usage. It's never going to be a substantial part of the business for those reasons. So I think the 5%, 6%, business? Mark, it is the level of like the alpha for the foreseeable future and I don't think that will change much. Our next question comes from Markus Cole from Liberum. Please go ahead. Hi, yes. Good morning, both. Just sort of most of the questions have been sort of asked, but I just wondered if your sort of capacity per division sort of assumptions have changed in the 14,000 from sort of 13,000 Historically. Thanks. Not particularly. We've introduced For senior divisions, as I call them, where we've got strong management teams in strong Geographic areas. So if you've got a Manchester or an Essex where we believe We can grow the business is up to 800, 900 units and then that's what we're doing in those specific locations. We may need to open up a 23rd division to support 14,000. But I think generally we've got the infrastructure in place to deliver the volume. It's more land capacity that tends to be issue, not how we operate. Okay. Thank you very much. Thank you. We will now move on to a question from Ami Gall from Citi. Please go ahead. Yes, good morning guys. Just two questions from me. The first one on the outlook growth that you're planning for the next 2 years. I'm wondering if you could give us some sense of the Work in progress investments and overheads, the right size of the overheads in the business going forward. And the second one really is a follow-up on Pricing on the back of the pricing environment in the market, has there been any change in the behavior of the mortgage lenders? So on the work in progress on the overhead, I think there will be a tick up in the work in progress investment by the end of this current financial year. My estimates are that we may have a further €100,000,000 or so invested compared to the half year figure. Thereafter, I would broadly issue work in progress moves in line with Turnover, we would ideally like to improve our book term a little bit beyond that year end position, which We're obviously moderate compared to the half year, but I think the background of it is at this stage when there's still some wider Longer term share is in the mortgage is perhaps premature. So an investment this year of €100,000,000 and then broadly in line with turnover thereafter. And then for the overheads for the business, look, we have the divisional structure in place, But we still don't have all of the people which we need in place. We will be raising the pressures as we go forward with that to IT costs or We're more than keeping it appropriately. So again, for the foreseeable future, I think if we can increase volume next year by at least 5%. I think that's Probably a reasonable guide in terms of how the administrative overhead might move in the next financial year as well. Then you might just No, I was just asking whether there have been any pushbacks on pricing from the lenders? No, we haven't experienced that. I think the issue on mortgages, if there is one, is that So there's certain 90% 95% mortgages, and that's particularly exacerbated for the newbuild sector. Obviously, we welcome the government to make book. We're yet to see how and when that price to new build and where the banks will ultimately support us. Look, we haven't seen any down valuations, if that's what you're alluding to, it's all over the next months. Anastasia Solonitsyna from UBS has our next question. Please go ahead. Good morning. I just got a quick follow-up on margins. If you could give us some more color around H2 margins? I understand that volumes are skewed So the first half is proportion of 57% which we implied by the guidance. But why does an implied margin will drop by like 50 basis points There is a result from the level of first half. I'm sure that in second half, you'll have some benefit From addressing efficiency measures of some productivity ramp up versus first half and also lower COVID costs. So how does this pick up? And is there anything else to it apart from lower completions to impact margins in the second half versus the first half? Thank you. Look, the line broke up a few times there, but I'll do my best to answer it upfront Well, I'll kick it up in terms of how the margin progresses in the second half. I think the best way I would explain that. If you look at our current order book, the anticipated gross margin And that's all a move, which can move as costs move as prices move over the balance of the rest of the site. But That current anticipation is around 21.5% as a gross margin. So that whether we'll get to the full 21.5% in H2 To choose gross margin is not certain, but it gives you a reasonable expectation in terms of what that outcome could be. And what you will find is that the whole legacy build cost increases, which we see over the past few years with our cost price We'll have a lower effect on the margin going forward as we see fewer completions from old land and we continue to replace it with new land At around 23%. So that's the direction of travel. And I think further improvements in FY At 2022 as well, again, there's obviously a little cost increases of a continuing diminishing effect. Okay. Thank you. Thank We now move on to Shane Cadbury from Goodbody for our next question. Please go ahead. Business. Just 2 from me. Look, firstly, on the build cost front, I know it said in the statement that kind of low single digit was Kind of what you're seeing, but if you could give us a little bit more color, I know you touched on the materials aspect of things, but what you're seeing in terms of labor Would be quite helpful. And then secondly, look, you mentioned already you kind of had the longer term capacity delivered the 14,000 Homes, what kind of time frame should we be thinking about that over? So if I do the first one and Maybe Keith to do a harder one. In terms of build cost inflation, it's quite a mixed bag really because you've got Some timber products going up by 10%, 12%, but then you've got Labor costs quite flat in many areas. So we've been able to place many orders within budget Shame because people are keen to build up their order book, to get some turnover guarantees as we merge from lockdown. So we've been able to get some favorable prices from good contractors. I think build costs Don't worry me at the moment, Shane. But going forward, as we move towards meeting net 0, that's when you'll see More higher costs coming through the systems because the technologies don't exist and the costs are a little bit Higher. So that's what worries. But that's probably in 2 or 3 years' time. And if I can just hand over to Steve for Yes. I mean, Forecast growth over a long period of time is not it's obviously difficult To say accurate people, where I think of it is, in the next financial year, we'd like to deliver at least 5% on the volume line. It's a market strong and supportive. We would like to do more than that. We would have the capacity to do more than that and probably get back to FY 2019 volumes, but that does require the market to remain supportive over that next 12 to 18 month period. As you go beyond FY 2022, then really it's going to be our net numbers And obviously, the market is still relevant. But we think sort of 5% per annum is a sensible Now I would caveat that if you don't see good land opportunities in the market, it's a wrong thing to As in when the land market changes, it presents less or more opportunities as I'm sure it will. But it gives you a broad direction in business. Our last question today comes from Andy Murphy from Edison Research. Please go ahead. Business. I've got 3, if I may. Just thinking about the stand duty extension, I was just wondering whether you could Gives a bit of color around what impact the original end of that extension was having on demand and what you may have seen as a result of the extension that's been announced. And secondly, just thinking about the government's future home standard, I was wondering what Belway needs to do to comply and if maybe you can give us any sort of indication of what That might be adding on a sort of per standard house development. And then finally, on sort of ESG, I was wondering Whether you could perhaps flesh out what the costs there might be on your future plans, again, on those sort of cost per house basis? Thank you. Andy, I'll do 1 and 2. Yes, you're right on SVOT. I mean, the good thing about SVOT is It got the whole housing market going. It wasn't focused on new build like healthy values. So That enthusiasm was sector wide, and it was very effective. I have to be honest, I'm sure Anyone who goes on right move can see the number of properties that are moving, whether they're new, old, big or small, the whole market's active. Going forward, do I see a surge in activity for June? Not really. We're selling Beyond June now in our business, so we're probably selling towards the latter part of the summer and into the autumn now. And it's planned to end, I think, at the end of October as it tapers off. But as a house builder, We can use SDLT as an incentive. If we wanted to, we could write our own product going forward. But Just at the moment, I think we're fine. I just don't want to return to the old days where you've got Via taxes on the bigger properties, Andy, and everything is focused on the lower end of the market because I think it's unhealthy and it doesn't create A smooth good quality housing matter really. But in terms of your future homes task force or As we look at reducing carbon emissions going forward, all I can say to you at the moment is the building rates Plan for 2023, reduce carbon emissions by 31%. And those costs Our £300,000 to £4000 aplock are already included in our liabilities. When we get to 2025, we've got to reduce carbon emissions by 75% against today's standards pre building rates. So that then the costs are unknown at the moment because we haven't Concluded the design solutions, we don't know how we're going to achieve that. And it will be a mixture of Improving the fabric of the building, new technologies in the building, more renewable energy in the building. And we've got Start looking at decarbonizing the whole grid. So that's the next step, I think, Andy. What are the Costs for 2025 and how are we going to do it? And I suppose on the wider ESG piece, I I mean, frankly, meeting the 2025 building regulations is likely to be where the majority Well, the future hold standard rather is likely to be where the majority of any future cost increases lie. More broadly than that though, We have a number of targets in place at the moment. We'll have a more holistic review. We're bringing in some third parties to help us. And lastly, in particular, we've disappointed the Carbon Trust to help us establish science based Carbon reduction products, which we'll be looking at what we call Scope 3 Carbon Reduction throughout the supply chain. And the second cost So what that might be, Andy, frankly, we don't know yet. We need to understand that better, and that's why we're having those experts help us look at those sorts of things. Other aspects of what we're doing on ESG, whether that's waste diversion or waste reduction or reducing waste Waste usage or the water usage or plastic usage, I actually think over the medium term, should it work to be cost neutral because We just did less. It makes you more efficient. It's good in house disciplines to have. And we're already good at those sort of metrics. But I don't see why we can't get any better, not necessarily in case of some sort of extra cost. So I don't see it as a huge long term cost risk. I see it perhaps as an opportunity which we should all try to embrace. Brilliant. Thank Thank you. Ladies and gentlemen, this concludes today's call. Thank you for your participation. You may now disconnect.