Hello, and welcome to the Persimmon 2021 full year results presentation. My name is Courtney, and I'll be your coordinator for today's event. Please note that this call is being recorded, and for the duration, your lines will be on listen- only. However, you will have the opportunity to ask questions, and this can be done by pressing star one on your telephone keypad to register your question. If you require assistance at any time, please press star zero and you will be connected to an operator. I will now hand you over to your host, Dean Finch, Chief Executive, to begin today's conference. Thank you.
Thank you. Good morning, all. I'll start by saying a few words as usual, and then we can take any questions. I hope you've had the opportunity to listen to the presentation we released online earlier this morning, and obviously I'll refer you to it. In 2021 we saw growth in our volumes, our profit margins and the cash generation. So it was a very good year. We also took significant steps to establish ourselves as a leading responsible developer, and I believe we have led the industry both in terms of cladding and in resolving the CMA inquiry . We also took significant steps to improve the quality of what we build, and the service we provide to customers. I'm delighted that we expect, in a few weeks' time, to be recognized as a five-star builder.
Providing customers with outstanding value along with outstanding service and quality is a key strategic objective. We're investing in our business as our landholdings demonstrate, and we're able to do this without sacrificing margin. We're also investing in our brick, tile and timber frame factories, and this will enable us to build more, build better, build faster, and build greener. We're also investing in our people. The new group operational management structure led by internal promotions will ensure better and more consistent delivery across the business and further consolidate Persimmon's exceptional strengths. In terms of sales, the year has started strongly and as best as we can currently see in the full year, we expect to grow by between 4% and 7% with margins remaining resilient at around that delivered for the full year of 2021, albeit with a slightly greater HA mix.
Build cost inflation is obviously significant, but we continue to be able to pass this on with pricing holding firm. We start the year with a lower number of outlets than we would like, but plan to open more over the course of the year, with us ending the year in a much stronger position. This will of course mean a slightly different phasing in profits between H 1 and H 2. We have made good progress opening outlets since the start of the year. Along with everyone else, we watch in horror at the events unfolding in Ukraine. I remain confident that Persimmon, as a responsible developer, has a strong future ahead of it as it continues to deliver industry-leading margins, growth, capital returns and a five-star product.
I'm joined this morning by Mike, that's Mike Smith, Julia and Martyn, and will now be happy to take any questions you might have.
Thank you. As a reminder, if you would like to ask a question on today's call, please press star one on your telephone keypad. Please ensure your line is unmuted locally and you will be advised when to ask your question. That was star one on your telephone keypad. Our first question comes in from the line of Aynsley Lammin calling from Investec. Please go ahead.
Hi. Morning. Thanks. Just two questions from me actually. It sounds as though you're very confident around kind of maintaining margins. Just wondered if you could give us your view of what build cost inflation is likely to run at this year and maybe some, you know, a bit more color on the labor and the building materials element of that. And then secondly, the 2% increase at the start to the end private reservations. Is that kind of reflective of the wider, you know, strength of the wider market? Are there any funnies in there? What have you been doing for price then? Has that impacted kind of where, you know, sales rates have gone at all in the early part of the year? Just again, a bit more color around the kind of start to the year. Thank you.
Right. Morning. Build-cost inflation. Well, you know, it's as everybody else is saying, it is punchy. You know, we're seeing 6%-7%. In terms of the mix of that, we're still seeing some, you know, chunky increases in some materials. Partly that I think is driven by, you know, well-publicized transportation costs and energy costs. Obviously, who knows how Ukraine will impact all of that. It's affecting some things like bricks, stairs and other things. Although, I think along with others, we are seeing some easing in materials compared to what we saw in the summer and spring of last year. That of course is welcome.
You know, the mix has probably switched and we're seeing some, you know, chunky labor cost increases, you know, ground workers, for instance. We might be seeing double-digit there. Hence why, you know, we expect that this year we will continue to see some pretty big numbers in terms of build cost inflation, which I've just spoken to. You know, as you've linked it, I mean, we obviously are continuing to monitor it very closely, and we are moving our selling price forward, sufficient to keep margins where they are.
That 2% increase in sales rate at the start of the year, you know, obviously reflects us having moved pricing on at the start of the year, anticipating the build cost inflation. We are very pleased that we continue to see the market strong and holding firm, which is great news. You know, that should enable the margin to remain pretty resilient during the course of the year as far as we can tell at the moment.
All right. Thank you very much.
The next question comes in from the line of Rajesh Patki calling from J.P. Morgan. Please go ahead.
Yes. Hi. Good morning, all. I've got two questions, please. Firstly, just adding on to the previous question. Sorry. If you can remind us of what proportion of your brick, tile, and timber requirements are sourced in-house, and the quantum of investment you are undertaking to increase, you know, brick and tile capacities, and how you see the payback on this. And the second question is related to cladding remediation. One of your competitors noted this morning that they expect GBP 35 million-GBP 50 million additional costs in the event the HBF proposed recommendations are implemented. Could you provide your thoughts on the proposed recommendations and what kind of additional costs do you expect? Thank you.
Morning, Rajesh. I think you're definitely right to refer to the self-help we have with our own in-house facilities. Clearly, that helped significantly during 2021. I mean, Martyn, do you want to come in on you know what the plans are for taking it forward and how we're seeing brick and tile increase this year?
Yeah. At the moment, morning, Rajesh, we have spare capacity with the brick factory. We can supply up to about 2/3 of our requirement, and we do have spare capacity there. With the timber frame, that also has some spare capacity, and we use it and are increasing to use it across the country at the moment.
I think it's about 40% of it.
It's around about 40%.
Yeah.
Timber frame. Obviously, with the new investment coming on, you know, with the new factory we're building, we're quite excited about that, and that will increase over the next few years, the proportion we can supply in-house. You know, it is. I think as I alluded to, clay bricks are we're seeing some quite chunky increases in those. Being able to help ourselves with our own concrete factory is great. On cladding, well, I'm sure we'll talk a lot about that this morning. Look, 12 months ago, we already went ahead of where HBF have announced, you know, a few weeks ago, where the membership is. I think.
Look, cutting to the chase on cladding, frankly, I'd point you to the legislation. The amendments that have been made and are passing through the Lords at the moment are crystal clear. The government expects you to look back 30 years. It expects you to remediate your own, that you've built, not just owned, but that you built, and it expects you not to take money from the Building Safety Fund. Well, we were quite clear a year ago that we ticked all of those boxes. Hence why, at this point in time, we feel that the provision that we've made is still the right number.
Clearly, in those moving parts in the provision, there's quite a number of moving parts, you know, records going back 30 years are not always great. You know, you do, people have come to us with buildings that you know we didn't have records on, and we picked up. We're now looking at a total portfolio of 33 buildings that are requiring remediation, and they are of all heights. We fixed four of those, and we're working on all of the remaining 29.
The moving parts within the provision are the number of buildings, how much it's gonna cost, what the legislation ultimately says, and what we expect to recover from the supply chain, and of course, we do expect to make some recoveries from the supply chain. As we stand at the moment, the GBP 75 million for fixing your own looks to be a good number. You know, for those who read the legislation, you know, it's fairly clear that Mr. Gove has indicated that he's giving himself the opportunity to extend the Building Safety Levy to buildings of all heights. If where we get to in the discussions with government still leaves a pool of orphan buildings that require funding.
It wouldn't surprise me at all if we do see a further levy come forward during the course of the year. I expect, you know, that will be a proportionate approach taken by our government. Probably we'll see it applied with recovery expected over a sort of 10-year timeframe. Probably implying there that we expect to see more cost in terms of levy, but that our provisions are good at the moment. That is a moving picture.
I mean, clearly we very much expect to follow any law introduced by government and are clear that we expect from the actions that we're taking that we won't have a problem becoming a member of the building industry scheme and you know expect to contribute as law-abiding citizens to any levy that ultimately government decide to impose on the industry. You know, we expect all other developers to do the same.
That's great. Thank you very much.
The next question comes in from the line of Will Jones, calling from Redburn. Please go ahead.
Thanks. Good morning. Three, possibly if I could, please. First, just actually looking back on the year finished. I think in the appendices, when you look at the gross margin by brand, there's quite a big difference in the second half year-on-year in Persimmon Homes versus Charles Church. It looks like about a 2% increase in the gross margin of Persimmon Homes and a 5% decrease in Charles Church. It's quite a variation there. Perhaps you could just help us with that. The second was maybe just around the site numbers or the outlet numbers, I think 290 in development.
Could you just help us with how many of those are active for sale at the moment, and where you think that number might be by the end of the year compared to, I think the 320 you're looking to get to next year. The last one is really just around the equivalent units, that 4,100. Again, is there a target in mind where you'd like that at the end of the year, and any implications that might carry for the WIP position, please? Thank you.
Okay. Thanks. Thanks, Will. Well, I'll ask Mike, if he doesn't mind to pick up one and two, and Julie will pick up three.
Yeah, sure. Morning, Will. Yeah, I think in terms of the 2021 performance in terms of and the second half, you know, it's the usual thing. I know you're sick of hearing us talk about mix, but we always have regional differences between north and south within our Persimmon Homes and the house types we have. So, I know it's a simple answer, unfortunately, it is what it is on that. In relation to the 290 sites under development, in terms of outlet numbers, we're about the 260, 270 number on that. We've obviously got a good clear pipeline of where we think they're gonna grow through the year. I think we pointed to trying to open 75 in the first half of this year.
Obviously, that's subject to planning delays, which we are still incurring in places. Hopefully, that will drive us much more towards the 320 number in development at the end of the year. Again, it's all fingers crossed and subject to successful planning being achieved and then getting the spades in the ground.
Morning, Will. In terms of the units, we came into the year with about 400, and obviously, that is a function of the outlet number. Dean already mentioned that it's lower than we'd have liked coming into the year. As our outlet number increases, our units will also increase. Build rates are good. They've been good this year. We're pleased with those. We're hoping we want to invest, obviously, in our land and work in progress through the year. We're hoping, aiming for sort of early 5,000 exiting the year, and that will give us a really good platform into 2023.
That's great. Thank you.
Thanks.
The next question comes in from the line of Emily Biddulph calling from Credit Suisse. Please go ahead.
Morning, all. Hope you're well. I've got three questions, please. Just the first one on volume. I think you said on the January call that you thought you could do sort of 95%-100% of 2019's volumes this year. Today's 7% growth year-on-year doesn't quite get you there. I mean, do we look at this and think that anything sort of changed year to date, or is the guidance you're giving today just sort of tightening up sort of where you think volumes could be, and we sort of shouldn't read too much into it? Secondly, just on sort of house price inflation versus cost in 2021, do you think there was sort of any sort of positive contribution sort of through the P&L in 2021 at all?
Like, did it have any sort of positive contribution to margin at all? If we sort of look at where build cost is running today and sort of where house price inflation is in the order book, is there any scope for that to sort of change into 2022? I appreciate those are sort of quite big assumptions at this stage, but as we stand today, is that spread positive, and could it be better year- on- year? Then finally, I just wanted any guidance you could give us on cash land spend in 2022 at all. Thanks very much.
Morning, Emily. Well, maybe I'll have a go at one and partly answer two and ask Mike to come in on two and three. I think if I remember the call in January, clearly there was maybe a slight difference of opinion between myself and the finance director. I think that, you know, we did say, I think at the time, I cautioned to a slightly different range in volume and that is where we stand at the moment. In terms of exactly where we are in the range, it will depend on securing planning permission and getting consents through. We're doing well at the start of the year, but you know, we've still got a long way to go.
We as a business, you know, as will not surprise you, are very much focused on margin and quality. Quality of profit and quality of build now as well. We're not gonna chase volume just for the sake of it. I'd far rather deliver you less houses, but at a better price and a better margin and a better return than saying chase some, you know, 2019 numbers when the world has significantly moved on from then, is my view. You know, it is being, I think, responsible in terms of service we give customer, quality we give customer and quality of profit and returns we give shareholders.
I'll attempt to answer two, but I'll ask Mike who no doubt come in with a more intelligent answer than me. You know, it seems to me that we did see margin progress in last year, particularly in the second half. Clearly we did see a positive spread there. I think there were some particular regional issues around that and some particular mix issues, and some sites are coming to an end and other sites are opening, which make the second half of last year particularly positive. You know, the new year and we don't expect fully to repeat, but the new year has started well, and margins as they come through on a weekly basis continue to be very strong, and we're delighted with them.
Obviously we further have, you know, added to the strength of that because we bought a lot of land and we bought a lot of land very well. Indeed as Mike referred to in his presentation at, you know, a record low cost to revenue percentage. You know, we don't have any better crystal ball than you've got. The world's gone mad. You know, we forgive us if we're relatively cautious at this stage about the outlook for the year. Of course I've mentioned the levy as well. Anyway, those are my attempts at those answers, and I'll ask Mike too.
Yeah, morning Emily. Yeah, just to add to that, obviously we pointed to the embedded margin in our own land bank at around 33%. There is a spread of there and I do note it in the presentation that a third of those own plots will be hopefully delivering around a 40% margin on a concurrent costs and revenue expectations. I think the other point to note in relation to 2022 and the thought is we've noted that there's gonna be a slightly higher HA mix in the volume delivery and that will add an element of dilution to the margin rate. To compensate that, we've got our vertical integration and offsite manufacturing capabilities which will then support us on that.
Moving on to the third point and cash and land spend. If you go to the 2021, you know, we've exited with GBP 1.25 billion of cash which is unbelievably strong. In terms of land spend, we spent GBP 460 million on land, and a part of that we strategic land acquisitions of around 180 million. I think we've pointed out previously in previous years, you know, we'd like to be spending and investing in land around the GBP 500 million-GBP 550 million per annum. But we'll be able to do something similar to that this year. But we've got to be conscious that we're not just going to do any deal.
It's got to be the right deal and it's got to be at the right margins. We've got the strict criteria for acquisitions. That is the hope. Pointing out where we've been, we talk about say the GBP 700 million cash position at the end of a reporting period being the ideal scenario. I think if we're slightly down, I think if we're around a GBP 1 billion mark in terms of cash this time next year, I think we'll be in a great position.
That's great. Thanks, guys.
The next question comes in from the line of Ami Galla, calling from Citigroup. Please go ahead.
Thanks. A couple of questions from me as well. My first question was on the CapEx on the Space4 factory you're planning to invest. I'm not sure if you'd given us guidance previously, but just some color in terms of the CapEx outlay there. The second one was on the ASP in 2022. Are there any mix shifts that we need to be aware of apart from the HA mix that you have pointed out earlier? The third one on the private order book, if you could give us some sort of color in terms of where that stands at the end of February.
I'm sorry, Ami. Something went funny with the line. We didn't quite hear the question. I think the first question was about Space4 factory, but I'm not sure we quite heard it.
No.
Could you repeat it, please?
Yeah. If you could give us some guidance on the CapEx investment in the Space4 factory.
Okay. Thank you. Well, Mike, do you wanna take a punt? Is it GBP 40 million?
40.
Yeah. On the CapEx at the moment, we're looking that it's gonna be GBP 40 million over the next couple of years. Obviously, it's gonna take a bit of time to-
Yeah.
to build the battery and then kit it out.
Yeah.
Just moving on to the ASP for 2022. Yeah, we've delivered GBP 237,100 in 2021. As Dean's noted, we've tried, we've been pushing prices in the early part of the year. We've not had too much of a backlash against that. I would expect the blended ASP to be a couple of percentage points higher than where we've exited. On terms of the order book, we've seen a good sales, as I said in the first eight weeks. I think we've said we're around 6,200 PD forward sold, and the average revenue of those is around GBP 259,350. That's slightly ahead of where we entered the year, and I think that's just a reflection of what we've seen.
That's very helpful. Thank you. If I can have one last follow-up. Just on the planning side, is there any color that you can give in terms of, are the delays quite generally broader in the industry, or are there any regional differences or bottlenecks that you are facing in terms of planning delays?
Look, the problems that we experienced and we highlighted last year on some of the nutrient neutrality issues around water, nitrates, and phosphates are still there. I think, you know, until government. It's stuck between two government departments at the moment, and it is now affecting a big swathe of the country across the south in particular. We do have some, like other developers, caught up in that problem. Until those two government departments really get a grip of this problem, then, you know, I'm not optimistic that there's gonna be much resolution there. We've highlighted in the past under-resourcing in some planning departments, which I think is also, you know, everybody's seeing.
Having said all of that, you know, I do point to, you know, what I said, if you managed to catch it yet, on the Glenigan's research, and we were the most active of all builders last year in terms of planning application and processing. You know, 21,000 plots put us and 101 sites put us at the top of the tree. Exactly when these consents will come through will dictate in part the volume outcome for the year. I'm pretty optimistic and confident of the outlook. You know, we're creating a great platform for growth, and if it doesn't come through this year, it'll come through next.
Thank you.
The next question comes in from the line of Arnaud Lehmann calling from Bank of America. Please go ahead.
Thank you. Thank you very much. Good morning, everybody. I have two, if I may. The first one is on, let's say, all your back and forth with the government. Firstly, as an industry, you have to pay the 4% incremental tax rate. Now we're talking of a Building Safety Levy, plus you've provisioned obviously the GBP 75 million for the buildings you're responsible for. Overall, a heavy contribution, let's say, but fair enough. I guess on your side, all of that considered, is there anything you can do to at least partly recover these extra costs, either in terms of pricing or in terms of cost efficiency? That's my first question.
My second question is on Help to Buy, as you mentioned a couple of times, you know, coming to an end in about 12 months. Firstly, are you adjusting your products to take into account the end of Help to Buy? Secondly, considering that at the moment you're probably selling more houses than you can produce, I guess the question is it possible that post Help to Buy, if demand is slowing down, that wouldn't necessarily impact your level of completion? If that makes sense.
Thank you, Arnaud. Some good questions in there. Look, you're right. It's you know, I've lived and breathed since January, in particular the movements with government on building safety. I'm obviously intimately familiar with it. But you're right to say that it's complex and there is a you know, broad range of moving parts. A key aspect I think on the cost aspect of just the spend on cladding and remediation is a proportionate approach taken to what will grant a homeowner an EWS1 certificate so that it can become you know, mortgageable and sellable. I think that that's incredibly important, and I think there is a lot more work still to be done around that.
I do think that the department and Mr. Gove are fully cognizant of that, not least because I'm sure he fundamentally expects some of this cost will come out of his budget too. Whether, you know, you are building towards B1, A3, A2, A1 within the definitions is incredibly important. I think what is also really important is that, you know, you own these works yourselves. That's why, you know, I'm sure like other builders, we feel it's very important that you know, the private sector is going to be better placed to more efficiently deliver the recovery and remediation work than the public sector.
I think that indeed is where, you know, Mr. Gove, in particular, wants to end up in all of this. I think you're right to point to, you know, the detail of this, 'cause the devil is indeed in the detail, and it will determine at the end of the day, how much you're gonna ultimately spend to make a building safe. I think there's a lot more work to be done there yet. On Help to Buy, yes, we, you know, continually amend our product. We have been looking at it. Look, I think us hopefully becoming a five-star builder in a few weeks' time is a very important element of that strategy.
In terms of also the detail and the house types we are building, yes, we've extended the range to prepare ourselves for the end of Help to Buy. Obviously, we've got Deposit Unlock. You know, I'm sure you've heard many people say before, is it Help to Buy or is it Help to Buy bigger? I mean, certainly we saw when Help to Buy one came to an end last year, sales didn't seem to miss a beat as we moved to the Help to Buy 2 scheme. I think you're also right that demand significantly continues to exceed supply. You know, the impact of coming to the end of Help to Buy may be more muted than possibly people fear.
With, I think, you know, mortgage availability still very good, increasing LTVs, products still being very affordable, you know, in terms of overall proportion of wage costs. You know, mortgage costs are around 30% of overall wage costs, and we're seeing obviously wage inflation. I think product still is, you know, remaining historically affordable. I think, you know, the positioning we've got as a group as a quality builder looking after its customers, providing a product that is 20% below, you know, average market selling price is a great place to be. You know, we're very optimistic still of the future, even if Help to Buy goes.
That's very helpful. Thank you very much.
The next question comes in from the line of Gregor Kuglitsch, calling from UBS. Please go ahead.
Hi. Good morning. Thanks for taking my questions. Maybe just coming back, sorry, on the cladding point, and thanks for your comments. I guess maybe two follow-ups. The first one, if you could just share how you understand an extension of the Building Safety Levy, how that would be structured, and I guess specifically if it would apply to existing planning consents or whether you think it would only apply to future planning consents. Then, secondly, I mean, I guess I know that, you know, I think the government kind of said, you know, to the HBF proposal kind of not good enough. Can you maybe share with us what they want more?
What, you know, what's the additional thing that I guess is not good enough or what do they want to reach an agreement? That's sort of the first question. Sorry, it's a two-part question. Just back on the outlet, just sort of technical clarification. So last year, I think you averaged at 285, correct me if I'm wrong. Are you saying with reference to that, you're at 290 now or are you saying you're 260, 270? Just maybe clarify sort of what's actually up, sort of up for sale and what isn't, maybe just a definitional point. The other thing which I noticed looking at your land bank, analysis in the slide.
I think your owned plot cost to average selling price ratio has hit a sort of new low at 11.4%. It's down again year-over-year. It's starting to become, you know, extremely low, I guess. Maybe if you can give some color around that and, you know, whether you think that's sort of as good as it gets from a sort of plot cost recovery perspective. Thank you.
Thanks, Gregor. Well, if I answer one, and I'll ask Mike maybe to come in on two, please. In terms of the extension of the levy, everything is still, you know, frankly up for grabs and remains on the table to be discussed. Could it be a levy or could it be a tax? My own personal view is that the problem with the tax for Mr. Gove is that the tax will go to that nice man, Mr. Sunak. He probably won't give it up back to Mr. Gove as much as Mr. Gove would like it to. I expect that in the end, he his preference is to a levy. Those details are yet still to be worked through, at least with industry.
My guess is that later this year, we will see a levy. The details of whether it will apply to existing consents or future, again, is a piece of figuring still to work through. I'm guessing at the moment that it's gonna be prospective rather than retrospective. It is still, you know, I'm afraid we can't give you clarity because those details are not there. If you, again, read the legislation, it's very broad. It's simply giving the department the powers to apply a levy and basically allowing it to decide what and how it will apply that. Thus, therefore, you know, clearly Mr. Gove has given himself the maximum flexibility in order to solve this problem.
Again, you know, I suppose in answer to your second part to your first question, what's not good enough? Well, read the legislation. You know, it goes back to what I was saying a few moments ago. It's clear it's 30 years, and it's all buildings you developed, whether you owned it or not. That is what Mr. Gove wants.
Okay.
Mike, you're back on that one.
Yeah. Morning, Gregor. Hope you're well. Apologies if I wasn't clear enough on the outlets point. Yeah, what we're saying is we've got around 290 active developments at the moment which are under construction. We've then got a slightly lower, the 260-270 number, which is our current sales outlets position. We're obviously gonna hope to open that differential as we move through the spring period. Yes, we're looking to open 75 new sales outlets in the first half based on planning. The 320 is an aim for sales outlets at the end of the year. I would probably say on average for the full year of 2022, we'll be running around the 295-300 average outlets, I would expect.
I would caveat that obviously on the planning delay here. We hope these are gonna come through when we want them to, but yeah, we're getting our crystal balls out at points on that. On the land bank, I think just to note that, yeah, 11.4 is absolutely brilliant and we're really proud of what we've done. Our experienced land and planning teams have really driven hard on that. But to note is that we do have obviously 60,000 plots of this 88,000 are owned. The land cost in there is embedded. It's there, it's not going to change. If we keep seeing increases in revenue, the percentage will improve.
Whether it improve and keep improving at the rates that we've seen, that's very gonna be dependent on house prices and where we go. We will be trying our utmost to keep that at the level it is or improve it as we go through 2022 and into 2023.
Thank you. Maybe one follow-up on the planning. Just to be crystal clear, they're not demanding sort of voluntary contributions into some kind of fund anymore. It's essentially moving towards either a tax or some levy. Is that your understanding?
Essentially, yes. I think if you accept the principle that a levy will be applied, you know, then, I think that removes the demand for a voluntary.
Thank you.
The next question comes in from the line of Glynis Johnson, calling from Jefferies. Please go ahead.
Morning. I just have two actually. The first is just a clarification. You talk about Glenigan and how you're being the most active. Can I just confirm, that's in terms of sites that have been bought or that's including sites that have come through the planning system that you've pushed through? Actually, I'm gonna do three, if I may. Second one is just in terms of your intake of land last year, can you tell us how much was from your strategic land bank and any kind of guidance you might be able to give for 2022? I appreciate it's lumpy and timing is difficult, but that would be very helpful. Then just lastly, when I put together data on your, I'm gonna call it your blob chart. It may not be doing it quite the justice.
On your plot chart of margins, it suggests that your margin's actually ticked up a little bit, which fits in terms of what you're telling us in terms of plot cost to selling price. I'm wondering just if you can talk us through the moving parts on that. How much of that margin improvement on the land bank, I appreciate it's a very small amount, but how much of that has come through higher revenues, higher selling price, and how much has come through the contribution of the new land coming in?
Ooh, that's a hard question. Well, Mike's looking away from me. He hasn't got an answer. I'm still gonna ask him 'cause I don't know. Glenigan is, Martyn, that's sites we've applied for, isn't it?
It is. Again, it can be a mix of all sites, to be fair. Glenigan's ones that we've either bought recently or ones that we've had under our ownership for, I don't know, a longer period of time. I think it, you know, we've mainly highlighted to demonstrate we've been very active and, you know, I think very successful. We're delighted with that. In terms of the strategic land now, it's about half.
Yeah, it's around 10,200 of the 20,787 plots that we've brought into our consented land bank have come through from our strategic land interests.
I'm not gonna second that.
I think it's that there is a mixture. We've obviously seen increased revenues, which have mitigated the costs that we faced through 2021. There is an impact on the own plots that were there in the land bank this time last year and at June. There is an impact from there. We've seen margin go from 27.6 operating from 20%- 28%. There is gonna be an element in there. In terms of what we've been buying in that's gone into the land bank, we've been seeing that the margins have been very similar to what we've been acquiring historically. It is a mixture. I couldn't honestly put my finger directly on the component parts and what's what from the 33, or getting to your 33.3%, I think it is. It is, yeah, mixed.
Perfect. If I can cheaply do just one quick follow-up. In terms of the strategic land that came in last year, what proportion was already owned freehold versus what was on option?
Not much of it will have been owned. I think most of it would be the conversion of options.
Yeah. Yeah. I think that's right.
Thank you.
The next question comes in from the line of John Fraser-Andrews calling from HSBC. Please go ahead.
Yeah. Morning, Dean, and the team. Two from me. The first is on, obviously.
John, sorry to interrupt you. We're really having trouble hearing you. You're breaking up quite a lot. Sorry about that.
Oh, is that better?
Yes. Thank you.
Two for me, please. The first is on cost efficiencies with the good news on the five-star anticipated later this month. Is that now the end of investment in improvement of control of build and customer care? And might that herald, given there's been some investment there, some operational efficiencies still to come through if you're not bearing incremental costs and making incremental efficiencies? That's the first one. Secondly, on fire safety, very helpful, Dean. You've set that out, how you interpret that playing out. Question from me is, where's the conversation in terms of other industries in the supply chain contributing to the remediation? Is the government itself accepting any culpability for some of this cladding that's on high-rise buildings, given that it regulated those buildings? So two for me, please.
Okay, John. Thank you. On cost efficiencies, well, in terms of our investment, no, that we're still gonna be continuing to improve the product because standards are increasing all the time. You know, I think Persimmon has motored over the last couple of years to really improve. The industry itself continues to improve. You know, we have caught it up, but that bar continues to go up. We're very conscious of that. What we do see is that, you know, it does save us costs, cost of wastage, cost of remediation. Some of those costs, you know, those are day works. It can be a chunky number, you know.
You can be talking about a couple of % of what of cost wastage, if you like, in there, which, as you do get it right first time or increasingly get it right first time, that's a bucket of costs to go at, that we are going at to improve our bottom line. You know, I think you saw that last year with the margin. The margin did go up despite the fact we put a lot of investment into improved product. That wasn't all just the fact that it was selling price inflation, 'cause we needed that to cover some eye-popping build costs. It was that we were building better, and that is saving costs, and I expect that will continue over time. Hopefully that answers that.
As we build a better product, you know, the value of the product we're building becomes better and better. It helps it sell more, and helps it sell for more, for more money, so as it becomes more valuable. On fire safety, you may or may not be familiar, I don't know. Again, because I'm intimately familiar with it now, I assume everybody else is, and you know, clearly there's a lot here and it's probably wrong of me to assume that. There is this principle of waterfall that Gove has established, and the legislation has established. Developers and manufacturers are at the top of the waterfall.
It then tiers down the waterfall to freeholders, and then ultimately leaseholders are at the bottom of the tier if there is nobody left to pick up that building. You know, clearly that is why he's focused on you gotta fix your own fellas. You know, he has given himself pretty draconian powers to make sure that those who don't fix their own won't play a part in this industry. I have no doubt he means that. No doubt. If some developers stop building, while that might have been unthinkable in the past, I don't think he thinks that now. We and manufacturers are top of the tree in terms of top of the waterfall in terms of who we expect to pay this.
In terms of government, well, you're right to point to the fact that government is culpable there. They know it. That's like any negotiation, isn't it? I mean, the more they get off of us, the less he has to pay out of his own budget. That's a fact of life. You know, given he's granted himself Henry VIII powers, and we are law-abiding citizens, and ultimately we'll have to obey the law. I think, you know, we are seeing a sensible approach, personally I think, from government in terms of being proportionate and trying to fix this problem.
Thanks, Dean. Just a quick follow-up. Is there any evolution in the GBP 4 billion number that was included in the letters?
I think that's a very good question, John. I've seen the basis for the GBP 4 billion, and my view of it is pretty sketchy. HBF have done a great piece of work, done their own survey work drawn from their own membership, and that is producing an order of magnitude lower cost and smaller number of buildings involved. You know, our view of this is very simple, really, which is if the whole industry fixes its own, and we get some real numbers about what is the size of the pot, then, you know, you're ending up with a much more sensible figure for the absolute, for the balance that is going to be covered by the levy.
Great. Thanks, Dean.
The final question comes in from the line of Charlie Campbell calling from Liberum. Please go ahead.
Morning, everyone. Just two quick questions from me. Just in terms of the HA part of the business, are we still right in thinking that that becomes 21% of the business as it was in 2019, trends back towards that level? Secondly, just on the sales per site per week, you've reported up 2% year-over-year. I suspect others might kind of report stronger results as we go through the results season. I just sort of wonder if there's anything there in mitigation. Perhaps you've taken maybe a more aggressive stance on price to slow that down a bit, or perhaps it's just mix. Just get a view on that. Thank you very much.
I think on affordable, yeah, over time, we expect it to be around the average you said. So yeah, that's right. No, there's no changes from us there.
Yep.
In terms of sales, I think you're right to allude to the fact that, you know, we're not chasing volume, and we don't. We wanna protect margin. I'd also point out that we probably start from a higher base anyway. You know, I see the numbers that others are reporting, and they're below our numbers, so we start from a higher base anyway.
Thank you.
That was the final question in the queue, so I shall turn the call back across to yourself, Dean, for concluding remarks.
Brilliant. Okay. Well, thank you very much, all. Sorry, I know it's a busy day, and I'm sure you need to get off to Bicester now, so good luck with that. Obviously Mike, Julie, and I are around with Martyn for any product questions you might have.
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