Hello and welcome everyone to the Crest Nicholson PLC preliminary results for year 2024. My name is Becky and I'll be your operator today. I will now hand over to your host, Martyn Clark, Chief Executive Officer of Crest Nicholson, to begin. Please go ahead.
Thank you, Becky. Good morning everyone and welcome to my full-year results presentation as CEO of Crest Nicholson. It's good to see you all here today. I'm joined by Bill, our CFO, who you all know well. In terms of structure of the meeting, I'll give a brief introduction. We will go through the numbers and then I'll spend some time taking you through my first impression of the business and some of the initial actions that we have taken over the last eight months. I'll also provide my views on the opportunities that exist at Crest and the changes that need to be made to strengthen the business so it can capitalize on these, thereby delivering value for our shareholders and other stakeholders. Before I start, I just wanted to provide you all with a brief overview of my experience in the industry.
I've spent almost 40 years in the housing sector, first with Bloor Homes and then with Persimmon. As you might imagine, throughout that long career, I've had a wide range of operational and commercial leadership roles around the U.K. That culminated with my most recent role where I was Group Chief Commercial Officer at Crest Nicholson. I really enjoyed getting to grips with things and I'm confident of a positive outlook for the business, but to make the most of that potential, there are some things that we need to change. I'll touch upon some of those today.
We're also planning to hold Capital Markets Day on the 20th of March when we'll provide more detail on the forward-looking strategy for Crest, which is based around three strategic pillars: building homes of exceptional quality, delivering our standard services to customers, and optimizing the value within our land bank to enhance returns and margins. Looking back at 2024 today, we've announced results which are in line with guidance issued at the start of my tenure. Whilst disappointing and not where I want them to be in the future, we've delivered these results within the context of a challenging macro environment, a change in CEO and CFO, and more impactfully for Crest having been in an offer period for some months over the summer.
As I'm sure you all understand, this offer period was a big distraction, but that's behind us now and I'm encouraged by the traction we've been getting from some of our changes I've brought in. But of course, as these results demonstrate, there's a lot more to do. Legacy fire-related provisions have hung over the entire industry for some time and Crest has not been immune to this. It was a priority for me when I joined to provide more clarity on those issues, and you'll see from the announcement we made on that, it was critical for everyone inside and outside the business to accelerate the completion of the surveys, which in turn inform the cost reviews. With this information, we can ensure that we have the financial resources to meet our commitments, and it means everyone can start to now look forward.
Legacy non-fire-related issues also weighed heavily on Crest's performance over the last few years. Our most notable site, Farnham, finally achieved practical build completion in September. This has been a very challenging and costly development where many important lessons have been learned by the business. However, the majority of residential units are now occupied with less than 13% of remaining apartments to sell over the next 12-18 months. There remains a number of low-margin sites in the portfolio that are still to be traded through, but these will be replaced with new, more profitable sites. A couple of other points I'd like to make by way of summary. It's fundamental that the homes we build and the customer experience we provide reflect our brand.
We're on track to deliver a five-star rating for last year, which is great, but I see significant opportunities to enhance the overall performance, sorry, overall customer experience going forward, while of course retaining a resolute focus on controlling costs and enhancing our margin. A standout period for me in the period was the improved cash position of the business. There is still more to do at Crest with regards to our work in progress management, though I will give some more sensible plans on how we are going to improve on that today and the capital markets day. Linked to that, one of the things which first struck me when I arrived was the reduction from planned margin to operational margin. That is the margin we expect to achieve at the point we acquire the site versus the margin we achieve when we build out the site.
This is due to a combination of strategic decisions and weak oversight of key commercial and operational controls. We need to change that, and I've introduced a range of initiatives to better manage this and hold our teams to account. This will underpin our margin forecasting going forward. We enter 2025 cautiously optimistic. We've all met the challenges facing the industry over recent years, and we've worked with the new government directorate around housing delivery targets. What I would say from my meeting with the government is that some of the early signs are encouraging, but the enormity of the challenge should not be underplayed. Planning consents are never easy to obtain, but Crest have had some long overdue successes recently. Sites that have been slow to progress have obtained positive resolutions at local committees.
Shortly after the change of government, a number of sites within our strategic land bank have received a draft allocation. Build cost inflation is moderated to near zero, which means we have better visibility of our cost base. But the most critical factor is customer confidence. It is obviously very early days, but the anecdotal signs for 2025 are encouraging. Some of this is our own making, to be honest, but it means we enter 2025 with forward momentum, albeit with a lot of work still to do.
We have set 2025 as a year of transition aimed to reset the business on solid foundations with a strategy that focuses on the customer whilst embedding strict commercial and financial controls in order to leverage the strengths within the land bank. Successful execution of that strategy will deliver sustainable shareholder value. So I'll hand over to Bill and then come back after he's gone through the numbers with you.
Thanks, Martyn. Good morning, everyone. This morning I'll take you through a financial summary of the year, give you some more detailed insights into the combustible materials charge and provision, and then take you through the guidance for FY 2025. Here you can see the key financial headlines. At the back of the presentation is a full income statement as well as the balance sheet, the cash flow, and some other analysis you might find helpful. Overall, this was a disappointing year, but given the distractions and challenges, we're pleased to have reported adjusted profit before tax within the guidance range and better than expected outcome on net debt. Revenue for the year was GBP 618.2 million, down by 6% on FY 2023. I'll have more sales metrics for you on the next slide.
Gross margin fell from 16.1% - 14%, substantially as a result of GBP 7.3 million of combustible materials charges, but also reflecting broadly flat sales prices across the year and some further NRV provisions, although on a much reduced level to previous years. As a result, the adjusted profit before tax fell to GBP 22.4 million. Exceptional items were GBP 166.1 million, and I'll take you through these on a separate slide. Adjusted basic earnings per share was 5.6 pence. On the dividend, the board has proposed a final dividend of 1.2 pence per share, bringing the total to the year to 2.2 pence per share. Having deviated from policy in FY 2023 to maintain the same level of distribution as FY 2022, the board has, as expected, reverted to a stated dividend cover of two and a half times adjusted earnings.
We were pleased to meet our guidance on net debt, with the year end coming in at GBP 8.5 million. This reflects a combination of closer management of WIP and some deferral of land payments as planning slipped. On sales metrics, average outlets were 44, down from 47 in the previous year, with the pace of new outlets continuing to be impacted by the challenges of obtaining planning. The open market sales rate was 0.48 compared to our planning assumption of 0.45. On completions, we delivered 1,873, of which 238 were at the joint venture sites. After the seasonal lull in reservations around Christmas and the new year, we've been encouraged by the volume of inquiries, appointments, and reservations in recent weeks. Sales for FY 2025, as of the end of last week, stood at GBP 1,051 across all unit categories. The details of the exceptional items are as follows.
The combustible materials charge, including imputed interest, was GBP 137.8 million. Separately, we recovered GBP 4.4 million from the subcontractor and have multiple other claims in progress. We do not recognize any recoveries until the cash is received. There has been little substantive progress on the legal claim against the group in respect of an apartment block that was damaged by fire in 2021. As such, the only change to the provision is legal fees. I do expect the case to progress in FY 2025, either through mediation or the case coming to court. This assessment does not include any recovery the group may make from insurance subcontractors, but does include an assessment of areas where we believe the claim is overstated. On completed sites, we've concluded the work that we commenced in H1.
In aggregate, the charge in the year was GBP 32.3 million compared with our estimate of a half of GBP 31.4 million, with GBP 25 million included as an exceptional charge. These costs are included in the balance sheet in either accruals or provisions, depending on the nature of the cost, and I would expect the cash to be spent over four to five years. The group has also written off this remaining freehold inventory as we await the outcome of the government's review on ground rent practices. This charge is GBP 5.7 million.
The tax credit on exceptional items was GBP 48.2 million, and as such, I do not expect the group to pay any cash out on tax until FY 2027. We've made good progress in our assessment of the overall obligations that the group has on combustible materials and are now in a position to estimate the expected cost across all nine buildings.
Overall, there are 291 buildings in scope. We have an initial assessment on the vast majority of these buildings, but more importantly, we've completed 211 detailed FRAEW surveys, which relate to the external walls and are carried out by independent qualified fire engineers. Where we're not satisfied with the initial survey, we undertake a second survey. Using the experience gathered on these surveys, we've been able to estimate the expected cost for unsurveyed buildings. We expect to complete the remaining external surveys by June 2025 ahead of our commitment to government in the Remediation Acceleration Plan. Included in the provision are all the costs for all nine buildings, internal and external work, build cost inflation, project management costs, and our best estimate of known risks.
Moving on to the balance sheet, we're now able to give you greater color on the makeup of the inventory balance, which reflects that close to 60% of the balance is land. This is a higher proportion than the business of Crest Nicholson requires, with too much of the land on large and capital-intensive sites. Work in progress has reduced from GBP 361.3 million- GBP 334.1 million. This reflects the completion of some of our low-margin apartment schemes, but also the early benefits of tighter control on site commencements and materials on site disciplines. Our stock of completed units has increased from GBP 89.6 million- GBP 102.9 million. This is largely a result of completing build programs on apartment schemes, which we will now progressively sell over the next two to three financial years.
We've made some good progress in cleansing the Part Exchange portfolio and are now starting to see this balance reduce. Parts exchange is an important lever for our sales teams, and with better controls now in place, I would expect to see further improvements. As a reminder, the group's committed debt facilities are an RCF of GBP 250 million, the maturity of which we've extended by 12 months to October 2027, and a GBP 85 million private placement, with the next repayment being GBP 20 million in August 2025. Overall, we're getting sharper focus into the business on the importance of cash and return on capital employed, and I would expect us to continue to improve the efficiency of the balance sheet to support the group's committed cash outflows. Overall, we've made some good improvements in the year on our cash management.
We've improved our forecasting process and accuracy, as well as starting to improve our WIP controls. The key benefits have come through in working capital, with a reduction in land and WIP balances, and given the group's profitability position, we've recovered all overpaid tax. So, in summary, FY 2024 has been an extremely challenging year for the group. I'd like to thank everyone at Crest for the hard work and resilience in getting through the year. Having now made substantial progress in closing out the build of most of the legacy sites and providing for all known costs on the completed sites and on fire remediation, the business can now move forward with a stable baseline. Finally, turning to our guidance for FY 2025, and here I've given you our high-level planning assumptions.
We're targeting an uptick in open market sales volumes, with the benefits of our sales training program, specification upgrades, and a modest improvement to the markets all supporting this growth. Conversely, we're less focused on PRS and affordable volume, and as a result, overall volume will be slightly lower to flat. The forward order book for FY 2025 stood at 1,051 units at the end of January, and planning is in place for almost all units. We're starting to see some sales price improvements, but it's hard to say at this point how much is from our own initiatives and how much is market-driven. On gross margin, I anticipate site margin mix improvements, with a reduction in revenue from low and zero margin sites from around GBP 100 million to around GBP 50 million.
Given our seasonality and the profile of unit delivery, I expect around 30% of EBIT to be delivered in H1. The interest charge will increase to between GBP 10 million and GBP 12 million, with the group being in net debt throughout the year. We're guiding adjusted EBIT to between GBP 28 million and GBP 38 million. On cash, I expect a year end net debt position in the range of GBP 40 million to GBP 90 million, with the peak being over half a year. The key assumptions on cash for the year are land payments of around GBP 120 million, offset by some land disposals as we start to reshape the portfolio to focus on smaller sites and improvements in WIP.
We expect to spend around GBP 70 million on delivering the combustible remediation program and a higher level of interest payments, but no tax payments of note, and return to the group's stated dividend cover of 2.5x adjusted earnings. With that, I'll hand you back to Martyn.
What I'd like to start with is an objective take to my impressions about Crest Nicholson and to outline what we have to work with and what we can make better. I'll then touch upon some of the actions we've already taken and my priorities for 2025. Within that, I'll also talk through the changes I've made, how we are managing the fire remediation work, and how we've accelerated things. A positive starting point is that we have a strong land portfolio.
I've spent some time working to understand what a good site looks like for Crest and the characteristics of sites that have delivered an appropriate margin and return on capital employed. The majority of the land portfolio is well aligned, and there is no doubt that it can underpin the growth of Crest over the medium term. However, some of those sites are very large, impacting our work in progress, our return on capital, and our ability to grow outlets. We need to objectively review the options available to us on each of these sites, maximizing the potential within our land holdings. We also have a strong brand. One of the first things that I did was to undertake a program of customer research, both with our own customers but also the market more widely on how customers perceive Crest.
I was really encouraged by the brand awareness being high and consumers having positive perceptions of the brand, including its more premium proposition. We can certainly leverage that and lean into it more, and we have some exciting plans around that. We're currently in the process of taking this research one step further with a view to understanding what customers want to ensure this is incorporated into our house type and layout designs. Crest's position in the market and the product we deliver is a key operational priority in mind. I've been encouraged by the dedication shown by the teams within Crest over what has been a difficult year for them. Uncertainty for anyone is clearly an unwelcome distraction. But through my regular engagement meetings, I'm confident that we will have a team of people that are embracing the changes needed as we reshape our strategic goals.
There's a big opportunity to improve the efficiency and level of control across the business. We've started to bring in new processes and a higher degree of rigor in how we do things, but there is much more to be done, and frankly, some of this needs to go hand in hand with cultural change. These changes cover the entire process from how we identify and buy land, how we design our sites efficiently, the controls and standards to which we build our homes, how we work with suppliers, and rigorously monitor and control costs through the journey our customers experience. These changes will close the gap currently that we have between the product and brand value. I describe it as an opportunity because I know what we need to do and how to do it, but we still need to execute, and this will take some time.
Ultimately, what it comes down to is the requirement for a clear and distinct strategy, which reflects Crest's valuable land and brand, the opportunities in the market, and current operating environment. We all know that the recent years have been very challenging for the industry, from COVID through to the macro, but I'm here to look forward. I know the strengths of the business, and I know what we need to work on. We've made some encouraging progress already, but there is more to do, and we're going to the Capital Markets Day in March to talk you through that in more detail. In the meantime, let me talk you through the direction of travel. It can sound a little obvious, but I really mean this. Delivering a seamless customer journey is fundamental to building a successful house-building company.
If there is one thing which I've reiterated over and over again, and where I've really focused my time and energy, it is on making sure everyone associated with the business understands how much importance I place on this, and then by default maintaining a Five-Star Rating and underpinning strong demand for Crest's product. We've made some internal organizational management changes and introduced clear metrics and measurement processes in order to develop a proper understanding of our customers, their needs and preferences, and ensuring that our proposition matches these. This ranges from robust inspection at every stage of the build process through to having dedicated site teams to promptly address customer issues, with a dedicated system to track and enhance response times. Ultimately, we want to support and showcase our proposition for our customers from the first contact and beyond, and we're improving how we operate to do just that.
Talked a bit earlier about our brand's positioning and the gap between that and the specification to which we were building homes. In recent times, frankly, I don't think we're always selling a product that matched those expectations, which impacted sales and values achieved. What are we doing about that? Going forward, we have upgraded our core specification offer based on feedback, along with more flexible options that will meet those customer demands and reflect our brand position. These revised specifications to our open market homes are aimed at driving value and hence profitability and improved sales rates. We have already carried out lots of internal training with our sales teams and changed their incentivization packages to reflect the customer experience we want buyers to have. And in the process, this will also enhance the profitability of the business. Critically, though, it's not just that touchpoint with the customer.
We've done a lot of work on the whole customer journey. From the moment they go onto the website and make an initial inquiry through to the sales journey and then the post-purchase care, we all know word of mouth can be very powerful, and we want our customers to feel Crest is supporting them through what is one of the largest financial commitments they will ever make. Therefore, build quality is a fundamental pillar in our growth strategy. I talked about the disconnect between the brand and what we are producing and how we are going to address that gap. We've already put in place monitoring processes and methodologies, which means our overall build program will be more controlled and measured going forward. We are investing in our IT infrastructure and business information tools.
We now have available systems that provide better visibility on performance and issues covering everything from customer service to production to quality reporting and our financial functions. Alongside that, we have also strengthened, and we'll continue to do so, our reporting tools and refocused our senior teams to actively manage this. We've also increased the focus on physical build quality and the education of site teams and our supply chain, and finally, we've externally benchmarked our work against independent NHBC construction quality reviews, providing both challenge and confidence to our colleagues. I see that as an important part of the cultural evolution we're driving across Crest, and I'm encouraged and appreciative of how many have responded so far. To date, solid progress, but again, there's more to do. I touched upon the land bank a little earlier in my presentation.
We have a strong land bank, and I can see how it will underpin sustainable growth for Crest over the medium term. However, it is also important to understand where Crest is today. Some of the land purchases in the past might have been very good deals considered in isolation, but I'm not sure they fit into the cohesive strategy that Crest needs to have a sustainable, profitable future. One or two of the sites are in the wrong location. For example, they might be too far away from any of our divisional offices, which means oversight is difficult. Or the size of the site might mean the cash requirements are too large for a business of that current scale. We are going to review all of that, and almost certainly, we start with some of that land which doesn't fit with our forward-looking strategy.
Equally going forward, we are going to have a cohesive land acquisition strategy which aligns with our overall strategy, reflective of our brand, our customer needs, building a product we know we can build, and located in areas where we can deliver commercial and operational excellence. Rather than think about land on a more ad hoc basis and then trying to, or assuming we can, make these individual elements work. Fire remediation, one of the areas that has caused some uncertainty around Crest, relates to the legacy fire provision. When my first action was creating a dedicated central team, which is currently oversight on everything that we're doing on the remediations. Previously, it was done with a mixture of group-led initiatives which were delivered and controlled by the divisional businesses.
This central governance regime has allowed us to be more efficient, and we've accelerated the rate of assessments, which has allowed a review of the fire provision, which covers all 291 buildings in scope. The result is that our internal program aligns closely with the government requirements as set out in the joint plan. Centralization of this important area will also enable divisional businesses to focus on new home delivery and do that well. The other point to make is that while Crest is taking its obligations seriously, we expect others to do the same. We will diligently pursue all claims against any third party that has contributed to any of the deficiencies found within these buildings. I talked a lot about building homes for customers and putting Crest on a long-term, profitable, and sustainable footing. Obviously, there are different connotations to sustainability, from fiscal to social.
Ultimately, I'm committed to creating great places for our customers, communities, and the environment. In 2024, we've achieved good progress in key areas of our sustainability strategy, positioning us well for future challenges. First, we continue to take action to reduce our greenhouse gas emissions. We've introduced Scope 1 and, sorry, we've reduced Scope 1 and Scope 2 emissions by 18% compared to 2023, marking a 63% reduction since 2019. We've made significant progress in reducing emissions from site operations, including a reduction in our reliance on generators by the use of alternative fuels. Additionally, Scope 3 emissions intensity dropped by 9% this year and 6% against our 2019 baseline. This will continue to decrease as more homes align with the Future Homes Standard. Secondly, on waste, we exceeded our target by cutting waste intensity by 35% versus 2023. This was driven by better waste management processes and policy compliance.
Finally, we're preparing for future regulations. Air source heat pumps have been introduced across several developments, preparing as well for the forthcoming Future Homes Standard. Biodiversity Net Gain, which came in force in 2024, is embedded early in our land acquisition and planning processes. And therefore, as we look ahead, we remain focused on reducing carbon emissions, enhancing biodiversity, and delivering high-quality, energy-efficient homes that our customers desire. So a couple of slides for me to finish summarizing 2024 and then reminding you of our future focus through 2025 and beyond. I'm encouraged by the traction and results that some of our initial changes have generated, and it confirms to me that we can make Crest a better, more sustainably profitable business. And as we brought this, significant progress has been made on the legacy issues.
They are obviously difficult subjects, but we've provided within the fire provision for all known buildings in scope and have clarity on other site provisions. I know that we walked some of you around our Farnham development in November, and you can see how that's finally come together. All of this means that we can start to look to the future and what does that hold for Crest. I'm describing eight months in the business now. I think the path for Crest to have a successful, sustainably profitable future is pretty clear. And I know that we can deliver that and, in doing so, deliver value for our shareholders and other stakeholders. It requires leadership, strategic clarity, better controls and processes, consistency in execution, and a customer-first culture based on accountability and transparency.
And as I say, I think we've made a first start, but it will take time before I'm satisfied that all leaders are being pulled effectively. Our success is going to be based on excellence in each of our strategic pillars. That means having a first-class customer experience from the initial inquiry through to when they become an owner of one of our homes. It means having a product that is built to an exceptional quality that appeals to our customer and reflects our brand and our product that we plan to sell. It is important to continue to improve our operations and processes and tend to make the business far more sophisticated in terms of how it leverages data and systems to drive positive commercial and operational outcomes.
And finally, we need to optimize the potential within our quality land bank, ensure that its shape reflects the need of the business, and support sustainable growth. The combination of all those things is that ultimately we'll make a better margin on the houses we sell, combined with better sales rates and less operational inefficiencies, all aimed at driving profitable and sustainable growth and maximizing shareholder returns. I'm really looking forward to continuing the momentum that we have started to build through the second half of 2024, and invite you to our capital markets day on the 20th of March, so you can see in practice what I've been talking about. And with that, I'd like to hand over to questions.
Thanks. And [Aynsley Lammin ] from Investec. I think we've got three actually. Just firstly, can you elaborate a bit more on the kind of recent trading, interesting comments, maybe sales rates over the last couple of weeks, how price and incentives have evolved during the kind of early start of the year? And then secondly, Martyn, just going back, I think you were saying that there's been a kind of problem with the planned margins and then the kind of delivery of the operating margin.
Just want to clarify that. Is that more just control over build cost and general contractors delivering products at the margin that was targeted, but the actual land bank, the land was bought on a sensible margin and you can deliver that if you kind of reinstate proper controls around the build cost? And then thirdly, just on the ASP with the guidance for about 2025, should we expect to step up in the blended ASP given there'd be less kind of bolt sales? Thanks.
Yeah. So I'll do first. Yeah. So recent trading, last four weeks, sales rate is 0.63. We are achieving better than budgeted sales prices on average. We've done a lot of work over the last six, nine months to train up the sales team, make some specification changes to the homes. So I feel like there's a lot of self-help in this. It's really hard to tell when the market does feel more positive. We are getting more inquiries through. So how much is us and how much is the market is to us to tell at this point, actually.
On the ASP, yeah, I mean, I expect the overall blended ASP to shift up a bit because we'll do more open market private homes and less affordable than PRS. There's still also quite a lot of apartments to go through in there, so it's going to be tempered a bit by that.
Okay. Thanks.
The latter part of your question, no, I don't see any problem with the embedded margin within the land bank. What I've seen is that we tend to start sites perhaps a little bit too early, appointing contractors maybe that haven't been fully vetted, had all the issues closed out, and we then expose ourselves perhaps to claims that could have been resolved early. We tend to do things more than once too often that cost money. We need to build better in the first place. So it's a combination of making sure that we can tender right, build right the first time, get the margin that we expected.
Thank you. [Glynis] Johnson, Jefferies, f orward, if I may. First, just in terms of those lower margin completions you're going to in 2025, how much of that's actually the apartments? Is it 400 apartments working back?
It's not as funny as that because there's obviously houses in there as well. But yeah, the low margin side revenue is going to go from about 100 down to 50. The bulk of that is apartments.
How many apartments is in the mix going forward, excluding those that are built already?
Excluding those that are built already, there are very few that are going to be built from here that are not affordable.
Second question: is it due to doing less bulk selling or private. Are you talking about selling the units that were originally bought and planned to be bulk as private? And is that possible? Is the spec right, or does it require extra costs at these lower margins?
This is more of the past of bulk units in a hurry to either generate cash or generate profit. We're going to be a bit more thoughtful about that going forward.
Just in terms of the peak net debt, you said in the first half, is peak net debt in that guide, or is peak net debt above that?
Bit high. Okay.
And then just the last one. Land value, if you take your land value that you've had, thank you very much, and work it by the plots, it comes out to 48,000 give or take. Seems quite low, actually, given your relatively southern exposure.
Is that land value, including all of the 13,000 plots, are they all owned on the balance sheet? And is there a big skew between the big sites and what you might see as your sites going forward in terms of size?
That was a lot of questions. Four questions. That's not 10 questions. Can you just repeat them again? Easier for me.
The land value, including all 13,000 plots in your consented land bank, or some are not yet?
Some are not yet.
And is there a big skew in terms of the price, the plot cost between the big sites that you have and what might be going forward, the type of size of site you might be looking for?
But there's half a dozen sites carrying a big WIP number.
Land WIP number.
Land bank. But yes.
Plots.
Yes.
Thanks.
Will Jones at Redburn Atlantic. I'll try three, please. One was, I guess, just extending the last one around [ audio distortion] years of supply? I mean, which of those do you think will change going forward? Do you think maybe the plot count will grow into it, but maybe the value and the yields?
I think we need to look at the whole portfolio and that's something that we're doing at the moment. It mathematically looks like you've got 70 years, but the plan, 40,000 divided by 2,000. But in reality, some of those sites are very long and have a very long tail. So we need to reshape it to make sure that if we're going to have GBP 600 million land around, we can actually deliver over, say, six-seven years. Not some of it open in those 20 years.
Some of it may be open in [25 years]. So the whole thing is looking at reshaping. Second, just around the kind of strategic initiatives that we talk about investing in sales force and build quality, just wondering whether there are any costs associated with that and how that might shape it up versus what may be overhead savings you can make the other way.
Yeah. I don't think it's costing us anything to train either the sales or the build teams, to be honest. I think where we've been not very successful is we've been selling properties based on achieving a target number of homes rather than the best of them. And I think we definitely need to have refocused the sales team to achieve closer to the end of the month for us. Maximum discount level that they can go to. Similarly, with the build costs, what I've looked at is the amount of money we're actually spending on doing things more than once. It's quite significant. If I can drive that cost down and drive the customer care cost down, then that will improve bottom line.
The last one just around net debt, potentially year to October 2026. Do you think, basically, given the 75 or so fire outflows, that net debt rises again that year? And just more generally, is there anything around fire safety obligations that you think would be an impediment to the strategy right otherwise at the table?
We're not giving guidance on medium term, but I would expect us to keep net debt in a range medium term of +GBP 50 to -GBP 50. I think we've got adequate resources to live within that range and obviously go up a bit during the course of the year with the working capital flows, but keeping in that range of close to zero. My sense is we've got more than enough opportunities to keep it in that range, keep buying the land, but have our land that we can sell relatively quickly rather than hold on balance sheet for 10 years.
Marcus for UBS, I've got three questions as well. Shall I go one by one, or shall I?
Yeah. One by one.
In terms of land bank margins, you say good at the end, you said great. Can you give us a number? In terms of strategy execution, you said it would take some time. Is this two to three years, three to five years, or sort of when should we start seeing some sort of level of results? And then in terms of the last one, it's just capacity per division. Where do you see this?
Okay. If I do two and three first and then think about the land bank margin. The strategy execution timestamp, it depends on which area we're looking at. So some of it might take three years. Some of it might take six months. There are many things that we've got to look at. If I refer back to my comment on sales training, making sure we're trying to achieve the maximum we can for our homes, then one of the factors of that was making sure that we're building it right and the specifications right. And that we've already implemented. We're seeing progress on that already.
The land bank, we've identified some sites that we'd consider arguably don't fit our current strategy. So we've got to work, plan out whether we sell those or sell past those. And that will take a bit longer. And then other things like house type design or whatever we look at, obviously they've got to work their way through the planning system. So that will take a number of years, not quite yet. So depending on which metric you look at and which area you need to focus on, you can have a bit of time. Yeah, that's right. In terms of capacity for each operating division, I mean, look, I've worked in areas, businesses that have done 700 plus from a division.
That's some going. And I've worked in some that are doing 300. It depends on the product, but as an average, 500. Again, depending on the location of the sites, which is what we need to address, and depending on the product they're building. Okay. Land bank margin is 23%.
Hi there. I'm [Morgan Newson, Charlie [Campbell] of Stifel]. Just a couple of questions from the sort of 14,000 plots in the short-term land. Just to help us understand the shape a bit ahead of March, how many sites is that? Do you have that number?
Not off the top of my head. And it's probably going to take another six weeks or give you some plans that show where they are and what size they are that might make a bit more sense rather than just a unit.
I was just thinking along those lines. And then secondly, on quality and product, how do you square that with standard house types? Can you keep standard house types and maximum quality of homes?
Absolutely can. And to a degree, there is if the more you standardize, the more you get consistent quality. But I think what we need to do is ensure that there's two things really, that our product is what our customers want to buy. So that's house type design. And once you've then got a set range of house types, just making sure you execute that consistently. And we're not simply to improve. That's why we were first to start the HBF survey of the year for it. This year, we're aiming for a five-star. Hopefully, when the results come out next time, we'll be able to say that we are five-star in 2024.
So it shows us something which you think we have to have another look at the standard house types that you've got, just the range that we've been able to?
Yeah. I mean, I spent quite a bit of time getting some external market research done on seeing what customers want. So I now need to look at the house types we're building to make sure that they match research that we received, where there are gaps for introducing new house types, where there are obvious house types that are within our range at the moment that we don't use. They don't need to be in our range. So arguably going from 20 to 25 house types doesn't mean I'm going to go up to 50 or 60 or 70. It just means that that core range will change its shape.
Thanks. Thank you. Just one follow-up, brilliant. You said six larger bets you're on at the moment. Can you tell you how profitable they are relative to the rest of the group, more or less profitable in margin terms?
On average, slightly better. But probably [can't enough] to lower down a bit more the margin, but narrow more risk. Yeah.
Any more questions? Operator, can we see if there are any phone questions, please?
Of course. If you wish to ask a question, please press start followed by one on your telephone keypad now. When preparing to ask any questions, please ensure your device is unmuted locally. Just a reminder, that is star followed by one. We currently have no further questions, so I'll hand back to Martyn.
Okay. Thank you very much for taking the time to come and see us this morning. 20th of March is only six weeks away. Look forward to seeing you then. Okay. Thank you.