Welcome to the Persimmon Trading Update Analyst Conference Call. Throughout the call, all participants will be in listen-only mode, and afterwards there'll be a question and answer session. Just to remind you, this call is being recorded. I'll now hand the floor to our host, David Jenkinson, CEO, and Mike Killoran, FD. Gentlemen, please begin.
Good morning, everyone. Thanks for calling in. What we're going to do, we've got me here, and Mike sitting beside us as well. We're going to follow the normal procedure. I'll give a quick opening statement, picking out some of the key areas I want to bring your attention to from the statement, and then we move on to, as normal, the questions and answers. Quickly, the first four areas I'd like to draw your attention to from the statement is, firstly, on my appointment, I stated my key focus was an improvement in our customer relationships. I am pleased to say I am happy with the progress we have made in the first seven months of the HBF reporting period, and this will continue to be my number one priority.
Secondly, I have also stated I wanted to restock our shelves by increasing the amount of work we have on the ground to enable us to provide more reliable moving in dates and allow sufficient time for our teams to follow our quality control process. Once again, I am pleased with the progress we are making on this area, and which is reflected in the 18% increase in equivalent build units we have on the ground. The third point I'd like to bring your attention to is that the legal completions are slightly down on half one 2018, this is a by-product of our drive to improve customer care and satisfaction rather than a change in market conditions.
However, we are in a strong position for half two, 2019 with a good forward sales position, strong margins, excellent outlet network, and with half two build programs in a much better shape. Finally, I would just like to say how proud I am personally of the work Persimmon is doing in getting first-time buyers on the housing ladder, with 52% of our private completions being to the first-time buyers. I'll open now with the questions and answers and any questions anybody may have.
Thank you. If you wish to ask a question, please dial zero one on your telephone keypads now to enter the queue. Once your name's announced, you can ask your question. If you find it's answered before it's your turn to speak, you can dial zero two to cancel. Once again, that's zero one to ask a question or zero two if you need to cancel. Our first question comes from the line of Gregor Kuglitsch of UBS. Phone muted. You will need to unmute that line.
Hi. Good morning.
Hi, Gregor. How are you doing?
Okay, you can hear me. That's good. Doing well. Thank you. Couple of questions or maybe three, actually. The first one is just to come back on the volume point. Just want to explore that a little bit. I think in April, you were kind of indicating flat. I think in the end, you were down kind of five, six. Appreciate that's a bit difficult to predict on timing. The comments, your opening remarks suggested a better outlook for the second half. Maybe you can just give us a bit of a feel where you see things trending on that in the second half. Do you expect to be kind of at least flat?
The second point is, do you have an indication where I'm sure you try to track this, where your HBF rating would come out if you did the survey today, so in terms of percentages? Would you be comfortable in saying that you'd be in a sort of four-star builder run rate? Final question is, you've indicated margins are flat for the first half. Any direction from here? Do you expect it to kind of pare back a little bit as some of the costs come through that you're incurring, or not so much? Thanks.
Well, I'll deal with the second question first, Mike can pick up on the volume point, and may be able to help you out on that a bit as well. On the third one, Mike can pick that up as well. Well, as you know, we ended the last HBF reporting period, which finished in end of September, at 79%. We're now seven months into the period of the next reporting period, I'm really pleased with the results we've seen, we've seen a movement in forward from where we were last year. In particular, in the last four months, we've seen a considerable kick up in our results. I wouldn't want to go on record quite yet until we're further into the reporting period of the 12 months for the HBF rating.
What I can say is that we're confident of where we are at the moment, and we're comfortable with what we're seeing.
It's early days.
I think, Gregor, the key thing there is that obviously a lot of the measures that we are introducing, it's still early days, as we say in the statement. As Dave says, we're seeing good improvement in the results from those initiatives. It is still early days, so that's quite encouraging. We need to see how things go, obviously. On the volume side, I think the outlook, the market for us appears to be pretty similar to what we've been seeing through the first half. It's remarkably resilient, really, in terms of the challenges, obviously, that the country faces. We've got to consider the increasing uncertainty with respect to the process of removing the country from the EU, et cetera. The market in the regions, across the regions, has been remarkably resilient.
Our private sales rate, I guess, is an indicator of that, in that it's been pretty consistent referenced the prior year, which was, we all know, quite a strong comparative period for us. We've been seeing a pretty consistent performance against that. Visitor numbers are good. Cancellation rates remain pretty low. We're not seeing a pickup in downsells or anything like that. Yeah. Obviously, it's well rehearsed that products are at higher price points, particularly perhaps in the southeast and in and around London. It's a bit tougher conditions. Across the regions, where the majority of our business is, the product that we're offering, the homes that we're offering to our customers, is proving to remain attractive, hence, good visitor levels and good interest. What does that mean for the volume outlook? Well, as Dave said, we've got a very healthy forward sales position.
We've got around about 4,400 PD units forward sold at the end of June. That's a good starting point. We will suffer a few cancellations out of there in the normal course. Rule of thumb, if you were to say, well, we'd carry forward maybe 4,000 out of that number and for delivery through the second half. It's all about the sales rate through summer and autumn. Traditionally, as you know, it's always a bit slower in autumn than spring. As you see in the statement, we've done 0.74 of a private sale per site per week in the first half. If you were to say an assumption of maybe 20% lower, which would be the traditional sort of pattern, that would give you a sales rate of around 0.59.
How many weeks, 15, 16 weeks perhaps, to sell in a simple way, thinking about it simply, would give you a figure of maybe a little bit more than 3,000 expected to sell PD through the second half that we could take as legal completion. When you add those two numbers together, maybe 7,000, a total of 7,000. You've got the issue of building the right ones. Obviously, we're, as Dave said, very pleased with the progress on construction. We add obviously to that the HA units, another, I don't know, 1,500, 1,600 units on HA. You can make your own conclusions from that. We've got solid support for the second half. We want to be measured in terms of delivering the balance of outcomes that Dave's touched on already.
I think the thing is on that, I think if you look at the different moving parts that's going to produce the results for the second half, we believe we're in a good position.
Yeah.
We'll have a good outlet network.
with a similar sort of number. With a really strong forward sales position to which to build on. We've got good stock on the ground of the right product, 19% more than what we had this time last year. We believe the margin, it will be pretty strong again. We also believe the sales rate and the price for the sales unit will be pretty similar to this year. It won't be hard for you to come up with your own calculation in terms of volume, Gregor, for the second half.
Okay. Thank you.
I think we're going to be measured about delivery as we have in the first half. I think that pattern will be consistent. We're not chasing volume. We want to deliver the quality of outcomes.
Margins.
The margin point?
The margins, we are investing in the business. I think we're indicating, as we have before, that the full year outturn of last year will be a reasonable guide for the first half of this year. In the second half, I think we'd expect that to come back a little bit, but not significantly. There's a bit more, obviously, investment going into the business, as we've said. We'd expect our margins to be still pretty healthy by the time we get to the full year position. Obviously we've talked before, the quality of the land bank is the key support to that delivery.
Excellent. Thanks a lot.
Thanks Gregor.
Cheers Gregor. Thanks.
Thank you. Our next question comes from the line of John Fraser-Andrews at HSBC. Please go ahead. Your line is open.
Morning, John.
Good morning, gents. Two for me, please. One following up on what you've just outlined there, Mike, on the completions. The missing piece of the jigsaw for the full year completions is what the social private split was in the first half?
Yeah. The private was just shy of 6,000 unit of legal completions. The HA sales were around about 1,600.
Thank you.
To give you that sort of seven,six-ish number.
Sure. Then on outlets, can you talk, appreciate you're holding back and you've got higher inventory level. Outlets actually dropped quite rapidly from the 1st of May, where they averaged for the four months to 350, and then the six months, 345. Also your completions clearly were somewhat lower than you guided at that time. Can you just explain exactly what did happen on the outlet side?
Yeah, sure
sales rate resilience.
Yeah. We're talking averages here, John, so it's not an absolutely precise science. You'd have to monitor it hour by hour, day by day through the period. What we've seen through the first half, around about 350 average, as you say, running through to mid April or back end of April, and then slightly lower levels from there through to the end of the year. As you can appreciate, spring selling season isn't flat. It does have a different pattern within there. It builds through into April and May, so in June. Obviously, if you've got a few less sites later on in that period, on a weighted basis, it can influence the numbers according to that higher level of activity later on in the period, because it's just how the market appears to work.
I think, we end the year just slightly lower than the 345 mark. On average, 345 for the first half. I think moving through into the second half, we'd be confident of around the 345 mark at this point, because we've got good visibility on new outlets coming through. We've said we plan to open around 85 new sites through the second half. We've got good visibility, and as Dave says, we've got a very strong invested whip position, which delivers a good platform to work from through the second half.
Is the sole driver the build quality, or have there been any planning issues or any market issues that also explain the fall?
No, not at all. It's been about putting quality before volume and ensuring that we meet on what we said we were going to do. To be clear, I made my number one priority to ensure the houses are right, and that's the route we decided to go along. If you've got to lose a little bit of volume in the short term to make sure the house is all right, that's a price I'm prepared to pay and stand by.
Okay. Last one for me then is just on the selling price, which was a little bit firmer on private. Is there any market inflation in there, or is that mix, and are there any sort of regional variations on price that you could highlight?
Just on the sort of inflationary, I mean, again, it's very, very hard to be exactly precise on this. At the sort of 1.7% increase on the PD average selling price thereabout, we'd say the inflation is probably one and a quarter with 50 bits of mix effect. It's hard to be exact on that, but that's the feel. We are able to nudge prices forward still. Dave, regionally, what-
I think to the north, excluding the Southeast and bigger units, the price points are incredibly resilient. I'm still seeing some decent price growth on released new sites, and the pattern hasn't really changed in the last 12 months, to be honest. When we buy the land and we get the right mix and the right product and we present it properly, we're seeing good price growth. As sites mature, the larger four beds become a little bit more difficult, and the market's certainly a little bit stickier in the Southeast.
Okay. Thank you.
Okay. Thanks, John.
Cheers, John.
Thank you. Our next question comes from the line of Clyde Lewis at Peel Hunt. Please go ahead. Your line is open.
Thank you. Morning, Dave. Morning, Mike.
Morning.
Hi, Clyde. How are you?
Not too bad, thank you. Not too bad. A couple, if I may. One, could you just sort of say a little bit about sort of your land buying and what you're seeing on pricing of land and how hungry you are to obviously add in the market. Obviously, you've got your strategic pull-through, but just what you're seeing, I suppose, in more open market land buying. The second one I had was on Help to Buy. Are you seeing a drop-off at all in terms of usage with the improvement in higher LTV mortgages and the drop in rates that we've seen there? I suppose the third one was in terms of the increase in stock that you've indicated in the first half. Is that it now, or do you think there's a little bit more to come in the second half of the year?
I'll deal with them. The first one is the easy one, which is Help to Buy. No, we've seen no drop-off. There's still really strong demand for first-time buyers' houses out there, and Help to Buy works really well in facilitating that. It's something I'm very proud of, that the company enabled so many people to get on the housing ladder. Yeah, we're not seeing any drop-off. Land buying. As you know, we're in a very, very strong position. The land bank is extremely low, and the strength of the land bank underpins the strength of the business. What that does, that gives us options to buy land at the right terms, at the right time, at the right place. We haven't spent quite as much money on land at the moment, but that's a timing issue rather than by design.
We have some fantastic strategic land coming through in the next 12 months, and a bit of our focus has been on that. What our spend will be in the second half will depend how much that comes along. To summarize on that it's more of a timing issue why there's a drop in the spend rather than by design. The third point, increase in stock. I still think we've got a bit more work to do on that. We still haven't got the perfect shape on all our sites where we can offer a product at every different stage when a customer comes along, and that's something I'm very keen to see change. I would like to see probably about another 10% growth. I think we've had a 19% increase this time.
If we can generate another 10% increase of stock on the ground, I think that would put me in a much better position for moving the customer care even further than where with the improvements we've seen to date.
Okay. Perfect. Thank you very much.
Thanks, Clyde.
Thank you. Our next question comes from the line of William Jones at Redburn. Please go ahead. Your line is open.
Morning, Will.
Thanks. Morning. Thanks, guys. Just again, three, I think from me, if I could. The first is just coming back to the issue on outlets and maybe some early thoughts, if possible at all, on how they may progress in 2020. I guess just winding it back to this 15-20 you've held back. Did some of those start to come back into the business, I guess, in terms of their opening next year, or is that where they do come back in, they're netted off by the equivalent holdback on new sites again in next year? I'm just trying to get a feel for should we be thinking about circa 350 or a bit less holding maybe for the next 18 months, or can they grow slightly? The second was just to double-check on built cost.
I don't think it was in the statement, but you had talked around the 4% mark or so for your expectation in 2019. Presumably, that is still the case, given your margin commentary, but just to double-check. The last one, maybe just to update us on the retention program that's about to get launched for new reservations. Just really where you are logistically on that. Is it ready to roll? Where relevant, what might be the accounting impact of that in terms of the booking of those new sales? Thanks.
I'll deal with questions two and three, then we'll make them deal with question one. The first question on build cost, nothing's really changed from where we were before. Labor cost seems to have steadied. Material costs have increased a little bit. We've spent a bit more money on customer care, and we've been able to offset that by some cost savings, specifically around the externals type of area what was said before and a bit from our own manufacturing. The guidance we'd given on that previously still stands. In terms of the retention, yes, it's fair to say it's been a little bit more difficult than what we envisaged. We've been working really hard with our stakeholders to try and make sure the scheme works, not just for us, but for all our stakeholders.
If you'll note, we've actually changed that to ensure that the retention covers not just anything that's at key release, but also anything that's one week later. That was one of the feedbacks that was coming back from specifically the customer-facing type groups. We've got all the documentation in place now. We've done all the drafting. We've had that to solicitors and probably 99% there. We've got some lenders in a good place on this where they're just about able to support it, and we've got others we're still in discussion with. We should be in a position to roll this out so anyone who makes a reservation in July will get the benefit of the retention.
On the outlets point, Will, I think Dave's already said that we have the ambition to carry more stock moving forward. That will obviously affect the sales release profile of the sites that come through when we get a detailed ticket to start. I think that it's difficult to be precise in terms of that unwind of those sort of 20 sites or whatever. We would suspect that it will continue around that sort of level through the second half of this year, and it may even continue into the first half of 2020. It does depend on the progress that we make against that ambition to have more availability on site that is a bit more progressed, as Dave's already touched on. That's our sense of it at this point. Okay. Thank you.
Thank you. Our next question comes from the line of Arnaud Lehmann of Bank of America. Please go ahead. Your line is open.
Thank you very much. Good morning, gentlemen.
Morning.
Morning. I have three questions, if I may. The first one is just a follow-up on your comments on margins. I'm just trying to understand the moving parts, because you mentioned the investment in the quality of the product and the cost inflation offset by your cost-cutting initiative. Could you elaborate a bit on the cost cutting? Is it the brickwork? Do you still have some land coming through that is supporting the margin? I'm trying to understand the upside and the outlook for this. Secondly, I'm sorry to bore you with Brexit, do you have contingency plans for a potential no-deal Brexit in particular? Are there any products that you're importing that you started to source more locally? Do you feel ready for this event? Lastly, maybe one for Mike. You've reduced your land creditors, I think, in the first half.
Is it a timing effect, or is it a proactive strategy to take those over?
Okay. Yeah. Mike? I'll just jump in on that land credits point first, if I may. Perhaps Dave, I'll have a look. You deal with the margin one. The margin part. I'll deal with Brexit. Yeah. Yeah. On the land creditor profile, obviously, it's timing issues when the deals are done. Land creditors are generated on completing the contract for purchase of the land, in simple terms, where we agree with the landowner to defer part of the consideration.
It's just a deferral mechanism on the cash out of the business. It is primarily determined by when the deals drop, when those deals are completed, which is pretty unpredictable. As Dave said earlier on, the land market is still offering decent opportunities. We've got great opportunity within our strategic land bank to pull that forward and get them converted, and get on and build the houses that the country needs, which we're very keen to do, obviously. Again, from a profile perspective, I would have thought land creditors may bob along around the same sort of level moving forward. But again, it depends on the deals and the timing of completion on those deals. Sorry for not being able to be too precise about that.
We put it in the statement because directionally they moved in different directions compared with the first half of last year.
Okay.
Just to remind everybody, last year we started about GBP 570 million, ended at June at around about GBP 610 million. We extended the profile on land credits in the first half of last year, whereas in the first half of this year, we've shrunk the land credits, if you will, by about GBP 60 million, going from GBP 550 million to around about GBP 590 million. Directionally, we thought it was important just to point that out. I think it is a bit of a timing issue. We have some large strategic sites which are going to be coming through in the next 12 months. I think you're probably going to see that increase in the short term, back up a bit. The maturity is pretty steady. We haven't got any refinancing risk there particularly. We've got a nice tail on the amortization. We're quite happy with that.
On the margin front, yes, we've got areas of cost mitigation. I don't think this is absolute reductions in cost. This is about mitigating cost inflation to limit it around the 4% mark. Yes, we're investing in the business in customer care initiative and obviously areas of specification that we've changed, taking on board feedback from customers along the way, as we normally do, and we'll continue to do that. That's why we've said the margin through the second half will probably come back a little bit compared with the first half. For the full year, we'd expect the margin still to be very good. Maybe a tad below what we delivered last year, but nothing significant. I think the prognosis further out, obviously, we've got an inflationary market. We've got some great quality land. As always, land recovery, we're in a very strong position.
We publish and will be publishing in August our average plot costs, et cetera. I think that the work that we've been doing on external investment to reduce costs there, this isn't relating to build. It's part of the build cost, but it's not related to the construction of the home. We've seen decent mitigation of those costs, we've got a lot of new sites coming on. That's part of what you'll see on the balance sheet in August. When we published the balance sheet in June, you'll see an increase in work in progress, and that will be primarily because of the investment in external works, offsite infrastructure and the like, together with the increase in built units that Dave's already touched on in terms of the 19% increase in equivalent units of build that we're seeing.
Those two key areas are leading to an increase in work in progress, and obviously you've got to do your external investment to get onto site, open them up, so you can get to the plot. Necessary investment, very keen to get on. Some great sites coming through, which puts us in a nice position certainly for the second half and beyond.
Okay. That's very clear. Thank you. On the Brexit contingency plans?
Well, obviously, we've had a little bit of time. We've had so many false starts with Brexit that we've had plenty time to consult with all our suppliers. We've had assurances from all of them that the necessary steps are in place, such as using alternative supports. Obviously, we'll continue to review this with our supply chain to make sure what we're going to happen. I think we've prepared the best we can. The risk area where I see it is probably them areas where we have a problem with certain materials at the moment. Obviously, we're dealing with that the best we can. I don't see it being something which is going to prohibit our delivery in any way. I think what the materials will be available to meet all the demand out there in the marketplace.
That's great. Thank you very much, gentlemen.
Thank you.
Thanks, Arnaud.
Thank you. Once again, just to remind participants, if you do have a question, please dial zero one on your telephone keypads now. The next question in the queue comes from Ami Galla at . Please go ahead. Your line is open.
Thank you. Morning, guys. Just two questions from me.
Morning, Ami.
Hi. Just two questions from me. First one was on Part Exchange. If you could give us some color as to what's the current utilization level and what sort of threshold are you comfortable with? The second question really on planning, how do you see the market today? You've touched upon that there are more strategic sites coming through. Do you think planning has become more easier or at least the process is a bit more faster than usual?
I think the planning hasn't really changed in the last two to three years, to be fair. If you know what you're doing, you have the right planners, and you have the right teams out on the ground, which we've invested heavily in in the past. We have a huge team of planners throughout the business with an expertise which we think is second to none. When you have the facilities to deal with it, obviously planning is a fluid thing, and it moves. It's not stuck in any one thing. We look to react and use the skills within the business to enable we don't have the problems.
Planning isn't really been a barrier the last three years of delivery other than areas of the Green Belt, where it's very difficult to trump the presumption in favor, use the presumption in favor argument to trump the exceptional circumstances argument. Planning, I'm pretty comfortable where we are in the company, the skill set we've got, and what we're working with and the planning system we're working in at the moment.
I think on the Part Exchange point, Ami, we are keen to support existing homeowners to buy newly built homes, obviously, and we've got a lot of capacity to do that with our Part Exchange and Home Change facilities. We're looking to support any customer that wants to take advantage of the convenience of those schemes. We don't set a particular limit or minimum number. We look at each case on its own merits. Obviously, we review the quality of the existing home the customer is looking to move on from. If we can agree an acceptable position with them, then we will support them with Part Exchange. In terms of our sense of Part Exchange is we may see a little bit more being carried because we want to support more customers.
Indeed, we've already pointed to the fact that at higher price points, perhaps the market is a little bit slower. What can be very helpful for customers is to use Part Exchange in a sensible way. I think we would encourage, and we do encourage all the teams to communicate the availability of that opportunity to customers.
I think the encouraging thing that we see in Part Exchange, which gives us some visibility in the secondhand market.
Yeah
is those Part Exchange properties which we take in, we are turning over very quickly. We've got very little aged stock, which tells us that the secondhand market, if it's priced properly for the right product, is still functioning very well.
Yeah.
That's helpful. Thank you.
Thank you.
Thanks, Ami.
Thank you. Our next question comes from the line of Gavin at Peel Hunt. Please go ahead. Your line is open.
Morning, gents.
Morning.
Morning, Gavin.
Just a couple around the customer care initiatives. I'm just wondering if you could just talk us through a little bit on the detail of kind of how the processes have changed, particularly around kind of inspection of properties before moving in, and really kind of like your view on whether you think a week is long enough to kind of find all snagging issues with a new build house. Then the second one is just around the reliability of moving in date. Have you got any figures you could give us around how reliable, I guess, they were in maybe the first half of last year compared to what you've seen in the first half of this year? Thank you.
I think there's three parts to that. Obviously, the customer care inspections. We've made a lot of improvements in lots of areas. We obviously increased our investment in the resources out on the sites. We've significantly increased our training. We started to digitize our customer care service. We're the first builder to offer out-of-hours calls and weekend calls as standard for our customers. I think the point you're driving at is what have we done to ensure the quality control procedures. In the business, we've got what's called a seven-point check process, where seven different people check a house before the customer comes, of course. That is partly for the reason for the drop in the volume, because we wanted to ensure that that process was being adhered to.
Before a customer moves in, there are seven key touch points that have to be signed off and gone through. We're confident if that process is followed, and we'll have enough time to follow that process, that'll produce the quality of house that the customer expects at key release. It's part of our drive to get the house right first time. The second point, on a week, I think a week is adequate time to identify the snagging issues if we get the houses right first time. We're investing very heavily in that area, both in terms of procedures, additional staff, and we've got additional investment we're going to make in our own quality control procedure, which we'll give a bit more color on in August.
If we get the houses right first time, I think most of the issues, what we're talking about in the polishing of the house, will be picked up by the customer. Initially, as you were probably aware, our scheme related to only up to the point of key release.
Yeah.
Some of the feedback was coming back from our stakeholders. It needed a bit longer than that. It needed time for the customer to move into the house, get a look in the house, and get familiar with the issues that they would have picked up they didn't get a chance to pick up. That was something we had to acknowledge, and I think it made sense, and it's part of our drive to listen to our customers and try and give them the best service we can. That's why we decided to take that decision. Is a week enough? We'd like to think it is. Obviously, we'll keep that under review. If we found out it wasn't, then that's something we can look at later on once we get the process up and running. Moving in date.
The positive thing about the moving in date is this has got a bit of a gestation period. Most of the benefits that we're actually seeing when you look at the data is down to our improvement in customer care service aftercare. We've not really had the full benefit of the moving in date yet for our customers, because if you actually think how this works, we stopped releasing certain plots in certain places till it got to roof in January. If you think to take a plot from virgin to roof, it probably takes three and a half to four months. That probably takes you to April. A customer has to reserve it. The average contract period is 12 weeks. Really, the first legal completions where we should really start to see the benefit of the deferred completion will be May and June.
The May and June completions aren't in the HBF rating yet. That gives us some confidence that we should see some further improvement as we move forward.
Okay. That's useful, Dave. Thanks very much.
Thank you.
Thank you. Our next question comes from the line of Colleen Strong from Jefferies. Please go ahead. Your line is open.
Hi, Colleen. Hello?
Hello, Colleen. If you unmute your phone, you can speak.
Hello?
Once again, if you unmute your phone. Your phone is unmuted from our side. There seems to be no response from Colleen's line. I will once again, if there are any further questions on the line, please dial zero one on your telephone keypads now. Colleen's come back. If you'd like to ask a question, your line is open. On the line from Jefferies.
Hello. Sorry. It's Glynis Johnson.
Glynis. Glynis, hi. How are you?
Not quite sure what happened there. Didn't answer to the name of Colleen. I'm going to ask the elephant in the room is, what has been the interaction with government in the recent months? Have you got any feedback in terms of how they are feeling about your customer service, and how are they looking to monitor what comes out? Are you getting anything from an industry perspective in terms of what government may require for quality levels, and how they might tie that into Help to Buy?
No, to be honest, obviously, we're in discussions all the time with the government. We have regular meetings with them. They know, and they can see the improvement in quality and the difference that we can see. Obviously, they have visibility on the improvement we've made in the HBF rating in the last seven months. The important point is, in terms of the industry perspective, where the government looks as though they're taking this is what is an industry ombudsman scheme. They've announced that they're going to consult on that, which is part of the reason that we are looking to pioneer the retention scheme and get ahead of the game and make an additional investment so we're ready for when that comes along. No, I think we'll have discussions with the government, obviously, more around other issues like SECUR and zero carbon homes and delivery.
Obviously, customer care is one of their issues. I think the main focus where the government's going to look to deal with this is through the ombudsman scheme.
Okay. Thank you.
The design of the extension around Help to Buy, Glynis, which I think is part of the.
The question that you were asking. The government in housing and consulting with the industry and others about the design of that. We're in the same place as everybody else with respect to that. We're not sure as to the exact criteria that will be adopted in that regard. Obviously, you can see that we are very focused on making sure that the quality and service of what we aim to deliver to customers is increasing and improving, and we're very confident that we'll be able to satisfy whatever requirements are brought in the future with respect to Help to Buy or customer support and service moving forward to ensure that we've got the business nicely positioned moving forward.
Thank you.
Thanks, Glynis.
Thank you. Our next question comes from the line of John Messenger at Redburn Europe. Please go ahead. Your line is open.
Hi, Dave, Mike. It's a couple of questions, if I could.
Hi, John.
on the retention side of it. Can I just understand, obviously, some of your peers kind of have questioned whether it's right to go for this kind of mechanism that you're going to use, but more from the point of view of the lenders. What is the issue for some lenders? Is it about the actual kind of putting these through their systems and the fact that there is this retention sitting with a solicitor? What is the pushback that you're getting, and is there a reason behind it that is more of an obstacle looking forward, or do you think this is very much something you can get over? The second one, which is obviously beyond Brexit, we've got the current kind of vying for who becomes the next prime minister with lots of promises, and obviously, one of those areas covers stamp duty.
It's too early, I guess, but are you or do you have concerns as to what that might do with creating a bit of a hiatus in terms of people coming into sites? This is more at the top end of your range. Obviously, you're much less exposed. Do you have concerns that there will be kind of people thinking, "Right, I'll hold back. I'm not going to think about moving. I'll wait until I've seen what the stamp duty scenario looks like beyond September, October time." Just a couple of whatever your thoughts are on those two.
Yeah. John, I'll take the stamp duty uncertainty issue first. I think Dave will handle the retention side of it. Obviously, we're in a period where there is a selection process going through. Stamp duty has been mentioned. I think the way that we are interpreting that, you're right in that it's at the higher price points, particularly London market, where perhaps on reflection, it has contributed to the slower market to a degree. It's not really our specialist area, as you know.
Yeah.
We understand the concerns that others have expressed relating to that, and we can understand them having those views. A little bit of help and relief on that would perhaps assist. Thinking about constituents in those perhaps higher capital value regions. It does create more uncertainty, as you say, for a short period of time, perhaps.
Yeah.
We're not really seeing that sort of hesitancy or lack of urgency across our regional markets, with the price points that we're offering product at. We are at the lower end. We emphasize that in the statement, as you can see, using the HM Land Registry data that the ONS use.
Yeah.
I think we share your observations on that. I think it does make sense. It's not something that You could argue that for chains, et cetera, maybe there's a consideration there that we need to be just a little bit more aware of. Apart from that, it's hard to predict it really in terms of-
Yeah
market effect on that. Dave?
In terms of this, the retention, obviously, we know that this is something we're pioneering. We're stepping into new grounds. Obviously, that can be challenging for different people to come on board and accept something which is new. I don't think it's one particular thing that worries the lender, because it depends which one you're actually talking to and which ones, where they stand, I think. It basically falls into two areas. The first one think it could be an admin burden for them, which we don't believe to be the case, and we've put forward processes that would prove that that wasn't the case. The second thing is some of this risk around foreclosure, what happens to the money? We believe that to be a negligible risk.
I don't really want to start naming names and saying what the real issues is on this, because we're still in discussions with some of these lenders to try and find a way through with them. We have got some lenders in a good place with this. It is something we're absolutely determined to introduce. It's for the customer. It's something we do believe will change behavior within our own company as well to make sure we get the house right first time, and also give confidence to the customer that any outstanding issues will be resolved. In our opinion, it's hard to see why they would have any real objections to it. It's something that we're going to continue to push forward, to bring forward.
Brilliant. Dave, if you think of the pool of lenders out there, have you got kind of, is it half of them have accepted this and the other half have still to go for, or just have a rough idea of that?
I think it's the way the mortgage market works is two or three main players-
Yeah
who do the majority of it, the rest are gated by UK Finance. We've got to meet one major player, maybe 9% there. Another major player who's got one or two reservations, another major player who accepts the principle of it, we need to work, make them a little bit more comfortable, one or two areas about what happens in a foreclosure situation. We're confident we'll be able to roll this out. We'll be able to confident that that will be a major lender who will support us. I actually think this will change behavior for the whole industry in time, I do know that some of our peers have been in seeing all that. The banks themselves discussing a retention scheme.
Got you. Brilliant. Thanks very much.
Thank you.
Thank you. As that was our final question, I'll hand back to our speakers for the closing comments.
Well, thanks, everyone, for ringing in. We've had some good questions here, which I hope give you a bit more visibility on where the business is and gives you a bit more comfort on some of the queries you had. Just in summary, I'd just like to pick up on what we're looking at for half 2 2019. Customer care, we're really pleased with the improvements that we're making. We expect to see even further progress in that area as we start to get the benefit of even more of our initiatives. We have a fantastic range of outlets in place with a fantastic land bank. The forward sales position is very strong. The margin has proved to be very resilient. Sales revenue per plot has been very robust.
Most importantly, which pleases me at all, we've been able to get a 19% increase of WIP on the ground, which places us in a great place to not only increase volume moving forward, but also to improve the quality of houses that we hand over to the customers. Thank you.
Thanks very much.
This now concludes the conference. Thank you all very much for attending. You may now disconnect your lines.