Hello, welcome to the Persimmon 2020 half-year results presentation. Please note that for the duration of the call, your lines will be on listen- only. You will have the opportunity to ask questions later on the call. This can be done by pressing star one on your telephone keypad to register your question. If you require assistance at any point, please press star zero and you'll be connected to an operator. I'll now hand over to your host, Dave Jenkinson, Group Chief Executive of Persimmon PLC, to begin today's conference. Thank you.
Good morning, everyone, and welcome to our half year presentation Q&A. I hope you've had the opportunity to watch our presentation online and catch up with our trading update. I believe the presentation highlights the resilient financial performance of the business and how we have carefully managed the business through this cycle. I have numerous items I could pick out from the presentation, but in particular, I would like to draw your attention to, firstly, the weekly sales rate at almost 50% above the same time last year. This has given us a forward order book of 21% increase on last year, and we currently have over 13,600 plots sold for the end of the year, with 10 settlements remaining for year-end completions based on current build programs and output. The WIP position is 14% above the same time last year.
We have almost 10,500 plots which we could potentially complete for the end of the year, based on current build programs and on current output. Gross margins are proving very resilient, if we produce a number at least similar to half 2019, then we will regain our operational efficiencies and related overhead recovery that we've lost during half one of this year. In the short term, we are in a very strong position, I am well aware of the medium-term challenges associated with COVID-19, rising unemployment, and Brexit. How we have managed the business over the last two years gives me every confidence we are ready to face into a number of future economic scenarios which may develop. In the normal way, I will open up to Q&A.
If you'd like to ask a question, please press star one on your telephone keypad. Ensure that your line remains unmuted locally. I'll then come to you when to ask your question. That's star one. The first question comes from the line of Rajesh Patki from JP Morgan, London. Please go ahead.
Yes. Good morning, everyone. I've got two questions.
Morning, Rajesh.
I will leave.
Are you well, Rajesh?
I'm very well. How are you, Dave?
Good.
Yeah, fine, thanks.
Great. I've got two questions. First one is on the COVID-19 related cost, GBP 11 million of cost that you've undertaken. If you could talk about your decision to capitalize them while some of your peers have expensed through the P&L. If you could provide some color on that. The second question is on land spend. If you can talk a bit about what you're seeing in the land market at the moment, are you looking to continue with caution for the remainder of the year after adding about just under 1,000 plots to your land bank in the first half? Thank you.
I'll deal with question two, then I'll pass on to Mike to give you a bit more color on question one. In terms of land spend, nothing's really changed. The market shape's pretty similar to what we've seen for some time. We remain vigilant. We're always looking for opportunities, and we are picking up one or two opportunities where we think the risk reflects the reward. We're being very cautious, and it's against the strict criteria, so there's no real change in the land market. In terms of the COVID related costs, this relates to two parts. First bit is the COVID cost related to site overheads, and the second bit relates to the overhead and efficiencies from not having the same volume as what we normally associate with the business.
That was really important to us, and it was part of our decision not to furlough staff. That was reflecting one or two inefficiencies, but we think it was a price well worth paying.
I think, Rajesh, from a technical accounting perspective, basically it's no change at Persimmon. We've continued to apply our accounting policies in a consistent manner. What costs would normally get expensed have been expensed through the P&L account, what costs would routinely get charged to work in progress inventories have been. I think that the GBP 11 million that we have incurred in terms of COVID costs, the bulk of it relates to the increase in site duration with development time frames. If you think about it, given a period of disruption to production, what that means for a particular site is that it lengthens the development time frame.
As a result of that, we're going to incur additional overhead over and above what the original site budget would be indicating for that site. Just by way of an extension of the development time frames. We've got about 26,500 plots that are in active development at this point. All of those active sites have been subject to some extension at this point in time in terms of development time frame. The future anticipated revenues off those sites is about £5.7 billion of future revenue. In the context of that future revenue, we've expensed GBP 1.1 million of the £11 million through P&L in the first half, being recovered against legal completions taken in the first half. The GBP 9.9 million is carried in work in progress to expense against future completions in the normal way.
We sort of think about the disruption as perhaps, an example of a similar set of conditions disrupting site activity would be, bad weather window. If you remember the Beast from the East a while ago, that did disrupt production for three or four weeks. We continued to apply the same accounting policies at that time, and we've done the same this time. The margin burden, if you will, of that GBP 9.9 million moving forward is about 17 basis points over the gross development value of the sites that we've got left. In the normal way, the team within Persimmon will be working hard to recover that value over future periods. We'll wait and see.
Yes, at this point, there's a bit of additional cost there, but hopefully over time we'll be able to nibble away at that and get back to the original budget plan for each of those developments. Is that okay, Rajesh?
Very clear. Thank you very much.
Thank you.
The next question comes from the line of Arnaud Lehmann from Bank of America. Please go ahead.
Thank you. Good morning, gentlemen. Hope you are well.
Morning, Arnaud.
Morning. I've got three quick questions on my side. Your sales rate is quite impressive. You talk about 49% increase since the beginning of July. How do you see it? Is it underlying market conditions, or do you think you are gaining significant market shares because it seems to be much stronger than what some of your peers have reported. My second question is on your margin outlook for the second half. You are kindly guiding us for similar or higher level of completion in H2. Do you expect to be able to deliver better margin in H2 on the back of that relative to the first half? Lastly, I think in the presentation you mentioned that the net cash, which is the cash minus the loan creditors, is around GBP 450 at the end of June.
Where would you expect that to develop into the second half with higher completions, but also now you have this kind of small dividend payment coming? Where would you expect to land at year-end? Thank you.
Oka y, mate, I'll let you do two and three first, then I'll answer question one.
From the margin outlook, Arnaud, I think you're right. Your intuition around margin for the second half improving, I think is right, in terms of direction of travel. Actually, on the trading update in early July, we did point out that really what we've lost as an industry is the ability to complete the planned legal completion. We've lost revenue for a period of time, and I guess the industry is playing catch up to a degree to get back to a similar cumulative position over time. What that means is that we will deliver more volume through the second half, as Dave has already pointed to, and that will improve our overhead recovery rates through the second half. You've seen a housing operating margin in the first half of 26.6%.
I think you'll see that move forward because of overhead recovery improvement, both in gross margin terms, so 31.3% housing gross margin moving ahead a bit. We don't want to give a forecast, maybe 50 basis points improvement on a normalization of overhead recovery through the second half. On the OpEx line, you can see that our operating expenses as a percentage of revenue was around about 5% in the first half, whereas over recent years you've seen around about 3% being achieved. I think that a return to nearer 3% in the second half is a decent estimate at this point as a guide. When you put those pieces together, you can, I guess, work out where you think the operating margin for the second half will be.
In terms of cash outlook, I think obviously on the prognosis of quite a positive period of delivery on trading, as Dave's already pointed to in the second half. I think our cash outlook will therefore be quite strong, particularly when you think about the activity in the land market. As Dave's already said, we've been quite cautious and will continue to be, because that's really a key part of managing the house building operations through the cycle. I think it's a positive outlook in terms of cash. I don't particularly want to estimate a number, I think, if you turn the handle on your forecasts, I think that it's likely that we would be in an improved cash position from where we are today in terms of direction. To what extent?
There are a lot of moving parts to that, but I would assume, sat here today, I think we would expect to be in an improved cash position exiting this year into next, on the back of the positive outlook we've got certainly for the second half.
Thanks a lot, Mike. In terms of sales rate, I think it's a point well made. I do think if you look at all the stats, there's obviously a bit of activity in the marketplace. We picked it up very early during the lockdown period because we could see from our sales staff, because we had market intelligence. There is something actually happening at Persimmon, which I'd put down to our actions rather than just the marketplace, though, because our sales rates are now ahead of this time last year. Importantly, our reservation rates seem to be ahead of our peers.
I put that down to primarily our decisions to invest in WIP during the lockdown and before lockdown, which has meant we have the ability to provide stock and our range of sites across the country to customers, which means we are in the best position to capture the demand that is out there.
That's great. Thank you very much.
Thank you.
The next question comes from the line of Aynsley Lammin from Canaccord. Please go ahead.
Hi. Morning, Mike and Dave. Just a couple from me. First of all, wondered if you could comment where you are on the kind of customer care journey. I mean, obviously now trending at five-star rate, and are you kind of there in terms of what you were set out to achieve? Secondly, others in the industry have talked about struggling to get much close to 90% build rate and productivity, et cetera, and you're kind of signaling that you're virtually back to where you were pre-COVID with a negligible impact on margins, if I understand it correctly, looking forward. Just wondered if you could provide a bit more color how you can explain how you've got up to kind of 100% much faster and with what you've done very well, obviously. Secondly, any guidance on the ASP for H2 completions?
You obviously got good visibility on those completions. Is it going to be kind of in line with the first half's 225? Thanks.
Well, I'll take one and two, and I'll pass three on to Mike. A customer care improvement plan, as you know, wasn't just about the HBF star rating. We had a comprehensive package of scheme which will have a lot of moving parts to it. It's still not fully embedded in the business. I don't think we'll ever be finished because we always want to improve constantly to provide a better service to our customers. What we do know, the things we have done, the process and systems have proven very robust. The results are clearly there by one metric, which is the HBF star rating. We're really pleased as we sit here today, we're currently at 89.6% for the year.
Really pleasing for us is since January, we've been trending as a five-star builder, and in the event of the last couple of months, things also have improved even further. In terms of the customer care improvement plan, it looks like it's working. The great thing for the company is we believe there's further benefit to come, and I would specifically draw your attention to the retention scheme. Well, still at the moment, about 40% of our customers are using it. The feedback's very, very good. We were delighted that the Consumer Code recognized it as a best practice within the industry. We believe it's made a material difference to our approach, not just to the customers, but within the business as well. That's another classic example of things taking place. FibreNest is another one we're getting good results.
The customer care improvement plan, I look at in totality rather than just the star rating. In terms of the output, I couldn't be happier with the way the business has responded. You have to think why that is, and I think it's a good point, and I think it sits in three reasons. The first being what we did before lockdown. Secondly, what we did during lockdown, and third, what we did after lockdown. As you know, before lockdown, we took a conscious business decision to invest in WIP because we suspected there'll be additional demand in the market as Help to Buy was coming to an end, which placed us in a very strong position in terms of WIP as we entered it.
The second important point is you have to remember, we positioned the business that the shape of our sites and the form of our developments are normal, traditional developments. We haven't got high-density city developments and high intensity, high volume output sites the same as some of our peers. It's much easier to respect social distancing. By the very nature of the sites, people generally are isolated anyway, so it's much easier for us to comply with the social distancing rules than anybody else. The other big benefit of us was taking the decision not to furlough the staff. Not only did it mean we could prepare in the office for coming back to site, but having a sales presence gave us good visibility and market intelligence of what was out in the marketplace. We knew there were customers wanting to reserve our houses.
We knew our website inquiries were really high. We knew our inquiries levels were through the roof, which gave us confidence not only to invest in terms of further, but also it gave us confidence to want to get on site as early as we possibly could to capture it. As we've got a lean management structure, it was very easy to make that happen. Finally, because we had people working, we were able to prepare for getting back to work as we knew what we wanted to achieve. I think it's a credit to the whole team, and I think you picked up on Richard's presentation yesterday, that the process has been very robust.
Much so that even with the relaxation of the recent government guidance to 1+ meter , we've continued to respect the 2-meter rule, and we're still being able to achieve the output. We believe even if there was a further lockdown, we are well prepared for what may happen in the next four to five months in terms of that aspect. You want to pick up on the ASP, Mike?
I think, obviously, a feature of the first half is a little bit less affordable housing delivered in the mix. If you will, that has flattered ASP of the overall blended average selling price for the group in the first half. We'd expect a normalization of that moving into the second half to perhaps a more normal mix, which will again serve to dilute the overall group ASP in the second half. Overall, I think, flattish pricing outlook, albeit behind the scenes, maybe a nudge forward, certainly on the PD side, given what we're seeing in the market currently. Overall, in terms of group blended ASP, maybe flattish as compared with where the first half landed. Is that okay, Aynsley?
Yeah. All very clear and impressive. Thanks very much.
Thank you.
The next question comes from the line of Will Jones from Redburn. Please go ahead.
Thanks. Morning, guys.
Morning, Will.
My first set of questions, I suppose, more about just exploring that recent sales strength. Could you maybe help us with the Help to Buy component of that? Maybe, has it changed in the last couple of months versus, say, where you were across the first half? I guess any numbers within that would be useful. Again, Mike, you just hinted that you have got the opportunity to nudge forward price. Could you push you a bit further maybe on what that might entail? Is that 50 basis points, or is it maybe 1%-2%? Is there a number maybe you could put around what you may be able to do around price? Then linking that all to what you can continue to sell at. I think 0.97 was the rate you mentioned for the last few weeks.
Historically, Persimmon has always talked about 0.7, 0.75 as being its optimum. I appreciate you're very well invested from a WIP perspective and all the rest of it. Is there a number in mind that you could keep going at for a certain period of time relative to that high, nearly 1x number? That was all around, I guess, recent sales. Just away from that, could you help us on where the site numbers are currently at versus, I think the 335 you mentioned in July, and the extent to which you think you need to be at least active to some extent in the land market going forward to keep that number moving forward to keep it held up? Thanks.
Look, yeah. That's quite a comprehensive list there, Will. I've got them all written down.
Should I jump on the sites?
Site numbers, yeah. You can look at that, yeah.
I think site numbers have remained pretty resilient, Will. I think we enjoy quite a broad and strong site network. We're slightly down on the same point last year, maybe 1%- 2%. We've got about 340, 335, 340 at the moment, active outlets. Visibility moving forward, we've got about 55 sites that we're earmarking to open through the second half. As you know, it depends on the rate of sale that we achieve in terms of longevity of those sites, in terms of existing sites and the replacement profile. It's hard to predict where we'll exit this year, but I think we remain confident that we've got good visibility within the site network. We don't see that materially changing. We might trend through this half at a similar level to last year, say. I don't think there's going to be any significant changes to that profile.
That's the sort of near-term outlook on site numbers. Dave, did you want to talk about pricing?
Yeah, I think Mike's given you a guide on prices. I don't want to go into it any more detail than that.
It's hard to assess, really.
What I would say is what we can see every week from our sales. We go through every single plot sale every single week. Every price gets reviewed. We reflect the demand on that site. Some forward, some backwards, if we're not selling enough on a particular site. At the moment, the current trend is very positive. We're really pleased with the sales prices we are achieving. We are ticking them forwards. It's not that simplistic where you can put your finger in the air dependent upon one site. We are a much more sophisticated business than that. We would never just simply put a price increase in across the board. Each individual regional team will report and looked at on its own merits. The trend at the moment is encouraging. Your question in terms of sales strength.
I think most things in life, people look for a simple answer to this. It's never that simple. It's normally a number of moving parts. Help to Buy percent hasn't really changed. If you were to push me for one or two key reasons what I think it is, I think it's firstly, down to our decision to have the WIP on the ground. We can see that in our weekly sales rate, the houses we're selling the most are the most advanced. I think a lot of competition are probably struggling to provide the stock the same way as what we have, so we have a bit of a commercial advantage, and I think there's probably no doubt we've captured a little bit of market share there. I don't think it's down to any one particular thing.
I think it's down to a lot of things, the harder you work, the luckier you get in terms of these type of things, we have prepared for it. I think that probably answers that one. Not intending to go on any more about that. Question three was how long can we continue at the sales rate? I think the key element here is the WIP, because we have the land, we have the outlet coverage to provide it. What we won't do is make the same mistakes in the past of chasing volume at the cost of customers. The great thing is at the moment, we do have the WIP in the ground, we don't have to make that decision.
We can get the volume, we believe, when we consider the benefits of our customer care improvement plan and maintain our customer care. What is very encouraging is, because some of our peers are probably not investing the same amount as what we are, we are able to get labor at the moment at reasonably attractive rates. As long as we can gain access to the trades, we'll continue to meet that demand. I think what will change our sales rates will be not about Persimmon's actions. It will be more to do with the market sentiment or possibly some of our peers getting more stock on the ground. The final one, and you've tested me here well with five, is the land market. I've been consistent from the very start with this.
As we've outlined in our presentation this morning, we have five and a half to six years land supply, depending upon how you measure output. We have visibility on 133,000+. We don't need to buy land. When you need to buy land is when you do a bad deal. What we see at the moment, of course, we're picking up one or two deals which we think are attractive, but nothing of the scale to match the replacement that we're actually absorbing. We won't do that because we don't need to. As we sit at the moment, we're vigilant, we're continuing looking, and when that risk to reward switches, then obviously we'll go back into the land market, and we have the balance sheet to do it at the right time, and we'll make that call at the appropriate time.
Understood. That's great. Thank you.
The next question comes from the line of Gregor Kuglitsch from UBS. Please go ahead.
Hi. Good morning. Can you hear me well?
Yeah, great. It's fine, yeah. You okay, Gregor?
Excellent. I'm doing well. I hope you guys are doing well, too. I've got two questions, if I may. The first one is just on volumes. Dave, I think you mentioned, maybe I misunderstood in your first sort of introductory remarks, that you think you could complete up to 10,500 units, or was it a build comment? It just sounded like a very high number. I just want to understand what that referred to. I guess related to that, on your sort of minimum flat volume guidance for last year, I'm looking here at 8,300 units, kind of how you see the risk and reward around that. In other words, what's the limit, basically, given the strength of the sales rate? Essentially, I guess it's a supply build question that limits the potential there.
Then the second one is perhaps a longer-term one. We've seen the white paper from government a few weeks back. I'd like to have your perspective, if you have one, on the sort of potential planning law changes and the impacts for Persimmon, whether that is perhaps part of the reason why buying land, or whether you think it's too uncertain right now to assess. It looks on paper relatively radical, but I guess it's still early days. I wanted to have your perspective on what you think about those proposals. Thank you.
The second one is easy to answer. I'm not the type of guy that makes snap judgment. It hasn't come out very long. We'll review the documentation. We've got until the end of October to respond to that. I'll speak to the teams. I'll take external advice. I'll form my views on it at that time. To make some form of snap judgment now would be a mistake, Gregor. I wouldn't really want to give you any views until I'm certain what I think. That's probably too early to give you any advice. In terms of volume, I think you're right. If you look at our sales rates, they're very strong, as you worked out. The comment I made was on build rather than on volume. What the point I was making is our WIP position is 14% above this time last year.
Potentially, based upon our current build programs and then based upon our current output, we have the potential to build 10,500 plots for the end of the year. Obviously, we wouldn't achieve all them plots, but that is the build position we were in. In terms of quarter three, we're pretty confident what visibility we've got. We're expecting to probably pick up about 45% of our sales up until September. In quarter four, there's still a lot of challenges to come. We don't know exactly what's going to happen come the winter. All things being equal at the moment, we've positioned this business in the best possible place to capture the demand. That's not just about sales rates, that's about build. I'm not for one second going to say we're going to complete 10,500 units. I don't think we will.
You would never sell everything that you have available. What we have got is stock. The infrastructure can build that number because we do want to carry forward as well. As we sit here today, we could not be in a better position to meet the demand that's out there in the marketplace.
Thank you, Dave. Thank you.
Thanks, Gregor.
The next question comes from the line of John Bell from Deutsche Bank. Please go ahead.
Yeah, morning Dave, morning Mike. Hope all well.
Morning, John.
Hi, John.
A couple of questions from me. Firstly, on the dividend, obviously GBP 0.40 declared. Looks like you're leaving the door very much open to the full GBP 1.10. Should we interpret that as you're waiting for the autumn selling season to start to play out before you'll update us on that number? The second question is on build costs. I think we're seeing some pressure on lumber prices over in the U.S. I wonder whether you're seeing anything similar here or anything else that you want to flag on the supply chain. Thank you.
I'll pick up on two and one, and I'll let Mike have his comment on one as well. In terms of build costs, what we are seeing at the moment is very encouraging. We're really pleased with the tenders that's currently coming in. The fact we got back to work so early and the fact we kept our subcontractors busy and kept them in employment, and the fact we paid them on time, they really appreciate that, and they know we've got the sales ahead of us. Some of them want to work for us at the moment as people coming out the woodwork at the moment are really keen to work for us because they know we pay on time and they know we've got the work. We're really encouraged what we're seeing in terms of build costs.
We're not seeing any sort of pressures in terms of material costs. We're not seeing any coming down, but we're not seeing them going up. We have done one or two good deals where we've improved the quality for the same price. The labor costs are very encouraging what we're seeing there. Obviously, that may change as time develops on, but at the moment, we've got no real pressures in terms of build costs of anything that's looking favorable rather than negative. In terms of the dividend, I think your observations are quite right. We take very seriously managing a house business through the cycle, and we would never do anything that affected the long-term future of the business. What we want to do is make a modest payment what we thought we could afford based on what we could see in quarter three's performance.
We wanted to keep our options open to see how quarter four develops. As I outlined, we're obviously in a great position potentially for the end of the year, our sales position, our build position, but we don't quite yet know what could happen in the next two to three months. You would never jeopardize the long-term future of the business by doing something that you later regretted. I think the judgment is really sound. I think it's fair comment. If we get the result we're hoping to get, then our cash position would be very strong, and that would give us options, and the board would make a review of that come November. I'm not sure you want to add to that, Mike.
Yeah, I think just a final observation, John, on the divvy is that obviously, at the time of the prelims in February just gone, we did outline what we thought the bottom slice in perpetuity element of the dividend would be. Obviously, we're currently talking about the final dividend that was postponed from July. We're paying GBP 0.40 on account of that. We're sort of paying down that GBP 1.10 final dividend for the year 2019. We're paying that down, if you will, partly by the GBP 0.40. As Dave say, we'll continue to assess whether we can pay down a further amount or the rest of that as we move through the rest of this year.
It's important to note that also at the prelims in February, we did point out that the bottom slice of the capital return would move forward from GBP 1.10 to GBP 1.25, again, to be paid in early July each year. That's still intended to be, at this point, the final dividend on account of the current year, 2020, paid in July 2021. Whether or not there's any surplus capital on top of that, then as Dave's already said, we'll continue to review that. I guess at the next prelims in February 2021, we'll be able to update the market in terms of our views on any top slice of capital return that would normally get paid in early April. Unfortunately, last time around, we had to cancel given the immediate prognosis for the market. Is that clear, John?
Yeah, very clear. Thanks, gents.
Thanks, John.
The next question comes from the line of Anindya from Citigroup. Please go ahead.
Morning, guys. Just two questions from me. Firstly, on the reservations, when you see the sort of trends that you have reported in July, are there any regional areas that pop out in terms of areas of strength? My second question is a follow-up on the cash element. Were there any payment deferrals that you have taken in H1 that we need to think about in terms of H2 cash outs here? Thank you.
I'll answer one, and I'll pass two on to Mike. In terms of reservations, this isn't just until July, this is until August as well. We've seen sort of a six, seven-week period we're talking about here, not just the four weeks of July, just to be clear. The regional patterns, not really the only exception to Scotland. We have a little bit with the lockdown, but apart from that, it's across the board. You want to pick on the question two, Mike?
Yeah. In terms of cash profile, I think actually you do raise an important point, Anin, in the first half of this year. For the corporate U.K., not just Persimmon, obviously the legislation has changed on corporation tax payments. The first half of this year has seen an acceleration of cash out with respect to corporation tax payments, which amounts to about GBP 90 million for ourselves. That's an additional cash outflow in the first half of this year compared with last year. Moving on to your question, which is the second half of this year. There's not really any sort of one-offy type cash outflows. I think, as we've always said, as Dave's already touched on, that we'll continue to adhere to the disciplines of running the business, according to our cyclical playbook, if you will.
Which means that, as Dave's already indicated, our land replacement strategy will continue to be pretty cautious, and that obviously moves the overall cash generation position, or can do. You do have to recognize we'll continue to pay down our land creditor tail.
Yeah.
I think there's about GBP 130 million of additional land credit payments to go out in the second half of this year. Those obligations will be met. Indeed, that's a positive for the business because it opens up more headroom in terms of additional capacity to invest at the right time in the cycle, as we've already explained. Over and above that, I don't think From a work-in-progress point of view, I think we'd want to continue to invest quite strongly in work in progress. I think we're probably nearing full investment in WIP at the moment. We may see a little bit more going to work in progress, but it's not going to turn the dial massively from this point. Dave, I don't know if you want to-
No, I think that's exactly right, Mike. I'd just like to pick up on the tax point that Mike makes. It was really important to us not just to support our staff, but to support wider society. We made a conscious business decision very early that we pay our tax on time. We believed we could afford it, and we didn't look to defer it like some. Where we are at the moment, we've played our part in wider society as well. It was really important to us.
Okay, Anin.
Thank you.
The next question comes from the line of Charlie Campbell from Liberum. Please go ahead.
Morning, Dave. Morning, Mike.
Morning, Charlie.
Morning, Charlie.
Yes, just a couple of detail questions, really. Just on slide 41, I just wanted to explore, there's a couple of negative price movements there. I just wanted to make sure that was mix rather than any market effects. Also to understand why the social is down more than the private. I thought that's maybe a bit surprising. A second question, really, is just on whether you've seen anything changing in terms of down valuations or cancellations in the second half.
No, not at all. In terms of question two, which I'll pick up. Down valuation for mortgage market has been pretty solid and pretty steady. Our cancellations this week, I think we're about 16%, so in line with our historic rates. Nothing materially changed. People are able to get a mortgage out there at the moment. It may take a little bit longer for them to get the mortgage and get through the contract process. Where we are at the moment, there's no real issues in terms of mortgage availability at all, or cancellations.
When you look at the pricing movements, it is subject to mix changes, Charlie, so I can reassure you there. You're probably looking at Charles Church and thinking, have they been discounting heavily to get rid of the five-bedders? That is not the case. We can categorically say that it is down to mix. We're not having to incentivize increasingly in this environment. Pricing, if anything, is nudging forward as we've indicated. I think that actually, when you look at the performance of the Charles Church brand, we're quite pleased with that in terms of how it's performed. It is down to mix. Again, in the South, Persimmon Homes, while again, there's been obviously sites rolling off and new sites coming on with perhaps more affordable product coming through a little bit more strongly.
Which we're quite pleased with at this point in the cycle because it serves to further strengthen our offering at lower price points in the market. I don't think there's anything in there that we're particularly concerned about. If anything, there's a slight strengthening of our market positioning because of the new sites coming on. Is that okay, Charlie?
Yes. Thank you very much. Thank you. Okay.
Thanks, Charlie.
The next question comes from the line of Glynis Johnson from Jefferies. Please go ahead.
Morning, gents.
Morning, Glynis.
I did promise Mike only one question, but I do have two clarifications.
He could ask five. He's got a five question for a day.
Not so far, anyway. You talked about hoping for improved cash position at the end of the year versus first half. Can we just confirm that's including the GBP 0.40 dividend or is that including the GBP 1.10 potential? Second of all, just in terms of that dividend, should we take the GBP 0.40 interim as part of that, say, that GBP 1.10, or should we view the GBP 0.40 as an excess and the GBP 1.10 is still a final dividend? Lastly, actually, what was my question is actually about next year. Are you already selling for next year? Do you have any visibility on that? If you just do completions, at least, the same second half this year versus last year, will you still go into next year with your build equivalent units being up?
I'm not quite sure when you started really building that WIP on site year on year.
Do you want to do questions one and two, mate? I'll pick up question three.
On the cash position, I think rather than being too scientific about does it include the GBP 0.40, doesn't it include the I would say that the direction of travel, Glynis, is a positive direction of travel. I think, we're positive about the trading outlook. First point, we continue to be cautious, as Dave's indicated, on land replacement, because we've got fundamentally a very strong, high-quality landholding position, as you know. You can see that in the margins, and the forward visibility that Dave's already touched on. I think the direction of travel on the cash book is positive.
I wouldn't particularly want to get into, pre-divvy, post-divvy type sort of conversation because there are a lot of moving parts, as you can imagine, except, as I said earlier on in answer to another question, that I think we'd expect to be an improved position, come the end of the year. Obviously, we've not decided to pay down the GBP 1.10 any further. Moving on to the second aspect of the cash flow on the divvy. The GBP 1.10, is the final dividend on account of 2019. We had to postpone that a short while ago. It was due to be paid in early July, 6th of July.
We've now stepped forward and said, "Look, on the back of the strength of the performance of the business through the first half, we're pleased to be able to pay down GBP 0.40 of that GBP 1.10 in a modest step forward." We'll continue to review the prospects for paying the further element of that GBP 1.10. Obviously, there's GBP 0.70 left. Are we able to pay some or all of that at some point in the future, before we get to December? As Dave's already said, I think probably the time we would communicate our view to the market on that would perhaps be our November trading update. Just to be clear, GBP 0.40 is part of the GBP 1.10 and the remainder of that GBP 1.10 will continue to be reviewed as we move through the second half of the year.
I'll just hand back to Dave to talk about the prognosis for the opening position for the next year.
Yeah, I think it's a point well made, Glynis. Obviously, where we are at the moment with our build position, as you could expect, we're still able to sell for this year. We're not really having to sell into next year. One thing I know with the house building business, you have to capture the demand when it's there, and you have to meet that demand when it's there. Because if you can't capture and meet that demand when it's there, somebody else will take it and will buy a secondhand house. Where we are at the moment with potentially 10,500 plots we could complete by the end of the year, we're not really having to sell into half one 2021 because our build position is so good.
As we move across into the year, then obviously that will change because it'll be much more difficult because we'll choose not to take some of them 10,500 houses through, and we may choose to hold them at a different stage, which will affect the ability to complete them for the end of the year. I think the important thing for us is, as long as we can see the demand in the marketplace, we'll continue to meet that demand with our WIP. I think we're probably in a sweet spot in terms of WIP now. As Mike's outlined, we don't probably need to make any net increase on WIP, but we need to maintain what we've got on the demand we see at the moment.
As long as we can create the demand what we see, meet the demand we see at the moment with our WIP, then we're very confident that we'll capture the forward sales for half 1 2021 at the right time. The biggest moving factor, what half 1 2021 looks like, will depend upon the number of completions we take in half two. I'll let you model it yourself, Glynis. How many you think you can take between 10,500 and 8,300? Whatever your view is on that, I'll give you an idea what the forward sales pitch is going to be into half one, 20+ what you think we can complete afterwards. Does that make sense?
Yes. That's great. Thank you.
The next question comes from the line of John Fraser-Andrews from HSBC. Please go ahead.
Thank you. Thank you, and good morning, gents. Two for me.
You all right, John?
Good. Thanks, Mike. The first question is just to continue this theme of what volume you can do in the second half. Clearly, you're not going to do the sort of 27% increase over 10.5, but at the same extent, what's to stop you doing your WIP increase, which is a 14% rise? The second is on the management of CEO handover to Dean Finch. That's coming into sights, obviously, in the next trading period. Perhaps you could just outline what the details of that are, please. Thanks.
Well, I'll pick up on both of them. The second one's easy. We don't know when Dean's coming yet, so we don't really know in terms of what the handover procedure is going to be. What I can say is, and I hope you can see it in the results, that I'm incredibly committed to the company and the whole team's worked incredibly hard to produce these results. The uncertainty hasn't affected the business up to now, and I'm sure when Dean comes over, he'll be inheriting a very strong business with a very strong team. In terms of volume, John, I'm not going to give you any more color than you've actually got. A lot will depend upon how the year develops, what challenges come in quarter four. We're pretty confident in quarter three because we've got good visibility of that, and the build has advanced.
In quarter four, there's too many moving parts to give you the exact figure. I think I'll let you model it yourself somewhere between the numbers you've actually described, John. I think what I can tell you is we'll be trying to produce the best performance we possibly can, as always, obviously, because customers need us to finish their houses by certain dates we've given them.
I think the WIP position into next year, John, obviously, as Dave's already indicated, the sales cuts off for this year, let's say end of September, for example. We would normally continue to sell into this year beyond that, but I'm just using it by way of example. In terms of build, we continue to build right through to Christmas. That naturally puts strength into the forward build position for next year. That's just a couple of overview comments in terms of the WIP position, which you were talking about for next year, really. It does depend on the legal completions we take this year, which Dave's already pointed out.
I think normally, when you've got such a good forward sales, it's much easier to target which plots you actually want to do.
Yes.
We normally sell up until the end of October, beginning of November. We're very confident we take a reservation and complete a house buy, and we target certain houses to take through what we call option plots. For Christmas, we want to complete before Christmas, and we'll continue to do that.
We'll continue to build safely on-site, and most importantly, we'll continue to ensure the quality of houses we produce of appropriate standard because we don't want to undermine the benefits of the customer care improvement plan. There's some uncertainty on Q4, John. I think it'd be inappropriate to give you a figure. I think you have to take your own view on where that figure is. As I said to Glynis, we'll be trying our best to achieve the best performance we can because we've given dates to customers.
Yeah.
I think that's an important point that Dave points out in that Q3, we expect an unusually strong Q3, really because obviously we haven't delivered what we'd expected to deliver in Q2 because of the disruption to site. Dave pains to point out that there's a hangover, if you will, of delivery into Q3. Surprise, surprise. We're going to have a different shape on delivery this year compared to normal, and that puts the cash book in an even stronger position come the end of September. It's a bit obvious, but it shouldn't get lost, really.
No. Well, that makes sense. I'm also mindful that there's some government incentives where the windows finish in March. I imagine that a lot of customers are wanting to complete as soon as they can before that window.
John.
Sorry. Go. I think that's a point well made, John. Obviously that's part of the reason the company's in such a strong position because we anticipated that and we invested in the WIP to capture some of that demand. I think COVID probably accentuated a little bit and brought it forward. This was going to happen anyway, John. I think it's an observation really well made.
Yeah. It is.
Would it be fair to assume that the increase in the forward order book, that the lion's share of that, the very high lion's share of that, you anticipate delivering on before the year end?
I think what you can see, I've given you the dates when we could, and we've given you a low stock and up stock. I think the potential is there to do more and to produce our best ever result. If we produce our best ever result, which I'm hopeful we will for a half, combined with the numbers we've done in half one, I think that probably doesn't just make us the most profitable business, but it probably makes us the biggest as well. I'll let you come to your own conclusion. What we will be doing, we'll be doing the right thing. We'll be meeting the demand in the marketplace. We have the work to meet it. We've given dates to customers for the end of the year, and we're trying to get the best result we can.
The one thing I'm certain of, if we don't capture the demand when it's there, it will be lost to somewhere else. You can't try and manage the delivery. You have to meet the demand when it's there. If that means we have a big half two, then we'll have a big half two. We will meet the demand that's there.
Very good. Thanks, Dave, Mike.
Thanks, John.
The next question comes from the line of Andrew Murphy from Panmure. Please go ahead.
Morning, Dave. Morning, Mike.
Morning, Andrew.
Hi, Andrew.
Hi. I've got a couple of questions left, because clearly lots have been answered already. I was just interested to explore FibreNest a little bit. You said you got 8,000 people signed up. I was wondering if you could give us a flavor for what the income per user is on that and how quickly that's growing and to what extent households are taking up on any individual site. Second, I was just interested in your carbon reduction plan. Did not see too much detail in the statement, just wondering if you could flesh out a little bit of detail about how you're going about that particular initiative. Thanks.
Yeah.
Sorry.
On the first question, I'll ask Mike the deal on FibreNest, and Richard Stenhouse, who's done the presentation this year, will also give an update on our carbon reduction strategy.
Yeah, on FibreNest, Andrew it's still embryonic. We've got a business there that is gradually maturing. The average revenue per customer is currently running around £28, £29 per month. That's gradually improving. Interesting, we offer six different packages on FibreNest, different speeds at different price points. We've got the cheapest entry point in the market. What we've seen, as you'd probably second-guess, you probably know what I'm going to say already, but during lockdown, a lot of people working from home, and there's a lot of schooling being done remotely, et cetera. The demand for high-quality fiber connections to the home has translated into a migration towards our top packages. 500Mbps, again, which I think it is the most competitive offering in the market in terms of those speeds and reliability and service. We see that coming through customer feedback.
Increasingly, customers are appreciating the reliability and the speed that's being offered. Penetration, if you will, take-up, is gradually improving. We're around about 90% now. The other element that is gradually growing and is a bit delayed is into the affordable market space. As you can appreciate, we deliver a certain proportion of our sales to housing associations for their clients. When it comes to FibreNest delivery to the clients of housing associations, it's once removed, if you will, because they're customers of the housing association rather than our direct customers. That's gradually building as well. It's an opportunity for us to continue to work on. It's all wired in, and it's available. It's just whether or not those customers are aware of the facility and wish to take it up, which, as I say, we're working on.
I think that the prognosis for FibreNest is positive. Just to remind you, it's our network. We're investing in that network, and it's a valuable asset that we're growing within the Persimmon stable, if you will, for the future. I'm sure there'll be a number of future opportunities to come from that investment as we move forward. I'll hand over to Richard now to talk about our approach to carbon reduction. Richard.
Yeah. Thank you very much, Mike. Morning, everybody. We've invested, I think Dave mentioned in the presentation yesterday, we've now invested in actual resource, specifically resource, to look at the wider sustainability agenda. Obviously, we appreciate the importance of this. In terms of carbon reduction, during the second half, we'll be undertaking some work with external advisors to establish a science-based target for carbon reduction. Also with regards to the Future Homes Standard and what have you, we've got a working group, and we've got people, expertise in the group, to assess the impact on the Persimmon as and when those final announcements are made. It's a work in progress at the moment.
We've got a clear focus strategy in looking at our carbon reduction and wider sustainability issues and the ESG type agenda, and we'll be pushing that forward with momentum through the second half, sorry. Is that okay, Andrew?
That's very helpful. Thank you very much.
Thanks, Andrew.
Cheers.
We have no further questions, so I'll hand back over to the host of the call for any concluding remarks.
Thanks, everyone. This will be my last presentation, and I'm really pleased about what we've achieved over the last two years, especially when you consider the challenges we have faced. This is a credit to our people and our culture, and I hope the update today shows what a special company Persimmon is. I'd like to thank all our staff for their support and commitment. I have absolute belief in them, and this gives me confidence we will continue to deliver the company's new homes and deliver for all stakeholders as we face into the potentially uncertain economic future. Thanks, everybody.
Thank you.
Thank you for joining today's call. You may now disconnect your handsets.