Trading Update

Nov 9, 2020

Earnings release

Good morning, and welcome to the Taylor Rimpy Plc Trading Update Call. Today's conference call will be hosted by Taylor Rimpy, Chief Executive, Steve Redfern, and Group Finance Director, Chris Carney, followed by a Q And A. I would now like to turn the conference over to Pete Redfern, Chief Executive. Please go ahead, sir. Thank you. And thank you everybody for joining us and apologies for the short no We've got a lot of people on the call, so hopefully, most have managed to get here. There's quite a lot to go, probably slightly more than you'll take for 2020 as being an unusual year. And as you will know, it's about three and a half months since our July sort of half year results. And so you know, sort of quite a lot to update you on. I'll take a fairly sort of traditional approach to the order. I do think start with the housing market then our trading. Then construction and how we're coping with current sort of COVID conditions and probably there also pick up, sort of what's happening through this sort of second lockdown. Then on costs, including the restructuring that you will have seen in the statement, then land buy and touch on customer care and come back to the guidance and let Chris pick up anything that I've managed to to miss on the way through. And I'm I'm confident there will be something on this occasion because there is a lot as I say to cover. I think on the housing market overall, it won't surprise you using from, sort of most commentators that the housing market has generally performed sort of pretty well over the last few months. It's returned something like normal more quickly than I think most of us imagined, as you know, through the conversations that we had through the capital raising subsequently, we were confident about the underlying business housing market, but I don't think sort of we would have called quite how sort of positive it's been over the last few months. I do think that we should get that in context. So that I think it can easily be overplayed. There's nothing that market race away and price or volume terms I think we've seen it come back to something like normal pretty quickly. And probably with more strength and resilience than we think for a while, in the upper end of the market. And I don't mean £1,000,000 plus houses. I mean sort of areas that are very important to us good quality, good locations, sort of detached housing, family housing, which has been relatively slower over the last few years compared first time buyer market. We've seen some real strength in that. Have your price sort of it that we've seen price move about 2% net for us. That's an underlying movement. Probably a little bit better if we excluded sort of our care home and NHS worker discount. Which is still in our sort of current sales. That would probably be a bit about 3%. That's our view of underlying kind of market price movement over the last 6 months or so. I think sort of our average selling price is made by more than that. The average selling price in the order book, even if we remove sort of slight positive distortion from our Central London business, the average selling price in the order book has moved about 5%. But I'd say only 2% of that is underlying price movement and impacts of sort of forward view of margins. Our trading through that has been robust you can see in the statement, we try to be pretty detailed about what you've actually seen. Cancellation rates aren't quite normal, but they're materially lower than they were. Last couple of weeks have been around 19%. We would see normal as anything around sort of 14% to 15%. Not something there that concerns us probably unsurprising given the amount change going on in sort of people's lives at the moment. But has remained stable. And I think I'll come back a bit to the second lockdown. But all of the comments I make about the market overall haven't changed in the last week or so, we've seen our cut customers generally come back to us and say, no, we want to get on with it. We haven't changed our view. We have 1 or 2 over the weekend who said, we don't think we need to do a physical visit, but we're absolutely receiving with the purchase. So we haven't seen any kind of sea change in confidence over the last few days. I think I should spend some time on our sales rates you know, we've we've quoted it in, you know, a way which is, yeah, directly comparable, but, there is a slight distorting effect of Help to Buy. There are no new Help to Buy, sort of sales within that sales rate. We expect to be able to use the new scheme for formal renovation from 16th December. We have as many have sort of engaged individually with customers. There is no commitment on that because we can't commit and they can't commit sort of and take a formal reservation. But we have sort of about 3 80 sort of informal hold specific customers against specific plots built up over the last 6 or 7 weeks, that relates to that Help to Buy 2 scheme. So you can see from that sales rates and you know that we are selling well ahead that we are selling well into the 2nd quarter, when the stamp duty changes, you know, sort of will have reversed and when that helped to buy 2 game will be if ever helped by 1 or not, that we're still maintaining sales rates into that period. And I think in some ways in terms of market signal, that's the most important sort of piece in here. Sort of our sales rate for last week, for instance, included 0.23 sales per week that are for the second half of last year. Point 43 for next week, the majority of which will be in quarter 2. So we're still seeing really good forward confidence into next year. Our estimates if Help to IP was operating today given the specific level of plots we have available and customer interest of where our sales rates will be, if we want to have to buy 2 sales, will be more like low 0.9, so 0.9to0.95. That is a very sort of broad brush estimate. It's hard to be specific because obviously people who want that scheme don't want to reserve without us at the moment. And so it holds it back. But I think it gives us real confidence for next year, in terms of the underlying depths of demand. And I'll come back to that a little bit when we talk about guidance. Excuse me. I think if I move on to construction, Probably the biggest direct impact on our confidence in 2021 delivery is where we move to on construction. When we talked to you at the end of July, we said we were operating at 80% or a bit better on average across our sites and that it was important to bear in mind but we'd only just gone back on-site in Scotland and that years of the sites in London was still hampered. We have gradually plugged away over the last few months. And as of today, I would say our average level of production is very, very similar to where it was in sort of first quarter of this year and what we would see as normal. There are exceptions that are on-site that are particularly constrained for some type of rung ahead of normal. But overall, we don't see that construction sort of output on a daily basis at the moment being a limiting factor. We still have to catch up. And we are starting to now sort of catch up. And that will still impact on next year's overall volume, but that's built into our guidance. We have also not had to constrain our construction sort of during this second lockdown. We went very closely through the rules, but we maintained the rules that we were operating to as we came back on-site in May. Sort of, and actually, the rules that we have to operate to do today will probably be slightly lighter than that. So we still feel we're operating in a safe responsible manner well within the rules, but able to deliver construction, which is pretty much in line with normal levels. On costs we haven't particularly touched in the statement on underlying build costs because there wasn't a lot new to say. We're still seeing sort of very little upward build pressure I think even given the stronger market, you know, so that we still not got production for the sector as a whole up at normal levels. So there's still our resources out there. You know, we're not making a call yet on next year simply because we don't have any sort of particularly new data. So I'm sure we will come back to that in February. But at the moment, very flat bill costs And then specific cost actions that are within our own gift. We've talked for a while about sort of taking some of the additional resource out of customer service and other areas where we've made changes out over the last few years as we get to deliver the level of performance quality that we want to make sure that having got over the hump, we are then returning to an efficient model. We've seen some of that happen over the course of the last few weeks. More significantly, we've made a series of overhead restructuring changes, which total an annual rate of about GBP 15,000,000 at a cost of about GBP 10. And those are principally around head office and our London structure. And effectively what we're doing in London And we're in consultation at the moment. So sort of it's not fully finalized, but what we are looking at is merging our Central And Eastern London business I'm focusing more on greater London than the Central London price points. I should say, and it's not stating the statement because it's not, you know, sort of it's not changed. But our performance on our existing central London schemes continues to be good. We have no concerns about land write downs in that market and no of issues with particular schemes. It's more a strategic view of where planning policy is and where we want the future positioning of the business to be But those restructuring savings are in process at the moment. Most of them started 2 or 3 weeks ago, so they're not sort of been announced this morning, but they're not yet completed as we go through that consultation process. So we obviously have to be clear on what basis we're talking about them. But we are expect on that 1,000,000 pretty much a full year's annualized savings, sort of in 2021, because most of them, we expect to be in effect by the end of the year. Very importantly, on land buying, we were very clear I think with the capital raise that we had already reentered the land market and that even without the capital raise, we would have been active in land We got good early momentum. We had a lot of schemes that we were looking at at that point in time. Many of those have now come through the process. And being either approved or contracted or both. We have and we summarize it today, you know, sort of the total level of approvals in that period after we've returned to the land market later on in the shutdown. That is about 1,000,000 a gross land acquisition about 70 schemes. I'm very pleased with the mix of those schemes. They are slightly more weighted than normal smaller schemes, but I want to be very clear. We are not pulling away from large schemes, and there are a handful of larger schemes in there. Those continue to be real assets for us. But we want a slightly different mix. I mean, we've been saying that since the beginning of the year, and this has given the opportunity to accelerate that sort of mix shift we expect those schemes to give us outlets through late 2022 and through 2023 and to give us real engine rooms per volume growth in 2023 2024. And there is nothing that we said through the capital raise on that. That we are changing. I think in terms of the underlying metrics and where the land market sits, we have seen materially less competition through the course of the last few months. I think that was particularly through, through June, July, August, and early September. With a stronger market. We have seen more people return to the land market, at least in part, as the autumn has gone on, you know, sort of, and I don't think that surprised anybody given the relative strength of housing, but we were able to take some good opportunities early on. There's a significant mix different sort of sites in there. There are sites that came new to us completely because of the shutdown and because we were there ready to do a deal and having the capital to do it and those we saw material discounts. There are some more normal schemes that have come through our strategic land bank that show normal discounts, but but not additional discounts. So so there's quite a big mix. But overall, with our existing land bank and those acquisitions, it really underpins our confidence in returning to that 21% to 22% operating margin range that we've talked about. I do want to pick up customer care. I'm pleased that we're past at the end now of the customer care yield, although still returns are coming in. We are confident of being sort of a faster level. But I think more importantly, I'm really pleased with the level of performance on those surveys and the 9 month surveys and customer feedback for customers who've moved in either through the lockdown or subsequent to that, I think, a real testament to how people have handled their communication with customers and their delivery and the fact that the quality of plots has continued to improve even whilst we've been going through all of this change. So coming to guidance, sort of obviously from a market point of view, sort of the key changes, sort of pretty material upgrades to, guidance for next year and a smaller upgrade for this year. This year is a bit about those higher selling price points. It's not about an underlying price movement because we we have most of our order book in line for this year. It's more about the mix of plots that are coming through. And that gives us, you know, more of a sense of upside against that sort of base level forecast than we saw. But, yeah, as we've always said, we have sold majority of our blocks for this year. So the impact of that on this year will be small. But I think that and some small cost efficiencies And we expect in our guidance to absorb those $10,000,000 of redundancy costs well. So the underlying cost movement is probably a bit better than it looks on the surface. More importantly for next year, where our focus has been, I think the key thing is we're able to take out the low end of our guidance at this point, both based on where construction progress fits and based on where sort of underlying market has gone to. The fact that we are so well sold for next year far better than usual we are selling well into the second quarter and even the second half at this point and still selling well even without some of the government incentives in place. We are not assuming next year sales rates are at the 2019 levels. Strategically, we said at the beginning of the year, even before COVID, that, you know, we'd like to edge off those a little, and that is still the case. And we're also building in a little bit of caution beyond that. But based on where we think we would be today, with Help to Buy2 in place is a reasonable view of what we expect our sales rates to be next year. So that gives us some flex I think that has led us to change our guidance from 80% to 90% of normal volumes to 85% to 90% and take the bottom end of the range out. And I think whereas have gone towards the 80% of that range. We would say that that is a reasonable range. We're not saying that we expect to be at the bottom end. There's a broad range around that. And I think with the cost savings coming in, a little bit of selling price coming through, we can also be sort of more positive on our margin expectation next year as that will be announced to top line and therefore to overhead efficiency. And all of that put together leads us to sort of our upgraded guidance to materially above the top end of the range. So an operating profit of materially above the million that's currently the top end of the range. I'm not gonna I know I know you will ask many questions on this, and, you know, I'm not gonna apologize too too strongly. I do still think it is right at this point to have, a range of expectations out there, both on volumes and margins. This is not about everything's sort of racing ahead, it's about a return to normality more quickly than we expected. It's about sell help on construction and particularly on overhead costs. And it's about the underlying resilience of the land bank. But I do think it's appropriate to still maintain sort of relatively wide guidance on where volumes and margin sits for next year because there are still plenty of risks and plenty of oxides against sort of the numbers that we are giving you. But hopefully that guidance against the overall bottom line gives you confidence in where we expect to be overall and we're happy to try and pin in some of the gaps, but please understand that there are still uncertainties and sort of If we put in everything that could happen on the positive side, I didn't have a double end of the guidance to do with the ugly stretch. So Chris, I am pretty confident I've missed a few things in there. What have I missed? Well, not very much, Pete. I'd just probably add that our cash guidance, we think we'll be towards the upper end of the guidance, which was 1,000,000 to 1,000,000 for the year end. Obviously, it just depends on how much we spend on land in between now and then. But apart from that, Pete, I think you've covered everything. Thanks. I probably should at a time into that cash guidance and into land, probably the only area I've I've got to think about is that link between land and timing. Yeah, we don't normally quote land on an on an approval basis, but because we're reentering the market and with real momentum, we thought it was important to give you a sense of that. That there are, a sizable number of those schemes that are fully contracted, but some of them are not and they're still very working through. Through the process and the pipeline, we expect to continue land activity at a higher than normal level. It might slow down a bit, but we're not sort of, alright, that's that capital spend, we will now start. I think we do see opportunities out there, so we expect to continue to drive momentum. But it will take time for that overall on the balance sheet. And when Chris talks about land spend, he's talking about cash spend. We do expect land creditors to be a bit higher at the end of this year than they were. And that's really the timing of those approvals as they come through. And we continue, we do feel in this uncertain environment we absolutely need to have a capital base there to be able to make both land credit to commitments and sort of provisional land bank commitments. So the cash will take time to flow through. But the commitments you'll see come through 7 December and come through the first half of next year. Should we open up for you. And we have a couple of questions obtained to, sir. The first question comes from, Hainesli Lammin. Your line is now open. Please go ahead. Hi, thanks. Good morning. Everybody, just a couple. Wondered if you could just elaborate a bit more on your comment that the lending market's holding up well. Just to provide a bit more color there on what you're seeing from the kind of mortgage market? And then secondly, just again, a bit more color sounds like it's all holding up well, but as we're going into this lockdown, any regional differences, kind of sales rates, cancellation rates changes early, into the second lockdown. It sounds like it's held up remarkably well, but interested in your view there. And then just thirdly, maybe one for Chris, if you could quantify what your expectation is for how much high land creditors might be this year? Thanks. Thanks. So if I sort of pick up the first 2 and then obviously leave so on to you, Chris. I think on the end market, it's on that and underlying interest rates, you know, have always been the key questions and underlying interest rates obviously have been helpful. I think on the lending market, I'd say it still hasn't it's never quite normalized. But it's been as close to normal as we could ever reasonably have wanted. You've seen sort of the odd lender withdrawal deals and then actually relatively quickly we've introduced them on higher lender values. I think 1 or 2 lenders have been concerned that their lending books have got too big, and then they've said they've increased the pricing on deal. So it's acted as a slight balancing act to a market that probably could have been slightly stronger. But I see that as healthy. And we still see most of the mainstream lenders in the market, but a broad range of deal and most importantly of all our customers have a choice of pretty low interest rate mortgage deals with a range of fixed rate terms it's important. But as I say, I think there is an overall sense of market racing away sometimes when you when you see press coverage, and I think that's overstated, it's it's normalized, but with the upsize of of the upper end of the market in terms of the sort of those those, kind of move up customers. And in terms of the second lockdown, I think we saw, and I'm talking about the weekend before last, we saw a reduction over that weekend in terms of immediate website sort of interest. And I think before it was clear the housing market was going to stay open. We had our customer say, are you open or not? And then particularly, the most common question is, was might ask that I thought I was going to move into in, you know, sort of late November, December. You are still gonna finish it. I am still gonna get to move in before Christmas, aren't yeah, rather than, oh, do I really want to go ahead? So and I think that's been true across all regions. Obviously, the sort of structure of lockdowns are very different in Wales. We did in Wales go to a virtual model only, for the course of that sort of short sort of firebreak shutdown. We saw sales rates reduce a bit during that, but we didn't see any kind of shift in customer confidence on people who are already connected. I think, obviously, we're now going into a period before, Christmas. When we'd expect things in terms of sales rates to slow down a bit and people are focused on moving in. But at the moment, everything we see in terms of the feedback in every region, both from prospective customers and currently reserve customers is around, I want to get on with this, you know, sort of, they're looking for more reassurance that we're not going to have to change things much than they are suddenly extremely nervous And I think this is true of the sort of, the stock market to a degree as well. I think they've almost taken comfort from the fact that we can have a second knockdown and actually it doesn't necessarily feel unless you're in certain key sectors, which are very directly affected, it doesn't feel like it has that much sort of impact for many. And I think that people taking confidence from that. If you can continue to build, then I can continue to buy. I think there is, and I touched on it, but it is quite a complex dynamic. So I'll probably spend on it a little. There's this point about Help to Buy too. Yeah. I don't know, and you, you would have to ask them yourselves if anybody has had booked reservations in their sales rate or order book so far. We haven't, and we think that that's right, you know, sort of because haven't taken a deposit from from people. We we haven't got any kind of contractual commitments. You know, we have a, you know, person who says I'd like to buy that house at that price it will probably, you know, sort of have that in on it. We said, we'll go hold that house. That's that's what we need when we say a a hold. I do think that's likely to, you know, it's holding back sales rates at the moment, but it's likely to artificially boost sales rates during December, but probably more likely January. We don't book those sales until they've gone right through the 1st round of processing. And then we think that will, yeah, there'll be a bit of a backlog there. So I actually think, you know, sort of what what you see in our sales rates at the moment is probably artificially held back, and it will probably get an artificial boost in, you know, sort of January. And I think we'll be you know, sort of disposing for you in, you know, sort of, February, what we think the actual underlying rate is because I think that will be quite important. But that's That is quite important in understanding our views about where the market sits at the moment and it's impressive. And on land credits, they were at 1,000,000 at the end of June. And I'd expect to see them to grow in set of 1,000,000 by the end of the year, could be less depending on the timing of when land deals complete, but more likely to be at or above 800,000,000, but still they'll remain less than 30% of the gross land balance and even with land creditors at those levels, adjusted gearing will still be pretty low because of the cash on hand. Great. Thank you very much. Thank you. And then I question comes from Chris Millington. Your line is now open. Please go ahead. Hi Chris. Yes. The rudement fee is free, if I may please. Can I firstly just ask about the weighting of FY 2021 profits between H1 and H2? I presume we're going to see a more even profile there, but I'd love some comments around that. 2nd one, and I understand probably not really the foreign, but I'm going to ask it anyway, but dividends. I just wonder if you could kind of update us on where you're thinking is there? What are your key considerations when thinking about the policy, particularly around specials as we look forward. And the final one I wanted to ask is outlet numbers. At what point do you see the balance tip and you start to grow them in light of that higher land spend? So in terms of, first half, second half late in next year, yes, we expect to see a month to month balance business between the first half and the second half. I can't resist the temptation to add bank gold on the end of that, but yes, it's kind of where we expected me. I think inevitably there's a kind of 1st quarter you because of both volume production catch up and because of stamp duty. Yeah, I do think the key question, you know, sort of from our market point of view is around, well, okay, how will quarter and beyond go, but we're seeing some early signs that are encouraging on that. But yeah, we do very much expect to see a much more even split. And it will be our focus obviously subject to growth. You know, in a year of growth, you naturally expect more hard to waiting, but subject to that to maintain that sort of balance as we go through the next few years. On dividend, yes, we haven't changed that yet. Now we do expect as we did, yes, and we've said before, we do expect to pay what we consider a normal ordinary dividend next year. I have, I think, been pretty consistently clear on calls that we see that as normal dividend per share as in, therefore, more in total as per the capital rates. But yeah, we are we are not, you know, sort of about to get into, you know, discussions at this stage on quantum of special. We still think it's likely special dividend in the following year. I think this is not a signal about the special dividend for the following year. It's about how I see next year. I I still feel the resilience we've seen in the market, where I think interest rates are now likely to sit for the long term. And capping into new areas of demand that we've always known with that ever have been fairly creescent through the last few years. Gives us more confidence than I've had for a few years about the underlying resilience of warehouse prices are. And when we're able to buy sites at mid-30s operating sorry, mid-30s return on capital and 20% plus operating margins, then I think I see more of an investment opportunity there. Than I did. I also don't think the planning environment is going to get, yeah, materially easier. So I think that our waiting is a bit more towards in investment than it was. That is not about moving away from special dividends, but it is about actually seeing that as a as an opportunity and making sure that we have the capital to continue your sort of investment where that investment adds value. And that, that has been a shift over the last from months, COVID has given us some really good opportunities, but I think it's also underlined sort of where the underlying market sits and it has made it much more likely that interest rates will sit lower for longer. And I think the last thing I'd add to that is the various facts the conservative party conference, they were starting to talk about sort of how they helped first time buyers out sort of longer term, half the end of Help to Buy should give us confidence that government is aware and feels a responsibility to to how they help, you know, first time buyers get on the housing ladder. That might not be helped to buy. That might be some different structure, but I think all of those are broad positives for medium term market. In terms of outlet numbers, yes, sort of I think the one thing that has remains, sort of challenging through the last few months is getting the right level of interaction with local authorities. That's not a criticism. I don't know if the IT systems that we've got and they've always been resource stretched. We are still loading outlets. We still expect to, but it certainly slowed down not because we're holding them back, but because the resources aren't there on the other side. But so we are opening, sort of outlook as fast as we reasonably can, and we expect to continue to do so. But I think these new sites that we're buying, we've always said you know, it isn't gonna be 2021 that they are they start to open. It's 2022, and it's, you know, 2023. And and that's that hasn't changed. But I think that's we probably have more corporate momentum on that than we've had in several years, but it's still a battle. So we're going to have to keep pushing it. And as we've made sort of some of the restructuring changes, one of the drivers has been to simplify some of the other areas of the business so that our teams, our MDs, and so our regional guests can really focus on not just buying sites, but getting them through the system, you know, sort of at pace. And so, you know, our budget conversations over the last week are partly about delivery of the next year or 2, but the bigger focus is how to get those, those sort of sites open, sort of, outpace. And just to be clear there, Pete, I mean, Are you referring really to maybe just a slight erosion as we go through next year, then it picks up with the new land in 'twenty two or stay bullish yet, but sorry to push you a bit further. No, it's alright. I think you've just described the bookends, if I'm honest. Chris, for the chance of slight erosion just because of that pace of opening new outlets, you know, sort of, and then picking up. I think, you know, our our forecast in that bite, we is to keep them stable through next year and then build. But I think if you look at it from a, excuse me, point of view, Yeah. Actually, the outlets are already open. So it's not about volume. It's not about volume risk. It's about then, you know, sort of when we could start pick up volume growth after that, but, that's the swing factor. Understood. That's really clear. Thanks so much. Thank you. And the next one comes from Will Jones. Thank you. Good morning. A few from me, please, if I could, I think the first one might have a couple of sub parts, but it's really around land and working capital. So just lots of obviously helpful data in the statement and the intro. But when I think like the 15 or 8000 plots bought since Q2 and you compared up to 78,000 land bank. Would you have a rough idea of how many of those will be represented in the 78, just ballpark, please? And obviously, as a follow on to that, I think in the statement, you talk about the 78% potentially growing by 10% over the next year or 2. How much again, sorry, but how much do you have a feel for how much land buying you might need to say through calendar 2021 versus replacement to obviously grow that land bank net of what you've kind of approved already. And sorry within that as well, just because I'm trying, I guess, to get to a view on working capital needs across the whole business in 2021, but would you highlight anything else outside of land and non creditors to be aware of the next year? Obviously, I guess, WIP there might be a normalization, maybe a bit ratios, but anything you'd do for 'twenty one working capital outside of land And then this kind of 2 or 3 hopefully a bit more simple. And perhaps this one, you've kind of touched on it with Chris's questions then, but should we read, obviously, you've got your jump in volumes next year. You've been clear about accelerating volume growth in 2023. Is the financing item in 22 there? Is that looking like it might be more stable or could there still be some slight growth? I guess the order book normalization process might take a couple of years. So we can take our views on sales rates and sites, but obviously you will have quite a high looking order but probably still, but I imagine Christmas 21 as well. And then the final one, sorry, if you could comment around the lease investigation with the CNA, please? I think the formal side of that has come to like since you last spoke and yourselves and other companies, but anything you've learned since then would be really helpful on that. Thank you. Yes. I mean, let me pick up that last one first, Will. And Chris, I'll probably need you or you will to know sneak managed to get most of those things down. Just on the leasehold investigation, there's not really a lot new that we can say sort of where we're obviously fully cooperating with that investigation, providing information. But there's not new questions in there that we're aware of at this point that haven't been sort of broadly discussed sort of with you before. So there's not some new kind of pieces that suddenly come into the picture. So there's not really a lot to add. I think in terms of the land, I can't simply because I don't have the data points, tell you the answer to how many of those plots are already in that land bank. I'm sort of tempted to hazard a guess that it's 3 1000 to 4000. It's that sort of order because I know how many sites have been sort of contracted and would have mostly made it there at the block mix. So it's probably that sort of order. But what I want to go back to is when we went through the capital raise, and I'm pretty sure we talked about this sort of, as a range of numbers in, at the half year as well. Yeah. What we said was, we did see this $500,000,000 as being incremental land spend. That was against the baseline, which would have been slightly lower than normal because of the pandemic anyway, but that through to the end of 2021, that we expected to commit, including that GBP 500,000,000, about GBP 1,700,000,000 worth of capital and that equated to that growth in plot numbers of about 10,000. And we still believe those are perfectly reasonable bookends. We talked about, sort of GBP 500,000,000 equating to roughly 50 sites at roughly an average of GBP 10,000,000 per site, which is smaller than our average sort of site size. I think we've got 829,000,000 over 70 sites. That's because there are 1 or 2 larger seated ones in there, so it's slightly bigger than average, but but those smaller sites are are all in there. So, hopefully that gives you enough to kind of start to work through the working capital dynamics. So Chris, you may be able to add some more specific things that help, Will? Yes, I mean, in general, will operating assets obviously are going to increase over the next 12 to 18 months as that new land comes on to the balance sheet continue to make? Significant further investments. By the end of 2021, you'll see most of the incremental investment reflected in the balance sheet. And as Pete said, it will deliver incremental outputs in 22 completion growth in 23 And I would expect to see that that balance sheet reach a mature position a year or 2 after that on width. At the end of June, we were at 1,700,000,000 due to the delayed Q2 completions that will probably dropped back a bit by the end of this year as we sort of start getting back to a more normal pattern of completions, but it it's still going to be ahead of last year, which I think was 1,460,000,000. And so somewhere maybe around the 1,600,000,000 mark, depending on obviously weather and COVID and bottlenecks and stuff. And then I'm expecting that with balance to be broadly stable as we go through 2021 because we've been delivering a smoother profile of completions as Pete touched on. And in the past, and some of the current inefficiency that is you know, persisting from those COVID delays is going to be replaced by with investment from incremental outlets. Right. And we'll sort of go back to the middle part of your sort of questions and then you'll need to fill in what bits we've missed because there's anything down. You asked about whether there sort of any potential for volume growth in 2022, I think. And the answer is yes, there is potential, definitely. And yes, I I go back to, we are not with this story staring you to next year being a fully normal year, you know, and our view about what normal should look like for this business. Has not changed. So, you know, and again, through the capital raise, we talked about seeing 2021 as being a recovery year in 2022 is looking pretty normal. And I think that's how we see it. And that's that's applies to volumes and other things as well. Sort of so, obviously, some of the cost savings that we've sort of specifically taken help that, a little bit, you know, and obviously there is still plenty of risk. But if you're asking about potential, yes, risk potential for continued volume recovery through 2022. That's slightly different to my views of outlet driven volume growth I really do see is being 2023, 2024, if you see what I mean. What's our view of ordinary underlying sales rates in a normal world, not quite as strong as 2019, but it's not a long way behind 2019. So, you know, sort of when we still have you know, sort of, good sized sites that are delivering really well for us on sales and margins. So, you know, sort of, I don't think any of those longer term bits of guidance, you know, sort of have materially changed. Thank you. And the next one comes from Arnold Alina. Your line is now open. Please go ahead. Thank you very much. Good morning, Pete. Good morning, Chris. A couple of follow ups on my side. Firstly, on I'm trying to understand your comments about Help 2.0. What type of evidence do you have at this stage that the second time buyers were able to use her to buy. I'm not gonna be able to, to use it anymore up still in the market. And also for these houses that are above the caps? Are you still seeing the first time buyers going for them? In the early assessment, I guess without the support of Help2Bali. That's my first question. And just also on your comment about 2021, profits and thank you for the guidance at such an early stage. I'm just trying to understand some of the moving parts, but basically To keep it simple, is it a reasonable assessment to assume that your gross margins or your operating margins in 2021 would be very close to 2019 levels to get to your of 10% above the top end of the current consensus? Thank you. Yes. So on sort of Help to Buy 2, I think there's a few bits. I mean, our sales rates for last week, and I'm picking one way because it's because it's similar specifically, but I don't think it's misleading our sales rates for the last week included, 0.23. So, you know, possibly a quarter but on the sales rate, but it's in the second half of of next year. That doesn't include any Help to Buy sales in it at all, and that's selling sort of well ahead. That, that's not the infusion over the last few weeks. Yes, that gives confidence that the revised out there who don't expect to use Helpwise 2 and are prepared to connect regardless of strategy or anything else. Pete, we can just can't hear you, but you've gone a bit thin. Sorry, could you hear enough of that for it to be clear or should I repeat that? I wouldn't mind if you can repeat it, Yes. So, sorry, the, if you look at sort of our sales sort of over the last couple of weeks, and I'm picking out the statistic from last week, but it is representative. We had 0.23 sales a week over last week. That were for the second half of next year. By definition, those won't be using Helpwise 2 at all. And there'll be a mix of first time buyers and and, and move up buyers. My my my guess is the bat and I don't know this for a fact, but my guess is the vast majority of them will be people who would not expect to want to or be able to use help to buy anyway, but that gives you some sense of resilience of that market. I I think, you know, sort of the other thing I point to is the number of, you know, sort of informal holes that we're taking, and we're not pushing them. We're not actively selling them, and some of our businesses are not using them. So this is a, you know, a sort of global number. Actually would also give you a component of about 0.23 sort of a sales rate, on health buy too just on people who would like to be able to commit and identify a plot. So that gives you confidence that first time buyers who can use the scheme are using it and aren't, you know, sort of too offset by by the price caps. And I think the last statistic I would give And and since a natural consequence of, you know, Help to Buy 1 coming to an end and Help to Buy 2 not being in place, our usage have helped to buy over the last couple of weeks has dropped to about 20 percent of sales from the high 40s. And yet, we're still maintaining that sort of 0.65 to 0.7 sales rate. All of that as, you know, sort of, all of the customer groups are still moving forward, broadly in the same sort of level as they have been. None of it's none of it's perfect in the sense that none of it gives you absolute certainty, I think. So we're actually selling with that game until we're actually selling you know, sort of, at those price points without them, we won't know for sure, but those early indicators are all quite positive. I think on I know I had a question on margins. And Yes. Do you want to take that one up, Chris? Yes, whether the guidance was assuming that the gross and the operating margin was back in line with 2019. No, that's not the assumption. It's certainly closer to 2019 than 2020. I think if you apply the, you know, the revised volume guidance for 2021 of between 85% 90% of 29 output and also the reasonably specific guidance that we've given on operating profit, I think you actually find that it sort of ends up between where 2021 consensus currently sit and where 2019 was. Thank you. And the next one comes from, Curtis Johnson. Your line is now open. Please go ahead. Thank you. Good morning, everyone. I have 3, if I may, but actually 2 of them are just hopefully quick clarifying ones. First of all, you say your guidance is based on continuation of current selling rates, but you've given us a number with Help to Buy, a number without Help to Buy. So which number are we are you basing your guidance on? 2nd one is just about, really sort of going back to Chris's question actually. Land cash out, how much of the cash out for land are already in the cash number that you've given us and how much is still to come? And then lastly, in terms of the order book, and selling 6 months ahead is really quite a long way forward compared to what you and others in the industry have been doing over the past few years. Are you going to look to try and bring back that order book just to make sure that you have all the benefits of being more accurate in terms of delivery and so on? Or is it about derisking and keeping that order book at that 5 to 6 months and as long as possible? Yes. Thanks, Lucas. I think when we talk about continuation of sales rates, formally, we're talking about, will they be sensible or something that's helped by 2 then in the numbers, sort of And so not getting back to 2019 levels, but not getting back to where we would have expected 2020 to have been if there's been a pandemic, but some way towards it. So, you know, give or take point 9, you know, sort of which I think if we'd got help to buy 2 at the moment, even with the informal health we've got is a reasonable view of where we are at the moment. I think that also relates and I'll leave the land cash question to Chris. That also relates to the last question on the order book. We we don't expect the order book to stay this long. We expect the order book to reduce slightly in size during the course of 2021. And we'd be slightly uncomfortable if it didn't. For exactly the reason that that you set out, you know, our construction is catching up. You know, it will probably have mostly caught up you know, current projections by the time it gets to the half year. It should definitely, of course, up by the time we get to the end of next year, and we're we're sort of back in balance. That does give us against the short term sort of movements in sales rates. So if we do see a bit of weakness as we move from quarter 1 to quarter 2, then it gives us protection for that. But I still don't think it's sort of quite the right place for us to be sort of long term. I think I will say our construction forecasting and construction delivery has got significantly better over the last 2 or 3 years. So some of the concerns that we did have, you know, sort of around being able to forecast delivery properly and deliver properly for the customers are reduced, but I wouldn't say they've gone away. So I still think there's with the right length of, of order book, you know, sort of, and we're probably, you know, sort of above that upper end through these sort of strange circumstances. I am with that customer service piece. I was nervous that some of the completions that happened during the sort of post lockdown we'd get worse customer service calls because simply plots have been delayed. In reality, that hasn't happened. We worked really hard on the communication. They're not the timing of that delivery and being very open with customers about where each site sits and where their plot sits, and that's actually worked very well. And I think that's reinforced, you know, our ability communicate that compared to 3 or 4 years ago when it was a real challenge. But I still think the order book sort of will naturally come back in terms of length and scale over the course of the next kind of 6, 6 to 9 months. And, Chris, do you want to pick up the land cash ask questions. I don't give you an absolutely specific to the question, Glynis. I mean, obviously, there's a number of deals there and the timing of when it's variable, but what I can do is give you a feel for the basis on which the year end guidance is a base And so looking at the balance of the year, so November, December, I'm expecting land spend somewhere between 203000000 in that period? Clearness, can I can I just go back on the order book? And this is, I mean, sort of giving you an extra bit of data because I think it's useful. It may may help others as well just to understand that dynamic and because it's significant, but it's not, you know, sort of totally out kilter. But, you know, we would normally say a sort of, perfect order book going into any given year is about 35 percent of that year sales, obviously depends on the nature of plots, and there is a bit business units business unit, but that will be our normal kind of benchmark until relatively recent years businesses have struggled to get there and then more increasingly have. We expect that order book going into next year order of magnitude because you spent the next year's business? Yes, so the risk then that we sort of face market wise is is significantly reduced into our ability. And that's why, you know, my my comment earlier about, you know, we're not particularly dependent next year on the outlet openings that we're looking the moment, it's about driving momentum for the following year. And it's the same with the order book and the sales rate, sort of We have to manage that carefully with customers and communicate it well. But it does help us manage risk. Thank you. Thank you. The next question comes from Kevin Yako. Your line is now open. Chris. Just a couple of quick things. The first one's just around, I guess, Q1, I guess the bottleneck for the industry is in terms of construction, but I guess all the other businesses that you're aligned upon to get completions through, just how you're kind of managing that risk and any concerns you might have around that. I just really found you a little on your comments about the upper end of the market. I mean, sound you've disclosed in helping, but are you Are you saying now that you're pretty comfortable that you're taking still pretty strong levels of reservations kind of beyond stamp duty holiday ending? Are you seeing kind of a shift in consumer patterns? And I guess kind of a sub one to that is just any comments you've got around how the London market has been performing as well, please? Thank you. Yes. No, I think we are saying that we're seeing reservations, yes, we are taking reservations beyond the stamp duty window ending. And we're not seeing a dramatic shift in customer behavior because of that. Obviously, people would like to take advantage of that window they can. But we're not seeing it as being a the deciding factor. And I wouldn't have expected it to be sort of the upper end of the market for us does not get into the highest reaches of stamp duty. So the impact is not sort of negligible, but when people see sort of overall kind of confidence in the housing market. It's a factor, but not a dominant one. Sorry, could you repeat the other question? Yes, the other one was just around I guess the bottleneck that, you might be seeing in March for construction, I guess all the other, you know, conveyancing white goods and all the rest of it, you need to be operating well to get your completions through. Yes. And I think there are bottlenecks there. I think we see at a granular level on individual sites, you know, shortage of a kitchen unit here and some element of what it really is like that. It's very, very specific. Supply chain is not fully back to normal. We're not seeing any systemic risk, but it's definitely taking more of our site manager team's time to make sure they've got, yeah, every last element that they need. I think our overall take is it's manageable. Sort of that it's, yeah, and we've used the term friction a few times in the last sort of 6 or 8 months as we've gone back to site. Some of the bigger concerns about would sort of the drylining factories be beyond flat enough to deliver demand. And those things have reduced significantly. It is the smaller finishing items. And I think one of the things we were, slightly concerned about a week or so ago was the second lockdown was you know, analysis, it it's fine for whether it's been out or it's about construction, the housing market's staying open, but if valuers aren't going out you know, sort of and if, you know, people were not able to do customer service roles in people's homes, then then actually that creates quite a lot of friction. And that but actually what we've seen is the messaging that's gone out and how people have been behaved is that side of life is going on more or less as normal. It's an extra job to manage, but it's not at the moment causing us a risk that I think threatens, you know, sort of anything we've said today. Okay. Great. Thanks. And on London, and is there anything to note there? Sorry. I missed the end of that. Was there an additional question there? Yeah. Just London, any comments around how the local market has been performing? Yes, I think everything we said about the country as a whole broadly applies to London. So do we've not seen marked weakness in London, you know, sort of we, are continuing as I touched on to sell, you know, sort of well within our sort of 3 remaining central liability schemes, sort of I think the price point piece is slightly different. Sort of whereas we're definitely seeing in the wider Southeast, you know, upside in sort of higher price points. I don't think that's as marked in London. London, it's it's stable and it's positive, but it's not, you know, not seeing that sort of upside growth, and I guess you would expect that. I still think you've got slightly more of a headwind in London around, the, sort of impacts of Brexit. I don't think that's impact people's decisions outside London very much at all, but I think it still is in London to some degree. But but I think if you looked at our sales rates, our relative price movement, the level of confidence the kind of customers will align, you would not see a demand difference between our London games, either the more expensive ones or the more sort of, normal schemes. And the rest of the country. Thank you. And the next one comes from Marcus Cole. Your line is now open. Please go ahead. Yes. Good morning, both. Hope you're better off. I've got 3 questions. I was just wondering what your price assumptions are for your FY 2021 guidance. What needs to be in place for the 2021 special dividend to be paid? And then you've made comments of accelerating growth beyond 2023. Just wonder what you saw overall capacity was for the group now. Okay. Sorry. I'm just making sure I note them down this time so that after I've answered the first one, I've completed a couple of deals up. In terms of price, our our broad assumption is that prices are stable where they are today, you know, sort of and so we're certainly not assuming that the price growth from today, nor were we assuming the prices go backwards. I would say though, and I touched on earlier that, you know, we do things right to have a, a slightly wider range, sort of a more contingency in our assumptions today than we would in any normal year. So we're not deeply sensitive to small movements in price is what I'm trying to say. I think in terms of you and you asked about the 2021 special dividend. I am still of the view that it is unlikely we will pay a cash special dividend in 2021. It is far more likely to be 20 22. And that's something we've said, you know, fairly consistently for the last 5 months and hasn't hasn't changed. We expect to pay an ordinary dividend next year. And it is likely we will pay a special dividend the following year, sort of once, but it's quite likely that we will announce that special dividend for the following year sometime next year. So that for you hasn't changed. And in terms of growth, it always depends a little bit on how you get there, mix of sites and everything else, sort of, but in the order of 18,000, we could probably manage 2019, but we have to land you know, sort of, pretty, close you on things, but it's about it's about having the sites. You know, we can flex the capacity in individual businesses at a relatively low cost in it's about having the right land opportunity to not chasing volume, you know, sort of land in any given market. Okay, yeah. Thanks very much. Thank you. And the next question comes from John Bell. Your line is now open. Please go ahead. Yes, good morning, Pete. Good morning, Chris. I think various of my questions have been already asked actually, but a couple, that I can ask. The first one, just on on stamp duty. Is it your working assumption that the stamp duty holiday comes to an end at the end of March? Or is there any possibility that you could see that extended? And then secondly, perhaps you could just quickly comment on Spain. Thank you. Yes. Thanks, John. So on stamp duty, our working assumption and behind that kind of guidance is that it isn't extended. I do think it's a perfectly reasonable view that it might be. I just think it would be wrong for us to sort of make our assumptions based on that because I think it's sort of It's not likely to be sent but decided, imminently. I I think, and I've, you know, had this year about Help to Buy for a while. It will depend on the strength of the market. The stronger the market, you know, sort of the less likely something like that is to be extended if if this second lockdown shows real such as we can see the broader economy. I know that the government won't necessarily want to see a negative risk you know, to look for the housing market at the end of the first quarter before we're we're through the other side of this. So it it is a swing factor at all, minor swing but I see it more as a balance of risk than, then something we should, we should rely on. And Spain yeah, Spain sort of in many ways kind of has, had the same sort of impacts from a country point of view in the wider economy to the UK of COVID. The impacts on house building and our business in particular have been subtly different. In many ways, the construction has been a bit less. Because of the way the rules were implemented from earlier on and the nature of our schemes, the sales impacts because we're we're essentially a second home business have been slightly greater because it's strangely enough when people can't travel to Spain, they're much better likely to make a reservation on a new house in Spain. So I think because that we We do expect to deliver a decent profit in Spain this year and next year, because the order book and the construction pipeline is longer. But it will be materially less than 2019, but it doesn't mean that it sort of so the performance won't probably be quite too volatile as the UK. But 2021 won't return to normal as quickly and 2022 is the 1st year when it will look look much more normal because we think we'll get a sales season in the summer next year. We've got good kind of telephone interest from people, you know, everything prices move materially or anything like that. But we think it will be when people can go out back out and visit sort of through sort of next summer that we start, see sales get back to normal, and then that starts to drive a much more, you know, normal kind of came out of the business in 2022. Very clear. Thank you. Thank you. And the next question comes from Shane Carberry. Your line is now open. Please go ahead. Good morning guys. Thanks for that. It's all very helpful. So there's actually only one question that I have left if I may. I'm just interested in getting kind of a bit more color, I suppose, on the kind of competitive environment for the smaller sites that you're seeing in the land markets. Look, should we take this as kind of I suppose evidence that some distressed kind of smaller players out there and could that kind of lead to potential M and A opportunity Yes, I think, have you sort of on those smaller sites and those smaller players? Is broadly the same as, as it was sort of 6 months ago, you know, and in a broader sense, we expected a large competitors to be sort of back in the land market by the end of the summer. And that's more or less what we saw, although still, and I think this is consistent with their comment that pace of being back in the land market is less than it was. They have been more competitive than we have. I think with the smaller competitors, there is a wide range. So we've seen a small number who are quite active, you know, sort of particularly privately funded ones. And we've seen most who are not very active at all as balance sheets get repaired and they get some certainty back. I think distress in terms of survival distress, I think it's much less likely that the housing market getting back to normal, people can get lines of credit, you know, sort of most most in the sector, including private companies, are better funded than they were, you know, before. So they might not be active and today, that doesn't necessarily mean they're going to be sort of distressed in a existential sense. And I think our view of sort of acquisition opportunity remains, if we can buy land in the market without the encumbrances and uncertain of an acquisition. If we can do the sort of diligence on a piece of land and acquire the sites that we want, then looking actively at acquisitions, they have be very much valued at opportunities, and I don't think the same conditions were rather likely to make sense. So I certainly think for us, I don't think acquisitions are likely, but I've had that view for a number of years, sort of, but it inevitably reflects a land market that is working for us. Thank you. And the next question comes from Clive Lewis. Your line is now open. Please go ahead. More interest. Just the one from me, if I may. Pete, I think you referred to the land market. You don't expect it to get any easier. Is that Is that a view on what you think might or might not come out of the white paper on planning at all? Yes. I think it's a mix. It's a mix of different things, right? And I probably say that sort of more clearly than 3 months ago, It it's interesting. I I I think we've seen a slight climate shift, and I mean, in land rather than in the climate in the southeast that is positive. If you look at sort of our land buying in those 14,500 plots, you will find a slightly bigger bias. Yeah. Actually, more probably more than slightly compared to normal terms towards towards the southeast, but not you know, sort of, Central London, and you can see that a little bit in the average price per plot. You know, they're more shorter term sites, less strategic, and they're they're more Southeast weighted. Some of that is actually, I think, in a very general sense, there are more of the markets around London where planners are a bit more for business and actually a bit more open to the need for growth, whereas I think in the north, and it shows a gray in different markets sort of across the country. But in the north, a combination of the economics of land, you know, putting things like part l and part f costs on a, which are broadly the same per plot in the north to where they are in the south of the same house, putting those on the value of land in the north, have a much bigger proportional impact and much harder to absorb. And those may, you know, we've been looking for superior returns, from the acquisitions we've made. We've got them, but that's definitely been easier in the south as we've referred to some of those additional costs, you know, that is in the north where it's just harder for land owners to to accept And I think, yeah, we see in the Northeast and in the northwest, for instance, sort of some reasonably meaningful holdup in, you know, sort of the spatial planning system, and we see that less than we have than in the southeast. So I do think there's a bit of a switch there about when you're where the opportunities are. But I think if you put all that together, I think there is change in the planning system does not immediately tend to lead to, you know, sort of, a positive immediate result in terms of availability. And you put the economics and that change together. And I think there'll be couple of years sort of as we go into 2020, sort of 2 and 3 where we'll be glad of the sites that we've got secured and moving well through the but I think it could easily be a bit harder. Okay. Okay. Thank you. The other one I had was on actually on sort of the government comment that you made again the support from the government. I mean, In terms of sort of how that dialogue with the various government bodies has evolved over the last 3 to 6 months in particular, what would you point to to sort of, again, to sort of reinforce the comments that you made about that support being there? I think that the most important thing, which is not actually really to do with market support is to do with how we have managed sort of through, the COVID period. I think the industry has done a far far better job of getting its, actual behavior in the right place. It's communication with government in the right place. And you can see that in government's, yeah, positive desire to sort of, let us remain open. And clearly, that's partly about economy, but actually, yeah, I think that the industry has done a good job of that. And I think our conversations with governments around that as an industry are much more sort of, neutral and positive than I've seen in the past. It's not that they've ever been particularly hostile, but there's more trust, I think, that's grown through that? Because I think the industry has generally quit behaved and performed pretty well and delivered what it was supposed to deliver. So I think we can do that in UCaaS but I think the particular bit I was referring to was, you know, the Prime Minister coming out of the conference and talking about, yeah, what's a fairly speculative sort of post help device scheme, but the very fact that, you know, sort of he sees it as appropriate to talk about that this far in advance, I think we should take as a positive. You know, it shows that you know, but I still think there is not a huge desire in government particularly in the treasury to prolong help to bypass the end of 2023. But what it showed fairly clearly was that they understand that they need to have a think about, well, what are our contingency options? Great. Thank you much. No problem. Now, I mean, if there's one last sort of questions, very happy to take them, but it feels like covered most of the main things. So if you perhaps take one final sort of question and then, and then wrap up. Okay, sir. The next one comes from Andy Murphy. Hi, Andy. Jim. Seems like there's no funds from Andy. Would you like me to move to the next one, sir? Yeah. If there if there is, if there is somebody else, then let's say that. Yes, sir. It comes from Amy Gala. Your line is now open. Please go ahead. Yeah. Morning guys. Just a quick last one from me. With the delays in processing contracts, how should we think about that risk in the reservations which are penciled in for Q1 deliveries next year? So when I took when we took some delays in processing contracts, those are around Help to Buy too. And so those would be reservations that by definition would happen in April at the earliest, and we expect to be able to process those contracts from the 16th December. So it might impact on when those reservations get booked as when they're actually taking those reservations, but there's quite a big window sort of then through to, you know, when we would expect the completion to be. So I don't I don't think I don't see that as a material risk to completion timing next year. Can I have a follow-up? I mean, in terms of the, excluding Health Dubai too, I mean, in the wider mortgage market, I think there's a general still, delay. Is that not really impacting your the reservations and the processing Yes, no, that is fair. That has been. I think, you know, and it's one of the reasons why we've been sort of reserved about our views until this week. We went through with our teams in detail their outcome for, sort of this year and next last week. And you know, to be honest, we expected to have far more sensitivity over the timing of exchanges. And actually the the pretty consistent feedback was yeah, it had lags, but actually sort of, it wasn't a huge problem today. And they were generally getting getting things, yeah, sort of fully exchanged and contracted on the original completion date or the adjusted completion date post COVID, and it wasn't actually impacting and that we were sort of starting to catch up. Thank you. Well, if we wrap up there, because it feels like we've dealt with most of the key areas sort of and gone through most of the questions. Obviously, we are available over, you know, the next few hours the next few days if there are supplemental questions. If people want to make sure that they've, you know, understood one element of what we talked about, because I am conscious that ideally sort of would have been stood in front of you, I think, because there's quite a lot in this particular update and there's been a lot of moving parts, but we're very much available for further questions and discussion where needed. And, all that remains is to thank you for joining us this morning and look forward to So the next update around the end of the year. Yes, sir. Thank you. That concludes our conference for today. Thank you for joining VMP TLC Trading Update Call. This call has been recorded and will be available to listen later today. Thank you.