Thank you all for joining us today. I'm going to open with a couple of slides before handing over to Jason to take you through the numbers in detail. Today, I'll outline the key steps we've taken to manage uncertainty during this current downturn, while at the same time seeking to protect both our margins and continuing to build a platform for future growth. First, let me pull out some headline figures for our first half. In keeping with Persimmon's long-term strategy, we've not chased volume, but rather we prioritize gross margin over volume and held prices wherever we can. As you can see from our results, this is playing out as we anticipated in March, with gross margin performing relatively strongly, but with fixed costs impacting operating margins.
As we grow volumes through the remainder of the year, I expect this strategy to pivot back to our advantage, given that our fixed cost base is relatively lower than our peers. Our completions reflect both our pricing strategy and the weaker forward order book at the start of the year. If you look at some specific points, private average selling prices were 8% higher. Incentives were around 3% of sales price. Through the period, our sales rates recovered from the lows seen after the Mini-Budget, but were still down on last year. That said, our total forward order book at the end of June is up over 30% since the start of the year, and it has continued to grow in July. Private forward sales are up by much more, which I'll talk about more later.
Our forward sales average selling price, as we came into the second half of the year, was up 0.6%. It's improved since. Our sales rate of 0.59 is more or less in line with the industry average, which, of course, includes a number of bulk deals. We've had lots of interest. We've taken a selective approach to investor deals. Frankly, I've seen many that are just really very opportunistic. We'll, of course, continue to review this throughout the year and judge any opportunities on their merits. As things currently stand, I'm confident that we should deliver at least 9,000 completions this year. As we do this, we expect our net margins will improve. Those are the key quantitative figures. I'd like to talk now about some of the qualitative improvements we've made in the first half.
Since I started, we've been protecting Persimmon's strengths while also focusing on improving our capabilities. With rising mortgage rates and the removal of government support, I believe that the priorities I set out three years ago to improve both customer service and build quality, while also rebuilding the reputation of our brand, are even more critical in today's market. We're no longer order takers and have to work hard for the trust of our customers. I'm really pleased with our progress on reportable items, where we're now better than the industry benchmark, following a 50% improvement over the last year. When I joined the company, we were the worst performer on this measure in our peer group, and we're now regularly in the top quartile. Likewise, I'm really pleased that we've improved our five-star HBF customer satisfaction rating with our current score now at 92.3%.
We've also seen a marked improvement in our Trustpilot scores, as you can see here. Turning to land, we're continuing our highly selective approach to investment, targeting those exceptional deals that maintain our stringent hurdle rates. We've added some excellent land in a targeted way during the first half. We have a good pipeline of land, both owned and coming through the system, and that we're looking to bring into production at the appropriate time. Securing planning consents, despite the well-versed challenges in the planning system, has been a real focus. We're being proactive and we're prioritizing land we already own. We're, of course, closely monitoring the cash investment required and the timings of new site openings against demand. We're acting now to strengthen our platform for the future in a targeted way.
Our investment in a second timber frame factory and TopHat modular manufacturer will also help here, as we maximize the benefits from our existing brick and tile factories and the progress I've spoken about on our quality, customer service, and sales and marketing. When the market recovers, I want Persimmon to be able to grow quickly while delivering an industry-leading margin. I'll say more on this later. I'll now hand over to Jason. Let me just say, I mean, obviously, this is Jason's last appearance with us. We've enjoyed working with him. Sorry he's not been here long, but we wish him all the best for the future.
Well, thank you very much, Dean, and good morning, everybody. Let me start with a little context for the trading and the financial highlights for the first half. As Dean mentioned in his opening remarks, the challenging market backdrop impacted performance as we flagged in March. Of course, none of this will take any of you by surprise. You also know that sales for the first half of 2023 started in earnest around October last year, which coincided with the now infamous Mini-Budget. We had a much lower order book going into January, 56% lower, and a lower sales rate. This together led to volumes 36% down at 4,249 new home completions. Pricing remained resilient in the period. Overall, our average selling price was up 4%, with demand particularly firm for larger properties.
Dean will talk more about the sales trends and our more recent trading in a moment. We saw a 33% decrease in new housing revenue and a reduction in the operating margin to 14%. PBT came at GBP 151 million, 66% lower. Finally, on this slide, I'd just like to highlight the dividend. The board has declared an interim dividend of GBP 0.20 per share, which is in line with the capital allocation policy we set out in March. Achieving a balance of investing in the business for future growth with sustainable returns to our shareholders. On the next slide, we'll look at the movement in operating profit. Operating profit was GBP 152 million. Two principal elements drove the reduction: lower volumes and inflation.
We estimate that the reduction in volumes impacted profit by GBP 183 million compared to the first half of 2022. While we saw some increase in our selling price overall in the period, this was more than offset by build cost inflation of around 8%-9%, which together, with a greater proportion of affordable housing, led to a GBP 89 million decline in operating profit. We also had an increase in net operating expenses of GBP 16 million. This reflects the annualization of prior year investment and inflation. As outlined at the full year results, the investment we made in OpEx was to improve the quality, sales and marketing, customer service, and IT, which will strengthen the business's platform into the future.
We're closely managing build and operating costs, which are core strengths of Persimmon. Dean will talk more about those in a moment. I'll now walk through the key drivers behind the movement in revenue in the first half. Volumes were down 36% overall, with private completions down 41% and housing association only by 12%. Sales rates recovered in the early part of the year from the sharp sell-down in Q4, albeit to lower levels. In the period, we sold 3,281 private homes at an average selling price of just over GBP 288,000, which is up 8% year-over-year. It's worth noting, underlying private ASP has been approximately flat since Q4. We continue to differentiate ourselves through being the most affordable major house builder, the price of our homes around 20% below the national average.
The absence of Help to Buy in England, along with the affordability constraints, hit first-time buyers in particular. Overall, these customers represented 34% of private completions, down from 42% in 2022. Performance in partnerships was resilient, with revenue only 4% down to GBP 144 million and selling price up 9% year-over-year, reflecting the great result achieved by the team. Moving on to the next slide, I'll talk a little more about our investment in land. In total, we have around 68,500 own plots, which gives us a good platform to grow. We're working hard to convert our land holdings into active outlets. Our total, 84,751 plots that are owned and under control, 41% of which are owned with detailed consent and 39% are owned with outstanding planning conditions.
In total, we added 3,245 new plots to our consented land holdings. Three hundred and seventy of these additions came from the conversion of strategic land holdings. This is a replacement rate of 76% compared to completions and shows our cautious approach to land acquisition. Looking at the portfolio overall, land cost as a proportion of anticipated revenue of own plots is a very competitive 11.4%, assuming no change in selling prices. In the next slide, I want to show you a little bit more detail of the new land investment. In the first half, we acquired, by that, I mean, legally brought onto the balance sheet, an additional nine sites for a consideration of GBP 40 million cash, plus around GBP 50 million in deferred payments.
These nine sites are broadly distributed across the country, giving us good diversification and represent a gross development value of around GBP 550 million. Of these new sites, eight had detailed planning permission, meaning we will be able to get on the sites promptly and convert them into selling outlets, and therefore, quickly recycle our capital. In fact, the ninth, which was secured on outline, was very successfully achieved planning and is already selling new properties. We haven't seen much movement in the price of consented land, and we've maintained our financial discipline in line with the margin on our existing land holdings. I'll cover that a little bit more on the next slide. On this slide, we've again analyzed the group's land portfolio to show you the breakdown of the embedded margin, as we did at the full year.
The anticipated margin of the owned portfolio is 31% overall, based on current revenue and build cost. This is a slight reduction from the full-year position and reflects the impact of higher build cost inflation in the last six months. The chart highlights both the value and the low risk in our land holdings, with only 6% of plots owned having an embedded margin of less than 20% at June 30. 63% of our own plots have an embedded margin in excess of 30%. We believe our land portfolio is well-positioned and provides us with a good platform for the future. Just a quick final slide on land to answer an often-posed question: When did you buy the land that is supporting the business today? This, this slide breaks down the completions in the first half based on when the land was purchased.
The slide largely speaks for itself, you can see only 6% was purchased prior to 2011, 50% was purchased between 2016 and 2020, 33% was purchased more recently. Each year, we're adding land that is producing new outlets, we're not reliant on old strategic sites. There is more to do to grow the business in the medium term. I'll now change tack, I'll cover cash flow for the first half. The group entered the year with a strong cash position of GBP 862 million. As we said in March, there are a number of elements that are driving cash utilization. I'll just call out the more significant ones. First, payment of land creditors, which was GBP 182 million.
WIP investment of just over GBP 200 million, with EUs up by 800 to support the second half volumes, and considerable infrastructure spend associated with opening new sites. Of course, the payment of the 2022 dividend of just under GBP 200 million. In all, that led to cash of GBP 357 million at June 30. Our guidance for you on this is a year-end cash position of GBP 300 million-GBP 500 million, with the range driven primarily by land spend, which we expect to be in the range itself of GBP 400 million-GBP 500 million for the full year, and the level of WIP investment. Moving on from cash, I will now touch on the elements of the balance sheet.
The group's a robust balance sheet with net assets of GBP 3.4 billion, which is GBP 10.51 per share. The group's land asset was flat. The WIP was up, the reasons I just covered on the cash flow slide. At 30th of June, we had GBP 356 million of land creditors, which is down GBP 117 million net from the start of the year. Around a further GBP 90 million is due to be settled over the second half of the year. Part exchange stock at 30th of June is GBP 25 million higher at GBP 86 million. We continued to sell part exchange properties swiftly. We have minimal exchange, minimal aged stock.
In terms of liquidity, which remains strong, it has been bolstered by a new bank facility, which I'd like to cover in a little detail on the next slide. Last month, the group signed a new revolving credit facility, GBP 700 million, with a 5-year term, replacing the old facility of GBP 300 million. We were very pleased with the strong support shown by the four major clearing banks and also adding Svenska Handelsbanken to our syndicate. The new facility has attractive borrowing costs and embeds sustainability targets, consistent with our focus on achieving net zero homes in use by 2030.
In summary, those targets are a reduction in our absolute Scope 1 and Scope 2 carbon emissions, in line with our Science-Based Targets, building sustainable homes by reducing the average Dwelling Emission Rate, and skills and development, increasing our training programs for colleagues to ensure quality delivery and career progression. The new facility will not only provide resilience for the business, but will also provide the resources to grow our land and invest in the opening of new outlets. To finish, I'll just take a moment to remind everyone of our approach to capital allocation. Our overriding objective is to retain sufficient capital in the business to ensure we can grow sales profitably in the medium term. We've told you that we need to grow the number of outlets, and of course, this will require capital.
As the group invests, our long-standing financial discipline will continue in land appraisals and the decisions to open outlets by focusing on margin and cash payback to bring good returns well into the future, leverage will be kept low. As regard capital return, first, let me remind you, our policy is to pay a sustainable dividend from the company's earnings, balancing those payouts with capital retained. We set this at a new baseline of GBP 0.60 per share in 2022. This figure was chosen to provide a good level of cover, on average, recognizing the cyclicality in our industry. For 2023, the board intends to maintain the dividend per share with a view to growing it over time. Today, we've announced an interim dividend of GBP 0.20 per share, which is entirely consistent with that policy.
For completeness, in due course, we would return any excess capital to shareholders through a share buyback or a special dividend. Thank you, and I'd like to hand back to Dean.
Thank you, Jason. Let me begin with current trading and some key figures. As you know, the market continues to be challenging, with high mortgage rates and low consumer confidence impacting short-term demand. You can see this in our numbers. At the end of June, we were some 46% down on this time last year. Compared to January, our private order book is up over 80%. Affordability is the key issue for customers. Underlying interest is still good, with the number of weekly website users continuing to exceed the equivalent weeks last year, and our product proposition is strong. We build high-quality homes at attractive prices with our Persimmon Homes ASP around 25% below market average. That's a key figure for me, not least when our brand reputation is also improving. Mortgage providers and customers are seeking solutions to the affordability constraints.
In common with others, we're finding that an increasing number are choosing to take on longer term mortgages to manage the impact of increasing rates. Some of our brokers are seeing a 14 percentage point increase in the number of first-time buyers taking on a mortgage term of over 36 years, with 49% taking them on in 2023 versus 35% last year. We're now in the typically slow summer selling period, our sales rate of 0.41 over the last 5 weeks reflects that. Pricing has, however, remained resilient, with private average selling prices up 0.9% since the start of the year. Incentives are around 3% of sales revenue. Cancellations have remained at typical levels and down valuations are low.
Despite this further seasonal slowdown in recent weeks, I'm confident that we remain on track to deliver at least 9,000 completions this year, as we're currently over 90% forward sold for our sales based on this number. I'd like to turn to margin and provide you with some detail on the movement in our margin for the first half. I'm sure we all remember we shared this slide, or a very similar slide with you, at the full year results. The expectations that we laid out to you then have been mostly borne out as we progressed through the year. The net impact of HPI and build cost inflation of 8%-9%, impacting the profit and loss account in the first half, has reduced our gross margins by 4.2%.
The fall in sales rate, and therefore volumes, has impacted by a further 2.3%. The proportion of completions that we delivered to housing associations has gone up from 17% in the first half to 23% in 2023, resulting in a 90 basis point reduction in margin. Increased incentives and marketing costs has resulted in a 2.1% reduction. All in, our margins have fallen by 950 basis points in the period to 21.5%. That's in line with what we outlined at our year-end. As we also explained at the year-end, just as these pressures have reduced our margin, so we expect our margin can and will improve as the build cost pressures ease and when the market backdrop is more favorable and sales rates improve.
In the meantime, we're mitigating this margin reduction in the areas that we can through taking a disciplined approach throughout all of our operations, as I'll show you on the next slide. We're looking at everything and asking ourselves: Can we do it differently? Learning from the best in our group, can we be better? Can we be more efficient? Can we drive value enhancement? We're going through on a plot-by-plot, site-by-site basis to identify opportunities. There are four areas of smart savings where we've been particularly focused. First, value engineering and identifying cost savings that do not compromise quality. Our technical director is leading this review with regional chairman and MDs to see whether we can learn from the best examples across the group to spread build efficiencies.
Second, are there some specifications that customers don't value if it brings the price of their home down and makes it more affordable? Using GRP canopies over front doors, for example. Overall, we think there's the potential for up to GBP 1,800 savings a plot. Third, subcontractor pricing. With an easing in inflationary pressures, are we capturing this in pricing? In some trades, we're seeing prices coming down, we're using more regular reviews to capture that. Fourthly, overhead. Persimmon is a lean organization, but we're constantly reviewing where we can target some savings. A recruitment freeze has seen headcount reduced by 300 this year, for example. We're targeting GBP 25 million of annualized savings, which will benefit our 2024 operating budget.
In doing all this, we're always looking to strike the balance between the need to manage the current uncertainty while ensuring we're well positioned to respond quickly as the market recovers. We've been strengthening key capabilities to balance exactly that. It's to our vertical integration I'll now turn. As part of our cost focus, we've looked to further expand the use of our own factories. They remain very competitive in pricing and provide us with a security of supply. If you take brick as an example, since I joined the company, we've increased the use of our own bricks to around 55%, from around 30% in 2020. We estimate it's around GBP 2,000 a plot cheaper to use our own bricks. We're also looking to strengthen our platform for growth. Our own facilities have a key role here. Take Space4.
I've spoken before about our new timber frame factory. In June, we secured planning permission for it. It'll be a state-of-the-art, heavily automated factory and a real step change. It has the capacity for up to 7,000 homes a year. It will deliver complete timber frame panels with much more of the work carried out in the factory, pre-insulated, windows pre-installed, and services pre-drilled, for example. It'll also deliver build efficiencies in terms of both speed and cost, more consistent delivery of factory guaranteed quality, with reduced dependence on trades where there are shortages. We'll start building next year and hope to have the first frames come off the production line in 2026. During the period, we also invested in Top Hat, the country's most innovative modular manufacturer. The most exciting part for me is their excellent brick facade.
When combined with our new frames, it will be yet another leap forward. There is a video on our website of Andy Faller, our Group Construction Director, and Richard Hush, the MD of Essex, discussing some of the benefits they, they see for those who'd like to watch it. I also thought it would be useful today to talk through where we are on building safety. We're being very proactive here and are making good progress. Our dedicated team is, amongst other things, holding monthly meetings with the ManCo or their agents on every development to ensure progress. This table demonstrates the benefit of this approach. Works have been completed on 36 or 45% of the 80 buildings. While there are still some coming into the program, we believe this will now slow down. 4 of the 5 recently identified developments here, we believe will only require minimal works.
As you can see in the table, we're moving many developments through the various stages and still aim to have started works on all developments by the end of the year. This means the next 18 months are likely to be very busy indeed and the peak of the cash spend. We're still targeting completing the program within the 3-year timeframe we set out in March. A key point on this slide for me is that we now only have 17 of the 80 developments that are progressing through a tender process, meaning that we have firm pricing for all the rest. I'd like to now take you through some of the other areas where we've been strengthening our approach, excuse me, I'll start first with sales and marketing.
This is an area that Persimmon has not traditionally invested in, and we've been working hard to develop it in recent years. Our key objective is to drive interest and obviously convert it into sales. We're targeting marketing activity on particular groups to drive interest and get more customers into the sales funnel. We're combining both national and local marketing to achieve this. Our national campaigns, Boxing Day and Easter, did drive increased website visitors, as you can see from the graph. We'll be launching a new campaign soon to take advantage of the usual uptick in interest in the autumn. We've complemented this with an always-on digital marketing capability that we simply didn't have in the past. We've invested in our staff and enhanced sales agent training and mystery shopping, and we've been disciplined with incentives and offers.
With the current affordability constraints, conversions of leads to reservations is the key challenge. We've seen greater use of part exchange in the first half. This includes more examples where existing customers are buying a new home with us. In some regions, up to 30% of the business is coming from existing Persimmon customers. This loyalty is pleasing to see. It speaks of our improving brand reputation and is something we've been looking to grow as we've improved quality and customer service. It drives repeat custom and is something we're looking to grow further. A new CRM system, Yourkeys, will mean we can nurture prospective customers through the sales process to drive our conversion rate. As we grow the database, it will improve our insight data, enabling further targeting of our marketing.
We'll start the rollout in the coming months. This system will only grow in effectiveness through time. It's again an example of how we're investing now to improve our performance and strengthening our platform for longer term success, which ought to be secure, given the relevance of both our brands and the strength of our national presence. It's these two factors I'll now turn to. Persimmon has two core brands for the private market that are now well-placed to offer quality homes at a range of price points to suit different segments of the market, and we do that across a national network that's perhaps unrivaled. As I've mentioned, our affordability is a real strength, with Persimmon Homes' average selling price around 25% below the market average, and we've combined this now with a transformation in quality and service over the last couple of years.
It's been my mission since I joined the company to combine our affordability with significant improvements in quality and service, and there's no doubt in my mind that this transformation in quality and service has helped drive the improvements in ASPs in England. As the map shows, we've had significant increases in, in the North, South, and Southwest. I think this is a real accomplishment, not least in the market conditions. This, of course... This is, of course, a changing picture, and we'll keep it under close review. The land we bought into our holdings in the period has been targeted, particularly where we see firm pricing remaining. The challenge remains getting new sites through the planning system, given the well-publicized constraints. I spoke in March about how we're adopting a more proactive approach, and I want to update you further on this now. Planning, of course, remains challenging.
Nutrient neutrality is now stalling 145,000 homes across the country. Recent Lichfields analysis showed only 40% of local authorities have an up-to-date local plan, it's clearly going to be a significant political battlefield in the run-up to the next election. This political backdrop, alongside the local authority capacity issue that's been well documented elsewhere, means it's taking it much longer to get sites through on average. We've made this point directly to the CMA as part of their market study. What's essentially supposed to take 13 weeks is often taking 13 months. We've responded and upped our game. We're now much more proactive, working with local authorities. We've brought together our planning teams and external affair teams to pursue both planning and communication excellence.
Well-designed schemes that maintain Persimmon's plotting efficiency while meeting local priorities are well presented, are more likely to get permission. If I take the site in Cranbrook, near Exeter, let me take Cranbrook as an example. Early engagement with the council meant that the proposed scheme met the local housing priorities, delivered the desired broader community benefits, and was communicated in a clear and understandable manner. It meant we met our own criteria while securing permission from the council. We're building local homes for local people, built by local workers. Combine that with our permission, Persimmon Homes' average selling price around 20%-25% below the market average, and it's a compelling message. We secured outline approval for over 1,400 homes there, six months sooner than we thought we would. We're also taking this approach on nutrient neutrality.
We're identifying on a site-by-site basis what mitigations we can pursue. This often involves working closely with the local authority to identify solutions. The challenge is obviously harder in some areas than others. Nonetheless, we've made good progress, and I hope we will see some previously blocked sites coming through soon. My lesson here is that, it's that the engagement works. I'd like to play a short video of Councillor Olly Monk, the portfolio holder for housing and planning at Cornwall Council. Three years ago, the council wouldn't even reply to our emails, let alone speak to us. It shows that beneath the national debate, where developers engage in a responsible and constructive manner, there are opportunities.
Do you know what I'd like to say? Is just that of all, of all the developers that I deal with, Persimmon are the one who, who are, are appreciative of the issue that we've got, and, and they put the most effort into letting us know what they're up to, how they're changing their working practices, and how they're working to improve their brand image across, across, across the board. And, and, you know, politically, at Cornwall Council, we want to deal with you, deal with you as quickly as we can, and get you to, you know, get you building down here to help us.
It'd be fair to say that Anthony's really sulking.
Do you know what I'd like to.
It's fair to say that Anthony's really sulking, 'cause I wanted to let him show you a second video because I thought you'd be bored, if you want to see it, I'm sure he'll share it with you. Today we're seeing some positive early results. We secured detailed planning permission for 5,102 plots in the first half, 120% of completions. As you can see from the graphic, they've also been spread across the country. We've been particularly focusing on our owned land holdings, sweating our existing assets. This will continue in the second half. Another way of looking at our progress is the drop in refusals. Over the five years, 2018 to 2022, we averaged around 10 refusals a year. Far this year, we've had just two.
I now want to speak about our outlet position. We've said our target is to grow our outlets back to pre-COVID levels in the medium term, as long as the planning system allows. The proactive and enhanced approach I've just described is at the core of that. We've a strong pipeline with good visibility. Over the next 2.5 years, we expect to have 250 new outlets at various stages of the planning process. Over 90% of that is already owned and under control. We're doing our best on planning, but opening will depend on our success of getting them through, of course. We'll also maintain our discipline. That's both in terms of our stringent investment criteria, as well as us rigorously assessing the cash required to opening new outlets in the current environment.
We'll carefully match spend to demand. We shall obviously not press forward hard if selling prices aren't good. We're being proactive to build a stronger platform. Despite the current weak market, we're not seeing the price of consented land fall. There remains a demand and supply imbalance. We expect that once mortgage rates begin to fall, demand will recover quickly. In conclusion, it's clearly an uncertain market and we'll remain disciplined in our approach. Whilst these are challenging times with many negative headlines and high mortgage rates, employment remains high. We're seeing strong wage increases come through the economy. There's record levels of equity. Banks are still lending. The fundamental long-term strength of the market remains. There is still a chronic undersupply. The ongoing aspiration and demand for home ownership endures.
With a growing population, this is only going to become more acute. Housing and planning are likely a real battleground at the next election. It will be interesting what this brings in terms of policy proposals. I've emphasized this morning how we're constantly looking to how we sharpen our approach. If you like, controlling the controllables. We'll remain disciplined with cash and cost control in place. I've spoken of areas of smart savings. We haven't chased volume at the expense of margin. Our pricing has remained firm in this market. This has protected gross margins in the first half. Net margins have been impacted by smaller volumes. As we expect more completions in the second half than we achieved in the first, we're confident the margins will improve. We'll continue to focus our build where demand is highest.
We're hungry for new opportunities, we'll seek them out wherever we can. We're now targeting at least 9,000 completions. If there's more opportunity out there, we'll go after it. With the improvements we made in recent years, I've spoken on the progress we've made on quality and customer service in particular, we have two brands with improved reputations, offering a broad range of price points for customers. I'm very proud to be building quality homes at a price that customers can afford. I've spoken today about the range of investments to make us stronger for the future. You may even say we've been fixing the roof while the rain's been falling. Feels like a storm to me. Persimmon has a strong record of delivering excellent returns through the cycle, we seek to maintain that.
Despite the market conditions we've experienced in the period, the board has today confirmed an interim dividend of GBP 0.20 a share. With this disciplined and targeted investment, we're building a good platform for the future, which we expect will again drive strong returns through the next cycle. On that note, let me take some questions. First hand over is up over here, I think.
Thanks. Will Jones from Redburn. The first one may be just around the market and tactics in the second half, particularly whether there's a sales rate threshold for the second half, below which you would consider the need to either move incentives up more or potentially adjust gross prices. Second one was just about margin. Two parts, really. First, looking back at the first half in the appendices, it looks like... Charles Church was only down three percentage points on its gross margin year-on-year, but Persimmon core down 11. Quite a big difference there, if you could help us understand it. Then just as we stay on margin, second half versus first, I think you're saying the operating margin will be up. Will the gross margin be up second half on first, do you think?
Last one, just around the outlet openings, that 250 number you've given for potential openings over the next 2.5 years. Do you have any context for that figure over the last 2.5, just for the backdrop to that 250, and whether it's a higher or lower number than we might have seen in the past? Thanks.
Okay. Morning, well. No, look, you know, as. Look, first of all, we're pretty confident that the 9,000 is a good number. We're over 90% forward sold. The market, you know, the market is variable at the moment. We are seeing a summer slowdown, which is perhaps more acute than normal. But it is bouncing around. I mean, for instance, last week, we were at 0.53. No, look, we're not, as I said very clearly in, in my slides, we're not, we're not gonna chase volume at the expense of, you know, value that we think is out there. Sorry, I didn't properly. What was your second question? Margin, first half?
Charles Church.
Oh, Charles Church. Well, funnily enough, we got asked this question at the board yesterday. Here's the man that gonna answer the question. The reality is, don't get too hung up about it, right?
Yeah. Principally, we have two entities that employ our staff. One, the PLC, who are Persimmon Homes. A lot of the, the overhead costs go to Persimmon Homes. You know, Charles Church will get an allocation of that cost. On a consistent basis, we, we can keep it that way.
I was trying to explain to Roger yesterday the fine art of absorption accounting, but he, he got bored with me. Will gross margin be up in the second half? Look, we got to see, haven't we, you know? I think the second half is going to be tough. There's, there's sort of, clearly, you know, the headlines aren't good, are they? But, you know, I'll tell you what, it feels a hell of a lot better than it did in Q4 of last year. So, you know, I'm, I'm, I'm looking forward to the second half. On 250 outlets, well, yeah, look, that is a good number. It's, how quickly we can bring it through the, the planning system.
You know, that represents really quite a catch up on the past of stuff we've been doing in the last couple of years. As you know, as you well remember, we had the hiatus in 2018, 2019, and 2020. That is, if you look at the chart, that's when we, you know, we, we moved forward on land, and that's now it coming through the system. We'll be, first of all, working hard to get it through the planning system, and despite, you know, I, yeah, I think we've seen some real progress in what we've done. It's, it's obviously not, not one of the controllables for us. We have to work hard with the councils. You know, that, that will dictate the pace at which it comes through. Got one just here.
Thanks. Aynsley Lammin from Investec. I think I've just got 3, actually. First of all, on the slide, I think it was 9, where you had the 9 sites that you've acquired with detailed planning. Lots of those in kind of Scotland, Wales, not, not many in the Shires, Eastern, Western region. Is that because it's just more difficult to buy land there with detailed planning, that you're kind of hurdle where it's gross margin, or have you got more coming from strategic? Just interested in more color there. Secondly, just I guess on the margin, you know, that chart you showed at the previous results meeting where you had the, kind of, you know, volumes get back to 14,000-15,000, start to see HPI mitigating the cost inflation. Do you still expect...
Is the message still that you expect Persimmon to be able to deliver a structurally, you know, margin that's at the premium to sector that it was historically? Thirdly, just interested to hear your thoughts on, you know, expectations of what the government might do, ahead of general election, Help to Buy, mortgage guarantee, any kind of thoughts or developments there you've seen? Thanks.
Thank you. Look, on the, on the first question, I wish we were that brilliant. You know, obviously, these things come through, you know, at, at pace, and deals depend on individual landowners. I mean, look, yeah, some of it, the Banbury site, which was, the one which was outlined, that was a win. Autumn, year before, very happy with that. Got it through outline to RM in record time. We haven't even got a show home open there yet, so we're selling from a cabin, and it's selling really well. I'm absolutely delighted with that one. That was a great win. Some of the other ones up in Scotland, well, you know, Scotland's a bit of a mixed picture at the moment.
Out on the West Coast, there's a bit of weakness, but in East, particularly around Edinburgh, really strong still. That, that reflects some of that. Look, everything we do at Persimmon is about value, and, you know, we're really focused on. We're really proud of the fact we, you know, we keep our headline average price below GBP 300,000 for a Persimmon product. Everything we do, from buying land, to developing the site, to building it out, to the supply chain, to our vertical integration, is focused on that goal, and I think the team are really, really, really good at it. I am confident that Persimmon will continue to command a premium margin to the sector in the medium to long term as volumes recover, as market conditions become more benign.
I'm really confident about that. Obviously, we can only control the controllables. You know, mortgage rates will remain high, I suspect, for longer than we all would wish for. The market is clearly correcting itself. You know, there's been a probably by the end of this year, there'll probably be a real terms reduction in housing prices of about 20%, even if nominally, it's fairly flat for us, at least. That is already course correcting, I think. With strong wage growth, you know, there's no shortage of demand, absolutely no shortage of demand. Can they get mortgages? That's the issue. Can they afford to buy the product? I think with our price point, we're bang on the right spot. I think it's exactly where we need to be.
Yeah, I do think the margins will, will recover over time, and I think, I'm confident Persimmon will continue to be leading the pack. We're not planning-- We have no expectation that the government will introduce something like Help to Buy, you know, in the run-up to, to the election. I mean, if you heard Mr. Gove's speech up at King's Cross a couple of weeks ago, I can't remember whether any of you were there, but he was hinting at, you know, some sort of support. I think... You know, I didn't get the impression it was going to be focused exclusively on our sector, but perhaps more, you know, more broadly this time. You know, we'll have to wait and see like everybody else. Rajesh.
I think Rajesh has got a question here.
Thank you very much. Zainab Bheekea from J.P. Morgan. I've got three, please. First one is: how do you plan to strike a balance between your aim to grow outlets over the medium term and, the restructuring plan that you've announced today?
Sorry, what was that again, Rajesh? Strike the balance between growing outlets and-
The restructuring plan for delivering GBP 25 million savings. The second one is in bulk sales. If you could add some more color on the growing importance. It seems to be about 5% of reservations. Is it similar proportion in the order book? Lastly, you included 7 more buildings within the scope of cladding remediation, but remain comfortable with the provision. Does this reflect over conservatism in the initial provision, or is it very minimal work required in the new buildings? Thank you.
Look, you know, we start from a low cost base anyway. You know, interesting what we heard last week, you know, very, you know, Persimmon is well ahead of that anyway. What we don't want to do. Look, these are tough times. We already manage the cost base very tightly, we're, day in, day out, we're hunting the ledger to keep a tight control of costs. Day in, day out. That is in the Persimmon DNA. What I absolutely don't want to do in, in our hunger to control costs is to impede our ability to grow back quickly when the market recovers. We're gonna manage that very, very, very carefully. We had 74 investor plots sold in the first half.
The current forward order book, to my knowledge, doesn't include any investor sales in it. There's probably a handful here and there, but, you know, no more than that at this stage, in that number. I think the cladding provision movement or lack of movement reflects two things. You know, having been stung once, of course, we were pretty cautious next time around. Don't say that if the auditors are in the room. Obviously as well, there's ups and downs. We've been unpleasantly surprised by the cost of some buildings, but very pleasantly surprised by the cost of others that we've got provided for, and that's provided a net win so far within the portfolio.
The new ones that are coming in, bar one, don't look as though they're gonna cost very much at all to get remediated. As far as we can tell, at the moment, we're in good shape. Look, we gave you a lot of transparency in those numbers. It shows you, I, I hope, that this is a moving, beast with lots of ups and downs that we're having to manage all of the time. We do hope the rate of new buildings popping out at the ether at us is now gonna dry up, but we don't know, alongside everybody else. There's one here, please?
Thanks very much. It's Charlie Campbell at Liberum. I've got, I've got 3, 2, 2 detailed, and 1 maybe more philosophical. The, you've very kindly given us a GBP 25 million target for overhead savings, but you gave us 3 other categories of cost savings. Just wonder if there's a number around those, if it's similar order of magnitude or lower. Secondly, on land appraisals, yeah, just, just wonder what sort of view you take on the sales rate in that. Do, do you, as you're appraising land, think about more normal sales rates, or do you use the current ones? Then the last one was the philosophical one. You, you, you, you said that you thought that affordability was the main problem at the moment.
I wonder if it's also uncertainty and whether or not actually sales rates might start to pick up just if we start to get some stability in mortgages. We don't necessarily need to see mortgage rates go down. I think consumers maybe need to understand where they are for some period of time. Just wondering your thoughts on that and what you're hearing from your sales offices around the country.
Okay, thank you. I can give you the answer for, or establish the answer for plot costs and value engineering, which is about GBP 25 million, we, we reckon at the moment for the course of the next 2 years. There could be more scope in that opportunity, you know, as we, we scrape hard at it. I can't give you a view at the moment on subcontractor costs. Sorry, I can't give you an answer on subcontractor costs. I can tell you what I feel about subcontractor costs, which is, you know, clearly, build cost inflation has and is continuing to moderate. You can see that across the industry.
Now we're post the Part L implementation, which I think caused an artificial spike in the first half, rates are coming down a bit faster than they were. It's not, it's, it's, it's variable across the country, but I think we've definitely see that we're passing a turning point on this at the moment. We need to go after it, and we are. You know, we're working hard with all of our subcontractors, recognizing that they've got a business, too. You know, we helped them out when the market had gone wild, now they need to show a bit of love back, and we're very clear about that. Our approach to land appraisals is always the current market. Always the current market. Could there be an opportunity in that? Yeah, there could be. Yeah.
Look, I think you're clearly right. I mean, uncertainty is a factor, you know, what I see with customers and talking to our sales advisors, people aren't waiting. They aren't thinking, "Well, I'll wait another few months 'cause I think the price is coming down, gonna come down." Don't see that's going on so much. You know, and the other, the other feature now is if you've got a lead, it's much more certain, much more certain. There's a, there's a much more committed buyer now than, you know, perhaps we've seen in the past. If you've got a lead, you know, it's gold dust, you hang on to it, and you, you drive it, you drive it to completion.
I, I, I'm, I'm sure there's something in what you're saying, but, you know, our view is that it is affordability, it is trying to get their foot on the, the mortgage. That, and customers will go through every sort of hoop to try and get their bank of mum and dad. You know, we think in our case, the bank of mum and dad is probably about 25% of, probably about 20. One in four of our customers are using the bank of mum and dad. I talked about, you know, the, the lengths that people are going now in terms of mortgage terms. Every permutation is being tried by our customers, and we try and help them, too, to, to get their foot on the housing ladder.
There's one at the back here.
Ami Galla from Citi. First, few questions on cash from me. One was on cladding provisions. Could you give us some color in terms of the timeline as to how the cash outflow would work? The second one was on PX investments. Have you achieved the sort of normalization in PX or the sort of investment in PX, and is this a normal level to look forward from, or do we expect further investment in part exchange from here onwards? Another one was really on the land mix slide, on slide 11 that you'd given. Can you give us a similar color of how that sort of tenure sits across your land bank, of how much of land is pre-2015 and how much is post?
In terms of a technical one, when you, How does the timing of strategic drawdowns work when you kind of try and give us a color of the timing of land? Is it at the time of the contract, or is it at the time of the drawdown of the strategic pipeline? Connected to that is when we kind of think about the volumes coming through in the pipeline over the next 3 years, is it reasonable to expect that bulk of it would be coming from land bought post-2015?
Wow, lots of questions there. Jason, do you want to have a pump at the cladding one?
Sure. That, so in the, I haven't got the statement in front of me, but you can see in the statement there's the cladding provision split between current and non-current liabilities. It's about GBP 100 million a year for 3 years, approximately, you know, across the board. We spent slightly less than we expected during the first 6 months, partly 'cause of the BSF, we've not refunded. We've got about GBP 40 million-GBP 50 million to refund to BSF, that will, you know, be the majority of what we'll do. You can, you can see that, let me just take... Okay, going. PX, I think it's probably has about normalized around that level. You know, we were- we've ramped up, so there won't be a big contribution into cash going forward, but it remains an important feature.
As we've stepped up the percentage across that period. On the land mix slide, I knew I'd get more questions. The problem with putting something up is you get more questions on it, and sort of fair, fair enough. I think on the, it won't be dissimilar as it goes through across the board. The strategic is a, you know, where it gets drawn down. I think your question is: when, when do we pull the strap through into... I mean, I think there's every different type of opportunity there. Some of it's quite old, some of it's quite recent.
It does take quite a long time, you know, to go from true strategic, which may just even be allocated or not even, so you could be up to 5 years, you know, to bring it all the way through into actually, into, you know, usable outlets. But there's a whole range of stuff within that. But as I try to say there, the pre-2011 stuff is, is, is quite limited, you know, going through that, going through that overall. I think that's the... I think that was it. Anything I missed?
More in terms of the volumes as well, it's a similar picture I think over the next few years.
I think so. I'd, I'd probably have to do a bit more analysis to give you a better answer, but I can't look at-
Okay, Mike.
Mike doesn't think it's going to be different.
Yeah, I would, I would expect it to be, you know, where we'll be, the volumes will be driven from the, the land that we've acquired over the last two or three years. Yes, there will be some tail-end sites or old sites, but we'll have to get to the tail end of those, and they will deliver a diminishing number of plots.
Yeah. I think as Jason and Mike have said before, you know, this, I keep, keep getting asked, you know, I've, I've got this mountain of strategic land out there, which is propping up Persimmon's margin. Well, if we have, I haven't found, I haven't found it 'cause we've been here three years now, so I don't know where it is, so it's not. Jason clearly shows that. Clearly shows that in that slide. Another one here, please.
Morning, Sam Cullen from Peel Hunt. I've got a couple, if possible. Just going back on land and in terms of kind of picking up volumes or growing rapidly, as you said, if assuming the market improves, can you give us some comments about the breadth of the land bank? Obviously, the, the depth is, is pretty impressive, but do you have enough sort of shots on goal to, to take if, if and when the market improves in terms of reservation rates, probably kind of picking up going forward? Then, secondly, take your points around the, the in, the in price of, of the land going forward and the margins you can make.
Assuming no improvement in the planning backdrop for the next 3-5 years, do you have to kind of structurally increase the, the asset base of the business to, to feed the machine going forward, to get back to 16,000 units?
Okay, thank you. Yeah, look, we do. You know, we're not, obviously, we've got some big sites in, in the land bank, but, you know, we're very focused on making sure, as you put it, to use your language, a number of shots on goal, 'cause that's what you've got to have to, to get it through. We've bought two really big sites since I've been here, which are about 2,000 units each, one's 3. That's it. You know, the rest are, you know, probably on average, 250, something like that.
Thanks.
200 odd, yeah. Yeah, look, I think unfortunately, you're right in the point you make there. Structurally, I mean, who's going to win the next general election? I don't know. If it's the Conservatives, well, you know, they're going to be in on a NIMBY podium, so, you know, that's not going to get fast, is it? If it's Labour and Liberals or, you know, they're trying to poach seats off of the Tories by not building, aren't they? That was going to be probably pretty hard. You know, you know, it's, it's only Labour at the moment that are saying they're going to build on the green belt, and I guess, what are they going to say when they get to office? Who knows. Yeah, I think it's gonna...
We don't expect planning consents to get easier, which is why we've upped the game, you know, there is something in that, you know, it, it, it's a bit like dealing with your customers, isn't it? You know, give them what you want, and hey, ho, they might buy. Likewise, you know, we've got to treat the local authorities as customers and remember that they're local politicians as well. You know, local homes, local people, local jobs. That really resonates well. So as you give them a development which, you know, ticks the environmental box, we just got 1 through in Swindon, in Cheltenham, confusingly called Swindon Farm. That, you know, we were in a consortium, we're not now.
We've moved forward on recognizing Cheltenham's environmental emergency, as they've declared it, and we've got consent. A competitor hasn't done that, they don't have consent. You just got to be nimble, right? That'll be a great market. It will sell well. If it's techie questions, he's gonna have to answer them.
I'm ready.
Glynis Johnson, Jefferies. I'm gonna sweep up with a few, actually. You can always trust me to do this. You say on the slide, you signed the Scottish Safer Buildings Accord. Others haven't done it as yet. How do the costs in Scotland compare to the cost in England on a sort of, you know, per, per building basis? I know every building is different, but just some sort of color on about how Scotland differs from England. Slide 9, where you show those sites that you've actually taken onto the balance sheet, looks like a total price of GBP 90 million on 9 sites for GBP 550 million GDV. That looks like a plot cost to selling price of 16%. Is that just about mix, or has that changed since when you first agreed to buy them?
Slide 10, land margin at normalized delivery. What is normalized delivery in either selling rate per site per week or in total number of deliveries? Definition of medium term, trying to get back to pre-COVID levels of sites. Is medium term 3 years, 5 years, 10 years? One just, or 2 more, actually, sorry. The increase in the RCF, GBP 700 million. What does that tell us about how your use of your debt facilities work intraperiod? Is it you're seeing bigger swings in terms of WIP investment and so on? Lastly, the plot cost to ASP through the P&L in the first half versus what's in the land bank. It's actually quite a bit lower in absolute terms and about percentage points lower relative to the selling price.
Do we need to be thinking about mix of what you're actually delivering through second half of next year in terms of that underlying profitability, or again, is that just comes out in the wash?
I'll have a go at some, then Jason and Mike, if I can punt over to you. Scottish Accord, look, you know, it is, The Scottish Government is inevitably taking a different approach to England and Wales, and they have yet to define exactly what their approach is going to be. That is a bit of a frustration, but we are nevertheless just getting on with it 'cause we think that is the right thing to do. Could that mean more cost to come? Yeah, possibly, as they finally decide what they're going to do. The exposure is not great for us. I wrote down 16% on the balance sheet. What was that one about?
Land.
Oh, it's just mix. It's 'cause we've got Banbury in there.
Yeah, it's not normal. It's very weighted toward that Banbury site at 940.
Yeah.
Yeah, I think, they, they range between about 8% and 20%, those sort of things.
Land margin.
Let's have a go. Normalized delivery, you said on page 10.
Page 10, land margin, normalized delivery. What is normalized delivery?
Where did we say that? Did I say that, Mike?
Well, it, it's on the assumption of 15,000 volume plan.
Okay, there's that one.
Medium term. Well, look, I think, you know, it is not that far out, as far as I'm concerned. I mean, next year, I think it's gonna be pretty tough, but, you know, I think, you know, mortgage rates will recover. We want to be, we want to be back in the game in 2025, 2026.
Yeah, 3-5 years is what I said in March, for the outlets, and I don't think that's changed. We're 6 months into that. Just reasonable.
On the RCF, look, you know, I am, I am cautious, and we're not gonna run off and spend all that money.
We, we doubt we'll dip into it this year. We think, you know, we might dip into it next year between periods. Depends obviously, on a number of factors, but you know, it gives us some resilience and some options, and if we wanna move faster, you know, we've got that opportunity to do so.
Plot costs to ASP.
That one, I, I just ran out of paper, I think, Glynis.
Just give us that one again.
Because our plot cost and also the plot cost to ASP is actually quite a bit lower than what's in the land bank. I'm wondering if we need to think about mix-
Yeah
profitability perspective into that land. Is there anything you've been thinking about that going forward as it comes more?
I think, yeah, the, the 11.2 that we've obviously put through has got a higher proportion of HA in there, so you, you could say it's slightly off-
We, and we probably we sold slightly better in the North and slightly-
Yeah
-worse in the South and Southwest, so you see a slight mix change there just because of where sales rates are.
Yeah. Yeah. Okay, thank you. There's one as well.
Yeah.
Thanks. Richard Manning from Bank of America. Just 2 from me, please. Could you just give us a quick update on when we can expect the benefits from the Space4 factory to come through? And is there a certain amount of volumes when those benefits of the vertical integration really start to impact? Secondly, in terms of your customer mix, as rates remain higher for longer, are you seeing, with your price point, some customers trading down from maybe what they were targeting before? And is that something you'll continue to benefit from? Thanks.
Thank you. Yeah, 2026 is when we expect the, the, the, the factory to, to open. I'm really pleased we got planning consent, get on, build it now. 2026 is when it will come into, to production. Look, you know, if, God, if we'd have had that last year, it would we'd have all slept easier at night. I, I just really I'm really excited about it. You know, obviously, timber frame is more expensive than trad, but, you know, in, in a buoyant market, I think is absolutely essential part of the tool, toolkit. The, the what we can do. Well, look on, look online at the website, you know, 'cause Andy is waxing lyrical about it.
You know, I do urge you to look at that 'cause he, he explains it very well, I think, and it's worth looking at. I think, you know, it could be a real game changer for us. Yeah, we are. On customer mix, there's two, you know, obviously, there's two, there's two aspects of that. Was Help to Buy, Help to Buy, or was it Help to Buy bigger? You know, clearly, yes. Also, I think, you know, downsizers as well. You know, I, I was at one of our sites on Sunday, and, you know, we had a three-bed to sell. They were retiring, and they wanted a two-bed. Well, we're going to have lots of two-beds here, you know? Look, we're, we're seeing it both in first-time buyers, and also downsizers.
That's, that's, that's a big slug of our market, and, you know, they're cash buyers as well. That's really, really interesting. Yeah, do, I think that will, will, with our price point, we will see more of that come through. Okay. Thank you very much.