Trading Update

Apr 23, 2020

Earnings release

Good morning, and welcome to the Tailor Winpplc Trading Update Call. Today's conference call will be host by Taylor Winpit's Chief Executive, Pete Redfern and Group Finance Director, Chris Carnney followed by a Q And A. I would now like to hand the conference over to Pete Redfern, Chief Executive. Please go ahead, sir. I will focus almost entirely on today's statements. I don't plan unless it's particularly relevant to go back over, the sort of statements we've made during this crisis over the last 2 or 3 weeks So obviously given we haven't done a conference call with most of them, very happy if you want to ask questions, but I won't bore you by repeating them. Just a couple of broad comments before, I sort of start. Two things we're not doing today. We're not reinstating guidance for this year. I think you would be surprised if we were and sort of slightly concerned. We do think we're able to map out a plan, which is largely within our own control, but obviously there are still plenty of variables. Very much our focus is on making sure we have options, both options, if conditions give us opportunities and options of conditions, you don't sort of get tougher than they are today. So it doesn't feel the time to step out significant guidance. But I am not sort of trying to draw you away from asking the natural questions that I know you will all want to So we won't be able to answer, but we'll do our best, particularly where it is giving you a view on what is happening at the moment and how we see it. Obviously, where you start to want to translate that into what numbers might look like, then we will probably resist, but very happy to discuss how we see the environments at the moment. The other thing that we are not doing today is we are not calling the market. I think yes, again, recognize that any decision to start build which I'll spend some time on. Absolutely connects into a view about the market, but we're not saying sort of that there is no future market risk that they're not saying that COVID-nineteen will not have an impact on the housing market. I think what we are saying, which I will come back to is the early signs are perhaps a bit more positive than people would expect but also that there's certainly no inevitability, to material downside in the market with the exception obviously. Of volume in quarter 2 and probably, sort of into quarter 3. So we'll come back to those, but I don't want you to go away from it thinking We have a suddenly buoyancy of the market. We think there's a range of outcomes and that our plan allows us to deal properly with all of that possible range. The thing I will spend the most time on is the decision to restart construction activity on sites today, what's behind that, and some of the implications and certainly philosophy about view as to why now is the right time. And I will then touch on the sales stats and Chris probably open up to give you a chance to talk about the movements in cash since our previous statements. I think since we closed sites and you'll well remember that we were the first to take that decision, although it was our decision rather than government imposed. We've been working hard to work out how best to open up sites particularly from a safety point of view putting in place method statements and protocols to be confident that safe distancing particularly can be on our normal construction sites. But also looking at the changing environment, changing perceptions, how our own people feel about it, and sort of what the environment is like and the process. And I'm sure you'll ask questions and we'll try and cover off some of those in advance on how we feel the supply chain will respond whether we feel subcontractors will be there, which are obviously key parts of the decision. I think the reason we're making this announcement today And we've sort of been working on it closely over the last few weeks as we now feel we do have, the systems and processes and if necessary, the equipment in place to be able to actively start work on-site, we think that process is best handled in a stage and managed way. One element of that decision is behavioral. What was very clear if you go back to the 20th, 21st March is that sort of ordinary subcontractors are not that different to the average popular person in the population and did not immediately naturally feel that safe distance being applied to them. I'm trying to make that behavioral change stick overnight with the number of people we would have on-site would have been difficult, arguably impossible. Whereas now when people have got used to that more, are used to it in their daily lives, actually we feel as well as having the systems and the processes that we can set up, there's also, a much better behavioral balance for our subcontractor And I think the strong action of stopping sites, but then supporting subcontractors gives us the moral high ground to say to them, these are the rules. We're doing it to protect you. We want you to do protect us. And we think that gives us a position that makes it much easier to be confident that our site managers have a realistic task to make sure that these procedures are adhered to. I'll talk a little bit about the phasing. And the main reason I'm talking about it is because it gives you a sense of how we're setting it out. Obviously, sort of I know that you'll sort of try to then draw numerical conclusions from it. It is quite difficult to do that. Sort of, and our focuses on getting it right, getting activity back, getting activity back in the right way rather than it is on how quickly can we get back and get to sort of completions and cashback. And I'll touch on that in a second. Sort of more directly. But the first step of the phasing is our own site management teams, which tends to be about four people per site. Arriving on-site on 4th 9th. And they will spend that week on some of the more complex sites a little bit longer preparing the sites return to work from subcontractors. So preparing the side means, sort of, changing layouts of toilets, canteens, putting up signage changing where appropriate and necessary, some of the traffic management routes make them wider or put in passing places, where it's an option and where it's necessary putting in additional car parking spaces to reduce or move completely the need for you to use public transport and also going through training themselves. In the new methodologies so that when the first subcontractors arrive, sort of during the week commencing the 11th May, in relatively small numbers at first, they're lined up very confident and we've hit the ground running in the right way. That 1st week number of contractors will be focused towards finishing trades, but, and this is important. I said I would touch on our views on the cash dynamics. We're not chasing nearly complete plots. That 1st week, the reason we're bringing in finishing trades partly from a customer point of view because we have customers in the order book whose homes are merely complete who now wants to complete, but it's also because we think it's the best way to do gives us a longer lead time with our suppliers, particularly the heavy side suppliers on bricks and plasterboard and the like to be certain now to date, which is one reason for announcing it so strongly today. So they've got time to plan and prepare and know exactly sort of what we want. So as we speak, buyers in individual regions are converting their plans sort of into orders, and sort of that gives the timeline that we think is realistic. So it's more focused on that. We want to pepper pot and just sort of try and grab immediate plots. We don't, as you can see, and Chris will come back to have a near term challenge with liquidity at all. So it's more about making sure we manage value. And if we still be easy plots, sort of and don't continue to build, sort of our pipeline for the future, then I think we hit a bigger problem further down line. And we have a long term view of this. Our focus is not on 2020 completions and absolute performance. It's actually on how we make sure the business is set up very well. Particularly as we get to late this year and exit this year so that 2021 can be as strong and as normal as it could possibly be subject obviously to market conditions, which we'll come back And I think that may be a difference between us and others if you are more cash starved. To be honest, if you have a more short term mentality, you're more likely to take those short term plots. We will be focused on starting to do work on new outlets, whether that be So planning work, we already have planning permissions coming through over the course of last few weeks or whether that be early infrastructure work, we'll be disciplined about the amount of infrastructure but it is not a case of stopping the future pipeline. I think even with that, with the pause and the slowdown, it inevitably will have an impact on future outlook. But I'm making that as limited as possible as a key part of the objective. And again, I sort of go back to that may be different to what you hear from others, but we feel very strongly that's the right balance. For us. So going back to the plan, week 3, we start to bring on more trades, week 4, and we're into late May, early June, we're getting towards and certainly by early June, we're at what we see as a new normal operating capacity while social and seeing rules are in place. And we're not calling whether that's going to be another month or another 6 months to the end of the year, but a level at which we think we can sustain the business profitably, the level of inefficiency is low and is very much weighted towards the extra supervision costs rather than having natural in built efficiency because of the slower throughput. But we feel at a level of somewhere around 80% for our normal sites. And I don't want that to get too closely focused into mathematical models because at this point, it's nuts and it will vary from site to site, but it gives you an indication of what we think is realistic. But somewhere around 80% of normal capacity, we feel we can operate these sort of restrictions and rules. I think it is also worth saying that we have designed this process and this approach it's sustainable, not just in the way that I talked about because we are continuing to build forward on future plots, but also that it is sustainable because we can adapt and control it if lockdown rules change. One of the things we've wanted to avoid is a rush back to site and the risk that then actually you sort of have to then shut down again in 6 weeks' time because the laws have changed. And we feel this is adaptable and the clear time from government sort of and they have been very supportive last night and this morning on this decision and the communication of it, the clear sign from government is this is what they want to see you sort of happen. So they will try to avoid putting any accidental roadblocks in our way. And of course, making it clear, and this is absolutely where we started from that our people support this, our subcontractors support this, our site managers support this, we are not forcing anybody back to work that doesn't want to go. We are very focused on making sure that anybody is vulnerable, who is sheltering somebody who is vulnerable or who actually isn't ready yet themselves because they fearful or they have family constraints, but those things have to take priority. But to be honest, with this phased startup, we think that will be something that we can naturally manage anyway. We'll definitely start from those principles. So that if this goes to plan, we therefore see by early to mid June, we're up to that new normal capacity. Yes, these sort of plans don't at the moment, implied Scotland, we hope that as we set out ways of working. Clear on them that will be one factor in the Scottish government becoming more relaxed with construction activity starting up, but it's early days to form that judgment And I think in London, there are more likely to be more, sort of constraints, just the nature of sites. And I don't think there are many sites if any that we would expect not to open, but with the constraints about public travel, the constraints on the size of car parks, you could build on the sheer density of sites. It is harder. So I think on average, it's unlikely that that 80% level is going to apply to certainly central London sites. I think greater London is slightly more like the country as a whole. But hopefully, that gives you a clear view of the sort of structure we are accepting. Coming on to the supply chain, you can imagine on the subcontract side, people to respond to this is very positive. People are keen to get back to work. They are very positive about the decisions that we have taken so far, both the decision to it's nice in the first place, and also the support that we've given them through early payments and to pay it forward scheme. And so relationships and communication are very strong. I think on the material supply chain, relationships and communication are also very strong. And I think we have clear indications on all the key elements that this announcement will be one of the key steps in them re gearing. And you've seen other comments, we've seen them come out today or the comments of other parts of the supply chain. Starting to think about mobilization, people to a certain extent need a lead to jump off, I think, and we think this will provide it. That doesn't mean there won't be friction, but we see that as friction rather than any one roadblock that means that the whole process whole because we cannot get hold of a particular material or because there's another element of a broader supply chain, like the valuation process or service connections that sort of isn't available. None of those things will be totally straightforward and will run totally smoothly. But we have tested all of them, and we do believe that all of them can be managed, that we can get to a process at a slower rate of delivering sort of build completions and then sort of sales completions as well. I think that's the main things I wanted to say on the mobilization process I think on the sales side, sort of around mobilization, it doesn't feel tenable to us at a point when most non essential shops are closed to open our sales centers. It is an area our employees tend to be more sensitive about because they're not confident that sort of if somebody comes in off the street that they will necessarily adhere to the same rules. So that will be slower. I have to say, in my view, construction limitations will take longer to unwind for simply practical reasons. And so actually being able to get that mobilization underway sort of and looked to a not too far away partial remobilization of a physical sales presence, I think feels right anyway. I think with a strong order book and now come onto the stats on that, that gives us confidence that we have the customers there for the production that we will engaging over the 1st few weeks of months anyway. I've seen others refer to and debates go around, will you focus on sites that have a strong forward order book, will you focus on those plots? I think I've made it clear on plots that we will focus across the site. We don't have a site that doesn't strong order book. So sort of I guess the answer is yes, but that still means that if we can manage the site safely, we will be developing on it. And I have not seen all the way through the financial crisis, for instance, an environment less sales was so bad, that you shouldn't actually have every site open that you wanted to. You might and you although you possibly could, you might run them at a site and sell a page, and depending on the sales environment, but you would still choose to have every outlet open that was an option. And I don't see anything in this. That is going to be worse than that from a sales perspective. I think moving on to sales more directly, yes, we are not, as I say, calling what the housing market is going to do, but we have been pleased both by the performance of our own teams and our own systems, sort of on the sales side, we have kept more salespeople on furloughed than most of our competitors. We have a salesperson who came from each site who as sort of still responsible for that side, they stay in regular contact with every customer in the order book. I know others the sector have gone to more sales management teams doing that, but we feel it's important to have somebody who knows the site, they've been sort of index and actually so the customer has the confidence of talking to somebody they've probably met before. And certainly if there wasn't the main sales person that they spoke to, it was somebody who's that for them and who knows the ins and outs of the site. And we think that's pretty important and helps, and that also gives us a good read across of confidence. And we have not seen our customers sort of looking to exit. Now we all know that if prices fail, as we go through the next few months, then that's the sort of thing that would trigger more meaningful cancellation but at the moment, that's not what those customers are expecting or want to happen. They will wait and see to a degree, but one of the elements that we think will come from starting a construction process is even more confidence in that sort of environment. And you can see from the stats, cancellations have been, I think, surprise be low. We've quoted it as a percentage of the full order book, which I think is a fair way of doing it. We have pointed out perfectly validly that we should perhaps quote it as a percentage of the private order book, which is a fair point. If we did that, it will be something like 1.4%. So I think still tells you the same story. Just as an aside, we've also quoted the level of exchange as a percentage of the whole order book but it would still be pretty close to 50% if we go to the private order book. It is something I have 44% or 45% from memory. The private order book. So the level of exchanges is strong, and we have continued to make exchanges. On cancellations, the level of cancellations and this sort of the specific that Chris used in the phone call last night and hadn't quite made this comparison, but I think it's quite powerful. The number of cancellations we've had in the 3 weeks has been slower than the number of cancellations we had in the same 3 weeks a year ago. So it does give you a sense that yes, all reservations are slowing of normal, but cancellations have not suddenly spiked. On those forward reservations, we've taken, I think, 285 new forward reservations since we shut our sales sites and those have happened by Microsoft teams, by other video conferencing methods, and by phone. And the majority of them are people who had already visited the site and aware of it, although it is important to remember that the vast majority of our customers anyway come from so close to our sites for their current homes, but they're used to the site to know them anyway. But we have also taken sort of reservations, which have been totally new from people who haven't visited the site before. We haven't, you know, and this is a trading update on the call. We haven't put up our usual charts looking at forward sales activity. But I think the most significant one is probably website that exists. It just gives you the simple snapshot of level of and activity. That is down year on year, but it's down from, I think, 540,000 hits to about 495,000 So it's down about 8% or 9%. So sort of I think if you'd said to me, you have to physically close all your sales offices and everybody's going to be staying at home from us. Pandemic and you're still going to make, sort of net sales and have 90% of the same level of interest, then I'll be pretty surprised. As I say, none of that says, oh, everything's fine with the market a little bit will be okay, but it does give you a sense that there is a natural resilience, sort of out there. And I think as we open up sites from a construction point of view, that will give our salespeople a strong lead to talk to both existing customers and new ones and start to let us complete on some the near term plots in the order book, which, as I say, is more for us about getting customer service right than it is about an immediate need for cash. Because very much the focus is on a normal sort of state or steady return to work as much as it can be managed in this environment. As I say, I won't dwell on many of the other issues. Chris, do you want to talk about cash and probably pick up anything else that I've missed? Yes, of course. So good morning, everyone. The million gross cash position as of yesterday translate to GBP 198,000,000 of net cash, which is GBP 33,000,000 more than the GBP 165,000,000 of net cash we reported at the time of our last update a month ago, we've taken nearly 900 legal completions over that period with the majority in week 13, the last week of Q1, which is typically a busy week and also happened to be the week where we were closing our sites up. And some of those 900 completions also took place during April where customers expressed a desire to move into homes that were already fully build complete. Contracted land payments during the period since that last update have been relatively modest at at 1,000,000, but we have not skimmed at all on payments to subcontractors and suppliers And in fact, we've sought to make payments as fast as we can process them because we strongly believe that that's the right thing to do. And that has resulted in payments for supplies and subcontractors in excess of GBP 200,000,000 over that period. Looking at the future liquidity and the cash outflows associated with, I suppose, the remaining unwind of our trade creditors are positioned our existing land commitments and our ongoing operating costs, we are very confident that even in a scenario where our sites were to stay closed all the way through to the end of the year, which obviously on the basis of today's announcement looks very, very unlikely. We'd be very confident that we have enough liquidity to see us through that. And having said that, as you would have seen from our previous announcement, months, we're taking the preservation of liquidity very seriously. We've stopped a discretionary land spend. We've canceled the dividend. We've drawn down the RCF and management of obviously voluntarily reduced remuneration as well. And although we've demonstrated, I think that we're taking all the right actions to preserve liquidity, we don't anticipate our sites remain enclosed, as you can see from today's announcement. So our balance sheet remains strong. And so our focus on cash and liquidity is geared much more towards opportunity rather than survival. And I think that's a really important point to stress. And then the other thing that I'd pick up on, and it is probably a very obvious point for those of you who are close to the company, but one I think that that's worth emphasizing. We have a huge amount of experience across the whole of the group management team, And within the operational rules, I think I fucked up the lease time in the industry at 14 years, and all of my colleagues have significantly more time under their respective belts. And that combined experience of both the good times and the bad really matters at times like these, I think, to all stakeholders, especially employees, but subcontractors, government and shareholders too. And hopefully, you can see that in the way that we're communicating. And I think the different approach that we're taking compared to say 2008. Thank you, Chris. I think, Sarah, if we could open up for questions now. Thank you. Our first question comes from the line of Pritesh Pia from HSBC. Thank you. Thank you for the call. I have two questions, if I may. The first one is on the supply side. You talk about, the supply side is aligned to your plan. Are you about this big supplies, which takes, obviously, a couple of weeks to fire up the kiln and start producing again. So I'm trying to look at your inventory and how much supply is it you and how long it can last before the supply chain is fully streamlined. And my second question is, at least to obviously on the pricing front, you talked about the pricing being in line with Q1 over the small two hundred units that you have take into the vision. Have you seen any kind of price negotiation people are trying to enter into and or any color on that would be great. Yes. And so if we take Bricks as an example, and you can imagine we have had very detailed conversations over the last week with all of our main suppliers. So we know what stocks there are. We know where they sit. We know, sort of to what extent they are allocated either specifically to us or potentially on call off for us. So we have a very good handle on where things sit. If you take specifically. We actually went into this crisis as a country with more than usual stocks of bricks. Some of the excess stocking that we had talked around, sort of through last year, the Brexit process was still in underlying bricks supplies. And actually the level of capacity in the first quarter in the industry as a whole ran ahead of what the demand actually was I don't think this step up in volume is quite as big as that has been estimated by brake manufacturers. And that means for mainstream ordinary bricks, the vast majority of our requirements, actually stock levels are good. And yes, we are confident they are enough to buffer, that sort of initial startup period. And some brick manufacturers have also kept some of their kilns running, which is at least partly to do with the nature of the kilns and their age and sort of what's most efficient for them. Sort of I think what you cannot rule out and it will be this will be true to some extent is there will be exceptions. So if you're looking for a very specific soft mud brick on a bespoke site, sort of that care on has been turned off and stocks have been worked out on that, so there will be exceptions. And that's why I think you actually will see prices, arguably materials go both ways. So you'll see in some places where supplies actually need cash and there isn't the level of demand or activity in the early weeks and you'll see some areas where relatively short swaps are in soft supply. So yes, you'll see both movements there, I think, and it will be quite specifically related of individual items. And you can sort of extrapolate that same thought process across quite a lot of the supply chain, sort of but we have thought through the timing. And whilst we think the phasing of the timing that we're talking about is absolutely right from a safety point of view, we also think right from a supply chain point of view. So we know when we are going to need plasterboard and in what quantities, and we know how that ties into supplier's plans. So there will be and you'll probably hear the word friction a lot, but friction rather than sudden stoppages. And I think That does make it hard for us to be absolutely clear on what we'll be doing X. We are not setting volume targets for our sites because we want to be very clear they give it right. But we are we're going into this not expecting that suddenly a site will have to stop for 2 weeks because we cannot get sort of critical materials. A lot of planning has gone in to make sure that we understand those limitations, some tweaks to exactly what materials are used in specific circumstances. But overall, think the supply chain will be there. It's just they'll want to choose specifics on individual plots with slightly more specialists that they'll probably need to friction. And then just going on to the second question on pricing. I mean, first of all, a lot of it depends on how we go into it. And we have not gone into sales in this period chasing sales. We our primary role for our salespeople has been maintaining contact with customers, we have to a certain extent deliberately driven website traffic and then we have seen sort of what comes out of that in terms of potential new sales. And so we have not been looking to sell at a discount and we haven't been selling at a discount. And we haven't had significant pushback from those customers on that. In any environment, you always get one person who comes and says, I think I should have a discount of X, but that is very much the exception rather than norm. There is no sort of underlying expectation there that we're going to sell at a discount in the future. And in fact, if you looked at the prices today sort of And this is obviously consistent with them being at the same level we were selling up in the first quarter, they are still ahead of the price that we were selling at in the quarter of last year having pushed up our prices at the beginning of 2020. So we haven't gone backwards from that position. I think if you are trying to reconstruct a 2020 P and L, it's very tough, but we will tell you when we report if we're seeing pressure on prices. And at the moment, we're not seeing that. Thank you, Rich. Thank you. And your next question comes from the line of Laming from Canaccord. 2 for me as well, please. Just firstly, obviously, looking at all the supply chain issues and with the exception of the friction, fairly comfortable there. But just when you look at the whole kind of infrastructure around building, selling a house, whether it's NHB inspectors, the mortgage providers, lizitors, I mean, are you comfortable that enough of that will be in place to kind of get to the 80% capacity you were kind of thinking about? And then the second question, just on the subcontract I mean, presumably with social distance in place and you get to 80% of normal capacity, what do you do in terms of pricing for the subcontract So do you kind of adjust prices downwards because there's less productivity? Are they paid kind of by the job rather than our just interested in your thoughts about how price into some of these changes? I think on the wider, sort of questions. I kind of built this into the whole supply chain answer to a degree. So yes, the NHBC is still operational, although it has furloughed a large number of staff. But we are confident talking to them that they will respond to demand. And again, the time line we set out, let's just say we're going to want to leave this level of inspection sort of in 2 weeks' time. And if we suddenly clicked, I think, as I said, we want those tomorrow, they're ready, then that will be tough, but we think we can give them. And what we are picking up if the timing is right, but sort of as long as people can look at it and say, yes, we understand the rules and understand how that fits people want to make that step. So all of those bodies, and that this is true, sort of not just at the NHBC, it's true on sort of connections. It's true on valuations. It's true on compancing. Compancing process can generally be sort of done totally remotely. I think if we saw some wobbles with it at the end of March early April because I think they were because it's a series of small businesses. They will let us up to cover working from home in the life, but we've seen that then stabilize. And from a bank lending point of view, which is obviously key, I mean, we have sort of information on this, but so over you and actually if you put it together, you get a consistent sort of picture of banks starting to normalize their lending, sort of not quite back to normal yet. So definitely a focus towards Help to Buy and therefore new build, but starting to get back to more normal loans to value because of the strength of the order book and because of the fact that the and they talk on extending mortgage offers sort of means that we have some time for that to fully normalize. And of course, you're then having an estimate about what's the expectation as we get on to completions needing to come from new reservations and therefore new sort of mortgages. Sort of if we again, if we try to get up to 80% tomorrow across the board, I think it will be challenging. But as we see it staged through, we think that's a realistic balance. And you are starting to see a real sea change in a sort of a will to get things done. And again, sort of thing out strongly sort of with government support sort of actually give something for others to base their plans off. And just on the sub contractor costs, any change? Yes, sorry, and it's harder. To be honest, it's one I probably will slightly dark because it will come back to a relationship with individual subcontractors in the circumstances. So, you know, sort of the vast majority of our subcontractors those in the large firms will come back to site. I doubt they will be very lemming sort of because they know that we will have put the rules in and that gives them the credibility with their own people. I don't think there'll be many who won't. But we don't really know until we get into that whether there are any shortages in different areas. I think there is more likely to be sort of if we get this right, more, sort of people proportionally relative to what we're doing than there was sort of before, and that will in the end lead to downward pressure on prices. But I wouldn't want to give you a sense that we're going to be going out there aggressively on day 1 and saying you can come back to site because they were 20% less. We will feel our way through that in a way that is sort of if I can put it as commercially sound but sensitive and let it find its natural balance, over the course of the next few weeks. So it's probably one to give you a better update on at the half year. Just rather than now. Sure. So very clear. Thanks very much, Peter. Thank you. And your next question comes from the line of Arnaud Lehman from Bank of America Merrill Lynch. Your line is now open. And good morning to everybody. A couple of questions on my side. Firstly, could you give us an indication of your monthly cash burn, whether you give it like before any cost cutting initiative or including the following, when you said that even if nothing happens before, between now and the end of the year, you would still be consultable situation. Could we have a feel, what's your cash expenses on a monthly basis in the current environment? That's my first question. My second question is just on your on your financing. You said you drawn down on your credit facilities. Is there a significant cost associated with that? I mean, what what the overall cost of your of the debt right now. Thank you. Can I hand both of those straight to you, Chris? Yes, absolutely. So I'm dealing with them in reverse order. Yes, we drew down, is there a cost? Yes. But clearly, it's not a significant one. The, as you'll appreciate, relatively low. And obviously, the amount of of that cost depends entirely on the duration of the drawdown. So monitor that as the sites get underway and we start to generate inflows. I think in terms of monthly cash burn, yes, we've done detailed analysis. And as I said in the intro, we're very confident that we have more than enough liquidity to get us through certainly to the end of this year. And that's in a scenario where sites are completely closed down. So I think to be honest with today's announcement and moving towards opening sites, I think that starts to become a slightly irrelevant question, just in the context of moving forward and having the ability hopefully soon to, to start to liquidate the work in progress positions that are on our site. Okay, fair enough. Thank you very much. Clyde Lewis from Peel Hunt. A couple, if I may. Obviously, the government's last advice really was not to move home. How are you sort of, how are you getting within that and sort of where are you, I suppose, with sort of discussing with the government with regards to what's going on because there's been quite a mixed message. One hand there, they're saying, don't go to work and we don't have to. And the other hand, they're saying construction is still fine and then obviously thrown in that moving home issue. So that was sort of the first question. I suppose the second one was on I mean, you talked about the wider infrastructure and I think Pete, you referred to sort of some planning, being granted in the period. And sort of attached to that, I suppose, if you can sort of tell us exactly how that process is done within local government period. Again, I'm sure there are some sort of technical issues as well as sort of legal issues about taking decisions sort of not on council sites, cultural properties, etcetera. And where your thinking is on new sites. Clearly, you're going to be completing sites more slowly than might have done, but are you at all tempted to open up any new sites in the next few months at all? Yes. So in terms of the moving home process and government communication, I think I find it difficult to be too critical of government on the communication overall I think it's sort of easy for us all to be armchair pundits and not sort of really reflect whether we'd be able to better job on consistency of communication if we were sat in play through this. So yes, there is inconsistency there and that did kind of make that sort of week to 10 days. Kind of difficult to get the balance right, but actually it's a fast moving piece. And I think their position is reasonably clear. That sort of they would like to see construction activity they'd like to see. And we took our own decision on sales, but my judgment would be if we'd have said we were opening sales offices that that wouldn't have felt right from a government point to the point of view or for the person in the street. And whereas I think that the environment is right for an of construction sites. And I think when it comes to the moving home process, it's a bit like many of the other, sort things that have gone on out there, you have to be careful and real and sensitive about how it is performed. So whether you do it through a lockbox and over a piece or sort of some independent drop off. For most of them, actually, our sales people have from a distance of far more than two meters, sort of welcome customers into their home, but without any physical contact. And it is possible, we have the clean processes that mean that an in home affidavit has sort of has had an extra level of almost surgical clean. So there's all sorts of things like that around the process that I think are really important And again, I go to if tomorrow we were trying to sort of operate at 100% of capacity or even if tomorrow would try to operate at 80 percent of capacity. I think those things will be a limitation. I think to start and build up, we'll get to a better place starting early and building up steadily. And if we wait longer and then try and do it in a rush. So we know that can happen. Whilst government did say we sort of it was 3 weeks or so ago, they were specific about moving home and actually they have actively moved towards, sort of encouraging some of the opening bank lending and the other things that support moving home. So, yeah, I think life has already moved on. And, you know, we've had feedback both directly and publicly in my letter to Alex Sean that you read out as a select committee today is a good example in terms of our remobilization of industry is taking a moral position, but also returning to activity. So you can see there is a level of support and you have to have confidence, I think, then, but subject to the challenges of communicating consistently at this time, but actually the support will be there. And when you look at some of the obvious sort of questions, which we can't answer today, but what will happen to Help to Buy, will there be a stamp duty kind of holiday or change, which sort of obviously things that are being talked about, it is early to judge, but we are not sort of, holding bated breath and depending on that because I think the level of activity will be slow to start with. If I go to the signs we see are more positive than to actually buy expect, but we will be sort of reviewing those pretty carefully to go through the next weeks months. I think on new site land planning process, etcetera, So we have, I think, 3 planning applications that are sort of have received approval in a remote sense, including the first one, which was reasonably significant. Yes, the planning system is not operating. Normally, you would be amazed if it was. But it's sort of starting to operate. They have changed the rules to allow remote meetings to be held, how long that will last, and whether that will ever be the consistent sort of normal over the next kind of few months across different councils. Some councils have the resources and the energy to do that, some do not. So it is piecemeal. I think, would we consider opening new sites in the next 3 to 4 months? Absolutely. Mean, in the sense, I think I've already said that, but I there is no convocation there. If we have a site that sort of we have a bloody permission on where the level of infrastructure is not ridiculous, sort of so inevitably always in certain times you're less likely to start a brand new large high rise scheme because of the level of But if on a normal housing site, generally, I go back to, I've never seen an environment where, you wouldn't rather have the outlet open, even if you are more cautious in an uncertain environment about the scale of WIP and therefore the scale of years for sales rates that you assume. And I have a similar, but slightly further off you on land. The land market does not tend to adjust immediately. You always have a very small number of desperate buy sellers who's diving is just unfortunate for them. But broadly, I don't see sort of a kind of a normal land market resuming over the course of the next few weeks, but over the next few months, it may, and that we want to be in a position to take advantage of opportunities. Okay. Thank you very much. And there was one quick follow on, I wanted to, I suppose, sort of whether or not you will, extend out either sign your working hours on-site. I suspect there are probably sort of local council or sort of rules that might limit that, but would you like to sort of start at 6 and finish at 7 or something? Is that something that's possible for you guys over the next 4 to 6 months? We would and particularly staggering that labels as a snagger, snagger, sort of campaign facilities, but particularly signing in walks and the like. And so our working practice as you sort of do aim for that, it will be one of the sort of specific actions of next week before we get back site and the following week when our site managers are on-site to work that through. So by site, we think local authorities will broadly be supportive of that, but we do want to be even more sort of aware and careful with our neighbors on-site, than we would ever normally be. So we normally try and be I'm pretty careful and pretty courteous, but actually sort of making sure that if they are at home, that we are aware that they are at home and that actually sort of their awareness of site activity is therefore greater and particularly thinking about issues like subcontractors part on sort of existing occupied streets, which is a continual battle for us anyway. We're always kind of, warning ourselves contractors off that, but you can imagine this particular set circumstances, that is particularly important. So there's a few things there where we're well aware that we're going to have to manage it carefully and working hours is one of them. We would like to extend working hours so that we can stagger people and have less individuals on-site at any one time. I think a lot of councils will be supportive. I doubt they all will because that's the way these things tend to be. Perfect. Thank you very much. No problem. Thank you. And your next question comes from the line of Will Jones from Redburn. Your line is now open. Good morning and hope everyone is well. 3, it's afternoon, well, sorry. Ah, okay. 3 minutes past midday. Apologies. So you've said 8 o'clock. You caught me out. Yes, the 3 are good. The first is just on build rates. It was very helpful that you gave a broad number around getting back to 80% of the capacity, but clearly heavily caveated. But I guess then the question in the front is what was your capacity? And I know obviously last year you sold at around 1 site per week this year, you're going to use that back to 0.9%. But presumably, last year, you built something similar to the 1 and you made a big virtue of building up the the factories and the build teams and stuff over the last couple of years. So how would you encourage us to think about what the capacity of the business might be on from a build perspective. Yes, I think I would start from sort of the sales rate for this year. And to be honest, the 80% scientific enough for you to get some materially wrong answer if you start from the slightly higher sales in build capacity of last year. The difference is not great enough. I think you lose it in the roundings. So if you think of 80% of that sort of level on average, that's essentially sort of what we're talking about. Understood. That's great. Thank you. I'm sorry. Well, you asked another question and I didn't make a note of it. No, no, no, I haven't got was the second was on, on sales rates and you said that how that might have the ability potentially to bounce back more quickly than build rates. But I guess just big picture. I had to what extent would that potential be curbed by the fact that you're not able to reopen show homes and sales centers and have all your staff back on-site. And you mentioned, I think, in the release about being governed more there around the government's non essential retail advice, any kind of hinting when that might change? And then just to be clear as well, our presumably buyers can't visit the site at the moment, or can they? Is it just is the only physical visiting really for the handover of homes. I don't know, just any color on that, because it would all feel like that there is a reasonably big constraint on the ability to sell, although obviously your last 3 weeks have been risenly encouraging that context? And then the last one was just really a mechanical one. Can you remind us when buyers do come in? The reservation fee is that just a few 100 quid small, isn't it from memory? And then deposits these days when you exchange contract, is that more obviously would help to buy in mind this stuff? Is that more than 5% mark than 10%? That would be great. No, no, no problem. So and I'm not sure I captured all of that, but let me work backwards through it. So, yes, the reservation fee, sort of few 100 quid, sort of exchange fee aim for 10, we do sometimes accept 5 on sort of Help to Buy sort of obvious reasons given the deposit constraints. I think the sort of initial question on the core question, I probably just need to sort of make my comments clearer. The way we thought about starting up sites and it's the same with starting up sales is from a t zero concept. So we haven't spent the last month agonizing about when sort of lockdown will end because it feels like a fairly fruitless exercise. You have a date in mind. And for us, effectively, that T 0 is now the 4th May, so we have now fixed that. And we know what we think is the right sort of platform from that date and what the right build up sort of profile is. What I'm saying on sales is once you get to that t 0 date, which I do think is slightly more dependent on government advice and the construction date given where government device was on construction. When you get to that TZERO practical ability, to return to normal from our point of view, from a sales perspective is much quicker. We don't need a month phasing on the sales side to get back. We don't have many people on the side. It's much simpler and clearer what the rules are, sort of when you have a small and it's simple things like not yet sales execs not showing customers around show homes, sort of We have far more ability than we did even 5 or 6 weeks ago to do things remotely anyway. So there's a whole series of things that we can do. You know, sort of so it's more look at you. So I think, you know, say, and this is totally speculative. So, yeah, please don't, you know, sort of confirm kind of place any store in the date, but say, so yeah, the return to, sort of relative normal of the first retail outlets and we will but with social distancing in place happens, at the beginning of June, a month if we have our site managers arrived on-site, I'm not saying that suddenly sales rates will get back to normal, but I am saying that we'd absolutely be in a good place very quick to do our part of the sales process at an almost 100% level very quickly. So and then we respond to the market Whereas on-site, those social distancing rules are more complex and take longer to put in and they'll have more of a constraint. So does that make sense? Yes, very clear. Thanks a lot. Thanks. And I think there was another small question about the customer's visiting sites. I think technically sort of it would be hard to classify as an essential operation. So I think technically, people couldn't, albeit you do start to see just more, people sort of using their daily exercise for slightly, yeah, sort of more varied trips, don't you? But I think, typically at the moment, so that, that will be hard to, and we certainly wouldn't be encouraging customers to sort of, bigger size to be. But, you know, I think I do think most expectations, and this is true for the retail outlets are that a month from now, they won't be back to normal, but we're we're if it hasn't already been sort of released to a reasonable degree, we'll at least have a clarity on when it might be, if that makes sense. Thank you. Your next question comes from the line of Gregor Kuglitsch from UBS. Please ask your question. Your line is open. Hi. A couple of questions just for me. So the first one is just in terms of the speed of taking legal completions? I know you don't want to get forecast, but under the scenario that you've painted in terms of getting everything going kind of by midJune, the services of mid May and then obviously full operational or what you called it normalized by early June. What's actually realistic in terms of how quickly can you say, I don't we take till the end of June, how many completions do you think is even sort of realistic in terms of the conversion of the order book, right? Just if you can give us a broad sense, I don't pin you down to a specific number. And then the second question is on the operational inefficiencies. So in a scenario where I guess we are at social distancing, say, for the remainder of the year and you operate at that 80% level? What's your best estimate in terms of the margin drag? Everything else equal? So assuming obviously pricing and so on is stable, but just in terms of the OpEx, inefficiency loss that you get as a result of running kind of 20% below normal, just so we can at least have a bit of a reference point for that. And then obviously, we can take our own assumptions in the macro. Yes. I'm quite pleased that we've got this far into the conversation before we've got but I kind of have to say, I can't really answer. Of course, we can guess, but at this point, on both of those, it would be a guess sort of I think we are clear that the process we're talking about sort of can get us to a point by the middle of June where we can operate an individual site in a sufficiently efficient way that we feel it is worthwhile. Otherwise, we wouldn't, clearly, we wouldn't be doing it. But I think sort of if we start sort of guesstimating, and we genuinely don't have an estimate of how many completions by the end of June, because that's not the focus. Sort of it's about yes, and actually I want to, to be honest, I want you to be pretty relaxed about whether a completion comes in the end of June. The beginning of July because it starts everything off on the wrong foot, if they were immediately chasing for a, sort of 6 week completion target in this sort of environment, it's it's the wrong priority. So I I I can't I'm afraid I'm just not gonna put a number on that one at On the efficiency 1, sort of it's I can't put a quantification on it. We obviously have some estimates. I think sort of we don't see a huge amount of additional cost, there might be a bit of extra supervision costs but effectively, our sites tend to now run with more supervision than we're certainly not saying we'll reduce the number of site manage on the site. So if they run at sort of, 80% to the production level, we probably keep more or less the same staff, but that's just on our site management teams. And as we talk out the subop side on subcontract cost sort of as well as some downside. So I don't think, apart from obviously, for the first or 3 weeks. I think once we get into June and certainly July, I think the level of cost efficiency drag that we see at a site by site basis is not particularly material, but because the timing of where we are with the half year, I think if we get into kind of trying to guesstimate what half year numbers are, then then I think sort of will, we'll not be focusing on the right things internally or externally. Thank you. And your next question comes from the line of Chris Freemanou from Morgan Stanley. Open. Hi, good afternoon. Most of my questions have been answered, but just on the on the cash and the revolving credit facility. Just wanted to ask there, can you give us as much detail as you can please just on the covenants attaching to the revolving credit facility. I appreciate what you said about restarting activity. I appreciate your, on the front foot as opposed to in defense mode, but just so that we can understand in a downside case, how that limits how those covenants might limit your room for maneuver, as much detail as you can on the covenants attaching to the RCF, please. Okay. We you're quite right, Chris. We've not those details of our banking arrangements. But I can say that we have a syndicate of familiar high street banks and financial covenants that are typical for our sector such as maximum gearing, minimum tangible networks, and minimum interest cover. And they all had substantial headroom at the start of the year, as you would expect. And our next test date is the end of June on a 12 month rolling basis. And we fully expect to remain in compliance with those. Would you expect in a downside case that you were describing where we had very limited activity, for the remainder of the year. Appreciate that's not what you're saying in the base case. But would you face an interest cover problem in that scenario? Yes. I mean, it's difficult to say. I mean, in a I think you're describing a scenario where site lock down for the rest of the year and also on top of that, we can't take any more revenue whatsoever, yes? Now obviously the civil works is If you're not generating profit and in that scenario, you wouldn't be able to, then you start yes, you start to sort of come under pressure in that perspective. But I mean, even if we didn't take another legal between now the end of June, I'm very, very, very confident that that would not be a problem at the test at the end of the end of June. December, obviously, that would be a very, a very extreme scenario on the basis that of what we're, what we're sort of announcing today in terms of the remobilization But yes, inevitably, there would definitely be more pressure on interest cover in that. That's still helpful in terms of trying to underpin the downside. Thank you. Thank you. And your next question comes from the line of John Messenger from Redburn. Please ask your question. Your line is open. Hi, good afternoon guys and hope everyone is fitting well on the call 2, if I could please. 1 is just on coming back to the point about protocols and how you're actually building. Can I just understand where are the biggest challenges in that? I'm thinking about the whole social distancing, would it be fair to say that it's things like drylining and those areas where there is a bigger bottleneck or an issue in terms of trying to do what you want to do? And how are you getting around that? And then the second one was just on the supply chain. Is your view on supply materials based around effectively direct supply from manufacturers, or are you relying on some opening up of merchanting system in the next few weeks for that dating may. And I guess you may have insights on that given your position obviously in side, one of the well known merchants. So those are the 3, if I could, please. Yes. And I think, sort of in terms of site activity, we talked about one of the bigger areas, and I'll talk about another. So one of the biggest areas is, and I've got a piece of gas catchall kind of piece for it, but it's the generalized site interaction actually not when people are doing their active job. So not when bricklayer or painting. It is relatively easy for us to segregate, for instance, any of the finishing trades in a house, and we've had discussions about and we will review, you know, is that one person per floor or one person per house, but it's quite easy for us to set up signage. In the same way we think about it if you with electricity connections, if an electrician is working on a house, they have a catalog that isolates the unit and we have a similar sort of system with that says there's somebody working in their house in the task document. And that's relatively easy still. And similarly with bricklayers, you've got to think through, which is what we've been doing, things like loading out because NASH sort of bricklayers would have juniors loading out for them, but people don't carry hogs anymore, you load bricks out by forklifts. So actually loading out in advance and having stage work, it's pretty straightforward to do. So the first category is those generalized interactions. It tends to be in the kind of loose social areas. So toilets contains, you know, sort of finding in areas, areas where everybody passes through. So that's where staggering sight times sort of taking meetings and things like that inside managers being held outside rather than inside, yes, signing inbox being outside because we've tended to favor signing it in books being in the site manager's office. So he naturally sees first thing in the morning who's arriving on-site. Sort of and obviously in this circumstance of difference to that priority, so removing them outside. The other sort of area which was difficult and where I think we struggled slightly with the construction leadership council rules and where we think there is a need for specific PPE as in bidders and sort of mouth masks, is there are a certain number of jobs which are inherently two persons, you know, largely due to carrying a certain weight they have been designed for two people? And you know, you cause a whole series of other issues if you then try to move lintals or heavy windows or temple stairs with one person, then you're kidding yourself. If you think they're not going to come within two meters of each other, And that's where we think PPE has a place sort of so that actually those specific parts of the job, which can only be done by two people working close proximity. We'll be aiming for PPE to be there as people start. And I think it was another question, John, sorry. Yes, on the is on the supply chain in terms of obviously forgetting materials on-site? Yes. Are you really thinking direct or because of your role at Travis, is there a view that actually the merchanting guys are going to slightly flex their existing policies with the view to that date on 9th March that will bring in the smaller items and the infill product that you'd have a need to actively kind of do what you're doing? So I obviously can't, you know, in this context comment specifically on Travis, it wouldn't be appropriate, except to say what I would know publicly, which is that they have said they're starting to look at how they open up click and collect orders for general builders as well as sort of emergency supplies. And they haven't yet put a date on that, but I think there's along with them. But our plans are largely based on direct supply because that is predominantly how we work, sort of an it tends to be our subcontractors who then buy through merchant rather than us directly, but we do start to see in the same way as in other areas. We do start to see a slow, but gradually opening up of the Merchant Sector. If you look sort of at the moment, you can see things starting to move. And again, I don't want to sort of point to anything too specific because it's sort of commercially sensitive to them, but sort of I do think that will start to move. Thank you. You too. Thank you. And your next question comes from the line of Markus Cole from Liberum. Please ask your question. Your line is open. Good afternoon, all. I was just wondering if you have a quick question on the dividend. I was wondering what level of activity you need to see before readdressing dividend policy? I think it's not so much, Marcus, the level of activity. And it's too early, I think, to make sort of comments about what the main drivers would be. It's more about underlying certainty of environment. And sort of so, yes, I don't think it's we need to get to 80% and see it Obviously, it will depend on confidence in the sales market. It will also, I think, depend on being sure that sort of we dealt with the health side of this crisis, which clearly we're not at the end of at this point. So sort of we need to see those things not wholly resolved, but certainly to be moved along much further now at the moment. So I don't see that as need near term thing, I think the thing I could say is people should absolutely not get themselves up to expect us to comment on that in a meaningful way at the half year. Sort of beyond that, we will just have to say, but it's more about the broad environment than it is about any specific measure or trigger of activity? Okay, understood. Thank you very much. Thank you. And your last question is from the line of Amy Gala from Citi. Please ask your question. Your line is open. Thank you. Just a couple for me. My first question is really a follow-up on planning. I mean, I'm wondering what sort of ability do you have on your existing permissions? If you have a larger site, which you choose not to proceed with, or do you materially change the phasing of a larger site? Does that impact your existing permission. My second question is on Help Dubai. If it does get extended in the second half, should we be assuming that there could be some level of side to the initial intake land margin on plots? I think on the first question, yes, relatively easy transfer generally, sort of the phasing is within our control. And so generally, sort of there is no direct contractual link within that information, the timing of the phasing. The exceptions tend to fall into 2 different sort of categories. 1, on a new site, particularly with large infrastructure that can be which we are required to put in before completions can go past a certain level. Now we looked at those at the moment, so I don't think there's anything that you would need to sort of model in to take account of that. It does not have a big enough and broad enough effect. It's a handful of larger sites. And generally, we would expect in the same way as we would expect, it is highly likely that planning permissions will be extended, which is not took a big issue for us because we're normally well on with value permissions well before they come to the end of the day, but for smaller developers, that's quite important. So we expect them to be extended anyway. But in the same way, I would expect local authorities to be quite lenient with some of those timings under this kind of circumstance. Sure. And sorry, could you just repeat the second question, Amy? The second one was really unhelp to buy. Is the the taper does get pushed forward to later years. Does that really mean that what you had budgeted in terms of sales rate on potentially plots that you were acquiring, there's probably an implied upside to the initial margin? I think sort of I'd be I think I'd have to be brave to couch it in those terms. So technically, you are right. I think we see Help to find a sense of the balancing kind of position in this as in if the market is more challenged, I think there is a much greater likelihood that it is extended. And so sort of rather than a big upside to what our original assumptions would have been. Now of course, there's a scenario where what you've just said out is true, but I think it you'd be optimistic to say that house prices will be higher in say 18 months' time than they would have been anyway, because of the effects of Helpwise. I do think sort of there is a much stronger argument that actually, this is another factor that it stems the current cycle, in a way that it's actually quite beneficial for us because in some sectors, there will be the elements of a sort of cyclical correction in this? And if there is government support that actually sort of support the healthy market and underlying supply demand sort of characteristics are obviously in our favor. Yeah, I do think again, you have another set of circumstances, which means that interest rate increases are probably pushed further back. I think the positive piece from what market point is if you get through the next sort of few months and confidence is intact redundancies and unemployment are not a significant problem, then I think you could look to a longer sort of run of a stable market. But I would struggle to look for outperformance on sites that are already done on the base of price off the back of this, I think. Many things would have to go right and nothing would have to go wrong for that to be the right balance of judgment at this point. Thank you. And that concludes our Q And A session for today. I will now hand over back to Pete Redfern for your closing remarks. Thank you, Sarah, and thank you everybody for the time today. I hope, as John said, that everybody is well and stays well and so are the ones that are close to you. Take care and we will look forward to catching up with you. Properly at the half year, although there's still seems to be an environment where there's an announcement a week, so maybe explore that. Take care. And, to you soon. Thank you for joining the Taylor WMP PLC Trading Update Call. This call has been recorded and will be available to listen on demand on website later today. You may now all disconnect.