Earnings Call: H2 2020

Oct 20, 2020

Good morning, and welcome to Belway's 4 year results. My intention today is firstly to provide an overview of the business. Keith will then take you through our results and our balance sheet and I will close with some details on operational matters together with an update on current trading. Needless to say, it has been a rather unusual and challenging period since we announced our interims back in March of this year. And it's probably fair to say that the housing sector has fared much better feared in part due to the success of the stamp duty changes and in part due to that pent up demand generated from lockdown. Operationally, I'm pleased to report that all of our construction sites are now open and continue to operate within COVID safe guidelines. Our sales offices are also open and limited to appointments only and reassuringly This has not led to any dampening in demand. The majority of our office based colleagues are still working from home. Albeit our offices do remain open on a rotational basis to perform those tasks essential to support our construction teams. Our first priority whether construction, sales, or offices has always been the safety and well-being of our staff of our subcontractors and our suppliers and of course our customers. Our approach has been cautious responsible and centered around the principle that safety comes first. Prior to COVID, we had been on target to deliver our 11th consecutive year of volume growth. And whilst the pandemic has changed that course and despite the inevitable challenges in the months ahead, we still very much believe in the medium term prospects for housing. Geographical spread with a capacity of some 13,000 homes. And that recovery in FY21 will be very much focused on volume and margin to benefit the years ahead. At this stage, It's a little too early to guide upon margin, but we do expect volumes to grow by around 20% in the year. Now before I hand over to Keith. I just want to highlight some key points within the business. Firstly, we have the benefit of a record order book and are very encouraged by the sales rates achieved at the start of our new financial year. Our whip is in a robust position providing that platform for recovery beyond FY21. We also have the luxury of a strong balance sheet and the immediate capacity to invest inland. Our production rates are improving by the month with some of our housing sites now approaching pre lockdown levels. And finally, we are planning to pay a dividend for FY 'twenty. Now for Keith. Thank you, Jason and good morning all. The disruption caused by COVID-nineteen had a significant effect on the financial performance of the group. Housing revenue fell by 31 percent to 1,000,000,000 and pre exceptional operating profit fell by 52% to £322,000,000. We incurred a total exceptional charge of 1000000, comprising COVID related costs of 1,000,000 £47,000,000 to help owners of legacy apartment schemes where fire safety improvements are required. I will elaborate on both later. After taking these into consideration, profit before tax fell by 64 percent to 1000000, and earnings per share fell by a similar percentage to £156..6. Pre exceptional return on capital fell to 11% partly because of the reduction in profits and also understandably a much reduced asset turn, prior to lockdown, completions were ahead, and in fact, by the 23rd March, we'd completed 6013 new homes. 7% above the equivalent period in the prior year. That outperformance did however quickly unwind. And for the full year, completions fell to 7522, which is a decrease of 31%. The reduction fell evenly across private and social homes, with social housing representing 22% of the business. A similar proportion to FY19 with this being a reasonable guide to the likely private social split in FY21. The overall average selling price remained broadly unchanged at £293,000. And pricing in general is remained firm. There is still some downward pressure in relation to more expensive homes, particularly in London and the southeast, and especially for product approaching the current Help to Buy threshold, of £600,000, although we have only a handful of homes, which are close to this price point. In the year ahead, the average selling price is expected to be around £290,000 Although beyond FY21, there's likely to be a modest reduction. This is a result of anticipated mix changes as we continue to refocus our land buying efforts with the new regional Help to Buy price caps in mind, and I will set out some analysis in that regard in a short while. Looking at our geographic performance, you will you will see that we retained a balanced spread with broadly an equal split between homes sold in the north and the south of the country. This widespread national approach enables us to pursue land opportunities in hours of strong demand while limiting exposure to localized market volatility. COVID is obviously reduced output, but there are still areas of strong performance. Our Manchester Northern Home Counties And Essex divisions each completed more than 500 new homes, benefiting from strong market conditions in those areas, and the affordable average selling price of our product. London accounted for 6% of completions, at an overall average selling price of under £450,000, which reflects our investment in the outer commuter zones where demand is stronger, such as our developments at Poplar, Bexley Heath, and Horn Church. And as a reminder, the higher London output in FY19 included 2.14 units at 9 ohms, where the average selling price was £820,000. In FY20, there were only 29 competitions from this development, and it is now fully traded out. Our Ashbury brand designed to increase output on larger sites is still performing well, accounting for just under 6% of output. This provides a valuable resource to increase sales rates and improve return on capital employed. The exceptional COVID costs of £26,000,000 include £15,000,000 in relation to non productive site based overheads incurred during the lockdown. This consists of items such as site manager salaries and plant and machinery hire, which would have otherwise been capitalized had they missed the normal accounting criteria. We also walked away from land deals where we had incurred speculative costs of £10,000,000. We did this simply because our assessment is that the expected returns from those sites in a post COVID world are not commensurate with a capsule outlay, and we believe better opportunities lie elsewhere. In relation to Fire, we set aside an additional £47,000,000 to help building owners of legacy apartment schemes where remedial work is required. Our approach has been to identify instances where fire safety measures may not comply with the most up to date interpretation of building regulations, and so far as they were applicable at the time the apartments were built. This is a complex area where our assessment of liabilities and the scope of works is likely to evolve over time. We will of course be pursuing recoveries from third parties, but have not yet recognized any asset in the balance sheet given the uncertainty over collectability. On a pre exceptional basis, the operating profit was 1,000,000, and the operating margin was 14.5%. Looking at the operating profit bridge, 9 elms made a significant contribution to FY19 not only because of the high average selling price, but also because the gross margin was more than 35%. The rest of the bars on the chart show the underlying movement in the air that is with 9 arms excluded from the analysis. The reduction in volume resulted in profit falling by 1,000,000 The movement in the underlying selling price had a modest upward effect, and there was downward pressure on the margin for several reasons. Firstly, the absorption of semi variable sudden overheads was less efficient than normal due to the reduction in output. Secondly, there was ongoing margin normalization as historic sites which benefited from house price inflation have largely traded out in prior years. And lastly, there were costs associated with revised building regulations covering fire safety and carbon reduction in addition to rising subcontract prices in and around London and the Southeast. We have several initiatives in place to help the margin recover in the year ahead, which Jason will outline in a short while. Other movements on the profit bridge include a non- exceptional charge of £19,000,000 in relation to expected extra COVID site costs arising from extended site durations and additional health and safety requirements. There was a £12,000,000 reduction in the administrative overhead principally due to savings in divisional incentive schemes. This is a one off serving, but with the forecast growth in revenue, I expect a similar absorption rate of 4.4% in FY21. Overall, the range of outcomes by the operator margin in the year ahead is clearly volatile and hence it is too early to give specific margin guidance, I would note, however, that we expect some improvement from the 14.5% achieved in FY20. Our balance sheet is robust and transparent. We are an asset backed business, with almost £3,900,000,000 invested in land and work in progress, much of this supported by our strong order book which is convertible into cash in the short term. Land creditors are used sparingly and remain low at 1,000,000 with 1,000,000 of this expected to fall due within the current Financial Air. Looking at cash in more detail, the substantial reduction completions, not only reduce the amount of cash collected, but it also results in a significant increase in the balance of both land and work we still generated £56,000,000 from operations. The cash tax bill was £108,000,000, an unusually high 46% of profit before tax. With this due to the legislative change, which aligns payment dates to financial years. After paying this last year's final dividend of £123,000,000 and a few of the minor items We ended the year with net cash of 1,400,000 and ungared position. Even including land creditors, adjusted gearing was just 11.4%. Average bank debt was under £60,000,000 and is expected to be a little lower in the year ahead. This is in the context of committed bank facilities of £545,000,000 and good long term relationships with supportive UK based banks. In this context, not only do we have a very robust liquidity position, but we retain significant firepower to invest in compelling land opportunities should the market support it. Moving on to land, There are 28,000 plots with the benefit of an implementable detailed plan information and an associated cost of one point £7,000,000,000. The additions to the top tier of the land bank have a pot cost of £60,000 and an expected average selling price of around £275,000. It's not a perfect science, but the chart shows the percentage of plots within our alarm bank, which are likely to be eligible for help to buy as the new rules are introduced. The analysis looks only at private units in England which are due for completion beyond the 31st March 2021. So to be clear, the change in price cuts will only affect around 15a half 1000 plots in the DPP land bank. Of these, we believe over half will still be eligible under the new rules, even only around 7a half 1000 homes, which could be priced above the new limits. That said there are regions such as the Northeast in Yorkshire, which are unlikely to benefit from the scheme. Our strategy therefore is twofold. Firstly, purchase new land with a good saleable product mix and with the new price cups in mind, and secondly, work with the HBF government and mortgage lenders to try to fill in the 95 percent LTV gap. I would also point out that our Scottish businesses do very well with a much lower Help to Buy price limit of £200,000. Only 90% of customers use the scheme in these 2 divisions. Our pipeline of owned and controlled land where DPP is expected within the next three years remains at 16,300 plots. Our strategic land holdings have risen to 27,300 props, a modest increase on the prior year as we continue to supplement the owned and controlled land bank together with our investment in strategic land has a balance sheet value of 1,000,000,000 and provides Bellware with access to over 70 two thousand plots. All land is in place with DPP to meet this current year's forecast. This healthy overall position enables the group to be selective when acquiring land in the year ahead. Yet with the support of a strong underlying balance sheet, Bawi has substantial resource to target further opportunities in the land market. The investment in construction based work and progress has risen to £1,500,000,000 the increase in reflection of the reduction in completions in Q4 last year. As a reminder, our order book on the 4th October was approaching £1,900,000,000, and we are therefore on track to deliver a solid H1 performance in the year ahead. The amount invested in part exchange properties reduced to 1,000,000 a result of group balance sheet restrictions introduced since lockdown together with this strong secondhand market. As you know, the interim dividend was canceled in the unprecedented position where the ability to collect cash from completions were severely curtailed, the duration of lockdown was unknown, and employers were claiming government grants for around 10,000,000 fellow jobs. It seemed neither prudent nor appropriate to return cash to shareholders. However, we are now in a position where our strong order book and investment in WIP gives us some visibility for the months ahead. Our liquidity and cash flow forecasts look solid and our balance sheet has the resilience to cope with a potential second lockdown. We have no restrictions on capital, have a not accessed government funding through the CCFF fund nor the coronavirus job retention scheme. Against this backdrop, the directors are proposing a final dividend of £50 per share a 50% reduction compared to the final dividend last year. While the amount is reduced, this strikes a balance between maintaining ongoing cash returns and ensuring that the balance sheet remains strong given the uncertainty in the market. It also provides significant capacity for land investment. If approved, the payment will continue our unbroken record of always paying a dividend, including throughout the global financial crisis, in 2008 2009. Going forward, it's just too early to commit to a prescriptive dividend cover although the board does expect to increase the quantum impairments over time commensurate with the group's recovery in errands. So to summarize today's presentation, we achieved a resilient financial performance given the unprecedented circumstances. We have an ungeared balance sheet that provides strength flexibility and capacity for investment. Our asset backed business and strong order book affords good liquidity and we have substantial forecast headroom in the year ahead. We expect to increase the dividend over time in line with the recovery in earnings. And finally, the business is in good shape. Beyond the current international crisis, long term industry fundamentals and capacity for ballet to grow remains strong. I'll now pass you back over to Jason. Thank you, Keith. I want to start by taking a look at the sales market. If I could refer you to the table on the screen so I can make a comparison between pre and post lockdown sales rates You may recall that we had a positive trading period earlier this year on the back of the general election where sales were ahead by around 5% and that momentum continued until the 23rd March. During lockdown, we continued to sell remotely, but the sales numbers were fairly modest. Sell started to recover with the phased re openings of our selling outlets on the 18th May and further boosted by the introduction of the stamp duty changes In terms of house price inflation, it is difficult to make meaningful comments in a year with so much disruption. But it's true to say that prices remained firm throughout the lockdown period and any recent HPI has been at fairly modest levels. One key challenge that we face is delays to the sale process Higher volumes have resulted on additional pressure staffed or working remotely. And further, the absence of 90 or 95% loan to value mortgages has led to a greater reliance on the Help to Buy product leading to more administrative delay. Typically to convert a sale from reservation through to contract would normally take around 6 weeks. In the current environment, that same process is taking 8 to 10 weeks. Turning now to land Initially, cash preservation took precedence and land spend was stopped. However, gradually across the summer period, we did see some attractive opportunities and acquired 14 sites producing around 2000 plots. Some of those land vendors accepted a COVID clause giving Bellway the right to walk away. Others needed cash allowing us to acquire them at more attractive margins. Overall in the year, we contracted on a total of 11,900 plots and at an expected average margin of around 23%. Although it is worth noting that some of those sites may be subject to extended site preliminary costs. Going forward whilst we are cognizant with the pressures on the wider economy and that taper in Help to Buy products. We have started the new year with an appetite and the cash to invest in land. This front footage approach served us well in 2009 and we intend to replicate that model providing, of course, we can buy and see good quality assets. And I'm still driven by increasing the number of outlets across the group as I see that as a good way of spreading risk in the years ahead. Moving now to production, understandably there appears to be debate about the rate of production that house builders can deliver in the current environment. Since we started the phase reopening of construction sites on the 4th May, we have continued to build up speed and return to more normal rates of production. Initially, we started on a limited number of developments with just finishing trades concentrated on homes that were largely built. The purpose being twofold, firstly to convert WIP into cash, but also to train our staff and learn how to work within COVID safe parameters. Today, I would say that some of our housing sites are now approaching program speeds at pre lockdown levels. Whereas others can be restricted by access issues or kinks in the supply chain, service installations, or where staff are showing COVID symptoms or may have tested positive, any of these issues can lead to a drag on production or even result in a temporary site closure. To put all this into context I would estimate that as at the end of September, our productivity is around 90%. And that takes into account both those sales delays that I mentioned and also those restrictions on build. However, assuming the 2nd phase of COVID cases are kept under control, I do expect that level to improve as we move into the program for March 2021. It's unprecedented. Every UK house builder is planning an extraordinary volume of completions through to the supply of white goods and I genuinely hope that we have COVID under control at that particular junction. Moving on to costs. Previously we've had much debate about rate rising costs. Although today, I would suggest that inflation is negligible for both labor and materials We still have some cost pressure principally from extended site preliminary costs and the introduction of new building regulations but we also have the benefit of our new standard house type range, the Artisan Collection, which has enabled us to be more cost efficient Our new house types have been plotted on some 21,000 plots across 164 developments. And whilst we have costs under control, we do recognize the need to repair that margin. Our back to basics campaign launched on the 1st October does exactly what it suggests. Every business has been challenged with improving margin for FY22 and beyond. And a few examples of back to basics are quite simple. We've appointed a new architect at head office to independently assess all new site layouts to We have a significant reduction in professional fees as we start to get the benefit of that standardization. Our group commercial director now works closely with the divisions to review and value engineer or groundwork's tenders. £100,000 saving per order can lead to savings of up to £10,000,000 per year. And we have also introduced margin improvement plans to monitor those cost savings as we progress. I also want to talk about people. Despite the pandemic, we are still investing in young people. Boe has continued to recruit and develop young and diverse talent across all disciplines within the business. We currently employed 258 apprentices, graduates, and trainees across the group an increase of 76 in the year. And we are planning to recruit a further 40 graduates in September 21 and are also keen to participate in the government's kick start program, giving young people an opportunity to develop their skills. And I'm very proud to announce the opening of my new Bellway Academy. Which is based in Newcastle is now build complete and this wonderful new facility allows us to really invest in people and we start to plan our first training modules in the new year covering everything from construction through to customer service. Staying with customer service, one thing that has not changed throughout the pandemic is our commitment to quality and service. I'm very pleased to report that we have achieved our 5 star rating from the HBF customer satisfaction surveys for the 4th consecutive year. And our customer first program has continued throughout the lockdown period. And by way of reminder, this is an initiative to raise customer service levels across the group. So our customers not only enjoy a 5 Star home, but also a 5 star customer service. We plan to roll out these new processes in 2021 and these include a greater investment in IT Making communication easier for our customers. Customer service training for every member of staff in every division and formalizing that culture where the customer is at the heart of everything we do. Now for current trading, if I could refer you to the table on the screen, The 1st 9 weeks, the period from 1st August to 4th October have delivered strong sales with volumes up by 30%. To break that down further, The 1st 6 weeks of the year delivered record sales as that pent up demand sought to capitalize on the stamp duty savings. And the subsequent 3 weeks have delivered sales rates at more normal levels consistent with autumn 19. And I think it's reasonable to assume that sales volumes will be a bit quieter for a period next as the market adapts and adjusts to the end of the stamp duty holiday and the introduction of the new Help to Buy rules. Outlets have marginally increased from 271 to 276, and we have the benefit of a record order book of some 1,900,000,000. But probably the most important statistic for me is that we are now selling beyond March of 2021. There is clearly an appetite from our customers to purchase homes that are planned for completion beyond March of next year and that gives me the confidence to invest. Finally, outlook. Whilst the short term outlook necessitates a cautious approach, the medium term prospects for housing look positive. And I very much believe that house builders can be one of the key drivers in returning the economy back to growth and I would further conclude that new build housing is more robust the many other industries. We were one of the first sectors to return to work and have spent some 6 months learning how to work within a COVID safe environment. And if lockdown restrictions were to be tightened again, I still think we can operate safely. And Belway's investment case is simple. Our ability to recover and deliver disciplined volume growth is very strong. Prior to COVID, we achieved 10 consecutive years of growth. We expect to deliver around 9000 Homes this year with around 5000 in the first half. We are operationally strong with a focus on margin and customer service, which is exactly where I want the business positioned. We have a strong balance sheet which gives us substantial capacity to invest in land. And finally, we are returning to paying a dividend making Bellway the only volume house builder to pay a dividend for 11 consecutive years. Thank you. If you're using We'll pause for just a moment to allow everyone an opportunity to signal for questions. Thank you. Thank you. We'll now take our first question from Gavin from Barclays. Please go ahead. Your line is open. Good morning, Ann. Good morning, Gavin. Few questions here, I think the first one's really just We can hear you. I can hear you loud and clear. Yes. Yeah. Thank you. The the first question that I could, please, just around the London and the Southeast. Just wondering if you could elaborate Keith maybe on what you'd defined as, I guess, a handful of homes at around that 600,000 mark. And I'm just interested to, I guess, hear about a little bit of modest price pressure in that area and maybe you could elaborate on that, but also I guess the build cost that has been been rising there whether you expect, I guess, either of those trends to move by the way. Second question is around the non exceptional kind of site duration cost. I think it was about an 80 bps drag on the margin in the year. Is that something that's expected to drag into future years because those because of productivity levels, etcetera. So maybe an indication of the margin drag going forward. And then the final one's just on the 9000 units. So the guidance you've given, I wondering if you could please tell us, I guess, how how much of that is locked in with reservations at the moment, maybe with a contract against it and, I guess, where you're seeing the upside or downside risk. Thank you. Yeah. Yeah. Okay. No problem. So when we talk about a a handful of homes, you if you were to look at our land bank, we've maybe got 2% of plots. So above £600,000. Now if you look at competitions we had in the past year, There was probably something like a couple of hundred units, in that similar sort of price bracket. And I'm thinking if sites like some apartments you had in Iowa with, a scheme you've got in in Greenwich. I think the point that Megan is we haven't got a huge amount of exposure there. But if you're pricing something at £600,000, it can easily be £20,000 out. And multiply that by a couple of hundred plots. It it adds up quite quickly. So, it it it can't move things faster than you would otherwise expect. But overall, the exposure there is fairly limited and obviously we find very few product if any at all, is that sort of price point going forward. And in terms of the the build cost point, again, that's perhaps a few more pronounced in and around London and the Southeast. I would say where we are now, build cost pressures are relatively flat. But in the year, we have seen increases on certain subcontracts tender trades, particularly around, groundworks. But in addition to that, where we've looked to comply with new building regulations, particularly in respect to fire and that sort of, that part of the country that has added substantial cost in some instances where we've had to look at designs, more systems, and that's sometimes led to delays in planning. So that's what we're alluding to in that regard. On the on the non exceptional costs of £19,000,000 in relation, to to COVID, well, this is something we talked about a little bit of the trading update. So on all of our sites, we're now expecting the time to build and trade outs will be longer than it otherwise was. And let's say that 6 months or so is a reasonable assumption as we sit today, that adds substantial extra cost to the overall sites. If you think each side costs every 30 to £50,000 for months to run, that quickly adds up to a large figure. So it will have an impact in FY 20, but that will continue into subsequent years as well. And I think that 19,000,000, which we incurred in FY20, if we complete around 9000 units, could could be 24,000,000 dollars, $25,000,000, that, that sort of, ballpark. And I think Jason had jumped in on the 9000 Homes. Was it Thales, Gavin, you asked about on the 9000 homes? Yeah. Just around kind of, I guess, what you've got in the order book, how, you know, what what have you got secured of that 9000 and how much is to do if you like for, for the current market. Yeah. Quite comfortable positions, Gavin. We we've already completed on 2000 homes, so far this year, which is 700 ahead of this time last year. And the majority of our order book of 6000 plus units will fall due in this financial year. So we're we're quite far forward sold, for now. My my Concerns are not really sales. My concerns are other issues, really. And that's why there's sort of a tone of caution in in our numbers. And if you listen to any of that wobbling or nonsense, I was talking in my presentation, you know, those pinch points of March of next year are genuine concerns. You know, if there's a a COVID 2 or a COVID 3 at that junction, that can have a material impact. On our numbers. So I I think I agree that you'll conclude that, you know, we're in a comfortable position on sales, but just around the corner in the new year, we've got to contend with Help to buy 2 stamp duty holiday. Brexit, COVID 2, COVID 3, you know, the furlough scheme coming to an end. So there's a lot of hurdles to over, overcome. So that that's why there's a a little bit of caution in our numbers. Understood. That's really clear. Thanks very much, gents. Yeah. That's great. Thank you. Thank you. We'll now take our next question from Chris Millington from Numis. Please go ahead. Your line is open. Morning, Jason, good morning, Keith. I'll go with the usual free as well. In the commentary, you mentioned you're looking at ways to kind of mitigate the impact of the Help to Buy change. I just firstly would just like a little bit more commentary on that as possible. Second one is just about your attitude to land investment in London. I don't know if you're seeing better conditions at the lower price points, but does that go kind of hand in hand with your desire to invest more in land? And just related to that, and this is the 3rd question, If the market is sensible this year, I mean, what do you anticipate spending? I understand it's subject to deals, etcetera, but just to get a feel of the direction of travel. So I'll do that 13, if if you don't mind. So in terms of help to buy what what do we mean by trying to manage the impact? Well, I said, you're always going to have a mix of product on on-site and you're not going to get everything below the Help to Buy, threshold because you do need to have a a reasonable sales mix, but It's about making sure when we're investing in land that that sales mix is reasonable. There isn't the predominance of large 4 bedroom homes, the independent of 5 bedroom homes on there, and gradually nudging down the average selling price on those sites we're requiring. And perhaps the best example I could give is if you look at the additions to the top tier of the land bank in the period, had an average selling price of around £275,000. So it gives you some sort of color in terms of the the direction of of travel. In the background, of course, you know, we we work with third parties. We talk to people about what a replacement scheme might be in terms of a private scheme, whether that's 95% lending, whether that's a make, or or some of the, sort of product. All of those I think you've got legs, but all of them are complicated, and will not happen overnight, and we'll need a lot of effort to get over the line. Do you want to do at at the London, London? Yeah. I'm I'm good. So I I think how it's funded, it's been to London, Chris, is probably reduced, from as high as, 15 or 20%. I think we're down to 5 or 6% at the moment in London, but I've got no ambition to leave, London at all. I'm still very keen on that market. I suppose across the the the past 5 years, our approach to London has been more commuter belt as opposed to those more central zones. But my only caution on London is higher density apartments. So, I think I'll be reluctant to buy any taller schemes at the moment, but, certainly, if we was in places where we are at the moment. Actually, he's got home church, you know, Dartford, those commuter, areas where we've got lower dense apartments and housing schemes. We're finding that market very robust at the moment. And then with regards to your last question on overall land spend. I mean, just just a, you know, a big, a big caveat with it, that it will depend on the quality of opportunities and where the market goes. But if you take a bear's case of around 9000 units, we we feel we could comfortably expand in excess of £700,000,000 on land, which could give over investments, of 150,000,000 to 200,000,000 in the year ahead. If you look at what might go through the p and l. Now that's not a promise. It it's a guide. If the market's stronger, if completions are higher, clearly would have capacity to do more. I think our intention is to repeat what we did in 9, and and to use our balance sheet strength to invest when there are good opportunities to rebuild the margin and to rebuild the volume output. As quickly and as robustly as we can if the market supports that. Thank you. Our next question comes from Annsslee Lammin from Canaccord. Please go ahead. Thanks. Morning, both. And just three for me as well, actually, just on your ASP guidance of 290, just wondered how much kind of that I know it's only slightly down, but is there much assumption for house price inflation being negative? You mentioned the Southeast and a bit there. So just wondered how much of that mix in HPI? And secondly, just can you give the Help to Buy percentage of sales for this year? And thirdly, obviously, you'd cut out the kind of plans to open new divisions earlier this year. You've reinstated the dividends. Where are you on your about divisions, you're just still holding back cautiously until we've resolved some of the macro issues, just further thoughts on that really? So in terms of our average selling price guidance, such based on, the current expected completion mix based on the prices we currently have in our evaluations, they take into account any pressure we've seen in London, and they take into account any pricing that we've been achieving recently. There's no future inflation or deflation assumptions in the so so, really, it's just a very modest mix change coming through. Which cause that down ever so slightly slightly, but but just to, you know, be clear, you know, if you're talking about guiding within a few £1000, we're not we're not that precise in terms of our those other forecasts. On on healthify, percentage, last year was 35 percent of computations. What what we saw, throughout lockdown is that we raised a usage stepped up quite steeply. I think at one point was between 50 60% as, as the higher LTV product was withdrawn by the banks from the market, I would say now we're at a run rate of around 40% or so of health to buy usage. What that will be for the full year, what what we'll have to see is the rules change. So I'll pick up point 3, Andy, on you know, the divisional structure and and growth, which is a good question. I I have changed my you and my plans as a result of COVID. So previously, we was looking at new divisions and divisional expansion that I I suspended all that for the time being and changed the the approach that I'm creating for super divisions, as I call them within the group, so that we can grow some existing bigger businesses to run volumes of 8 or 900 units per annum. And the reason being is that I don't want the expense and risk of a new division in today's market, but I can still grow, some of our divisions and still deliver growth in the next 2 or 3 years. So if I've got a division like, Manchester or Milton Keynes where I've got very good geography and a very strong management team, then I think they're capable of de delivering bigger numbers out of those offices. So that tariff plan to deliver growth within the existing, divisional structure at the moment. I hope they explained it. Very clear. Thanks very much. Our next question comes from Jan Bell from Deutsche Bank. Please go ahead. Your line is open. Yes, morning gents. I think I've got 3 as well. First one is, could you just tell us the percent of your 2020 units that were in Apartment format and how that might evolve going forwards And the second one, if you could just update us on, I think you've got a scheme down in Croydon, which you had on hold because there were some quite big costs coming up. I'm guessing that may now have started, but maybe you could just update us on that. And then third, on the fire safety costs, provision. Just to clarify, was it originally the plan to take the provision over 3 years or was it that you expected the EUR 40,000,000 or so to land over that period in cash terms? Thank you. Alright. Alright. Well, I'll I'll do one of these. So apartments, I think it's about 15, 16%. Of the business. But there's all well, maybe not bizarrely, but we have, around about a third of those in London, at 2 thirds outside of of London. And I think that's, probably a core level of output now. The reason why I say it's a little odd is we used to be led by London in terms of apartments, but as we moved into the other zones and have less exposure there, you've seen that percentage figure actually come down to that 15, 16%, I think, is, a reasonable run rate we expect going forward based on the land we're buying at the moment. On the fire costs, the cash outflow is very difficult to predict because the schemes are obviously quite complicated. But the the the 2 to 3 year point is the ex a reasonable expectation in terms of when the cash outflow will be But we pay the P and L charge, obviously has to be reflected in in the year, which we did that because that is the obligation we feel we will have even though it it might take 2 or 3 years to spend it. John, just on Croydon, good spot really from you. It I've put the foundations in in, but I've not released it beyond that for the time being, which is the only development that I haven't released across the group. East Croydon site is very well located, but it's a twenty four story block. Next to a train station that runs into London in 15 minutes. And for me to start that, just at the moment, I'm a little bit nervous of the sales market, particularly where it's situated, and I don't particularly wanna invest 30,000,000, into the the width at the moment. I'd prefer to spend 30,000,000 on land and invest it in that particular site at the moment. So I'm just gonna see how, why the sales market evolves in the new year before I release fraud. I hope that makes sense. Hey, Dose. Thank you very much, gents. Thank you. Our next question comes from Marcus Call from Liberum. Please go ahead. Morning, both. Hope you can hear me. I've got 3 questions as well. So historically, the target was to have 500 artisan collection completions in FY 'twenty. What was the outcome of this? The second question is, could you please give some color on land buying in FY 2021? Should we expect the to be in line with the 9000 unit completions guidance? And the last one is, has there been any signs of slowing demand in forward looking measures such as internet traffic? Oh, real bad. On on our design, we, you're right. We initially said we do around 500, but but that came out at around 300 in the, in terms of land buy, well, I'll probably refer you to, our our earlier answer. We expect to spend in excess of 700,000,000, which could give a an over investment of, 150 to 200,000,000. If you assume 9000 plots, in terms of completions. And then on the internet, in terms of If I if I just answer the internet or the wider sales market. So we're the the window we're looking at is that 9 weeks from the first, the August 4th October. And in that 9 weeks, you've had 6, 50 weeks of sales that I I mentioned in the presentation, we've been returned to what I call more normal sales levels consistent with autumn 19. And more laterally, what we've noticed is that the social restrictions across the UK have started to tighten. We've noticed that out footfall has started to reduce, but sales have held up. So what we're seeing at the moment is just people lower intent on moving as opposed to any other, footfall. Now whether that changes in the weeks ahead, you know, is is anyone's get at the moment, because we're unsure how the restrictions will evolve, but the only real change of late is footfalls reduce the little I hope that explains that. Okay. Yeah. Thanks very much. Thank you. We'll now take our next question from Ami Galla from Citigroup. Please go ahead. Hey, good morning guys. Just a couple of questions for me. My first one was on the land market. As the sales rate have recovered across the markets, you seen competition intense, become more intense in this market? I mean, I'm wondering if the small and medium size developers are also participating in the sort of deals that you are looking at? And again, is there any difference between same short term land as what to say strategic land? My second question, you touched briefly on supply chain pressures becoming a sort of a delay point in the sort of bill cycle. Has that experience improved since reopening, or are you seeing more tighter of material availability across some of the product categories? I'll start with the landmark here, Amy. Certainly across the summer, there was very few if anyone in the land market. So we were pleased to pick up a few deals at better margins, but the numbers were were fairly modest. It's with got into the autumn market where the land market is generally, it's busy period. I would say the most competitive part of the market is the medium size sites. You know, a 100 to 200 units seems to be, competitive. The only, the only people buying at the moment, and I'm exaggerating a little to make a point by the volume out builders with these are balance sheets. So we're yet to see the smaller, private players return in any numbers and there are no housing associations buying land at the moment. So it it's just sort of restricted to medium size or bigger volume house builders. And I I wouldn't call the market the competition intent. I'd just say it's busy around the medium sized outlet. If you wanna buy a site for a thousand units, there's very few buyers, but, there's still a few on the the medium sized stuff. And in terms of the supply chain issues. You know, he still today, and we've been back to work for 6 months. We had you know, what I call kinks in the supply chain in some parts of the country, that still fizzed persist today. And some of the leading periods, all sorts of materials, you know, whether it's basketball or bricks are are are still extended. And I I do worry about March of next year, when you've got all the stress on the supply chain, you know, whether it's a mortgage approval or a mortgage consent or white goods or floor coverings, you know, that's gonna be huge pressure in the industry. A a a time when everyone's not really a a a full pace. So I think they're all manageable at the moment. The supply chain issues, but they could, return to office in the new in the new year. Thank you very much. Thank you. Our next question comes from Emily Biddoff from Credit Suisse. Please go ahead. Your line is open. Good morning, guys. I hope you both well. I've got 2 questions, please. The first one, I just wanted to come back on volumes. I appreciate the sort of the 9000 guidance and the points you went through in response to Gavin's question, just around the sort of potential risks of sort of delivery later in the year and sort of visibility on sales rate later in the year. But I just wanted to sort of get a sense of like if actually there isn't too much disruption through this range? Like, what's the upside scenario here? Like, is it possible that you can go through 10,000 units, or is that a sort of completely impossible number because of the rate of field at the moment. I just sort of wanted to get a sense of sort of high conservatives and 9000aires and kind of what you potentially could do in a sort of relatively perfect world? And then secondly, on gross margin, like I appreciate you don't want to guide on the full year at the moment, but presumably you've got pretty good visibility on the gross margin on those 5000 units in the first half of the year. I just wondered if you'd sort of, yeah, you'd like to quantify that at all, or you give us any sort of sense of how do we should be thinking about the H1 gross margin? Thanks very much. Emily, I'll I'll do the third one and maybe Keith to do the other one on margin, but On on the volume. I mean, it's it's a good question because our sales and our width is in a a a a very robust position. But we we don't look at where, if it's a perfect world, where we could be in July, we do look at the opportunity to upgrade, you know, various points in the year, Emily. So, you know, it's it's not beyond the realms of possibility that we could deliver 25% growth this year. You know, that's the next, target for us to hear. You know, the moment we've guided 20 percent to take us to 9000, I guess 25 percent take us to 9495. So it is the sort of missed clears in the new year. That would be our our our next target to look at. And then we'd review it from there. That's all I can really offer. I'm afraid, Andy. With regards to the, the margin, Emily, we do, I suppose the only firm that you have in terms of H1, is you know what revenue you've contracted those plots us, we obviously take a site based margin, which will vary and evolve throughout the duration of the site and those symptoms will evolve in the next 6 months. So that's why, we can't say precisely what that will be in in H1 at this stage. What I would say is the overall margin we expect to deliver in the order book is most likely to be in excess of 20%, that will be, I suppose, a reasonable level of outcome for the full year. I'd take those figures with a pinch of caution in terms of how precise they are I've got something in excess of 20 percent for the gross margin for the full year. And as I sit there, I suspect both volume and margin will be stronger in H1. And that strength in H1 is, not just the order book in terms of volume, but also that will help you recover overhead, more efficient DNA to our most likely as well. But to give you a more precise fit than that, I think, would be, making them a little bit. That's really useful. Thanks guys. We'll take our next question from Sam Cohen from Peel Hunt. Please go ahead. Your line is open. Morning, gents. I've got 3, I think. First one is, sort of, when you talk about the land deals that you imported this year and you talk about Croydon and some of the other, and the lowering apartment level of apartment schemes you guys are looking for Is that kind of related that you're thinking about post COVID world with, with, apartment schemes being less attractive than perhaps they want to work. So just some comments around that would be interesting, whether they're related or whether I'm just making connections with their answer. And secondly, just your thoughts about the potential to continue to rebuild margins towards a sort of 20% level without underlying HPI, if you're still going to have a kind of £3000 to £4000 increase in costs on the back of the energy scheme, it would be interesting some comments there. And then then lastly, kind of related to the stress you're alluding to in the supply chain. Were we to have, say, a 2 week cold snap in November? How much capacity do you have, to kind of hit the build targets you need to, you need to hit to in order to make the numbers you think you're gonna for for March, next year. I'll be able to hear your comments around there. Thanks. Can I do the I'll do the apartment dues? My view on apartments, Dean. Is there there is still, customer demand for apartment schemes, but we we do like if we're doing them in the future to have whiteboards, some sort of social infrastructure in the building. So, you know, if it's an apartment scheme, I'd like to do low or medium density, and I'd want, a resident gym in there, and I'd also want, an office suite in there for use by the residents. So he's just creating some other after the building that are interesting to the resident so they can live, you know, work and keep fit in the building. I I don't have an appetite to do high dense residential only buildings at the moment, because I think there's too many negatives in the market against that. So I'm not against departments. Just specific apartment, the interest at the moment. In terms of the supply chain, it's still a 2 week cold snap, in December. It had no impact on on on us at all. We are very operationally focused as a as a business. That's probably one of our strengths. So unless the cold snap was for you know, 6 weeks, it it it wouldn't affect us. We're well managed. We're well organized. So we'll we'll be fine in that regard. And I think you're asking around no normalized margin and taking the cost pressure stolen forward. The way I would answer that is we've contracted on land in the periods, at a gross margin of around 23%. That takes into account expected additional cost of complying with building regs of around £3000 to £4000 per plus. Yes, there could be a bit of downward pressure on that margin because of of COVID, but but prior to COVID, that was the expected intake margin. And in addition to that, we have made an assumption in the majority of our valuations for plots which complete beyond most probably December 21 that the new building regs will become applicable, and therefore, we'll separate from those costs. And we've got that embedded within our our margin guidance. So once we once we begin to normalize, and you haven't got this COVID issue anymore, I still see no reason why, a 23% gross margin over the long term shouldn't be something that we aim towards, albeit it will take a good 2 to 3 years, I expect before we get back up to that sort of level. And of course, it assumes that an alarm market continues to offer opportunities at that at that sort of price point. Okay. Thank you. We'll now take our next question from Alacer Stewart from Progressive Equity Research. Please go ahead. Your line is open. Good morning, gentlemen. A couple of questions. First of all, Keith mentioned, you could take advantage of, think the words were compelling opportunities in the land market. Are they starting to, present themselves just now? And is there any change in the, in the landscape as it were, it's a more sort of, redevelopment of retail sites, coming along, with the new planning, regs. And the second question refers to, Jason's comments on the 6 week, sales period going up to 8 to 10 weeks. Is that now the new normal, or do you think it could speed up if, banks and, surveyors bring on more more resource. And, you know, if it doesn't, could this present difficulties ahead of what looks like a really quite challenging, February March for you. I'll I'll tackle both of those, Allison. So, I think what he means with compelling, land opportunities is that there are some very good locations, what we call robust desirable locations with, you know, a bell white type ISP that we're we're very interested in, and they're good for us for the medium term. So I don't think land prices have changed materially, so certainly not at the moment. I would describe them as stable. So, it's the number of opportunities that are on the market. The interest is because it gives us choice. As opposed to just bidding on whatever comes next. In terms of the retail market, We've already started, building and buying land in places like, Lake side where Hamilton have been selling off retail land. I would expect that space to grow, as you'd suggest, in the next year or 2. As more of it gets sold off, across the UK. So it's something that interests us, very much. Because we've been, quite successful in in that area. And in terms of the stresses on the south system, I I think they are going to ease principally because the problem we have at the moment is that lenders and suppliers are sort of a little bit overwhelmed even the help to buy agents across the UK have seen a spike in volumes But I think once they digest that through the system, I think as we roll into the new year, that position will lead and we'll move back to, you know, a 4 to 6 week reservation to contract period. Although you might see a little problem in March again as the ill goes through the funnel. At the end of March, but I do think they're leads. I think it's a short term problem, Alastair. Just one very quick final question. Jason, you mentioned, housing associations, the rights of the the land market. How's that? I I haven't spoken to, but certainly a number of the ones in London, have been concentrating on their existing pipeline program. They've been, concentrated on some fire issues as well. They've not been investing in, the land market. Since March of this year. Whether that changes again, Alice, there are I'm I'm not so sure, but they've got big management issues to handle, haven't they, which we don't have. So I think they're concentrating on those for the time being. Great. So, thanks very much. Thank you. We'll take our next question from Andy Murphy from Panmure Gordon. Please go ahead. Your line is open. Thank you. Good morning, Jason. Good morning, Keith. I'll go with the standard 3 if I may. On productivity, you talked about being a sort of 85% to 90%. Just wondering whether you could give us a flavor of when and if you think you can get back to the full 100 percent. Secondly, just thinking about house layouts and sort of the impacts on people's behavior and requirements under sort of lockdown scenarios scenarios. So I was wondering where you're at in terms of you're thinking about introducing garden pods as offices or putting, sort of make more use of rooms in lost sort of spaces, and wifi, that sort of thing to to help people along. And whether we're people actually demanding those sorts of changes, And then finally, on the Artisan collection and the cost savings around that, I was wondering whether you could give us a flavor of what level of cost savings have come through and what further efficiencies in terms of sort of annualized pound notes are there to be taken. Andy, I'll do the 3rd to maybe Keith will help out on the, the architect. So pro productivity, I would suggest we're at 90%. Andy at the moment, if I was to be honest, of productivity compared to pre lockdown levels. It it's not I think exact science, I'm, I'm sure some pretend it to be, but it changes by the week. I've got a number of developments across the UK that are building up pre lockdown levels, whereas others, are sometimes restricted by access issues or those kinks in the supply chain that I mentioned earlier, or sometimes we have staff or contractors that test positive or even show symptoms, so we close the site automatically for a period of time. And also you'll have some apartment schemes, across the group that are still limited by social distancing because it, because of the footprint nature of the site, there's only so much welfare facility you get on-site. So instead of having two hundred people on that particular development, you might be restricted to 125. So there's still some, issues in the system that put a drag on production. But to answer your question, we still think we can grow that ninety percent. It's assuming, you know, COVID 2s kept under control. So we still think that can improve again in the new year. You know, maybe up to 95%. It's just, subject to COVID, really, at the moment. Andy, and in terms of the house type layout, you're you're quite right to mention it. Those office, type layouts that we look at. Sorry. Not the offices. The, the apartment Kings that we're now introducing business suites in and gymnasiums. Similarly, on our standard house type range, we've got opportunities for customers now to have, homework in within, the building, certainly in four and five bedroom homes. But we're also offering, you know, garden rooms or office parks, as a customer for that you can have in in your garden as well. Can can you answer the yep. On on Arthur Sun, Artisan is one of a number, of things going on in the business to try and intensify that focus on on cost control. And it will take several years, though, before you really do see benefits come through. The reason why I say that is rather to be plus plug it off to sign on 21,000 plots. They take time to come through the the planning system to be build concrete. You have something like 4 to 5000 expected to come through in the next couple of years or so, but that won't dramatically change the the the p and l. It'll take longer before you have a a a higher level of compliance with all of our divisions. But the scope for savings is initially around things like design and engineering phase. We will not have to repeatedly pay architect phase. We will not have to repeatedly revised site drawings, we'll only have to comply, with evolving building regs once rather than 22 times and 22 different solutions. And we will spend something like 15 to 20,000,000 in the group on professional, fees, where where which is, I suppose, the the ultimate prize under serving. In addition to that though, there was efficiency servants, there's familiarity with the product And then there's what I would call value engineering, which runs in parallel with this, and that's things like, can we get a better grip deal on our boilers, for example, because you've got less variety because you have a standard product and you have one solution Can you get the best deal on your roof tiles or or whatever it might be as a result of having a standardized approach? And I can't give you a precise figure because it just continues to evolve and it will change year in, year out. But but I think I think the the underlying message is that it's a directional thing. It's right for the business. It creates conscious and see and how to maintain the the quality which we strive to achieve.