Good morning, welcome to the Taylor Wimpey Plc Half Year Results Call. Today's conference call will be hosted by Taylor Wimpey, Chief Executive, Pete Redfern, and Group Finance Director, Chris Carney, followed by a Q&A. During which to ask a question, you will need to press star and one on your telephone keypad. The accompanying presentation slides can be viewed and downloaded from the Taylor Wimpey corporate website. I will now turn the conference over to the Chief Executive, Pete Redfern. Please go ahead, sir.
Thank you. Good morning, everybody. Thanks for joining us. Slightly odd to do a results presentation over the phone and be sort of working the slides and giving you the numbers, but it's been a pretty odd first half, hasn't it? We probably shouldn't be surprised by that. I will try and give you the slide numbers as I go through and so that you're able to follow. There are some charts in there that I think are useful. We have gone through the presentation to try to give you the information we think is most useful at this point in time, because obviously with such a strange first half, and I think certainly for us, and I hope for you, the focus very much on the future, particularly 2021, but giving you enough of a flavor of the second half of 2020.
The kind of information that we think is most useful is slightly different. Most of the key information you would normally use is there, some of it in the appendix, so we're not trying to take things away from you, but definitely a different focus today. I'm going to start with slide five, and really just reflect very briefly on how we have approached the last three or four months. Our focus has been on doing right by all of our key stakeholders, including our shareholders, but also including our employees, our subcontractors, our customers, and government. I think we feel that we have got that right and that that has put us in a strong place. It's clearly been a very poor financial performance in the first half, and I don't think that will surprise anybody.
I'm sure there are numbers in there that are tough for you to understand and get to grips with, and we understand that, and Chris will spend some time trying to help with that. The key thing for us has been to get things right from a safety point of view for our people, and make sure that the business is protected and as strong as possible going into 2021. I make no apology for spending a lot of my time talking about how we're setting things up for the future rather than going back and reflecting on the last six months. Just picking up a couple of points from slide five, we did have very proactive management through the crisis.
We tended to be the first out to explain what we were doing publicly across the sector, and we feel that in lots of areas, the sector then followed us. That actually helped us and them and helped the supply base and the subcontractors to get a clear pattern about what the sector was doing. That overall, because of that, we are all in a stronger place. I think if you reflect on what you would have expected in terms of production and sales way back at the beginning of April for the sector, I don't think you would have been too disappointed with where collectively we are now. I'll come back to our own particular sales and production stats and performance later, but I think that leadership and communication has helped.
I'm not going to list, you'll be glad to know, all of the things like Pay It Forward and the care home scheme that we've done through that period, but I do think they are important, and I think they have put us in a strong place with all of those relationships. I think also we've seen the benefit of our prior investments in operational strength in our site management teams and in IT systems. We've learned through the crisis as well, and actually have been fairly self-critical about our past speed, particularly with IT, of putting together a plan.
Actually we've seen a number of developments, including if I just pull out one example, a new app developed in a matter of weeks that lets customers see virtual viewings, to have precise opening times for all of our customers, and to do video calls online with our salespeople through an app. It's the sort of thing that would have taken us far too long in previous circumstances, I think we've learned from that about how we can use those kind of more pacy approaches to keep costs down and to be more fleet of foot, particularly in the customer and sales arena than we've been historically.
I think though, then as we look longer- term, it's also been an opportunity for us to look harder at the question we raised before the pandemic was a focus of everybody's mind, but back at the beginning of the year about outlet numbers and outlet size. I do think it's created an opportunity for us to invest in more smaller sites on top of the large sites that we already own and that are coming through our strategic land bank to make sure as we go through into a potentially uncertain, which we'll definitely come back to, 2021 market and 2022, to make sure that we've got the maximum number of choices. We all know that higher outlet numbers give more choices. We believe in our strategy on larger sites, but I've never said that that doesn't mean that we shouldn't want smaller sites as well.
I think it gives us the opportunity to get that balance right, and obviously the capital raise was a key focus of both changing the mix of sites, but also giving us the opportunity to grow outlet numbers over the next 18 months, and we'll give you an update later on in the discussion over how that has progressed over the last few weeks since the announcements around the capital raise. Moving on to slide six, just giving a quick overview of operations, and Chris will pick up on some of the stats within this in a little bit more detail. First of all, on production, we said when we announced our return to sites that we expected to get to around 80% of capacity on average by the end of June. We are at that level today.
I know that some of you have expected, based on more recent comments from one or two competitors, that we might upgrade that number today. I don't think that's right. Here today, we do have sites that are operating at higher levels than that. I would repeat what I have said in the past, that we would hope by the end of the year to get to a higher level than that 80%, but we're still getting up to full speed in Scotland. There are still some sites, particularly in London, that have slightly more constraints. We have to allow in how we guide you, particularly in how it impacts on volume numbers for this year for the potential for localized lockdowns, such as that we saw in Leicester and that we might see over the next few months.
I still think it's good guidance. It doesn't mean there isn't upside to it. Given that it's the level we're at at the moment or perhaps a little bit better, I think it's pretty solid guidance. What we don't want to do, is create a false expectation of the completion volume recovery during the course of this year. We think the implications on costs and speed of build are likely to be limited to 2020. No real change to that. The additional site costs from our COVID-19 measures are not particularly significant. There is no change there. Clearly, the first half impact has been very significant. That's more about inefficient use of overheads on site or no use of overheads on site as we were not able to build or build at any reasonable capacity.
Whilst there is a small impact in the second half, we don't think it is huge, and we don't think that our base case is that 1st of January, build is relatively normalized. I do think it's important our focus has continued to be, and I think this caused some surprise when we returned to sites, but it's been true all the way through. We have continued to and will continue to open new outlets. You will look at our outlet numbers at the end of the first half, and they are above the numbers that we gave you at the prelim stage. That is not brand new land coming through. It doesn't happen that quickly, albeit some of the sites we're buying will give us quite quick outlets, probably quicker than we expected.
I think that is a key dynamic for us going into 2021, but particularly going into 2022. I think whilst some of those may open, new outlets may open in 2021, it's 2022 volumes that they start to help. On the sales side, I'm not going to labor the impact of IT on the future, but there has been a good sales recovery with good sales rates since reopening of about 0.7 a week. I'll touch on some of the detailed numbers. The main constraint on sales today is production. It's the availability of production capacity for completion this year, which again, I will touch on as we go through. With suppliers and subcontractors, I think we've been pleasantly surprised. We expected what we described as friction. There was the potential for bottlenecks, and we've not really encountered any major bottlenecks so far.
There have been some areas like plasterboard that slowed things, but for a matter of weeks rather than in any significant or material way. I think we have seen some of our subcontractors being slow to have the confidence to bring their people back from furlough, as they wanted real certainty of work. As the broader sector has returned to sites, we've seen those problems gradually ease. Again, when we started the plan to reopen sites, we knew it would take a number of weeks. It has done so, but most of those headwinds are largely gone. The constraints are about the safe operation of sites, about inevitable bottlenecks on car parking and toilet facilities and the like, rather than underlying macro issues.
If I move over to slide seven and look at the underlying structural backlog for the market, we're still of the view that it remains favorable. I think that's why we've seen the housing market very quickly return to something like a normal level of activity. I don't like the phrase pent-up demand. It feels too trite, but there is a bit of that. I think, in those first weeks after opening, the skeptical would say, "Is this just an inevitable backlog from that. Won't this just peter out in a few weeks." We said at the time, that's not what it felt like. We understand our customer. We talk to them site by site, and it gives us a better feel than you get from the statistics.
You have seen, and you'll see in our stats, that actually the level of interest and activity on-site has continued to be high, and actually on most measures has run ahead of the equivalent period of last year rather than behind. I think from a political point of view, I think the stamp duty change was positive. You can't see a meaningful blip in the statistics. As a result, we saw some increased interest on those particular weekends. I think it is a more impactful help for the secondhand market, but that's still a positive because I think we have long been concerned that the level of activity in the secondhand market, the low level of activity in the secondhand market is a risk for new build. We see I think a broadly supportive government environment.
Actually, the sales volume stats returning to normal, but the opportunity for prices to start to move forward rather than be stable or go backwards. We increased our prices by about 1% for the 1st of July. I have to be honest, it wasn't done with the same absolute across-the-board view that we did in January. I think conditions are a bit more uncertain. That underlying demand element of the rates making that decision. On mortgages, while it was a point when [audio distortion].
Need to change was I think a bit of background pressure on Nationwide to then return. So those mortgages are back. I think that risk is therefore largely past. I think in the risks, the obvious inevitable ones, the risk of unemployment increasing will affect the housing market. I think it's impossible to say. I think it could definitely go either way. I think there is a tendency to think, actually, it's bound to be a negative. It's bound to impact on house prices negatively. I don't think that's true at all. I think if we've learned anything over the last four or five years, it's how resilient the housing market is. That it is not inevitable in periods of uncertainty that it will go backwards. I do think, you've heard me say it before, it's about interest rates.
If interest rates stay low and mortgage lending sort of stays resilient, then actually the market stability, we might see lower sales rates for a time, but market stability can weather most things. We do start to have to then refocus again on new regulations and policies, particularly Part L and Part F, which the government is still committed to bringing forward. Albeit, I think now the impact is absolutely going to be into next year rather than late this year, which was the sort of situation we were looking at the beginning of 2020. If I move on to slide eight, and just on sorts of sales momentum. The normal kind of stats, but we split them by different weeks because we thought it would be more useful. You've seen quite a lot of these apart from the very most recent period.
You've seen them as we've done announcements through the last few months. Probably one though I would pick out that I would ask questions on if I was you, cancellation rate. It did peak in the weeks immediately after reopening for sales. It was never high enough to be a concern. As a proportion of a very large order book, it was tiny, but off a relatively low initial sales base, it was higher than usual, as you can see at the sort of 30% level. The last two or three weeks, that's come down to the low- 20s. And with the level of low sales that we need this year, that is a very manageable level. And it's just individual customers, in some cases just swapping from one plot to another because of changes in build time.
In some cases, changing their mind about buying a house because of their own personal job security. The fact that that has already started to normalize, I think doesn't really give us any concern. Our constraint on sales is absolutely about construction. You'll see in the statement we're 98% sold for this year. If you work through the math of that, you'll see that means we have roughly one plot to sell per site for completion this year. Trying to generate sales rates of one a week but consistently through the balance of this year is not going to happen and actually will give us an order book that was difficult to manage in terms of scale at the end of the year.
That does give us the chance, though, to manage any of those cancellations, to make sure we've got the right customers in the right places, and to make sure that we finish this year with as strong an order book as possible for next year. I go back to our focus is on making sure that we go into next year with as much momentum as possible. That order book value is good. I think the other thing that does warrant comment is the level of exchanges. Again, they were sort of running lower than usual through the crisis. I think you sort of have to ask the inevitable question as you get back to normal work, were you going to see more cancellations and therefore less exchanges? Again, we started to see those normalize over the last month and see the level of exchanges pick up.
It is running slower than it would normally do, but I don't think that should surprise us or concern us when you look at the expectation we have for the second half of the year. You see at the bottom just a couple of the charts that we have used over the last few years, giving you the level of immediate customer interest. Actually, that plays out across the board. As you've heard me say, the number of brochure requests has dropped off structurally over the last few years, but the measures that we look at the moment have increased materially. I would place more store proportionately in the website visits than the appointments booked, because obviously we're using a different selling approach, and therefore the number of appointments booked is always going to be significantly up.
The website visits, I think, is a much better, sort of more real indicator of underlying demand at this point in time on a relative basis. Just briefly on slide nine, an update on the NHS and care workers scheme that we introduced during the crisis. Both from our existing order book and sort of from new sales. We've had significant interest from that. We went into that scheme very much because we felt it was the right thing to do. I think it was something that we decided as the management team that was appropriate. We've been pleased by the way it's operated. From a reservation point of view, it comes to an end at the end of this year. Obviously with the level of availability, the number of additional sales is not likely to be huge.
It is a point in time, but we do think it's an appropriate scheme and will be effectively a COVID-19 cost in the second half of the year. Moving on to land on slide 10. We still continue to see land market opportunities running at a significantly higher level and at better quality and with less competition than we are used to. I think it's not many weeks since the capital raise, so I don't want to repeat what we said there, but certainly the environment that we were seeing then has continued to be the case. We have seen, as we expected to, one or two of our large competitors return to the land market in a more active way, but we haven't seen most of the smaller ones, and that was the dynamic that decision was based on.
I think one thing that has changed is that we have seen more opportunities coming forward at really good returns and with interesting financial metrics and interesting site qualities in London and the Southeast. I would want you to focus on the wider Southeast rather than London in terms of the balance of quantum than we have done in quite some time. I think that metric has changed because at the time of the capital raise, we hadn't seen that yet. It felt like it would happen, but it hadn't started to happen. I think some good opportunities there.
I come back to land investment is about timing, and the opportunity to increase it materially in the first half of this year and the early part of next year gives us the opportunity to grow the business further post the pandemic than we would have done it if it hadn't happened. Actually, as I touched on earlier, to rebalance the outlook a little towards more smaller ones. I would still maintain the capital was not essential, but it does give us a good opportunity to invest well for our shareholders. The pipeline continues to build. We've done about 26 land deals now. That's the equivalent of what I think was 13 at the time of the capital raise announcement. About 20 were in the first half and about six so far in July, the forward opportunities continue to be good.
On my final slide of the first section, you see what may be the last time that we show it to you, but those mapped out against the quality of land acquisitions over the course of the last few years. It's always very difficult to pick out an average number on any land acquisition. That final smaller silver block, smaller because the purchases in the first quarter were largely canceled, and then either not entered into or re-negotiated. This largely represents second quarter purchases. That actually reflects smaller sites, more of a southern weighting, and in many sites factoring in those Part L and Part F costs, which we're finding is doable with the higher land values in the South and into the better markets of the Midlands and the Southwest. It's pretty tough in the North.
Actually seeing land prices adjust in the North may have to wait a little bit more until we see those sort of regulations actually in place. I will pause there, and I will come back after Chris has spoken and talk a little bit more about outlook and where our tactics are as we look at the next 6 to 12 months. Chris, over to you.
Thanks, Pete, and good morning, everyone. As normal, I'll start with a summary of the group results. The impact of the pandemic is very visible on the first half, with revenue down 56%, gross profit, including some COVID-19 related costs down 78%, an operating loss in the period of GBP 16 million, which I'll come back to and talk about in more detail on the next few slides. Net finance costs at GBP 14 million bring the pre-exceptional loss before tax to GBP 30 million for the half. Following an involved process, we've now agreed a contract for the replacement of the ACM cladding at our Glasgow Harbour site. We've increased our exceptional provision by GBP 10 million in the period to reflect that.
Despite the net loss for the period of GBP 32 million, the tangible net asset value per share has increased since the year-end, which is of course due to the equity placing in June. Moving on to slide 14. This is the first of two slides that together with the margin reconciliation slide should give you a very good understanding of the impact of the pandemic on our results. You'll have seen that we haven't taken an exceptional charge for COVID-19, I will take you through the impacts to our costs and cash flows as I move through my slides. The chart on the left shows weekly build output. As you can see, there was a five-week period where all sites were closed and not generating any output. Either side of those closures, there were periods of demobilization and remobilization where the output was significantly reduced.
This disruption to build, as you would expect, has lengthened production programs and this has meant that completions in Q2 were significantly reduced which you can see in the chart on the right. This delay to completions has a knock-on effect and will ultimately push the completions we originally intended to deliver in Q4 of this year into Q1 of next year, reducing 2020 volumes meaningfully. By meaningfully, we are guiding to around 40% less than 2019 levels, assuming there aren't any significant changes to current circumstances. Moving on to slide 15. On this slide, you see how the reduction in Q2 completions translate into a reduction in revenue for the half. That lost revenue, together with some incremental COVID-19 related costs, is what drives the reduction in profitability period- on- period.
The GBP 39 million of costs relating to COVID-19 in the main relate to site overhead costs that would normally be capitalized into WIP and recovered as plots legally complete. Because sites were closed and build wasn't being progressed, we are required by accounting standards to expense those costs in the period. Moving on to slide 16. As ever, this slide provides a great deal of visibility of the various factors influencing the U.K. operating margin in the period. The net market impact of house price and build cost inflation is a relatively small negative, as you would expect. Most of the change in margin period on period is the direct consequence of lower revenues reducing our ability to absorb fixed costs that you saw in the last slide.
Net operating expenses, which are predominantly fixed overhead costs, and direct selling expenses, which also include a high degree of fixed salary and show home costs, together contribute a reduction in margin of 11 percentage points. The only other significant contributor to the drop in margin is the GBP 39 million of COVID-19 related costs, which account for another 5.3 percentage points of the margin reduction in the period. Most of that relates to non-productive site overhead costs during the closure and remobilization period. It also includes some incremental costs, such as extra cleaning, extra PPE, Perspex screens for sales centers, and other items of a similar nature.
Although the reduction in volume and revenue in half one has generated a negative margin, now that we have all our sites open, build output at around 80% of normal levels and strong demand, we have all the ingredients necessary to see a margin recovery in half two. Moving on to slide 17. The 58% reduction in U.K. completion volumes is consistent with the reduction in group revenues you saw on the first couple of slides. Underlying house price inflation for private completions from half one 2019 to half one 2020 has been very flat, flatter in reality than the Nationwide figure we provided in the margin reconciliation slide. The increases in both private and affordable selling prices that you see on this slide are mix related with slightly larger homes, slightly more weighted towards the south.
The JV result for the first half was also reduced by the pandemic. We still expect the share of JV profits for the full- year to be at a similar level to that reported in 2019. Moving on to slide 18. Our balance sheet was strong even before the placing in June. We now have a very strong balance sheet, which gives us options. The increase in net operating assets since the year end is driven by the growth in work in progress and an increase in land net of land creditors. WIP is higher than this time last year because of the delay to Q2 completions, and I'd expect the WIP balance at the end of this year to be higher than the end of 2019 by a similar sort of amount, reflecting the delay of Q4 completions into 2021.
Our short-term owned land bank comprises over 54,000 plots. I'd expect that to increase further along with the net land position in the balance sheet over the course of the next 12 months as we invest the proceeds of the placing into new land. You can see at the bottom of the slide that the closing tangible net asset value per share was GBP 1.028. Just to save you running the calculation yourselves, the placing increased that figure by GBP 0.043 per share. Moving on to the cash flow. Clearly, the closure of sites and resulting reduction in legal completions significantly restricted both our profitability and our cash generation. Cash land spend in the period amounted to just over GBP 300 million, with around three quarters of that spend relating to land creditors from prior- periods.
Supplier and subcontractor payments were about GBP 325 million, less than the same period last year, but still significantly more than recoveries in the income statement. The investment in WIP and land that you saw on the balance sheet are the main contributors to the operating cash outflow in the period. Those investments put us in a strong position for delivery in the second half and next year. The placing in June delivered net proceeds of GBP 510 million, which is shown in this slide, net of other investing and financing activities, including amounts invested in joint ventures. Moving on to slide 20. Working through this crisis has really reminded me that when the environment is changing rapidly, it's really important to be clear about where your priorities lie.
We're running the business to deliver long-term shareholder value, and for me, that means resuming our focus on cost and efficiency, getting back to generating cash, and always retaining a strong balance sheet. We came into this year with our focus on cost and margin, and that has not changed. While the pandemic has inevitably limited what we've been able to achieve in the first half, now that we've unfurloughed all our staff, we can resume our focus on the areas that I set out in February. For example, in May, we launched a new benchmarking dashboard tool, which allows our commercial teams to compare costs across business units, sites, house types, cost heads, and resources in a way that just wasn't possible before.
I'm confident that visibility, especially when combined with the introduction of our new tender management system in the second half, will deliver a lot of value for us in the future. I think tight cash management almost comes as second nature to businesses that have had to run for cash in the past as we did through the Great Financial Crisis. One example of that you can see on the balance sheet is that our debtor balance has reduced, and that's no coincidence. We have daily, weekly, and monthly cash forecasts, which provide us with a high degree of visibility and control, and we will maintain that degree of control through the balance of this year and beyond as we invest the proceeds of the placing.
At the same time as managing our cash tightly, as Pete said, we've done the right thing for our suppliers and subcontractors by striving to pay them as quickly as possible for the work they had already performed, and even going a step further with the Pay It Forward scheme. We think the commitment we show them now will pay off in the future. We've operated the balance sheet pretty cautiously in recent years, and I said earlier, when we went into the placing, it was with a strong balance sheet.
Our operating assets are going to increase over the next 12 months as we invest the proceeds of the placing. That investment will start to yield completions in 2022. By the time we get to 2023, we should be seeing volume from the majority of the sites acquired. I would expect the balance sheet to reach a mature position a year or two after that, when those acquired sites will be approaching the middle of their life cycles. Moving on to the guidance slide. As you know, we suspended all guidance at the end of March when we closed our sales centers and construction sites.
Now that all of our sites in England, Wales, Scotland and Spain are open again, and we've had a period of time to assess the implications of social distancing on production output, we feel it's right to return to providing guidance. Most of what you see on this slide is self-explanatory, and I've already touched on the volume guidance. The net cash guidance for the year end of GBP 550 million-GBP 750 million is intentionally quite a broad range, because it's dependent on how much we spend on land in the second half, and that will depend on the number and quality of opportunities we see. We could fall outside that range, but if we do, it will be because the environment and the circumstances support that outcome.
I would expect underlying build cost inflation in terms of new tenders to be pretty flat for the balance of this year, with stamp duty and Help to Buy deadlines stimulating a resumption in demand for labor and materials. We are already well progressed with all of 2020's completions. The underlying level of build cost inflation on those compared to 2019 is, as we guided to in February, around the 3% level, excluding mix and COVID. Given the dislocation in the land markets and opportunities that it presents, we've decided not to reinstate an ordinary dividend this year. We do understand the importance of the dividend to shareholders and expect to resume ordinary dividends in 2021. We would also expect to review the special dividend position in 2021 for payment in 2022.
Overall, our intent in providing this guidance is to be helpful. We are conscious that the economic outlook does remain unclear. It is very much provided on the basis of market circumstances as we see them today continuing, and obviously those are subject to change. I think that's probably about it from me. I'll pass back to Pete.
Thanks, Chris. Chris, if my line goes at all or my voice fades, can you shout? You're the only other one with a live line, and I understand that in the earlier piece it did fade at one point, but I couldn't tell because obviously it's a one-way call when you're presenting. If I pick up from slide 23, I'm not going to spend more time on the first box, which we have touched about, but I will briefly comment on the other four. Particularly, I think the second one, because we haven't really talked about customers and customer service at all as yet. We've been pleased with the customer service performance through the first quarter in more normal times when we were back at a five-star rating and some of the other measures we use. Strong customer service had continued to improve, including the Trustpilot score.
We've maintained that through the second quarter. Sort of sit today, year to date in this customer care year at sort of nearly 91% customer service score. I think I worry a little about completions in November and December from customers who have been unfortunately delayed because of the production slowdown, and that will have an impact, but that we will have to watch and manage. I don't think, if we do see that it will sort of speak to an underlying shift in the actual service we've given customers, just the unfortunate impacts of the pandemic.
We have been extremely focused on how we made sure through the shutdown months and in the immediate aftermath, including sort of at the moment, that we're actually able to resource up and deal with any customer issues after completion as actively as we are able to deal with construction on sites. The sort of message to customers when they can see lots of activity starting up on sites, but we're not there to sort their problems, would be a deeply wrong one. We've been very focused on that. I think I'm also pleased to include the statement that the construction quality score continued to improve. That's mostly a first quarter measure because the NHBC hasn't been doing reviews in the second quarter, but I think speaks to the underlying trend that we've seen over the last 12 or 18 months.
I will pick up on the purple block. We have been very pleased with how the business and the people in it have responded to the challenges of the pandemic, both our systems, but also the attitude of people. I think, as I touched on in some of the IT developments, I do think it's sort of given us the confidence that we can adapt and move more quickly than we have done in recent times. The last two blocks I'll deal with together. I've talked about land investments and growing the outlet base, but I put it together with cost because I think I want to sort of set out, we're very clear that those have tended to be our two challenges over the last couple of years. We need to use this crisis to really get those right and firing on all cylinders.
Chris has said one of his main objectives remains costs, and it remains mine as well. As we go into 2021, we need to make sure that our cost base is as keen as anybody else's. As I say, I do think we're in a strong place to grow our outlet base from here. I've seen the early signs of that. That does take me on to slide 24 and coming out of the shutdown period. I'm not going to pick up every line on this slide. As I've said, the relationships that we've improved and enhanced through the last few months are settled in a good place. The strong balance sheet gives us choices, and there are some real positives about how we respond to change and react, and also how we serve customers who want slightly different things.
By adapting long-term, our attitude to the use of offices, to how we sell, there is a big strength of view within the business that the appointment mode is selling, which means we get a smaller number of much higher quality visitors and are able to really focus time and attention on them, which our customers like and our salespeople like. May well end up being the future normal mode of working and certainly will be a core part of it, even if we have partial on a non-appointment opening as well. Also the level of communication and relationship with our suppliers subcontract base has improved, and we do think that gives us some options going forward.
I think, we feel that on slide 25 has really shown the culture and values of the business and some of its underlying strengths around its land bank and its balance sheet. Finishing on slide 26 before we open up for questions on the outlook, and I'll pick up a couple of things on guidance as well, expanding on Chris's comments. We do have very good visibility of 2020. It's really about production more than it's about sales. I think, yeah, it is about building an order book that is not just as big as possible, but is actually right places, right level of resilience, not so big that we will struggle to manage customer service within it and struggle to manage build timelines, but that really starts off 2021 in the strongest place possible.
Building on that 80% production capacity, as I said, I do believe there's upside. Our goal is to enter next year as close to 100%, and not just 100% in the sense of we're doing 100% of the work, but that it's being done properly in a structured and organized way. You do tend to find when you rush into these things, that's when future construction issues come out, and we're very committed to maintaining the quality approach of the last few years and not repeating some of the challenges that came out of the challenges of the last cycle. We've made good early progress on land after the equity raise. There was really good momentum on that, and we'll follow that through.
It's not about focusing on a particular point in time and saying we expect to have spent X by this date and Y by that date. We do expect over the course of the next 12 months to have spent that capital raise on incremental land investment, but the exact timing will depend on the timing and the quality of the opportunities rather than some slightly arbitrary target. Our overall sense of the market remains positive and short-term trading really does underlie that. I think when I said I would pick up some of the guidance points that Chris has made, it's particularly 2021 that I want to talk to you about.
I think for us, it's a challenging time to give guidance for next year, and the key decision is actually going to be how we think the market will perform, and therefore how we set our stall out from a build point of view site by site. If you think back to our high sales rates of 2019, they came because we set our stall out in late 2018 for a higher level of production across the board on sites. It's hard to be sure at the moment that's going to be the right thing to do for 2021, given the uncertainty around unemployment and the broader economy.
I think it will be a decision we will take through September and October about where we expect our sales rates to be next year, and that's quite a big swing factor on volume because our focus will be on maximizing the margin and optimizing the price. Actually setting out with too aggressive a sales rate target and therefore too aggressive a build target, might put us under pressure. It's slightly hard for us to give you really good guidance on that today because I think setting that out six months in advance in this slightly uncertain world at the moment feels wrong. I think the swing factor is between, do we target sales rates of 0.8 or do we target sales rates of one? The reality is likely to be somewhere between the two.
As you can imagine, that's quite a big balance in terms of next year's guidance. That's where we sit today and really what's driven our guidance at the moment, which perhaps is on the cautious side, but I think it's appropriate because that decision remains to be taken in the autumn. Therefore, if we can finish there and open up for questions.
Ladies and gentlemen, as a reminder, if you wish to ask a question, please press star and one on your telephone keypad. Our first question comes from the line of Aynsley Lammin from Canaccord. Please go ahead, your line is now open.
All right. Morning, Pete. Morning, Chris. Just two from me, actually. Firstly, on the dividend, obviously you're saying you're going to reinstate the final ordinary dividend for this year. Just thinking about what that might be. It is GBP 0.038, I think is what the 2019 ordinary was, the final one. Should we use that as a starting point? Is it still going to be 7.5%? I think was the number of net assets to drive the ordinary dividend. Will that differ if you see more land opportunities, et cetera? Just thoughts around that. Secondly, on the getting back up to normal build rates into next year, have you got any idea of the impact on margin, any of the inefficiencies, or have you actually taken the majority of those costs within the GBP 39.2 million?
I don't know if you've got an extra cost per site operating under social distancing measures in a COVID secure environment, for example. Thanks.
Should I take the first one, Chris, and then you pick up the second one?
Yeah, sure.
Yeah, no, I think on dividend, Aynsley, we haven't taken a board decision, so we haven't put it in black and white. We will start from the 2019 ordinary dividend as a start point for our planning. I don't think that is likely to be flexed because of land opportunities. I think the balance sheet has enough strength, and we have enough choices that that's not a swing factor. I think the only meaningful swing factor is if trading conditions in the back end of this year and very early next year are materially worse than what it feels like they will be at the moment. We might look at quantum. I think we are still committed to paying an ordinary dividend, and I'm not expecting us to have to make that adjustment.
It would be wrong to set out in black and white a dividend now when it's not a decision that the board has taken yet. That will be our start point in setting a number.
Sure.
Yeah. On your second question, Aynsley, looking at half two, there are two buckets, if you like, of COVID costs that we are likely to incur in half two. The first are the incremental costs or the extra cleaning costs, extra PPE, extra cabin and welfare rental, car parking, all those sort of things that are related to continued compliance with social distancing requirements and government guidelines. The second is the cost of the extension to prelims as a result of production inefficiency. Of course, that will naturally reduce as site productivity increases over the period, and we get back to normal output. You've got a reducing balance, if you like. By the time we get to next year, which I think was your question, actually, you would expect that those costs would reduce pretty substantially as the productivity increases.
Yeah. Great. All very clear. Thanks very much.
Our following question comes from the line of Will Jones from Redburn. Please go ahead.
Morning. Thank you. I think three from me, if I could, please. Obviously, there's a lot of moving parts behind the gross margin and the operating margin, of course, in the first half. If we just step back and try and move away from volume inefficiencies and lockdown effects and COVID and all the rest of it. When you think about the land bank gross margin today, and let's call it a contribution margin to make it easier, would you still point us to that bubble chart, obviously, of the land buying of the last number of years and a logical average of the last number of years? Is that still a decent pointer as to where the contribution margin the land bank sits today, or is there some knock versus that for price versus cost, whatever the moving parts might be?
That would be just helpful as a high-level view of the land bank, please. The second, I think Pete faded a bit when you were talking about price in July. I think you said you'd look to put prices 1% in the month. I think in appendices, we can see a 0.84 sales rate for July. Is it fair to say that the prices went up where you did it and they've been accepted, received, et cetera? Does that put you up, just for the record, 2% year- to- date because of the one that you did back in Q1 in terms of where you would say, broadly speaking, spot prices sit today? Beneath that, you've been clear about your 3% build cost guidance for the year on the P&L.
Can you just give us a feel for how the spot picture is looking in negotiations, which obviously will be the effect that carries forward into 2021? Then, sorry, this was really a question just in terms of volume capability, I guess you're very clear here you don't want to guide for next year, and I understand that. If we think about 100 of volumes last year becoming 60 this year, in terms of unit terms, 40% down, is it fair to say that you don't need halfway back up between 60 and 100 to 20% below 2019 levels? Is that something that next year looks pretty achievable, even with a slightly cautious view around sales rates and build speed versus where you might be? Thank you.
Okay. I made the mistake of not writing those down at the beginning, Will, and then regretting it when we were halfway through. I am sure that I will either need Chris or you to come back and remind me of a couple. Let's start with the volume one. I think halfway between 60 and 100 probably is at the cautious end of where we are, but it's in the range. I think we would hope it's better than that, and that will come back to the decision in the autumn around build. That's the low end of where we'd start and then I think try and build up.
If you look at underlying growth margins and the margin in the land bank as well, if I take those as one question, I think the underlying growth margins in the first quarter would always have been under a bit of pressure. We were clear about that because the sales price gain that we made from the 1st of January wouldn't have affected those completions. Also because they were slightly more weighted towards the south, where the market has been generally softer, and so margins are a bit lower. If we look at the margins in the land bank today, whether you take the implied guidance in that land acquisition chart or whether you take our medium-term margin goal of 21%-22%, those are broadly consistent, and we still believe those are the right level and what sits in the land bank.
The one area, and it's not price, and it's not underlying cost inflation, the one area which we flagged in the first quarter, which I wouldn't go away from because it isn't priced into most historic sites. Is those government regulatory costs, particularly around sustainability. That's the one area where there probably is pressure that isn't just an offset of various different moving parts. That's why we flagged it as a more meaningful thing. That is not trying to guide you away from those margins if we have to do that as that. When we finally see that regulation and we see where the mix of land and house price inflation is, then we'll round that in. That's the only area that I'll flag as a risk to that. I think our view of the underlying margins in the land bank remains resilient.
On price, we came into the year and targeted a 2% increase. Excuse me. As I think I said to you in the trading update right at the beginning of the year, we didn't ever expect to hold on to all of that, but we've held on to one, maybe 1.5% of that. I would say a little bit of that eroded in the early weeks of the shutdown, not directly related to the shutdown, but just mathematically. The 1% that we put in, I wouldn't expect to hold on to a whole of 1%, but does that take us to about 2% in terms of what I would say our average price is today, compared to our average price on the 31st of December? That's broadly right. It does vary a lot from site to site, but that sounds broadly right. Do you think that's fair, Chris?
I think it feels comfortable to me because I've looked at it as two fractured different quarters, if you see what I mean. I haven't tended to put the two together, but that's about right, isn't it?
Yeah.
I feel like there's one question in the middle there that I missed, Will.
I think it was Will.
I think it was [build]. Yeah, sorry.
Are you able to answer that one, Chris, because I've forgotten the detail of what Will asked?
Yeah, no. I think, Will, what you're asking was, you recognized the 3% guidance for 2020, and you were more looking at what the spot, I suppose, rate is on current tenders.
Yeah.
Which really is pretty flat, I would say.
Great. Thank you. Just to complete the earlier answer there, those Part L, Part F costs, I think it depends where the government, I think, falls on one option versus the other, but it was essentially a few thousand pound a plot. That's from memory.
It was. As I said, we're starting to factor them into land and where we've got historic land that's got a bit of selling price inflation. It's quite hard, I recognize it, and it's for you to put an absolute number against it. That's the one meaningful movement that could affect a number of sites.
Yeah. Thanks a lot.
No worries.
Our following question comes from the line of Jon Bell from Deutsche Bank. Please go ahead.
Yeah. Hi, Pete. Hi, Chris.
Hi, Jon.
I think I've got three, actually. Pete, the line seemed to drop out at the stage when you were talking about the 1% price rise.
It's done that twice, Jon. It sounds like it's dropped out twice when I was talking about price.
Yeah.
Clearly, I've got mental control over the phone line.
Could you just repeat that?
If it were to just go through that again?
Yeah. Please do, yeah.
We came into July, and the instruction to each of our businesses was to increase list prices by 1%, unless they had sites that had struggled over previous weeks to generate traction and visitors. Occasionally I have a site where the prices are not quite right to begin with, and just adding price to that never feels right. It was not done with quite such a absolute across the board basis that we did it in January. You can see in our realized prices over the last two or three weeks that there has been a tick up in price off the back of that. It's not the full 1%, and we wouldn't expect it to be. When you move price, there are people who've already looked at historic prices, we tend to give our salespeople a bit more leeway to trade in the short- term.
I would say we have to be careful with this because it's off quite small numbers, but I would say we've probably held on to between half and three-quarters of that 1%.
Yeah. Okay. Thank you. My next question, just sticking with the topic of house prices, actually. I wonder what your internal base case is for 2021, and in the stress testing that I've no doubt that you will have done, what's the headroom on NAV? I'm thinking a long way forward. My final question is just on that productivity percentage number. I wonder whether you could tell us what you think that is on your London sites, please. Thank you.
If I answer the base case on house prices and the London sites, Chris, you pick up the stress test on NAV on house prices. I think our base case is flat. I think actually if you asked me to bet some money on a number, it would be slightly up from flat rather than slightly down. We're talking about 1%, 1.5%, because I think the dynamics that we see today, which are price cautious and mortgage lender cautious, but actually also supply constrained lead to slight upward dynamic from inflation. With downside risk to that, if we really see unemployment become such a major feature that it impacts on people's confidence about the underlying economy. Our stress testing on pricing tends to be down to a 20% fall worst case market downside.
That's more of a long- run view of how we stress test rather than any kind of range of prediction for what we see as the downside case at the moment.
Would NAVs stay intact with that kind of price movement?
Chris?
Yeah. Obviously, we do lots of sensitivities around that. You keep increasing the price adjustment, and there comes a point where certain sites will gradually come into that area. To give you a feel for it, if we assumed a 10% drop in prices, the NRV resulting from that would be less than GBP 40 million. Because obviously, when you look at the contribution margins that you see in that land intake, [Charles], headroom between the prices that the land's bought at, and that allows obviously for price reductions.
Yeah. Okay. Thank you. Just the productivity then on the London schemes.
Yeah, sorry, I didn't pick that one up. A mainstream, fairly ordinary London scheme in Greater London rather than the center, probably is around the 80% mark. It's not massively different. It's where you get into central London, particularly parking and travel constraints, tight access on sites. And actually in the early stages coming out of the shutdown, less certainty on the recovery of the market, because whilst London has picked up during July, it was slower. A combination of those. It's more like 65%, probably 70% at best.
Yeah. Okay. Very clear. Thanks, gents. Thank you.
Our following question comes from the line of Arnaud Lehmann from Bank of America. Please go ahead.
Thank you very much. Good morning, Pete. Good morning, Chris. Probably three questions on my side, please. Firstly, just following- up on one of the previous questions and coming back on slide 16, where you give the details of your margin trend, and that's very helpful. Just trying to understand, if we take it line- by- line, what is likely to still be a bit of a headwind into H2? I appreciate the COVID-19 cost, you would expect to improve significantly relative to H1. What should we think about selling price relative to bill cost, the land mix, or the share of JV profits, for example? Do you still expect that to be the small headwind into H2? That's my first question. My second question is on the land purchase. You raised GBP 510 million through the capital raise for land purchase.
Have you already identified GBP 500 million of potential acquisitions, or is it more to give you optionality for the next, let's say, 6 to 12 months if and when this opportunity arises? Lastly, just a technical question on the extension of Help to Buy. We heard yesterday that the government was considering extending Help to Buy in the current form, I guess, into next year. I assume this is just a technicality to allow all of your existing customers to benefit of Help to Buy, including, let's say, buyers of a second home or if the property price is above the cap, so they're not falling out of it with the change from the new Help to Buy scheme. If you don't mind clarifying that. Thank you very much.
No problem. Should I pick up the land purchase piece and Help to Buy, Chris, and then you do the margin piece into 2020, 2021? On land purchase, it's some and some. We had identified at the point of the capital raise a significant number of sites. If we looked at the pipeline, it actually was in excess of 500, but we would never have expected, and we were very clear on that, for all of those sites to have been that pipeline. Some sites have fallen out, some new ones have been added, and some of those deals have been done. To give you a sense of scale, the deals that we've already committed to total in the mid-300s.
That shouldn't all, and this is a fairly arbitrary exercise anyway, shouldn't all be allocated against the GBP 500 million because we would have expected to do somewhere around GBP 200 million-GBP 250 million of incremental land purchases in the second half anyway. If you think of that proportionately, that equates for a sizable proportion of it, but it enables us and I would expect us to continue to be effectively using that GBP 500 million in both cash and commitment terms, because not all of it will be spent at the end of 2020 through certainly the next six months and potentially the next nine. It will have boosted our land purchases over that kind of timeline. It's a bit of both.
We'd identified a longer than usual pipeline, but you can't really allocate any specific site against things we might have done anyway and things that relate to that GBP 500 million. We have identified a significant number of sites. On the extension of Help to Buy, yes. I think technical extension isn't a bad way of describing it. What I think we've all been seeking is an extension to the current scheme. It isn't just about price caps and it being available to non-first time buyers. Even a first time buyer within the price cap can't just roll it forward onto the new scheme. They'd have to reapply, get a new mortgage, and that would obviously cause a lot of risk and a lot of disruption. Anybody whose home will not be complete
By the end of the first quarter because of the pandemic would be then affected by that. Obviously even those whose homes say were now scheduled to complete in February and March would experience quite a lot of additional uncertainty and stress if there wasn't some kind of extension. The sense we get, and you see it in the press as well, is that there will be an extension. That's what's always seemed logical. I don't think it'll be huge, but the truth is I don't think it will need to be. We probably have somewhere between 150 and 200 customers in the order book who would fall into a category where they were expecting to use that scheme. They need to use that scheme. Without an extension, they would struggle because of the revised completion date on the plot.
That's why we've advocated on their behalf really for that extension.
Yeah. On the margin rec slide, so when we report the full- year results, that will reconcile from the full- year for 2019 to the full- year to 2020. I suppose what you're asking me to do is predict what that will look like. In terms of if you look at this H1 slide, because obviously that will be a component of the full- year slide. The four biggest numbers on there being the impact of fixed elements of build cost, direct selling expenses, which I said have a substantial amount of fixed cost in them, net operating expenses, which again are predominantly fixed costs and then the incremental COVID costs. You would expect as volume increases in the second half that all of those percentages, all those percentage point changes, would reduce quite naturally.
Then, in terms of market inflation on selling prices and market inflation on build costs, well, we've set out in the guidance slide that that 3% I'm still expecting to be the same number for the full- year. I certainly don't anticipate the inflation on selling prices being much different either because as Pete already said, we're pretty much fully sold for this year. Our completions are already in the order book for this year. I suppose as you look to the second half, obviously the margin is going to increase and that will be reflected in that margin reconciliation when we get to the year end.
That's very clear. Thank you very much.
Our following question comes from the line of Glynis Johnson from Jefferies. Please go ahead.
Morning. I have four, if I may. The first one is just given that you say the build rate is now sort of the constraint in terms of what you can do next year, I'm assuming you have a reasonable idea of phasing of delivery. I'm just thinking the 40% of completions that were Q4 this year, that move into Q1 next year, does that mean that next year is much more evenly split H1, H2 given what you're anticipating, given what you're budgeting in terms of build schedules? Second of all, in terms of the selling rates, you talk about the very low availability on your sites now for the rest of the year. When do you start selling for next year?
I'm really trying to just get an understanding of what we might expect for selling rates for the remainder of this year, whether or not we'll see them come off just because you don't have stock to sell. Thirdly, you talked about the net proceeds that came through that they were net of joint venture investments. I'm just wondering, can you tell us actually how much went into joint ventures? Also give us an idea of what other cash outs we need to be thinking about for the second half of the year. Is there a [outflow] joint ventures? When will we see the planning go out? Lastly, Pete, you're going to wish you'd written this down.
If I add together all the things I think you're telling us in margins that's related to the lockdown, so the impact of fixed elements and build costs, direct selling, net operating, incremental COVID. When we look at that in an absolute amount, that seems to come to well over GBP 120 million. Your employment cost last year, if I just take an average monthly was GBP 28 million, which seems to suggest that it's much more than just the employment costs that have been the impact through the first half. Can you just sort of give us a bit more color on that? How much of the first half impact was just the labor costs of your direct employees that you had to keep paying? How much were the other costs?
Okay. I did actually write it down. I clearly have either learned from Will's questions or I just know what you're like, Glynis. I'm not sure I wrote down enough detail, but I think there are a couple in there on JV and cash for you to pick up, Chris. I'll pick up question on phasing for next year, sales rates and selling into next year. We'll collectively come back to the margin question at the end, which I'm not sure I'm going to find that easy to answer without a bit of paper set down between us for Glynis, but Chris may be able to. On phasing, I think in a broad sense, we do have a sense of phasing for next year, which is to very much target.
This will be one factor in our plans for how we think about total volume for next year will be to target a much more even balance first half to second half. It's those plots delayed from quarter four give us the opportunity to do that and get the balance right. There's not an inevitability to the kind of continual rolling pressure into Q2 and Q4. It's a chance to address that, and we will take it. I think that the slight note of caution, and it's not about that overall principle, is we will be going through and are at the moment, and we will probably go through three iterations with our businesses of exactly what sort of build plans, on which sites, at which levels, given the market uncertainty and the changes through the lockdown period, through the course of our budgeting process in late summer and the autumn.
Whilst at a broad level, absolutely one of our targets is to have the right volume next year that includes a sensible first half, second half phasing and gives the business a strong platform to then grow from that in the right way. In the same way as outlook, it just means that you're actually got a sound base to build on. That's a very detailed exercise, literally side by side, plot by plot through the business. We've started it, but it isn't complete. It's one of the reasons why, until we've gone through that and looked at what the market conditions are through the autumn, we won't decide exactly what the right balance is for next year. I think on sales rates for next year, we have already started selling for next year. Broadly, on an ordinary site, we don't like selling more than six months out.
We're selling plots for completion in January. I do think that sales rates will probably be more like 0.8, 0.9 today if we had a full range of availability through the next six months, because there are absolutely, as you would expect, some customers for whom January is just not quick enough. I think particularly at the moment where people want to get on with life, as much as they can, that's a meaningful factor. I do think that will continue to hold sales rates down through the autumn. Certainly not the one a week that we were doing in 2019, whether it's 0.7. I'm not necessarily sure I expect to see them dip, because I think there'll be enough rolling plots each month coming from February and March that we probably keep it at the same sort of level.
We are already starting to sell for next year, which will be normal, but inevitably with less sales to take for this year, we're probably slightly further ahead than usual. Chris, do you want to pick up the JV point and the cash point?
Yeah. In the first half in JVs was GBP 24 million, Glynis, and we'd expect to sort of get distributions and get probably around about half of that back in the second half. The second half assumptions, I think you were probably alluding to what we got in there for tax and the exceptional provisions. Tax GBP 60 million and exceptional provisions, cash payments of GBP 20 million.
Yeah. And then, Chris, you may be able to help me on the last point, because I understand that the underlying question you're asking, Glynis, but it's hard to, without a spreadsheet sat in front of us to reconcile it. The people cash costs and that GBP 28 million, [is a region], are by far the biggest part. I tend to look at it as actually it's fairly easy for us to ring-fence the incremental costs. It's actually lost revenue is the biggest movement. Our underlying costs, both overhead, fixed sales costs, and fixed site costs, have been there through the shutdown, and we haven't recovered revenue against it, and that's the biggest impact. I'm not sure I can directly answer your question. I don't know if you're able to, Chris.
Yeah. Apologies if I'm not answering the right question, but I think, Glynis, you asked about the elements of the GBP 29.9 million COVID cost that relate to the lockdown period and what element of that relates to salary costs for our site managers and other directly employed site operatives. That's around about GBP 11 million of that amount. That hopefully helps you sort of reconcile your question.
I'll come back on that question offline. Can I just, in terms of cash outs, just for understand, is there anything for pensions in the second half?
Sorry, was there any?
Anything for pensions, any other cash outs for pensions?
Yes.
Conscious that was one of the others.
There's a slide there that you can see later in the pack that sets that out. Yeah, we'd have GBP 20 million of deficit contributions in the second half on the pension scheme.
Okay. Thanks.
Our following question comes from the line of Gavin Jago from Barclays. Please go ahead.
Morning, Pete. Morning, Chris. Just a few, if I could as well, please. First one was just about the order book, and whether you could provide a bit more detail on the mix in the order book, I guess by volume and/or value between private and affordable. I guess linked to that, your expectations on the mix between the two for the full- year. Obviously you said you're broadly 97% sold for the full- year, but just to put some numbers on that'd be great. Just the second topic, just around back to Help to Buy and just looking at slide 38. There's obviously kind of a spectrum in there on the percentage of units within the price cap.
Just want to maybe your views, Pete, just on where you think the kind of the risks and/or opportunities, of course, would lie as we move towards the new Help to Buy scheme, assuming that it stays where it is in March, April. The final is just on any more detail on regional demand, I guess particularly since the stamp duty changes have come into play. Thank you.
Yeah, no problem. If I sort of almost work backwards through those and then I've got the build book mix to hand, Chris, but you can then give that out. I think on regional demand, I don't think there's any big regional differences that are obvious if I look broadly over the course of the last 8 or 10 weeks. I think Scotland, and to a lesser extent Wales, lagged in terms of physical opening. Sales rates did lag there. I don't really put that down to any difference in attitude or demand. That was just a different approach from government to returning to site after COVID.
I think one area I would pull out is London, where, as you all know, we've seen London, particularly prime London, but to a certain extent, other parts of London and the more expensive parts of the Southeast lag behind the rest of the U.K., certainly in transaction numbers, probably in price growth as well over the course of the last couple of years. Before that, central London prices actually falling. I'd say in the very early stages of returning to site, London was also slow to come back, whether that be because there was more sensitivity around London and public transport around coronavirus itself, because it was seen as a hotspot, whether it be because there's still a residual Brexit uncertainty, or whether it be because part of London is tend to be linked into the international market.
I would say over the last three or four weeks, generally, that trend has gone, or that difference has gone, and London has caught up. Potentially, arguably even moved ahead slightly, although I wouldn't place a great deal of store in that. That sense of London being weaker than elsewhere isn't there today for the first time in quite a long time. I think on the price caps, obviously the move to the next phase of Help to Buy have had some risk. I still personally think it's a risk.
If you look at it from an overall resilience, stability of the housing market, which I see is in our interest, I think it's a risk worth taking in the sense of if you take the view that we're going to have to move away from or reduce our dependence on Help to Buy at some point, I'd rather it was in stages, and that's therefore a perfectly sensible stage. I do think there's quite a strong argument that some of the price caps, particularly the Northeast, run at slight odds with the government's own agenda about leveling up. If I'm honest, I think there's a slightly London-centric perspective on what they should be trying to do in the housing market in certain regions.
I think there's a specific about some regions around actually, if you look at the Northeast, what Northeast needs to level up is actually more better quality housing, not more first-time buyer housing. It kind of works against that slightly, but that's more of a political kind of detailed argument. I think from our point of view, we just sit and think, "To manage." It sort of means the scheme won't be as prevalent in the medium- term. I think that's a good thing because I don't like the level of dependence on it in the short- term. It'll be something that we have to adjust. I've been, I think, very consistent and very clear. I think this short-term extension is fair and logical and necessary.
A longer- term decision should depend on what the conditions are at the time and needs to be thought about very carefully because it has longer- term negatives as well as the obvious. If all you're focused on is your own house builder P&L for the next year, of course you want it to continue forever. If you've got a broader, longer- term view of the business and the value in it, you've got to deal with that dependence on government support for your customer at some point. It's not a bad way to do it. Chris, are you able to give the order book split?
Yes, of course. The volume of the order book at the end of the half was 11,686, and the private element was 6,567.
That's great. Thanks very much.
Yeah.
And hard for us to meaningfully steer you as to what that split might be at the full- year. I've no reason to think that it's going to dramatically change from that proportion or the norm, but there may be a dynamic there. There's a slight difference, but nothing obvious to think about today.
Excellent. Thanks very much.
No worries.
The following question comes from Gregor Kuglitsch. Please go ahead.
Gregor, just before you ask your question, I think we probably, for time's sake, should make yours the last of the questions. I've got one other question that's been asked from somebody who couldn't join in, which I'll answer after we've dealt with yours. Sorry, Gregor, back to you.
Okay. Well, looks like I just about made the cut. Three questions, please. The first one, obviously there was no call at the time of the equity raise, but could you just kind of flesh out or kind of outline a little bit in terms of land and basically to what level of size and essentially how much capital you're prepared to tie up? Maybe, I don't know if you thought about it in plots or balance sheet value. Could you just give us a bit of a sense, as compared to the 75,000 plots that you're currently at roughly, or I think 77 actually as of H1, how much do you think that can run up to essentially before it kind of starts unwinding, I guess, from 2022 onwards? That's the first question. The second question is on the margin point just coming back.
I guess what we're learning here is maybe the obvious, that obviously there's more fractionalization of fixed costs and so on than just the pure OpEx. I guess my question is, in order to achieve that mid-term target of whatever, 2021, what kind of volumes does the business actually need to deliver? Because obviously, those are, I think, more interlinked than we all perhaps thought. Finally on the dividend. I seem to remember there was a 7.5% of NAV and GBP 250 million minimum maintenance dividend commitment pre-COVID. Just to clarify the question, I think with Andy's question earlier, is that what you're talking about when you're talking about a return? I guess it is, but just for clarification's sake. Thanks.
No. If I take them again in reverse order. On the dividend, yes, that is what we're talking about. I think, we're being reasonably explicit on the ordinary dividend. That's where we start. I think the question was asked earlier in pence per share, and I think we're conscious that having raised capital, simple math, we've got more shares. I think that's the right way to think about it rather than absolute pound notes, because I think, our sense is where we expect to get back to is the same pence per share. I'm just very slightly cautious, and it really is slight at this point on giving out an absolute number for next year now, but that's roughly what we expect. I think on the special, that's where we would expect to get back to. We haven't started to think about quantum and look at it.
I've no reason. I'm not trying to steer you down. It just is a different question for a different day, and I'm just not ready to talk about quantum on that at this point. I think on margin, it's a very broad brush answer, but I'm going to say 14.5, 15, which I've seen as roughly the underlying stable number of the business can comfortably operate at. It's not maximum, but it's also not the low point. That's almost inherent in that margin guidance. I think I would argue that it should be pretty obvious that there's quite a lot of fixed costs at a site level. That's not particularly a concern or relevant over the long- term. It's very relevant over the short- term, certainly over three months, and probably over 12-18 months.
What I mean by that is as our sites are set up to be able to deliver higher than normal volume, we put a lot of work into that and actually a lot of training and recruitment and retention into the people. Actually, losing those people at this point in the very short- term, particularly through the crisis when you don't quite know where it's going to end up, would have been very short-sighted. If actually we decided that the long-term level of site operation was lower, we'd have less people per site. That's not where we are and not what we expect. We do have to be a little bit patient to let it get back to a normal level.
We are finding that level of site management cost on site very useful in managing quality and the health side of the crisis while we go through it. It does give us a slightly bigger fixed cost per site. I think that's an asset as we return to normal, and I'm not going to cut it out just for the 2020 performance. If we get halfway through 2021, and actually the market's nothing like normal and those are unrealistic sales rates to achieve, then we have to look at that and address it. It's a timing thing. I think it's an asset, but in the short term, it's a cost that we have to cover, if that makes sense. There's always obviously been fixed costs on sites, but they're set up for a slightly bigger level of site.
Going back to land, these are very broad brush, GBP 500 million, GBP 10 million a site, 50 sites, average size 200 units, 10,000 plots, which answers the direct question about where the land bank could get to. The mix will depend on in terms of how much strategic land comes through, that those 26 sites are not, for the most part, strategic sites. There's a bigger mix towards more immediate acquisitions in there than usual. That's the sort of metrics that we are comfortable with. It's not a massive step change, but it is a change. It gives us the ability to grow the land at an opportune time and have higher outlet numbers. In most market conditions, higher outlet numbers give you choices.
Thanks a lot.
No problem. The other question that I had offline from somebody who couldn't join, but I think will listen to the call later, so I will answer it so that I can pick it up, is there is obviously been mathematically an investment in work in progress, and particularly with the lower trade creditors in working capital.
Pete, you've dropped out again.
Is that a permanent or long-term thing or will it reverse? It's absolutely not permanent.
Pete.
I don't think it's long- term.
Not hearing you.
I think a bit of time to reverse. I would certainly expect by the time we get to the middle of.
Pete.
You lost me there, didn't you? I can tell. I would certainly expect by the time we get to the middle of next year, that would largely, if not totally, have reversed. It will depend a little bit on production and.
Should we wrap up- now? Is there anything that we haven't touched on?
As we've gone through those, we should finish, [Wes].
Sorry, we just lost you again right at the end there, Pete.
I don't know why you're suddenly losing me. I was just saying, is there anything that we should wrap- up with that we haven't covered?
No.
Should we just close the call there?
I think we've covered quite a lot.
Great. No, thank you, everybody. Thank you for the time and look forward to hopefully a point when we can do one of these in a bit more face-to-face and in person. Take care.
Absolutely.
Cheers.
Thank you for joining the Taylor Wimpey Plc Half Year Results Call. This call is being recorded and will be available to listen on demand on the Taylor Wimpey's website later today.