Earnings Call: H2 2018

Oct 16, 2018

Morning, everybody, and, welcome to the 2018 final results presentation. I am joined by, Jason, chief exec and Keith Adi, the finance side. I think both of you may know already. And today, I will highlight the key financial and operational achievements in what has been another great year for the group. Jason will then give you an update on strategy before Keith takes you through the results and the balance sheet. Jason will then round off with an operational review before we go into take any questions you may have. So turning to just the key highlights, we have broken 10,000 homes, Barry, for the first time in our history, increasing volume by 6.9% to 10,307 homes. Return on capital remains high at 27.2% and taken together This has helped drive up earnings per share by a further 14.2 percent to 423.4p. And this has facilitated a 17.2% rise in the proposed total dividend, which has increased to 143 p per share. In terms of capital growth, The net asset value per share has risen by 16.5% and now stands at 20.79p. Operationally, I'm delighted to say that we've maintained our status as a 5 star homebuilder for the 2nd year. The land bank is solid, and we've contracted to acquire nearly 13,000 plots, helping to ensure that we have all the land in Lastly, the order book is strong and with new divisions planned and coming on stream, I believe we are well placed to continue our disciplined and sustainable growth strategy. Jason? Thank you, John. Before I talk about the results, I thought it'd be useful to provide a brief overview of the market, set out our long term approach to delivering value and then explain how both of these have influenced our strategic priorities. Starting with the market, Firstly, there is still a good demand for affordably priced homes in many parts of the country. Excuse me. And industry output in England is still substantially below the government's ambition of 300,000 homes per annum. I'm also encouraged that there remains cross party support for the supplier of new homes across all tenures. Brexit clearly poses considerable uncertainty in the wider economy, and we're yet to see whether the March leaving date will have an impact on our busy spring selling season. At the moment, however, with unemployment at a generational low. Customer confidence is still holding up well. Access to low cost. Mortgage finance is good. And not only is this supported by a a responsible lending environment, but we expect interest rates to remain low. In the medium term. Help to buyer is providing a necessary boost to the sector, particularly for first time buyers who presented 2 thirds of our customers using the scheme last year and Help to Buy is also providing access to competitive mortgage finance and critically helps people get on the housing ladder who would be otherwise unable to do so owing to the substantial deposit required to secure a competitive mortgage deal. Land availability is still good, supported by a generally positive planning environment. Our only frustration with planning is the time taken to convert an outline planning permission into an implementable consent. And the period of time taken discharge the many repetitive planning conditions that inevitably lead to delays in starting new developments. And lastly, access to certain labor and materials remains a challenge, which whilst it's probably frustrating the rate of growth in industry, it's not insurmountable so long as you we continue to manage the business with a strong operational focus. At Bellway, we're adopting a long term and sustainable approach to our business, and this requires a strategy that is flexible which is particularly important when managing a business in what has traditionally been a cyclical market. We believe a long term focus requires a quality product, a strong brand reputation, and critically a strong focus on customer service. Our strategic priorities have been designed to provide a platform for further growth, yet also afford us the flexibility should there be a change in the market. Conditions still offer the opportunity to deliver further value, principally through volume growth and return on capital employed, and this should lead to further value creation. Through capital and dividend growth. In seeking to achieve these objectives, we have 4 key strategic priorities Driving down costs, appointing the right people, strengthening the brand, and maintaining a flexible capital structure. Now both Keith and I will return to these throughout the presentation, but first Keith will give you an overview of the results and the balance sheet. Yeah. Thanks, Jason. Good morning, everybody. So I just plan to take you through the results balance sheet in cash flow in the usual manner. And so starting with the results, and you'll see that the 6.9% increase in volume together with a 9.4% increase in the average selling price, which rose to £285,000. Resulted in housing revenue rising by 17 percent to over £2,900,000,000. This is 2.2 times higher than the level achieved in the previous session peak of July 2007. Evidence in the rapid rate of growth achieved by Belray. Other revenue reduced to £21,000,000 and mainly includes the usual receipt from the disposal of freehold reversionary interests on apartment schemes. Which was £11,000,000 in the year under review. And as a reminder, the prior financial year included an unusually high ground rent sale receipt of £33,000,000. In the current financial year, we're hoping to dispose of a further ground rent portfolio But beyond FY19, the legislative outlook is more uncertain, and hence, grant grant sales may no longer be a recurring source of other income. Gross profit rose by £92,000,000 to £753,000,000. An operating profit rose by over 14 percent to £653,000,000, with an operating margin 22.1%. The strong trading performance resulted in PBT, rising by over 14% to £641,000,000, and earnings per share rose by a similar percentage to 423.4p. The growth in volume was mainly driven by an increase in the in the number of private completions, which rose by over 9% to 8263. A total of 348 homes were sold using our Asbury brand, which accounted for 3.4% of output. And this may be relatively small but it's equivalent to a small divisions width of additional units that we were able to sell with no real change in the overhead. We use that brand only on those larger sites where there is scope to half dual outlets. And whilst there's still potential for us to grow, we won't use it as a tool to justify buying larger sites. In addition to completions on fully owned sites, our share of output from joint ventures was 42 units. And depending upon build programs, this should increase further in summer 2020. The private average term price rose by over 9% to £323,000. With the rise mainly influenced by investment in desirable but still affordable locations across the country where demand is strongest in sales proceeds, therefore, tend to be a little bit higher. But notwithstanding this increase in selling price, our core focus remains on affordably priced middle market family housing. This has influenced our strategy on both land buying and standard house types as Jason will outline later. Affordability is location specific. But our exposure at the upper end of the market is limited. And as a generalization outside of London, the market can be slower for homes priced over 5 £1000, and this represented only 9% of completions in the period. Within London, the market is slower for homes priced above the Help to Buy threshold of £600,000. And again, homes in this price barn constitute a small part of overall output representing only 4% of total completions. Naturally helped by continues to be an important selling incentive, and it accounted for 39% of completions. In addition to Ashbury, it's our 6 most recently opened divisions, which are making the greatest contribution to growth. And their output grew by almost 25% in the air, and in total, they accounted for 22% of homes sold. Adding further new divisions to the structure will be key to delivering future growth. Out of our 13 more mature divisions, 7 are now delivering output in excess of 600 homes per annum, a reflection of the strong market, which has helped augment returns. Our Scotland West division is a good example, completing the sale of 794 Homes, thereby enabling it to spearhead the Oakland of our 20th division, Scotland East, on 1st August 2018. London is still really important to Belway, but represented only 11% of completions, and our average selling price in the capital, if you take out 9 albums, was only £376,000. And not only is that price point affordable in the context of the London market, but we're still seeing demand robust at that sort of pricing. 9 albums are still performing well, and it contributed 132 completions in the year, and those together with prior year completions and at exchanged reservations mean that we had only 62 apartments left to sell at the 31st July. We expect 9 hours to be build complete in winter 2019 and still anticipate that the final site margin will be better than our acquisition assumption. Now looking at the operating profit bridge, and as I guided last October, the rise in average selling price was the major driver for growth. The increase in volume was also important. And a further £45,000,000. And the chart shows that £31,000,000 of this was from growth in our 6 newer divisions. The profit contribution from the disposal of Freehold Reversionary interests was £17,000,000 less than the prior financial year. And as a result, the ground rent disposal contributed 20 basis points to the gross margin a reduction of 50 basis points compared to FY17. Following the events at Grenfell, we have, as you would expect, undertaken a detailed review, and we've identified a small number of high rise buildings where ACM was used. All of these obtained the appropriate building regulation to sign off at the time, but nevertheless, as a large responsible developer, we believe we've got more than just a legal obligation to our customers. We're, therefore, working with others to design replacement solutions where there's appropriate to do so, and we believe the net cost to bow her if any remedial works is less than £6,000,000, and this is fully reflected in the reported gross margin. And I'm drawing this out, not because I see it as a material sum, to give you some comfort that we believe the expected costs of remediation are fully reflected in the balance sheet. Adjusting for these non trading items, the underlying housing gross margin remained very similar to the prior financial year. However, the benefit of house price inflation, which affects the margin in the future, is less pronounced than it was previously. You may recall, we used to talk about achieving price rises of 10 to 15% when new sites in London were first released to the market. This is simply no longer the case, and hence, the challenge going forward will be to offset some of the reducing benefit of house price inflation with improved land buying hurdle rates and a reinvigorated focus on cost control. In relation to the administrative overhead, cost increases reflect investment in new stuff and new divisions in order to achieve growth. The demand enhanced cost of employing skilled staff remains high, but the absorption rate has again improved as the newer divisions gain critical mass. We will be investing again in the year ahead in a cautious and disciplined manner. But overall, the operating profit rose by over 14% to £653,000,000, and the operator margin was 22.1%. In the current financial year, the operator margin achieved will depend upon site mix and the extent to which we capture future house price gains. There will inevitably be some moderation in the future, reflecting the lower inflationary environment. And Jason will therefore explain some of the positive cost control initiatives that will help to protect the margin over the longer term. I've included the balance sheet for reference, And the investment in joint ventures includes our site at Fradley, and our longer term site at point the Ponton road. And it may be small and meaningless to all but a handful of people, but it would be remissively not to point out that it lasts after 12 years of IS 19, we're able to report a modest pension service, albeit it is just over £1,000,000, but perhaps more meaningful in the context for the balance sheet. Is our investment in inventories, which I will come on to next. The total amount invested in land has risen to £2,000,000,000 with some £1,700,000,000 of this relating to the 27,000 plots which have the benefit of an implementable detailed planning permission. The additions to the top tier of the land bank have a plot cost of £64,000 and an expected average selling price of over £270,000. The overall average plot costs in this section of the land bank is just over £62,000, and the average selling price is around £290,000. As a result, there should be further yet more moderate growth than the average selling price. Which in the year ahead, I expect to be slightly in excess of £290,000. Whilst the average selling price should rise, our exposure to particularly high value units is low, with only 5% of plots with a detailed planning permission, above the help to buy a threshold of £600,000. Our pipeline of owned and controlled land where DPP is expected within the next three years has risen to 14,200 plots. And taken together with the DPP land, this provides alarm bank runs to 4 years. In addition, our strategic land holdings have risen to 8 and a half thousand plots, and I stress this includes only those that are allocated in local plans or other subjects of current planning applications. The investment in construction based work in progress has been a major driver for growth, and it has risen slightly to £1,100,000,000, but as a percentage of housing revenue, it's fallen slightly 38%. As a generalization, construction stages are slightly more progressed than they were this time last year, commensurate with the growth plans for the business, which are, of course, subject to continuing market demand. And as always, we're careful about build releases, We seek to optimize investments to achieve to achieve growth, whilst ensuring the balance sheet is not exposed to undue risk. Of a proportion of units released to build, but not yet sold as the same as it was this time last year. And the amount invested in pot exchange properties is closely monitored, but its risen to £47,000,000, reflecting a slower secondhand market. The group's financed by retained earnings, bank debt, and land creditors are significantly cash generative producing £648,000,000 from operations before additional investment in the land and construction based web. It's this continued investment that has allowed us to more than double revenue since the pre recession peak. After investing in land and site construction to achieve growth, the cash generated from operations was £376,000,000. Representing almost 58% of operating profit compared to 45% in the prior year. Overall, after paying the dividend, tax, interest, and other minor items, we ended the year with net cash of £99,000,000, representing an ungeared balance sheet. And even inclusive of land creditors of £365,000,000, gearing was low at only 10%. Should the rate of growth reduce over a sustained period, there will be less requirement to invest in land and whip and, hence, there will be more capital for return to shareholders. And in terms of the dividend, I'm pleased to confirm that the proposed final dividend will rise by 12.4 percent to £95 per share. If approved, this will mean that the total dividend will rise by 17.2 percent to £143 per share representing a cover of three times. The compounding effective reinvesting earnings back into the business means that this dividend is now 3.3 times higher than the pre recession peak of £43..1 per share. Notwithstanding the future growth potential in the business, the total dividend yield based on yesterday's closing share price of just over £28 was over 5% demonstrating the inherent value in the group. We retain the ability to be flexible with regards to dividend payment but for the foreseeable future, I expect that we will maintain a cover of around 3 times earnings. Our approach to growth requires an ongoing focus on return on capital employed and this has remained high at 27.2 percent. Post tax post tax return on equity was also high a 22.1% even with a lowly geared balance sheet. Over the past 3 years, revenue has risen by almost 68%, and earnings have increased by 84%. In addition, the growth in NAV and dividend over the same period represents an annualized accounting return of 23.3 percent per annum. Going forward, we see further potential for growth, but malware remains agile. We're able to respond to new opportunities or to changes in market conditions, but always with the overriding objective of making the right long term decisions for shareholders. Thank you, Keith. I'm going to provide an update on operations, and then trading. Starting with growth from new divisions. We have opened 7 new offices since 2013, and over the same time, we've increased volumes from 5600. To over 10,300 units in FY18, representing an increase of over 80% As Keith mentioned, Scotland East is our newest division opened on the 1st August, and combined with our Scotland West division, has the capacity to deliver 1200 units over the next 2 years. Further expansion, is planned with 2 new divisions, Eastern Counties, and London Partnerships. And these will both commence construction in this financial year and contribute to completions in FY 'twenty. Eastern Counties is based in Huntington, and will focus on good value family homes between the cities of Peterborough and Cambridge. With London partnerships based in East London, we'll focus on strong relationships with RSLs and local authorities, and this new division will concentrate on lower cost homes in London where the shortage is most pronounced. A partnerships is not a new initiative, Bellway, our Thames Gateway and Essex division have previously carried out a number of regeneration schemes, and joint ventures, but this is the first time we've set up a bespoke division. In setting up the partnerships division, we've already placed our Barkin Riverside project into the new team, and this is where Bellway acts as a delivery partner to GLA and the LNQ Housing Group. And I'm more also pleased to report that we have a further 800 plots with heads of terms agreed in in pipeline, with other RSL partners, that we we should start towards, the summer of 19. In addition to the growth opportunity from partnerships, the prefunding part profile of such schemes will allow us to improve our return on capital employed in line with our strategic objectives. And as Keith has already mentioned, it's the investment in these new divisions that is driving our growth, and this new structure of 22 divisions gives us or generates a capacity of around 13,000 homes, and gives us the platform to deliver growth in the future. And beyond that, our business remains scalable, and there is scope for further expansion in years ahead. Turning now to growth from land acquisition. We've been active in the land market. Plots contracted in the year to date, total around 13,000 across a 100 sites, and they're expected to produce an average gross margin of around 24%. Outside London, our landline has been focused on, but they'll waste traditional market of good value family homes, and our land buyers are working hard to ensure that we have the right product mix and in locations that attract stronger selling rates. And this means fewer larger homes and homes above the Help to Buy limit of £600,000. Inside London, our appetite is generally concentrated on the greater London boroughs and the commuter areas, with an ASP of around 375 k where we continue to find a robust selling market. Recent larger acquisitions include Saint George's Hospital in Horn Church, a former Tesco site in Dartford, a former Waitrose site in Chelmsford and some redundant retail land in Lakeside near Zurich. All of our sites are still sourced locally in the divisions, but we continue to approve all land acquisitions through our head office land buying team. And this discipline allows us to strictly manage the level and size of investment but also gives us a greater control over units, mix, and ASP. Strategic land has also been the subject of further investment. Our strategic land holdings continue to grow in size and our investment is now starting to bear fruit. During the year, we've promoted over 2700 plots from our strategic land bank into our owned and controlled land bank, and we anticipate further successes in the short term. We've also signed up a further 27 options during the year, which could ultimately provide over, planning permission for over 7000 plots albeit only 2700 are included in our land bank as a measure of caution. By way of example, we recently exercised an option in Maidstoning Kent where we secured detailed planning permission for a scheme of 250 units this was part of an emerging local plan and was acquired at a discount of 12 a half percent to market value. Overall, our strategic land bank of 8a half 1000 plots is providing a useful source of supply. As we continue to grow in size and I anticipate further investment in this area. Turning now to costs, Fairway has a strong culture of cost control running through the group, but cost pressures still exist for labor and materials and gaps still exist in the supply chain, albeit they are more manageable and appear to be abating. In some parts of the country. Overall, we expect costs have increased by around 3% in the year. And as Keith points out earlier, the benefits of house price inflation are beginning to reduce, so we need to mitigate the impact of these cost pressures and drive efficiencies through the group. And our approach to this is simple, but effective. A new standard house type range, a new standard specification, and a new group head of procurement. And these three drivers are there to simplify and modernize the build process, enable us to accelerate build times, and by make, by materials in greater volumes, at lower prices. We're also modernizing our IT structure. The Nucorn's valuation system is currently being installed across the group. Over the next 24 months and improved visibility on costs will allow us to manage developments more efficiently but also provide greater visibility when buying new land. Turning now to the new house type range. Central to our cost objectives is the artisan collection, initially comprising of 24 newly designed homes, ranging from two to five bedrooms. 80% of the range is sized under 1200 square feet. Which positions us firmly in the market for good value family homes. Since its launch in June 2000 and 18. The Artisan range has already proven to be very successful. We have plotted the house types on 44 developments across the country, totaling some 6000 plots. The first plots are expected to receive planning permission in November of this year, with the first artist at home being occupied in the summer of 'nineteen. And the key theme of this range is the flexibility of the elevational treatments. Each house type can be plotted with either a brick, weatherboarding, tile cladding, or rendered elevation, and this allows us to create a variety of street scenes and address particular design codes and character areas yet still meet my ambition of standardization. And this approach maximizes the usage across the country which explains why I've been able to plot some 6000 homes in such a short space of time. Our internal layouts have been based on customer feedback and represent the way people want to live today. And similarly, our new standard specification is developed for living in 2020 and beyond. And some of the new features include hardwiring for broadband, USB points, LED downlighters, and notably electric car charging points on some of our new developments. Aside from the new designs and features, our house types are more efficient and easier to build. Early pro prototypes and detailed program have indicated we're only able to accelerate build times by up to 2 weeks per house. Cost benefits are also significant. Initial estimates project bill cost savings of around £2000 per plot driven from design, marketing, prelims, and build costs. Our second strategic priority is about appointing the right people. We invest in people. We put people first, and everyone is encouraged to make a difference in developing and progress in their own careers. This creates a very successful and positive working environment, and it's this operational strength that has afforded us the opportunity to grow volumes, yet still improve our standards of quality and customer service. We are members of the 5% club. This is a young person's initiative designed to ensure that 5% of our staff are either graduates or apprentices across the group. We're also developing a site agent training scheme. For managers at every level. And the purpose of this is to design a set of training courses for site managers at all levels of experience but all focused on quality, customer service, and health and safety. And we hope to have this training program in place for the summer of 19. I also want to focus on stronger brand recognition, and we are committed to maintaining our 5 star status as a house builder. This year, we achieved a record score of 92.1% for customers who would recommend Belway to a friend, and we are only 1 of 2 major national house builders to achieve disaccolade. Last year, our site managers won 49 NHBC quality awards, a relative to our volume output. This is the strongest performance in the sector. Our website has also been revamped to improve the customer experience when buying a new home and also better capture potential sales leads. We recognize customers' approach to buying a new home is evolving, and the internet is now the primary lead from all of our sales inquiries. Our new website offers a fresh new look, a much improved search and functionality. And we've also introduced a Belway London logo to complement our existing corporate identity with the intention of improving our visibility in London but also in a more consistent and cost effective manner. Turning now to trading, During the year, the group benefited from modest house price gains, perhaps 1 or 2% with these being more more pronounced on affordable homes in good residential locations. Our reservations were up 7% at a rate of 200 homes per week. And notable performances were delivered in Scotland, East Midlands, and Essex, demonstrating a strong performance in a wide range of geographical locations. Average outlets have also increased by over 7% in the year to 247 And importantly, we expect them to rise again in FY19 to 264, a further increase of 7%. Our cancellation rate has also remained static at around 11%. Now for current trading, Sales in the 1st 9 weeks since 1st August are up by almost 3% at a 176 homes per week. And our order book at the 30th September is also up by nearly 8% to almost 1,500,000,000. Which albeit this reflects a lower number of completions in the year to date. 68% of our order book is also contracted. And finally, Outlook, Scotland East is now opened. And as mentioned earlier, further divisions come on stream from the 1st February, and we'll deliver completions in FY20. We are mindful of the uncertainty surrounding Brexit, and we will wait to see where the customer sentiment is affected during the busy spring selling season. That said, we are well positioned as a business, and I have 3 key messages. Firstly, standardization of our product will drive down costs and help mitigate margin pressure in the future. Secondly, Our London Partnership's business provides an excellent opportunity to deliver more homes in London and already has a pipeline of some 1300 units. And finally, with 22 divisions, we have the platform to deliver further growth. Both this year and beyond. Thank you. Well, thank you for listening. I don't suppose anybody has any questions, but just to lay off chance. Yeah. Fire away. We've got a microphone link. Sorry, it's Charlie Campbell at Liberum. Just a couple of questions, please. Just on in terms of volumes, you've typically tended to give volume guidance for the year ahead. And I note this year, you've you've declined to do that. Is that a change of style and we should expect that we won't see volume guidance again or just there's too much uncertainty and therefore, you've decided not to. And then the second question, you gave a gross margin on land acquired at 24%. I just wanted to check. I presume that's before the benefit of standardization, but just wanted to be clear on that. If I do the first one, you The second one's your one. Charlie, it's not an indication that we're not gonna give volume guidance, in the future. I think we're in a strong position for the autumn. We've got we're in a position where we have an increased number of outlets this year. We've got the whip in place, we've got the staff in place to deliver, and we expect to deliver growth of around 500 units this year. We just want to make the point that it's probably less pronounced than last year because we're a little unsure around the uncertainty surrounding Brexit. Now I think it's important to note that, you you'll be aware that in FY18, all or most of our volume growth was de delivered by private sales, and it often swings with the pendulum. So this year, we can deliver volume growth through, HS. So that's why we're, you know, a bit We don't want to be too confident, but we're in a good place, but we've still got this Brexit smack back in the middle of the spring selling season. You know? And in terms of those land buying rates, the 24% is before, any any cost benefits come through. So the challenge in the future is then to make sure that we to those and nudge up or attempt to nudge up those those hurdle rates as we as we go into the next few years. Thanks. Will Jones from Redburn. 3 if I could please. The first just to double check-in terms of the new house types, the phasing of that in terms of the next 3 years or so, how's it how do you expect it to kind of come through in terms of their share of completions, please? Second one was just around, I guess, cash flow. The free cash last year stepped up quite significantly compared to the previous couple of years. Was that a conscious effort for the business, or is it just the way that that I guess the timing of certain investments dropped and perhaps should give us some feel as to where you think net cash might end July 19, please. And then the last one was just around Help to Buy. You've highlighted that 2 thirds of your Help to Buy uses are first time buyers. So a third home move is it seems likely that those that component of Help to Buy properly will get taken out with the next government review. We that's what we're led to believe. So how confident are you that you can retain that portion customers that aren't first time buyers within your sales mix, could they still transact, do you think? Do they contribute decent deposits anyway or just any thoughts on that chunk of sales that I guess could be at risk? Unit volumes on it. Yeah. Yeah. Yeah. So so what does on look. If depending if we get the plan in, we think a handful this year, in FY20, we're talking about 500,000 units, and then in FY21, you know, I would be thinking of 1500 to 2000 units, that, that sort of rate of progression, but obviously we'll we'll, as we as we progress them, those sites through plan, we'll give you more detailed guidance, Will, on that. And on the cash, I think one of the reasons we'd begin to generate a bit more cash is, as I was saying, in this speech, we've delivered what 68% revenue growth in in 3 years, 17% last year. We're not gonna do that this year, so there's inevitably a little bit of a moderation in terms of the if the rate revenue growth. So that's made us a bit more cash generative, but in terms of investment in the year ahead, you know, I would I would be thinking if we can convert, I don't know, 60 percent of of operating profits into into into cash, that would be a good starting point for us. And and in terms of where we might we might end the year, well, you know, I'm expecting a very similar trajectory of death in the year ahead, so similar peak at similar Raju Bridge, and we'll probably end with about a 100,000,000 again, I would think at this stage. Will, just on Help Dubai, I like you're expecting an extension in the fullness of time, and hope we'll hear on 29th October I don't know whether it's gonna be kept on amount or salary or first time buyers as as you suggest. But you're right to point out there's a third that a non, first time buyers. We genuinely don't know how many people in that third would have bought the house anyway. It just seems to us that It's where we are today. It's probably wrong when you're seeing customers on 100,000 plus salaries buying homes for 500,000 600,000, so they could probably afford to buy anyway. So I can't answer your questions specifically. But I would guess a large proportion of those have the ability to buy anyway. They're just take taking advantage of these amazing commercial terms and it's probably gonna be thinned out along the way. We take some we take some comfort. If you take London, out of the next, not necessarily direct at first time buyers, but our average help to buy selling price is 2.85. So below below the group private average selling price, so it gives us some some comfort that we're not we haven't got a lot of exposure at the higher end of the health supply market. The important thing we'll on Help to Buy for us is is the deposit. So it critically gives you a deposit and it enables you to get a decent mortgage deal And the difference between non Help to Buy mortgage offer and Help to Buy is significant in terms of coming out your monthly pay packet. I mean, that that's the issue for young people today. John Bell at Barclays. I think I've got 3. The first one on the 2019 ground rent sale, is that something that you've exchange contracts already, or you're hoping to do that in the near future. And the second one is on the party's exchange increase that we can can see. I think you referred to a slower secondhand market. Which period specifically are you referring to as as there been an intensification in that slowed down more recently than that you've seen. And then finally, just on those 9 those last 9 weeks trading stats, what's the growth in open site numbers year on year? Yeah. Okay. So in the the ground rents for FY 'nineteen, we we haven't exchanged so that there is obviously some, a degree of uncertainty there, but we are progressed with contracts. The expected quantum of the receipt is sort of high single digits, sort of 9, 8, 9, 10,000,000, that that sort of, order. On part exchange, I'm probably comparing to, I mean, there's a generalization and a trend over the past couple of couple of years, and you're probably talking about PX holding times now 3 to 4 months. And if you asked me 3 years ago, I probably would have said 1 to 2 months. So it and it's probably just edged out over that. Over that time period fairly incrementally. So so that's what's driving that. But just to give you a little bit of comfort behind that balance as well of that £47,000,000. As at July, 60% of us was already sold on. So the ex wife, there's a capital cost. The the risk to the company is is relatively moderate. And in terms of outlets. I knew somebody would ask me that, but I'd so so outlets in the, in the 1st, 9 weeks, have followed the trend last year, so they're about 7% up. That I stood in the front. Alice Stewart from Stockdale Securities. Free questions, please. First of all, you talk about Brexit being a possible threat in the spring. Are your sales team sales team seeing any change in, buyer patterns, number of people coming to site? You know, how long they chew they take to actually firm up, etcetera. Second question is, the average, value of plots, bought during the period was down from 65.7 to 64. Does that reflect a change in geographical mix, size of plots, strategic land coming through, or are you just driving harder bargain with your land vendors? And finally, what exactly does 376,000 buy you, in in in London, you know, is it apartment? Is it an apartment? Is flat, I should say, you know, is it in zone 6 or 7 or wherever they go to? What what's the so what's the average unit that you can buy in and at that price. Okay. I'll do 13 and you do 2. On on Brexit, Alastair, I just, you know, break it, but down and look at the facts for me, and then, we see where we're going, but if you went back to June 16, and I'll tell you what happened then at the referendum, there was a certain amount of panic and, you know, Armageddon and doom, about, but the reality, what materialized that was only in London was nerve and the the rest of the country got back to normal quite quickly. And then if you look at year to date on sales. We haven't been impacted year to date by Brexit, but when I go around the country, I get a similar pattern. If I'm in Redcar or Rotheram or the WIL, or anywhere, I don't get asked about Brexit. There's less concern. And as soon as I come into London, I was in Greenwich last Friday on a development and the sales advisers there were asking me about people are worried about Brexit. It's a very much a London centric thing London's nervous. London's a little bit more sensitive, and the rest of the country. If I was to say they don't care, I don't mean it, but, you know, it's that sort of thing we're selling homes to people who need to buy a home because they've got a growing family. It's that family market, and I would guess, and it's a guess that when we get to, the spring next year, a similar pattern will materialize, unless the deal is done sooner, then the whole thing calms down, but I'm not seeing it through sales rates at the moment. Now on year, on on the plot cost I thought there's nothing there's nothing behind that. It just it just moves about. So to give you a spread geographically, half the plots were what we call the north of the company for these presentations halfway in the south. That's very similar to last year. So maybe a little bit more strategic land coming through, perhaps 15% of the additions to the top tier would have originated from a strategic allocation, probably that was close at the 10% last year. I'm not sure that's driving the plot cost difference. I think the fundamental point is the margin which you're buying those land on. Is still around 24% as it was in FY17. And in in terms, I don't know if you're registering a sales interest in some of my properties, but if I just mentioned those, I know it does sound modest, but in terms of where we are, if I've mentioned them sites that we've acquired in the last sort of six to 9 months in Hornchurch for 375. You could buy an apartment off me or a two bed house. You wouldn't quite make a three bed at that level, But when I'm in Dartford, it's all apartments, Alastair, when I'm in Bexley Heath, it's all apartments and two beds are 350 to 375. Where else was I? I was in, barking at some market, Lakeside in Zurich, you'll get a three bed house at 3 75, but you won't get beyond that, and you can get a 1 or 2 bed flat. So we're we're very much fringe jealous that we're we're not into the the sexy bits, we're where there's still robust interest as we call it. Good morning. It's Gavin Chego at Peel Hunt. Just one really, just on the margin and the dynamic between house price inflation and your build costs the 1% to 2% that was mentioned in the trading review, what have you got in the forward order book at the moment? Is it kind of at the lower end of that? Well, the way our the way I would explain that this we've been seeing, as you've already said, price increases of of 1 to 2% in the in the costs around 3%. And we're see, but the pricing gains are still offsetting the costs, so they're still adding to the profitability to the business. However, probably not enhancing the margin as they previously were. Over the over the past few years, though, managed to increase land buying hurdle rates from 22 to 24, once partly offsetting the other and embedded within the forward order book at the moment we've probably got a gross margin of around 25%. There's still a little bit of an enhancement sitting with, at the moment. But it's still, you know, I don't want this to be a negative message. Actually, the market is still, producing additional profitability because of inflation doesn't mean that that margin's gonna go up and up every year. Morning, yeah, Chris and Ethan at Numis, just 2 if I can. Firstly, just on partnerships, I think most people understand partnerships to be kind of a lower margin, higher Rocky sort of play. I just wonder if you could kind of talk around how you think it's going to influence the group margin and potentially where it could get to in a few years' time. And the second one's just really a continuation from Gavin's question there. Just really about expectations for build cost inflation going forward, you know, just areas of kind of note and just kind of, you know, how you see that directionally at the moment. In terms of partnerships, my ambition is simply to get it to, one of our largest size divisions, Chris, you know, 6, 7 hundred units. I'd I don't plan it to be a countryside or, a Gallifah try model. It's in addition to what we're already doing, London, and it's to complement our existing structure. And you're you're right to suggest it will be a lower margin type products, but it it's it won't just focus on longer term regen where we're doing 10 year projects. It's gonna be you know, just like we are on Strathland, we like the smallest stuff that we can get in and out, and we are happy to do build contracts. We're happy to put equity in and do joint ventures. We're happy to do regeneration schemes. And then you get a variety of margins, you know, ranging from 15% to 20%. So it won't just be one type of model. And in terms of build cost inflation, I've just the the the biggest spike we have just at the moment, and it changes, every quarter is Bricks and blocks, and there's a there's a pressure still, on supply, and there's a pressure on costs. I take the view that when Ibsdock open in Lester in at Christmas, I take the view when Persimmon are fully on stream with their new concrete brick factory, but they'll be they'll ease the supply demand issues and costs will come a little bit. So I'm I'm less concerned on that. And, Chris, there are still hotspots and, cost pressures in the country, but It's not all over. We're we're we're finding some developments in, in some areas now that the cost pressure is starting to calm down. So we don't see it the trajectory going up. We almost see it flat ebbing downwards on cost pressure. Andy Murphy from Bank of America Merrill Lynch. I've got 3. The first question, perhaps the most important just on the sales rates, if you stripped out the newer divisions and looked at your more mature divisions, I was wondering what you could tell us about the sales rates you're seeing there. I get the idea that you're adding divisions and therefore the overall, sales are probably up as interested on a like for like basis in the sort of more mature areas. Secondly, can you just talk us through what's happening on incentives across across the range of, purchase prices, if there's any change there? And finally on the coins, IT system you're introducing, can you give us a feel for what that's costing, whether that's material or not? Thank you. I mean, we we don't I think what's more important to us, which drives sales reps, is new sites rather than divisions. So whether that sites in an in division or a new division doesn't really make a difference, but broadly speaking, there were 6 newer divisions. They're probably contributing around 25% to the overall group sales rate at at the moment, but they have been in they have opened in 5 years since August 13, but there will be about a quarter of the overall business now. Incentives, this isn't double the figures I've already already given you. The inflationary figures, are, I've talked about, I think, on net of incentives, but I would say incentives have maybe crept up from 1 a half to 2% across the group to maybe 2 to 2 a half percent. But, again, that's not on top of a reduced inflation figure that's within those reduced house price inflation figure, so you shouldn't add those 2 together. And in coins, you remember coins has got a a very long life to it, but over a 5 year period, we think the total cost including all the people, some of which are people who already exist, but the allocated cost is if the order of £6,000,000 over 5 years. Just show £1,000,000 a year. Ami Galla from Citi. I was wondering if you could give us some color in terms of, mortgage lenders and how their behavior has changed over the last 1 year. Are you seeing more pushbacks in valuation? Is the availability become more tighter for your average customer? Any color here would be interesting. I haven't seen, any issues in terms of availability. And, perversely, there are better mortgage deals out in some low in some places, despite interest rates go going up, And the only detail I can give you on down valuations, because I've I've read the same things that you've read, Amy, is and I ask all the businesses, we have had a handful, 2 handfuls at at the max. Predominantly located in London and the southeast, and we think they're all on the back of the Mark Carney comments but it hasn't grown. It hasn't got bigger. It may disappear next week. But it's the thing we monitor on a weekly basis, but it was just patchy, and it came all of a sudden, and, but if I said that I had 10, you know, that's as as much as it is across the group. Sorry. I'm not asking another question. You got a singer quit song. Now all all I wanted to say is as as many of you as many of you will know is John Watson's final outing, So I'm gonna sing a song for you, John. But, no, he's he's been he's he's clearly, you know, been 40 years at Bellway, a big chunk of CEO and chairman, is going to be replaced by Paul Hampton Smith in December this year. I think you'll all know that the company's clearly gone from strength to strength during his time period, and I was going to actually mention TSR stats, but Keith and Jason have given me a better start to mention there. And that status is in the year you joined us as the year you took on the CEO role. I think Boire was doing around 5700 units, and then roughly 10 years later you took on the chairmanship. And the business was doing around 5700 units. So, that was them, not me. But but clearly there was a little bit of an intervene period there where where the where the GFC kind of hit things for 6, but Or he should make a difference. So that's something. But just to say, John, you know, congratulations I think everyone will thank you for your time at Bellway, and I hope you have a good and and long retirement. Thank you very much. Thank you. Great. I'm not gonna say anything. Just move on. Yeah. Thank you very much. Cheers. See you for a few moments if you need us.