Thank you, Alice. So, we're running a little bit behind. I'm afraid that's my chatting. I apologize, but good morning to you all, and thank you for joining us. As usual, I'll do some brief introductory comments and the highlights on the half year, and Chris will take you through the financial review, and our guidance. And then I'll take you through how we're seeing things today, and how we're positioning the business for the future. I think you'll already have seen the statement and noted that we now expect full year completions, excluding JVs, to be towards the upper end of our previous guidance of 9.5-10,000. And I'm very pleased to say that we've performed well in the first half.
Importantly, we are very well set up to grow again from 2025 if the market is supportive. It's early days for the new Labour government, but all early indications look positive for the sector, with recognition that planning is a major barrier to economic growth, and that house building contributes significantly to that much needed growth. But there'll be more on this later. So I think some great progress in the year so far, but I'll just pick out a few of the highlights this morning. We're really pleased with the private sales rate of 0.75, which is 0.69, excluding bulk sales. And while interest rates and mortgage rates remained high as rate cut expectations were pushed out, the market has been stable.
There's no doubt that the teams have worked hard to, deliver this whilst continuing to protect value. First half completions reflect a lower order book coming into the year and are in line with previous guidance. I think you can see along the bottom line here, that this is a business in really good, shape, with an excellent land bank of 79,000 plots, benefiting from a mature strategic land pipeline and a record of successful pull-through. I told you last year that customer service would be a major focus. We are already, a five-star home builder. So it's been pleasing to see customer service scores pick up as a result of, this concerted effort from 90% to 96%. We've also seen some, positive, movement on the nine-month scores in recent months.
Very pleasing, but as always, there's more to go. And lastly, I think these results are a testament to our experienced teams and their dedication, but a very proud and special mention this morning for our 62 site managers who recently collected Pride in the Job quality awards, winning more awards this year from a few smaller, or less sites, with, I think really speaks, to the quality of our teams. I think this quality is also reflected in another period of high construction quality review scores, and lower reportable items, and there's more on those, in the appendices. So this is an update of a chart I showed you at full year.
I won't repeat all that I said then, except to say that mortgage rates, though with some improving momentum recently, have continued to be high, and this is impacting affordability, particularly for first-time buyers. And of course, we have seen earlier market expectations of bank rate cuts pushed back. So given that backdrop, we are happy with how resilient the market has been. There's good news, though. There are as many mortgage products on the market today with high LTVs than at any time since before the Mini Budget in 2022, and competition between lenders remains good, which in turn is flowing through to pricing where we're starting to see some better lending rates come through. So a stable first half of the year.
Pricing has remained firm since quarter four last year, and it's worth remembering that, overall, we've only seen low single-digit erosion of house prices from the peak in September 2022. As previously flagged, the order book is down slightly, and building this remains a key priority to set us up as well as possible for 2025. And so now, over to Chris.
Thanks, Jennie. Good morning, everyone. I'm pleased to report a good first half performance, delivering in line with our expectations. As you can see from the variances on this slide, the results have been impacted by the lower order book coming into this year, but we are pleased with the good progress being made through 2024 so far, both in sales and operational delivery, setting ourselves up for growth from 2025, assuming supportive market conditions. In the first half, we delivered 4,728 group completions, resulting in revenue of GBP 1.5 billion, a reduction of 7% on the first half of last year.
Our focus on driving increased operating efficiency, cost savings, and value improvement helped us achieve a gross margin of 19.3% and operating profit margin of 12%, down 2.4 percentage points on last year, and I'll expand on that in a minute. Return on net operating assets reduced to 10.9%, which you should remember is reported on a rolling 12-month basis, so the prior year comparator includes a period of strong trading before the Mini Budget intervened. In the U.K., we experienced good levels of demand in the traditionally strong spring selling season, and as Jennie mentioned, market conditions remained relatively stable throughout Q2. However, as we entered the year with a lower order book, completions in the half were lower, and we delivered 45% of the top end of our full year guidance range, very much as anticipated.
22% of completions in the first half were affordable, and I'm expecting affordable homes to contribute around 21% of the mix for the full year. Consistent with our guidance, the blended average selling price in half one was broadly stable year-on-year. Within that, and also as expected, private pricing was 2.7% lower, with most of the reduction due to some underlying market deflation, as you'll see on the next slide, with the balance relating to mix. In February, I also flagged a continuation of the increase in affordable selling prices, and the 7.8% increase you see here is a result of geographical size and tenure mix. Looking forward, I'm expecting a slightly higher blended average selling price for the full year at around the GBP 320,000 mark, reflecting the mix in the second half.
The bottom of this slide shows our U.K. and gross operating profit margins of 18.9% and 11.5%, respectively. Both were enhanced by the sale of commercial land in the first half, as you will see on the next slide. So my intention with this slide is to give you the detail of the various factors influencing operating margin in the period. If you compare this slide to the one from February, you'll observe that the predicted H1 build cost inflation of 4% came in at 3.5%, and net pricing on completions in the half was indeed slightly lower due to market deflation of 1.5% on selling prices compared to the first half of last year.
There is also a 0.5% impact from landbank evolution as we start to trade out some of the sites acquired in the years after the Brexit referendum, when the land market was most benign. These market factors combine to generate a 3.7 percentage point reduction to operating margin in the period. Moving further down, there is typically always a contribution from land and property sales. The contribution this half was GBP 16 million greater than half one last year, and that increase enhanced operating margin by one percentage point. Looking ahead to the second half, spot market bill cost inflation on new tenders is pretty much 0, and the value improvement actions we've taken nudge us just into deflationary territory, say 0.5%-1%.
In terms of the half two income statement, there is still some lingering historical bill cost inflation in WIP, but that will pretty much be offset by value improvement and efficiencies. Net pricing has been broadly stable for a while now, so the flow through of price deflation from the order book will continue to reduce and should be smaller in the second half. Although there will be some additional costs in half two relating to IT improvements, we expect to deliver greater volume in the second half, so there will be an operating leverage benefit compared to half one. Overall, if you exclude the impact of land sales from half one, we expect to see a modest improvement in the underlying operating profit margin in half two.
We retain an enviably strong balance sheet with net assets, as at the end of June, of GBP 4.4 billion. The movement from last year is driven primarily by the increase in fire safety provision, which I will explain in a moment. The value of our land holdings, net of land creditors, is broadly flat, with both balances reducing as expected. WIP has increased year-on-year, reflecting a greater weighting of completions in half two this year, and an intent to deliver smoothly in the second half, setting ourselves up for 2025. Moving on to building safety. As you know, we have, for a number of years, had a dedicated fire safety remediation team in place, and having assessed all our buildings, we are making good progress in advancing building from detailed design works to tender and through to commencing works on site.
The pie chart on the right breaks down our remediation progress to date. Moving to our increased provision today, we continually assess our remediation provisions, and over the two years since our last update, the tenders received have generally shown that our cost estimates have been very accurate. That said, our recent tenders have reflected some inflation in remediation costs, likely driven by increased demand for limited resources, which required us to reassess the expected cost for buildings where work is yet to complete, and this has resulted in an additional charge of GBP 46 million. In addition, the work we've done to assess the completeness of our building register has identified a small number of additional buildings with an estimated remediation cost of GBP 10 million.
We're very committed to getting these works done, swiftly as possible, and reflecting that, we are providing additional funds to increase the size of our remediation team and also updating our expectation on legal fees in what can at times be a complicated and contentious area, and this amounts in total to a further GBP 9 million. Lastly, our experience shows that the Building Safety Fund pre-tender costs have not been reliably controlled and monitored, and as a consequence, we've taken the decision to provide for them in full, along with a contingency on all untendered works, and this adds a further GBP 23 million to the provision. In total, this increases our provision by GBP 88 million, bringing the total funds set aside for remediation to GBP 333 million, with GBP 67 million already spent.
And as I've said, more than once before, the provision reflects our best estimate of the cost of getting these works done. And due to the duration and complexity of what's involved, it's not impossible that it might need to change at some point in the future. But including a small intended contingency and taking a prudent stance on BSF pre-tender costs is intended to avoid that. Moving on to cash flow. We closed the half with a strong net cash position of GBP 584 million. On an adjusted basis, after deducting land creditors, we remain negatively geared, which underlines the strength of our financial position.
The slide shows that the reduction in cash in the six-month period is mainly a function of the investment in WIP that you also just saw reflected on the balance sheet, and that investment sets us up for delivery in the second half and beyond. We remain a cash-generative business, with controls on land and WIP spend that are responsive to the opportunities that we see in the market, which brings me nicely to capital allocation. This slide will be familiar because our priorities for capital allocation are unchanged. Our first priority will always be to maintain a strong balance sheet.
The adjusted gearing position that I just mentioned demonstrates that it really is our top priority, especially in the context of the market challenges of the last couple of years. Second, where there are good opportunities to invest in land and WIP, we will deploy our capital to support growth in the medium to long term. You can see from the statement that there have been more approvals in the period, because we've seen more attractive opportunities coming to market, and Jennie will talk a bit more about that. And of course, our strategic pipeline will continue to give us more choice on where and when to deploy our capital.
Third, our ordinary dividend policy reflects how we've set the business up to deliver returns for shareholders through the cycle and is a key differentiator for Taylor Wimpey, paying 7.5% of net assets to shareholders each year. This policy stems from our unrelenting focus on capital discipline, and it's intended to provide investors with confidence in the long-term return generated from investing in Taylor Wimpey. Today, we're announcing an interim dividend for 2024, in line with our policy of 4.8 pence per share, which will be paid in November. And finally, where we have excess cash, we will return it to shareholders, and we have a strong track record of doing exactly that at the appropriate times in the cycle. Finally, turning to guidance.
Based on our strong first half performance, I'm pleased to report that we are now expecting to deliver U.K. volumes for the full year towards the upper end of our previous 9.5-10,000 guidance range. And we remain on track to deliver group operating profit in line with current market expectations. I expect net cash at the year-end to be around GBP 550 million, depending on where land spend ends up in the second half. And with deposit rates remaining elevated for longer, we now expect a net interest income in the PNL of around GBP 4 million. So in summary, I'm pleased with our first half performance, delivering in line with our expectations.
We will remain confident and on track to deliver in line with our guidance set at the start of the year, and assuming supportive market conditions, we are well positioned to deliver growth from 2025. I'll now hand back to Jennie.
Thanks, Chris. So let's talk now a little bit about what we're seeing on the ground and what this means for how we're setting up the business. And here's the usual slide on sales performance, and I know you'll focus on the first column of the numbers, so essentially the last four weeks of trading. We're running at 0.64, which compares to 0.47 in the equivalent period last year. But I'd encourage you not to get too carried away. It's only four weeks, and it's against a very weak comparator. I'd say generally that we've returned to a fully normalized cancellation rate, albeit again, you can see that the last four weeks is a little high, which I think is a function of lower sales overall, gross sales overall in that period.
Cancellations in order book terms aren't particularly noteworthy. As you will have heard from others and noted from our statement this morning, the housing association sector is facing a number of significant headwinds affecting their appetite for Section 106 affordable housing. This is a sector-wide issue, and we don't expect it to impact our 2024 completions, but it has the potential to impact order book and affordable housing completions from 2025 onwards without action. We are, of course, progressing mitigation actions where they're available, and we remain fully engaged with affordable housing partners and the government. And finally on this slide, as has been a feature of the last two years, we're seeing very low down valuations despite some uncertainty, which I think is very good to see.
As the market normalizes, I wanted to share a bit more of what we're seeing and hearing from our customers. The overall sense that I would give is one of more positive customer sentiment. We didn't see any meaningful change in customer behavior in the run-up to the election, and you'll see from the graphs on the left of the slide that it shows a fairly normal seasonal trend for website traffic, appointments, and walk-ins. Customer behavior has, however, changed when it comes to the timing of commitment to exchanges. As we noted at the full year, these have moved out to longer than we've seen in recent years, albeit conversion time to reservation has actually decreased slightly, and the quality of inquiries has improved.
Speaking to our sales teams around the country, I think you get a sense of a certain amount of chain anxiety, and some people on the sidelines just waiting for rates to change. That said, I think it's really pleasing to see the percentage of first-time buyers increasing to 40% of private reservations in the first half. With prices relatively flat, some of those catalysts to action are not as strong at the moment. This means that incentives have remained a factor in the market to drive commitment, albeit at a stable level of between 5%-6%. The teams continue to work hard to support customers on a longer journey and to manage the process, making that improved customer service score I mentioned earlier even more pleasing.
Mortgage costs are higher than pre-2022, but it still remains cheaper to buy today than rent in the U.K. for those with larger deposits. The red line on the graph shows the cost of a 75% loan-to-value mortgage. According to our IFAs, in the first half of 2024, those Taylor Wimpey customers who took a mortgage took on average a 72% LTV, and this was 78% LTV on average for first-time buyers. So during the first half, we ran IFA and mortgage myth-busting educational events, which remain valuable to our customers. And the data from our IFAs continues to show customers, both first- and second-time buyers, utilizing mortgage terms, which are longer.
And although five-year fixes remain the most popular, we are hearing just a little bit more of a move to two-year fixes, with expectations of interest rates reducing. So overall, underlying and longer-term market fundamentals remain compelling. The desire for home ownership remains high. There's a significant undersupply on all comparison measures relative to population that will underwrite this market for the foreseeable future. And now we turn to planning. So I don't think that you need, much reminding, but maybe for those who are listening in, I don't know, somewhere, somewhere else, the current planning situation remains extremely challenging. So looking at this graph, with the HBF figures, this shows that in the 12 months to March 2024, the number of both units and sites, approved continued to fall to record lows.
The number of units achieving, planning permission was the lowest in almost a decade, while the number of sites approved in quarter one in England, and on a rolling 12-month basis overall, was the lowest since, recording began in 2006. So that's about half the number of sites that were being approved in the latter part of the 2010's. So we saw some localized disruption as a result of the local government elections in May, with a number of more contentious planning decisions experiencing further delays as a result of the national election through June. We're seeing these decisions pick up now and, you know, more or less going the way that we would have expected them to go.
So, as you've heard, the government is committed to get Britain building again and have put it at the center of their economic growth agenda, which is very positive news. It's early stages, but these measures, I believe, are key. In order to deliver their manifesto promise of 1.5 million homes over the Parliament, government recognize that it starts with planning, and all the signs so far are the government wants to move quickly. So we've seen the announcements of a return to mandatory housing targets, which featured prominently in the Chancellor's speech, a new task force to accelerate stalled housing sites, of which there are many, and funding for additional planning officers, all of which are very welcome.
We've also had confirmation in the King's Speech of a new Planning and Infrastructure Bill aimed at increasing the number of homes built each year by simplifying the process to approve key infrastructure projects, modernizing planning committees to speed up decision-making, reform of compulsory purchase orders to ensure that fair but not excessive compensation is paid, therefore, unblocking development sites and improving the land assembly process. And has also introduced a nature recovery and development funding provision to leverage development projects to fund nature recovery initiatives. Though, government, I believe, are hopeful that they won't need to wait for legislation to resolve the nutrient neutrality issues.
We expect the Deputy Prime Minister to write to local authorities, setting clear expectations of universal Local Plan coverage, and are also requiring them to prioritize Grey Belt and review Green Belt boundaries where necessary to meet housing need. And finally, what's been a busy few weeks, and in fact, a busy 24 hours, they have given a commitment to New Towns , national coverage of strategic plans, and publication of a long-term housing strategy. So the consultation draft of the NPPF was issued yesterday. The consultation will run for 8 weeks, and during that time, we will, of course, engage with government and officials and make representations. The consultation includes various provisions intended to deliver a growth-focused approach to the planning system.
It proposes reversing the changes to NPPF in December 2023. Makes housing targets mandatory and requires local authorities to use the same standard methodology. As a result, local targets will rise to a total of just over 370,000 dwellings per year, as the new standard method better reflects the urgency of supply. This means that local authorities will have to make plans for homes proportionate to their existing communities. In other words, a stock-based approach with an uplift where house prices are most out of step with local incomes. The priority will be for housing requirements to be met on brownfield land and will require local authorities to review Green Belt if housing need can't be met on brownfield land or Grey Belt . Finally, local authorities must demonstrate a five-year housing land supply going forward.
While all of these measures are extremely welcome, we must recognize that it isn't a quick fix, or easy solution. NPPF, mandatory housing targets, five-year housing land supply, they can, when implemented, move the dial quickly in planning terms for a willing authority, but near-term housing delivery will rely on sites already in the system. Schemes will also continue to be impacted by council resource constraints and potentially local opposition. New land opportunities released as a result of the changes are more likely to be delivering output in the medium term, but we are confident that government does understand the importance of the industry to economic growth and the need to move on this quickly.
So, Taylor Wimpey, I believe, is well positioned for growth and ready, and able to play our part in delivering, much-needed new homes across the U.K . What gives us, this confidence in the future is our land bank, having land where homes are needed and where our customers want to live. If the government is successful in pushing through its agenda, our strong and well-dispersed existing land bank and excellent strategic pipeline are a significant advantage. And as you heard from Chris, just earlier, we have a balance sheet to enable us, to buy land for future years, whether by converting our liberated strategic pipeline or from open market, as and when land availability improves, setting us up to continue to drive strong returns through the next cycle.
We continue to have excellent short-term land bank of 79,000 plots, and given the tough planning environment, our strategic conversions of 2,000 plots, while a good number, is lower than we have seen historically. This is the result of delays we have seen both in the determination of planning applications and in plan making. Overall, though, the land bank has held up to a really good level, and we're considering our much-reduced land activity over the last two years. We can expect to continue to benefit from strategic pull-through as we look forward. We do have a very big advantage in our mature strategic land pipeline of around 140,000 potential plots, which is ripe for delivery across the medium term.
We have, in my view, the best strategic land position in the sector, which we have invested in consistently, offering the flexibility and optionality to take advantage of the execution of our strategy today. That flexibility is not just the mark-to-market nature of valuation and optionality of timing, but a demonstration of its flexibility and optionality in changing policy environments. While the land market does remain constrained, we have seen a bit more opportunity than would have been expected at the start of the year in some areas, and we have been able to take an active and opportunistic approach, approving 5,000 units in the first half. We will continue to be opportunity led, but I do want to be clear that our focus remains on the quality of the deal.
So just taking a step back, for a moment, I think you'll remember me talking about how we very deliberately and I think thoughtfully set the business up to manage through the cycle. There is, of course, a reason why we have been giving you visibility in the last year or so on the number of plots that we have in applications in the system. We've been actively preparing for potential planning changes over the last 24 months. When we set our strategic land teams a challenge to bring forward more assertive applications, and we've been deliberately loading the bases in anticipation of a change in policy direction. As at the 30th of June, we have 30,000 plots in planning for first principle determination, a combination of outline, full, and hybrid applications.
As a reminder, that's roughly double the level that we have had in the past. To be clear, this is all before we consider the more business as usual work of liberating the short-term land bank. As the policy environment starts to crystallize, we have also been analyzing our strategic pipeline for the next level of potential applications we can ready, which could benefit from the anticipated changes in planning policy I outlined earlier. There's also, I think, some optimism that local plan reviews, including the recently paused or abandoned local plans, will restart, enabling more traditional strategic promotion and securing the necessary housing land supply needed to deliver on the government's commitment to build 1.5 million homes.
What I would want to reiterate is that while we are very hopeful that the government changes to the planning system will materially move and improve future prospects, I'm also realistic that it will take time for many changes to flow into deliverable sites, which in turn can become outlets and future volume. We have said that we are well-placed to grow for next year, assuming supportive market conditions, but I do want to be clear, this is based on our current visibility of land and outlets already under control with planning, rather than any short-term fix or proposed planning changes. We own and control all land for 2025 completions, almost all of it with detailed planning. So touching now on outlets, we are exactly at where we expected to be.
As a reminder, outlets have reflected land buying sort of been reduced in the last couple of years and planning issues, and they have been under pressure. You will continue to see that for the balance of the year. But I'm really pleased to say that against that backdrop, we are on track on our own expectations and have added 26 new outlets and are already started on site for 14 of the outlets due to open during half two of this year. So we have better visibility today on outlets for next year than we have ever had at this time of year.
While we do not guide on outlets, I can say that we expect to open more outlets next year than this, irrespective of planning changes. We've spoken at length about our efforts to drive operational excellence through the business to protect value, and I'm extremely pleased to say that the teams now see this focus on efficiency and execution as business as usual. But there are some areas I think worth calling out. Our Timber Frame facility successfully delivered its first units in the first half, and we're pleased that the facility received its ISO accreditation, which is a great achievement for such a young facility and a testament to our approach and to the great work of our experienced management team.
This will be key to our capacity for growth as we target 30% of volume from Timber Frame over the medium term. And of course, we are making sure that we are active now to ensure that we have the skills developed and ready to deliver growth. This can't be done overnight and requires long-term approach and effort. We are, for example, working with the Skills Partnership, and we are trialing different ways to increase new apprenticeships, including working with key subcontractors to support them in accessing funding and training for more trade apprentices. We've also talked to you about the value we're deriving from a more data-driven approach, ensuring that we are optimizing this to simplify and where we can, add value.
In the case of our Touchpoint customer portal, we're adding value to the customer experience in an easy-to-use and engaging interface, which allows customers to track their journey, monitor build progress, and log issues. And as it's fully integrated into our CRM system, it also means that our teams can pull data in real time, highlighting trends and aiding decision making. So, to conclude, we remain extremely focused on managing the business effectively through the cycle, as well as on building the business and doing all we reasonably can to prepare for growth. A brief reminder then of our priorities, which we continue to pursue. We continue to work hard to protect and prioritize value, and are focused on building as strong an order book as possible to set us up for 2025.
As ever, we are tracking demand and expectations to be able to match our build to market circumstances. We remain focused on progressing land through the planning system, and you'll have heard today that we are active in the land market, where we see good opportunities to invest and have seen a bit more activity and opportunity this year than we expected coming into the year. We continue to invest in the long-term sustainability of our business throughout our activities, and particularly by investing in our people, to ensure that we have the operational capacity for growth and the ability to execute. And looking forward, as you've heard today, we expect full-year U.K. completions, excluding joint ventures, to be towards the upper end of our previous guidance range of 9.5-10,000.
We have retained the infrastructure and the ambition to grow our business in the medium term. We've focused on getting land into the planning system and are well positioned, but the positive changes to the system announced and expected will take time. We've put in place a strategy focused on, in leveraging the inherent value of our existing land bank and strategic land pipeline as planning and market conditions allow, and are focused to deliver growth and shareholder value. And finally, we have never had better visibility of sites than we do now, so we remain confident, of achieving growth if market conditions allow in 2025. So, Chris and I are happy to take questions. Thank you, Glynis.
Thank you. Glynis Johnson, Jefferies. Forgive me, I'm gonna go with 4 to start with. Apologies to everybody. On the land bank, first of all, there's a few. The plot cost to selling price has gone up a little bit in terms of what you've approved. If you can just talk through, you know, if there's any nuances in that, in terms of, is it slightly more oven ready and therefore more on the build costs—more on the land rather than necessarily the build cost, but just any, any kind of color around that. Second of all, just a clarification, the 30,000 plots in primary determination, I think you said they were different from your strategic land. Can you just talk about how that sits relative to your strategic land bank?
And again, I'm focused very much in terms of timing, of when you can actually start building on that. Is there any difference? Should we think about them as more longer term sites, those 30,000? And then just in terms of two more things. One, previously you talked about putting extra factories, build teams, however you want to phrase, on sites. I'm just wondering, have you started to do that now? Are you starting to, on some of those bigger sites, think about how you can maybe increase the build rates? And then, Chris, cash. You talked us through your capital allocation, but what level of leverage would you be willing to take this business to? When do we have to start thinking about the priorities of growth versus dividends?
Just a bit more color around maybe the nuances of when things start to get a bit more stretched.
Okay. I'll just take them in order, Glynis. So on, in terms of land cost, on approvals, you know, it is something that fluctuates, quite a bit. But you talked about oven-ready sites, and the difference between that and perhaps a strategic site. So looking at the balance of acquisition, you'll have noted over the, sort of the last 18 months, the strategic land, sort of conversions have reduced, over our run rate in previous years. And strategic land generally comes in at a much lower land cost. So you're seeing a little bit of that, just, sort of eroding. You know, I've had a quick look at our land approvals. There are a couple of sites that I would describe as oven ready, fully serviced. That does tend to lift the land price.
Probably no more than I would say in a normal year. They do tend to sort of drive that average up a little bit. I mean, I think the average is still sitting at around 15-15.5%, which I think is a very healthy balance. On the Strategic Land sort of pipeline and those 30,000 plots, we've got two-- we tend to think of our Strategic Land pipeline in two buckets, for ease. A bucket that our long-term specialist strategic land teams are managing, that tend to be sort of larger, probably, initially a focus on Local Plan promotion.
And then we've got Strategic Land that we would consider to be a little bit more sort of front-footed, that our business units would run. But the 30,000 plots that we have and that I'm referencing in is a combination of Strategic Land in its purest form and some that we're running through the businesses. But you know, as I said, that doesn't include anything that's in our short-term land bank. So that liberation work is a different bucket. Then I mentioned a third that we are sort of analyzing and sieving through the strategic land bank. Now, given the changes as the communication from government became more sort of crystallized of what else we could prepare for for promotion. In terms of putting extra factories, I mean, that's still a strategy that we utilize.
We do still have some sites which have multiple factories on on sites. It's a very live conversation. It's quite intuitive with our with our our businesses and from the the divisional chairs to make sure that we are keeping pace as the market moves. And as we've described quite a bit over the last year or two it would be wrong to think that all sites move at the same pace. So it's very much a site-by-site, and then ensuring that we're putting the resources in place. And if that requires a second factory outlet, then that's what that's what happens. We're not holding back on on WIP, where there's the market to to deliver that. And then cash, your question, Chris.
Yeah. Glynis, I'd say that, you know, our strategy now for a number of years has been to set this business up to perform through the cycle, and our differentiated dividend policy to provide, you know, a consistent return based on net assets is, you know, entirely consistent with that strategy. So the fact that we remain in a negative adjusted gearing position, and with the short-term land bank, as Jennie said, at 79,000 plots, means we've got a long way to go before, you know, we have any sort of issues in that regard.
Sorry, can I just quickly follow up? Are you increasing the number of factories on your sites?
I would say at this point, it's still stable, but that is something that, you know, is very much a live discussion. We talked about agility a lot, Glynis, as we were sort of controlling WIP and managing, build rates to a falling sales, sales market. You know, we, we're looking at the reverse approach now, where, we are extending, more WIP. But, you know, if, if a site gets to the point that the demand, requires a second, factory, then, you know, we will, we will open it. Certainly, those sites have been set up that way, so they'll be ready for it.
Yep. Okay.
Will?
Thanks. Will Jones at Redburn Atlantic. First, just around the market, please. Clearly, achieving pretty good sales rate so far this year and up to July. How close does that bring us to being able to tweak a bit on either gross prices or incentives, looking to autumn? And then maybe just around planning and outlets, just, I guess, on the government agenda, you talk fairly about it likely to be taking time, but would you, if you were pushed on it first half of next year, would you say that's a reasonable expectation for these measures to start benefiting the system? And to what extent do you worry that the affordable housing demands of the government might somewhat constrain progress on that? And then just, I guess, big picture on your outlets.
Appreciate you won't want to guide, but I think this year and last, you'll open in the order of 50 outlets in each of those two years. Before that, you were running at 70-100, I think, annual range. High level, I suppose, in a better planning environment, is that 70-100 kind of ballpark something you could aim for, or does the land somewhat constrain you to getting back to there, I suppose? Thanks.
Okay. So, market-wise, I mean, you'll see that the pricing has been really quite flat since sort of quarter four last year. We are seeing good levels of customer interest. I think the quality of our inquiries is good, but there is still, you know, definitely an affordability issue. And we have had to maintain a level of incentive to drive commitment because, you know, with house prices stable and maybe the prospect of interest rates falling, you know, we need that enticement to drive commitment. I think we are constantly reviewing, and we've talked before about plot by plot, site by site, looking at sort of nuancing our pricing.
And you know, and I can see that flowing through on the weekly sales. Some sites are, you know, actually gaining a little bit, some sites, you know, not moving, maybe, even sort of a little bit, a little bit, on the down. So it's a balance. I think if there's a rate movement, that that certainly will help. You know, I'm really pleased to see first-time buyers coming back to that sort of 40%, but it's still got a way to go. And, you know, first-time buyers certainly behave in a more procyclical way, so a little bit of movement on, house price, in the positive, you know, sort of could help drive, that, that demand.
On planning and outlets and, you know, how they would flow through, I mean, look, I'm really pleased with the draft NPPF that was issued yesterday. It holds a lot of sort of promise and opportunity, but it's a consultation. So the first thing, Will, is in terms of a local authority sitting today and deciding what it is that it's sort of what decision it's going to make, the minister's statement in Parliament is a material consideration, so, you know, sort of to get a bit planning anarchy. And so some authorities might, you know, sort of move a little bit more to the positive, but you know, many more will wait until the consultation is complete. That's at the end of September.
And then, you know, we can expect quite a lot of revisions, and I think the message yesterday was NPPF commentary at the end of the year. Then it becomes a material consideration. So, what does it mean for the first half of 2025? Well, you'd like to think that as a material consideration, it would start to drive planning decisions, but, you know, again, history would show us that there'll be a reasonable community of local authorities that will need more incentive in order to do that. So I think planning approvals is something that first half of 2025, anything that's in the system now, you might see, you know, a little bit of improvement, but I would caution you, you know, sort of in your optimism.
And really then, new applications going in to fit the new model of housing need, you know, those determinations, late 2025, start of 2026, and then volume flowing out through then. But, you know, one of the reasons why, you know, I bore you with the HBF, you know, graph, you know, on a, a regular basis is, you know, that land supply, the, the amount of approvals, has fallen to a really low level, and so there's a need for a recharge just to get back to something that was vaguely normal before you get into the actual, you know, being able to, to drive growth. So I think that we just need to look at how long it takes for those to, to flow through. On affordable, housing, I mean, I think there's two issues.
There's the comment that we made about affordable housing associations and the current problem, really, which is around the current affordable housing program is fairly committed now up to 2026, and so the Spending Review will be an important signal for the direction of travel there. As to, I believe, the Chancellor has indicated that she will make a statement at the time of the Autumn Budget around sort of rent sort of rent provisions for housing associations, which I think would be very helpful for them. But in terms of overall affordable housing demand, the government have been really clear about what their aspiration is for Green Belt review.
So they've talked about 50%, and they've talked about a 40% requirement for New Towns . So that's very much on the look forward, things to come. I think there's a healthy understanding that there are viability challenges, and that, you know, development can't deliver everything. And that, you know, there is a need for a continuing viability discussion. And certainly, you know, it's a relatively small reference, but continuing reference in the new draft of the NPPF on subject to viability. So we will need to look at that. And then, sort of outlets, you know, as we look forward, you know, and, you know, we've talked about loading the bases. You know, we've done that deliberately to try to drive the best of our strategic land pipeline into the system.
That did, you know, require quite a lot of work. It's not an instantaneous action, and we would hope to be able to drive an uplift in outlets coming through from our strategic land bank over the coming years. You know, back to that point about the land availability environment, the land market overall needs a little bit of a recharge. As that's recharged, then my expectations and ambitions for increased outlets would increase in line with that.
Thanks. Aynsley Lammin from Investec. Just two, actually. Obviously, lots of focus on the supply side and planning, but just interested with your discussions, government, any kind of hints that they might be looking at something on the demand side? You know, not exactly Help to Buy, but something equivalent. Does the industry feel that's needed? Just interested to hear your thoughts there. And then secondly, just on M&A, obviously, been, you know, a couple of ongoing deals in the sector. I think I read that Taylor Wimpey had had a look at one of the private players. Just interested to hear your views there. Is it something you rule out, or would you consider it? Just anything there.
Okay. I mean, on demand side, I'd really just sort of reflect back what I've read in the manifesto. You know, government are very supply side focused. They've talked about a Mortgage Guarantee Scheme . You know, I do sort of think that that will have, you know, relatively, you know, sort of low levels, if any, sort of impact. But, there've been no other discussions that I'm aware across the sector on on demand side sort of stimuli. And on M&A, you know, look, as a point of principle, I'm, you know, not going to comment on on M&A. What I would sort of reflect is, look, I think that we're as a business in a fantastic position. We've got a strong and resilient land bank.
We've got an excellent balance sheet, and, you know, and a great business platform. And, you know, we've retained the infrastructure within the business to drive volumes to, you know, sort of that 16-17,000 plots. And, you know, and I hope that over the last, you know, sort of two years, you've heard a lot from us, too, about how we're setting the business up. You know, using the the challenges and, and this time in the market, not just to sort of mitigate for the, for the current environment, but to really prepare the business and our platform for, for a growth opportunity, and that includes some of the strategic land actions that we've talked about, the timber frame investment, you know, IT investment, and, and people investment.
So we'll do what we think drives the best value for shareholders, Aynsley. Thank you. Oh.
Ami Galla from Citi. A few questions from me. The first one was on capital allocation again. Could you give us some color in terms of land spend? You know, what is your ambition in terms of investment in land over the next couple of years? What's a sensible level that we should budget in? The second one was on build costs.
You know, your comment on build costs being flat today on new tenders is helpful, but in terms of a line of sight for next year, you know, as we kind of think about the moving parts and the recovery on track, and most of the house builders getting on site more rapidly, you know, how do you think that changes, and any sense as to what's the normalized level of build cost inflation on a sustainable level that we should think about in this sector for the next couple of years? Sorry, I have a couple more to go. One on Green Belt sites. You know, within the land bank, within the strategic land that you have, can you give us some sense of what's potentially in the Green Belt definition, that exists.
The last one on the sort of remediation of the sort of recladding work that you're doing. You know, what is your best estimate of how many years would this take to complete?
Okay. So if, Chris, if I take the Grey Belt, Green Belt, question and I send the rest to you, is that okay?
Yeah, fine.
So, Grey Belt, I mean, it's a new, it's a new definition. You know, and I certainly in my mind's eye, I'm thinking of it as that sort of urban fringe, you know, sort of, urban edge, liminal, sort of space between urban and and Green Belt. We've got a bit more detail from yesterday, you know, previously developed land, in the, in the Green Belt, and land that makes limited contribution. So that, that's probably a little bit wider than we might have been, expecting. We do have land that we flagged as, sort of fulfilling Grey Belt. What we then need to do is a second assessment as to where those local authorities are on their land supply, because Grey Belt really only kicks in if they're not meeting their housing need.
Green Belt, overall, we've got probably, I would say, about 40% of our strategic land, you know, that 140,000, is Green Belt. I'd say some of that is already moving through local plans. You know, there have been authorities that have been still willing to take a reasonable, and sort of medium-term view of of allocations, and so some of that's already in sort of emerging local local plans. And Chris.
Yeah. So, on capital allocation land spend over the next couple of years, obviously, you know, the land market, it has the potential to change with the announcement of the NPPF. That's not gonna kick in, as Jennie says, immediately. So, you know, our approach on land is very opportunistic. It is selective, and as a consequence, it's gonna be a function of what's available in the land market. So, you know, our capital allocation is, you know, every single land site that we buy, Jennie reviews, it goes through a rigorous process. So we're not gonna be changing our approach or our aspirations because, as Jennie said, we've got a really good land position, and therefore, we're not in a desperate need to buy land.
You know, if the market gets a bit better in the future as the supply of consented land improves, then, you know, we have the ability to sort of take opportunities now and also wait as that unfolds. In terms of build cost, yeah, build cost inflation, what's it gonna normalize to in the future? I'd be quite rich if I knew that. I think, you know, if you went back to history, you know, a stable sort of market, you know, you would, I think the industry would wish for like house price inflation of 1%-2%, and build cost inflation of 3%-4%, can be sort of sustained within that, and that would be a happy place to be.
I guess it depends on affordability to some extent and how that eases in future years, and what that means for levels of demand. Whether it's gonna be a sharper sort of trajectory, who knows? But you know, history would say, you know, if we have a steady growing market, this maybe... But I think what's undeniable is that you know, there are scarce resources, whether they be materials or labor, and as volumes increase, there will be pressure on costs. Oh, sorry, and the last one was remediation. I mean, with the additional investment that we've put into increasing the team, I'd be really disappointed if it was longer than four years.
Morning.
Morning.
Harry Goad from Berenberg. I've got two, please. Firstly, just coming back on your comments on land, Chris, if you could talk a little bit more about what you're seeing in terms of land pricing and whether you feel, at a high level, whether land prices have declined enough. 'Cause if we think about the extent of build cost inflation we've had in the last two to three years, we think about pricing incentives, it just feels at a high level that land prices still need to reset quite materially lower. And I'm interested the extent to which you're seeing sites coming up that you can actually make your hurdle rates on. The second one, please, is around partnerships.
And I don't think you're gonna tell us that you're going to pivot the business model like Vistry has, but, you know, at the margin, are there certain sites where you might think about doing that sort of partnership transaction right at the outset? I'm not talking about the sort of bulk deals, but almost like budgeted, preemptive, bulk-type deals. Thank you.
Yeah, I'll take those, Harry. I mean, look, from a land pricing perspective, in a world where land supply is constrained, you know, land prices have maintained at a level that I think surprises us, given you know, the sharp change in overall output. But, you know, I do think that that's just a signal to, you know, demonstrate just how little land there is available in parts of the market. You know, we're looking at that quite carefully, but, you know, it is, you know, demand and supply economics. The more land that there is available, the more keenly, you know, landowners need to sort of assess their their position. So, you know, what would I expect?
I'd expect that if we started to see more increases in sort of planning, some freeing up of planning friction, then you'd expect land supply to start increasing. I think because we are at a low level, it's not going to sort of change over overnight, but you would expect a gradually improving position around around land pricing to come to come through. You know, and as to sort of hurdle rates, you know, I am happy with the land that we have bought. We've described it as opportunity and quality deal-led, and that is exactly what I see, you know, when I sort of run my finger down the list of opportunities. I'm very comfortable with them.
And then on partnerships, I mean, I think we've been at sort of pains in the past to, you know, sort of confirm that we do, we do have, sort of partnerships. We do do some bulk deals. We do prefer them to be part of our sort of assessment of a site and to set the site up, to manage the output to bulk. It's very much on a project basis, but I'm happy that we will continue to do that. You know, our preference is to work with established partners who you know recognize the quality of the build and the service that they receive from Taylor Wimpey.
You're very patient. Thank you.
Charlie Campbell at Stifel. So just a couple of questions from me, really. First question, so the short land bank's got 79,000 plots in it. What sort of proportion of those, roughly speaking, are on sites where, which are under construction? And how would that proportion sort of vary between, sort of, let's say now, and, I don't know, 2019 before planning got really difficult again? Just to understand, I suppose, what happens if you free up planning, how many more sites you could get from the land you already own, really effectively. And the second question, sort of the Section 106 and housing associations, sort of struggling a bit. I mean, what happens, sort of worst case? And I should understand that.
I mean, if you've got permission to build 100 units on a site and 20 is social, do you actually have to deliver the 20 social, or can you say, "Well, look, we couldn't find a buyer for that, so we can change the plans effectively?" I mean, does the 106 cause a problem to the private delivery effectively, I suppose, is what the question is.
Yeah. Okay, it's a good question, Charlie. I mean, in terms of the short-term land bank, you know, the way that we segment the short-term land bank, the easiest way, I think, is to describe it that everything that's saying, that's detailed planning permission, you can assume that that's, you know, on a site that's running through. And there's a slide, I think, in the appendices that will also show you sort of a little pie chart with a... I think if you really, really squint, you might be able to see it, a very small representation of sites with implementable planning permission that we're not on site for. So we're very active.
You know, the business doesn't sit around on schemes with detailed, implementable planning consent. They're all open. I think the area that you want to sort of look at is that that's sitting with outline planning permission in the short-term land bank, and then you would add to that, that big bundle of applications that I have been discussing this morning. I can't, Charlie, and honestly, you know, bring to mind the 2019 breakdown, but you'll, you know, you'll be able to see that in the appendices of the slides. And in housing associations worst case scenarios, I talked about mitigation, mitigation and mitigating actions, which, you know, our teams are really active pursuing. There's a range of them.
There's for-profit players in the market that are, you know, sort of looking at things a little bit differently and wouldn't be as bound by some of the factors that we talked about in terms of balance sheet, legacy, cladding and other things. But most Section 106s also have what's called a cascade mechanism, which is effectively a series of different exercises that you would go through with the local authority if you couldn't deliver a particular housing association. So what would that cascade look like? It could move from, you know, one type of housing association structure to another. It could move from tenure, so rather than affordable rent, it could move to shared ownership.
It could move to discounted market. It could move then to payment in lieu of. So there's a range of options that can be engaged with, and it really will be for each individual scheme and conversation. You know, I think that we may also you know see something like passporting or an opportunity where if there's an issue that you reach a headline and some Section 106s could have a you know you shan't deliver more than 90% of your open market housing until 100% of affordable housing is delivered. There's quite a range of different structures that an authority can you know can give you leniency, and you can continue to deliver a private sector.
So there's quite a range of options available, but it's all friction. And it does require engagement with the local authority. Is that helpful?
Thank you.
Yeah. Excellent. Okay, at the back of the room. Yeah.
Thank you. Morning, Peter, from Morgan Stanley. Just have a question around, so we've discussed planning and land availability and how that might potentially impact the pace of volume recovery. In a environment where the rate backdrop improves, how quickly do you think volumes can recover? But then also, what are some of the other maybe supply chain issues you might face, for example, maybe labor? Maybe a bit of color on that, labor availability, and how that might also affect the volume recovery as well.
Yeah.
That's it for me.
Okay. Look, I'm going to struggle to give you a rate of volume recovery because it depends on what the shape of interest rates and the pace of interest rate sort of reductions look like. So we'll be very much sort of measuring that or basing that based on what we're seeing in the market at any time, and we'll update you, you know, as we go. But supply chain constraints and labor constraints and other things are part of that sort of exercise or preparing for growth that we've been really actively engaged with across the business. You know, and Chris mentioned, you know, the sort of material suppliers and others, you know, could be a source of constraint.
And I do believe that this is one place where government can help, because by being consistent about what their aspirations are, consistent about, you know, their intentions in respect of Net Zero or Future Homes Standard s and other things, will give more confidence to the supply chain and encourage them to gear up. You know, the types of things that we can do, we've talked about engagement with our subcontractors. We communicate quite clearly with our subcontractors on a regular basis about what our aspirations and expectations for growth in the near term are. The timber frame facility is certainly a part of our delivering on sort of expectation for growth and the benefits that timber frame can bring, both in terms of the speed and taking, you know, certain trades off the critical path.
You know, we have worked really hard over a number of years. You know, our procurement process is considerably, you know, I dare say, slicker, but more informed, much more analytical and data-driven, and our relationships with our supply chain and subcontractors, material manufacturers, is considerably closer. So, you know, I do think that there will be challenges, as Chris talked about, but we are working really hard to take as much friction out of that as we possibly can, as we work to ensure we've got a good platform to grow from. Thank you. Okay, Chris.
Thank you. Morning, Chris Millington from Deutsche. The first one is really just a couple on margins, actually. I don't know if you can comment on where you think your embedded landbank margin is after some of the pressures we've seen in the last few years. Next one's about the direction of administration costs. I mean, you're one of the few who have actually made a reduction year-over-year here. Are we gonna see that bounce back as things like bonuses come back in and activity levels build? Sorry, there's another one on the margin there. Affordable Housing margins, how do you account for those? Are they materially different? Some, some normalized, some have a differential there.
And then the final one I've got really is just about this premise around a supportive market will help you grow in 2025. Because if we look at reservation rates today, they're fairly consistent with your volume outlook at the moment. So when we talk about a supportive market, we're talking about sales rates uplifts, outlet uplifts. I'm just curious about kind of what that driver needs to be to kind of move you on, somewhat further.
Okay. From a margin perspective, Chris?
Yeah. So, let's start with affordable. How do we account for that? It's a blended basis, so you know, the each site has a site budget, and the margin across both the private and the affordable completions is equalized. In terms of the margin embedded in the land bank, you know, we've never sort of disclosed that to my memory ever. But obviously, what you can see is that you know, the results that are there today, and you know, the potential for margin recovery in the future is to do with scaling up the business and driving better sort of recovery of our fixed costs.
So, you know, as time progresses and we scale up that and respond to that demand, then that's how the margin improves. In terms of admin costs, yeah, you would see, I think, that admin costs are actually flat in the half one income statement. Net operating expenses, which is a slightly different definition, is less, and that. So it's mainly the other income expense line that is showing a benefit, and that's the absence of aborted pre-acquisition land costs in this period compared to the first half of last year. And the last one was.
Affordable housing margins?
Sorry? No, I've done affordable housing.
Oh.
I was doing them in a confusing order.
I think, I think that was it on the margin. There, there was something on the admin cost, whether or not you see it starting to grow again.
Yes. Yes.
Sorry, [audio distortion]
So, I referenced, and I think Jennie did, too, that we will have some increased IT costs in the second half. So, you know, we are changing our IT service provider this year, so there will be some costs coming through in that regard. So, you know, admin expenses, you know, you're probably looking at 2%-3% increase year-over-year. So that's admin, not net operating expenses. Yeah.
Look, I think we've been really clear, Chris, that we've got excellent visibility for our outlets for 2025. You know, and we're in an excellent position in terms of planning for those outlets. So, you know, supportive market means, you know, sort of the consumer market.
So, we should think of outlets being higher year over year, if it is outlet driven or
So
I know you don't guide on outlets, but the
We don't, you know, and we're drifting into that difficult position. But, look, we're splitting it down. We've got really great visibility for outlets. We've talked about year-on-year that our sort of new outlets will grow. So, you know, more outlets open next year than this year. And then, you know, a supportive market. So, you know, hopefully we'll see some rate reductions that will support that as well. Okay. Thank you. Okay. Oh, Sam. Right. Is this the last one?
Yeah, I think so.
Okay.
It's just one. Thank you. Yeah, Sam Cullen from Peel Hunt. Just coming back on the strategic land and the, and the Green Belt, did you say 40%?
About 40%.
Are they concentrated in a few kind of more enlightened local authorities? And given
No, there, there. We have, you know, when I talk about having a widely dispersed land bank, both strategic land pipeline and short-term land bank, we have, you know, really sort of robust position. So, in some areas that are more constrained by Green Belt, you might see a bit more concentration of Green Belt because there's no other strategic land options. In which case, you know, I think that we've got a good position in the beauty parade. And in areas that aren't constrained from Green Belt, you're not likely to see much representation of it.
The follow-up, I guess, was in terms of the 50%, I think, affordable housing provision that's been outlined, is that gonna be a net negative in terms of viability issues, or do you think sort of half of something is gonna be worth more than 100% of nothing?
I think it's
The land ban
absolutely a function of where you are, but not just where you are, but what are the technical constraints, the infrastructure burden, the Section 106 requirements required to deliver it. So, you know, I think it's in the same way as I would caution, you know, government in setting a 50% target on the basis that the perception might be that all Green Belt's in wonderful areas. I'd say that even in, you know, good areas, if you've got a high Section 106 or a high requirement for a community, you might struggle to, to deliver 50% affordable. In other areas, you know, if you can get straight off the back of a highway and you don't have, you know, any material ground conditions, then, you know, it's entirely possible.
There's just a real significant range of variables involved in that.
Thanks.
Okay. All right. That was a bit of a long one this morning. Thank you all very much for coming. For those of you who haven't been on holidays yet, I wish you a very good summer holiday, and we'll see you in the autumn. Thank you.