Trading Update

Apr 25, 2019

You very much, and thank you everybody for joining us. Sorry about the slight delay. We just wanted to give everybody a chance to join. If I just give you an overview of what I feel are the the key part of the statement and where 2019 stands, give Chris a chance to add anything that I have missed and then we'll open up for questions. I'm very conscious that there's a fairly significant, elements to this particular statement, particularly around sales performance and costs. So spend sort of time on the 2 of those first, the market and sales first. And then, sort of the cost position And then sort of relatively quickly run through the broader pieces, and probably finish with kind of our view for 2019 as and a broad sense of 2020 and beyond. Sort of so starting with sales, I think sort of we, if you go back performance, we would have been extremely pleased with this sales performance with the sales rate, that is 21% ahead. Year on year. And even if we strip out the bulk sale that you're already aware of from our earlier statements, then still an underlying sales rate 16% ahead. And there's no material sort of bulk sales or other elements in the sort of balance the period. So there's nothing new in there. That is a clean and comparable sales rate year on year. So very pleased with I think it's a sign of the market which has broadly remained robust despite all of the wider uncertainty, but it's also It won't surprise you to hear me say a sign of the shift in our underlying strategy from a year ago coming through. And I think showing real evidence that we can make a real difference to that sales rate performance. On price, I think our view is if you take a broad sort of take a view prices remain flat in an underlying way. There are not any big movements. I would say London still remains toughest area and the upper part of the market generally still remains slower. And I would say you probably got small price pressure. Not big movements, but small movements to make sales rates happen at the upper end in whatever region you're in. And you therefore, probably got a little bit of price upside on smaller units, but none of those moves outside London are particularly significant. And as I said, that general sense of prices flat sort of is key. I think it is worth just touching on because if I were you, I would be asking if I don't cover it, sort of price versus volume strategy for 2019 on sales, you might argue given the sales rates and particularly given the cost pressure that why it wouldn't be stand back from the sales rate slightly and push price harder. It remains our sense that even at a lower sales rate, there isn't a lot of price upside out there at the moment with the level of uncertainty that people see whilst sales remain robust I would say there is still sort of an air of caution in the market. And therefore, it's our view that having changed our build plans and therefore our availability and look differently at how we sell and how we make sure we've got a broad mix of product that gives us got a lot of, sort of sales rate upside, but converting that into a meaningful and justifiable price sort of upside at the moment will be tough. I think I am more optimistic about the prospect for price sort of later on in the year and into next year. Obviously, subject to where the sort of broader economic and political situation ends up. I think we have now seen 2 to 3 years where effectively affordability has been getting better in the in the U. S. And the U. S. And the U. S. And the U. S. And the U. S. And the U. S. And I think in the very, very near term, we see sort of it being more advantageous to build a stronger order book, to create the size of business that we want to be this year and don't that there's a lot of price upside in the short term. But as I say, sort of feel reasonably optimistic about sort of pricing into future years. Certainly compared to sort of 3 to 6 months ago. Sort of on the flip side, I think we have been surprised by how tough cost has been in the context of the first quarter of 20 19. As you see from the statement, that is particularly weighted towards the materials side. I think we've sort of seen things flip slightly in the that 4 or 5 years ago, the biggest pressure was definitely on the labor side. For the last couple of years, it's been pretty balanced. So to a certain extent, what we're seeing at the moment is a bit of a catch up particularly of the impact on the underlying cost base of the supply chain from exchange rates movements post referendum, which never felt like they'd fully come through. They still sort of pent up in the supply chain. There is also, and I don't want to overplay this, but I think it's important to understand that it's in there an element of everybody trying to secure, sort of stop lines a bit further into the future with the uncertainty of different kinds of Brexit. So sort of we're not talking about huge stockpiles of bricks on sites, but we are talking about generally trying to make sure that we can clearly see stock in the supply chain and that we have a longer, sort of security of supply than we used to. And that certainly adds to that cost pressure. I think sort of you can see from the numbers that our guidance for cost this year has moved from roughly 3% to 4% up to 5% up. I mean, there's not mathematically a huge shift, but in a world where prices are flat and cost has increased, then inevitably that has an impact on margin. And I also wouldn't want to underestimate the impact that a stronger underlying demand has on that cost side. There is clearly a relationship between the industry selling more strongly than it expect in the U. S. In the U. S. In the U. S, in the region, in the region, in the region, in the region, the sort of summary version is that in terms of impact on 2019, we see those sort of being basically neutral. So our underlying guidance hasn't changed, but it is slightly more volume at a slightly higher price points because of mix, offset by a slightly higher costs than that for a slightly lower margin. And coming on to some of the sort of board general elements and picking up land, first of all, we haven't seen any meaningful change in the land market. We've been pleased with how our own plans have progressed and particularly on outlets, sort of been tracking every single outlook very closely to really make make sure that the specific plans we've got are sensibly put together and that we've really got the right pressure in the right places. And actually sort of pretty much every outlet that we set out to open as open when we plan to, which is not a normal set of circumstances. And so relative to our internal forecasts, our outlook numbers are slightly ahead in the U. S. And in the U. S. And in the U. S. And in the U. S. And in the U. S. And in the U. S. To be. So we feel pretty positively about that. I think I would still say, and you will have heard me say this before. I personally feel this is a difficult environment in which to take the biggest strategic land decisions. And I don't mean strategic in the sense of sort of land with planning, I mean, the broad land strategy, sort of with the wider economic uncertainty, but with very sort of good terms on land available. It's quite hard to work out where the balance is. So I think we're in a relatively neutral replacement position still but still looking out where there are great opportunities sort of in a more uncertain market to get particularly strong deals. If you looked at the sort of financial performance on the land that we've secured in the first quarter, it's very much in line with the high returns that we secured last year, if anything slightly above. So no shift, but it's certainly environment where because the opportunities are so great, but the uncertainty is high, then it's difficult to work out what the right balance is overall. And so I mean, those are, I think, the key elements, as I found guidance, sort of our guidance for the year remains unchanged, but a slightly different makeup. I think we do have more volume upside this year. The sales rates sort of mean that the limiting factor is about building in the first half of twenty nineteen. So, we're still in the first half of twenty nineteen. So, we're still in the first half of twenty nineteen. So, we're still in the first half of twenty nineteen. So, it will be pleasing to see some volume growth and gives us confidence in the strategy for sort of volume growth into 2020 2021, but I'd say offset by the offset by those higher cost pressures. Chris, if I missed anything. I'd just add one thing. I think it's worth noting that we recently formally regained our 5 star state the NHBC customer satisfaction ratings. Pardon me, we've worked hard over recent years to improve our approach to customers doesn't have and overnight, but our customers have been telling us for a while now that the improvements we've made are working. And that gives us really good momentum to continue to improve. Thank you. And can we open up for questions then please? Thank you. Ladies and gentlemen, we'll now begin the question and answer And your first question is coming from the line of Aynsley Lammin from Canaccord. Please go ahead. Hi, good morning. And just three from me actually. Firstly, just on the margins going back to that. Obviously, you've given a very clear overview there. I just wanted to that the margin pressure, the incremental pressure you're seeing is just the cost inflation doesn't relate to any kind of structure issues or maybe more money being spent on customer care? Secondly, just interested here a bit more on regional in terms of sales rates, particularly London and Southeast versus Midlands and the North? And then just on the H1 H2 split. I think you've kind of very recently had about 40% to 60% H1, H2. Does it go as much down as kind of around a third, 2 thirds? Is that what we should expect for 2019? Thanks. Thanks. I think on the cost side, Angelie, I certainly don't think there is anything material in there on customer care, sort of, it is part of our underlying cost base, the changes that we made sort of now, kind of 2 or 3 years ago, we've not sort of committed anything new, sort of, I think a little bit of a little bit of a little bit of a little bit of a little bit of a it to be 4 months ago. Now, I don't think that's changed. And similarly, sort of an individual site level, it's not it is that general underlying press I think there's always site specific issues, but there are site specific issues a year ago 2 years ago 5 years ago. So that's just the general mix. In terms of half 1, half 2 split, I think sort of inevitably because we've got slightly more of the year's business coming from sales that we're now building up production for, sort of we will remain sort of more weighted towards the second half. I don't think we're talking about kind of a 2 thirds one third split, certainly not at a volume level. We're still in the sort of low 40s to 6 see not not starting with a tree. And I think there was a question in the middle, but I was still writing down the first one, and I missed that one. Apologies. Just any more color on kind of regional differences on sales rates in London, Southeast versus Midlands North? Yes, I think and it sort of goes back a little bit to the comments on price and you could say the same on sales rates. There's no doubt London sort of with all the dynamics that we've seen over the last 2 or 3 years and probably still much more affected sentiment wise by Brexit. Is definitely sort of at the slower end. I think aside from that, the regional variations are, very patchy in sort of, and it's more local sites and the kind of buyer and the kind of price point that it is a difference between North And South. I'd say there is a probably a general trend that commuter markets sort of into London are generally softer, which probably isn't a great surprise. They're also the high price point markets. So sort of, but there isn't a north of the business doing sort of extremely well in the Southwest Knott or anything like that. It's the part from that London dynamic. There's no big sort of shifts. Problem. Thank you. Your next question coming from the line of Will Jones from Redburn. Please go ahead. Thanks. Good morning guys. 3 as well, if I could please. The first is coming back to the issue around materials costs. Could you just remind us typically how long are the contracts you enter into on materials just so we can appreciate the ones that have rolled off and are being renewed, are they from 6 months ago, 1 year, 2 year, just some help understanding that please. And I guess just to double check how confident are you that this is not in any way linked to the strategy, obviously it's stepping up on sales rates in the near term and volume in the medium term? Or do you think we haven't really heard this being raised to the same extent by others as yet? So just wanted to know if you think it is slightly company specific or it's actually industry thing. The second, I guess, just coming back on London, in the past, you've sometimes drawn out what you need to achieve on sales rate or how much it might be within the full year P and L. Is there anything numbers wise you can put on what's needed from London this year or, and to what extent you're on track for that? And then the last one, I guess since you last reported, we've seen the SIBEN come out with their intention to introduce a retention policy on completion for certain elements of the ASP. Is that something you've given any consideration to the recently or in the past or is it just issue for them, obviously you're a bit 5 star. So, from a different position, but is that, I guess, is that something that everyone's going to migrate to over time, I suppose? No problem. Well, I think I've got all of those, but feel free to remind me at the end if, if we've missed any. So on materials and contracts, most of our materials do not have a firm fixed contract price. So we have an agreed price that generally runs for either a year or 2 years. 2 years is probably the most normal. So you have then to have 2 years in place in any one point in time. It varies. So some of the bigger commodities, bricks and blocks generally are 1 year. They are normally, sort of fit on a calendar year. So the first quarter is when the negotiations tend to happen. And they those changes then impact on that that year as a whole. So, some things, you know, sort of we do not renegotiate on an annual basis, they will roll around again next year and then we'll have effectively a 2 negotiation at that time. We have not, as a general rule, no more than I would normally expect, seeing people effectively renege on those price agreements over over time. We are talking about a normal negotiating process, but what we have seen is the negotiations that we would normally have enough in this quarter, which have, sort of, which would normally have come up, have tended to be harder and start at a high price point to be harder to find the that we need. And if you go back to the dynamic of more demand than the industry expected, a desire for more security everybody in the supply chain and not in new build, but amongst merchants and sort of the RMI market as well, then you can understand sort of what's broadly what's a little bit of a negative impact on that. So, I think that's a little bit of a negative impact on can kind of at this point in the year, we can pin it down. I just think in context of a stronger market with the last 3 months of bum fights over that we have in the U. S. And in the U. S. And in the U. S. And in the U. S. And in the U. S. And in the U. S. It's not that I think cost pressure sort of won't be there in a year's time, but I do think there's a sort of slightly unusual set of circumstances in 2019 with the stronger than expected demand in that uncertainty. To what extent is this strategy linked in company specific? And whilst obviously the questions are linked, I don't think they're in terms of it's linked to stronger sales rates generally in the industry as a whole. But I don't think we're having to give more on price because sort of our volume expectations at an individual site level, sort of a higher. I don't I think from a a supplier's point of view, particularly on materials, sort of it's academic to them, whether that's sort of a more volume across sort of our sites. So I don't think that has has a direct impact at all. If it had an impact, I'm not saying that that will be more likely to be on the labor side, we're actually sort of subcontract in the U. S. And in the U. S. And in the U. S. And in the U. S. And in the U. S. And in the with you, we will know sort of as we look back probably not until the end of 2019. And to what extent that's totally across the industry and what we're seeing is completely normal and to what extent it's sort of specific. I think it is a broad industry based thing. You know what it's like when you're in a price negotiation, you are always looking for confidence that, you're getting the best deal that you can and you're getting a fair deal compared to everybody else. You get some degree of assurance of that, but you're going to be 100% certain, you know, we tend to be pretty upfront with you when there's good news and when there's bad news. And so I don't place any rate sort of surprise in the fact that we're the 1st saying actually no costs are tougher than we would have expected at this point. But I can't promise you that, but you'll come up with the same number in the course of the next three if you see what I mean. You will see and we will see. I don't think it's company specific. Sort of inevitably there's bits of geography and there's bits of people that differ sort of points in the development of their business. So pressures are always going to be slightly different, but I think it is likely to be a general trend, even if the trend impacts different people differently. Going on to the question on London, I think our dependence on Central London year. And we've touched on this before, but I'd reiterate it. It's very small. From a it's one of the things that kind of hold back our year on year progression in 2018 2019 is that we had a decent contribution in 2016 2017 that we don't have And so actually, the impact on our expectations for this year of what we're talking about in London is very small. And we still see a uptick from that sort of input in 2020 2021. So it doesn't change any of that. I haven't got the numbers in front of me, but I can assure you that they're not particularly material for this year. It's not the year. We're giving you a sense of where we think the market is rather than trying to flag a specific concern. And then, so going on to retention policy, my we are looking across the board where we think, we can make the experience, the process, the product, the service, the trust and assurance for our customers, as good as it possibly can be. And we're trying to do that in a creative, but also in an honest way and work out what customers actually really worry about and what will provide a good long term solution. In that, we do not think that retentions are the best way to do that. I've at different points in my career operated on the fringes as a customer and as a supplier in the construction industry, separate, separate to house building and I see retentions as an enormous negative from not just the, person providing the retention. But from a customer point of well, a point of view as well, there are a point of contention to me there and from the construction industry, the construction industry is trying to get rid of. And I do not see us, why to implement. And we're not seeing any pressure from government or, yeah, customers to do so. But there are other things that we can do that I do think sort of can offer as well. So that's what we're talking about. So, we're talking about cost issues, but are more about making sure philosophically, we think it through what the process looks and feels like from a customer's point of view. Short answer, I think there are better ways of doing it. Your next question is coming from the line of Grega from UBS. Couple or maybe three questions actually. So just coming back on the margins, I think if I kind of put everything together, I think late last year, we're talking down 50 basis points. Now it looks like maybe that's doubled to something like 100 basis points in terms of year over year decline. I just want to get a sense if that's kind of the ballpark. And as far as the question is slightly longer term, do you think the direction of travel continues to sort of be down also into next year and perhaps because this cost issue doesn't go away unless, of course, house prices pick up. And in that context, what do you kind of think is the realistic range we should be talking about as we think about the next couple of years? And then perhaps on the flip side, I think you've been quite clear on volumes. You've always said you expect the volume pickup next year with the new strategy kicking in. Is this now just being kind of front end loaded into 2019? Or do you still think you can have a meaningful pick up in the rate of growth next year. And 2021, I'm not quite sure what you're thinking because obviously this will help to buy switches over, but perhaps too far away anyways, but for 2020. And then finally, you've given us a spot site number, but in terms of average on average, so it's sort of put the 21% increase in sales rate into context. If you could just give us kind of the absolute well, I guess the average site production year over year so we can get a sense of the actual volumes sold are? Thanks. I'm conscious as ever, I've talked all the questions so far. So I'm going to, hand the first to over to Chris and just quickly add up what the answer to the third one is while he's working on the first 2. Okay. So I think the first question, Gregor, was on margin and you mentioned the 50 bps from back in November and was it going to be more like 100 now. Well, we obviously we've guided to slightly lower in the statement. Is that about 1% Yes, it's probably about that in the context of current consensus. I don't think that's an unreasonable assessment of the statement. Longer term in terms of the direction of travel, assuming the market remains stable, we are confident of seeing an improvement of the margin in 2020 and that confidence is sort of more mechanical than anything else, to some extent, Central London and the drag on margin that has in sort of 2019 is sort of 50 to 60 basis points. So that reduces to about 10 basis points. In 2020. Secondly, we've got more completions from land that we bought more recently at higher hurdle rates. And then yes, we would also expect to see some volume growth in 2020 as well, which help the operating efficiency of the overhead. So, so I think that's certainly the direction of travel and I suppose going back to the point on build cost and just reiterating, I think what something peaked earlier, we don't necessarily see this level of pressure on on material costs being maintained. But there's lots of moving dynamics in between now and next year. I think that was the first 2. Yes. Yes. And the mathematical answer to the last one, Gregor. So as you see, the spot numbers down just over 5% and the year to date average is down 8%. Thank you. Your next question is coming from the line of Rajesh Saya from HSBC. Please go ahead. Thank you. I have two questions. So, one is related to your sales rate and the large sites. Now these large sites are delivering much stronger sales rates. Can you quantify what kind of efficiency gain you could expect from these large sites compared to small and medium sites. That's first one. And the second one is, again, relates to that large small. So in 2018, the average outlets were kind of 45% skewed towards Small and 55% towards medium and large sites. Can you tell us what's there in the land bank and what you are currently selling at? Is it more light of thirtyseventy ratio? Or, 35, 65, if you can give a broad idea about it? Thank you. Okay. Both of those are quite hard questions to answer in the, yeah, without sort of data in front of us, yeah, that we can show you, showing that the makeup and the split and in the context an AGM update. So I can give you a very broad answer, but it's probably one to come back with at the half year. I think picking up the second one, there is a slightly bigger proportion of large sites in our land bank than there is sort of trading. I don't think it's quite as big sort of thirtyseventy split that you talked about, but it's sort of slightly more weighted that way. So it's 35%, 65%. It's probably something like I don't think there's a materially different mix of sites in our current trading pattern. There might be a slight but you might be talking about a 1% shift, not a 5% or 10% shift. So where we sit today in terms of trading is not sort of that different to where we were 6 months ago. It's how we're operating those large sites, not that there's suddenly more of them suddenly in the portfolio. But there is a general land trend that because our buying pattern because of a combination of availability and margin options and that should term strategy, sort of the land bank is more weighted that way, but that will come through steadily over sort of 2 to 3 years. I think the important thing is that on the large sites that we have in the active trading portfolio, we are able to see and show and not just in the regions that were already operating to some degree that were in the early part of 2018, but in almost all of our regions, that we can see that actually that way of trading is effective. And there is a strong sense of belief across our business that that works and is the right thing to do. Whereas if you go back a year, people are saying, well, I get what we're saying. I can see it's working there. I'm happy to try it, but I'm not sure if it's going to work in my patch. Now we have a much broader sense of consensus that know actually if you change things around, think about product mix, think about sales you think about how you stack up production and sales, you can make that work. And I think there's a much broader sense of confidence within our operating so that can be done rather than a big mathematical shift in where the sites themselves actually sit. Okay. And can you give us any quantification of the efficiency gain you could get from those last Sorry. Again, it's a really hard question to answer without sort of putting up some data in the slide in front of you because I'm struggling to work out how to quantify part. We also have side by side level that there's a net efficiency gain, but it's really quite hard to quantify. And we haven't flagged it as a separate material gain from that strategy. If I'm honest, I think it's probably what best for us to think about that, think about because there is a net positive, but it's not enormous. But we'll think about how we can press show you what sort of scale that is and where that sits and maybe pick that up at the half year. Okay, thank you. And just one more, if I may, on the land bank I mean, you continue to do it on a replacement basis. Is there any kind of target that we slowed down some point in time to meet those long term targets of bringing down the land bank by close to 1 year? I think whilst we see a, a strength in the underlying market, and I don't just mean in the short term, I actually think one of the most important things to think through right now is the positive shift in affordability that we've seen over the last the last year, sort of where everybody is very focused, but not unreasonably on where we are in the cycle. But there's an awful lot of characteristics of where we are at the moment that do not look anything like any of the late cycles that I have seen. And the fact that affordability is improving is probably significant ones. And actually interest rate sort of forecast in the future have tended to increasingly get more benign. And you look at a combination of general, sort of expectation of quite flat selling prices, low interest rates and continued wage of inflation and wage pressure. And that doesn't all add up. So if you stand back and kind of look at that, I think that's in some ways more important to get our head around. And then sort of so we actually see the going back to the land strategy, we actually see, and we always thought it was the most likely route, but it's always going to be a balance depending on market conditions. That that long term efficiency of the land bank comes slightly more from these higher sales rates and how we operate them rather than from in absolute terms reducing the quantity of land that we have. If we're effectively building a bigger business off the same land bank, then you get and that's what we're talking about. So, we're talking about, we're talking about those with the 2 different routes and it will be a bit of both, and it would depend on market conditions. Sort of at the moment, sort of with the market conditions we see, it feels like it comes more from those higher sales rates those sites rather than buying in an absolute sense, less land. Thank you. Your next question is coming from Charlie Campbell from Liberum. Please go ahead. Hi there. Yes, good morning, everyone. Just a couple of questions from me. Actually, maybe 3, actually. Just wondering if you could give us a bit more color on which materials in particular are moving in price. So is it more sort of a light side comment or a side comment? Is it more sort of things that are imported? And secondly, I just wanted to be clear on use of incentives, just I get the impression that hasn't changed, but kind of, to, give us sort of full color on that really. And then thirdly, you sort of said that, if you were asking about the price volume trade off. So we might as well take you up on that. And just wonder if that's something tried in a few sites where you've maybe tried to notch prices up and you know from experience therefore that it doesn't materially impact or it does materially impact sort of selling rates. So I'm just wondering if you could help us with that. Charlie, you're happy to say it. Charlie, could you just pick up the second one? I didn't I was noting down the materials sent to questions. I was just just on incentives, just whether there's any meaningful change in that year on year. Yes. Okay. So, on materials, I'm going to be fairly cagey largely because it's commercially sensitive and when negotiating, I don't particularly want sort of fit being held against our guys when they thought about it. And also because, I know part of the reason for the question is you want to read it across to the supply chain and what it means for them. So I wouldn't say it's massively weighted to either supply to either light side or heavy side. It's quite specific, which is generally the case. It's not yes, and I'm always uncomfortable with this sort of the brix is always the kind of lead indicator and brix isn't by any means that the area where we see the most pressure. Sort of so it is probably across about 50% of our materials that we see a reasonably significant pressure. So it's quite broad it's not just 1 or 2. But it massively varies with a combination of what the industry structure on the supply side is to what that's changed, to what extent people has changed, to what extent they're impacted by energy costs or exchange rates and how quickly that flows through their supply chain. So it's very specific case by case. Sort of the supply base would say all that's happening is they're passing on towards cost inflation that they've seen over the last 3 years that house builders have held off. A bit of truth in that, but actually the reason they're able to pass it on is because there is more demand sort of out there at the moment. So sort of And as ever, if somebody has a plan to go down, suddenly that has an impact on that price dynamic as well. So it's all the usual things. There's just more of them. In terms of incentives, I don't think there's any big shift. I would say, as always, everything we quote is sort of net of incentives. So it's factored into all of our comments. But I would say, and it wouldn't surprise you that sort of at the upper end of the market where sort of sales rates are slower. Generally, level of incentives is a bit higher than it was. But you're talking about kind of half percent either way. You're not talking about sort of 5% or 10% or anything like that. But there's definitely a bit more in those kind of in bigger plots where there is less movement. And going back to that price valuation trade off, the easy answer is yes, we have tried it on a number of sites because the way we price is an active dynamic. So we are always trying it on a number of sites. If you see what I mean, we're always kind of trying it on all of our sites where sort of we will push prices and we will sort of move, sort of prices around to try and the right balance between price and volume. So yes, it is based off, experimentation and testing rather than just, oh, we don't think that will that will work. It's a very live dynamic pricing structure. So it's inevitably built testing is built into it. Thank you. Your next question is coming from Clive Lewis from Peel Hunt. Please go ahead. Good morning, Pete. Good morning, Chris. 3 if I may. One coming back to the build costs. And the materials in particular, do you think there is much in terms of the figure that you're talking about that would be temporary or do you think this is very much sort of structural and it's there and it's not going to reverse in any shape or form? I'm thinking, again, you were talking about the the increased stocking levels ahead of sort of Brexit, do you think there's anything in that sort of sort of higher number for materials that is going to reverse next year, not first one. The second one was on land pricing, I suppose, and partly reflecting your comments on build cost pressures. Given the lack of movement in selling prices, are you actually seeing some softness in land price negotiations to reflect the increased build costs. And the third one was, again, going back to that first half, second half split. And obviously, you've got a lot more pressure on production in the second half of the year. Are you how twitchy you, I suppose, about making sure you meet those numbers in terms of completions and keeping the 5 star. We all know 1 or 2 examples of where there's been a huge H2 bias and getting things finished has led to a bit of a mess in terms of sort of customer satisfaction Is that keeping you, on your toes at the moment? Yes. So on build costs, I think we feel there is certainly the pressure, the level of pressure we expect to be, relatively temporary. As I say, I think it does a bit of capture and a bit of the strength of the market at the moment and a bit of extra stock all of those to some degree as a slightly temporary. But it's it will be, I think, overconfident for us to then say, you know, built that if there's an extra 1.5% of build cost in place, then there are what we expected. Suddenly that reverses, but I don't think we expect to be seeing a 5% level of pressure this time. Year, if you see what I mean. Sort of so whether that caught whether now there are a couple of moving parts that could have that sort of dynamic, particularly I think exchange rates. Sort of effectively the exchange rate movements post referendum taking a long time to come through in the cost base, if that moves back structurally over the course of the next 12 to 18 months. That would be a confident statement to say that it will, but if it does, then I think that has a slightly more meaningful impact. So I think the level of pressure, I think, will reduce. That doesn't mean that I think, yes, sort of costs will, sort of go backwards I think Chris's general point about margins though I would just wanted to reinforce, we have some underlying sort of company structural reasons why we've always felt that sort of 2018 2019 were particularly sort of relatively tough years because of where our strategy shifted and that 2021 some upside for a whole series of, you know, London and geography and land purchase and timing and things. So sort of that, that probably gives us a slightly more sort of air around the year as a whole. On land pricing generally, I would say yes, there is some softness in land pricing. I think I don't think that's particularly new in the last three been around for the last sort of 8 or 9 months. I wouldn't want to characterize it as sort of a huge shift, but it goes back to my comments. It's quite hard to work out what the right strategy for the volume of land you want to buy at the moment is because the deals are good, but there is a reason that the deals are good because Everett is a little bit uncertain about where the world goes. So you know, we're certainly not in a fill your boots mode, but we're, you know, but we're in an active buying mode and the deals are pretty good. So you know, sort of that, that's very consistent that. And sort of, twitchy over the volume and, sort of customer service, I would say we are not driving to a specific volume number that we're wedded to and we're Dyna Ditch for at the expense of customer service. We're very clear that we want to hand over sort of our homes in a good place. And we think we have, even though the back end of 2019, was pressurized, actually we are confident in the quality of homes that we handed over. And actually even if you go back to a point kind of in 2015, 2016, when that was most pressurized, we still think we sort of were we were not driven by our financial forecasting to do things that we thought wrong. We have one business unit in 1 year where we looked at it and thought, no, that's not right. And we stopped, stopped things from being handed over. So that philosophy still runs through have to say there is always going to be a balance there. There is more pressure on the second half of the year, and we've got to make sure we get it right. But to be honest, I am, and you have heard others say this, I'm more concerned from a service point of view that we, the quality behind will priority, sometimes that means you're handing over less quickly than the customer expected it, and that can impact your scores. But that's a hell of a lot better answer than handing over home isn't ready. So that dynamic is there for all of us. Sometimes you need to make sure you take a bit longer and get it right. It was not that entirely happy, but at least to get a home that's in the right condition when they take possession. Okay. Can I come back on the build costs and you're coming on FX exchange rates? I mean, traditionally, I've always thought house builders, by and large, don't buy a huge amount from overseas. But obviously, as you flag the dynamic of imported costs for the manufacturers that you're then buying from domestically, Have you tried to do some sort of exercises to try and work out how much you are exposed in terms of your materials cost to exchange rates? Yes, but it tends to be and it makes it hard for me to give you an overall number. It tends to be we look at it in quite a lot of detail. Component by component sort of as we're going through price negotiating strategy to understand what the supplier's exposure is rather than as having a so that the numbers I would quote you at a sort of across the board national level are are quite, are quite generalized, where we really look at it in detail is area by area. And the last one had gone back to the sort of production thing. I mean, could you maybe share with us as to how big Q4 would likely to be in terms of completions? I mean, not going to be 25%. I mean, no, I think we'd all expect it to be higher than that, but would it be as high as 35% or even 40%. Would it be that biased towards Q4? Yes, I think kind of I'd stick to the half 2, half 1, half 1, half 2 split at this point, sort of something like 4258. And not I don't really want to go into by quarter on a phone call. We may welcome back at the half year and feel free to re ask the question and we can sort of take a bit of time and talk you through it. But I don't want to pick a number up in there without giving you a bit of background. Thank you. Your next question is coming from Amy Gala from Citi. Please go ahead. Thank you. Just three from me. The first one is a follow-up on the material cost pressures based on what you say, would you then say that sort of cost pressures that you're seeing in your London business are relatively higher than some of the other regions. The second one, a clarification, is there any key differences in the strategically sourced plots coming through the completions in 2019 versus 2018. In the numbers? And the third one, just on the sort of sales rates that you have achieved over the first half of this year, I mean, Is there a plan that these accelerated sales rate would at some stage feed into the sort of land negotiations that you get into? Landicociates. Sorry, just remind me what the first one was. I got the strategically sourced. I mean, is there a difference in the cost pressures in London versus the rest of the balance in London versus the rest of the country, it's the other way around. London is the one place. And particularly where you're talking about contractor led build or sort of using the same subcontractors as contractor led build, yes, because the London market is sort of operating yield sort of reducing in terms of the level of build, actually, it's one area where we see price pressure going the other way. So that the price operations are more much more generally around the rest of the country, including the wider Southeast, but Central And a particularly one place where you would expect that it's sort of one of the underlying pieces where you can see it's a market related trend. In terms of proportion of strategically sourced land, not a big shift. I don't have the number in front of me, but broadly the same as last sort of we expect to be at more or less the same level through the next sort of 2 or 3 years. And then land prices and whether and that land per seeing and whether, we sort of build in the view of our new strategy. What we do not want to do and sort of we've all seen it in the past in sort of different guys is sort of it's particularly building any kind of strategy led price difference. I think it changes our land buying strategy because we are far less likely, for instance, to a back to back deal with a competitor of a large site, we have confidence that we can, sort of, generate the kind of sales rates that can make that site work for ourselves in isolation. But what we do not want to do is pass any benefit of that sort of back through the land base that has to be retained. And how you work that through your own businesses and sort of is a bit of an art form. But actually, we don't want to see that end up in land pricing and particularly in financing and deal structures. It has to be part of the upside that we retain. And just one follow-up on the first question. On the Materials side, is there a difference is what I mean, I get the point in the contractor costs coming down in London, but on the material cost inflation in London? No, no, not particularly. I mean, I would say on the more, if you're talking about exactly the same sorts of in the U. S. Market. So, in terms of the U. S, in terms of the U. S. Market, in terms of across the board, but it is generally the case. And even whether or not, we're not seeing a material difference between London and London and the regions. But there's probably slightly. It's certainly on the, as I say, the contractor led piece, there's definitely more availability. Even on the sort of subcontractor piece, I would say there is is a slightly easier level of availability in London sort of for ordinary build than there is elsewhere. Thank you. Your next question is coming from Karim Kamag from SunTrust. Please go ahead. Yes, good morning gents. Hi, Ken. Just like to pursue Clyde's last line of questioning regarding, the build rate requirement and quality and all those other issues around that. Is it have you, in any sense, when you look at that fantastic sales, right, in the opening quarter, have you been releasing earlier or selling further forward? And is it possible, for example, to quantify how much of the order book is for delivery beyond this year to maybe give us a better feel for things in that way? Yes. So, have we been selling further forward? Think the broad answer is no, sort of we have not been coming further forward. The point of sale sort of as we sort of the delivery of the Platts isn't materially different. If anything, I'd say it's probably marginally shorter, but very marginally than a year ago. And sort of actually given where we were with outlets and where we were with sort of releases, I'd say actually we see a little bit of the sales rate a cash up in the order book of where we'd have liked it at the beginning of the year. Now that probably, we've worked through that by late January, early February. So sales rates over the last few weeks have been more about very much more about sort of completions. But that's the line of isn't in any sense an unreasonable one. Of course, we've been releasing more, but there is a difference between releasing more and releasing earlier. Sort of and if you think back to a year ago, sort of we said one of the reasons this is going to be a longer term sort of shift that's going to take us some time to really work through is we need to get all of the sort of parts of the business and the parts of our supply chain to actually understand buy into and plan properly for that strategy. So as we planned our, sort of budgets for 2019, most of our businesses were putting into their sales plans, sales rates that were not quite at the level we're at, but which were more bullish than we'd seen historically as they bought into that strategy. And they were resourcing up their sites to meet most of that demand. But it's why the comment that actually across the board, the people within the business are starting to think, as you know, this works. We can see it. This works in our patch. Actually, then people really follow through with the plan. So that takes a bit of time. So I would say sort of the resourcing on the build side to really meet those sales rates has been, and different patients in different regions, gradually working its way into the business over the course the last 12 months. I'd say it's still not quite there yet, but it's definitely sort of progressed. And that in a sense is why talk about a bit of volume upside at this point because the sales rates we can see in the evidence, but the most important bit is that people, and that includes to say our supply chain start to have faith that that's real. And so, yeah, the materials are called off and the bricklayers are actually physically there on-site and building, and it's not just a theoretical plan. It's actually happening. Now that still takes time to go through. Now that doesn't mean that Clyde's question about the balance between build pressures and customer service is an unreasonable one, where it does keep us away at night because we care about it a lot and we're very focused on it. And we don't it's not about the 5 star rating. We're not worried about the difference between 90.5% score and an 89% score. It's about the actual quality of the homes that people hand over, you know, sort of earned And it's also about the process and the communication and the timing with customers, sort of so making sure we get that right is really important to us. We don't think we're compromising on it, but we're having to make sure that we keep that at the front and center of everybody's mind as we go through that shift. And the profile of the order book this year? Sorry, yes. I haven't got that with yes, happy to give you a number. I don't know if Chris you can Yes, it's going to pull out. It was how much of the order book goes into next year. It's certainly not materially different in the last year. It's no different, Kevin. So that, that volume underlying ex the bulk that increase in sales in effect is a chunk of that will be in this year or into the first half of next year. There's not a a longer tail that you've been taking into the order book? No. If you look on private sales, again, we're still I would say, as we went through a tougher set of trading conditions in the back end of last year and order books shortened a bit and not hugely. And but they did shorten a bit by the end of the year. We've probably got to a point where the average site was 4 months selling ahead from a point where it had been 5.5 months, that it probably wasn't that big a shift, but that's what it felt like. We're probably now at 5 months 5.5 is a bit long. It was a bit short, but you know, sort of we're about where we want to be. But we don't need to fill our expectations for, this year, next year and the year after. We don't need sales rates to remain at this level. We it is surprising us. And I would not say builders at a level that it satisfies consistently these sales rates. Yes, it's why we're not flagging a more significant increase in volume. Yes, we still got to do the work to make sure build is up there. What it does mean, which is why sort of I've mentioned it a couple of times. So that's why I think at least in your mind, as you think about what the pressures and the risks and the upsides are having in mind that if we're a head on sales and affordability is improving, actually. And I didn't think that you should be talking about this. I do think as we get to the back end of and into next year, the slightly more price upside than I thought there would be. Okay. So at this stage, you're probably what 75%, 80% secured? It doesn't, is that lower than that? I haven't actually, we tend to look at that on a private basis rather than across including the affordable bracket. That number that you quoted is probably not 1,000,000 miles away when you add in the affordable, which are clearly all already contracted. Yes. Okay. Thanks so much. Thank you. And there are no further questions on the line. That concludes our Q and A session for today. Thank you. And thank you for the number and level of questions. I look forward to catching up with you again at the half year, but don't at this point have a lot more to very much.