Hello all, and a warm welcome to the Taylor Wimpey trading update. My name is Lydia, and I'm your operator today. If you'd like to ask a question at the end of the presentation, you may do so by pressing Star followed by one on your telephone keypad. It's my pleasure to now hand over to our host, Pete Redfern, Chief Executive. Please go ahead when you're ready, Pete.
Thank you. Morning, everybody. Thanks for joining us. I think this is a sort of very straightforward statement overall, and seeing the, you know, sort of reaction from your notes this morning, it feels like you agree. I'll probably keep my comments a little bit shorter than usual, but run through the key areas as ever. First of all, just talking about current market, I don't think it will surprise you. You see it, you know, in all the stats that you see and in others' commentary, that the underlying market has continued to perform well. I would, you know, reinforce the comments that we made at the half year. Across all geographies in all product areas, underlying demand is good. Prices have continued to slowly grow since the half year.
We'll come back to that again when we talk about cost in terms of the net impact. We're continuing to see post-stamp duty holiday, post immediate post-lockdown kind of return to market, continuing to see strong underlying demand and good forward indicators on pretty much all measures across all geographies. I think while we've slightly taken it for granted over recent months, I think it's important to sort of remind ourselves of that. It remains good and the forward look remains good. I also think it's worth touching on because we have to keep an eye on the longer term future on interest rates and Help to Buy.
I think, you know, the experience of the last year or so has made me certainly slightly more relaxed about the Help to Buy exit next year, the fact that we're out of it in Scotland, the fact that we have, you know, a Deposit Unlock scheme, which can't be tested properly until Help to Buy isn't there, but gives, you know, an important, you know, sort of tool for customers who really needed Help to Buy. We've continued to see our level of dependence on Help to Buy at a much lower level this year for various reasons to do with timing in the pandemic and, you know, sort of, underlying demand and improvements in the second half market. All of those, I think, have given us continued confidence in the underlying resilience of the market.
I think it's also worth touching on interest rates. We weren't sort of biting our nails as we saw the MPC's decision last week. I think the forward signal about how far rates, you know, sort of might go up is far more important to us than whether we see a rate rise in December or January and February. It's about where they end up. I think we look at that and feel that the sort of range that most commentators are expecting at the moment is something that can be absorbed by the strength of the current housing market rather than seeing it as a big risk. Those are the two areas I do think we still need to continue to keep a watching brief on. I think it's important to have those in mind.
As I say, that's against the context of current demand being very resilient. Now, just touching on land planning outlets, I think, again, talked about by many others over recent weeks, you know, and we said at the half year, we'd seen a more competitive land market that had grown up, you know, sort of late in the first quarter and through the second quarter. I think that has continued. It makes us particularly pleased with the early investments that we made last year and the good pipeline of land.
You can still see that coming through onto the balance sheet as, you know, the land bank numbers have ticked up again in this period and will, we believe, continue to tick up over the next sort of six or nine months and absorb some of the excess cash that we still hold. I think it's also been well-publicized that planning has been more challenging. We're pleased with that pipeline coming through the, you know, sort of the number of outlet openings that we've made in the period has been, you know, sort of bang on our expectations. Our outlets have continued to remain below normal levels because of the pace of closing and, you know, a number that we've not put in the statement, but I think it gives you a sense.
We have somewhere in the mid-60s of outlets that are sold out and therefore not counted as outlets, but will continue to deliver completions, you know, sort of in the balance of this year and through to the half year next year. With the higher sales rates, which have remained above normal levels, given the state of the market, you know, that level is quite a long way above normal, which kind of artificially suppresses outlet numbers today. It's important in understanding, you know, sort of volume, sort of dynamics to get a sense of that. Overall, we're very pleased with the way our teams are handling a more challenging planning environment and, you know, sort of, as I say, pleased with the early investments that we've made that give us, I think, more choices than most.
Touching on build costs and, you know, sort of particularly the key area of material availability. The challenge remains in materials rather than labor, which I think is important to understand. You know, as you can see in the statement year and again, I don't think it will entirely surprise you. We have seen both the pressure on material costs and the availability of materials ease slightly over the course of the last few weeks. It varies a lot from, you know, sort of material to material. The one I would call out that's probably eased the most in both price and availability is timber, you know, which really comes down to worldwide commodity supply, demand, balance and cost.
You know, sort of, I think the other big dynamic we see is that our own teams and the supply chain as a whole has got better during the course of the last six months of dealing with those challenges. It's not that they necessarily massively changed at the front end, but people adapt. Our teams have got used to it. They've got used to longer lead times. You know, sort of the level of pressure is less, and they're managing it well. You know, as you can see from, you know, the overall message in the statement that we're reiterating our guidance for this year, you know, we expect to deliver towards the top end of the range of volumes that we set out of 13,000-14,000 at the half year. You know, nothing has changed.
Our teams are having to work hard under the surface, and they're doing a good job in getting there. But I think overall we feel that it's being managed well. I said I'd come back to sort of selling prices, you know, in the context of costs. We would continue to say that the improvement we've seen on selling price over the last 12 months, you know, relative to the additional cost is giving us, you know, sort of a slight tailwind rather than a slight headwind. You know, we're getting a little bit more from selling price than we are on cost. We were cautious at the half year because you could have created a scenario where selling prices would flatten and costs will continue to rise. The first of those hasn't happened, the second perhaps has.
You know, but overall, that same dynamic of slightly, you know, sort of, slight help rather than slight hindrance overall. I think overall a very straightforward statement reiterating where we are for this year and, you know, the key drivers for next year and beyond. You know, there's plenty going on out there to say it's hard work for our teams, but they're doing a very good job of delivering the business plan that we have set out. Chris, anything that I have missed that I should have covered?
No, nothing to add, Pete.
Great. Lydia, if we can open up for questions then, please.
Thank you, Pete. If you'd like to ask a question, please press star followed by one on your telephone keypad now. If you change your mind and want to withdraw your question, it's star followed by two. When preparing to speak, please ensure that your device is unmuted locally. Our first question today comes from Rajesh Shah of HSBC. Your line is open.
Thank you. Good morning, Pete, and Chris as well.
Hi.
I have two questions. The first one is on labor. Your comments on build cost is helpful. But when this supply chain situation kind of improves, how does the labor availability plays? Do you see there is any risk coming in terms of inflation towards early next year when things kind of normalize, so there is more supply availability? That's probably my first question. The second one is on land. You commented that the land market is competitive. We are hearing from a few competitors that few of the house builders are putting in house price inflation when they're trying to bid for land. If you can give a little more color on that, what you see in the market actually.
Thank you.
I think it's a fair hypothesis on labor, Rajesh. I think, you know, I wouldn't give a formal forecast, but if we look at next year's balance of cost inflation, you know, I think we would expect to see, you know, less significant material cost inflation. You know, particularly as you see some, you know, sort of areas and so we're seeing timber already start to come back 'cause where it's pure commodity driven inflation, then I think there's a reasonable argument that it's gonna, you know, sort of reduce not just sort of go flat. But probably a slightly bigger component from labor, both because, you know, sort of the pressure on wages is well documented in, you know, sort of the country as a whole.
Because, you know, at the moment, if particularly for smaller developers, build is limited by material availability, then, you know, it's one of the reasons why the pressure on labor has been less than you might otherwise have expected. I see it as being different components going into next year. I think given the sort of volatility we've seen on material supply and costs, I don't look at next year and think net net that there's a bigger risk there, if you see what I mean. I just think it's the pressure points will be in slightly different places. On the land market being competitive, I mean, just to be clear, we do not put house price inflation in our land appraisals.
We never have, and we certainly won't in my time and that of, you know, sort of the senior team. It's just a dangerous game to get into. You know, I think, you know, it's far more important to be really brutally honest with yourself. If it's difficult, you look at it and say, "Is it difficult? What is the right decision, you know, for us to take?" I haven't picked up that as a dynamic with competitors.
You have seen, you know, sort of some smaller competitors particularly, and I've said this before, particularly where people, you know, the kind of mid-tier companies are opening a new region, you know, sort of, they definitely will, you know, make a more bullish assessment of both selling prices and costs and probably, you know, sort of be less, you know, sort of firm on the margin they will accept. We have seen some higher bids. We have definitely seen a, you know, an environment with a bit less discipline than, you know, we've seen through most of the last few years. I'd say already in the back end of 2021, we've seen that lessen a bit. You know, I think everybody was playing catch up, you know, sort of on land in the first sort of half of the year.
I think, you know, sort of some of that pressure is eased. You know, it's not gonna go away overnight, particularly with a more challenging planning environment in the short term.
Okay. Really helpful. Thank you.
Thank you. Our next question today comes from Rajesh Patki of JP Morgan. Rajesh, your line is open.
Yeah, thank you. Good morning, all. I've got, firstly on the order book, appreciate you providing the value and unit figures, albeit in rough figures. Could you help us break down the private and affordability components within it? Also sort of understanding how the private book in the order book has changed over the last 12 months. Secondly, on net cash, can you confirm the previous guidance? Are there any incremental moving parts to those mentioned in the first half? Thank you.
Yeah. I'll defer to Chris on both of those, but to give him a sec to think about it. I would say overall, there's been no big change in the complexity in the buildup of the order book, sorry. It's sort of broadly the same mix as we have had through the last year. Chris, order book and you know, kind of maybe on cash.
Okay. Rajesh, I'll take the cash first. You know, we continue to expect year-end net cash to be similar to the end of 2020, around GBP 700 million, subject
To the timing of land payment. The risk, if there is any, would be to the upside. On the order book, what Pete said is absolutely right. You know, the broad makeup of the order book is very similar to last year. I think on volume terms, you see overall it's 8% down year-on-year. Obviously 2020 was an unusual period, and it is up on 2019. If you look at that 8% and you apply it across to the private, it's a very similar level of movement.
Thank you.
Thank you. Our next question today comes from Will Jones of Redburn Partners. Will, your line is open.
Morning, thanks. Three, hopefully, from me, please, which is quite quick. The first was around just Help to Buy. I think in the first half that you talked about, around a quarter of the sales, like 27%, being under Help to Buy. If you could just update us maybe on the latest flow on that scheme. When you think about the Scottish business that you highlight, which I think we're now over six months in from the end of that, end of Help to Buy there. How will the Scottish business perform to budget even without the support this year, do you think? Just how has that kind of played through there?
Second one was just on build rates and whether you could help us on whether the pace of build has changed in the second half versus the first. I appreciate there's seasonality in there, but has it got slightly faster perhaps? Where do you expect to end the year in terms of the look forward around WIP? The last one was really just pulling together price and cost in the context of your prior margin targets, ambitions. Would it be fair to say that what you've had so far this year, and maybe you said it yourself with the tailwind comment, but you've probably fallen the right side of the line on market assistance in reaching those targets over the next couple of years. Thanks.
Thanks. Just on Help to Buy, and then, you know, Chris, maybe I'll give you a specific number, but it hasn't massively changed since the first half of the year. I would expect, you know, sort of, as we go through December completions, you know, sort of and into next year, it will climb back up again, 'cause I think 2021 will end up being the lowest year. Because there's a mix of things that have affected 2021 that have continued to affect it through to October, including the handover from, you know, sort of Help to Buy one to Help to Buy two. The length of the order book coming into the year, you know, sort of all had an impact that have kept it lower.
I think that we're still in the 20s, but I do think it reflects a subdued year rather than that's where it will be now till the end of the scheme. I expect it to be somewhere in the 30s next year, probably the bottom half of the 30s, but hard to call. On the Scottish business, will they perform to budget? Our Scottish business always performs to budget. You've given me the chance to sort of praise them that, yeah, we have a very good, very strong Scottish team.
You know, sort of it's very, you know, one of our most resilient teams, and they're in a good place and actually have gone through the Help to Buy shift without, you know, sort of, any material, you know, sort of. I think it's sort of helped by the fact that they haven't been able to depend on Help to Buy as a totally consistent underlying part of their structure historically, you know. So I don't think it's a complete, you know, sort of, guide for what will happen in England. But I do think it's indicative.
I think, you know, touching on Help to Buy in a bit more depth, the key thing, you know, 'cause I would not want, you know, I wouldn't want you to state my comments overall to say that, you know, the early 2023 risk from Help to Buy, you know, is zero to negligible. It's something we need to keep an eye on. I think the key thing is the underlying resilience of the market at that point in time.
You know, if we're in anything like the kind of market conditions we're in at the moment with good underlying demand, you know, real need for sort of the move-up customer, you know, sort of, yeah, real need for product for move-up customer, you know, sort of which has been some of the product that's been sold to first time buyers under the Help to Buy this year. You know, interest rates, not at the current level, but not massively different today than, you know, I think I have, you know, a pretty high degree of confidence it doesn't make too much difference, particularly with the length of order book that we have, you know. We would view our order book as being at an artificially high level at the moment, but would expect to probably keep it that way through 2022.
You know, one of the reasons for that is just to keep a weather eye on Help to Buy in early 2023, you know, and then probably try and actively ease it back because we think better dynamic for us on the balance of price and cost with a slightly shorter order book and, you know, sort of a better dynamic for customers in terms of the consistency of product delivery and timing and risk. I think, you know, our comments for the order book is, you know, sort of probably as high as we would ever want it to be still stand and Help to Buy is one of the things that has us keep it there 'cause it feels like the wrong time to shorten that because of that slight risk.
As I say, I think the overall risk that I've seen for a number of years is one of the more significant market risks I think has reduced, and the evidence for that has been pretty good. I think on pace of build, you know, I mean, we were saying at the half year we didn't see any meaningful, you know, sort of constraint from COVID. The limit on pace of build is around material availability, you know, sort of. I wouldn't say it's particularly increased over the course of the last sort of few months. I'd say it's about the same. You know, and continuing to be hard work for the team.
You know, focus on delivering year-end plots and, you know, the right level of WIP going into next year is key and not easy for them. On price and cost, yes, I would say that, you know, sort of we've had a slight headwind. It is slight, you know, and, you know, we've talked for some time about the regulatory impact of, you know, Future Homes Standard and the like. You know, it's one of the moving parts that we're dealing with. If we get a positive against that, then we will definitely take that. We're not changing our 21%-22% medium term guidance. We still believe it's the right guidance. We expect to make margin improvements next year.
You know, the rough size of that hasn't changed in terms of our, you know, sort of, internal forecast. There's lots of moving parts, but fundamentally, we're still, you know, expecting to get to that level over the kind of timeframe we talked about before. We'll talk in a bit more detail about our views of margin for next year, you know, sort of with the prelims, I'm sure, you know, in early March.
Great. Thank you.
Thank you. The next question today comes from Emily Biddulph of Credit Suisse. Emily, your line is open.
Morning, guys. I hope you're well. I've got three questions, please. Firstly, just coming back on planning delays. When you're talking about sort of your incremental 50 sites by sort of mid-2023, like and that sort of being in kind of still an achievable target, like are you kind of basing this assumption on the idea that planning delays that you're seeing at the moment are likely to ease in the sort of relative short term? Or if we're still in the sort of same situation where you're kind of, you're still seeing the same sort of delays you are now in sort of the middle of next year, do you start to worry about that, or is there enough contingency built in that that sort of still feels very achievable? Secondly, I just want to come back on demand.
You usually give us some nice stats on sort of website traffic and sort of other lead indicators there, and I just wondered how they were trending. Then back on the private order book, like if you sort of end this year where you expect to be and sales rates sort of continue as they are, can you just give us a sort of sense of how far forward sold you're likely to be for 2022 and sort of how that compares to where you normally are? Thanks very much.
On planning dates, I mean, just to be clear, we've been, you know, sort of nearly 21 years in the business. There's never been a year where we're not worried about our openings and planning delays. Of course, it's the thing that as you've heard others sort of perhaps be a bit more open about than they normally are over recent weeks. You know, it's always a challenge. I do think it's, you know, a bit more of a challenge at the moment, but we kind of knew that when we talked to you know, sort of at the half year. You know, sort of, and that was sort of factored into our guidance, which is why we're not changing anything.
You know, it is something that our teams will have to, you know, sort of continue to work at and strive to. We're not, I don't think, factoring in things getting better in the short term. I think, you know, sort of I will be disappointed if in, you know, sort of a year's time, we're not seeing that normalize, particularly where it relates to resource requirements, a little bit where it relates to the national focus on, you know, sort of housing volumes. You know, sort of but we're certainly not kind of thinking, oh, you know, we get into January next year, everything normalizes. It would certainly be something that, you know, we continue to have to really work hard at, and it is the key point, key area of focus for all of our management teams.
We go back to, you know, we secured a lot of sites when others weren't in the market, you know, that gives us choices. It doesn't give us perfect risk coverage, but it puts us in a different place, and I think that, you know, sort of is important. You know, sort of it's never fully in our control, but it's also always partly in our control. You know, I think I'm pretty pleased with how our teams are focused and performing on it at the moment. In terms of websites, that I haven't got them to hand, but there's no reason for particularly excluding them. Generally we've continued to see, you know, sort of high levels of interest, good appointment bookings, you know, sort of and good website interest.
You know, because we've switched to a largely appointment only model, we still see lower levels of visitors per site than we would have done pre-pandemic, but that's more of a structural change rather than anything else, and we see higher conversion rates. We will update, you know, sort of the graphs we've given you historically, but there's nothing I would tell you that would concern you. In terms of the order book and forward sold and, you know, where we are now in terms of how far ahead we're selling won't have changed very much in December. You know, I mean, just to be clear, we're not selling anything for December at the moment. We are selling, you know, probably on an average site about seven months, you know, sort of ahead.
That is as far as we would ever want to sell. I think, you know, if you take my comments around, you know, once we've gone through the Help to Buy change in 2023, and if we're actively trying to normalize it, the range is somewhere between five and six months. You know, sort of probably in the perfect theory, it's five, but the reality is, you know, if the opportunity is there to be a bit ahead, then I think it helps your pricing dynamics. It's that range of 5-6.
Yeah, it's not a massive shift, but I do think, you know, it's important to understand that, you know, sort of where we are now is at the top end of the range in terms of length of order book.
Great. Thanks, guys.
Thank you. The next question today comes from Jon Bell of Deutsche Bank. Jon, your line is open.
Morning, Pete. Morning, Chris.
Morning.
I've got two questions, actually. You've commented on the land market. I think at one point, you used to give us the contribution margin on new input land. I just wonder where you might see that today in general terms. The second one is, could you give us an update on Postmark? To what extent you've seen sales pick up since London reopened, and how is pricing? Thank you.
Yeah. I mean, we wouldn't normally give a contribution margin on a trading update, but I think, you know, the sort of sense of where we are in terms of land acquisition margins is very much in line with where we are at the half year. There's been no sort of big change. I mean, Chris, you tend to be closer to Postmark than I do. I'll leave that one to you. Overall sense of London is it has started to improve. I'm, you know, fairly upbeat about London, if you look over the next two or three years. I'd still say it's still lagging behind, you know, sort of the market as a whole.
You know, sort of that's not a specific Postmark comment, which I'll leave to Chris, but it is a general London comment.
Yeah. You've caught me, Jon, without having actually had an update recently from Postmark, but I would agree with Pete's comments. You know, generally, you know, London and certainly prime London is slightly sort of lagging the market, but nothing that is sort of outside our expectations for that development anyway.
No. I think, you know, we will continue to expect to earn a decent return on Postmark, you know, sort of despite the sort of the various market uncertainties in London. I am not flagging in my broader comments on London. We're suddenly about to make huge investments. It still remains quite difficult to get the investment risk balance right overall in London, 'cause I still think there is greater planning risk and probably the Help to Buy risk in London is greater. We continue to have a sort of London strategy that's focused on lower price points than we would have been a few years ago. A general sense of the London housing market, which is, you know, sort of increasingly positive.
Yep. Okay. Thank you.
Our next question comes from Gregor Kuglitsch of UBS. Your line is open. Hi, Gregor. Your line is open.
Hi. Good morning, guys. Thanks for taking the time. I kind of wanna revisit. Can you hear me?
Yeah, we can hear you, Gregor.
Hello.
Good morning. Yeah, we can hear you.
Hello?
Yeah. We're still here, Gregor.
Can you hear me?
Yeah.
Hello?
Hello. Lydia, do you want to talk to Gregor just in case he can hear you but not us?
Yeah. Unfortunately, we're having some problems with Gregor's line, so I'll move on to the next question. The next question comes from Gavin Jago of Barclays. Gavin, your line is open.
Yeah. Morning, gents. Just two from me, please.
Hi, Gavin.
Yeah. The first one is just on Help to Buy, and just maybe explore just a few things around that. I mean, just to think about the timing and you talking about kind of how forward sold you are, would I be right in thinking that you'll pretty much only be taking reservations for Help to Buy probably until the middle of next year, because completion has gotta be done by December? Is that right?
A bit later than the middle of next year, but certainly fairly early in half two, yes, we'd expect, you know, them to be minimal.
Yeah. Okay. Then I guess just following on from Will Scotland comments, are you able to put a number on what proportion of the Scottish reservations that Help to Buy was when it was in place? The final one on this was just any views on whether or not Michael Gove's appointment has, I guess, presented any upside risk to Help to Buy actually being extended beyond March 2023, given the leveling up agenda and I guess the relative low use of Help to Buy given the price caps in the north and the Midlands at the moment?
Yeah. I can't give you a number on Help to Buy in Scotland. As I touched on earlier, sort of Help to Buy in Scotland has always been more volatile in the sense that we've always gone through periods of six months where it was available and then, but it was always rationed. It will have been lower than England, but it was material at different points. I, you know, as I said earlier, I wouldn't point to Scotland as being perfect evidence. I actually think the impact of the price caps and the level of sales, you know, sort of as we went from Help to Buy one to Help to Buy two in England, are probably in some ways more important. Collectively, you take all of those data points together.
It's that just makes me feel, and I've probably been at the more cautious end, make me feel a bit more relaxed than I would have done. I wouldn't just point to Scotland. You know, I think if you look at. Yeah, we effectively didn't have Help to Buy at all as a sales tool for reservations from, and Chris, correct me if I'm wrong, but effectively from, you know, sort of late September last year until, you know, sort of middle of December, and then we had a bit of a catch up in the middle of December. You know, sort of about. That's about right, isn't it? You know, we've already gone through a period in England where we did.
While we saw a you know dip because people were waiting for Help to Buy to be available, actually, even given that the dip was you know sort of much smaller than I think we would've imagined. But that has been in the context of a good market. I go back to my comments about what's important is the underlying market strength at that point. Go on to the question about Michael Gove. I haven't seen any specific signs that you know drives a change in Help to Buy.
I mean, one thing I would reiterate is whatever happens, if there is a government driven, you know, sort of, replacement, it won't be called Help to Buy even if it looks quite like it, because I think, you know, sort of they've made quite a significant, you know, stance on coming to the end of the scheme. I do still feel there's a place for a much lower, you know, sort of number of completions that are means tested to really help first time buyers who might otherwise, you know, sort of go into, you know, more directly government funded housing. But we will see. I come back to you. I'm still of the view that I've been in since the beginning of Help to Buy.
The more the industry can stand on its own two feet, the better for the long term, even if we have to manage, you know, sort of, the transition in 2023. Given the strength of the underlying housing market, where interest rates sit and are likely to continue to sit, and the length of order books, I think we're in a good place to do that.
Very good. Thanks. I wonder if I just have one quick follow-up just on the Future Homes Standard, just thinking about the supply chain and kind of labor pressures there. Are you getting any more clarity as you, I guess, you move to the interim stage and then to the full Future Homes Standard of
What sort of cost increases you might be faced with all other things being equal?
Yeah. I think, you know, sort of we've talked before about, you know, the cost impacts in 2023 and, you know, we haven't changed that view. It's a bit lower than we had sort of first talked about, you know, back in 2020, you know, sort of as we've gone through the standards and our teams have sort of worked out, you know, more detailed costings. I don't think we've got really clear standards because we don't really know the measurement framework for 2025 changes. I don't think we can give you any more guidance on that. We are working very actively on both labor and supply chain on how we execute the various different parts of that.
You know, the classic one that gets talked about, you know, sort of, and that we would have, you know, sort of flagged 6-9 months ago, if not more, you know, is around heat pumps. You know, sort of talking with basically both the supply chain on the, you know, sort of equipment supply, but also really thinking about accreditation, workforce, how we work with some of our bigger, more professional regional subcontractors to make sure that they're investing in the right skills and people, you know, sort of, and whether we, you know, effectively, you know, go into a degree of partnership with them over the next two or three years to do that. Yeah, those conversations have been moving on at pace.
You know, we see, you know, and this is a broader sustainability point, you know, sort of in a broader, you know, climate change, you know, both regulatory and other things point. You know, we really see, you know, sort of this next year as working through a lot of detail on how we execute. For the first time, we also see, I think some market upside, you know, as I think we see customers, yeah, actually really starting to understand the cost implications of new homes versus second homes, the environmental performance of new homes versus second homes and the adaptability of new homes. Yeah, I think it is a big topic, but it's gone from being a pure regulatory cost driven thing to, you know, sort of a more balanced, you know, sort of market and execution driven, sort of things.
I feel we're in a good place. You know, there's an awful lot we have, you know, quite a lot of projects running in the business at the moment. Yeah, I think, you know, people feel they're really getting to grips with what they need to do and what they need to change to remove from theory to practice.
Very good. Thank you very much.
Thank you. Gregor from UBS has registered a question again. Gregor, your line is open.
Can you hear me?
Yes, we can hear you, Gregor.
Okay. Well, here we go.
We could hear you before. You just couldn't hear us telling you we could hear you.
I see it. Okay. All right. Well, here we go. My question is on volumes, and I guess it's the sort of ramp-up profile. If you could just maybe perhaps I mean, first the obvious guidance for next year, if you could perhaps elaborate. I think previously your modest comment was 4% or 5%. I don't know if you're confirming that today, but just wanted to double check that. I guess the medium term question is to get to that target of 17,000-18,000 units. If you care to maybe perhaps elaborate a little bit on the timeline and perhaps the site count that you think you need to actually achieve that. That's my question. Thank you.
Okay. I mean, I think it is an important question, Gregor, but you know, we're not sort of either changing our guidance or going to go into more detail on it on a trading update. We still see, you know, our guidance for modest growth next year to be right. You know, we would, as we always have done, counsel the stronger the volume performance in our own range this year. You know, sort of, our number for next year isn't suddenly going to change up because of that. It's about, you know, sort of site availability, material availability more than it's about the market. You know, sort of and that we see material growth in 2023. I am sure we will, you know, in completions.
I am sure we will talk about it in more detail, you know, both with the prelims and through the half year next year and give you a bit more of a flavor. But it's not. We're not changing our, you know, sort of, expectations today. I don't think there's a lot more detailed granularity we can give you know, sort of today on how that profile will work.
Okay. Can you remind us what you're budgeting for the sort of two phases of the environmental regs?
You know, we haven't given a number for the second phase, as I touched on earlier, because, you know, we still think there's too much uncertainty around. We know what it will look like. We don't yet know how it is measured. You know, we know some of the things that we will do, but it's very hard to pin down a number. Chris, on the first stage?
Yeah, it's around about GBP 3,500. You know, bit less for three beds. More, you know, closer to the GBP 3,000 per plot and a bit more for four beds, closer to the GBP 4,000 per plot.
Okay.
For the first stage, in 2023.
Excellent. Thank you very much.
No problem.
Thank you. As a reminder, if you'd like to ask a question today, please press star followed by one on your telephone keypad now. Our next question today comes from Clyde Lewis of Peel Hunt. Clyde, your line is open.
Good morning, Pete. Morning, Chris. A couple if I may. One around, I suppose, the land market and whether or not you're seeing, I suppose sort of different types of sellers coming on sort of post-budget and sort of, you know, changes that we've seen and whether you're seeing any real differences regionally or sort of by site size, I suppose, around the sort of inflation level in the land market at the moment. The second one was around, I suppose sort of cancellation rates and mortgage valuations and whether, again, you've seen any sort of change in pattern in the last couple of months in those two factors.
Good morning, Clyde. In terms of the land market, not a material kind of shift in terms of new sellers. We did see, you know, sort of a few weeks ago, and it's probably still there, just a bit more commentary around some land sellers coming to market, just being a little unsure about, you know, kind of capital gains tax and, you know, often pre any budget. There's just that sense of, I wanna get it done now just in case. We saw a bit of that. I don't think any major change. I do think, you know, there are some underlying changes. You know, I think it's a more difficult environment, for instance, for land promoters to do their job.
There are some sites in the strategic land environment that, you know, sort of are coming to us rather than necessarily going to land promoters because, you know, the dynamics for them are not particularly sort of good at the moment. On site size, not a new dynamic. I mean, still that same sense that, you know, sort of large sites are less competitive. I think we did see, you know, I'm going back to the kind of first half, early in the second half, we did see some of our larger competitors being more aggressive in the land market that we'd seen for a while to catch up. I do think there's a little bit, and I'm not gonna go into individuals, so it varies depending on the region, the month, the individual kind of competitor.
You know, I think, you know, there was a bit of a, oh, God, we've got to get something done and then back off and find, you know. It's what's gone behind the comment that I would say, you know, it's kind of normalized a little bit over the last sort of six weeks or so. No big change in sales and on-site size. It's still the sense that larger sites are less competitive for obvious reasons, but not fundamentally different. Regionally, the only dynamic is the one, you know, I've touched on, you know, many times around when we see a competitor open up a new business, it will distort regional competition. We're not seeing, you know, sort of being fundamentally different in, you know, sort of the north to the south or anything like that.
On valuations and cancellations, very robust. Very low levels of cancellations. Sorry. Yeah, very low levels of valuation issues and totally normal cancellation levels. You know, sort of nothing unusual at all. You know, very much the normal kind of pattern. Valuation is probably running below any kind of long-term normal, but they have been for a while, as in down valuations running below normal levels. You know, I would say, and this includes in the build up to the MPC's interest rate decision when one or two mortgage deals were getting more expensive. You know, we get a genuinely sanguine sense from the mortgage lenders about their view of the housing market.
You know, if we go back to sort of August, September 2020, a bit of a sense from some mortgage lenders of, well, are things getting, you know, sort of too heated, you know, sort of as we got the kind of rebound post-pandemic, whereas actually roll forward to 2021 and actually, you know, they're competing for market share. They seem, you know, very comfortable to lend into the U.K. housing market. And that is reflected in that low level of down valuations and relatively sanguine view from valuers about price increases. You know, if you looked at, you know, back to the immediate post-financial crisis period, it was very much valuers who kept, you know, sort of a cap on prices for a period because they almost didn't want to believe that prices could go up.
I think at the moment, you know, they are doing their job site by site and looking at actual demand, which generally is pointing to prices going up.
Okay, perfect. Thank you very much.
Thank you. Our final question today comes from Ami Galla of Citi. Your line is open.
Morning, guys. Can you hear me?
Yes, we can hear you.
Yeah. Morning, guys. Just a couple of follow-ups from me. The first one on if you could update us on the how the remediation claims are going through and how should we expect the utilization of provisions over the next two years. The second one, related to cash flows really is, as we think about the growth in outlets in 2022 and 2023 that you flagged, how should we think about working capital investments in the business?
Both for you, I think, Chris.
On the provisions, looking at the legal provision, Ami, at the end of June, we had GBP 56 million remaining, I think. Since then, in the sort of four months to the end of October, we paid GBP 2.4 million of cash. I think that's a decent run rate, to go with towards the end of this year. We'll update our guidance on that, you know, when we get to the prelims. Similarly, you know, with the cladding provision, at the end of June, we had GBP 150 million of that provision remaining. We paid GBP 3.3 million in the period, since then.
The provision now sits at GBP 146.2 million, and you can take that run rate certainly for the balance of this year. Then that is one that we, you know, that we will have more, you know, specific detail on when we get to the prelims in terms of the unwind. I mean, in terms of, I think you're effectively asking about WIP investment. You know, we came into 2021 with GBP 1.66 billion of WIP, and that obviously reflected the delay of Q4 completions from 2020 into 2021. The WIP level is reduced at the half year to GBP 1.54 billion. For this year end, I'm expecting to sort of land somewhere between the two.
As Pete has already said, you know, we're working hard with the teams to sort of push on and try and get as much WIP in the ground as we can. As we go through next year, you know, I'd probably expect in line with the investment in opening new outlets to see a bit more investment in WIP, which is entirely consistent with, you know, the plans that we set out earlier.
Thank you.
Thank you very much. There are no further questions in the queue, so I'll hand back to Chris and Pete for closing remarks.
Thanks, Lydia. Thanks everybody for the time this morning. There's not a lot to add. As I said at the beginning, I think a fairly straightforward update that, you know, we're very much in line with where we expected to be. I'm pleased with the work of our team in what's pretty difficult operating environment on the build side, but they're doing a very good job of it. Look forward to catching up again in early 2022.
This concludes today's call, and thank you for joining us. You may now disconnect your line.