It's a slightly different presentation this time because with the launch of a new strategy back in May, we've been through all of our slides, all of our information, tried to just make sure we're providing you with things that we think are most relevant in that context. I hope, and our intention is, that we haven't taken away anything that you have come to rely on that gets a lot of usage. Actually, I think even if it's not in the main body of the presentation, every slide that we've ever been asked a question about is at least in the appendix. All the information you want should be there. If there is anything we've taken away that you say, "Actually, that was really useful," sort of like the margin reconciliation slide is still there, for instance, which I know everybody liked.
If there is anything that you did find it really helpful for us to talk about and we've just got that slightly wrong, tell us because we'll bring it back. What we tried to do is make it a bit more relevant to where we are today. It's a bit more of a refresh than usual. I think it will probably move on again when we come to the full year because it's a bit of a learning curve of working out what the right things and where your interest lies and how best to set things out. It's a bit of a sort of a test of a few different things that we're using. My presentation is in two parts. The first of those two parts is in two parts.
I'm going to talk about operating performance, both financial, and pick out some of the non-financial sort of elements of the first half performance. I'm going to go on and talk about current trading and outlook altogether in the second half of that first half. I'll come back on business improvement, strategy, and just a bit of a summary at the end. It's a slightly different sort of mix, but as I say, the sort of first half, the first section is very much on the performance over the first six months. Financial, first of all, I think should be no surprises there. The way we see the first half of the year, we would have liked a little bit more volume.
As we said to you back in April, May, the weather at the end of the first quarter sort of held that back slightly. That's the only thing that's any different to what we would have expected back in January. I'll probably say this about three times, and then I'm sure you'll ask me questions on it anyway. Our confidence in our 2018 numbers is strong. We are in pretty much internally in exactly the same place we started at the beginning of the year. The impact we saw in weather in February, we probably caught up a little bit more than we expected in terms of functional build, not so much completion numbers because of timing, but sort of in where we are. I think we feel more confident than we did then.
We felt reasonably happy then that the full year was on track. Looking at the financial performance, clearly a very strong performance, but clearly we're at a point where the significant growth in numbers that we've seen over the last seven years or so has slowed, but we've still finished the year with GBP half a billion in net cash or a bit more. Strong cash conversion and operating profit margin of 20% and a return on capital of 31%. I won't talk about the specific cladding provision. It's not there in those numbers. Chris will pick up on it, but either of us are happy to take questions on at the end, but I'm not going to cover it because I don't think we need to cover it twice. Some operating highlights.
I'm going to come back to a number of these because what I'm particularly, my main goal from this presentation overall, is to try and give you some sense of how some of the things we think are very important on some of the non-financial measures actually will link to financial performance over time. I think that's maybe what we've not given you as clearly as we could have done in our strategy day. A lot of these I'll come back to and just give you a sense. For instance, I will talk in a couple of minutes about the cost of customer care, where it sits, and why we see that as something that we can work on.
I think we still think they're the right thing to do, but we think we can do a better job of helping you link them to the underlying performance of the business medium to long term. Picking out some of those highlights on the eight-week survey, which is the one we've tended to focus on, the one that drives the star rating. The first half of the year was back above 90%. For the first time, and we told you we would do this, we're going to start talking about the nine-month survey, which we actually think gives better data in terms of really understanding what customer performance is like. I'll talk about that in a little bit more detail in a second. On the land side, still a very good land environment and the land cost percentage of new approval still low at 17%.
The revenue in the land bank has continued to grow, even in a set of uncertain economic conditions with a reasonably stable land bank. Our view of the selling prices in the land bank has improved. We're close to GBP 50 billion of potential revenue. Our strategic land bank has gone over 120,000 plots for the first time. If you look at production, and again, we'll expand on this a little bit during the presentation more than we normally do. Something called the Construction Quality Review, which is an external assessment of sites done by the NHBC. Performance has improved from 68%-74% at sites rated good or better. That all gives us a sense that we can show where we're getting the underlying improvements from the work that we're doing. Our number of directly employed trade staff is over 1,500.
About 1,000 of those are true full-time trade staff. About 500 are site management staff that we would have had historically. Meaningful growth there. On the people side, our voluntary turnover rate is still low at 14.5%. We'll spend again a little bit of time on this. Again, what I'm trying to do is relate that to current performance and future performance. We were Glassdoor's 15th highest rated employer in the U.K. Nobody else in our sector was in the top 50. On systems and efficiency, Chris will talk about this in more detail. I won't spend too much time on it, just a couple of specific things. My Taylor Wimpey, which is a customer facing website where people actually can get the information they want on their house move direct from the website rather than going through site offices.
Pilot is complete and it's being rolled out. Project management, the PIP is improvement plan, which I will spend some time on. The rollout is complete. As Chris will talk about, we've completed stage 1 of our cost and efficiency review. Going back to customers and communities, sort of getting over that 90% is important to us. As you'll see on the next slide, we're over 90% in all 3 of our regions. We've never been over 90% in all 3 of them. The last time we hit 90% as a company, our Southeast business was well behind. The underlying sort of performance is much stronger. I said I'd try and relate some of these things to financial performance. All I've done is just given you a view of the costs over the last 18 months, in 6 months brackets.
You can see they're starting to slowly come down. Most of our investments in this area was in 2015 and 2016, we always said getting to a point where we get the performance right will cost us some money. We think it's the right thing to do. Actually, we're confident as that beds in, that will start to come down. You start to see that trend. It's not huge numbers. I'm not trying to give you a big cost saving target here. It should hopefully give you confidence that when we look at some of these areas and say it's right for us to invest in these areas, once we get there, we'll get some of that cost back out, that we can actually deliver that. We believe, particularly on the remediation side of it, the actual physical costs.
What we're doing on the site quality reviews will make a huge difference over the course of the next 3-4 years. We don't think anybody else is looking at it in the same way. The industry has tended to be very reactive for these things and not get good data across different problems occurring on sites across the country, those sorts of things. We have a far more structured approach. That cost, you're talking about a GBP 60 million per annum cost, roughly. That cost can significantly come down and deliver a better service to customers, more certainty, lower risk, faster build times. Getting to all of that in one go is tough. It takes time. At the bottom of the slide, you see just a snapshot of the trend on our community investment via planning obligations.
Historically, when we've talked about this, in this sort of room, it will be, "That's how much it's going to cost us," sort of, "Have we got the best deal?" Actually, we think we kind of need to turn that on its head and just think, yeah, be a bit more prepared to shout about what we are investing. Over the course of the time you see on that slide, we spent GBP 1.8 billion on community obligations. Yet, we sit in a place in the sector where people don't really see the value that we add in a broader sense. I think we just need to be a little bit braver about calling out that cost, calling out what we do.
If I go back to the days when we had a business in the U.S., you would drive around sites, and there'd be a sign saying, "This school delivered by such and such a housing developer." We actually hide away from it for some reason. I'm not trying to signal to you that cost is going to inexorably increase. It will depend on the balance of sites we go through. Our sense is, at the moment, it's reasonably stable. Yeah, we'll talk a little bit about the political environment in the second section. Actually, this is part of us talking far more openly and positively about what we contribute to communities, and you should see that trend continue. Last we're on customer service, and I said you could see the regional sort of split where all of our businesses are just over that 90%.
I'm not going to spend a lot of time on the bottom half, but we will come back to it. That shows you the breakdown of the nine-month scores. There's a number of things on there, like the service performance afterwards, the development score, which is how people rate the environment they live in, which don't really come up on the 28-day survey. Those are the sorts of reasons why we think that's a better way of assessing how we do. You can see there's a big performance improvement over the course of the 12-month period that we're looking at. It's always more difficult to use as a management tool because of the lag factor, but actually, it gives a far better level of data. If we're not getting good scores on this, then actually we're not really delivering the right service to our customers.
Something you're a little bit more used to, quality of land acquisitions. Same chart you've seen before showing return on capital on acquisitions in the period set against contribution margin, but we've added scaling onto the size of the chart so you get a sense of the level of investment. Obviously, the yellow, for the first half of the year, was only looking for a half year, so it's always going to be smaller. Our sense for the year is probably more or less in line with an average of 2016, 2017. Land bank probably increasing a little because of strategic land additions, but not fundamentally different. The main message is additions remain at exceptionally high return on capital and very good, strong margins. We're not seeing that being challenged in the land markets at the moment.
Again, more traditional slide on land, just giving you a sense of the overall scale of where our land bank sits. I said we'd come back to production, this is a little bit less first half performance related. What I, as I say, I'm trying to do is give you a sense of how what we're focused on in terms of business improvement can really add to the bottom line. I touched on, and you see it well down the slide, the Construction Quality Reviews, which test underlying build quality. Our aim is to get those to well into the 80s, which we think is perfectly reasonable. The level of progression is very significant. Most importantly, the worst performing sites are the ones that stepped up. Just as importantly as the bullet point above, which is more of an internal measure on a consistent quality approach.
We are the only national house builder who can say to you, "This is our national quality standard." Nobody else has a national quality standard that they are holding all of their businesses to. It's actually quite a difficult, surprisingly difficult process and document to pull together because the industry is so used to running regional businesses on the views of local management on issues like that it's actually quite a big challenge.
If, as we say on the slide, we move to a Housing Ombudsman, that goes from a helpful process document that is useful to set a standard for our customers and useful for our own people, to an essential tool that you can't manage an independent quality review process if you're not able to say, "This is the quality expectation that we're setting." It just gives you a sense of one of the ways in which we're moving the business on. That in the end will be essential in our sector for everybody, and at the moment, we don't believe that anybody else has. Our focus has tended to be over the last few years on getting finish quality right because that has the most direct impact on customer service.
Our focus over the last 12 months, and if you look at the next two years, is on underlying build quality efficiency, getting the process as slick as possible. That document, that consistency of process naturally is really important. When Chris comes on to the cost and efficiency review, having that as the start point as to how we do things at the moment is an essential base level. Our overall strategic goal is to deliver faster, to be more responsive, more cost efficient, but also maintain quality. You can't do that without changing the process under the surface. Again, just a snapshot and external measure. These are Pride in the Job winners over the last four years.
You can see 2015 was a good year, then the pressures on the industry on volume put us under pressure, and we've got back for the first time till in 2018. We've got more winners. It's not that we haven't got any Seal of Excellence or regional winners in 2018, they just haven't announced them yet. We will see. It just gives a snapshot. I said I would also come back on the people side, onto the Glassdoor survey. I'm not going to go through every stat on here. We find this survey useful because of the other companies that are rated on it, because they're businesses that are progressive and moving forward. The top 20 companies include the ones you'd expect, the Googles, the Facebooks, the Apples, but they also include growth companies. They don't include many other relatively traditional businesses.
If you go and look at the site in detail, you'll see the slight anomaly, apart from you might argue, us, is Anglian Water is on there as well. As I say, nobody else in our sector is in the top 50. Getting onto the second half of my first half, market and sales. I'm going to talk both about our own sales and whereas in the past we've left the forward-looking piece till the final section, I'll pick up what's happened in July, alongside the first half performance. I think we do have to acknowledge that consumer confidence has been affected by the Brexit uncertainty. We haven't seen that in our numbers at all. I'll show you the usual snapshot I show you of different forward measures of customer surveys. You can't really see that in there. You can't see it in our sales numbers.
We don't believe last year the first quarter was exceptionally strong. Really since the first quarter, we've been tracking more or less in line with last year. We shouldn't hide from the fact that consumer confidence generally is not quite where it was. That's not worrying us for 2018, but it would be naive of us to sit there and say, "Yeah, no, everything's totally fine. There's no risk. It's all wonderful." It is an uncertain backdrop. New house building sales build rates remain very positive. We can't get away from the fact that Help to Buy is a key piece of that, and I'll come back to that. I have one slide on politics, and I'll touch on our views, as do continuing low interest rates. At the same time, a quarter point rise, as I've said to you before, doesn't deeply worry us.
If I'm honest, underlying confidence is more of a concern to me than a quarter or even a half point rise in interest rates. It's the next 18 months of people not being quite sure what the world holds for them that we have to be careful about. Mortgage availability and affordability remains good, and as a couple of your notes said this morning, at the end of the day, that's what's going to drive the next two, three, four years, but we can't get away from the fact that the next 18 months is a pretty uncertain period. Against that, performance to date has been very good. As I say, this slide now includes the July numbers, which it hasn't tended to do historically. If you look at the last three weeks, two of them have been ahead of last year.
One of them has been behind last year. The average is slightly ahead. Overall, certainly nothing, if we bring it right up to date, that should give us concern. Cancellation rate in line with the second half of last year, actually you'd expect the immediate post half year period to be a little bit higher. Sales prices are tracking in line with expectations. We're probably about 1.5% ahead of where we were kind of September, October time. Actually today, pretty flat I would say sort of month-on-month. Overall, a pretty solid set of sales statistics. Nothing in the forward measures at the moment that particularly gives us concern, which I'll come back to. Just briefly touching on Central London. Again, a more stable performance.
You see that sales rate probably a bit better than you would have expected in our Central London business in the first half. Specifically picking up Mount Pleasant, which we bought almost exactly a year ago. We're now started on site in terms of physical construction. We launch from a sales point of view in September. Our expectations today in terms of financial performance are the same as they were when we bought it. Certainly nothing that, no regrets sitting there at the moment with that site, which we think over the longer term will be a great site for the business. Cancellation rates, which I wouldn't want you to place too much store in but should give you a reasonable degree of confidence in the stability of the environment that we see in those sites. Looking at those usual lead indicators.
You can see on most of them that the first quarter of 2018 was perhaps slightly below the particularly strong 2017 numbers, not much, actually in line or slightly ahead of the previous two years, which were pretty good years. You can see as you go through into the second half, actually, we're actually probably slightly ahead of last year on most of those lead indicators. Nothing that should give you particular concern. One thing, I don't want to make too big a thing of this, one thing which we haven't particularly talked about, we changed our use of national, what's the right terminology overall? Rightmove and Zoopla. Our usage of them at the beginning of the year. Actually we use them very few sites at the moment. Which is not particularly a long-term strategic piece.
We wanted to test our own social media marketing, our own sort of website usage. You could perhaps see that in the first quarter a little bit, actually now we're still not using them to any great extent, and we're actually back where we were a year ago. That's part of wanting to interact directly with our customers and not depend on a third-party agency so that we can use them selectively where we think it makes sense on individual developments rather than across the board as we've been historically. We wondered whether that had an impact, but as I say, we're pretty happy with where we sit now that we've sort of worked through that change. I'm not spending a lot of time in this presentation going back to the core part of the strategy about sales rates on large sites and large site strategy.
We haven't changed our views. We'll talk to you a lot about it, I suspect, when we come to February. It's just too soon after to May to give you lots of brand new data. I did think one snapshot, which gave you, for the first half, a sense of our sales rates set out as we set out in that strategy. You can see the variation, and you can see that we're already achieving sales rates of one and a half on those larger sites. Just give you some confidence that we were sort of not completely making it up and that you could actually see, that we can see in the business actually how realistic sort of getting additional volume out of those larger sites over time is. As I say, just a snapshot so you get a sense of where we are.
We will come back and spend more time over that over the next couple of years, but it just sort of was a bit of an update. I also thought this would be sort of useful and interesting. Our price mix and our position in the market has moved steadily over the course of the last six or seven years. Obviously, the market has moved, so the average selling price has moved up, but Taylor Wimpey's position in that market has moved up. In doing that, we wanted, in the same way as we want to geographically, to retain a very broad, strong base. We're not trying to drive sales prices up by a huge dominance in the upper end of the market.
This just gives you a sense of the breadth of the market that we cover, and actually the breadth of the market where we have significant presence in terms of sales rates. We're not particularly dependent on any one sort of positioning sales price-wise. Again, we'll probably spend more time over the next few presentations on customer segmentation, which customer groups we see as being sort of most positive medium to long term. It's just starting to start that conversation. Just summing up, if I take a medium term view, employment prospects, mortgage availability, affordability, all generally good. Help to Buy is key, which I will come back to. Our base case still remains low price growth overall. Interest rates are important, but in the short term, sort of the thing I just think we need to keep a watch on is consumer confidence.
We're not changing our guidance on build pressures. I think in an environment where we do have uncertainty, actually the risk is on the upside for us that build cost inflations are slightly more likely to be lower over the course of the next 12 months than over the last three or four years. I'm saying that because it feels instinctively right rather than we can see evidence of it today. We're certainly not seeing strong upward pressure. Land market remains good with reduced competition, and we feel certainly in a very good place for the balance of 2018. I think more importantly from our point of view, that we're managing the right things and adding the right value longer term. Chris?
Thanks, Pete. Good morning, everyone. Before we launch straight into the numbers, just a reminder that the group results shown on this slide incorporate our Spanish business, which has had a very strong first half, nearly doubling their completions and more than tripling their operating profit to just shy of GBP 10 million. Pardon me. We expect to see further progress from Spain in the second half, and you can access more information on that business in the appendices to this presentation. Overall, the group results for the first half are very comparable to what was a record first half in 2017. In the context of that and the poor weather conditions in March, we consider these results represent a strong performance.
As noted in the trading update in April, we expect volumes to be more second half weighted than normal, and we remain on track to deliver 2018 in line with expectations. Revenue for half is pretty much flat with volume reductions offset by price improvements. Both gross profit and margin are showing slight improvements year on year, whereas operating profit and operating margin are showing small reductions reflecting a reduced performance from our joint ventures, which you'll see on the next slide. Net interest costs at GBP 13.3 million are slightly reduced compared to the same period last year, resulting in a profit before tax and exceptionals of GBP 331 million, which is just GBP 4 million shy of last year's record mark.
The effective tax rate for the group at 18.7% is broadly in line with the statutory rate, with a slight, pardon me, slight benefit from the recognition of additional deferred tax assets in Spain. We expect the future tax rate to stay pretty similar to that statutory rate. Tangible net assets per share is up 6.7% to just in excess of GBP 1, and that reflects our continuing investment in the business and of course, the reduction in the pension deficit. Turning to U.K. performance, volumes were 3.2% down on the same period last year, reflecting the greater second half weighting. It's worth noting that build is well progressed on those second half legal completions, and at the 22nd of July, we were 87% forward sold, so a strong position to be in.
Affordable housing represented a greater proportion of the total completions in the first half, and we'd expect that to drop back to a more normal share by the end of the year. Both private and affordable pricing were up year on year. Affordable pricing showed strong growth across all three of the divisions, with the increase in average unit size only contributing 1.4% of that total 9.8% increase. As you can see, our JVs didn't contribute many legal completions in the first half, which was purely timing and entirely expected. The reduction in U.K. operating margin is driven primarily by that JV performance year on year, and that will pick up again in the second half. This indicative analysis of the movements in U.K. operating profit margin is a slide you've seen many times before.
As a reminder, the slide aims to consider how the market has performed and then how we've performed relative to that. In our update in April, we talked about the market impact on margin from both house price and build cost inflation being pretty neutral for us, and that's exactly what this slide shows. We also see, when you look at the landbank evolution, that that's a pretty modest impact as we trade out of those sites that we acquired prior to 2013, which have the benefit of cumulative inflation. We replaced them with new land, where the margin on acquisition has shown incremental improvement over recent years. We've talked in the last few years about the investment in the customer journey, and that 0.1% impact you see here compared to the first half of last year is really indicative of that investment now being complete.
Overall, you can see that absent the JV performance that I mentioned earlier, the U.K. operating profit margin would be very close to flat year-over-year, even taking into account those reduced volumes. Most companies, when they embark on a cost and efficiency program, have a burning platform which drives the change, and we clearly aren't in that position. We believe that taking a proactive approach on this now will underpin the achievement of the financial targets that we set out at the Capital Markets Day. In particular, maintaining that operating margin between 21%-22%. Part of the program involves getting more out of our IT systems. Pardon me. We have an ERP system that captures significant quantities of financial and operational data, but we're not really fully exploiting that data at the moment.
Other elements of the program involve harnessing technology to strip inefficiencies out of the back office processes, and in so doing, drive productivity. I'm going to touch on some examples of those in the next slide. I think it's important to note that the anticipated level of investment in the program as a whole is quite low compared to the anticipated benefits, simply because we've already got our core IT systems in place, and very few of those benefits are related to people or redundancies. I'm happy to say that overall, the program is progressing in line with my expectations. Pardon me. Have a drink. With some work streams already underway and others that are in the process of being validated. The timing of the capture of the benefits from the program is varied simply because the nature of the different opportunities are quite varied.
At the Capital Markets Day, Jenny talked about the rationalization and consolidation of our standard house type range. From the impact of that, obviously we'll only start to see in the P&L once we've worked that through the planning and we start to deliver that on site. Obviously that takes some time. This list of opportunities is a high level selection of some of the opportunities that have been identified. I think they're pretty self-explanatory, so I won't run through each one of them. I thought it might be helpful to give you a bit of a steer on the first two that we're underway with. Delivery excellence will transform the working lives of our site managers. I can say that with a degree of confidence because that's exactly what it did for those who took part in the pilot. The feedback was great.
Being able to refer to drawings and update build progress direct into a handheld device, rather than having to go all the way back to the office, and note things down on pieces of paper and then input them into the systems. That is a huge saving in time. Also, it makes the site manager much more responsive. They can spend much more time out on site, which is where we want them, rather than in the site office. Commercial excellence incorporates 22 separate proposals in that one work stream. One example in commercial is the forecasting of WIP spend, which can be quite time consuming for our commercial teams. The solution involves that WIP forecast being generated directly from the information in our ERP system at the press of a button. Clearly, that means we can deploy those commercial resources into more value added areas.
One element in finance of the commercial program would be electronic data interchange. This involves supplier invoices being sucked directly into our systems and removes the need for any manual input at all. These days, that sort of technology isn't cutting edge, but it doesn't need to be in order to deliver good efficiencies for us. The average contribution for each of our homes increased by GBP 1,100 compared to the first half of last year. Contribution margins remained constant at 25.9%, with increased build costs being offset by lower land costs and selling efficiencies. It's probably worth noting that the increased mix of affordable units in the first half tends to increase the build cost as a percentage of selling price, but reduce the land cost as a percentage of selling price.
You should expect those movements to reverse in the second half as the mix moves back towards what you've seen in previous years. Following the tragic fire at Grenfell Tower last year, we undertook a detailed review of all of our buildings to identify those with aluminum composite material in their facades. Where we identified buildings with ACM, we worked with building owners, with management companies, and with fire service to implement the government's interim mitigation measures. We also sought professional advice from experts on each individual building as to what, if any, the next steps should be. We have taken the decision to replace the ACM cladding on a small number of legacy sites where we believe it's the right thing to do in the circumstances that are specific to those sites.
As a result, we've set aside a provision, an exceptional provision of GBP 30 million to cover those costs. That provision is based on our own internal cost estimates, but also an independent assessment by an external specialist PQS. The majority of that GBP 30 million provision relates to our Glasgow Harbour development, which was constructed between 2003 and 2006. Whilst the cladding at Glasgow Harbour met the technical standards that were relevant at the time of the building warrant applications, those standards were updated after the construction of the development started, and this ultimately left those customers facing a very significant and unexpected cost. We stepped in because we believe in the specific circumstances that it's the right thing to do for those customers. Turning to the balance sheet.
The increase in long-term assets reflects the adoption of IFRS 16 leases, which has required the recognition of just under GBP 30 million of assets in respect of our company car fleet and our leasehold buildings. There is a corresponding credit in other creditors. In total, we've adopted three new accounting standards in the period, there is more detail in the appendices for those of you who are particularly interested. Their impact for us is pretty minimal. The land and WIP balances at the end of June are higher, reflecting the weighting of volumes into the second half. I'll touch on cash and pensions in a minute, but clearly the provisions balance is higher simply because of that exceptional ACM cladding provision.
I mentioned at the Capital Markets Day that our basic approach to capital structure involves the land bank being financed by equity and the working capital being financed by short-term facilities. Clearly, we have a slightly more conservative position at the moment with GBP 525 million of cash on the balance sheet at the end of June. Obviously, don't forget that there was a GBP 340 million special dividend payment in July. I'm pretty comfortable with the flexibility that our current cash position provides on the basis that dividend payments in 2019 are set to increase. We're also likely to consume a little bit of extra WIP as we move to implement the growth in the strategy that we've set out. As you know, we made a payment of GBP 23 million in April to fully repair the pension scheme deficit, and contributions have ceased as a result.
Those contributions will only resume if the scheme drops below a 96% funding level on a technical provisions basis. At the end of June, we were sitting at 99% funded. Turning to dividends. We've declared an interim dividend for this year to be paid in November of GBP 80 million or GBP 0.024 per share. This together with the GBP 340 million special dividend paid in July and the 2017 final dividend paid in May, means we will return GBP 500 million to shareholders in 2018. At the Capital Markets Day in May, we updated our ordinary dividend to be 7.5% of net assets or at least GBP 250 million. At the same time, we declared the special dividend for 2019, which is to be paid in July 2019 of GBP 350 million, which of course will be subject to shareholder approval at the next year's AGM.
Together, these generate a total dividend for 2019 of approximately GBP 600 million or about GBP 0.183 per share, which is a 20% increase year-over-year. Working from yesterday's share price, this declared dividend represents a very, very attractive, some might call whopping, 10.6% yield. As I emerge from my first 100 days in the role, my immediate focus is in three areas. I think we have a great opportunity to harness technology to improve the business. The electronic data interchange example I mentioned earlier is just one example. We've recently introduced, for our VAT returns, a robotic process automation. An RPA accesses operating systems and applications just like a human would, only faster, cheaper, and more accurately. We think that technology has lots of potential uses within the wider organization. Clearly, I want to get stuck into the cost and efficiency program.
Implementing an ERP system is hard work, the guys that implemented ours five or six years ago did a great job. The process around that system, as the Commercial excellence program has identified, can be better in places. There's opportunity there. Lastly, we capture significant quantities of financial and operational data, but we aren't always using that analysis to transform the data into useful, timely information that assists better decision-making. I'm not entirely sure, as I stand here now, what the optimal solution is yet, but I definitely know that it's worth some degree of exploration. In summary, we continue to make really good progress as a business. We've got a strong balance sheet, quality land bank that drives great cash generation and excellent equity returns.
Our new strategy and the growth that flows from that strategy positions the group really well for the future. I'll hand back to Pete.
Thanks, Chris. Serious respect for getting the word whopping into your presentation in a credible way. I'd say.
I'd like to say it's a bet.
Yeah. It wasn't a bet, actually. We do sometimes have those bets, but that wasn't one of them. The second half, I just want to go back to the strategy, but talk about it in a slightly more granular way from within the business, and particularly try and set out why we think it's the right approach and what we think the benefits then can be medium to long term. You get some sense of it from my first presentation. You definitely get some sense of it from Chris's ending slide. What this slide does is set out the last of my slides from the strategy presentation, just to reassure to you that we haven't changed our minds and gone back and changed anything.
What I really want to pick up is just the final bullet point, because that sets the scene for what I just want to talk about over the next five or 10 minutes. Building a sector leading, customer-centric, highly professional, robust business model that can take advantage of long-term demand and be much better able to flex to meet short-term threats. We do think a lot of what we're talking about doing around customers and otherwise is the right thing to do, but we also think there are serious business benefits. We're in a very unusual situation, as I started off with my strategy presentation back in May, that we're in a U.K. market where there is far more demand for our product than the industry can reasonably satisfy.
We might have two or three years post-Brexit uncertainty, but that long-term position is what drives the fundamental value of the business, and we're not able, as an industry, to take advantage of it. A lot of what we're focused on doing is retooling the business to enable it to respond better in a higher quality, more cost efficient, but above all, responsive way, so that actually we can take advantage of the market opportunity that's there before us. It's not so much about short-term performance, although there are upsides, but it is about how to make sure we take advantage of what we see as a very positive market opportunity for us in the medium to long term. I'm just going to try and give you a little bit of granularity.
Just giving it a graphical sense, and this first picture, I don't think is harsh. It's just a sense of where we were as an industry back in 2008. I think the guy in the middle is probably about to lose at least a hand, if not his consciousness. I think this is too generous. We have moved on in the last 10 years. We as a business have moved on, but we're still not a process industry that can actually reliably increase production, change the way we deliver, and do it in a high-quality way managing costs. Things move too far out of kilter. We can't resource as quickly and efficiently as we want to. Yet we have too much of an impact on our underlying costs when we try and grow to respond to the market. We can't manage our quality.
We think on the last two, we've actually got a lot closer as a business than anybody else in the sector over the last three years. We were reacting, and we want to make sure that as we look ahead over the next 10 years, we're not just reacting. Actually we set up the business that, yeah, we'll have some good times and some bad times, but actually, we can take the best advantage of the good times and make sure we're as strong as possible in the tougher environment. We want to get to a point where actually it really is a production line. That doesn't mean it sits in a factory. This is not about whether we produce on-site. This is about every element of the business and how it operates, not just about our production.
What I'm going to try and do, and all this slide does is set out a kind of contents page, which we use over the next few presentations to talk about the different areas of the business we think are important. What I'm going to try and do in each of these areas, except for systems and efficiency, which Chris has already covered, is just give you a sense of some of the projects that are underway. We did one or two with the strategy day. I'm not going to talk about everything that's on the slide. I'm just going to pick out the odd example. What I'm trying to do is give you a sense of the depth of the retooling process that we're going through, some of which is complete, some of which is midstream, some of which we're just starting.
The sense of progression of what we can do in each of those areas. If we pick out a couple of things, the customer service portal, the fact that our customers can now actually, sort of for the first time, go and get all the information they need. It gives us efficiencies, but it gives us consistency. It gives us a record. As people start to use that portal, we move away from a place where the only record of the conversation we have with a customer depends on whether our sales exec on-site happened to make a handwritten note or not, and whether five years later, that's actually been kept in a lever arch folder somewhere in a site office. Getting away from that history of how sales happens on-site is a huge step.
Being able to provide a service that customers expect in every other way in which they operate, that they can get all their information on how they interact with a particular company online immediately, 24/7, sort of is long overdue. The level of adoption was immediately extremely quick, and I think it will only grow from there, and that's actually out in all of our business units. A key part of that which was practically more difficult, which is why it's a little bit behind and has only just been trialed, is a proper options online system. To do that properly, you need to be offering more or less the same options across all of your 24 businesses. You go back to that consistent quality approach document I talked about before. If you don't have that, it's very difficult to do an options online system really effectively.
There's lots of base work you need to do, but by the end of the year, that will be in operation in all of our businesses. Picking up a couple of others, we touched really quickly on sort of house type ranges, I said to you, if you remember, that actually people sometimes see that as a silver bullet. It's not. We're not talking about going back to a range. We already have a range which gives us reasonably good degree of efficiency, pretty good set of standard ranges. What we've already done with that range over the course of the last 9 months is slim it down from 112 house types. It tends to grow over time as people add things they think they'd want, back to 47.
The second piece, which I think we find more exciting, is the opportunity to take that base level range and really create some additional value with it to actually add customer value, doing it from an efficient construction perspective. We can take it forward. It's not going to totally change performance, it's a huge opportunity, it's a while since we've really refreshed our house type range. On the land side, we've already made big changes to our strategic land team.
One of the reasons you saw such a big step up in land acquisitions in 2017 and early 2018 on strategic land was because of the investment we'd put in into new people, often, actually a new breed of strategic land person that we trained in-house and brought through with a different set of practices, particularly in the Southeast, where historically our desired strategy was held back by the resources that we have. We're also focused on, I touched on it earlier, the Project Improvement Plan sort of at the bottom. Actually, this is probably the area I want to explore the most in terms of setting out something like that, which seems like, well, of course you're training your people, of course you're sort of trying to move them on. It's a bit more than that.
It's actually a structural change as much as it is a training change. We have redesigned the project management approach in the business. If you think of it, if you're familiar with the area, as a cut-down version of PRINCE2, all of our projects can run with the same set of consistent project management skills. You'd be surprised for a project management industry how variable and weak some of the project management sort of skills across the business are. Something that we kind of talk about a lot, certainly over the years, we've talked about a lot in terms of the difference between outlet opening time and outlet opening quality, the choice that you make. That Project Improvement Plan cuts straight to that choice. I've been saying to you for years that I favor quality over pace.
I won't give you an outlet forecast because actually I don't want to put the business under pressure to deliver fast, because I want them to deliver right, because in the end, I think that's where the value is. Now, I want them to deliver right, and I want more pace. If I want that, without it being a zero-sum choice, where effectively all we do is suddenly accelerate outlet production, but actually go back to a world where we're compromising on the planning permission, not having it, then I've got to change something in the machine. I've got to change that balance between quality and pace and actually that project management improvement plan, that training which we've been doing for the last two years in terms of developing the process, getting it out there, getting people familiar with it, getting people using it.
It's about being able to say, really put people under pressure to deliver both at the same time, and measure what the trade-offs are rather than leaving it to sort of individual decisions sat in the business. We can improve on both. If you just keep pushing and going from one end of the extreme to another, depending on what you want in the short term, you'll never improve on both. We'll go back to compromising on quality just to deliver pace. Actually getting that right makes a huge difference to business. Getting a balance between the quality and the pace and getting more of both, that has real value. Similarly, on production, Chris touched on some elements of production efficiency, some of the technology we can provide to site managers.
That same balance between getting it right and getting it fast is impacting heavily on our build times. It's one of the reasons why we can't respond as quickly as we would like to a market opportunity, is because actually, if we try and push too quickly, then quality goes backwards. What we're trying to do is create a world where we can have some of both. I think by changing the technology we use, the training that we use, the consistency of people, and it's where things like having a low staff turnover rate makes a huge difference. There is a huge impact when we lose, particularly production directors and production managers, but site managers as well, to getting that quality pace, not just the balance, but the total of the two right.
If we can actually change some of those things, if we can change the pace at which we can get outlets without compromising quality, if we can change the pace at which we build without compromising quality, and we can do the whole thing in an efficient way, then the potential high-value growth for the business relative to the sector over the next 10 years is huge. It's those things that actually will make the difference between us and our competitors as we look forward. I think the last one I just wanted to touch on is Project 2020. We talked a lot about it a couple of years ago, and we haven't talked about it as much more recently. It was just to give you a sense that we are, from the back of that, trialing three different production methods on a set of new house types.
That's part of our sort of process as we look at our new house type range. How can we do things different but make sure that we get it right on site, that we're not just sort of asking our people to deliver something that can't be done at the right pace and in the right quality. Yeah, we'll probably talk about those a bit more. Just gives you a snapshot, I think, of some of the house types that we're trialing. Lastly on people. We've consistently invested more than anybody else in training, development, in recruitment. You see it in retention. The impact on performance is enormous. We currently have about 600 people in apprenticeship programs, graduate development programs, and management trainee programs. New people into the business, all in the first two years.
Our ability to scale that up has grown significantly, as we're now able to attract people from outside the sector who wouldn't historically have gone for a traditional sector, as they would say it, like house building. Why do all of that? Create a long-term growth platform, more agile, more responsive. We had three choices as we looked at the strategy. The first one was to do what we'd historically done in the past, and said we wouldn't do again. We're looking at a point where the business is performing financially better than it ever has done. To move on from there, we could have gone back to go out, buy more land. We had the capital to do it, go out, buy more land, grow the business. We all know that creates additional cyclical risk, and we said we wouldn't do that.
The second choice would've been to do what we're doing at the moment, but try and sell a bit more of the value back from everybody else we deal with, whether it be our suppliers, our customers in terms of quality, communities, or anything else. I think of that as a zero-sum game. Bigger share of the pie for us. You can take it so far. It's right to fight for the share of the pie that's fair for you. Actually, at the end, that sort of old style Tesco strategy isn't going to take you that far. The third option is slower and longer term, but it's trying to create more value overall. It's trying to be able to grow further when the opportunities arise.
To do that, we need the business to be more efficient, more flexible, more responsive, more modern, more proactive, and that's what we're trying to do. I said I'd come back to the political environment. This slide sort of sat down slightly outside the others, but it felt right given the amount of dialogue over this over the last two or three years. Two main points that I kind of wanted to focus on were the Letwin Review and the planning policy framework. I said I'd pick up Help to Buy here. Clearly this is an unprecedented time in terms of the focus of government is distracted from things they would otherwise be very focused on, and our industry falls into that. I really do feel that things have just not happened at the pace in terms of decision, and I think that's delayed Help to Buy decision.
I think that's probably ended up being a positive, because I think if that decision had happened 12 months ago, then they would probably have curtailed Help to Buy certainly from 2021, if not even a little bit earlier. I think that's less likely now. If you look at all of the other uncertainties, I think, actually, as time has gone on, probably that's too high risk. My base case is it probably sort of gets extended a little without any major change. We will see. We don't know anything specific on that. We do get a sense that a decision probably will come reasonably soon. I could probably have said that at any point in the last six months, and given what's going on in other political questions, then it's hard to be confident.
On the specific bits that I did want to talk about, the Letwin Review and the Planning Policy Framework, I think we were reasonably pleased and more or less agreed with Oliver Letwin's kind of predominant conclusions. It's always nice when yet another review concludes that speculative land banking isn't really something that happens in the industry. I don't think it's going to change the question. I expect to be arguing that case pretty much my entire time in this industry, sort of whether that be however many years that may be. It was nice that he actually said it quite clearly, because he could have ducked the question more than he did. I think the general sense that we can do more with the larger sites we've got, clearly is embedded in our strategy, so it's hard for us to disagree with.
I think the slightly sad thing is it seems to have gone very quickly into the myths, and doesn't really seem to be getting much focus either politically or press-wise. I'm not sure we're going to see anything particularly substantive out of it. Certainly, something that started and I think people would've perceived as a risk, has ended up being a mild positive. I think more positively, the new Planning Policy Framework could have had some meaningful negatives in it. I think overall we felt it would be neutral, but overall, I think we now feel it is probably a net positive, in terms of just generally progressing the planning environment. We're quite comfortable with the fact the government needed to have a renewed focus on environmental issues.
I think our sense is, post sort of 2008, 2009, the focus went away from it too much, so that's actually overdue, and we're kind of ready to refocus on it ourselves. Just in terms of summary, we think some of the investments we've made are starting to pay off. We can see particularly the process improvements really starting to improve our control of the business. Our focus is on using customer-centric focus as really a catalyst for the people in our business to change everything, to make everything work much more effectively, and be far more proactive rather than defensive. The strategic goal is to create a business with a long-term ability to grow, but be more agile in doing so. We see significant benefits and efficiencies to come longer term from some of those investments that we've already made and continuing to make today.
In terms of short-term trading, I'll restate what I said at the beginning. We're comfortable with where our guidance sits for 2018. We expect small positive steps in all of the main financial metrics. Our own expectation for this year is almost exactly what it was in January. The environment remains good. We should be aware and have a cautious mindset about consumer confidence because it's pretty unprecedented times. Questions? Should we start with Will at the front and then move back to Glynis? Just as we get on to questions, I'm sure you've all seen this, but the way the slides are printed has changed the numbers. If this question specifically relates to a slide, if you can describe the slide rather than just the number, that would help.
Thanks. It's Will Jones at Redburn. I've got three, if I could. The first is the inevitable follow-up to all the initiatives you talked about today on customer care and bill costs and all the other issues. Is there a way of quantifying what you think that might deliver you in aggregate over time, or should we just think about this as a means of delivering your target margin over the next few years, even if house price inflation slows? The second one was a follow-up, really, from the CMD. I don't think it got asked, and I appreciate you're not outlet driven per se, but there was a reference to growing to 320 outlets over time. Yet at the same time you were talking about land bank length dropping slightly, site size rising.
I wondered how realistic is that growth, particularly given the experiences of the last few years and outlets, can all those aims really coexist? The last one was touching base on the mortgage market. There was a story, last week doing the rounds that created some concerns about down valuations across the wider market. Having stepped up, is that something you've noticed at all for your customers? Thanks.
Okay. I will probably miss at least one of those because I've got three of them, you asked four. Let's go through what we captured, and if I've missed something or between as we do, please let us know, Will. Broadly, when you're looking at 2018, 2019 numbers, you should take what we said on the various different things we can drive on cost and efficiency as being factored into our margin guidance. When you move beyond 2019, and particularly when you move beyond 2020, we see upside potential relative to where the market goes. We wouldn't try and give you a market forecast sort of that far out. On a relative basis, we think there are net savings that aren't factored into our broader guidance.
I think similarly, it kind of goes to your outlet numbers over time. We were quite clear in May, and this has not changed, that what we're trying to do on large sites doesn't affect 2018 and 2019 particularly. We have the potential for more meaningful growth in 2020. I say the potential, because again, I don't want to sort of be trying to give you a market forecast that far out in such uncertain conditions. Whereas we look at it and say, "No, actually, without doing things in the wrong way, we can't increase the rates of volume growth beyond expectations in 2019." When we look at 2020 with some of the things we're working on and some of the things we're doing, we have the potential to do it if the market lets us.
I think as you're looking that far out, and I know at the moment forecasts are probably as short term as they ever are. I get that. At least if you start to get a sense of that, and that that's why we're doing it, you'll understand why we believe it has a real value impact, even though it's not going to impact on this year's or next year's numbers. In terms of outlets over time, site size, and land bank. To a certain extent, it's time that's the difference. It is our view that now is not a great time to go out and aggressively grow the land bank in a way, because we've got quite a lot of strategic sites coming through over the next 12 to 18 months that will naturally push up the numbers.
As we've talked about before, there's not a huge amount of cash impact of that because of how those sites are structured and the cost. It cosmetically increases the size of the land bank because the nature of what they are. That's why we had a slight caveat that the land bank won't increase apart from some of that impact. I don't think we think that we would never increase the size of the land bank. We just don't think over the course of the next couple of years, that's the right balance. As we look at an outlet number further out and where we talked about a five-year forecast, we are talking further out, and some of that is more size.
We're not talking about the land bank growing massively, to actually make those numbers work, you're right, it has to go above 80. I don't think it gets to 90, but it does move. We're slightly confusing, and it's probably our fault. We're slightly confusing short to medium term view of what the right land balance risk is with a five-year view then on where the business can reasonably get to. In terms of down valuations, we've not seen any sort of meaningful increase. Inevitably, our own people are sort of looking at the market and keep testing themselves. Nigel, when we were talking about this last week, sort of said to me, "Yeah, I had salesperson in one business say we've seen a meaningful increase in down valuations." I said, "How many have you actually seen?" "Well, we've seen two since Easter." They're still very small numbers.
Yeah. Did that capture all of your questions, Will?
Yeah.
Thank you. Can we move back to Glynis?
Thank you. Yes. Glynis Johnson, Deutsche Bank. Four, if I may. The first one is on slide three, maybe five. Quality of land bank acquisitions. The contribution margin's gone up. The return on capital employed is flat for 2018. Is that the size of site going up? Is that an assumption on Help to Buy? Is there something else in terms of selling rates and asset turn? That's just one question. Question two is a slide at the very front of the pack that we don't have. The community investment. I know you say it's not indicative of what we should anticipate, but it has gone up every single year that you give us in that slide, at least the last eight, 10 years. What are you seeing in terms of the community investment that you required? Is it just because larger sites are requiring more?
Is it something to do with mix, or is there more in there?
Yeah.
Thirdly, I'm going to take you back a couple of years. A couple of years you told us that you were being constrained by build and not sales. You talked about a 15% potential additional customer demand. I'm wondering how you feel about that today. Do you think your build rate is the constraint on sales, or is it much more finely poised? Lastly, on the reduced competition in the land bank or land market rather, do you think that's because of the size of sites that you're looking at in terms of large versus small? Can you give us color in terms of smaller house builders, larger house builders? Just what's driving that?
Okay. I'll pick up some of yours, Chris, but you pick up the contribution margin, sort of return on capital and acquisitions. If I kind of work backwards, the reduced competition I think on sites goes back to all the things we've talked about over the last five or six years. I don't think it's suddenly switched in the last six months because we've suddenly changed our strategy and focused on larger sites. I think it's still absolutely true that competition is less on larger sites. We're still looking at what we would see as smaller to medium-term sites. It's not that we've suddenly made a big switch in terms of focus and that's kind of colored that view. It's a general comment that competition for land has generally been more muted, that the opportunities are better, and that trend hasn't particularly changed in the last six months.
I think that absolutely right, that 12 months ago, 24 months ago, probably not 36 months ago, I think we kind of had maybe an 18-month period, maybe a bit longer, when it was very clear that we could lose 10% of our sales, maybe even more than the 15% I quoted. Actually we couldn't build anymore, sort of anyway, so it would make no difference to the output of the business, and the constraint on sales rate was our own availability. I think your sort of comment, is it now more poised, is true. I would still say the impact on quarter-on-quarter completions is more build than sales. I think if you look over a 12 to 18 months timeframe, it's pretty balanced.
If you think back to the beginning of this year, our order book was behind last year, and we were fairly sanguine about it. I think it caused some concern in this room. You look at where we are today, our order book, and the biggest part of that change was affordable housing. You look at where we are today, our order book is ahead of last year, and the biggest change is affordable housing. We're still fairly sanguine about it. Our focus at the moment is on building the order book for 2019. We're not particularly worried about where 2018 sits in terms of sales. Yes, it's more poised, but that doesn't mean that actually we're starting to live hand-to-mouth on sales, if you see what I mean.
We still have a good forward position of where we are, and it's probably better than it ever was at any point during the last cycle, for instance, in terms of the sales position. It's all relative, isn't it? On community investments, yes, you have seen a generally increasing sort of cost over a long period of time. That was inevitable. If you look back, in many ways surprising that it didn't happen more quickly than it did, and some of that's to do with the pace at which planning applications actually happen and come through the books, and some of it's about sort of the process of a planning application and how it works. I think what I'm saying is not that it won't continue to rise, but that it will only tend to rise where extra value is generally there in the system.
I think it's a bit like the question about sort of Help to Buy. The political view 12 months ago is quite different to the political view today. I don't think we're going to see a sudden sea change there. You can see that in the way the NPPF is drafted, for instance, sort of that there isn't suddenly a big increase. It is one of the things that's kept land values muted. There is no doubt if you kind of mathematically broke it down, some of what's happened to land values in terms of maintaining them at a very stable level through the last seven or eight years is what's happened in the land environment, going back to the first question I answered. Actually, some of it is that the proportion of social take has increased.
Our argument has always been, that's fine as long as you don't think that you can get it to a point where landowners just won't sell. There is a point. It will vary with the landowner, it will vary with the geography, it will vary with the site where that point is. As long as there's not an across the board sort of, this should work everywhere, if you see what I mean, we can take X% out of every site in every geography, then it's manageable. I think it still remains manageable. My main point is we should look at it from a more positive point of view than we tend to, and actually be prepared to talk about it rather than sort of almost hiding it, if you see what I mean. Chris, on land acquisition.
I think if you'd told me a few years ago that we were getting a question on return on capital and acquisitions sort of flattening off between 34%-35%, I would've been very surprised. I think it shows how far we've come as a business. The real answer is it's mix. With every acquisition, we trade off all those key performance measures. The two key ones clearly are return on capital and margin. Sometimes we will take a super margin site that has a little bit worse return on capital, and sometimes we will take sites that have stellar return on capital with a little bit of margin reduction. I think the blobs on the slide tell the story, but we're pretty pleased with the rates that we're acquiring land at at the moment.
I have a serious issue with your answer, Chris, which is that you didn't use the word whopping in it at all. It was a missed opportunity.
Can I just follow up there? When you talk about mix, in that mix, is it that there's more upfront infrastructure coming back to the community infrastructure?
Yeah.
Is it a lower selling rate because you're assuming that selling rates after 2021 drop off-
Yeah
because of Help to Buy?
Certainly. There are no sort of inherent changes in our assumptions in local markets, if you know what I mean. We buy land based on current market conditions. Your point on different size of site is entirely logical, what we find is actually just because you're buying a really big site doesn't mean that you won't get any deferral on it. If you're buying a small site, you might get some deferral, you might not. They might want it on. Completely is determined by who's selling the land and what the level of competition is for that particular site. It's not quite as simple as to just sort of put them in different categories, if you know what I mean. Sorry I can't give you an absolute answer like that's the reality. Every acquisition is different.
Yeah, I think, it's also worth remembering that acquisitions in a six-month period are never going to be a statistical basis. Mix is genuinely a mix of one site that happens to be particularly strong on a particular measure, or we take a view, actually, no, that's the right site for us, and it's slightly weaker on it. Is going to distort the mix in six months of acquisitions, to the level. If it was down in the bottom left kind of quadrant, then we'd have to have a far more sort of focused answer. It's always going to move around a bit. Should we come across to
Morning. It's Gavin Jago, Peel Hunt. Just one word, could please us on near-term production and after yesterday's announcement from Ibstock about their planned maintenance and shutdowns. How comfortable are you you've got enough visibility on brick supply for the next 12 months?
We do have good visibility, I think, yeah, we've tended to find that whilst we get frustrated with the price of bricks, actually, the relationships have been good in terms of getting the availability. I think we feel reasonably comfortable on that. I think we haven't seen that being widely discussed in the market. It'll be interesting to see whether it affects smaller house builders to some degree. I don't think we expect at this point that it will affect us and probably our larger peers too much either. Do you want to move back to Jessica?
Yeah. Morning. Chris Millington, Numis. Just wanted to ask, firstly, I wasn't totally clear on what you were saying on kind of underlying pricing versus costs and kind of how you see that progressing at the moment. Is it broadly offsetting? That's the first one. Next one's just on London. Is that higher sales rate discount driven, or can you just comment on pricing generally? The final one is just on the contribution margin you did on that block chart we spoke about before. Can you just reconcile that back to a gross margin? Just tell us what the differential is.
Do you want to do the last one, Chris, and I'll do the other two?
Yeah.
On central London, I think, sort of the last two and a half years, we've kind of been feeling our way through literally every single sale on every single scheme. There's no sort of overall movements in price as a trend in that, if you see what I mean. I don't think the margins are pretty similar to where we were and certainly where we expected to be at the beginning of the year. Can you just refresh my memory, Chris? I didn't note down your first question.
The first question was.
the balance between build costs and sales price, yeah.
Yeah. It was just whether or not there's still a net economic benefit there as we're kind of running forward.
I think where we are right now, our views for the second half of this year, certainly impacts on the first half, you can see it from Chris's margin reconciliation slide, it wasn't that different in 2017. Kind of our expectation going forward is pretty damn neutral. One and a half to 2% of underlying selling price inflation more or less offsets three to four on build costs. I think given the uncertainty, you'd say 2% selling price inflation in 2019 is your most optimistic forecast today. As I say, my sense is in that kind of environment, build cost probably moved down a little in terms of inflation, closer to underlying inflation, just because the underlying pressures are a bit less. Base case is still they more or less offset.
You kind of go back in a way also to Will's question. In that environment, it's a bit pointless me sort of pointing this out, we can save GBP 10 million on sort of customer care costs and this is, or on cost X. We're balancing an awful lot of things, I think you should want to know that we've got some levers that we can pull depending on where the environment sits. Overall, the market impact we see has been pretty neutral on margin.
Chris, I caught the reference to gross margin. I didn't quite catch the rest of the question.
My accent causing me problems again. You show the site-based contribution on your return on capital on land acquisitions. I'm just wondering how that reconciles back to a gross margin because it's a site-based contribution, not a reported gross margin contribution.
Yeah, I mean, the difference is purely selling expenses.
Roughly, just so we can do the math.
Well, probably about, I would say about 3%, talking in that order.
I'm just looking for the slide because I think when we see
Which slide were you referring to?
It's the block site, the way you show the land acquisition margin.
Oh, got you. Yeah.
I'm just-
Sorry.
Can you just reconcile that to a gross margin, not a site-based margin?
Yeah.
Sorry. What I just wanted to check, Chris, was because you referred to it in return on capital, and I think you-
Sorry, it's the one where you show both. I just pardon me.
No, no. The return on capital is based on an operating margin, not a contribution margin. That's all I wanted to maybe clear up. As Chris says, the difference, yeah, sort of between contribution margin operating sales cost. Yeah. Sorry, it's just where you'd said return on capital, I was trying to get-
No, it's the way I phrased it. Sorry about that.
Yeah.
Between gross, not operating.
Yeah.
Between gross. Yeah.
Yeah.
Got it. Cheers.
Yeah. Sorry. Doesn't look like we have any more questions. Thank you very much. Look forward to catching up again at the trading update and seeing you in February.