Hello, welcome to the Persimmon Analyst Conference Call. Throughout this, all participants will be in listen only mode, afterwards, there will be a question and answer session. Today, I am pleased to present Jeff Fairburn, CEO, and Mike Killoran, FD. Gentlemen, please begin.
Good morning, everyone. Apologies for the slight delay there, we have got strong interest for the call, we always like to get as many people on as possible before we make a start. Welcome, everyone, to the trading update in relation to the six-month period to the end of June 2018. As you can see from the trading update, we have had a very solid period of trading. I am very pleased with the additional volume of legal completions that we have achieved in the period. Particularly given the pretty harsh weather conditions earlier on in the year, which is quite difficult to believe as we look out the window. In the six months, we managed to sell and complete nearly 300 extra houses, which is the equivalent of a new operating company.
Obviously, Persimmon is keen to grow, I think we have shown good growth over the last few years, with six new operating companies opened in the last three years, we are keen to continue to follow that approach. We have got good affordability. We, as everybody knows, aim particularly at the more affordable end of the market. Our selling price is still at a relatively low point to compare to the industry at GBP 216,000, which is up just 1.5% in the period. New homes revenue for the six months totaled GBP 1.75 billion, actually with the combination of increased selling price and volume increase, is up 5% over the same period last year. Total completions therefore were 8,072, which out of interest is the strongest performance in the first half-year that we have had at Persimmon, which is encouraging.
We expect further improvement on the operating margin, building on the 28.8% that we reported in half 2 2017. Albeit we are seeing inflationary pressure in both the labor and the material cost side of the business, it is within the range that we have reported before, 3%-4%. We continue to drive good efficiency in the business through various means, including the additional volume, which gives us good visibility on continuing to improve that margin as we go forward. We made good progress in land acquisition in the period with 11,000 new plots purchased over 44 sites, total land spend for the six months was GBP 343 million. One of our strong performance metrics over recent times has been the generation of very strong free cash from our trading. At the 30th of June, the group held GBP 1.15 billion of cash, which compares favorably to last year.
This was prior to the payment of the GBP 1.10 per share dividend on the 2nd of July, which was a total of GBP 344 million. Our capital return strategy has produced an excellent result for the shareholders. Just to recap on the dividend return plan, as you will recall earlier this year, we announced that we intend to return at least GBP 2.35 per share or circa GBP 740 million for the next three years, including this one, with an underlying capital return thereafter of GBP 1.10 per share into the long term. We've got a very strong balance sheet, and we have significant embedded value in our land bank, which stands at over 100,000 plots at this time. I think that the whole team has done an excellent job yet again in creating and unlocking value by growing the business while maintaining high quality returns.
We now look forward to the second half of the year with a strong forward order book, which is 5% higher than this time last year at GBP 1.68 billion. The sales rates have remained strong over the first half of the year at 0.78 sales per site per week. We've got good interest for all of our house types on the sites as we maintain that affordable mix across all of our developments. We expect to generate good, fresh interest on the new sites, and in the second half of the year, we're anticipating opening around about 100 new outlets, which is similar to the first half. Build is progressing well, and as I mentioned earlier, following a bit of a difficult start in terms of weather, I think that we did very well.
We came into the year with a strong build position, which put us in a good position from a sales perspective and has carried us through that period of more difficult build. Now we're into the good weather, and we're making very good progress on site. Our foundation stats, the amount of build that we've got looking forward is very good and strongly ahead of last year. Also additional information on the brickworks. We're very pleased with the progress that we've made with that. Volume is growing, and we're currently delivering about 1 million bricks a week to our sites. That will continue to increase as we go through the year up to capacity. The business is in good shape, and we're very pleased with where the company is at the present time, and we look forward to a good second half.
That's really the overview from me at this stage. Mike and myself are very happy now to take any questions that you've got for us. Thank you.
Thank you. Ladies and gentlemen, if you wish to ask a question, please press zero and then one on your phone keypad now in order to enter the queue. After I announce you, just ask that question. If you find that question has been answered before it is your turn to speak, just press zero and then two to cancel. There will be a brief pause while the questions are being registered. Our first question is from the line of Aynsley Lammin at Canaccord Genuity. Please go ahead. Your line is open.
Hiya. Thanks, morning. Just two questions from me. I wondered if you could give a bit more color on that kind of average sales rate of 0.78, because I think it was running at 0.85 when you reported in April. I just wondered if you could give, say, a bit more color on the trends you have seen, kind of maybe on a monthly basis through to the end of June, and is there anything there we should be worried about that that has slowed off in terms of the underlying market? Secondly, just interested to hear your thoughts. Obviously, we have had the draft report from Letwin, and anything in there that surprised you, worried you, or anything, your view essentially. Thanks.
Sure. Morning, Aynsley. Thanks for the questions. I will deal with the Letwin issue first, and then Mike will come back on the sales rate. We have been engaged with the review that Oliver Letwin has been doing, and obviously he has produced his interim report. I think that it is a well-considered piece of work. I think that it is a very narrow field of review, actually, in terms of whether the rate of sale and build can increase on those bigger outlets, and we know that that has been a feature of the planning system for some time. Certainly, the industry is keen to obviously explore all of the issues surrounding that. Particularly why we are at that situation where we have got fewer larger outlets. It really is linked, as we know, through to the planning system.
We particularly would like to see more sites released into the system through the planning process. I think that is the first point, but I think in essence, one of the issues that he raised or as a possibility for increasing volume was in terms of tenure mix. There is certainly some logic to that suggestion in terms of looking at widening tenure on sites to increase the number of potential customers. I think one of those could be particularly some form of discount to market value, which has been talked about over recent times, to enable more people at a lower level to access the housing ladder. We would be keen to see something of that type of nature. I think that there are challenges, and we take issue with one or two points in relation to particularly the availability of resource.
As, again, looking at large sites in areas, it is very difficult to increase output given the constraints of local labor in those areas. You're pulling from a wider and wider area to bring more people into those particular sites. The industry is working really at the top end of where it ever has in terms of rate of sale and build in that regard. I think we're doing pretty well in that regard. I think that he singled out the issue about bricklayers being in short supply. I think it's all tradesmen that are in short supply. I think the issue about bricklayers is that it's quite a gestation period to get anybody up to speed. You're looking at minimum three to five years to bring new bricklayers through, whereas other trades, it's a little quicker than that.
I think there's a number of issues, but obviously we're pleased for the confirmation on the land bank issue. I think he quite clearly saw that the builders are working very well on sites and driving through good performance. Overall, I think as an interim stage, those would be my principal observations. We'll see what he comes out with as we go through the rest of the year.
Great.
On sales rate, Aynsley, I think that we would recognize a rate of 0.8 of a private sale per site per week is at quite an optimal rate of sale in any market. To be round about that sort of level for the first half, we're quite happy with that, and it's in line with our expectations. In terms of how the first half of the year has developed, I think we've just got a slightly different shape on activity. We've seen this year in, year out. This year, the market was particularly strong in the first eight, nine weeks, where our sales rates outperformed strong comparatives. The strength in the market did increase through the first half of last year, whereas this year it is slightly different, where the market has calmed down a bit, I guess, over ensuing weeks.
Overall, we would look at the half year rate of around about 0.8, just shy of that, within 1%-2% of that, as demonstrating solid market fundamentals. If you reflect on the level of employment around the country, the regional economies appear to be doing quite well. Obviously, we're very aware and mindful of the major global issues that are swirling around, and obviously the Brexit transition, if you will, continues to be debated. We do need to keep a weather eye on those issues. Certainly demand in our regional markets for our sort of product, and Jeff's already mentioned, we'll continue to offer a good range of product, but perhaps more positioned at the more affordable end. We're seeing good, strong, solid demand for our type of product in the region. I think we're quite happqy with where we are.
The other thing, Aynsley, on that is that, I've said numerous times before about the issue about how long people, particularly in our space, the first-time buyers, that once these customers have generally made their decision and they've got a mortgage agreed, they've got the deposit, they want to get on with it. We're always keen to make sure that we've got a good forward build position, which is why we came into the year. We were very pleased with that, and we sold strongly off the back of that. I think that unfortunately was eroded a little with the slowdown in build that we had through from the bad weather. Opportunity wanes a little bit, but we're getting that back now. More build gives us more selling opportunity, and we expect to push on through the summer.
I think I mentioned in terms of foundations, actually, when you look at year-over-year, we're about 17% ahead in terms of the number of founds we've put in the ground, which gives us opportunity to sell well going forward. It's keeping a careful eye on product and price points, all of those things. Yeah, I think we're positioned well going forward.
Great. Sounds great. All very clear. Thank you.
Thanks, Aynsley.
Thanks, Aynsley.
Okay, we're now to the line of Will Jones at Redburn. Please go ahead, Will. Your line is now open.
Morning, guys. A couple from me, please, if I could. The first one's just exploring, I guess, the customer mix a little bit more, and perhaps you could just flesh out how Charles Church performed in the first half against Persimmon, just given some of the anecdotes that are out there on higher price points. I guess as a slight counter to that, did first time buyer activity lift in the first half, given obviously it was the first full period of the Stamp Duty change for those guys? Then the second area is more around land. I guess 11,000 plots is quite a decent number for the first half in terms of approval. Any insights you can give us there into the kind of the margin intake levels compared to, say, last year?
I guess, roughly where your expectations are in terms of replacement rates, I guess, for the full year. Thanks.
Yeah. Thanks, Will. On the land front, as you know, it depends on when these particular deals drop in terms of when they conclude. We've always got quite a pipeline in that regard. We've got good visibility on land coming through, and we were quite pleased to conclude those deals in that time and capture strong margin. I think that we're seeing a little bit more competition in the land market around some of the regional areas we're operating in as other developers look to distribute their spend according to their business. That's been a bit of a feature, but I think that it was always our intention, really, to get our nose ahead, and we're well ahead in terms of our land market position and the sustainability of the land that we've got in each of our operating areas.
We're really well-placed in that regard, and certainly we're continuing to maintain and look at strong margins, return on capital opportunities for sites that are coming through. We're opportunistic in that regard. We've got a good pipeline of land deals. We're always pretty cautious and, as I say, we're in a position where we can afford to be quite selective in that respect. We won't do a deal unless it absolutely meets our criteria. In terms of new input land, in terms of what land is looking like going forward for margin, I think that we've reached a level that is maximizing the point where we actually buy. We always said that would happen. We're pleased with what we've got. We're pleased with what we can see coming through.
I think there's a little bit more competition in some areas, and I think, again, this is a bit of a feature now that you can see in some of the places we operate where other developers have now opened up competitive sites alongside us, where the customer has got a bit more choice. I think, you bear that in mind in terms of the overall market as well. I think that's a sort of general position on the land. We'll give them a lot more detail, obviously at the full half results. Mike will give you an idea on the customer.
Yeah, on the sales mix, what we found in the first half, we have delivered a few more new homes to our housing association partners, around about just shy of 1,500 units in the first half against around about 1,300 in the first half of last year. Good growth in terms of delivery on the affordable front there. Just to remind you that in the forward sales at the 30th of June, despite that increase in delivery, we've still got a very strong forward sold position to our housing association partners, where we've got about 4,500 units in the forward order book. We've got great visibility on that part of the business moving forward.
In part, that is down to the fact that we've invested well over the last few years, as you know, which puts us in a position where we can discuss opportunity with housing associations and the like quite early in the process to make sure that they get the opportunity to acquire new units to serve their clients in their markets, at the same time as de-risking the build and our development projects to a degree as a result of that. On the private sale market, well, yes, we've delivered about 50 additional private sale units half year on half year. Within that, we've seen a reduction in Charles Church of about 125 units, whereas the difference, 175 additional units coming through the Persimmon brand. I think that that is largely down to, obviously, product positioning.
I think it's well trialed in the higher price points in the market that the market is perhaps a little bit slower. Again, given the regional spread that we've got within the business with our 30 operating companies, together with the range and choice that we continue to offer on our sites, it puts us in a great position, as Jeff said earlier, to kick on into the second half, where we've got good visibility of new outlet openings against perhaps less demanding comparatives as we move forward into the second half.
Great. Thank you.
Cheers, Will. Thanks.
Cheers, Will. Thanks.
Okay, we're now over to Gregor Kuglitsch and UBS. Please go ahead, Gregor. Your line is now open.
Hi. Good morning. I've got three, actually. Can I just come back on the volume growth point? Just want to make sure I understand what you're saying. It sounds like build constraints in the early part of the year kind of held back both sales rates and completions. Now that that's picking up, are you pointing towards higher completion growth? Obviously, we can see the comps get a little bit easier in the second half. That's question number one. Question two on margins. Obviously, you're pointing for another increase sequentially on second half. I think that's clear from the statement. I guess I want to understand kind of some direction on quantum to the extent that you can, although I appreciate you're going to report all the details in August. Finally, on the LTIP, can you give us an update-
On the amount of sort of option exercises that have actually occurred. Obviously, I think quite a lot happened post the period in terms of the final vesting, whether you've seen It may be too early to see this, but have you seen any people depart post vesting? Is there any churn that has occurred or not really? Thank you.
Thanks, Gregor. I'll just try and deal with that first point, and then we'll move on from there. On volume, what I'm saying is that the opportunity to sell is affected by build. I think that we've always made this point here. We're pushing pretty hard in terms of build to continue to drive more houses through the business. It is obviously constrained by numerous issues, not least the number of outlets, but also constraints on resource. It's quite challenging actually, to continue to increase the number of units, and particularly given the size of some of our operating companies. I've given a range before on operating efficiency of a company, 350 to 400 units up to 700-ish.
If you start pushing beyond that, we know that the businesses get very stressed, which is why we continue to look for sustainable opportunities to grow and open new operating companies. Only where we believe that those companies will exist into the future, offer sustainable land supply, and all of the issues that surround that as well. I think it's about how effective the companies can be at building, and that affects, it's not just build, it does affect sales. I think if you can imagine customers coming to site, these days people don't particularly tend to buy off-plan, not in any great numbers. The key thing for them is they want to know what the timescale would be for the point at which they purchase, when they could legally complete.
If you constrain on build, those dates are being pushed further and further forward, which puts people off. We tend to push that build to give us more opportunity to sell. In the first part of the year, it's amazing to think now, we had particularly bad weather, and build was constrained. We were in a fortunate position coming into the year, which gave us good opportunity to sell, that forward build was eaten into by the slowdown in that build process. We can see more momentum on that now, and we continue to push now, which we're looking on each site, on a site-by-site versus house type by house type, to cover all the price points, so you've got availability of houses at affordable price points for people to buy. If you've got that, you've got yourself a good position to take sales.
All of those things have an effect, and we're focused on improving that. A better build position gives us a better opportunity. I think margins, Mike, do you want to talk about that?
On margins, great. You can see the language we've used in the statement that, and you're right, we will put more flesh on the bones come August, when we issue the full results. Suffice to say that we do expect some betterment over the second half of last year. You've seen that trend over more recent years. We have continued to paint a picture that obviously the growth in those margins will slow as the pressures in terms of cost inflation in the supply chain, together with the land, or the ability to buy land at values that offer slightly better returns, starts to ebb. Obviously there's a complex planning backdrop behind the land market that needs to be understood to try and understand the ebb and flow in terms of residual land values.
Suffice to say, the margin trajectory that we continue to expect is one where it will eventually plateau out. The big question is, at what sort of level? I think that our expectation would be to expect that plateauing out to be some point over the next couple of years, probably. Nearer term, as I say, we'd expect another step forward in the first half of this year. Probably not to the same extent as you've seen in recent years. Being mindful of that overall shape to the curve, if you will, that we've been painting for some time.
I think the other feature on that, sorry Mike, on Gregor, is that there is a little bit more pressure, I would say, in terms of upward pressure on pricing in the supply chain, which we're seeing at the moment. There's quite a bit of work in that area to try and make sure that we've got good availability and working with our supply partners to make sure we fit with their processes in an efficient manner to contain that upward pressure on the supply network. In addition to which, obviously, all of the other things that we continue to do in the business through efficient build processes, standard details, in-house processes, design through engineering and architectural planning processes. Also now, obviously, the internal manufacturing out of the brick, Space4, and containing our prices and improving on those things wherever we can.
That's the margin situation. On the LTIP, I think the first thing to bear in mind there is that, yes, GBP 0.10 of that GBP 1.10 triggered the complete conclusion of the 2012 scheme. The LTIP is vested now in full, albeit we're in a closed period. There won't be any exercising of those options until the results are released. In terms of retention, we've not seen any change in behavior there. We've said for some time now that there will be some natural retirement process in the senior staff, that's normal. I think it's very important to recognize that Persimmon is very good. Excellent, I would say, bringing people through the business. We've got a great track record, and we develop talent all the time. We've got good visibility on people coming through for the future in that respect.
We don't see any big exodus in terms of the current staff.
Okay. One final question on the cash, because I think in the full year presentation, you talked about GBP 88 million for the first tax settlement on the LTIP. Has that actually occurred?
Okay.
Is it much more than that? Yeah.
Yeah. Obviously, the value on that settlement is determined by individual choice around date of exercise because the value is determined by closing price on that day. What we've seen in the first half relating to the first vesting date, which was last December, is that there was a cash outflow around about GBP 54 million in the first half. In terms of your cash flows, just to help a little there. If you recognize that we brought forward cash of GBP 1.3 billion, we're closing out at June of GBP 1.15 billion. If you add back the capital return of GBP 388, GBP 389, together with the GBP 54 cash out on that settlement, that gives you a free cash pre those items of around about GBP 296, GBP 297, which compares with an equivalent figure last year of about GBP 280 before other working capital movement.
There's good symmetry, if you will, in terms of the cash generation of the business, which continues to be very strong.
Thank you. Very clear.
Thanks, Greg.
We're now over to Andy Murphy at Bank of America Merrill Lynch. Please go ahead. Your line is open.
Morning, Jeff. Morning, Mike.
Hi
two sort of related questions and a third one, which is a point of clarity. Can you just talk about the partnership sales in the first half and what % of completions they were of the total, and what your best estimate would be for the rest of the year? The second question kind of related to that, and it sort of falls into the forward sales as well, is if that figure is increasing, what would the figure into, say, next year and the year after, and is there a sort of fundamental change in the proportion of partnership volumes that you are anticipating? The final question was just a bit of clarity on the IFRS 15 change. Just wanted to make sure that there is effectively no change to the profitability or the cash. Would that be the correct reading of it? It is just a recognition issue.
Yeah. On the IFRS 15, the update does actually say there is no change to profit or cash. I think, the answer is there. It is just a grossing up exercise in terms of the recognition of the revenues associated with the sale of the part exchange properties that we agree to buy in support of customers buying a new home from ourselves around about the country.
Right.
That is IFRS 15. In note one to the trading update, I have tried to provide some clarity around the effect of that, and the comparatives. The partnership content, I think that, again, this tends to wax and wane depending on the timing of doing the deals with the housing associations. I think, we do
We've got a very strong partnership business. We're one of the biggest providers of new build affordable housing in the country. Given the spread of our regional businesses and the outlets that we have, we can offer great choice to housing associations to pick up new units. We're very keen to develop that partnership business. It's important for us. We would say it's an essential part of creating more sustainable communities around the country, which is important. In terms of the exact percentage of legal completions, in the first half, it's nearer 19% against nearer 16% in the first half of last year. Not a fundamental change, I would say. In terms of the second half proportion of the sales mix, it's hard to predict because of the uncertainty around when the deals are completed and the units are handed over.
As Jeff's already outlined, a large part of that is delivering the build. We're very keen to continue to grow the partnership deliveries we are in the private sales market.
I think-
I don't think there's any conscious, strategic change in terms of the direction of developing that partnership business. We've always been keen on it, and we'll continue to move it forward, hopefully.
Yeah. No, it's relative to the overall business. If you look to the trend, it is trended down a bit actually, but it depends on individual sites and individual locations in terms of what the requirements are for affordable housing. But as a trend, I don't see any upward trend at all, Andy. It pretty much will continue over the shorter medium term in similar sort of numbers to we've seen over the last couple of years.
Okay. Can I just follow up, in that case?
Yep.
On the 5% growth in the forward order book, can you give us the growth rate for private versus partnership? Is that possible?
Yeah. Private in the forward order, in terms of volume, you're slightly over 10% on HA and you're sort of 1%-2% down on PD. You've got about 4,900 units sold forward into the private market, against just shy of 5,000 this time last year. I think we were about 5,980 into the private market this time last year. Within spitting distance. Whereas, the affordable is just shy of 4,500, as I said earlier, against a figure last year that was just shy of 4,000 units sold forward. Yeah. I think that pays testament to the fact that we've invested well in new land parcels over recent years, and we have a good opportunity to talk to our housing association partners for those new opportunities on those sites. They seem quite keen to take those opportunities. That's important for them and important for us.
I think the key thing there is delivery timetable, Andy, that when those houses are delivered, albeit they are in the forward order book. Delivery tends to be projected over a longer period of time.
Sure. Okay. Thanks very much, guys.
Thanks a lot.
Okay, we are now over to Chris Millington in Numis. Please go ahead. Your line is open.
Morning, Jeff. Morning, Mike.
Morning, Chris.
I just wondered if you could just comment on the regional profile, what you're seeing. I appreciate you haven't got a lot around the M25, which is the focal point, but just anything you can say there. Also, when you've talked about build cost inflation, you've talked about efficiencies offsetting the pressures there, but there's been no comment on house price inflation, so perhaps you could flesh that out. The final one is just really seeing how you're fairing from kind of a customer care HBF rating point of view.
Thanks, Chris. I think regional profile in terms of sales, it's been pretty consistent, really, in terms of the customer interest around the country. I think where the difference really is to us is more about competition sites competing against us and a bit more in our space on the smaller houses, in particular. Land investment over time has changed from some of the competitors and new sites opening provides more competition. The overall marketplace to me, in the areas that we develop, is pretty consistent with previous periods.
In terms of the house price inflation, similar pattern really. We've probably seen a slight slowing down of the house price inflation, it's still positive, which is good. Around maybe say 2%, Chris, in that regard. Still positive.
In terms of customer care, we've got a great focus on customer care, the quality of the product is very good. We continue to make progress on that, I don't want to give any misleading star rating guidance to you. I can tell you that it continues to improve, again, that's part of that challenge that we have through trying to grow volumes, also deliver a quality experience for the customer. It's not necessarily about the quality of the house at handover, which I think is very good. It's about the customer experience, managing the customer through the process. We've continued to improve on that, we're very pleased with the progress that we've made.
Okay. Thank you.
Thanks, Chris.
Okay, we're now over to Charlie Campbell of Liberum. Please go ahead. Your line is open.
Yes. Good morning.
Good morning, Charlie.
Yes, a lot of the obvious questions already gone. Just on build cost inflation, just wonder if you could give us a number for where that's been in the first half and where you'd see it for the full year. Also just in terms of mortgages, I think you made a comment that mortgage availability is still good, but just wonder if you'd give us any comment around, any color around that. Any changes in either direction, things getting a bit easier, getting a bit worse. Maybe on kind of valuations as well, any signs of down valuations becoming more of an issue anywhere in the country?
Okay. Well, Mike may come back on the build cost inflation issue. Mortgage availability continues to be very good. It's a competitive market. We still see lenders with excellent deals for customers, and more proliferation of additional smaller lenders looking to try and take a bit of the market. It's positive in that regard, and there's excellent rates and deals for customers. We haven't seen any issues particularly in that respect. I think that flows through into the valuation process as well, that there's not any perceptible change to valuations. It's a pretty robust process. We get challenged, and of course, there are occasions where we get disagreements, no noticeable change to what we've seen over recent times. I think, characterization of the mortgage market is it's a good place.
I think there's good competition. We're finding that the quality of the customers that we see these days is much better than it has been over long-term history. Generally, a lot of those customers are in a good position and do qualify for mortgage. Generally a good place on that, and very well controlled.
I think on build cost inflation, Charlie, I think we've said 3%-4%. That's our expectation for the full year. I guess for the first half it's running along in that sort of range, perhaps at the top end of that range. As Jeff's already said, it's down to us to try and mitigate those pressures, which are there both on the labor side and on materials components. We need to continue to think hard about how we approach those challenges. An example of that would be with our own brick production coming on stream now. That is going to help in that regard, and indeed add a bit more capacity to the whole industry, because we've seen at times through the first half, brick, on occasion, has been a bit tighter.
Yep.
We feel that we've made the right choices in that regard to just take steps to, as I say, mitigate the pressure for ourselves in that regard. It also, in adding capacity to the industry, hopefully, it helps the industry move forward a little bit better because the industry can capture brick supply in a more measured fashion, if you will.
I think brick's a good example because the brick industry would like to drive the price up, obviously. I think there's certainly moves to produce more of the upper-end product, which is a more expensive product. Therefore, the average price of bricks will continue to increase in my view. I think we're well positioned on that. We just keep a careful eye on everything really to make sure. The primary objective is to have availability of resource. Going back to the Letwin Review, I mentioned this was one of the perhaps parts that we disagree, there's been a lack of investment in the manufacturing chain, which has caused some blockages. I think there's only one way that's going to go, and it's to drive price up and then invest in more capacity. Those are going to continue to be challenges for us.
Yep. Excellent. Thank you very much. Thank you.
Thanks, Charlie.
Okay. We now are over to Jon Bell of Barclays. Please go ahead. Your line is now open.
Morning, Jeff. Morning, Mike.
Morning, Jon.
I think I've got two, actually. The first one is on Help to Buy. Just keen for thoughts on timing of any government announcements and what your kind of working assumptions are. The second one is on land intake margins. Just wonder whether there was a benefit from renegotiating some of your land contracts in the immediate aftermath of the Brexit vote that are now starting to show through.
Thanks, Jon. Well, I think, on the Help to Buy, we've not heard any more on that. There's a good flow of cash now, well controlled, but available for the volumes the customers, to enable them to buy. A good flow of cash there for them. Volumes are being supported in that way. We don't see any immediate change. I think, what I've said before is that we expect there to be some further discussion as we go forward. Whether that will be this year, I suspect it's more likely to be well into next year before we see any debate about that. I think, land, yes. You will recall we talked about Brexit. We took the opportunity to review some of the negotiations we had at that time. There will be a bit of that feeding through.