Welcome to the first half results presentation for 2018. I'll take you through all of the usual pages in the normal way. Mike will cover the financial review, and then we'll do Q&A at the end. Let's have a look at the highlights. I'm very pleased with the continued progress that the business is making. We've produced another strong performance and continued the progress forward. If we look at the highlights, new housing revenue has increased by 5% to GBP 1.74 billion, good top-line growth. I think that the issue on here that particularly strikes me is the operating margin, which at just under 30%, increased by 210 basis points from last year, is a very strong performance, and something which I'm really pleased with and I think demonstrates that the business is working hard, both in absolute and relative progress terms. Very pleased with that.
PBT increased by 13% to GBP 516 million. Return on capital employed of 53.8%. Good cash generation in the business, GBP 240 million pre capital return. Importantly, underlying earnings per share increased by 12% to GBP 1.363. Let's just remind ourselves of our strategy. The team is very focused on delivering this strategy, which we introduced in 2012. In summary, we said that we'd grow the business, which we've done very successfully. We'd operate efficiently. We'd invest in high quality land at the right time in the cycle. We'd manage the cash in the business, and any surplus capital would be returned to shareholders. Looking at the operations in the usual way as an overview of the performance, I'm particularly pleased with the continued progress we've shown in increasing volumes in the market.
An additional 278 legal completions in the period, which is a 4% increase over the prior year. For me, the standout numbers here are, again, operating margin just under 30%, cash GBP 1.154 billion, return on capital just under 54%. I think a strong performance overall. Unit completions over 8,000 now. We continue to drive further growth through the business, both top line and further margin progression. It's worth reminding ourselves of the coverage of the Persimmon national business. We now operate from 30 operating companies, and you'll recall that we opened the newest opco earlier this year in Suffolk, and that is performing very well. We've got a good land bank in that area, and we will quickly see that business grow to full scale. Just to remind ourselves, Persimmon does target the first time buyer, first time mover bracket.
It's no surprise that 39% of our private sales are priced below GBP 200,000. I think that's an important feature in this marketplace, in terms of affordability. The mortgage market continues to be competitive, and there are good rates available to borrowers. Help to Buy rates are around, there are some available less than 2%, but around about 2%-2.5% interest rates after the increase following the 25 basis points increase in the base rate, most of which has been passed on through the rates. More importantly, is the fact that that has not made a perceptible change to consumer behavior. We're very pleased to see that consumer confidence continues with no change. Looking at the summary breakdown of our different brands. You can see on this page, the breakdown from North to South Persimmon.
It's probably worth mentioning the continued repositioning of the Charles Church product. As I've mentioned, we're aiming particularly at the lower end of the market given the strength of the market for people wanting to get onto the housing ladder. Charles Church volumes, as we've repositioned that brand up at the top end of the market, have reduced. I think the good thing there is that when we look at margins later on, you'll see that the Charles Church brand and business is producing much better operating margins. A good improvement in that respect. Overall PD sales prices are up 3%, which was where we anticipated. We're not pushing our product up the market. It was part of the strategy to aim at the affordable end of the market.
We're very keen to make sure that we return affordability, and ensure that we've got a good range of products available for people to buy. As you can see from this slide, we continue to improve the land bank in support of further growth. Let's have a look at the land in a little bit more detail. We still see very good conditions. We've got a good pipeline of land coming through. We're also selectively purchasing new opportunities at strong margins and strong prospects. We're a keen buyer still in the market at the right price. Total plots owned and under control now is over 100,000. We bought over 11,000 plots over the six-month period across 45 locations. As I say, we're ready to invest. I think we anticipate further improvements in the planning system.
There are areas of the U.K. which continue to be constrained in terms of land supply. We'd like to see that continue to be freed up, and we're ready to invest in those areas and see an opportunity for further growth in the business as we go forward. Strategic land is still a very significant element of our business, and we have around about 50% of the plots in our land bank has been converted from strategic land. Let's have a closer look at the strategic land activity. As we say here, the long-term returns are supported by conversion of strategic land, which tend to be larger sites at high margins, strong return on capital, which live in the land bank for a longer period of time.
I think we can point to a significant value in the land bank sustained through this as we go forward, and Mike will give a little more detail on that. In the period, over 3,200 plots have been successfully converted in the year from our strategic land bank, over 15 new locations. These are good positions for us supporting further growth around the U.K. We continue to invest in further strategic land opportunities with 240 acres brought into our strategic portfolio and over 15,600 acres held in strategic land at the half year. A very strong position and supporting the short-term land acquisition activities, and the underpin of our very strong value land bank. A strong performance so far for the business. Let's have a look at current trading. I'm very pleased to say that markets continue to be supportive.
We see strong underlying demand. We see a supportive mortgage market. It's important to remember that in our space, it is cheaper to buy than it is to rent. If people have got the means to obtain the mortgage, it is a good opportunity for them to get onto the housing ladder. Persimmon has put itself in a strong position by making conscious decisions to address some key issues since we launched the strategy and over the last sort of five-year period. The outputs of these results are largely due to the actions that were taken in the business over some considerable time. We've focused on range and choice of house types on the sites, particularly at the low end of the market, given its affordability.
We've got very good sites we acquired at the right time in strong locations, which are coming through into current sites. I think we see good value in the land bank, Mike will talk again about a bit more detail about that value coming through. Also we've got excellent cost control, and I think that's another important feature for Persimmon. We're very focused on that in terms of ensuring that our cost base remains very competitive. As you know, we've got a number of things involving vertical integration with Space4 concrete brick, which is now producing good volumes. We're delivering over 1 million bricks a week from our plant now, that's a real support to the business as we see continued shortages in build materials across the board.
We've made a start on the tile factory at the same location at Harworth, which is quite exciting. We expect to see that come on stream next year. We've got good U.K.-wide coverage with very little London exposure. We see opportunities through the controls for further margin progression as we move forward. I think some of these things we're quite keen to showcase to yourselves and the wider market at our capital markets day that we intend to hold on the 8th of November, for which you are all invited. Looking at our forward sales position, we're quite encouraged by this position. In addition to the additional volume growth that we achieved in half one, we've also maintained a strong forward sales position, which is up 6% compared to the same period last year.
If we look at the pattern of trading over the year so far, you'll recall that we highlighted a strong Q1. We came into the year with a good forward sales position, we sold strongly in that Q1 period until we came to the bad weather conditions end of February, beginning of March, which did two things really. It prevented people from coming to site and buying houses, also it slowed down our construction activities somewhat, which we were in a good position to get through that, given the additional expenditure that we'd made in work in progress as we came into the year. We got through that well. Q2, in comparison to last year, was a little bit quieter. In overall terms, for the first half of the year, very similar sales rates overall.
As you can see, we managed to sustain the build progress through the half year to end with a 4% increase in volume produced over that time. We're now well focused on the second half of the year, building strongly through the good weather that we've seen recently. Encouragingly, over the last four weeks, we've seen a tick-up in the sales rate, which is performing better now than the same point last year. Q2 was affected, from a sales perspective, by good weather. The very good, warm time that we've had, but also the World Cup to some degree. Also, we've got a strong position in terms of our outlet position, which should put us in a strong position going forward. Let's refresh our thoughts on the return of surplus capital to shareholders.
You will recall that earlier this year, we announced a further enhancement to our annual returns, as well as the underlying £1.10 per share that we will pay in the long term through the cycle. We also announced that we would pay £1.25 per share for three years of 2018, 2019, and 2020. A combined £2.35 per share, which is being paid this year, or GBP 732 million, which we will continue through the course of the next two-year period. I think it's important to remember that since launching the strategy in 2012, the total surplus capital of £7.20 per share or GBP 2.2 billion has been returned, which is well ahead of the original plan that we announced in 2012. We'll continue to review that as we go through the second half of the year.
In the usual way, we will come back to the market in the early part of next year with the results of our review on the continued return of surplus capital. Now, with regards to the overall market, we see that confidence in the U.K. economy remains cautious but resilient. Lenders are very keen to support our marketplace, and there are competitive mortgage rates, as I've mentioned. We see strong employment, which is encouraging, but we remain cautious. We've got good visibility in the short term with over 90% forward sales position for the full year of 2018. We're taking sales now into 2019 to give us a strong forward sales position as we approach the end of the year. There's still key constraints to output growth, and it is a challenging environment for us. Planning has improved. However, there are still delays in that process.
As I mentioned, we want to see further improvements continuing to release more land in those areas that remain constrained where people want to buy houses. Again, Persimmon's put itself in a strong position. We bought land at the right time in the cycle and continue to do so, and we've got a very strong land bank with good embedded value. The supply of key materials and skilled labor resource is still challenging, but we continue to train people in the business. We've got over 500 trainees at the current time, and we've got significant numbers of people who we have trained in the industry, both in skilled resources on site, but also through the various professional services that we have in-house within our business now that help us produce best practice and drive the returns forward.
We continue to train, and we're very focused on the sustainability of supply which is a concern we must keep an eye on, which is why we're taking various measures, both to take on production of some of the materials ourselves, but also work closely with our supply partners to ensure that we can sustain the volume growth. Let's look at our priorities. There are lots of those, as you can imagine. Principally, we continue to invest in our sales network. We're very pleased that we've got another 100 sites, selling outlets to open in the half two of this year, which should generate further interest as we focus on selling forward in our business to put ourselves in a strong position. As I mentioned, we invest in people, so we've got over 500 trainees in the business at the current time.
Customer care is an example of that, where we've doubled the number of people employed in that area in the business since 2014. Significant improvements have been made in that part of the business. The quality control is excellent. The finished product is very high quality. We've just recently introduced an out-of-hours service for our customers, which we continue to improve the service that we're offering in that regard, to suit people's lifestyles in terms of when those works in their properties can be done. Also, we've introduced good IT support in this area and others to support the continued growth of the business. We're investing in high-quality land opportunities, as we've said, as a priority, and we also maintain an optimal capital structure in line with our strategy.
Now I'd like to hand over to Mike for a more detailed review on the financial side of the business.
Thanks, Jeff. Right, what we're going to do, as usual, is look at some of the key features of trading in a bit more detail, as Jeff suggests. We'll take a squint at the balance sheet, try and understand the cash gen in a bit more detail. Return to the philosophy around capital returns and two or three points on the 2012 LTIP scheme. Starting off on looking at the trading, I think the performance of the business in the first six months is very strong. Jeff's already highlighted the operating margin performance, which highlights the quality, I think, of the business. The quality of the earnings that the business is delivering is very high, as supported by the asset platform, which we'll look at in a second. I think it's not just the asset platform.
The quality of that is determined by our approach to acquisition and land replacement. Understanding where and when and by how much and to what value are all critical decisions that we assess every day of the week. Build efficiency, as Jeff's already touched on, is of paramount importance. You can see at 52.6% of sales value, our build and other direct costs are very efficient. I think in part, the initiatives that we've pursued in terms of growing our internal skill base, in terms of the areas that Jeff touched on there, in terms of planning, design, layouts. All these key elements of creating more efficient delivery to markets, in terms of providing house types that customers would like to live in locations they would like to live, are all building blocks in terms of generating more efficient direct cost levels.
I think repetition builds expertise, and you can point to bricklayers or planners or design experts. The more they repeat their processes, they become more expert, and it's in our interest to make sure that we retain those skills as that expertise builds. That's behind a big slug of the improvement that we've seen in areas of the business that perhaps don't get highlighted too much. I think that's something of an emphasis that certainly Jeff has brought to the business to retain those skills for the long-term benefit of the business. In terms of value delivery, looking at where the improvement in operating profit has come from. Volume delivery is an important driver as we grow our 30 businesses to sustainable scale. There's still opportunity there. Some businesses have strides to make in that direction still. As Jeff's already mentioned, pricing conditions remain firm.
There's some modest price improvement in these numbers, and we still see the opportunity to move ahead in certain areas. We're still positive about the pricing outlook. That then filters through in part down to the gross margin improvement. We'll see where the improved quality in margin is coming from as we turn the page, so to speak. A gross margin of 32.4% for the half year is another record for the business. It's 190 basis point improvement over the first half of the prior year. You can see, land recovery improvement with respect to the legal completions we've delivered in the first six months has delivered more or less two-thirds of that 190 basis point gain.
We'll look at the land bank in a bit of detail in terms of a view forward in trying to understand the direction of travel on that from here. It's encouraging to see that the new sites that we're opening are delivering on their promises, so to speak, and we'd expect more of the same, given stable market conditions. I think that we're well set to see some gradual further improvement. I don't think we'll see the same sort of level of improvement as we have seen 2015, 2016, 2017. We've said before that that's going to plateau off gradually as we. A bit of a flight path, if you will. We do feel still pretty positive that there's a bit more to come there as we move forward over the next year or two, everything else being equal.
Already touched on the build and other direct costs. There's a huge amount of work that goes into achieving a build cost level of just over GBP 113,000 per unit, in delivering a gross profit per unit sold, which has increased about 8% up to just over GBP 70,000 per unit. Which is about just shy of GBP 5,000 up on the first half of the comparative period. I think there's a very powerful story there in terms of margin improvement, which is a combination of obviously how we buy our land and the timing of buying that land, bringing it through as promptly as we can into production, and the prep that goes into that land in terms of all the elements that create a very valuable development process for the business to generate the overall returns.
Cost control is also very important, very close to our hearts. We continue to manage our indirect overhead to deliver that operating margin level. 210 basis point step forward in operating margin to 29.7% on new housing revenues. Just to touch on that, you'll see in the numbers, there's a wrinkle in terms of gross up for IFRS, the new IFRS on revenue, where we've included the part exchange sales value in our top line now, and that's fully disclosed in the announcement in note one. These figures are based on the new housing revenue, X that part exchange. I think it's about GBP 94 million of sales value on the PX. We've stripped out that to be consistent in terms of giving a view in terms of profitability of the business in line with historical figures that you will be familiar with.
Operating profit per unit has increased by about 9% to just over GBP 64,000. Sales and marketing costs still running at an all-time low are around 1% of revenue. I think that, as we've said before, growing the business in a quality disciplined way is a key ingredient to delivering these sorts of returns. It influences how we replace our land, but it also creates a much more efficient overhead base from which to deliver the new homes that customers can choose to buy. I think that, as Jeff emphasized, you're seeing the manifestation of all that hard work come through in these operating margins. Looking forward, are we confident about a bit more margin progression from here? Well, yes, we are. Why is that? Well, it's because we understand the quality of the land that we've been buying, obviously, over the last three or four years.
We were talking before the meeting, is our land market conditions pretty similar? We would say yes. We're still seeing good opportunities to buy good quality land, slightly larger parcels, probably. Another maybe 40, 50 units perhaps on each and every site. We're still seeing good opportunities available in the market. I think that the movement, when you look at the total owned plots in the land bank and scan across to the cost of revenue percentage at June, which is at 13.5%, that is very similar to where we were in December at 13.2%. Obviously, that land is available largely with detailed planning consent, or about to achieve detailed planning consent. That land will come into production over the next sort of 12, 18, 24 months, which will further support the delivery of our future margins.
We've seen a reduction in our land cost recoveries on the previous sheet which sort of moved from 16.2% in the first half of 2017 to 15% in the first half of this current year. Will we get down to 13.5%? Probably not, because as Jeff's already said, a tad over 50% of those plots were previously held as strategic on larger sites, which live longer in the land bank than we can deliver in any one financial year. I think that gives us confidence that as that land comes into production, our expectation of a bit more profit improvement from here is well supported, everything else being equal. We're assuming stable market conditions in considering that and taking that view forward. I think it can be characterized by saying there's significant embedded value in that asset base, and that shouldn't be underestimated.
As you can see in the first half of this year, it's been a key driver of delivering improved profitability of the business just over the last 12 months. Given the 78,000 plots we've got there in terms of total owned plots, that gives us good visibility at good return levels that we can rely upon to support our future delivery. As Jeff said, we're still keen to invest. We've spent about GBP 340 million on land in the first half. That splits down, around GBP 190 million of that is on new deals at the front end. Still seeing good opportunities to secure deferred terms in the market. With about GBP 150 million pay down of existing commitments that were brought forward in the land creditors at the start of the year. That just gives you a bit of detail behind that land payment profile.
Work in progress, it has ticked up over the last six months, which is a bit of a relief to a degree. As Jeff said, the weather in late February, early March, did slow our progress down. We were very fortunate that the teams had been asked by Jeff and Dave to get a strong position moving into Christmas of 2017. We had a very good position on foundations in the ground, which is pretty important. You can't pour concrete if temperatures are below, I think, three, four degrees. It's important that we prepare the business well for the spell of anticipated cold weather. We'd have anticipated it probably a bit earlier than late February, early March this time around. When it did come, as you can see, with delivering around about 300 extra units in the first half.
Without that forethought and positioning, we wouldn't have been able to achieve that. I think that's good business planning to ensure that we can put the business in a position where we can continue to deliver the growth that we're targeting. That mindfulness in terms of where we want to be continues. We're now catching up with build. We're now getting back in a position that's similar to where we were this time last year. That recovery period on build is progressing with a view that we want to get ourselves in a strong position come the end of December. As Jeff says, it's not just build, but it's sales support as well. As everybody knows in the room, to have availability on site is very important in the market to support sales.
If you're offering extended delivery periods, potential clients may think twice. We're very conscious that build is, yes, essential. It's a cash release mechanism eventually, because to deliver completed units, you have to complete the build. It's also very important in assisting forward sales generation as well. It's an essential ingredient that we're all very keen on continuing to drive forward. Having said that, we're selling pretty well. The asset turn is still pretty quick at 4.7 times. We'd like that to be nearer four, to give you a measure of how much more investment we would like to see in the ground. Obviously, we're keen to deliver the units as promptly as we can as well. As always, we're walking a bit of a tightrope on that.
We're building at a pace, also we're building at a pace to keep up with sales. Cash is very strong. Jeff's already touched on that. Just a little bit of detail on the cash. To put the year-on-year in perspective, I think what you need to do is when you look at your numbers is eliminate some differentials period on period. For example, the capital return in the first half of this year amounted to GBP 389 million, compared with GBP 77 million in the first half of 2017. If you add those back, if you will, and look at it pre capital return, that gives you a GBP 240 number against GBP 285 last year. If you add back this year, unique items, net settlement, which was GBP 54 million out, cash out, together with employers' NICs on that of GBP 16.
Overall, GBP 70 million, which was a one-off for the current period. That takes the cash gen pre capital return, pre net settlement to around about GBP 311, GBP 310, GBP 311 million, compared with a number of GBP 285. Sort of 9% stronger. Which brings you on to the tight correlation between operating cash generation and operating profit generation, which we demonstrate there. As we've discussed before, the cash generation of the business is the combination of trading and balance sheet management. We rehearsed this a couple of years ago on publishing a view, a simplified view of cycle in terms of how the business can deliver cash through thick and thin.
We'll be returning to that in November at the Capital Markets Day, we'll refresh that, and we can have another chat through that at that time, which will be pertinent, given that obviously there's some headwinds out there that could be challenging markets as we move forward at some future date. You can see in terms of the historical perspective in cash generation for Persimmon, cash generation has always been very strong, and that's the key point here in terms of managing the business through its change of scale. Markets will dictate, obviously, in terms of scale of business, in terms of sales activity, customer interest, customer confidence. The cash generation of the business can remain very strong as we rescale it, depending on where markets go.
I think it's how we manage the balance sheet that complements our trading activity in delivering free cash, which, returning to Jeff's comments on strategy, it's returning that less volatile cash return to shareholders through the cycle that adds real value in terms of the proposition that we're making to shareholders as we move through the cycle. There's a historical perspective there that hopefully will give the market a good degree of confidence of future delivery. We remain very confident that that commitment on capital return will be fulfilled because of that. Swiftly moving on to those considerations. Obviously, the first priority in our minds is to make sure the business has liquidity to support it moving forward, and that's to accommodate the working capital cycle whilst minimizing financial risk.
Scale of that for the business we are now, probably GBP 400 million-GBP 450 million in terms of the amplitude of that working capital cycle 2 times a year in late April and late September, early October, as we lay down the work in progress for legal completions, et cetera. Together with a bit of additional liquidity for land reinvestment, maybe GBP 300 million-GBP 350 million there. As a whole, GBP 750 million-GBP 800 million perhaps cash requirement and hold in the business to run through any period at the scale we are currently. Any cash over and above that, we're looking to return to shareholders in a measured way, being mindful about the future of markets, and what challenges may lie ahead. That sets the context for why we gave the 3-year commitment of the additional GBP 1.25 over the GBP 1.10.
The GBP 1.10 is what we believe is the recurring baseline, if you will, of capital return. The GBP 1.25 is the extra to manage the cash hold on the balance sheet in an efficient way, in line with the overall strategy that we're pursuing. I think the key thing is managing that balance sheet through the cycle and really for us. Working progress would unwind quite quickly, 4.5x. If that reduced to 4x or 3.5x, it's still going to unwind quite quickly. If markets become more challenging. The big piece is land replacement, where obviously we've been very selective for some time, and we've already touched on the quality, as you can see in the land bank in that regard. A couple of comments on the LTIP. That is now behind us. Final vesting there was the 2nd of July.
The first vesting was the end of December, as you all know. We touched on that in February. Latest update on that is that 4 million shares are issued out of 9.2 million options, albeit there's 1.8 million of options still remain to be exercised out of the first vesting. I've already touched on the payments to HMRC on net settling in the first half, the GBP 54 million. Another GBP 31 million was paid in July. That's now gone. In total, remaining options 11.2 million, which includes the 1.8 million remaining on the first vesting. The bulk of those vested on the 2nd of July. Of the total 13 million options that remain out there, potentially only 6 million shares would be issued to that as they get exercised according to participant's choice.
We have concluded to net settle those options, being consistent with the conclusion in terms of surplus capital, et cetera. As those options get exercised, payments to HMRC of around about GBP 133 million would be paid, by way of illustration. That's all quantified using a share price of GBP 2,487, which was the closing price on the 2nd of July, just to give you a fix on that. Similar sort of pricing as we're seeing in the market today. At that point, I'll hand back to Jeff to summarize.
Thanks, Mike. Just to summarize, really a strong performance through the first half of 2018. I think we've demonstrated that we've got a really good platform for the second half of this year, but also for further volume growth as we move forward, given the strong land bank, given the excellent cost controls that we've got, with further margin progression anticipated. Cash generation and shareholder returns have been very strong. We have a very strong management team with good depth. I'd like to thank all of my colleagues and other partners and stakeholders for their assistance in producing these fantastic results for this half year. Now I'd be happy to invite any questions that you have. When the microphone comes, if you could say your name and the company you represent, please. Thank you.
Thanks. Will Jones from Redburn. Three, if I could please. The first just around the sales rate. I think it implies that July and August have been selling at around 0.7, roughly, per site per week. Looking back at the second half of last year, I think you've pointed out before you had a slower second half than the first. I think it was about 0.64 or so for the whole half. Would it be fair to say, all else equal, as long as autumn behaves, that you'd probably expect to exceed the second half sales rate from last year as you look through for the next four months? The second one was just around the land bank. Obviously, you discussed the 13.5% plot cost ratio. We've touched on this before, but the ASP against that is outlined as GBP 204.
I think you were GBP 214 in the first half with the higher social content. It's probably going to be higher for the full year. Is it still the case that ASP is somewhat conservatively stated and therefore in reality the ratio is lower? Then the last really is just around, as you think on your view of the cash returns for next year ahead of February, would you give consideration to the possibility of buying back shares as well as potentially upping the cash dividend? It seems like you're hinting at an upside option here. I guess it wouldn't. Certainly when I look at my forecast, the gap versus the buffer you talk about, Mike, and where I've got you would easily cover buying back the 10 million shares that have come as a result of the LTIP, for example.
Is that something that you'd give consideration to maybe neutralizing? Thanks.
Good. Thanks, Will. I think, Mike, if you deal with the sales rate.
Yeah.
I'll start off with the land bank. We're pretty consistent in the way that we present this information. You're right, the ASP probably is on the conservative side. We haven't made any change to the way that we record that. It's built up from all of the detailed work that the guys do in the regions on the viabilities. It's true to say that they continue to be cautious in terms of revenues, which I think is a good position to be in. All things being equal, we would hope that we would outperform on that, which does point to some further improvement. As I say, it's consistent with the way that we've presented before, Will. I think on the cash returns, you're right. We will review that again as we do so every year.
I think it's probably right at this stage to remain cautious. We've got a strong position. The cash generation that we anticipate during the course of this year, given the trading that we've seen, should be in line with the prior year, if not a little better. That's all positive. I think we're facing into the Brexit scenario. We've got uncertainties around various aspects. I think we need to be a little cautious about that. We should have a better feel for that as we trade through the second half of the year. Let's see what position we're in when we go into the new year in terms of forward sales. We'd like to get a good forward sale position to give us some certainty moving into next year. Mike, maybe you deal with the point on the
Yeah
The buyback issue the sales rep.
We've always prefer, we discuss it long and hard in terms of preferred mechanics, in terms of returning capital. To date, we've always preferred dividends. Obviously, everybody participates. They don't have to choose to sell, which has maybe some positive connotations in that those that would prefer income, then obviously it's more attractive to return capital as income. The issue is on the table. We'll continue to debate it.
Genuinely, no decision has been made.
Yeah
We'll keep it under review.
Yeah
is the best way of saying that.
There are pros and cons either way of doing either. As Jeff said, I don't think we'd rule it out. I guess, to perhaps buy back a similar number as to what's been issued under the LTIP has some merit. Again, I think that's something that the board will continue to debate as we move forward. The way that we've always thought about the balance sheet is that the equity, high quality long-term funding, albeit it is relatively expensive compared with debt, or cash for that matter, it really underpins the high quality long-term asset base, which is the land bank. We've always been quite protective of the equity base of the business to make sure that there's the proper support there for the longer term assets that we do hold.
As Jeff says, it will be debated long and hard again, and we'll see where we get to on that. We're not ruling it out. To date, obviously we've preferred the dividend route, as being perhaps a cleaner delivery to all shareholders. In terms of sales rates, yes, a little bit down, 2%, 3% down over the summer period. What a summer period. We've been able to plan a barbecue for once, perhaps that's prevented one or two visitors to come to site because they've been taking the opportunity to watch the World Cup as well as having a few friends round. I think, as Jeff said, looking back over the last four weeks, we have been selling a few more compared with the same period last year. As always, there's a different shape to trading pattern year in, year out.
Our judgment is that the market remains sound. Good interest, which we look forward to taking advantage of as we move into autumn. I think you make a good point, Will, that autumn sales rates are always lower than spring. Spring is always the best period to take sales. When I look back on historical patterns, autumn would be somewhere between 15%-20% lower than spring sales rates, as a matter of rule. I think the exception to that was in 2016, where the second half was only about 10% weaker. I think that, as you say, we're optimistic about our ability to take a few more sales through autumn this year. Not just because we've got good visibility on new sites coming through, but the comps aren't as strong, let's put it that way, as we move through the second half of the year.
Thanks, Will.
Gregor.
You'll get it next, Andy. Can I ask a few questions? Gregor Kuglitsch from UBS. On the sort of social and private growth, I think if you kind of look at the numbers in a bit of detail, social was obviously up a lot, private was down, I think in terms of unit completion. Can you just give us-
Private overall was ahead. Are you talking legal completions?
Legal completions. Correct.
Yes. Private is ahead overall.
It's about a 32, 30, wasn't it?
Yeah.
Okay.
Not as strong as the affordable.
Yeah. I guess the question is, how does it kind of rebalance? Is there something unusual that happened in the first half? Does it kind of equalize out back to the growth for the year?
Was it just some timing? That would be helpful, because obviously quite important for.
Yeah
ASP mix into the second half. Appreciate your comments on margins. I kind of want to push you a little bit more in terms of what you think.
You want specific numbers, right?
Well, what you think, I suppose, a high watermark could potentially be. I understand, obviously, the land recovery cost. I think we can all kind of calculate maybe there's 100 basis points in there. What's a little bit less clear is on what you're doing on build, which has obviously been quite impressive over the last few years on the build cost side. The final question is just on build quality and customer satisfaction. Can you give us a update where you are and what your ambitions are? I don't know how you measure it, whether it's via the Star rating, the HBF ratings, or it's something else that you're striving towards.
Thanks, Gregor. I think, Mike, you can maybe deal with the margin point.
Yeah.
To start off, the mix issue really is just a matter of timing, Gregor. I think there's no significant change in terms of the content of social housing as a proportion of overall numbers, both in the completions or going forward. I think it's just merely timing. As you open new sites, we tend to
See an influx of affordable housing produced upfront on a new site. It can largely be a consequence of that. Nevertheless, it is a good support to the business, generates cash and so forth. Obviously, average selling price and margin slightly behind. I think taking that into account, given the strong margin performance, I think it's quite encouraging. As I say, the overall average selling price improvement was at 1%, but it was above 3% in the private. There's a dilution effect on margin as well. No real changes there. I think that just one other factor on that NPPF or the changes to NPPF, will encourage more affordable housing, I think, going forward. That really is on new sites or on new consents coming through.
Given the strength of the land bank and the mix that we've got, there'd be pretty marginal effect in that regard. I think on the build quality aspect, obviously, it's a key focus for the business. The star rating is one measure, but it is a very blunt measure, albeit a good indicator. It is a question of, would you recommend your builder to a friend? I think, as I mentioned, we've been investing in that side of the business for a number of years now, to the point where the product, the quality of the house that we're handing over is, in my view, excellent and drastically improved. I think that we're introducing those aspects in terms of dealing with issues that the customer raises after he's immediately moved into the property.
Over the last couple of years, we've seen the average number of items reported reduced, which is a good reflection on the quality of the property on handover. I think the whole industry's made good strides in that respect. We obviously measure lots of other aspects of customer care ourselves. I think one part that we've identified, particularly which we are looking to improve is contact with the customer, making sure that we are keeping them informed at the right time through the sales process, because this is not just about quality of product, it's about the customer journey. We haven't always been as good as we should be in terms of keeping them informed as to the progress on their property. That important time for when they've got to plan to move into the house.
We can do better at that, and we've introduced aspects to help us in that regard. We've seen a progressive improvement in terms of our customer care over time, and we're happy with the progress that we've made, but we can do more. Mike, do you want to deal with the margin part?
Yeah. In terms of margin, I think we are positive about seeing a bit more progression. Where is the high water mark? That's a good question. It's a particularly difficult one to put your finger on. I'm not going to give you a number, actually, Greg. We'll have to wait and see where the high water mark is. Having said that, I think let's not ignore the fact that there is inflation in the supply chain. We do need to be mindful about getting ahead of ourselves to a degree in anticipating our ability to mitigate that. Yes, we're working very hard on a huge number of areas to mitigate that pressure. I think that if you look at the build and other direct costs in the second half of 2017, which was just shy of GBP 111,000.
Here we are in the first half of 2018 at just over GBP 113,000. To my calc, 2.25% increase there. That's despite our best efforts in mitigation. I think the availability of materials waxes and wanes. There are certain windows in time where both availability and at a price becomes key issues, and we have more muscle than most in the market to ensure that the price we procure build elements that are sensible. Even we are under pressure to provide better prices to certain partners in the supply chain.
I think just on that, Mike, it's probably worth saying that there are some things which we focus on which have made a difference, we've talked about them before, but they are critically important. It's easy just to say, "Well, you've got cheaper land, so you've got better margins." Yes, the land market's been good, but it's the other differentiators, the other things that we've done which have sustained that better margin. It is about cost control, but it goes right back to the standard house types, process, making sure that we do the same thing time and time again, not just in one company but right across the group, which is quite challenging to achieve actually. There's real efficiencies there, not just for us in terms of how we build, but also for our supply chain network.
We're asking them for a specific product, not lots of different products. That makes it more efficient for them to produce effectively for us, which is why we enjoy very good prices with our supply chain. The subcontractors like it because it's repetitive work. The guys know what they're doing. It's simple. A lot of time was spent by me, specifically, on the house types, designing them so they were easy to build. The construction details were simple. They were designed to optimize both price efficiency, in terms of people buying an optimized house at a price point, but also from a construction perspective to make it simple, easy to build. We've driven through that process through the business.
We've also driven those efficiency savings ourselves through Space4, which was pretty inefficient originally when we took it over, to now any manufacturing process needs repetition, needs consistency, which we've got going through the factory. Same with the bricks. We only produce three colors of bricks, that will supply two-thirds of our requirement for three bricks. These things do make things significantly easier for us, but also the whole supply network. We mustn't forget that the construction of a house is a complicated process. It's probably the most complicated thing that you could manufacture in difficult circumstances on site, given the weather constraint, given the fact that every location has got different resource, different labor, different dynamics going on, which is difficult to retain in terms of consistency. That's a hard job.
It's never finished, it continues through, which is why we can see some detail tweaks that we can continue to do to make a difference to that.
I think margin, yes. The direction of travel, we are positive about, but we don't want to put ourselves in a position where in 18 months' time you turn around and say, "Well, you said you were going to get to this%, and you haven't." Because that's a fool's game. We are positive about the direction of travel for all those reasons.
Thanks, Gregor. Andy?
Morning. Andy Murphy, Bank of America, Merrill Lynch. Two questions. First one, we're on the subject of cost. I'll just raise a question about labor rates. It sounds to me like rates are on the rise but not getting out of hand, given what we're hearing about labor constraints and other issues around labor. To what extent are you able to control the rate of labor cost inflation and hold it down, basically? The second point was on Charles Church. Volumes came down. Just wondering to what extent that is because the higher end of the market is proving a bit tougher, a bit more difficult to sell into, and to what extent is it really about your repositioning?
Thanks, Andy.
Thank you.
Well, I think on the labor rates issue, I think we've seen less volatility over recent times. Over more recent years, we've seen quite an increase in those labor target rates. I think we seem to have found a level. There's still pressure on the upside, but I think it's a little easier to manage. Albeit, where there's more competition in an area, naturally you see a little bit of pressure there. It is still difficult to find the amount of resource that we need. Pricing stabilized a little bit. I think the important thing is that we continue to bring new people in and train to achieve that growth in volume that we are keen to achieve. I think on Charles Church volumes, you're right to point to the price points in the market.
It is a more challenging market the further up the price banding you go. We see that where we have that property in the higher price bandings, we've got to incentivize a little more to sell those properties. I think that's reflective of the second-hand market as well. Priced correctly, they do sell. I think it's a little bit more price sensitive. 9% of our sales have been on part exchange, and the turnover of the part exchange units is very good. We've got no delinquency in that at all. It doesn't point to there being a fundamental problem in the market. It is about pricing realistically to sell, and we're very focused on that. At this present time, there's more consistency in the lower price points of the marketplace.
Charles Church's average price is GBP 355,000. We're not talking about GBP 800,000, GBP 1 million properties here. We're talking about aspirational product, but at affordable prices. I got a question some weeks ago, "Well, what content within your portfolio do you have of units priced over GBP 600,000," for example. When I looked back then, it was around 2%. We're priced, our skew on pricing and our offer to the market is very much at the more affordable end of the scale. If markets do toughen up a bit, we believe the market will come towards us, if you will, rather than moving away from us.
I think another factor there on the Charles Church, Andy, that we've discussed before, is that there was a bit of overlap in terms of product between Charles Church and Persimmon, and we've removed that overlap. We've made it clearer in terms of definition between the product that we're selling on Charles Church and the product that we're selling on Persimmon. That as well has also meant that some of that volume that was in that overlap bit has been removed from Charles Church. Thank you.
There you go.
Okay, Jonny. Over to that side.
Jonny Bell from Barclays. I think I've got three. The first one is, you've hinted that you expect to see some further improvements in the planning system. I just wonder whether you could elaborate on what you're expecting there. The second one is on Help to Buy. What % of private completions were done through the scheme, and any latest thoughts on scheme's extension? Then the third one, I think Gregor touched on this, but what is your HBF star rating at the moment?
Thanks, Jon. I think on the planning front, I think it's a continued progressive improvement of the National Planning Policy Framework, which was introduced in 2012. It's continued to improve. Local authorities have adopted those policies, some with a bit more persuasion than others. We continue to see that evolve. The latest iteration of NPPF continues that evolution, and does put the onus on local authorities to identify that supply of land going forward. Probably doesn't go quite as far as we would like to see it, particularly, in the area of green belt development. That is still a matter for local authorities to decide, and we know those ones that aren't willing to go there. I think that in itself will continue to see constraint in terms of some of the areas where we need to see more housing supply.
We can only get planning permission on sites that will be granted by those local authorities. That in itself is a function of those local authorities and their decision-making processes. Nevertheless, it's an evolutionary approach. It is a good process. It's about the best we've seen in a long time. We hope to see that continue to improve. I think, Mike can perhaps deal with the Help to Buy completion numbers. The HBF Star Rating Scheme, we are currently three star. We don't talk about the inter-year numbers, but what I can tell you is that we continue to see progression and improvement on that. I'm pleased with the progress that we've made over time to continue to move that forward. As I say, it's a reflection of the overall sort of aspect of customer care and not just quality that people perceive it to be.
We've got more that we can do on that, and we expect to see that progression continue.
On Help to Buy, we've done, of the private completions, about 60% of private completions, customers have chosen to use the Help to Buy scheme. That compares to last year, about 57%. Pretty similar to where it was last year.
Thanks, Jon.
Possible extension?
Yeah, we've not heard of what the results of the LSE review is. That's on somebody's shelf somewhere in some government office. Our guess would be that they tie it into budget prep, for the autumn, perhaps. I don't know if anybody in the room has heard any different. I think it's got cross-party support. It seems to have achieved the objectives it was targeted at. Indeed, as we move into perhaps more challenging times, from an economy point of view with Brexit and the uncertainty around that, common sense would say, well, perhaps it's a policy that would continue to be applied, to make sure that the U.K. population is supported in their ambition to buy new homes, for obviously the wider reasons of supporting U.K. economic growth when we're facing into those types of uncertainties.
Thanks, John. We'll take a question from Glynis now, we'll move to Aynsley over here.
Thank you. Yes. Glynis Johnson, Deutsche Bank. Three, if I may. First of all, strategic land. Just interested, page eight, you gave us more details of your strategic lands and conversions. The site you gave us was smaller than the average size. I am wondering why you selected those three sites, give us the examples, and what is perhaps the larger scale of what converted in your strategic. Second of all, the standard housing type. Maybe you just give us a little bit of detail. How many housing types do you have at this point in time? What proportion of sites are they actually rolled out on? Then lastly-
Sorry, what was that second question?
Your standard housing types.
Standard housing types.
How many and what proportion of sites. The last one is a sort of bigger picture question. You can argue the uncertainty in the market because of Brexit, rising interest rate environments, has been increasing over the last 18 months, the last 6 months in particular, yet your land intake is still more than your replacement requirements. I appreciate there is some difficulties in controlling necessarily the timing of all intake, but what are you looking for in terms of your own business that would make you start to consider what is perhaps a change in requirement for land?
Thanks, Glynis. Gosh. Right. Strat land. Yes, there is quite a mix in there. I think the largest site was actually just over 1,000 units. I think Mike gave those examples to give you a feel for the locations really as much as anything. The sites in strategic land vary quite significantly, actually. I think typically they tend to be bigger, as we've seen over previous times.
I think it was also the fact that we've got detailed planning consent with ownership, so they're a hell of a lot more certain. Whereas the largest site that we've got is different phases. Obviously, as we progress with that site, we would firm up the later phases as we go, which is a normal approach that we do. A combination of sort of contract status and location.
I mean, there's a real range.
Yeah
size of sites in there. Some pretty small actually, but they are historic positions, typically, or situations where we've got spare land from previous, where we've actually managed to promote through the planning process because planning requirements change in local areas. We'll take every opportunity we can to get value out of the land and the strategic land bank. It's a real picture of many different things going on there. I think, that sort of linked really to that third point that you make in terms of, when do you pull back? Why have we got a replacement rate higher than our usage? Which you saw typically over the earlier years in our strategy where we were investing strongly in the business. It is really just a matter of timing, and an odd big site, like we've said, can skew the numbers quite a bit.
When it lands, it lands, and there are quite a few of those, not just going through the strategic land side of the business, but also short-term opportunities which has, in many respects, had characteristics of traditionally what strategic land would look like. Where you've got landowners with land that meets the criteria under the NPPF, which can be brought through quickly because of an under supply of land in a particular area. Again, we've been strong buyers in that space as well. Each piece of land is looked on in its own merits. Quite a lot of what you see here coming through would've been on our desks for quite a considerable amount of time to bring it through the system.
We spend the time to get the planning consents right for those sites as we bring them through the process so that we specifically target the market that we're interested in. Because in some instances, it can be easy to get a planning consent, but it can be for completely the wrong product and so forth. We spend quite a bit of time getting that right. We won't rush a site through just because we're desperate for a piece of land. That's one of the things that the strong land bank enables us to make the right decisions, not just in acquisition, but in promoting it properly as well, bringing it through the planning process to maximize the value of it. When would we pull back?
I think we're constantly reviewing the marketplace in that respect, and it does fluctuate and change in different locations depending on competition, but also the dynamics of the local housing land supply. In areas that are constrained, land prices have been up, supply and demand, we stand back. We've no need to enter the market on land deals which are not attractive to us or won't sustain the returns going forward. That work that we did in those early years put us in that strong position to be able to make those decisions that are right for us. I think we consider all aspects in terms of when we actually buy a piece of land and the dynamics of that housing market.
It's interesting, in some parts of the country where the dynamics from a customer perspective have changed, where more land has been freed up in an area, there's more opportunity for customers for choice from where they buy from. That's another factor that you would take into account in terms of what your sales rate may well be from a site, which is another factor for, obviously, return on capital. There's lots of moving parts there that we're looking at all the time. We get a feel for how the market is, and we'll make the decisions on that basis. There's no impulse buys. We are seeing a few in the market who've got money to spend, and they'll go and take a deal and that's not our space. We'll leave that for them.
The decision to buy more land than you're using up is currently about the land price rather than the customer, or the end market?
Well, we're not targeting particularly to buy more land than what we utilize at this present time. It's just a function of timing in terms of those sites coming through. You could well see in the second half of the year, there might be a lower number of plots bought or next year. We don't target that specifically in terms of how much land or how many plots we're buying in any particular six-month period. It's more the long-term view on where we want sites, and whether they're the right ones for us in terms of the returns. That's going to fluctuate a little bit. I think the standard house types, it feels to me as though we're about at the stage where that is maximized, I would say. This is another area which is quite challenging.
We're seeing two pieces of legislation coming in at the moment which affect house types and what we can build. That's the planning requirements for minimum space standards, which some local authorities are applying and others aren't. Also building regulations, well, what you would consider a building regulation requirement, but is actually again directed through planning for disability standards, which again, local authorities are applying irregularly across the country, which is quite challenging for us actually, because your standard house types now no longer comply in some areas. You've got to move and change with that. There's a bit of work going on in that area as well. It's quite challenging. As much as we've said we want to see standard product, if the country needs more houses, we need as a production vehicle, we need some standardization in that respect.
The houses can look different, but they're fundamentally the same. We've got these tensions really that are challenging for us to try and cope with as well.
How many are there?
How many house types? I think the core of our standard house type range is probably eight to 10. There are variations on that depending on planning requirements in places for corner units, character units, and various other aspects, principally-
Would they still
It's difficult to give you a useful answer on that, Glynis. It would be misleading because there are so many different aspects of that. Fundamentally, the individual unit sizes, scale, and positioning in the marketplace is fairly tight banded. Sorry, I can't be more helpful on that. Aynsley, thank you.
Just two from me. First one, I've heard you mention a few times about the forward sales you expect to carry into 2019. Just wondered if you're doing anything different this year given obviously leave the EU 29th of March, you may be aggressively selling a bit more, giving up a bit more margin as we go into next year to kind of offset some of that risk possibly. Secondly, just on average site numbers, kind of, I forget what the average sites were for 2017, but just wondered what your expectations were for this year, average site numbers versus last year.
Thanks, Aynsley. Well, Mike will deal with the site numbers, but in terms of the forward sales position, I think as I've said, given the uncertainties of Brexit, that I think it's important we always look for a good forward sales position. You can see that we turn our work in progress over pretty quickly. We address sales quickly in that build and sell process. We have looked at our selling outlets, and we are selling a bit further forward, to try and put ourselves in a better position for forward sales by the end of the year. I think that at this time, that feels like the right thing to do.
We also can see that there are opportunities into new phases on sites where the strength of the market leads us to certain product mix and types, which I think we want to sell to the market if people want to buy. We're a bit further forward. We're looking to sell a bit further forward. That in itself can produce challenges. Mortgages only last so long. Help to Buy has got a duration in terms of how long you can hold a contract before you can complete. There's only so much we can do on that front. I think that there are a few things that we can do. Site numbers.
Yes, site numbers, I think, we are optimistic with the visibility we've got on new sites coming forward. We've said around about 100 planned to open in the second half of this year, which is a pretty similar number to what we were looking at at the same point last year. If we can get our site numbers 2%-3% ahead on average, compared with last year through the second half, then that will provide a bit more support. I was just trying to find what the average was for the second half of last year, and I can't find it at the moment, but perhaps I'll let you know after the meeting. I think we've got a chance of getting our noses in front on the outlet numbers through the second half.
I think the important point there is as well, there is a desire to increase the output per site. I think everybody recognizes that. We've got a good number of large sites, and we're pushing really hard on those in terms of the volume of sales and completions that we're taking off those outlets. Yes, the industry would like to see more outlets. Unfortunately, it's a function of the planning system that has produced more bigger sites and fewer smaller sites. This was part of the recent Letwin Review. We would like to see more outlets. Given the planning situation with fewer, bigger outlets, the Letwin Review says we'd like to see more volume on those bigger outlets, which we're aligned on, but that's quite challenging.
It would be easier to produce more volume of more outlets, and I think we've been saying that consistently for some time. Thanks, Aynsley. We're currently running short on time, so I think if Ami here will take a question and then over to you, Clyde.
Thank you. Just two quick questions from me.
Yeah.
On Charles Church, I appreciate you had lower volumes, your gross margin there improved by 4.8% in the first half. Are you doing anything differently in this product? My second question is just a follow-up on the labor costs that you have. Could you give us a proportion of what % is your own labor within the labor cost figure?
Yep. Mike, perhaps you can do
Yep
the margin improvement on Charles Church.
Mm-hmm. Yeah, on Charles, it's, again, the clarity of the positioning of the product in the market. It's the same attributes that we're seeing in Persimmon. We've got a standard house type range in Charles Church. Yes, we are at the higher end in the market. Obviously, you do have to incentivize a bit more. Again, I think that the clarity of the positioning of the product, maybe the customer can see the value of the product a little bit more clearly. These are in locations of higher amenity value, where people are prepared, obviously, to pay a price reflective of that. I think that has helped our margins progress. Yeah, I think it's the same sort of processes that we apply to the Charles Church production as we do Persimmon. There's no sort of unique features, if you will.
It's the same sort of processes that are delivering that sort of margin improvement.
Charles Church is probably a bit later to the party in terms of standardizing the product range, which we have now, which is an efficient range as well and producing good value. I think that's also a factor in there.
Also, the base cost of the land recovery is improving, as we've seen for the business overall. That's helping those margins move forward.
On the labor force, I think I can't give you the exact numbers, one thing that we have continued to say is our policy or plan is to employ as much as the workforce directly as possible. It has got more impetus in parts of the country than others. I think we continue to want to improve the employed status of the workforce. We are battling against this desire for labor-only type of subcontractors who move around, and when prices are rising or where there's the opportunity, then they want to remain free to the market. It's quite challenging for us to increase the directly employed workforce at the moment. Albeit it is something that we'd like to do. There's no discernible change in that regard over recent times. Thanks, Ami. Clyde, last question here, I think.
Two questions, if I may. Just on sort of regional differences, are you seeing much material differences across the group at all at the moment? Another sort of regional one was, have you got any new offices, new divisions planned at all? The last one I had was really on sort of mortgages. You talked very positively about the competition in the mortgage market. What's happening in terms of the valuation side of that? Are you actually seeing any areas where there is some downward valuation pressure at all?
Thanks, Clyde. Regional variances, the beauty of having a true national business is that you would expect to see some regional variances, you can cope with that in the mix. I think, at the moment it's no different. I think I alluded to the fact there's a bit more competition in certain areas than others, not from a necessarily a land perspective, but land that's come through and is now delivering houses. More choice for the customer. That's changed the dynamics in some of those areas that we operate in. There's been more focus in the Midlands areas, for example, where demand is good, supply has freed up as well. More choice for the customer. That's not an issue for us, particularly. West of Scotland, we're seeing again, a similar sort of picture there.
Generally, for the right product, the underlying demand for what we're producing is still strong, and that continues. There's no fundamental change in dynamics of the marketplace in the different regions. As I mentioned earlier, we do see opportunities for further growth. We'd like to see the planning system free certain areas up, which are constrained. If we can achieve that, we see opportunity for further offices. I think Northwest, West Midlands are areas of potential improvement of housing supply. Southeast clearly, quite challenging. There are places where we've already got a very significant landholding position where we see opportunities for continued growth as we go forward.
Like where we've opened the office in Suffolk near Ipswich where the Anglia business had got excellent opportunities and good land holdings, which we've managed to form another business off the back of that, which has to be sustainable. In our operating methods, each business that we open must be a sustainable business in the long term. We don't want to open business and then find we've got to close them. We're pretty cautious about it. I think planning is really going to be the opportunity if it actually does free up those areas that are constrained at the moment. Mortgages, yes. There's real competition in the mortgage market for new build, particularly given the fact that the second-hand market has been a little bit weaker. The lenders are keen to do business in our space. They are very competitive.
There are excellent opportunities for people for mortgages, and the brokers do a great job to find those for the purchasers. I think, the mortgage market for us is well served. We've not seen any tick-up in down valuations particularly. It's just the usual sort of pattern. We do test price. There's been no real change. I think the encouraging thing is the strong practices that we've seen by the lenders in the valuation processes continue. Thanks very much. We'll conclude that there then. Appreciate your questions, and we'll speak to you again soon. Thanks very much, everyone.
Thanks very much