Good morning, welcome to Bellway's full year results. Hopefully, you will have had the opportunity to read our statement this morning and you will have seen a strong set of results, which Keith will take you through in a few moments' time. There are a few key highlights that I would like to mention. Housing revenue has recovered to within 3% of FY 2019. Underlying PBT rose by 72% to GBP 531 million. We have the benefit of a record order book totaling almost GBP 2 billion. We've made a record investment in land, with a land bank now comprising of around 90,000 plots. Going forward, we have three strategic priorities. Volume growth, value creation, and our Better with Bellway approach, a commitment to act in a responsible and sustainable manner.
First, I want to spend a few moments talking about volume growth and explain the reasons behind that record land investment and what it does to the shape of the business going forward. Keith will then pick up value creation and Better with Bellway later in the presentation. Previously, you would've heard me talking about building a stronger platform and adopted a similar front-footed approach to buying land to when we emerged from the financial crisis back in 2008. I'm very pleased to report that we've contracted on almost 20,000 plots in the period. Certainly in the first half, those plots were acquired at a time when there was notably less competition from other house builders. There are three key drivers behind that appetite for investment. Firstly, the opportunity to be front-footed and acquire sites at good margins.
Secondly, strengthen the land bank, providing greater depth and a solid footing for growth. Finally, and most importantly, increase selling outlets. I'm very keen to position the business in a place that mitigates the loss of Help to Buy in spring 2023. The way to do that is to increase selling outlets. What does that do to the shape of our business? It means we can grow more quickly, but still in a disciplined manner. I tend to look at growth in two ways. Firstly, short term, and then the longer term opportunity. In the short term, and by July 2023, we will increase annual output by around 20%, that's despite the challenges posed by the supply chain.
That growth of 10% per annum can be achieved because of our land investment, because of our increased selling outlets, and of course, our strong order book. I also think it's important to note that we can deliver without any compromise to our build quality or our Customer First program. Longer term, we believe that we can grow the business to a similar size to that achieved currently by our larger peers. We believe that a volume target of 16 to 18,000 homes per annum is achievable in the longer term. That is more than the 14,000 homes that I've previously guided. I think it's right to articulate the reasoning behind those more ambitious plans. There is clearly a long-term structural demand for new homes. There is also continued political support to achieve that ambition and increase volumes to around 300,000 homes per annum.
Our strengthened land bank, with over five years' forward supply, and our further investment into strategic land, provides a solid footing. We also have scope for further divisional expansion, and our financial returns to remain strong, with a balance sheet able to support our investment program. I'm very happy to take questions on this towards the end. First for our results, Keith.
Thank you, Jason, and good morning, all. I will start with a summary of some key financial metrics for the year just gone. Housing revenue increased by 41% to GBP 3.1 billion and is now just 2.3% lower than the FY 2019 peak. The underlying operation margin rose to 17%, and return on capital employed recovered to 16.9%, with further improvements in both expected in the year ahead. We provided an additional net amount of GBP 52 million in relation to fire safety on legacy apartment buildings. After taking this into account, earnings per share rose by 102% to GBP 3.169. We sold over 10,100 homes, with completions biased towards the first half as previously guided. This is a reflection of the strong pent-up demand and WIP investment at the start of the financial year, when construction progress was weighted towards units in the latter stages of production.
The average selling price was over GBP 306,000, with the increase of almost 5% influenced by a focus on higher value homes, prior to the March 2021 reduction in the Help to Buy price caps. There was also some underlying house price inflation, perhaps 3%-5% for the full year. As a result of these pricing benefits, I now expect the average selling price for the year ahead to be around GBP 295,000, slightly higher than previously guided, although still lower than FY 2021. This moderation is driven by mix changes as we strategically position the business to deal with the withdrawal of Help to Buy from March 2023. Our share of profit from joint venture completions rose to GBP 10 million. As I've said before, this can be quite uneven due to the profile of build and sales completions.
In FY 2022, I expect it to half to around GBP 5 million. The market has been strong across the U.K., with Scotland, Manchester, and the Midlands all performing well in the north. The recovery was more pronounced in the south, where there was a 43% increase in completions, with this reflecting construction progress and the greater fall in volume in the south in FY 2020. Our Ashberry brand now represents 7% of homes sold and is used successfully on larger sites where the site layout and sales market justify two selling outlets. 7% of homes were completed in London, and our private average selling price in the capital is now just over GBP 400,000, which reflects our ongoing investment in the more affordable outer zones where demand remains strong. We put aside an additional gross amount of GBP 67 million to deal with legacy building safety issues.
This relates to developments where initial investigative works had not been previously concluded. It also includes a widening of the scope of works on certain more complex sites where provisions had been made in prior financial years. We recognized GBP 15 million in cash recoveries from third parties throughout the supply chain, and this results in a net charge of GBP 52 million, with GBP 32 million of this incurred in the second half of the financial year. As you know, this is a complex industry-wide issue where we are trying to act responsibly. From a financial point of view, we have now set aside a total of GBP 165 million since 2017, with a provision of GBP 116 million remaining at the 31st of July. There are still a handful of schemes which are being investigated, both by us and in collaboration with warranty providers.
I, therefore, expect as these investigations are concluded, that we will incur further costs in the year ahead. It is, however, fair to say that I believe most issues are fully provided for, and I see these costs primarily as a balancing item. We do, of course, continue to pursue further recoveries from third parties where they have fallen short of the standards required, and we will recognize these going forward in line with normal accounting criteria. The underlying operating profit was GBP 532 million, and the underlying operating margin was 17%. Drawing out large items in the operating profit bridge. The extra volume and average selling price added a total of GBP 186 million in the year, and improvements in the underlying gross margin added a further GBP 44 million. The underlying gross margin of 20.9% is still below our recent land intake margin of 23%.
The shortfall is in part made up of a cost of GBP 22 million in relation to extended site durations because of COVID. This is not an additional cost over and above that reported last year, but it is instead the proportion of the extra COVID costs which have traded through the income statement in the period. In addition, there is still some effect of legacy cost increases as we have reported in prior financial years, which still sit within the valuations. There will be further improvements in the gross margin in the year ahead as we bring in new, recently acquired land and continue our program of commercial cost-saving initiatives. We will also benefit to some extent from higher site-based margins because of some recent house price gains, as I mentioned earlier. I note, however, that there remain upward cost pressures in the construction supply chain.
In relation to administrative expenses, the recommencement of divisional incentive schemes mainly accounts for the increase in the year. There will be further increases in the year ahead as we expect to incur additional costs to attract and retain quality people to achieve growth in a competitive market. In addition, we will incur some extra costs because of items such as higher pension contributions, insurance, IT security, and our investment in ESG matters. Overall, taking everything into account, I expect that we will achieve a full-year underlying operating margin of around 18%. Beyond this current financial year, we can deliver a normalized, sustainable operating margin broadly between 18% and 19%, with the potential for this to rise further if there is ongoing underlying house price inflation.
Unusually, I've included a slide on tax, and the reason is that our effective tax rate, which was 18.4%, will go up in the years ahead. Firstly, in April 2023, the standard rate of corporation tax in the U.K. is due to increase to 25%. Secondly, there is just concluded a round of additional technical consultation in relation to the Residential Property Developer Tax, and the indications are that this could affect groups such as Bellway from April 2022. The combination of these two taxes together could result in our effective tax rates, along with others in the housebuilding sector, rising in stages by some 50% in relative terms to over 30% of profits by FY 2024. A few summary observations on the balance sheet before I look at the detail. Our pension asset increased to GBP 10 million.
The remaining fire provision of GBP 116 million is shown separately. Land creditors increased to GBP 456 million because of our additional land-buying activity. Our cash position is strong, and we ended the year with net cash of GBP 330 million. Even accounting for the increase in land creditors, adjusted gearing was very low at under 4%. We generated GBP 520 million from operations, a strong figure as you'd expect given the elevated brought-forward investment in WIP. In the year ahead, I still expect the group to be in an average net cash position, perhaps GBP 75 million or so, and I expect some utilization of our bank facilities in the springtime as we focus on WIP investment to deliver year-end completions. Committed debt lines, including bank debt and our recently issued USPP loan notes, total GBP 500 million, and they expire in tranches through to 2031.
This provides excellent resilience and strategic flexibility. Moving on to the top tier of the land bank. There are 31,000 plots with an implementable detailed planning permission and an associated cost of GBP 1.8 billion. Additions in the period have an anticipated average selling price of GBP 280,000. Looking forward, this section of the land bank has a carried forward expected average selling price of GBP 290,000. While this year, the average selling price may be around GBP 295,000, in FY 2023, I expect the average selling price to moderate further to around GBP 290,000, unless of course, we benefit from some house price gains over that period. This reduced average selling price is a deliberate strategy to maintain sales rates as Help to Buy ultimately expires. Our pipeline of owned and controlled land, where DPP is expected within the next three years, has risen to 24,300 plots.
This means because of our land-buying activity in the year, the Bellway owned and controlled land bank has risen to some 55,000 plots, which is around 5.4 times the FY 2021 volume output. This strengthened land bank is healthy for the business and will ultimately lead to more outlets to help achieve future growth. Land contracted in the period has an expected gross margin of around 23%, and as already mentioned, this will help to drive margin improvement in the years ahead. Our strategic land holdings have risen to over 30,000 plots as we continue to supplement this additional tier of the land bank. In total, the owned and controlled land bank, together with our investment in strategic land, has a balance sheet value of GBP 2.5 billion and provides Bellway with access to around 87,000 plots.
Investment in construction-based work in progress stands at GBP 1.4 billion, which is a reduction of GBP 65 million compared to last year. In addition, the completion of additional units in FY 2021 means that the remaining plots are in earlier stages of production compared to a year ago. Coupled with manageable yet ongoing sector-wide constraints throughout the supply chain, this means that H1 output in FY 2022 is likely to be similar to last year, and full-year volume growth will be loaded towards the second half. The carrying value of plot exchange units at under GBP 2 million is unusually low, and I have no doubt that the balance sheet value and the cost of running this scheme will revert to normal higher levels in the future.
The final dividend is proposed to increase by 65% to GBP 0.825, which means a total dividend of GBP 1.175 for the year. It is covered 3 times by underlying earnings, and given the growth potential for Bellway, this is a reasonable guide to dividend cover in the foreseeable future. Over the next two financial years, our volume growth and operating margin targets should result in cumulative underlying profit before tax of around GBP 1.25 billion. After paying tax, we broadly expect to return around one-third of the residual amount to shareholders. Before I conclude, I wanted to briefly outline Better with Bellway. This is our new long-term approach to sustainable and responsible business practices, which we are currently developing in consultation with several external stakeholders. The intention is that Better with Bellway will become an integral part of our culture and our day-to-day operations.
Not only will this result in a positive influence on our stakeholders and the environment, but it will set a solid foundation for future operational and financial success across all aspects of the group. Our three flagship priorities are likely to be our Customer First program, our desire to become an employer of choice, and our carbon reduction strategy. Jason will cover the first two of these in his operational review. With respect to carbon reduction, we are using internal and external experts to help measure our base carbon output using an in-depth assessment of the embedded carbon emissions within our business. We will measure not only carbon output from our daily operations, but also embodied carbon, which is generated throughout the supply chain, and also carbon arising through household emissions over the lifetime of our product. We will develop ambitious science-based carbon reduction targets.
We have already established a working group to meet the targets of the Future Homes Standard as it will apply to our product from 2025, and Jason will touch upon some of our initiatives in that regard. More widely within the group, we have moved all of our controllable office, stock plot, and site compound energy supplies to renewable sources. This action in particular has helped us to achieve a 24% reduction in Scope 1 and Scope 2 carbon emissions per home sold since 2018. There is more to do and there is more to learn, but we have plans to go further. We are currently investigating the use of site-based biofuel. We are also considering wider carbon emissions, which are outside the scope of Bellway's reporting obligations.
This includes a review of our company car incentive that we offer to certain colleagues to determine whether we can encourage individuals to make more environmentally friendly lifestyle choices. We look forward to March next year when we will publish our new science-based carbon reduction targets and also hope to report performance against a range of new KPIs for each of the priorities in our Better with Bellway sustainability strategy. To summarize, I thought it would be useful to set out key aspects of guidance. In the year ahead, we expect to deliver volume growth of around 10% to over 11,100 homes at an expected underlying operating margin of around 18%. In FY 2023, we expect to deliver further compound volume growth of another 10%, increasing annual output to around 12,200 homes. The operating margin in FY 2023 is likely to be between 18% and 19%.
Over the next two years, cumulative underlying profit before tax could be around GBP 1.25 billion. Beyond FY 2023, we have significant growth potential and should be able to produce a long-term sustainable operating margin without house price inflation of between 18% and 19%. Our responsible and sustainable approach to growth, together with our balanced yet growth-weighted dividend policy, should generate significant long-term value for shareholders and a positive impact on all of our stakeholders. I will now pass it back over to Jason.
Thank you, Keith. If I could start with trading. I'm still encouraged by the current selling environment. It very much feels to me as though the market has now normalized and we're getting back to a more traditional autumn selling period. At the start of our last financial year in August 2020, sales were largely inflated by that pent-up demand and boosted by the stamp duty holiday. Reservations then moderated a little bit following the introduction of the new Help to Buy rules and a further lockdown. Overall, private sales are ahead by 20%, although it is very difficult to make meaningful comparisons to such a disruptive period of trading. That said, we were still 6% ahead of FY 2019, and that demonstrates the underlying demand for new homes.
We have also enjoyed a strong period of house price inflation, around 3%-5% in the year, I do expect this to moderate now the market enters a more normal trading period. The mortgage market also remains supportive, albeit there are no widely available 95% LTV products. We are encouraged by growing lender participation in the Deposit Unlock trial, a 95% mortgage indemnity guarantee scheme. With the recent introduction of Nationwide, this could lead to some momentum in this space. Help to Buy accounted for 30% of reservations, despite the introduction of the regional price caps. Notably, in the last three months of our financial year, Help to Buy reservations fell to around 20%, and today its use seems to be more prevalent in the Midlands or the south of England.
Turning to land, as I mentioned in my introduction, our investment in land has very much changed the landscape for Bellway, certainly across the next two years. Our investment of over GBP 1 billion, securing almost 20,000 plots across 109 sites, has resulted in a land bank stretching across more than five years. We've purposely acquired some larger housing sites as we lay the foundations for growth, having deployed capital previously invested in London. These larger sites tend to attract higher margins, particularly those acquired in the first half of our financial year. That's not to say we've lost a love for London, but we have reduced our exposure to around 7% of volume, with our focus on predominantly edge of London sites or commuter zones, such as Barking, Bexleyheath, and Croydon.
A final point on land is that we've restructured and made further investment into our strategic land teams. Our intention is to target a wider selection of sites, including larger and longer-term opportunities, as we set out to deliver our longer-term growth objective. Strategic land will become a more important tier of our land bank as the group grows in size. For production. Production and costs represent the most challenging aspect for both the sector and the wider economy. To be clear, we are in a very good position. We have realistic construction plans and strong management teams to deliver the year ahead. That's what gives me the confidence to forecast growth of 10% per annum for the next two financial years. That said, constraints in the supply chain still exist, and I do not expect them to ease in the immediate future.
Since July, our teams have been faced with the pingdemic, limits on labor and materials, haulage constraints, and more latterly, fuel shortages, which were particularly acute in the Southeast of England. All of this puts pressure on costs, with increases averaging by around 5% in the year. We do have examples such as structural timber, which increased by as much as 100% at a certain point within the year. In the main, we are happy that the majority of our suppliers are acting responsibly. For example, we have recently extended our annual agreement for plumbing and heating products for only a modest annual increase, whereas our new brick and block agreements are subject to a 10%-15% increase, which is largely due to the raw materials. We have been here before. We are fully prepared.
We have good relationships with our suppliers, we treat our subcontractors fairly, and we have a strong operational vein running through the group. Our Artisan range of standard house types is also proving to be helpful, having been plotted across 29,000 plots over some 200 developments, and is proving to be very useful in terms of procurement for both economies of scale and mitigating those cost pressures. By way of example, we're currently refining our standard house type designs to remove unnecessary wind posts, but also rationalize our above and below ground drainage. Whilst that doesn't sound very glamorous, it all helps to save costs against the backdrop of the current inflationary environment.
The Artisan range also embodies our approach to high standards and attractive street scenes, helping to create a sense of place and community, and it gives us a good canvas to incorporate forthcoming building regulations in 2023 and 2025. A benefit from our standardized approach is that we control Artisan centrally. Design changes can be reviewed and refined more quickly to establish the most cost-effective solution, avoiding the duplication of costs from our previous and more bespoke approach. Our zero-carbon team are also making good progress with Future Homes Standard, with three sites identified as case studies. To develop our knowledge on energy efficiency and running costs as we plan to deliver lower carbon homes.
In our case studies, we'll be assessing fabric efficiency, renewable energies, heating solutions, and energy monitoring devices as we seek to establish the best performance to establish volumes on the scale that we require. Interestingly, we have partnered with Salford University for a research and design project. Sorry, I'm going to have to start again. I've tripped up the previous one. I'm going to go from, "And whilst," yeah?
Whilst this doesn't sound very glamorous, it all helps to save costs against the backdrop of the current inflationary environment. The Artisan Collection also embodies our approach to high standards and attractive street scenes, helping to create a sense of place and community, and it gives us a good canvas to incorporate forthcoming building regulations in 2023 and 2025. A benefit from our standardized approach is that we control Artisan Collection centrally, so we can review design changes quickly and establish the most cost-effective solution, avoiding the duplication of costs from our previous, more bespoke approach. Our zero carbon team are also making good progress with Future Homes Standard, with three sites identified as case studies to develop our knowledge on energy efficiency as we plan to deliver lower carbon homes. In our case studies, we'll be assessing fabric efficiencies, renewable energies, heating solutions, and energy monitoring devices.
We seek to establish the best performance to deliver on a scale that we require. Interestingly, we have partnered with University of Salford for a research and design project where we plan to build a house in laboratory conditions to trial new low-carbon technologies. We hope to start in the spring of next year, researching air source heat pumps, underfloor heating, and battery storage, to name just a few ideas. Moving on to people. Being an employer of choice is a key priority for our Better with Bellway approach. Our ambition is not only to attract new people, but to upskill and retain our best talent, ensuring the ongoing and long-term success of Bellway.
We are working hard in all corners of the business, and that is demonstrated in our latest employee engagement survey, where almost 90% of our workforce said Bellway was a great place to work. Some key initiatives are our flexible working policy, our Senior Leaders Development Program, early careers, with over 8% of our workforce now in earn and learn roles. Women in Construction. We're very proud to have won our first Female Construction Quality Award. Our London divisions are setting the standards for group in attracting people from different race and ethnic backgrounds. I'm also very keen to create some space and opportunities for young people with disabilities and learning difficulties, something that we're working on for the summer of 2022.
Another key priority for Better with Bellway is our Customer First agenda, and Customer First is about further improving our build quality and creating a step change in customer service levels. We have long held a five star rating, with 94% of our customers recommending Bellway. Ask those same customers the very same question nine months later, and that approval rating drops to around 80%. In part, this is due to lower response rates, but we're also taking too long to fix those post-completion snagging items. It's too easy to blame COVID. It's too easy to blame the supply chain. We need to improve our customer service levels.
Our Customer First agenda seeks to address those issues by training all of our staff with our new policies, training our business partners to be part of the same journey, increased quality inspections, new technology, more resource in our customer service teams, and the appointment of a group customer experience director to raise the profile of customer service in the group. Now for current trading, if I could refer you to the table on the screen. The first nine weeks since the 1st of August have delivered robust reservations of 218 per week. Whilst behind by 9%, that was against an unusually strong period that I've referred to earlier. Interestingly, Help to Buy reservations have now dropped to 18% since the start of our new financial year, and this does not appear to be having a material impact upon sales volumes.
Outlets are slightly lower than last year, but they will recover in the second half.
That trend will continue into FY 2022 and beyond as we benefit and take advantage from our land buying program. We also have the benefit of a strong order book totaling almost GBP 2 billion. Finally, outlook. I am very optimistic about the prospects for the group. We have the capacity to deliver substantial volume growth. In the short term, our land and operational strength can produce growth of 10% per annum for the next two financial years. In the longer term, underlying demand, coupled with our financial strength, provides the opportunity to expand beyond 16,000 homes per year. Our growth strategy, coupled with our anticipated improvements to operating margin, will deliver significant value for our shareholders. Finally, our Better with Bellway framework sets out our responsible and sustainable approach to business, and we look forward to reporting our new targets in the new year.
Thank you. I'll now hand back to the operator for questions.
Thank you. If you would like to ask a question at this time, please press star one on your telephone keypad. That's star one to ask a question, and we will take our first question from Brijesh Siya in HSBC. Please go ahead.
Thank you. Good morning, guys. I have a couple of questions on land. The land bank length obviously has gone up now, but given the history and your numbers are kind of oscillating around 4 yearly. Is that something you are looking in future as well, or the current land bank length is kind of you're happy with to carry on? The second question is around the static land bank. Sorry. Carry on.
We only caught the first question there, Brijesh, and I think that was about land bank length and what we think is the right size for the business going forward. We've always said it's not about having an artificial metric for a land bank length. It's about having land in place to meet your growth plans, and that's why we have more ambitious growth plans for the next two years, because we have obviously strengthened the position. To try and quote that in terms of figures, I do think the land bank length of 5.4 times is unusually high, and it is in part a reflection of it as a very strong period we've had. I would expect that naturally to come back down.
I think 4.5 times-5 times is probably what the math relates to in terms of a normalized land bank length, which should give the business the opportunity to grow but not too much of a drain on capital.
Okay. Got you. Coming to the operating margin for the midterm guidance of 18%- 19%. The current land you are buying is around 23% gross margin, and you kind of guide the admin cost to be around 4%. What kind of prevents us to look at 19% as a more sustainable margin rather than put that at 18%- 19%?
Well, look, it's a fair comment. I think in a steady state, an administrative overhead of around 4% of revenue, it is achievable. You're right. Simply doing the maths, 23 less 4 equals 19, as you rightly say. That is, of course, within the range which we're guiding to for a midterm operating margin within Bellway. Again, I would say if you have house price inflation in the system, that will hopefully mean that we're able to augment that and deliver in excess of that range. Without house price inflation, in any given year, not everything will go perfectly to plan, and sometimes you will just deliver slightly below a 23% margin if you have a problem on the ground or whatever it might be. I think it's sensible to suggest 18%-19% is a sustainable, achievable target for the group. Of course, house price inflation could augment that.
Okay. Thank you. Last one is on your kind of plans and research into how the heating systems should operate in future. Interestingly, you mentioned air source heat pump as one of the research areas. I'm curious to know whether you have explored that area just preliminarily or whether you have looked into ground source heat pumps as another source of heating as well.
Sorry, Brijesh. I struggled to hear that. Was it ground source or air source heat pumps was the question?
Yes. You are kind of zeroing on air source heat pump. I just wanted to understand whether you have looked into ground source heat pumps as well.
Listen, we're doing a lot of tests and some of the suppliers that we're working with at the moment are all claiming to have the best air source heat pump or the best ground source heat pump. We're doing our own trials on our developments. We've even got one with Homes England that we're starting in Portsmouth next year, where we're going to build part of the site to the 2025 building rates. That's without any fossil fuels, and that's with the introduction of air source heat pumps. Our advice at the moment, and our experience, because we've used some of them, is that air source heat pumps are better suited to housing and ground source heat pumps are better suited to apartment-led schemes. That whole picture, Brijesh, is really changing quite quickly at the moment. That's why we're doing our own tests and our own assessments through the group.
Thank you. All very well. I think all clear from my side. Thank you very much.
Thank you.
Thank you. Our next question comes from Sam Cullen in Peel Hunt. Please go ahead.
Morning, guys. Just a couple of questions from me, please. Given that the volume targets are pretty ambitious, can you talk around potential constraints affecting those over the medium term, whether that's the rate of site openings or kind of labor as a bottleneck to ensure that you can open sites and complete sites to hit those numbers? Secondly, just to follow up on the heating systems, I know your point about air source that suits to housing versus apartments. Have you looked at kind of pooled ground sources, ground source heat pumps for housing developments at all? Be interested to hear on that.
Sam, good to hear from you. Did you say ground source? Have we looked at them?
Yeah. Kind of pooled ground I know some of the developers are looking at kind of centralized ground source heat pumps for housing estates and whether you can kind of pool ground source heat pumps in that way.
Well, we've ac.
20, 30 homes, something like that.
Sam, we've actually installed ground source heat pumps on one of our developments. A few years back, we did a sort of an eco-led scheme. It can work, but we had lots of problems with it working operationally. I just think before we go in feet first with a combined ground source heat pump or independent air source heat pumps, we need to work really collaboratively with the suppliers to see what is robust, what's going to last for a decade, and what the running costs are. Because all the narrative, Sam, around it really is an air source heat pump costs five or six times more than a boiler. Well, so what? We can afford it to start with. What worries me, Sam, is the physical running cost of these things. What does the customer inherit for the next two decades?
That's the piece of the puzzle we need to get to the bottom of. Is it affordable for the long term? Whether that leads us to combined systems or independent systems, I just don't know the answer to that. We are assessing it and we are doing trials. Sam, I forgot your first question. What was it?
Constraints to volume growth.
Constraints to volume growth. Well, we're pretty confident we can deliver our short-term ambition, Sam, of 10% per annum. We've been here before. I'd imagine everyone on the call can remember the global financial crisis when all the brick kilns and manufacturers had shut down, and we couldn't get any bricks. We sort of understand the length of time that there's going to be disruption for. We're prepared for it. I don't think our short-term growth will be affected. Our longer-term growth ambitions, Keith and I have been working on this for some time. We've been preparing the business for future growth. The piece of the puzzle that was missing for us was the depth of land bank. Over the last two years, we've built a new head office in Newcastle, which is now able to support a growing number of divisions.
We've got our own in-house school, a training facility. We've got our standard house types in place now at head office, which are very much a necessity if you're going to deliver the volume that we're talking about. We've also restructured the business from a strategic land point of view. Our senior management teams are in place across the U.K., and we have a very much established head office operational team. The whole infrastructure for Bellway has changed across the last two years, and we are able to deliver that long-term growth objective. That land buying last year for us was really building the platform to enable us to move forward to 15,000-16,000 homes a year, Sam. I hope I've answered your question.
Yeah, that's helpful. Thank you.
Thank you. Next question from Jon Bell, Deutsche Bank.
Morning, Jason. Morning, Keith. Hope you can hear me.
Yes. Morning, Jon. Morning, Jon.
Good morning. I've got two questions. Keith, I think you talked about the tax rate earlier and the developers' levy. I think if I caught it right, you suggested the overall tax rate might be north of 30%. Are you expecting the developers levy to be 5% or are you also factoring in that your effective rate is higher than the statutory rate? Could you just help us bridge the gap a little bit there? Then the second question is, just on your private order book, could you give us the percentage that is currently contracted? Many thanks.
On the Developers Tax, we've got nothing other than speculation, if I'm perfectly honest, Jon. We participated in the industry-wide consultation, in terms of how we think the tax raised. All we really know is that it's very likely to become effective from April 2022, sooner rather than later. We did hear of ideas in terms of what the rate might be, I would be speculative if I was to say what that might be on a call. I think we should just wait and see like everybody else. My reference to 30% is no more than a guess. Our effective tax rate is typically a little bit less than the standard rate of corporation tax, maybe 50 basis points or so. There isn't a Bellway kink in there which is making it look unusual.
In terms of the overall order book, which is what we would typically quote, is around 65% of our overall order book is contracted.
Yeah. Very clear. Thank you.
Okay. Thanks.
Next question from [Emily Peters] in Credit Suisse.
Hey, morning, guys. I hope you're well. I've got three questions for you. The first one I just wanted to understand, the ASP guidance for the coming year, the mix effect that you're talking about, is that across both private and affordable, or is there any component in there where affordable is a bigger percentage of the mix or has a disproportionate impact? Secondly, I was hoping you might be able to give us some average outlets guidance for 2022. I know you said that you expected growth later in the year, where could the average come out? Thirdly, I appreciate it's a bit far off at the moment, when we think about growth post 2023, is it entirely unreasonable to think that you could carry on growing high single digit?
When you get to that sort of scale, would you rather us assume that sort of comes back quite quickly from 10%? Thanks very much.
On the mix effects, I don't expect a dramatic change in mix between private and social in this coming financial year. What you might actually see, is a slightly stronger ASP in the first half than what we see in the second half, and that's just as the mix of product flows through the system. It's almost a gentle graduation. There isn't a huge dramatic change between private and social for the full year. On average outlets, my best guess would be that we will average something like 270 outlets in this current financial year, which is very similar to last financial year, albeit we're starting from a lower base. What you will see is a second half loading of outlet openings, which should mean as we go into FY 2023, we start with a higher number, something towards the 280 mark.
That should lead to a very solid platform for further growth in FY 2023. I expect average outlets in FY 2023 to grow by at least 5%, if not more. The reason why we can say that more confidently than we normally would is just because of that strong land buying program and the visibility that we have over the next 24 months. I think, Jason, were you going to say the post 2023 growth?
Emily, the purpose that we can be prescriptive on growth for the next two years was because it runs in parallel with the Help to Buy scheme. We've bought a lot of land to support it. It's an interesting question you ask, because it is entirely possible that we can grow in FY 2024, but obviously, at a lesser rate. I'd suggest probably closer to 5% than 10%. The reason why we might be able to do that is because we're very encouraged by the rate of reservations that we've got with Help to Buy falling away. You will have heard me talk about Help to Buy now is running at around 18%. We're less dependent upon that product going forward. It's entirely possible that you could get to FY 2024 and still grow.
I'm never quite sure whether Help to Buy is going to disappear altogether, Emily, or whether it will continue under a different name in a more diluted form. For two reasons I say that. One, it's been very successful, whether it's for government purchases, banks, or builders. It's been a successful scheme. There's an election in 2024, some 12 months later. We've always had some product at the bottom of the market, for decades, to assist people in getting on the housing ladder. Customers need help with deposits. I'm not suggesting house builders need financial support from government, but I am suggesting that a deposit assistance scheme at the bottom of the market is probably likely going forward. That leads me to believe that Sorry, this is a long way going about answering your question.
It leads me to believe that growth is possible in FY 2024, but we're not brave enough to commit to it just yet. Is that okay?
That's brilliant. Thanks, guys. Yeah, that's perfect. Thanks so much.
Thank you. As a reminder, to ask a question, please press star one on your telephone keypad. Our next question is from Glynis Johnson in Jefferies. Please go ahead.
Morning, gents. I have two, if I may, and actually they're both sort of big picture, one to each of you, if I may. Jason, I wonder if you can just elaborate a little bit in terms of what you view things will look like post Help to Buy. I wonder if you can talk about expectations in terms of selling rates or build rates, dual branding, and also just in terms of what is the right price point. Do you need to bring that price point down even further? Then one to Keith, and this is about appetite in terms of gearing. Given those big ambitions in terms of what you could get to in terms of completions, what is the appetite for increasing the level of gearing, including the land creditors, in order to get there faster?
Glynis, if I start. I'd like to hear from you, Glynis. In terms of land and price point, I think we're probably about where we want to be, GBP 290,000, GBP 300,000, that affordable end of the market. I don't see any change there. I am very much driven by outlet growth. Very much. We will continue with our land buying program and look at the right balance between big sites and small sites so that we can get outlet growth in years ahead, because we see that as a good way to insulate yourself from differing market conditions going forward. If we can get outlets into the 300s beyond FY 2023, that's certainly an intention for us. We will dual brand to support that. We dual brand predominantly to work the cash harder. At the moment, Glynis, I am less worried about the selling environment.
I'm more interested in Future Homes Standard. I'm more interested in production issues. The selling environment is really quite robust at the moment. For us to be talking to you with a GBP 2 billion, I think I'm 80%, almost 80% sold this year. I've got a GBP 2 billion order book. I've reduced Help to Buy down to around 18%, and there's still strong demand for homes. My attention is to support sales by giving them more outlets, but probably concentrate on Future Homes Standard and land buying for the future.
Morning, Glynis. On the debt position, debt or capital really isn't a constraint to our growth ambitions. There isn't a site which we've looked at or work in progress decision which we make and think, "Let's maybe delay that because of a capital reason." We might look at the risk in the overall context of the group. The bigger constraint will either be land or people or resource or ensuring that you can maintain quality customer care. It's those operational things that we don't grow too quickly. That aside, though, in terms of the level of debt within the business, I don't think it's a bad thing at the moment to have that extra resilience through the facilities we've got and have a modest cash or debt position.
Medium to longer term, I still think a level of debt within the business is appropriate, and I would revert to a historic answer of 20%- 25% average debt levels inclusive of land creditors. A very cautious way of measuring it. It's not a bad long-term cap to have for the business or base. Quite happy operating below that at the moment.
Thank you.
Thank you. Next question from Gregor Kuglitsch in UBS.
Hi, good morning. Can you hear me?
Yes. Morning, Gregor.
Hello. Excellent. Good morning. I've got a few questions. Perhaps the first one is to just sort of think about the returns that you're looking for. I think last year, I believe you're looking mostly at a sort of land creditor adjusted return, which I think was approximately 16%, if I'm not mistaken. Can you just tell us, sort of as your growth ambitions unfold and you sort of hit maturity in various metrics, where you'd expect that to go? I guess you sort of have an appraisal value when you think about that. That's the first question. The second question, maybe pushing you a little bit more on cost inflation, if you care to put a number around what you think sort of total unit cost inflation will be this financial year, and maybe compare that to what it ended up being last year in FY 2021.
That would be helpful. Thank you.
You do the first, I'll do the second.
Yeah. It's maybe best to think about that in terms of a return on capital. You're right, we maybe look at two measures, with and without land creditors. Without land creditors, we were just under 17% in the year gone and around 15% with land creditors. I do think it's right to include both of those because they are both forms of debts. I maintain that we are buying land with an anticipated ungeared return on capital at between 15% and 20%. I see that as a sensible target for the business to continue operating within. I think we'll migrate towards the upper end of that range within the next couple of years. Obviously, if we benefit from house price inflation, that could perhaps take it to beyond that sort of level.
I think the upper end of that 15%-20% target range is a sensible, sustainable level of return for the business, albeit we will outperform in certain years.
Gregor, on build costs. We've suggested build cost inflation was around 5% in the year. There are no signs on our sites across the U.K. that suggest build costs or supply chain issues are getting better, and there are no signs that it's getting worse. I would guess that build cost inflation is likely to be somewhere between 3%-5% for this forthcoming year. The reason I say that is because it's likely to moderate. What often happens in house building is that costs follow revenue. As the housing market or the selling environment has started to normalize, I would guess that house price inflation will follow soon and HPI will moderate, and I would guess build costs will moderate, too, in FY 2022. I would expect one still to offset the other. Does that make sense to you, Gregor?
Yeah, it does. Keith, just to be clear on the 15%-20%, is that including land creditors in the capital base or without? Sorry, I didn't catch.
Yeah.
The definition you used for that target.
It is. That would be including land creditors in the capital base. Obviously being mindful that returns, you might have an overall under investment in land or in any given year as well can distort the asset return element of it a little bit.
Yeah. Absolutely. Okay, that's great. Thank you very much. Have a good day.
Next question is from Ami Galla in Citi.
Yep. Morning, guys. Just two questions from me. The first one is on the land bank. Between the decision on strategic land holdings versus short-term land, could you give us some color as to what sort of margin differentials you get at the intake level? The second question is really on the sort of the capacity in the business to deliver yearly 16,000-18,000 units. Could you give us some color or context of how do you see your market share, as a percentage of the industry volumes move up over the long term? Thank you.
In terms of strategic lands, there are two parts to this. Initially, in the strategic land teams, we were focusing on short-term strat land that comes into play in two to five years. Often that is quite a sought-after space, and the margins are very similar to buying land in the open market. Our restructure and our increased investment to buy strategic land beyond head office, so we've sort of devolved authority into the regions so we can accelerate the rate of strategic land. We've asked the divisions now to look at longer term and larger sites. That will then become what Keith would say, margin accretive, because you're buying it in with bigger discounts because you're taking a little bit more risk. The reason we want to do that is because we see that as an important piece of the jigsaw to deliver bigger volumes going forward.
Your second question was on the market?
Share.
Sorry.
On your market share. How would the media say?
How the market share might evolve. Well, I don't think it's right to predict a movement in our share of the overall market. Certainly, our intention isn't to buy, to take the market share of others, because that could lead to ill-disciplined land buying. We see the overall housing market is continuing to grow, and Bellway wants to be part of that growth story, and actually has the capacity and the ability to be part of that growth story. It's not about going in there and undercutting competitors to fuel an ill-disciplined land buying mentality. It's about growing with the overall market.
Sorry. The only thing to add on that, Ami, and something I didn't mention to Sam Cullen when he asked the question. To deliver the longer-term objective, we've got the infrastructure and the management teams in place, but we will need more divisions. It's likely that to deliver 16,000 homes, you need up to 4 new divisions across the U.K., which is quite easily done. We've set up, I think you go back to 2013, we had 13 divisions. Today we've got 22. We're quite good at setting up new businesses. To deliver that volume, we do need to open a few more offices.
Thank you. That's very helpful.
Thank you. Our last question comes from Dean Grant in Bank of America.
Hi, gents. Congratulations on the results. My first question is just in line with your land strategy. For the next, or in the shorter term, your landbank length is at 5.4 times at the moment. How should we look at land investment into 2022 and 2023? I know you've spoken about normalizing of the landbank onto 4.5 to 5 times. As we get to sort of 2023 volumes, we get to this range. Maybe just any color there would be helpful. My second question is just a clarification in terms of volumes, and obviously you've spoken about growth being weighted into H2. Just maybe any color in terms of the weighting between the two halves. Is it flat H1 versus 2021? Maybe, sorry, just a last question on cost inflation. In the presentation you spoke about bricks increasing by around 15%.
Is the 3%-5% cost inflation, is that built into your 18% operating margin guidance already? Maybe any color in terms of HPI expectations with that as well would be helpful. Thank you.
Dean, if I start on land, then maybe Keith can help out on volumes and build cost inflation. In terms of our approach to land, I never fix on what we're going to do in the year ahead, because I like to see how the selling market unfolds. We like to look at prices. I suspect if I was to spend GBP 1 billion this year on land, I wouldn't be able to buy 20,000 plots because prices have been pushed up and margins have been pushed down a little. It's certainly our intention going forward to carry on with our land investment. I would suggest that in the next year or two, we will continually buy more than what we used to because we used to buy around 12,000 plots a year, but we won't buy as much as 20,000 plots.
We won't stretch that landbank beyond five years. We can afford to be selective at the moment. Whilst it's quite busy, we'll sort of cherry pick the sites that we particularly like and the ones that we need, and wait for the market to calm down a little bit. We'll sort of make it up as we go along, dependent upon the sales and the land market, Dean.
With respect to your second two questions. With regards to volume output in FY 2022, I would suggest H1 will be similar to H1 in FY 2021. You will see the year-on-year growth will happen in the second half of the financial year, albeit the profiling of that could still mean you have a slightly stronger H1 overall in FY 2022, which is a reflection of our build progress more than anything else. With respect to the margin guidance of around 18%, that fully reflects all known cost increases to date, which we would extrapolate across the balance of our sites where orders haven't yet been placed. It also reflects the current pricing environment. It doesn't take into account future inflation on either costs or house prices.
As Jason said, if history is anything to go by, usually one offsets the other, and that gives us the confidence to guide that 18% margin for the current financial year.
That's great. Thank you very much.
Thank you. This will conclude today's conference call. Thank you for your participation, ladies and gentlemen. You may now disconnect.