Earnings Call: Q3 2020

Nov 10, 2020

Earnings release

Hello, and welcome to the Persimmons Trading Update Analyst Conference Call. My name is Courtney, and I'll be your coordinator for today's event. Please note that this conference is being recorded. And for the duration of the call, your lines will be on listen only. And I will now hand you over to your host, Dean Finch, Group Chief Executive to begin today's conference. Thank you. Thank you. Good morning, everybody, and thank you for joining our trading update this morning. I'm joined by Mike Kalloran, our CFO and Martin Clark is also with us this morning, who is Regional Chairman of our So I'll begin as usual by just talking through some of the key highlights of our trading update and then open it out to any questions that you might have. So the business is obviously we're very pleased With the performance in the period, we believe it positions us well to post a good result for 2020 in the context of the year that we're all living through. I think persimmon has done Particularly well in light of the circumstances it's in. There is strong demand for the product. And I think Persimmon has done extremely well to manage the period in terms of build and having our product available to sell to our customers. Safety has been a key concern and we have relentlessly followed our COVID secure procedures. They're in place and are operating well in line with government guidelines. We've stuck to 2 meters and that is working smoothly to our building sites. Our 3rd quarter performance saw very resilient demand For new build, average private weekly sales rates for per site for the period was 38% up on 2019. We are fully sold for the current year and at circa €1,400,000,000 of forward sales reserved beyond 2020, that's 43 percent up on last year. And you will have seen that we are in a strong position in the balance sheet with close to £1,000,000,000 of cash on hand as at the end of October. The business continues to make really good progress with customer service. Our current HBF customer satisfaction score of 89.9% as of the 1st October and Throughout the year, we're trending ahead of the 5 star threshold since January. We expect legal completions in the second half will be at least in line with the second half of twenty nineteen. Obviously, subject to there being no significant further disruption from COVID and the current lockdown, I would say that we're not seeing any significant disruption from that in the business at the moment. So reflecting the Group's continuing good performance, we are declaring a further interim dividend of 0.70p per share this morning, which will be paid in December, and that is on top of the interim dividend of 40p that we declared in September. And this replaces the previously postponed Farm Bill dividend for 2019. I think this all underscores the strong financial strategy the group's followed over the years of deploying its capital well and managing financial risks well. The long term fundamentals of the UK housing market remain favorable. Obviously, there are uncertainties as we look ahead to 2021, including further COVID disruption, unemployment, Brexit and so on. But I do think that Persimmon is very well placed to navigate these, which are, of course, very unprecedented and extraordinary times. But nevertheless, I think the strength of the business, the strength of the balance sheet will sit through that and will continue to thrive. Obviously, I'm very new into post. I've only been in the job about 6 weeks. But I'm getting around the group as quickly as I can to understand the business and to meet our colleagues. I am incredibly impressed by the team's commitment to quality of build and serving our customers. I really have been very pleasantly surprised by what I found And I do think there's enormous potential in the business. But as I say, I'm only 6 weeks in, so it's early days and I look forward to talking to you more in detail on my thinking in due course. So with that, thank you very much. And I'll hand it open to any questions. Thank you. Our first question comes in from the line of Rajesh Pat I've got 2 questions. Hi, Rajesh. Are you okay? So the first question is on the pricing on the forward sales. If you can provide some color on the $1,400,000,000 forward sales for next year. And also the ASP for the first half was helped by the mix impact from fewer affordable units versus last year, do you expect a similar mix for the second half? And the second question is on the outlet numbers. The active outlets are 13% lower than last year. The reduction entirely due to the strong sales that you've achieved this year? Or have you seen any slowdown in Developing new outlets, how should we think about the impact of fewer sites going into next year? Thank you. Good morning, Rajesh. So shall I try now answer the outlet numbers and I'll hand over to Mike for the pricing of forward sales and mix impact. I mean, yes, I mean, I think, look, there's no hiding that Persimmon has, to some extent, been a victim of its own success. And we've sold strongly and it's just arithmetic really as we've gone through this incredibly high demand over the last few months. But look, we've got a strong land bank. We're actively looking at the market, we'll be cautious about it, but we will be replacing these outlets at the right time. We don't chase volume as a business. But nevertheless, What we are clear about is if we have to build then we can sell it at the moment and so we should keep that very actively under review and do the right thing for the business. On pricing, Rajesh, When you look at the forward orders, on the private sales, our average ASP is just a tad over 255,000. And on the affordable units, just over 125,000. So the on the private forward orders We're around sort of 8%, 9% ahead in terms of ASP. Now I don't want you to go away thinking that's inflation because it isn't. That is mix affected. The types of sites that are in the forward sales, obviously, year on year does change. We've seen firm pricing through the year, as you know. We've said that before. And we've Obviously, have the opportunity to be able to nudge our pricing forward. We micromanage that process. So yes, I mean, we're pleased with pricing at this point in time and it demonstrates, as Dean said, Good demand for the homes that we've got on offer. Is that okay? And the mix effect for the second half? Yes. The mix, in the first half, we did see Around 17%, 18% affordable in the mix. And I think that there'll be a bit more PD in the mix in the second half, Largely because of the deferral from the first half coming through because of the production disruption. So again, it's going to be marginal, but a little bit more PD in the mix we would expect coming through in the second half, which obviously will support, again, the overall group average pricing when we get to January and see what the final handovers look like. The next question comes in from the line of John Bell calling from Deutsche Bank. John, please go ahead. I think I've got 3 actually. The first one On capital returns, I appreciate that it's very early days and you've guided us to your March update. But just to frame the debate at this stage, could you just remind us of your broad thoughts on special dividends versus buybacks? 2nd question would be, could you walk us through how your market share has trended Through the pandemic? And the third one is, any supply chain bottlenecks that you anticipate ahead of what looks to be Fairly congested February March period. Thank you. So shall I take those in reverse order and I'll say a few words on capital return, but then I'll hand it over to Mike. And I think, look, And I'll ask Martin just to come in on this as well on supply chain. But I think the industry is running red hot at the moment. But I think we're on top of the issue. Probably top of the list of things that we're worried about at the moment will be appliances and doors. But We're on top of the issue and we're not predicting any concerns at this point in time. But we have with an incredible volume of activity and we see that going forward. Martin, Ewan? I think it's just worth pointing out with the excellent relationships we've got with our supply chain. They are working with us. Appliances and doors have been an issue, but we are working our way through them. We don't expect to have any impact towards the end of the year. Our market share, I mean, obviously, we did ride ahead over the peak of the summer because we had that stock availability. That has tended back to normality now really, which is how we see the situation going forward. Yes, it is very early days for us to for me in particular to comment on capital returns. We set out the position previously. And I guess that's where we currently remain and we'll say where we are in February. But Mike, I don't know whether you've got anything more I think we, John, we said back in the prelims in February earlier this year that We set out an intent for the financial year ending December 2020 to be in 'twenty one with the bottom slice and top slice, the special being paid in late March, early April. And the bottom slice is sort of the in perpetuity commitment to be paid in early July and the latter being set at 125, having reversed the $110,000,000 $125,000,000 per share for next year. So given that we've not said any different, that's still the intent that's on the page, so to speak. And as Dean says, as usual, we'll continue to review that and update the market in The prelims in February next year. The next question comes in from the line of Arnaud Lehmann calling from Bank of America. Please go ahead. Thank you very much, and good morning, gentlemen. Just a couple of questions on my side. Firstly, Could you comment on the margin trends for the second half and also what you what is sitting in the order book? I remember Mike had been highlighting the fade for the margin outlook quite a few times. Is that still the case? And are we talking about a fade relative to 2019 or a fade relative to 2020? That's my first question. Secondly, on the outlook for demand. I mean, lots of moving parts, obviously, including your Market share gains, although that seems to be normalizing. We've got a few changes coming for the industry next year, including the change to Help to Buy, Storm Duty holiday is around summer, but eventually might be removed. How do how are you preparing your offer And your supply to adjust for these changes? Thank you. So shall I morning. I'll take those again reverse order and I'll have a go at 2 and Mike will answer 1. Look, I mean, first of all, obviously, we are strongly sold into the first half of twenty twenty one, certainly Q1 and we expect that to continue into Q2. And some of that will roll on forward from that point onwards. I think it is incredibly hard at this point in time To conclude one way or the other about what the second half of twenty twenty one is going to look like, that feels Quite a murky crystal ball to me at this point in time. The fundamentals of the market remain good. We are seeing a strong demand at the moment. Can you project that forward? Who knows? But I think that as I said, the fundamentals of the market remain good. There's some obviously some changes, but Hard to call the impact of the macro and pandemic issues at the moment. I think with regard to the micro Of the changes to Help to Buy, I mean, obviously, when we get to that point, there will be an impact on the business. But I think it's perfectly manageable. And I think there still will be a strong demand for the company's product. And so we'll just manage that, I think very carefully through the course of next year. But the reality is that the businesses cope without Help to Buy in the past And we'll cope with any changes going forward. Mike, do you want to add to anything to that one, comment on margin? Yes. I mean, one thing, just An additional observation on that. We've mentioned before the Scottish market where the scheme is different up there and Effectively, the threshold is quite low, but we still sold well in Scotland. So I think If there's a small word example, if you will, as Dean is saying, the ability to sell in a market where we're not Tremendously reliant on that sort of scheme to support customers. We're still being very successful In selling into the Scottish market. And I think just if I may, just coming back on that. I mean one of the things that struck me about the business is incredibly well positioned at that end of the market. And it really does sell and build to that, shall I put it this way, the affordable end of the market, Where there is clear demand, strong demand and we are deploying our business to provide product that people can afford to buy and want to buy. So yes, I think the impact there will be we'll see some impact price tariffs, but actually I think Persimmon will do well in that. Sorry. Yes. And on the margin trend, Arnaud, I think yes, you're right to refer back what we were saying pre COVID where we were pointing to a bit of a margin drift. I think just to remind everybody, first half 'nineteen operating margin was around about 31%. Second half was 29.5%. The first half of 'twenty obviously hit by the disruption to handovers and therefore the fixed cost Efficiency of the business was disturbed, albeit the persimmons fixed costs, we believe, A reasonably lean relative and we struck an op margin of around about 26.5% in quite unprecedented times. So as we said at the on the back of the prelims, we some improvement on that first half op margin to come through in the second half as we Get back to a normal rhythm. Production has come back strongly After we emerged from the 1st lockdown at the back end of April, as we said at the time, and that has continued, really pleased with that, All the teams working hard to drive the build forward, which means that our margin expectation is still in line with what we were talking about at The interims in August, where we'd see some improvement coming through in the second half of this year. But still on this sort of medium term outlook for A fading trend, I think. Yes, pricing has been firm more recently, but we're being mindful of The conditions and context that Dean touched on earlier, then we'd Expect pricing continue to be resilient, but with the bounce back in the industry, maybe Cost pressures starting to reemerge next year. I mean, we've said in the past, cost inflation may be 2%, 2.5% for this year. And obviously, at this point, the costs are more or less locked in through procurements, etcetera. But for next year, that dynamic might change a little bit and that's why We're pointing to a bit continuing slight fade on that margin over the next year or 2. Is that okay, Arnaud? The next question comes in from the line of Gregor Gulich calling from UBS. Gregor, please go ahead. Good morning. Thank you for taking. Hi, how are you? Hope everything is good. I've got a few questions. So The first one is maybe on volumes. So you say in your statement you're fully sold for this year. So I guess you have a pretty good degree of visibility On your volumes for the second half, if you could just maybe elaborate maybe a little bit more on your statement of being at least flat. I think that hasn't changed, but we're here in November. So I guess you probably know more precisely. So any color there would be helpful, please. The second one is on orders or sort of recent reservation trends. And I'm specifically interested in the ones that are beyond March. Kind of going back to the earlier question on the product offer, where obviously stamp and Help to Buy will no longer apply or at least the current terms won't apply. So the question I guess is, are you seeing any changes over the last few weeks because I'm guessing that if I were to turn up to one of your sites, I couldn't actually get a reservation that would complete prior to March 31. So I guess we should already actually know is my point. And therefore, I want to hear what you have to say on that. And then maybe just to be very precise to follow-up on the margin point. So do you have a kind of endpoint or sort of the drift, I guess, Which you've talked about for certainly 18 months or so, where should that settle, I suppose, when we talk about op margins of, call it 30% or 31% as a starting point, where do you think a midterm sustainable level is? Thank you. Good morning. Just so dealing with those in turn On volume, look, we do have pretty good visibility as we approach The year end, we have guided and I'm not going to elaborate on that. We've got to point out that we're in the middle of the most Outside of war, the most extraordinary times of all of our lives in terms of managing a pandemic And that has implications on build. It has implication on Legal completions and the management of contracts, the business has gone through a mini boom And it is running very hard to deal with that. It could be, We could be in the most extraordinary positions of building and selling as many houses in the half of this year as we've ever done in the history of the business, we're slap bang in the middle of a global pandemic, Pretty extraordinary. So forgive us if we're not going to give you any more color on the year end because it is a whole host of moving parts. We're pretty confident we're going to get to the point we're guiding to at this point in time. But every building site in the country will have Some impact of somebody catching COVID. Every legal firm and agent we are dealing with will have somebody somewhere affected by COVID and that affects the ability to work a completion through the system. It's just a fact of life. And it's a very complicated moving part. So forgive me, but no more color than we've given, which is we expect to do at least as well as we did this time last year. I mean, On orders and reservations, I mean, obviously, we are taking reservations beyond March of next year, but Just not on the new Help to Buy scheme. And notwithstanding Help to Buy is a very important part of the business. It isn't everything to the business. And so we are seeing, we are still seeing Strong demand out there and Obviously, we are not selling under the new scheme at the moment because it is not yet released By the government, nobody is selling under the new scheme at the moment. One of the issues we are having to deal with as a business, as I said earlier, At the job at school, we are, to some extent, a bit of a victim of our own success at the moment because We have built well and it has all sold. And we are running at almost full capacity at the moment. Now we will catch up. But certainly, what I see, I mean, I've been on probably been in my 5 or 6 weeks here now, I've been on about 25, 30 building sites and sales offices. And to a man and to a woman, they're all saying to me, if we have the stock to sell, we'd sell it at the moment. And so the business has done incredibly well, I think, in these incredible circumstances. We will catch up with stock, but we need a bit of time to do that. There's no doubt at the moment, as I said, that if we had more to sell, we would be selling it. How that trends into the second half of next year is beyond my pay grade to call at the moment, I'm afraid. So just on margin, I'll pass that over to Mike. Yes. Thanks, Steve. Yes. On margin, it's how long is a piece of string dragger as usual on this one. Obviously, the market Changes all the time. If we get a bit more price growth coming through, then that obviously helps the margins, etcetera. I think what we try to do is give a good impression, a clear impression of what we believe is the short term prognosis Over the next 18 months or so. And I think the fundamentally, The quality of our asset base, the land bank is of such good quality that I think that we're going to be barring major disruption, I would hope that or I could see that our operating margins remain in the higher end of 20s for some time because of the high quality nature of the asset base. And as we bring through those assets into active outlets, we've got, for example, we've got 15 to 20 sites currently under construction that have yet to undergo first release. They'll be coming through over the next few weeks to supplement the existing network with good margins and good returns. So I think that will continue. And as Dean has already touched on, the deals that we're doing, the Fresh land deals that we're doing to replace plots consumed are of the same quality as being delivered through production now. So we've got great visibility in terms of the quality of those assets coming through, which will sustain our operating margins at these industry leading levels, certainly into the high 20s. And obviously, that can improve based on pricing and cost control, etcetera, or it may come under pressure if pricing comes under pressure, but That's the nature of the market. As you know, we're price takers. We're not price setters. And as Dean said, we see good demand at this point in time. We've sold well, but you'll notice our outlets are a little lower, around 305 currently because we've sold so well. But we'd hope that the strength of the outlook network is maintained around that sort of level moving into Q1 and will then be supplemented by these new sites coming through to move on from the good margins. Can I just one that's very helpful? One point of clarification. The sales rate you're quoting are excluding the new Help to Buy claims, yes? Correct. But you do have people that are in waiting on waitlist for that, I suppose. That's what one of your peers at least, Yes, I mean we've got waitlists on a lot of our sites, Gregor, help to buy or not help to buy, to be honest. Got it. Okay. Fair enough. Thank you. The next question comes in from the line of Aynsley Lammin calling from Canaccord. Aynsley, please go ahead. Good morning. Thanks. And just 3 for me. First of all, wondered how you're kind of managing the land market at the moment, what you're seeing in the land Are you suddenly either becoming a bit more aggressive or assertive in the market given recent trends? And secondly, Interesting your comments on what you're seeing in the mortgage market and whether that's kind of getting a bit more difficult or not. And then thirdly, I understand you don't want to kind of give too much guidance given what you just said. But just I guess from what you've said, we should Take away the fact that you'd be pretty happy with where consensus is currently around, I think it's around €850,000,000 PBT for this year. So any comments on that Mike would be great. Okay. Good morning, Ainsley. Thank you. Well, I think as I think Mike really sort of really addressed The land market, we're not changing what we're about at the moment. We're very focused On maintaining the margin, we have historically had and certainly there is nothing how high I've done in my 6 weeks here to change that. We don't See any need to do that and that's not going to alter as we go forward. We're a business that's focused on, as I said earlier, we don't chase volume. We're focused on the quality of our financial performance. Our goals will be to remain a large national builder, but we're not chasing volume. Mortgage market is supportive. Yes, We've seen, as everybody has commented on, I think now, LTV is going up and Some products being withdrawn and maybe we're seeing more of the 85% than we did and fewer of the 95s 90s if we did before. It will be interesting to watch how that changes over the course of the next few weeks months because if we move from the gloom and despair of the pandemic to the optimism of an upturn, then maybe that will change attitudes in the lenders as well. So we'll see how that goes. I'm sure Mike is doing nothing to change guidance this morning, but I'll pass over to him. Yes. I mean, Aynsley, consensus, as you say, at around about 8 50 pvt, yes, we're comfortable with that. We're not looking to chase that up or down at this point. The next Question comes in from the line of Charlie Campbell calling from Liberum. A A couple of questions from me, please, if I can. You just talked about the mortgage market being supportive. But just wondering if you've seen anything on down valuations at Clearly, banks have some reasonably kind of cautious assumptions about house prices in their models and therefore just wondering that might start to kind of play out in down valuations. And then second question, specifically for Dean. But It would seem to me from your work in previous companies that customer care and customer quality are Hi on your list of priorities. Clearly, it's been important more important to persimmon over the last sort of year or 2. And just wondering kind of how far How much further do you think there is in terms of Gurney? Is that something that you will look to prioritize and improve further? What do you think actually having gone round, a very good job is already being done on that front? Morning, Charlie. And do give my best to Gerald. I hope he's well. Mortgage, no. Personally, I've not seen anything significant on down valves. I'll ask Martin to. No, very, very, very few. The odd one, we don't really get it as a general concern. I think Mike is also agreeing. Yes. I mean down, I mean, we monitor The cancellation profile almost every second of every day. And We're not seeing any major shifts in any of those components, down valuation being one of the issues. Yes, We see a few down valves, but in a way, you want to see a few down valves because it demonstrates that we're As I said earlier, we are price takers and we're testing the market. So I think we'd be disappointed if we didn't see 1 or 2 Situations where we have to agree with a customer and the value of the mortgage lenders value A slightly different price. That's just normal business. But yes, nothing unusual really at that point. Thank you. Yes, I mean, look, My history is unlikely to change my attitude coming in here. What we will be about is building safe, good quality housing that look after the community, look after the environment and look after shareholders too, I mean that broadly is what Persimmon is about and it's going to be what I'm going to be about whilst I have the pleasure of being its CEO. I think Persimmon has made great strides. I think it's got enormous potential. It's done some really good work with the introduction Of the Persimmon Way, we're about to launch the customer portal, which I think will be a really good thing for us to get a far better understanding of our customers in a more instant than we currently have, less Pay for base system, but an instant digital way of communicating with our customers I think will be great and will uplift our performance. I could point to Fibonest, which I think is really an incredibly useful tool for Persimmon to differentiate itself For the customer, as I said in my introduction, I mean, I am really I'm not just saying it Because I'm paid to say it, I suppose, but I say it because I believe it. There is no question About the enthusiasm amongst the leadership of the business To be a good quality builder of safe homes, I think that is an incredible opportunity for Persimmon going forward because I think it can build on that and Become a true market leader in this and I think Maybe perhaps it will be a surprise to the market at some point in the future that if you want to buy a quality home, then you buy one from Persimmon And I shall very much enjoy that moment when that happens. And as far as I'm concerned, we're pretty close to it. So I think lots still to do, but great strength in the business and a great opportunity ahead of it. The next question comes in from the line of John Fraser Andrews calling from HSBC. John, please go ahead. Thanks. Good morning, gents. 2 for me, please. The first is on WIP, which was up a couple of 100,000,000 at the half year, 14% more in equivalent units. Has that continued to rise to deliver the forward order book that you've got? So that's the first question. And then the second one is, in terms of the numbers of sites that the drop, you obviously burned through them. What is your intent on sites? So for the end of this year and going into next year, I heard what you had to say, Mike, about the sites to come on board. But is there an intent to actually raise them to The half year level. Mike, do you want to cover WIP? Yes. On work in progress, John, I think that depending on how many we take out the pot that we touched on earlier in terms of legal completions in the second half, I think our work in progress may be slightly down on where we were sort of opening this year To open next year, it depends on the exact timing of handovers. I was talking to 1 or 2 people earlier on about not being too caught up The short term timing differences, it's all about cash flow. And If we manage to hand over a few more this side of the end of the year, then great. But if they slip into the 1st or second week of January, well, that doesn't really matter to us as long as They're good quality homes. The customers are pleased with them. And it's just short term timing differences. But I suspect that work in progress may be a little bit lower because of the, what we said on our volume expectations. And I think that we as Dean has already said, we're continuing to build very well And extremely well, if you think about the daylight hours at this time of year, etcetera, and the occasional bad weather. But we've been pleased with our output bouncing back from the disruption we've had. So I think that we are working very hard To invest more money in the ground, and you've already heard us touch on, we're going to have a strong cash position At the end of the year, and I think we'll put that to good use through Q1, Q2, Building into the market next year, as you say, to support the delivery of the forward orders. So yes, I mean, it's all there to be done. The teams are revved up to execute. And We've got liquidity and the opportunity to do that. So as Dean said, there's more work to do. But we're gradually repairing the production disruption that we experienced in the first half of the year. Given that we're back at capacity, it's hard to do. We can only do that gradually. But we are very focused on doing that. And I think the number of sites go hand in hand with that really. Our intent is to Support the outlook network, as we said earlier, these sorts of levels, we're currently up about 305, Got some new sites coming through as we speak. But I do think the success, as Dean puts it, we are a victim of our own success. And the outlet network, I guess, is under pressure because of that, because we're selling through that bit quicker. And we've seen a bit of delay in terms of getting sites through planning here and there, improvement in outlet numbers as we work through next year. We're running around the 3 0 5 level for Certainly through Q1, because we expect to continue to sell well. Yes. And I think just coming on in on the back of that, as We both now said this morning, I mean, we want to replenish the outlets that we've got, but we want to do that With quality and we want to continue to be A large volume builder and that's what we will be. But 1st and foremost, we're focused on the return on investment. We are able to get that as we see it at the moment. There's no shortage of that The proposals coming through to our land committee and we're working through those and signing those off. But We are cautious and we deploy capital in order to protect the size of the business, but also To protect the returns that we give to investors and I'm very clear about that's what we will continue to do as we move forward. Thank you. Perhaps I just have one more if I may. So on the land market, The question was asked earlier. But could I ask sort of more directly on pricing? The fact that you have replaced or your land replacement ratio is well below 100 You're being very choosy. Are you waiting possibly for land prices to unsettle? Have you seen any shift in land prices in the year so far? I mean, I suppose just my own personal view about that, I don't know. I guess I'm slightly skeptical of looking forward through the Future and thinking there is some golden moment to Vyland, I don't know, cleverer people than me may know the answer to that. I don't know. But we are working through the business. Without land, we're not going to build And without build, we're not going to sell, so very conscious of that too, but focused on returns. I don't think we're seeing Great change in pressure on land prices one way or the other. I don't think we're waiting for some magical collapse in land prices. We just managing the business sensibly to protect the business and to protect returns. But Martin's Closer to the coalface than me on this stuff at the moment and I'll ask him to comment on what he's saying. Yes, I would agree really. The area of recovery is quite wide. And whilst we are seeing some sellers that Probably keen to sell a site now. There are others that will hold off and hold off for best value. But we're not seeing any swings, any Big discounts offered or any massive price increases suggested. It just seems to be Everybody's bidding as they need to for the land and no different now to what it probably has been for the last 18 months, 2 years. Mean, there is a very strong control in the business. And what I would say that as you would expect me to say, I mean, I've inherited some very strong characters in the business with some very strong opinions and those opinions are Actively, vigorously and relentlessly exchanged about the business, Leaving me to arbitrate at times, but it's very focused on doing the right thing for the business, for our builders and for our investors. And that's what we're about. Mike, do you want to Yes. I mean, I think, John, I'll just return you to the longer term strategy. Yes, I mean, we know that The industry is cyclical. We're a cyclical business. As Dean says, nobody's got a crystal ball. We don't know. That's the truth of the matter in terms of Where are we in the cycle? We feel terribly late in the cycle, but will that result An adjustment to the dynamics around residual land values, that is yet to be seen. If anything, Dean referred to a mini boom and I guess characterizing the situation emerging through the first lockdown, You can't deny that with government initiative behind it, etcetera, we have experienced A bit of a period of time when the market has been remarkably strong in the context of The circumstances that everybody is living through, that clouds division a little bit To a degree, we don't the honest answer is we don't know what is around the corner. So given the strength Where we start from at Persimmon, we've got such a strong land position of high quality assets, as we've said before. We don't need to do a bad deal. We don't need to get out there and lower our guard, if you will, at this point. And I think caution is the watchword. Everybody understands the challenges that we face and the uncertainties that, that brings. And I think that We don't need to buy a new stick of land for some time if we don't if we feel that's the right thing because we've got great support. Yes, we have a smaller scale business on the back of that, but that's about managing risk, isn't it? So I think you've got to be to judge that at these sorts of times. And I think, as we've said before, we're happy see the land bank drift back a bit. We're a bit long at the moment, if anything. So we're in a great position to be able to Preserve the quality of the new assets that we introduced to the business. I think the, I mean in terms of cycles, I mean the thing that We're all getting used to I suppose is the unlike other economic governments around the world have deployed new economic tools, haven't they? And you know the quantity, just the sheer amount of money that's been printed quantitative easing programs over recent years is mind blowing. So there's a lot of cash chasing a lot of your assets. So we just don't know about the cyclicality Of the market we're in. So as you know just to repeat what we said, we're just we're cautious about it being sensible. The next question comes in from the line of Will Jones calling from Redburn. Will, please go ahead. Thank you. Morning all. Welcome, Dean. Three questions as well. Sorry, if I could, please. The first is just coming back to The price inflation side, I think, I think, Mike, earlier you gave a year on year change in the private order book. Obviously, you commented that mix was part of that. But could I push you on to what extent you've seen the underlying price picture change? And if there's a number you can put around that, particularly helpful, obviously, as it will compute our Margin thinking going forward. The second was maybe just a sub question within the land comments. It was obviously quite comprehensive just then. But just on the Strategic conversion side of things, have you been kind of holding back on that as well? Or has there been somewhat of a block in the pipe for whatever reason This year around the strategic land side of things. And I guess just, I guess, wrapping up with Dean, if I could, please, in terms of Helpful early thoughts there, and Kurt, it is still early in the process. But I guess away from the customer satisfaction side of things, is there anything you see in the business in these weeks that you might say jumps out as missing in any way, be it geography or product type or anything along those lines? Or really should we think about The strategic direction from here is more evolution of a successful setup rather than anything more radical. Thank you. Will, thank you for that. Or should I ask Mike to comment on price again? Yes. Pricing, Yes. You said you're pushing me, Will. And I think that There's a little bit of inflation in there. I would estimate that to be maybe 1%, 1.5% within that. As I said earlier, it's predominantly mix affected. Pricing has been resilient. But again, every site is a bit different and it depends where it is, what part of the country. I mean, Martin would probably testify to I mean, Martin, do you want to mention anything on pricing in your patch? We have seen some reasonable price growth where the demand is By the same token, there are further areas of the country, which perhaps a little bit more challenged given perspective on employment and the disruption with COVID. So I think that it's a mixed bag As always, and as I say, we micromanage that every week to achieve best value for the business in our build and sales meetings. And that is forensic. We go through plot by plot, side by site, identifying what the next release should be priced at based on our recent experience and precedent in the market, etcetera. So I think that we'll continue to do that. And Well, it's great that the backdrop is so resilient. It is remarkable given the circumstances, as we've said. I think on strategic land, I mean, it just continues. Yes. I mean, look, I think some colleagues have talked about we're some delays in planning and I think that is true. I think that is a function of, First of all, lockdown and then just backlog that's built up from that and then Resource levels. And resource levels, as Mike says, and just the function of working from home that inevitably has an effect on administration and processing So local government, it just does. So, but I wouldn't inflate that as a massive issue. So no major changes I would say there. In terms of early thoughts, I mean, yes, I mean, I'm not a rebel. So I don't think there's going to be a revolution. I think evolution As indeed, persimmon has been on a journey of evolution Through time, I think it's got enormous strengths in its people, in its positioning, in its marketplace and it's very strong control of build And in the assets it's had, it has got its Brick and Tile Factory, Space 4, 5 and S and so on, and what I would hope to do is build on that over the coming years. I mean the market we're in is inevitably going to change and I think Persimmon is well placed to take advantage of the opportunities that that throws up, whether that's through building on what we do in Space 4, through Modern methods of construction, changing build standards as we look forward in particular the 0 carbon agenda, I think Persimmon is well placed to take advantage of all of those opportunities. And there's a real excitement, I think, in the business to grasp that. And so it's a great time to land here and to help Along with the rest of the management team guide Persimmon on to its next megawits journey. So nothing, I don't think anything that's missed, there's nothing absolutely and we've all been in jobs when you've gone in on day 1 and thought, oh my God, what have I done? I did not have that sense for one moment. When I walked into Pursimant, I was very pleased to say No horror stories that I have picked up on so far that are lying in cupboards anywhere. So Very pleasantly surprised by what I found and think it's a great opportunity. Great. Thanks a lot. The next question comes in from the line of Glynis Johnson calling from Jefferies. I have 3, if I may. The first one is just in terms of selling rates. Wonder if you're going to give us a selling rate per cycle week that perhaps we can see. But also, thinking about those Help to Buy Sign offs that will come, we understand, mid December. Should we assume that selling rates actually continue to be robust through that Christmas period because of those Help to Buy releases, in which case, is there any indication you can give us in terms of how far forward you think you may start the beginning of the year. The second one is in terms of previously you talked about having potential for 10,500 build complete units The second half of the year, you have talked about that progression. But I'm wondering if you can maybe put some context in terms of where you think your build complete units might be at the end of the year, you started this year around 14% ahead. I'm wondering if we can think it's maybe the same number this year. And then in terms of selling price, Mike, you talked about more PD coming through second half of the year. I'm just wondering if there's any guidance in terms of selling price for this year. But also, Next year, should we assume a reversion back to a more traditional mix in terms of PD? Or will we also see SKUs coming through next year? Good morning, Glenn. That's right to me that the questions are a bit like buses, they turn up in 3. Anyhow, I'll pass them over to Let me, I mean, Just quickly on pricing. I think that pricing for this year, I think we expect to see At the half year, we came through about $225 overall for the business. And we expect to see some improvement on that coming through overall. And that, as I said earlier, I think it was to Rajesh's question, A little bit more PD in the mix. So do we get to 227, 228 Maybe in the second half, we'll just have to see how that mix lands. In terms of selling rates, well, for the 11 week period since we announced the prelims in August, our sales rate has been about just over 27% ahead of the prior year, just over 0.88 of a PD sale per site per week. And then for the 18 week period From the 1st July, which the trading update covers, that's the 38% improvement that we mentioned in the update, which is an overall rate of 0.93 compared with around about 0.67 last year. So there The science, if you will, in terms of the average outlets, etcetera, that we've been selling from. I mean, forward sales, I mean, depending on how many Legals, we actually hand over in the second half of this year. I think forward sales are going to be strong As a result of the rates of sale that we've been achieving, that's a combination The agility around the initial lockdown, selling stronger, getting more market share And importantly, as Dean touched on, having the build in place that we started to invest 18 months or so ago in anticipation of a bit of an improvement in activity with the Help to Buy window shut on the first scheme. So I think we did, through those self help measures, put ourselves in a great position to take advantage of the market, which has helped the business through this period of time. But because of that, I think the WIP is just moving on to the bill they use because it's the flip side of the coin. The build that you use come the end of this year might be a little bit thinner. We started this year about 6,100 EUs, which as you say was around about 14% stronger. We may be a little bit behind that because of the sales success we've had and the handovers on legal completions. But we're continuing to build the well. Last week, I think we built sort of 3 I think it was about 3 20, 3 25 from memory, which is, at this time of year, ahead of our weekly fresh reservation take. So As a broad indicator, we're now putting units back into the pot, if you will, to help Support forward sales delivery into Q1, Q2 next year. So there's work to do on the build side, but we're beavering away. The teams are working very hard and take advantage of that opportunity to place the business in a strong position moving into next year. I'm sorry, just to clarify. I think just thinking about the cash position, stitching it into the cash position, we're going to be strong cash come end of December, probably around about a £1,000,000,000 We're going to need a little bit of that to support the additional WIP investment into the second half to continue that drive to deliver legals through the first half of next year. And just to clarify, in terms of those equivalent units, are you talking that the rate of growth will be slower or the absolute number, the 6, 100 won't be met. I think the absolute number may be slightly behind the 6 The 6 100, yes. The next question comes in from the line of Gavin Yago calling from Barclays. Gavin, please go ahead. Just a couple from me, please. Just around Help to Buy really, I wonder if you could give us some figures for I guess what proportion Help to Buy has been through the second half? And I think you kind of covered it early on in terms of the next phase, but just how you're thinking about Positioning the business for, I guess, life beyond Help to Buy in March 2023 would be interesting at this point. And then final just on build costing light. You covered off, I what FY 'twenty is going to be, but any indication at this stage how you're feeling about build cost trending into FY 'twenty one? Good morning, Gavin. Well, it helped to buy about 50% of the business in line with I think pretty much rest of the industry in terms of certainly in terms of what I see from the HBF stats. And look, yes, we need to think to the future To the point where Help to Buy either disappears entirely or is replaced by something else. And I suppose if it disappears entirely, there will still be a strong business here It's my opinion. But if I suppose if I were to lay a bet, I suspect that it will be replaced by something that supports The continuation of demand for First time buyers in the market, because they're an incredibly important section of the economy. And it's not just about building, supporting house buyers profits, it's about Keeping the economy moving forward and helping people achieve their aspirations and getting onto the housing ladder. I think as I said earlier, I think Persimmon is in an incredibly Strong place in terms of where it is in terms of price points in the market. It's right at that point where It's helping those youngsters, those first time buyers get onto the housing ladder. And I just don't see that going away, particularly in an era of low interest rates, The well trailed arguments about which we all know that the demand for housing strongly out paces the supply in the country for whatever reason. So whatever is bolder us in 2023, We'll cope with it. We've coped with it before the incredible strength of Persimmon's balance sheet will help it see it through. And relative, I think, Persimmon will continue to be a very strong performer. I think, don't know, Mike, do you want to add that? Yes. I mean, on I think also, I mean, just an additional point on that, a reflection on that, Gavin, would be, I suspect that the industry is going through a bit another leg of structural change just at the moment where Perhaps smaller players are finding it more difficult. Obviously, regulation is increasing as we speak. The Various white papers and consultations out there in terms of future build regulations, etcetera. I think the landscape is becoming harder rather than easier to deal with. And I think that, in a way, placed to the strengths of the larger house builders because we have the skills and competencies to deal with this. And I think that that's going to place Persimmon in a super strong position as well Because as you know, we've got very strong planning expertise, land buying expertise in the business and certainly the capacity to accommodate these potential changes that are coming towards us. So I think the competitive landscape will continue to change as we saw through the GFC, and we may see a little bit more of that currently As we go through the next year or 2, together with the demands on the industry changing and increasing in terms of delivering the new build homes that the country needs. And cost inflation in the context of that, I think We've been through a period where labor availability was improving a little because of The reduced competition, but as the industry has got back to it after the first lockdown, then That window has been shut in gradually. We're not seeing a huge amount of inflation. Our costs are more or less locked in for this year as you'd expect now. But It's reasonably benign moving into next year subject to Brexit. We're going to have to see If we do if we get a trade deal then with a tariff regime that is supportive, that's great. But we'll just need to take stock in terms of how that transpires. But as The industry doesn't take a huge amount from offshore. Most of the heavy side is onshore. So that shouldn't be a major problem for the industry at large, I don't think. So yes, I mean, cost inflation looking into next year, it may tick up from the sort of 2%, 2.5% that we're expecting for this year over last. But touchwood, it shouldn't be too onerous In terms of accommodating in 'twenty one and perhaps into 'twenty two, I suppose The experience we have through the disrupted times that we've had gives us confidence because it sort of strengthened the ties to our suppliers and subcontractors. We've all worked together very well through this period and that sort of solidified those relationships. And obviously, we've got good visibility and continuity of work to offer, which is very attractive in terms of our activities. So yes, I think we're well set and Should be able to manage through next year reasonably well. The next question comes in from the line of Andy Murphy calling from Panmure Gordon. Andy, please go ahead. A lot of questions asked already, but I had a couple left over here. First of all, On the house buyer retention scheme, you said 47% of buyers used it. It's showing that that's quite a low figure. I would expect it to be somewhere plus to 100%. So I'd be interested on your comments as to why Why it's at that level and what your experience has been as house purchase have gone through and snags have been identified and dealt with? And secondly, just on the company's environmental attitude. I know, Dan, you've mentioned the environment a few times. I was wondering if you could perhaps give us a few thoughts, a bit of color around what the company might be thinking about in the future, How you might be measuring carbon footprint, we're looking at 0 carbon houses and those kinds of So green issues, is it an opportunity to sort of set a market for the industry? Well, thanks, Andy. I think just on the environment, maybe I'll pick that one up. And then, Martin, maybe if you want Give some real life examples to what's going on with the retention scheme. I think that would be really interesting. Well, so Persimmon is obviously establishing a sustainability committee and is in the process Of working out and setting targets for it to achieve, There's a big debate within the Board and within the company at the moment about setting the goals that we're out there to achieve. The environment, the industry itself is obviously changing with future home standards and we will work with that. And we have a variety of initiatives going on within the company at the moment where we're exploring potentially 0 carbon sites and exploring what that means. I think there is a in York where we're considering, there's a site in Bristol we're considering. So there is a great deal going on in the company in that regard at the moment. I think it is, look, customers Particularly that segment of customers that are important to us, this And I mean by that the youngsters, this is a really important topic for them. So we have to recognize that. We also have to recognize it comes with cost and that all needs balancing out, but also recognize the government's clear position on this and its ambition. I mean I think Gordon, I think Boris is going to make some announcement about COP Is the COP meeting next year and I bet the UK is going to Take a strong position on that and maybe somehow aligned with how the new Biden administration is thinking about that as well. So all of this I think is a very important agenda and I'm pleased to see Persimmon is very much on it and it's got some really good ideas. We'll talk to you more about those as they come to life. Martin, do you want to talk about Yes. Good morning, Andy. With the buyer retention, it's worth pointing out it's not compulsory. It is a consumer choice. I think with the level of focus that we've given to improving our quality over the last 18 months, That has really shown through and the customers can see what they're getting. And a lot of customers say, well, no, we're happy not to take a retention. We'll move forward to the contract In the normal terms, we know that you have also a robust post completion customer care service And we're comfortable with that and the comfort that gives us. So those that do take it up, the 47%, We deal with exactly the same as we do with the other 53%. And we ensure that we deal with The defects they report as soon as they possibly can. It's probably also worth pointing out that they are In some instances from July onwards, they were buying houses that were probably almost finished because of the level of work in progress we had in the ground. And therefore, they could see at the point of exchange that their property was well advanced and was to the quality that they expected. The next Question comes in from the line of Sam Cullen calling from Peel Hunt. I've just got, I think, 3 remaining. Firstly, on the land market and your the rate at which you're kind of referencing. I take the point that you're willing to shrink the size of the business to retain the margins within the land bank. Can you just kind of elaborate on how comfortable you are in terms of pulling the existing plots and sites. You've got an existing land bank through the planning system in order to achieve the level of volumes that you want to over the next kind of 2 to 3 years, that would be interesting to hear about? And then secondly, whether you could touch on whether you're seeing Any labor shortages or increase in absentee as we've heard across the rest of the sector that's becoming or has become a bit of an issue some businesses, it would be interesting to hear your thoughts on that matter. And then lastly, just on whether you're seeing an evolution in The things that your customers are looking for in the properties that you're building and whether that's something you're building into your house types moving forward? Morning, Sam. I think as Mike's alluded to the quality of the land bank in the company is good. And so Therefore, we are very comfortable about taking pulling stuff from the land bank into the outlets. And that is indeed what we are doing. And also, we As I think I've stressed now 2 or 3 times on the call, when we're actually buying land, the business is Very rigorous in its procedures about protecting its margins and just won't we're not sacrificing margins To buy land at any cost, we're making sensible assumptions. We sensitize those assumptions And any land deal that the company does gets looked at ad nauseam really before it gets signed off. So at the moment, I've got great comfort I think in terms of what we're pulling through from the land bank into the business. If we had more of it, we will be selling more of it and so that would be an even great place to be, but the business is in a very strong position. And I don't think with £1,000,000,000 in the bank at the moment, we need to be Too worried about that. Labour shortages, look, as I think I said maybe an hour or so ago now, there's not one of our Building sites anywhere in the country I suspect that is not affected in one way or another by COVID. I see it when I go out. It's there's an issue for us in terms of just People who are there because we are restricted to only having 2 trades in a house at the moment, which would have been very different to this last year, I'm sure. But we have a kind of traffic light system on the door as you go into a house that we're completing a ticket system, so there are only 2 people brought out in at any one point in time. So That thing itself is affecting production at the moment, but we're coping with that extremely well. Every morning, our site managers will be dealing with somebody who's gone down with COVID, but we're also managing that extremely well. It's not Although it's widespread, it is at no state, it is not the company is coping with it. And hence The positivity we're giving in terms of the guidance to be at least in line with last year. If we didn't have COVID, we'd be guiding higher. That is the reality, but we are coping with it. And in terms of customers, again, I'll ask Martin to comment on this. I mean, there's very strong demand and for whatever reason there is for that, that is being driven out there at the moment. And so I'm sure that does reflect changing customer preferences, especially in terms of where people want to live. I've seen for myself when I've spoken to our builders and To customers that I've met, having an office in the house is an important feature. And so we recognize that. And I would say the most important thing at the moment is going to be the availability of a strong Internet connection and that is going to be fundamental to people and it's certainly fundamental To the customers I've spoken to and as I alluded to, I think Persimmon is incredibly well placed in that regard and has taken a leadership position in the industry. But I'll shut up, Manaus. Yes. I think on the house type design and the evolution of the house types, over the last 2, 3 years, we have taken more time each year to sit down and actually review each house site to see whether it matches our customers' expectations and needs and adapt them. We bought the 2019 range out of the 2020 range, and next year, there'll be a 2021 range. They're not fundamental changes, their evolution, evolutionary changes, just matching really feedback we get. And as Dean said, Fibonest is incredibly important. And we must make sure that the houses have got fast Internet speeds on the day that people move in and we endeavor to do that on our sites. Okay. Thank you. Okay, Sam. Yes, right. Thanks. Thanks, Sam. Thank you. We've no further questions coming through. So I shall turn the call back across to yourself, Dean, for any closing remarks. Okay. Well, thank you very much all for your interest this morning and for talking to us and asking us lots of questions. I hope we managed to satisfactorily answer them all. But you know where Mike and I are should you need us And we are happy to answer anything you might have. So thank you. Thank you and good morning. Thank you very much.