Good day and thank you for standing by. Welcome to the Persimmon Trading Update Analyst Conference Call on Thursday, the 12th of January, 2023. At this time, all participants are in a listen only mode. After the speaker's presentation, there'll be a question and answer session. To ask a question during the session, you will need to press star 1 and 1 on your telephone. You will then hear an automated message advising your hand is raised. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Dean Finch. Please go ahead.
Good morning, everybody. Thank you for joining us today. I'm here with Jason, Martin, Mike, and Julia. Look, today's update sets out that the team, I think, did really well last year against the backdrop of some incredible challenges. It also confirms the challenge that we, like the rest of the industry, are currently facing on forward sales. Before saying more on sales, I want to reflect on what this team has achieved. In Persimmon's 50 years, we've not delivered this many new houses with so many happy customers. The business performed very strongly in the H2 of last year, and I'm pleased to report year-end completions that are towards the top end of our expectations. H2 completions were 15% up year- on- year. Pricing remained robust throughout the period.
We did see more use of incentives in the H2 , not by a material amount. In November, we told you that incentives were running at around 2%, this had crept up to about 2.5% by the end of the year. Cancellation rates increased in Q4, the risks on the conversion from reservation to completion on existing orders was nowhere near as bad as I feared it would be. Also, use of Part Exchange to shore up change was less than I anticipated, with its use continuing to run well below historical norms. While we'll obviously update further at full year with construction teams performing so well in the H2 , our legal completions came in towards the top end of our guidance. We anticipate this being reflected in a strong profit performance, crucially at five-star.
This combination of five-star and strong profits represents real progress for the group and is the first time we have done it in our history. You'll note from our statement that cash finished the year higher than we expected as a result of us doing better on completions whilst at the same time reacting quickly to the downturn in demand and taking a very controlled approach to the land market. My colleagues are doing an outstanding job to deliver this excellent performance. I see how we are improving operationally as I tour the country. Having personally visited well over half our sites last year, I see our operational improvements coming through.
Our developments are being built better, they're looking better, and we're providing much better customer care. It's great to see Persimmon combining operational excellence alongside its traditional commercial excellence whilst providing great value homes to happy customers.
Our teams have delivered despite the most difficult supply chain and labor availability constraints anyone can remember. The effects of the Russian invasion of Ukraine and the political instability at home alongside the economic challenges caused by last year's September budget. Clearly, the picture is much more challenging. We expect profits in 2023 to be down on the current year we are reporting on now. At this stage, it's not possible for us to give much more guidance than this. We'll be in a better place to update in March. All I can point to at this stage is that we start the year with a forward order book of roughly 1,600 PD reservations and roughly the same number of HA orders that are practicable to build this year.
The ASP in the order book for PD at 31st of December was 11% up year-on-year, and HA was 9% up year-on-year. From this, the sales rate of 0.4 is required to hit 7,000 units and a sales rate of 0.5 is required to hit 8,000 units. Incentives, I think, are likely to rise, and the reality of overheads this year is that they are mostly fixed. As we allude to in our statement, with mortgage costs for our average customer doubling over the course of the year, it can come as no surprise to anyone that we expect profits to fall this year. Clearly, it's very welcome to get past the debacle of last year's Q3 and see mortgage rates coming down.
Without greater availability of affordable mortgage products at high LTVs, first-time buyers are finding life particularly challenging. We're not panicking about this. As has long been the case, Persimmon is focused on the quality of the return rather than chasing volume. We've also responded, of course. We're taking a highly selective approach to any new land investment and are carefully managing our outlet and work in progress position to meet current market demand. When we saw this downturn coming, we took immediate action to cancel uncommitted land deals, as a result of the actions we've taken, we now plan to open 33 fewer outlets in 2023 than was previously the case.
We're already operating from a very lean, fixed cost base, and our well-established disciplined cost control processes will continue. Our Boxing Day campaign has seen an increase in interest in the early days of this year.
It's clearly too soon to tell, the response has been encouraging, and I hope we can successfully convert the interest. Persimmon's great strengths remain. We've got an excellent and highly experienced operational management team with great products to sell on the right sites across the country. The balance sheet remains strong, and we are protected by the strength of our margin. I remain very pleased we adopted such a disciplined approach to land investment, and our land bank's embedded margins remain industry leading.
This not only provides protection in the downturn, but will provide a strong platform for future growth. 2023 will prove to be a challenging year, with us adapting to a tougher market as well as implementing the New Homes Quality Code for the first time, I'm excited by the opportunities that this more challenging environment is likely to bring to us.
We're working to strengthen our key capabilities to deliver five-star homes consistently and respond with agility to the market as it returns. Persimmon's watchword is discipline. Disciplined investment, disciplined efficiency, disciplined cost control. It's this discipline that will secure our continued success in years to come as we manage the cycle. Thank you for listening to me. I'll open up to any questions.
Thank you. As a reminder, to ask a question, you will need to press star one and one on your telephone and wait for your name to be announced. Once again, that is star one and one to ask a question. We will now go to our first question. One moment, please. Your first question comes from the line of Rajesh Patki from J.P. Morgan. Please go ahead. Your line is open.
Yes. Hi, good morning, and Happy New Year all. I've got two questions, please. You mentioned cancellations to be at elevated levels in the H2 . Can you provide some more color on the more recent trend, and if there are any monthly variances in the fourth quarter? Second one is on incentives. You talked about incentive levels moving up from 2% to 2.5% at the moment. Can you give us an idea how high could these go before headline prices need to start moving down? Thank you very much.
Morning, Rajesh. I'll have a go at this. Cancellation rates during the year were running, well, ever since I've been here, have been running about 16%, 17%. They did spike up in Q4, particularly towards the end. At the very end were running, I don't know, around just over a third of sales. What has encouraged me though is opening up in the new year, that number has returned back to a more normal level. Yes, it's been quite volatile. First few weeks of the new year have been more encouraging though, but clearly early days. In terms of incentives, well, you're talking about 5%, 6% really before it starts impacting on headline prices as I'm sure you probably understand.
Great. Thank you.
Thank you. We will now go to our next question. One moment, please. Your next question comes from the line of Will Jones from Redburn. Please go ahead. Your line is open.
Thanks. Morning. Just a couple from me, please. First, I think you mentioned there in the opening comments, a couple of volume out turns based on, I think, 0.4 and 0.5 sales. I think it was 7,000 or 8,000 volumes. Perhaps you could repeat the numbers there? Was that a reference to private volumes or total including affordable? What does it assume around the order book? How many weeks you sell forward during the year, as it were, before you build for 2024? The second one's really just a clarification around private ASP in the order book. If we take, you're saying it's half a billion of private forward sales.
Obviously, we don't know the exact number, but if it was GBP 500 million, then that would imply, I think, around GBP 295 of private ASP. Perhaps you could give us the private ASP in the order book, please, in terms of what you start with. Maybe just following on from the comment before about encouraging signs on cancellation rates. Is that just a cancellation rates comment, or are you seeing a slight cause for encouragement from a low base on other stuff? Thanks.
Morning, Will. Private ASP in the order book at year-end was GBP 282.
Okay.
look, I mean, I'm resolutely not guiding. I'm just pointing out arithmetic. We have 3,000 forward sold HA and PD. We've got more HA sold than that. I think it's about 4,000. what I'm guiding you to on HA is-clearly we're gonna slow down build this year, and, I'm not expecting we're gonna build all of those 4,000 because it would be impracticable given that HA is pepper-potted around sites. You're starting with a forward order book of 3,000. We have really 40 selling weeks left this year. At 0.4, it's 7,000. At 0.5, it is 8,000. I'm not guiding you to a number.
Thank you.
That's where we are. In terms of the first few weeks of the year, yeah, look, I mean, of course, you expect the spring to open. I think there was a real buyer strike. Who can be surprised at that? It was chaos going into the year-end in terms of the market. There were any manner of predictions floating around of house price collapse. , it seemed to compete to me from day- to- day in terms of how far it could go. I don't know whether it was a book running for a prize or something. I think it can come as no surprise that buyers stopped buying in the run-up to year-end.
Our interest increased threefold on Boxing Day on the 27th compared to the previous week. I think we saw the highest days. Those two days were the highest days of all of 2022. We started 2022 pretty well. , that is encouraging. It has continued into the new year. Of course, we have to see that convert into sales. , it's encouraging to see mortgage rates coming down. , we point to, I pointed to the lack of an LTV product with the end of Help to Buy for first-time buyers.
There will always be a market for first-time buyers. , our position is that by improving the product, we want to grab more of that. It's pretty tough for first-time buyers at the moment. It's not just mortgage availability. I mean, the other thing that we saw, particularly towards the end of last year, that eligibility for securing mortgages became much tougher. Banks were being much harder than we'd seen for some time in qualifying people for mortgages, and I think that was the real issue that certainly impacted us in terms of sales. I mean, there's all sorts of stories that come to my desk. , people failing to qualify for mortgages because they didn't pay their parking ticket, that sort of thing was going on.
We do need we're desperate to see that position change.
Thank you. We will now go to our next question. Your next question comes from the line of Glynis Johnson from Jefferies. Please go ahead. Your line is open.
Good morning. Two, in fact, three, if I may. I have one in lastly. When you look at your balance of volume versus price, at that order book level that you've got, are you starting to roll out larger price increases in January? Are you already cutting list prices? , where does the sensitivity come? You've previously talked about you don't mind you would accept volumes down 40, 50% in order to preserve pricing. Are we getting near that inflection point where actually price cuts really do start to become more of a requirement? Second of all, what are the lenders telling you in terms of mortgage eligibility, their desire to lend? , are you starting to see some of those issues start to alleviate?
, is conversion slightly easier now than it was perhaps even just a few weeks ago? Just what your build width, when do you start to adapt your build to your reservation rates? Obviously, all house builders are sitting with very low inventory levels. Your build equivalent units are down. , but what could we see in terms of width reduction as we go through maybe towards the middle of 2023, just in terms of your own business and how you contract that build rate to what you're seeing?
Thanks. Morning, Glynis. Let me start in reverse order. We've already put width control in place, and we'd begun to do it before the year-end. I mean, as you can imagine, we were going like an express train. We were building over 300 EUs a week over much of Q3, Q4. We had to do that in order to hit year-end, and I'm delighted we did. It was the right thing to do to secure those sales and get that cash in the door. Equally, I'm delighted that the message has got out there. In week one of this year, our EU rate was a third less than EU rate the current week last year.
We put that into immediate effect, and we'll control it extremely cautiously as we move forward. In terms of eligibility, look, I mean, mortgage rates are coming down. That is to be encouraged. I've seen a 95% LTV, I think, from Halifax at 5.6. That's encouraging too. Clearly, banks, and we've all seen the stories are worried about negative equity this year. I think they remain cautious, but there's also competition in the market as you see evidence of rates coming down. In order, the first question in terms of balance of order and price and volumes, I mean, look, we are not going to be the ones leading the market down.
We are return focused rather than volume focused. Obviously, we'll watch the market very carefully, and we'll be nimble, and we'll adapt to it. , our land bank has been hard fought. I don't want to give the crown jewels away in a bad market. We'll be very cautious about that. I expect we'll see incentives creep up during the course of the next few weeks, but it's really too soon to say as well. , if this strong interest we've seen in the first few days of the new year remains and does convert into sales, then we might be saying something entirely different to you in March.
Thank you.
Thank you. We will now go to our next question. The next question comes from the line of Aynsley Lammin from Investec. Please go ahead. Your line is open.
Thanks very much. Morning, everybody. Just three, well, two and a half, actually. First quick one, just to clarify on Will's previous question, the 8,000 volumes completions you mentioned at a 0.5 stars rate. Just to clarify, that would compare to the 14,860 that you've just delivered, i.e. includes everything social and private.
Yes.
It does. Okay, thanks. The other two, just on build costs, labor and materials, any kind of color there, what you expect build cost inflation to be this year, trends you're seeing in those. Just on, I mean, on the obviously eligibility and LTV numbers, et cetera, important. When you look at the new interest rate environment, say if it settles around 5%, have you done any work for your kind of average customer of how much they can borrow when they look at the affordability qualification for the mortgages, compared to what it was kind of for the last couple of years? How resilient do you think the prices will be in the face of maybe customers only be able to borrow less than what they were before on affordability? Thanks.
On build costs, we're looking the outlook at the moment is 7%-8%, but it is volatile. Anything with cement in it is still rising. Other commodities, timber, steel, are falling, which is good news, obviously. I do expect this year labor costs will fall. We've already seen this with groundworkers. Obviously, they're first in, first out. , we're beginning to see rates come down for them. I would say on the whole, though, the rest of the trades are still punch drunk from December, and they haven't really woken up yet. I think they will.
In terms of bricklayers, though, I mean, for the first time since I've been in the business, this week, I've heard of 2 instances of bricklayers dropping their rates by GBP 100 a 1,000. One was in the Northeast and one was in Knowsley. I think the message is getting out there. I think again, I think March, April time we'll be in a better position to really understand what total build cost inflation is gonna be. As I said, it's quite volatile still, but I think labor will recede this year. I'm gonna give my voice a rest and have a drink. Do you wanna have a go Jason? Do you want the camera?
Well, the mortgage one is obviously a mixture of where rates go, wage inflation and what we do on incentives. If you think that obviously the banks didn't take one point whatever it was at the low 12 months ago and only use that rate for affordability, it was stressed. We've seen slightly lower stresses in the last month or so, above the elevated rate. , if you just did a calculator calculation, you'd be in the sort of 15%-20%, just purely depending on the numbers. , we can alleviate some of that as we talk about on incentives. Obviously, wage inflation in a pick your number, 5%-10%, so it might take one-two years for that to sort of catch up and go through that.
I guess we are a little bit in the hands of others around where interest rates go. It's not a sort of fundamentally change here, but we for certain customers.
Particularly for first time buyers. We put that example in the statement so you can see the very real cash implication that those first time buyers who were leaning on Help to buy are facing today. hence we're trying to be creative, and we would hope that maybe the government might start to be a bit more creative as we look forward.
Right. Thank you very much. Thank you. We will now go to our next question. One moment, please. Your next question comes from the line of Ami Galla from Citi. Please go ahead, your line is open.
Thank you. Just a few questions from me. One is on the land renegotiations that you've talked about. Can you give us some color as to what are the sort of discussions that you're having with land vendors?
Sorry, I didn't catch that question at all. I'm really sorry, I didn't.
Sorry, can you hear me?
Sorry. Some color on land renegotiations that we've talked about.
Okay.
Sorry, carry on Ami.
Yeah. Can you hear me well?
Yes. Yes, you're fine.
Yeah. My second question was just on future strategic drawdowns. As we kind of think about the next, say, six or 12 months ahead, how quickly do you think land vendors are willing to adjust to these revised market conditions? The last one is, can you remind us a bit on the payment profile of the land creditor base?
Okay. What I'm really talking about is, I mean, where we had uncommitted deals. I mean, we were in agreement in principle, but we hadn't contractualized those arrangements, so there's been no penalty or anything like that for the actions we've taken. We've either walked away or we're in the process of renegotiating or deferring. I think the land market is going to be very quiet over the course of the next six, nine months. I think it will wait and see and adapt. I mean, obviously you'll get some vendors that need to sell, and that can present opportunity. I think the vast majority will hold off and wait and see.
You really need to see the impact of what's happening to house prices to work through the market in order for any adjustment to the land market. Clearly as well, a central assumption for us is that Help to Buy is ended. Although of course, it's interesting to note, isn't it, that the one Labour government in the U.K., in Wales, has extended Help to Buy. Let's see what happens there. I think in terms of profile, about GBP 300 million this year, isn't it?
Not quite. It's just, it's about 50% of the 475-
Right.
in 2023 and about 40% in 2024. The residual, so slightly longer.
Thank you.
Thank you.
Thank you. We will now go to our next question. Your next question comes from the line of Arnaud Lehmann from Bank of America. Please go ahead. Your line is open.
Thank you very much. Good morning, gentlemen, and good morning, Vicky. Two questions on my side related to cash. I think you mentioned the word discipline a few times, Dean, in your introduction. Can you please remind us of all the kind of cash preservation efforts that you've implemented in the last months? My second question is related to cladding remediation. We remember you increased your provision at the end of last year. Do you have a feel for the cash outflow relating to this work in 2023? Thank you.
Okay. Thanks, Arnaud. Yeah, look, we've introduced a range of measures. I mean, Martin, do you wanna come in on that one because.
Yeah. By all means. Morning, Arno. I mean, without going into a lengthy list of everything we've done, it's essentially ensuring that we're not building ahead of where we need to build. We are ordering materials when we need them. Our material control can be better as the suppliers can deliver to tighter timescales. Ensuring really that we're only putting in roads, infrastructure, where it's absolutely needed to match the sales rate going forward. It's very live, and I think that's the important thing to note is that we will look at every single site on a site-by-site basis.
I mean, look, obviously land, we talked about deferral of outlets. And look, the biggest priority for me was to, in the last couple of months, was to secure the sales we had got and crystallize those and get the cash in the door at the year end. There was a huge focus on keeping those sales going and getting them completed into the year end. Lots of work on land. As Martin's referred to in terms of WIP control as well. look we're not, we're gonna look very, very closely at overhead. I think that's quite a difficult call.
I think that clearly, I want to make sure that Persimmon is capable of responding to recovery when it comes. We'll obviously be very sensible about controlling overhead spend and unnecessary expenditure. I don't want to be in a position. , Persimmon is not a fat organization. I don't want to cut to the bone and then find I've lost capable, skilled managers and we can't respond to a recovery in the market. That is pretty critical to me. , I've seen anything over my two and a half years here. It's how incredibly volatile this market is. Stop, go, stop, go. Gotta be careful about that. In terms of cladding, look we wanna get on with this as quickly as possible.
We want to make sure that residents, leaseholders are safe. We look after them. We do what we need to do for them. Also commercially, I believe it's in our best interest to get on with this as quickly as possible, and we have been getting on with it as quickly as possible. I think as we say in our statement, many of our site of our remediation sites have already started, and all will have been started by the end of this current calendar year. In terms of cash flow, I don't know, Jason, how... I think GBP 125 million-GBP 150 million.
In that range. Yeah.
That range.
I think we said at the November update as a multi-year program, it probably weighted towards this year and next. If you're in the sort of 125 to 150, slightly hard to predict given the nature of this work. As Dean said, we're trying to get on with it. We also need to do it expertly and make sure that it's done to the right standard. That's the sort of guidance I'd give you for now.
Very helpful. Thank you very much.
Thank you. We will now take your next question. Your next question comes from the line of Charlie Campbell from Liberum. Please go ahead. Your line is open.
Morning. I see lots of questions already been asked, but, just a question on the outlets. You've guided 250, 260. You've said although within that you've got opportunities to increase that if demand improves. Just wondering what, what is the order of magnitude of that flex? Also, I mean, how do you achieve that? J ust as given the comments on land spending.
I think the reality is that we have some flexibility over the course of the next couple of months, but really if we're not on site by April, there's not gonna be... , we're not gonna be selling this year and into production. , if we if come February, we are, and indeed early March, we are seeing a strong recovery in the market, then we could respond to that. We wouldn't recover all of the 33 outlets that we've deferred, but we'd recover some of those. , the cutoff really is April. You've gotta physically be on site and services.
The balance as I think Martin alluded to is where, in terms of cash in particular is, the calculation we're making is where we've got a lot of infrastructure work to go in upfront on some of the larger sites. How far do we progress that and what is our view of 2024? As you can imagine, some of the bigger sites like Didcot, Ormiston, others there's a lot of infrastructure that needs to go into there before you can really start selling off of those sites. That's the very careful balancing act, we've gotta work through. As you can imagine, some of this cost is significant.
, putting big roads through can cost you GBP 5 million, GBP 6 million, GBP 7 million, if not more, on some of the bigger sites. You won't get a penny in return for it, so, until you start selling. That is the challenge that we're grappling with at the moment.
Yeah. Thanks, Raj. Very clear. Thank you.
Thank you. We will now go to your next question. One moment, please. Your next question comes from the line of Andy Murphy from Edison Group. Please go ahead. Your line is open.
Good morning. Good morning, Dean and team. Got a few questions, if I can. Just kind of on the landmark, can I just push you a little more from the previous question? I mean, given that you're being cautious and I'm sure a lot of other house builders are being cautious, do you anticipate any sort of price correction in the land market? If so, what would be your best guesstimate? Secondly, around the five-star rating that you've grown into, I'm just wondering, given the slowing market, whether there's any opportunity there to kind of cement that five-star level, whether you have an opportunity excuse me. Have an opportunity to sort of adjust working practices further to cement that position.
Next one was around the Future Homes Standard and the Quality Code, whether that, whether that manifestly raises costs or, materially or not.
Just finally, I'm pretty interested in your 10 month mortgage free offer. It sounds like I should know what it is. Can you just perhaps outline how that works and give us any sort of color that you can in these early days on the take up? Thank you.
Okay. I think it's very hard. , if I, if I could answer your first question precisely, then, I'm not sure I'd be sitting here, to be perfectly honest with you, much as I love every one of my colleagues and all of you too. I think it's hard to say. I mean, I think I can't see any immediate reaction in the land market because, other than distressed sales, I think landowners are gonna hold off. I mean, Martin, correct me if I'm wrong, but I'm not sure even in previous recessions, you've seen a great deal in volatility in land value. No, not immediately, no. I mean, it depends, as Dean says, on the position of the seller.
If he's prepared to wait till the market returns, that's what he'll do. There are some people at the moment that are just pausing and just saying, "Okay, well, come back to us in a few months' time. We understand the position, and we'll stay with you and wait." I mean, I think the other aspect, of course, is in land, I mean, we're focusing very much on demand here, but there's supply too, isn't there? , with some of the proposals we're coming to see from government, I mean, we've gone beyond NIMBY, haven't we? We're going into build absolutely nothing anywhere, anytime soon. I think that will also impact land values because, clearly, consented land is going to come at a premium.
It's very hard to call at the moment. , how long will the downturn be? Will there be stimulus coming from political parties? Will the Conservatives really either carry through on what they're proposing? Have they got the time to enact it? , those are all pretty significant imponderable questions at the moment, that will all drive the land market. I wish I could give you greater clarity, I can't. I think it's complex with many moving parts. That said, I'm sure there will be opportunities our team will be hunting. Our teams are really good at this, we'll be hunting that out. I think in terms of Five Star, yeah. Look, I mean, Five Star is embedded in the business.
I think this slowdown does give us the opportunity, as you say, to further embed it in the business. A big focus for me this year is to get our eyes down. Really want to focus on, we've got customer service right, wanna focus now on improving our RIs and getting build quality up even further. I think the Future Homes Standard, you're well aware we've covered those costs multiple times. Nothing's really changed much there from what we've said previously. I think the New Homes Quality Code, though, is a different point. For us, it impacts build. , it puts further time into the build process, which will impact output. , we're...
It effectively re-requires us to put more time in the build program and it that could be up to two weeks. That will impact us. Again, given that we're in a year of a downturn and to some extent, it is fortuitous that those two things are happening at the same time because it just enables us to reset and to get ahead. Mortgage-free?
Yeah, I can deal with that one. Basically, we've calibrated the 10-month Offer to to be a sales incentive of order of magnitude 4%-5%. , we talk in our state and prepared remarks around 2.5% incentive in Q4. It's sort of not on top of that, it's instead of that. Then it's trying to hit the customer pinch point of affordability in that first year. We take the cash flow burden away from them, and that will provide... , it's up to 10 months. Obviously, we need to calibrate it depending on specific circumstances of each customer and their LTVs. Just to give you a sense, it's sort of in that 4%-5% level of incentives.
There has been, as you, as I pointed to, a great deal of interest in it. I was speaking to sales advisors and sales directors this week, and , potential customers are very, very interested in it. I think with it, particularly this year with cost of living crisis and everything else I think it's a good incentive to get people in the door. It's attractive to them.
Great. Thank you very much.
Thank you. We will now go to our next question. One moment, please. Your next question comes from the line of Gregor Kuglitsch from UBS. Please go ahead. Your line is open.
Hi, good morning. I've got a few remaining questions. The first one is just quickly if you can remind us, sort of I guess a bit of a modeling question, but in terms of the fixed cost that you would say you have, and obviously sit some in the cost of goods sold and some in OpEx. I mean, I had sort of GBP 280 million or something of that order of magnitude. We can work through the operational leverage. That would be helpful. The second one is, I mean, I'm appreciating you'll probably be talking about this in March, but sort of any further views or guide or how you're thinking about the dividend.
Finally, I mean, you commented on it a bit already on the planning side, but clearly we're going to sort of a more constrained environment. Maybe that doesn't matter right now, but I guess thinking about your strategic land and your sort of historical strategy of land procurement do the current proposed rule changes sort of impact how you think about that going forward? Thank you.
Thank you, Gregor. Jason, do you wanna go 1 and 2, and I'll do 3?
Sure. On fixed costs, it's probably just over GBP 250-GBP 300, around 10% of the total cost base. About half of that's in sort of overhead, and about half of that is within cost of goods sold across the sites. Clearly there's some, as Dean said earlier, there's a little bit we can do on that, but we don't come into this with an enormous amount of excess costs. On divvy, we are gonna update you in March on that, as we said in November. We have nothing incremental to say on that today other than to reiterate the key points around maintaining prudent balance sheet and having a well-covered and properly set dividend that balances between investment and actual payouts and sets us up well for the future.
We will fill you in on the details in March.
In terms of planning, well, I think I sort of partly answered this previously. I think we're seeing a divergence between Labour and the Conservatives. , who's going to win the next general election? I don't know. I think that there is a contrasting position. I mean, clearly the Conservatives have caved into the will of the back benches. I think under the fig leaf of local democracy, which seems to me to be about three old men and their dogs you can't build anything. I think the Labour position is going to be quite different to that. They are seeing I'm not sure Green Belt is an issue for them.
I think they, certainly from what I've seen and heard of them, their view of life is responding to the aspirations of young people to get onto the housing ladder. Homeownership is a key, is gonna be a key policy for them. They're obviously talking about increasing homeownership. I think their target is 70%. I think they'll take a different approach to planning. So again, I can't really give you a clear answer because we're in uncertain political times and also, presumably at some point, the Conservatives do want to get reelected. If they do, they might take a different approach to the planning environment. So we'll just have to wait and see.
Okay. Thank you.
Thank you. We'll now go to our next question. One moment, please. Your next question comes from the line of Jon Bell from Deutsche Bank. Please go ahead. Your line is open.
Yeah, good morning and happy New Year. My question's on Deposit Unlock. What's gone wrong with it? Why are rates so high? Who's gonna do anything about it? Do you have any views on that scheme? Seems that nobody ever uses it. Perhaps you can just give us some color there.
I think, look, I think on Deposit Unlock, you're dead right. , it's at the moment, it's very few banks are offering it. , I think there's one small and one. Is it Nationwide?
It's Nationwide...
Newcastle.
Yorkshire and Court and Newcastle.
Yeah.
First 3. It is quite expensive. It's, what?
6%, isn't it?
Yeah.
Yeah.
Yeah.
I think it's not been widely promoted, partly because we're still working through the end to Help to Buy. It's, it's not a competitive product at this point of time. Look also it costs us 2.6% as well. Let's not forget that fact. That may change over the course of this year. , it may become more widely available. It, it self-evidently at this stage has not replaced Help to Buy. If that was the ambition of government to give first-time buyers the opportunity to continue to buy at 90%, 95% LTV, then clearly it's not worked. Of course, the timing is awful, isn't it?
because government removed Help to Buy just at the same time it was doing its best to sabotage the economy. , that is what you can see coming through in the forward order book at this point in time. You've got to expect that it'll be the Prime Minister at least is trying to settle the horses and run the country sensibly. , at some point maybe the Conservative Party will get behind him and help him.
Thank you. Just as one follow-up, if I can. One of your peers said yesterday, really poured cold water on the idea that Help to Buy could be extended in England. Would you share that view?
I think never say never. Though I would agree with David that I think it is, there is no appetite from Treasury to do that at the moment.
Yeah. Okay. Thank you very much.
Thank you. We'll now go to our next question. One moment, please. Your next question comes from the line of Emily Biddulph from Barclays. Please go ahead. Your line is open.
Morning, guys. Hope you're well. I just wanted to come back on one point. You mentioned in the statement that sites that are particularly Help to Buy heavy and southern sites have been performing worse than the average. I wonder if you could give us a bit more color on the sort of distribution around that 0.3 sales rate. Is there a meaningful proportion of sales or sites that are performing materially worse than that? What are the best kind of 20% of sites doing or what are the worst 20% of sites doing? Is there a sort of reasonable distribution as well in terms of incentives, are you using them to sort of much greater extent on some more difficult sites? Thanks.
Yeah. Morning, Emily. Well, southern sites, southeast, both southeast and southwest, are particularly suffering at the moment. , really that's continued into the new year. North and central obviously came down along with all our markets. They held up somewhat better, and they've rebounded better into the new year. I think what we see, frankly, is the closer you are to London, the more impacted you are by the end of Help to Buy. Particularly within London, I mean, we've got one or two sites in London, for instance, Rainham and elsewhere with obviously the old Help to Buy criteria was a much bigger level. , there is an affordability issue there.
Fortunately for us, we don't have many of those. As , as you move further out from London, it's a mixed picture, for instance, in Kent, some sites are selling well, particularly towards South Coast. Closer into London, maybe not so much. it's very slow sellers in southeast and southwest. I know Bristol's hard hit at the moment. elsewhere in the southwest, more of a mixed picture. You're right to say there is a distribution and the toughest impacted is southeast, southwest, and in that, particularly around the London area.
Okay. Thanks, guys.
Thank you. We will now go to our next question. Your next question comes from the line of Sam Cullen from Peel Hunt. Please go ahead. Your line is open.
Hi. Morning, everyone. I've got a few questions as well. First one is on LTVs across your buyer groups. Can you remind us what the average LTV is for your buyers and particularly for the first-time buyers? If you have the numbers sort of pre and post-quasi, that would be helpful. The second one is kind of related to that. Is there any mix impact in the ASP in the order book in terms of lower numbers of first-time buyers taking lower priced properties out of that, which is boosting that 282 number? Are there any kind of bulk sales that are either in the 2022 numbers or in that order book also?
The last question is really on kind of the interest levels. I think, Dean, you mentioned a 3-fold increase, sort of Boxing Day prior to the week before. What's that? Is that an increase versus the prior year also, or is that a decrease versus the prior year? Just kind of the last more kind of philosophical question, I guess. You mentioned, I think you said your excitement about the opportunities that this environment will give. Just interested to hear you kind of flesh out what you think those opportunities are.
Okay. Well, I'll have a go at some of those quite detailed questions. I think On the detail of LTVs, I'm not sure we've got that. We'll have to come back to you. I mean, look, the bank of mom and dad is, we see that playing out very much with our first-time buyers in particular. That by no means answers all of the first-time buyer demand. The use of Help to Buy for first-time buyers will be a high proportion. I don't know the number, but it will be a high proportion. I mean, look, I think I just have to get back to you and maybe Vicky, we can have a stab at an answer and get back to Sam on that.
On the mix, I mean, yeah, look, I mean, I think the mix, there's always a mix on our sites. , I pointed to an 11% increase year-over-year. Pricing was robust last year. It needed to be to offset build cost inflation, which we've done. , pricing was robust. Bulk sales haven't traditionally featured a big part of the business. I should think year-end probably did 400-500, something like that, all in about 14,500, 14,800. Not a big focus for Persimmon up to now because again we're not volume driven, we're margin driven.
We are seeing investors making inquiries and that's rebounded quite strongly in the new year. , we've got to get into detailed discussions with them at the moment, in particular as regards their price expectations. Availability, of course, features into that as well. We've got to work all that through. In terms of interest levels, yeah, very high, as I said, around Boxing Day and into the new year. Highest all year. , I think it was a threefold increase on pre-Christmas. The week before Christmas, there was a threefold increase on Boxing Day. A very, very big uptick in interest from potential customers.
As , is traditionally the case, in some parts of the country, that interest level was getting back to where it was year-on-year. That's, that's encouraging. My excitement, well, I think there will be opportunities in the land market. I think there's opportunities for us to embed further operational improvements into the business. Who knows? There may well be corporate opportunity as well because it's going to be a very challenging time for builders. it that may present Persimmon with its strong balance sheet opportunities for further growth, which in this, new and different environment, we'll be looking keenly at.
Great. Thank you.
Thank you. We will now go to our next question. Your next question comes from the line of John Fraser-Andrews from HSBC. Please go ahead. Your line is open.
Thank you. Morning, Dean and the team there. two for me, please. The first one is just on this response to your Boxing Day offer, Dean, the threefold increase. Is that a measurement of sort of web inquiries and inquiries on specific homes into your sales offices? That's the first one. The second is just the confluence between house price inflation and build cost inflation last year in 2022. Did the build cost inflation land at 8%-10%, which I think you were guiding in November? On house prices, you mentioned in the statement that the ASP was up 5%. That was a mix of HPI and mix.
Perhaps you could just strip out what your HPI was in last year and how that compared, obviously, to the 8%-10%. Thank you.
Yeah, morning. Morning, John. Yeah, it was web inquiries, or inquiries into the business, so that's an easy one. Look, as , it's very hard, answering your second question. It's very hard for us to look through the detail and strip out the mix effect on price. I mean, I think as Barratt said yesterday, like for like, probably across the business, we saw at or above double digit inflation, like for like. Which has enabled us to offset build cost inflation, off-site gross margin level. I mean, obviously that picture varies very much around the country. There were very much stronger parts of the country than others.
, parts of the southwest and southeast saw very strong like for like increases in house price inflation. Other parts of the country, it was a bit weaker as you, as you'd expect. , that's all I've got for you, I'm afraid, John. I think like for like, probably at or around double digit, although it was a variable piece across the country.
Yeah. No, great. Just a quick follow-up then, Dean. On forward looking build cost inflation of what you said on labor, materials still seems to be mixed. Is it just timber and steel that's down for now and there's been no movement in the early part of the year on any other materials?
I think it's a volatile picture. As I said, anything with cement in it, costs are still going up or people are asking for price increases. I honestly think that will change. , there will be less bricks used across the country this year. There will be less tiles used across the country this year. Obviously we have a brick and tile factory. So that is going to impact the market. Everybody's gonna see the same thing. So I do expect inflation to moderate. Also expect trades only come back to work very slowly in the new year, I've come to learn. And I think they're processing still a very significantly different change in forward order book for them to what they were looking at pre-Christmas.
I think that will take some time to work through. As I said in my, I think my earlier answer to a question in my time here, I have never before heard of bricklayers reducing rates per 1,000. They are doing so now, and that will become more commonplace.
Great. Thanks, Steve.
Thank you. We will now take our final question. One moment, please. Your final question today comes from the line of Glynis Johnson from Jefferies. Please go ahead. Your line is open.
Thank you. Apologies, this is possibly one that might, could take some time, but maybe you'll just sidebar share. I just wonder, given the change in terms of the trading outlook, if you're getting what kind of mood music you're getting out of government. I'm thinking in terms of timing of Part L, Part F, and trenches, perhaps, and foundations being dug. In terms of any other support, in terms of any of the discussions around the Long form what are you hearing from government? Are they recognizing that life is very different now to when they might have been having negotiations with you last year?
Look, the Secretary of State is entirely focused, Glynis, on getting the Long Form Agreement signed. I expect that's pretty imminent. look we are in a different place to some, I acknowledge it is easier for us to sign than it is for others to sign. I welcome getting it signed. It's been a distraction. We just wanna get on with it and get it done. As I said earlier, commercially, just getting the remediation work done as quickly as possible is really in our best interest, in everybody's best interest, I believe. Cash heavy, it is what it is, we just need to suck it up and move on.
Look, there were some discussions before Christmas, from the department waking up to what was going on into the broader market. I wouldn't say at this point in time, DLUHC have got any particular interest in stimulating the market. I think that interest will, would need to come from more senior members of the government. I wouldn't rule it out, equally, I'm not holding my breath at this stage from any olive branches from DLUHC.
Okay. Thank you very much.
I think that was. Was that the last question? Look, lots of questions. Thank you for your interest as always. I am delighted with our trading performance in 2022. It was a tough year, to come in at the top end of our expectations is a real achievement. We have talked at length about how challenging 2023 will be. I've tried to paint you a truthful picture of what we're seeing. We don't know. We can't give you guidance at this stage. The next few weeks will be absolutely key. I think Persimmon is a very strong company. It's got some great people within the business. It's got a lot of great resources, strong balance sheet.
, I'm delighted with the land bank we've got. , it's a nimble and active team and we look forward to building on the opportunities that this more challenging environment will present. Thank you very much, and I think we'll speak again at the end of February, beginning of March.
Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect. Speakers, please stand by.