Earnings Call: H2 2019

Feb 27, 2020

Good morning, everyone. We'll make a start. Welcome to the visory group at full year results, for 2019. So agenda today, I'll run through couple of slides of our full year highlights. I've struggled to get it onto, 2 slides, of course, so many of them. Financial review, will be Earl, and different this year than we've had in the past, the, strategy and operational priorities I will share between, or we will share between myself and Graham. And and talking about that, welcome to, to Graham. Great to have you, here. And when I look over at Graham and Earl, you know, and things back on my career, between them, they've been the butt of most of my, great jokes over the last 8 years. So good to have a have a choice today. I'll run through the Outlook. Great photo to start there. Earl and myself have been, and Graham have been together all week, board meetings, etcetera, etcetera. But we did have time to, nip out to one of our, morning, everyone, one of our London developments. And we met these couple of young apprentices. The 3 of us had a long chat with them. And, you know, got on well with them asking what they're all about. They asked us what we're up here for this week and told them we're coming to do our results today. And at the end of the session, which was a good half an hour, I wrote down on a bit of paper, which is what they're studying now. Who do you think, will come over the most, energetic enthusiastic, enthusiastic, etcetera, etcetera between Earlene Graeme. And and and as you can see there, they're struggling with the concept of, of the question. So moving on to the, bogus, for your highlights. So it's another year. We're, first of all, to say, we're really, really proud. Of the people that produce these results and the results themselves of course. So it was another year of record profits with profit before tax increasing by 12% to 188 £200,000 a record. Operating margin, maybe against the trend of our our peer group progressed again to 17% against a backdrop of market uncertainty and just putting that into context, just as a reminder, if you take 2019, it's in in its entirety. The 1st 6 months, and to June of 2019, we saw no sales inflation, but we saw build inflation of between 3 5%. And then in the 6 months, to December, we saw no build inflation, but we saw sales deflation of 1 a half to 2% So both those factors together, I think really underlying how well we've done improving that margin to 17%. We've seen a sustained step up in our average sales rate to point 58, per, sales per week per outlet from point 5. It was a controlled and disciplined period end. That's the third one that Bulkers have had with unit numbers completions up 3% to 3867 units. Delighted to be able to say that Bauber's now are officially a 5 star house builder. Great result, massive amount of work done to get there. And that follows, obviously, all the trials and tribulations of where we were at the end of 2016, beginning of 2017. One doesn't come without the other. Further improvement in build quality metrics, with our reportable items. That's from the NHBC down 28% to 0.23, which is significantly ahead of the build benchmark. We've talked a lot about the, Phoenix range, which was introduced in the last 18 months. And last year, we delivered 358 completions, which is 14% of the overall. Improvement in health and safety, schools in every single region within the business, and there was another year of strong land acquisition, including conversion of our very valuable strategic land bank. And overall, the land bill will go into more detail that we acquired in 2019 was boarded an average margin of a very good 27%. Moving on to, probably more interesting for most of you, the Vistry group. So with the app was which we completed or merger as I'm calling it on the 3rd January. We undoubtedly, became a 5, top 5 UK house builder. It's a transformational acquisition. You know, we should look at it. This is three times it's it's closer to three times than twice, you know, so we're set we were 7 business units. We were 20, 27. We're now 23 because we've already closed 4. So three times, it's a huge, huge undertaking bias. But as I say, it does firmly position us as a top 5 house builder with a market, leading position in the attractive very high growth partnership sector. So for 2020, the focus is on this successful integration and most of the integration work is within the housing businesses and continued growth in the exciting partnerships area of the street partnerships. We've already established the best operating platform to maximize future growth and returns. And we have made Graham will talk about it. We'll talk about it. A lot of hard work in the last couple of months, but we have made excellent progress, to date. Whatever I said in the acquisition leading up to Christmas, I'm even happier 2 months in than I was at the time. It's going really, really well. And we are confident, very confident that we will deliver the significant benefits that we talked about, including a minimum of £35,000,000 per annum cost savings. And on that, I'll hand you over to Earl. Thanks, Greg. Good morning. Okay. So a lot going on forward looking that Greg's touched on Graham will talk more, but I will take, a brief moment to, talk about the very good performance in Old Bovis if you like in terms of the financial review. So income statement showing a significant step up in profit and the operating margin, driven by a 7% increase in our revenue and a 3% increase in volume. Gross profit up 10 percent to 253,400,000, and our admin expenses do reflect the optimum structure that we've got, the further enhancement in systems supporting that, but also the growth in the business and the increase in employee costs. So overall operating profit before exceptional items up to 192.6. Finance costs were flat year on year and that does include the small impact of implementing IFRS 16 on leasing, and got the first real contribution from our 2 development joint ventures at Sherford and Wellingborough. We entered into that Wellingborough joint venture during the year back in April 2019. So overall, 12% increase in profit before tax to 188.2 we did have some exceptional costs in the year, so $13,500,000 going through the income statement. If you add to that, the cost of refinancing and the costs for the placing very much in line with the guidance we gave at the time of the acquisition. I would I would say, did you enjoy your trip? Tax rate 20.7 reflects the underlying tax rate, plus the fact that some of the exceptionals are not deductible and an adjustment for for the prior year. Should say we will have some more exceptional costs this year coming through as we restructure the business, early days, but certainly we guided at the acquisition that could be up to 32,000,000, we will obviously be looking to come in lower than that. So in terms of volume and pricing, the 3% increase in volume, led by a 2% increase in our private volume, The affordable largely flat and that reflects a 31% of our mix, pretty much the same as last year, and very typical of the average affordable on our sites of somewhere between 30 35 percent. And again, that first contribution from our 2 development joint ventures with 58 completions. 23% of our completions came from Help to Buy and 7% from Parts Exchange, which is still a relatively low number still well controlled, no parts exchange at the end of the year held unsold for more than 3 months, and actually we'd be happy in this market to do a little bit more of that, so that represents an opportunity going forward. We had about 88 active sites, throughout last year, That's changed quite a bit now, so we are on about 175 housing sites at the moment, 19 partnership sites, and I expect that level to say broadly the same during the year, but we are on over 50 of those sites in some form of joint arrangements. Overall ASP up 3% led by actually the location and tenure of, the affordable in the mix. And in terms of other income, 14,000,000, half of that coming from, near enough the final sales of our PRS properties. So we've literally got a handful of those left, a couple of commercial sales in there as well. And also during the year, we did 6 partnership land transactions. So selling land, 2 housing associations on which we will then develop those houses, and that brought in just over another 40,000,000 of turnover. So in terms of the profit, just splitting out that one one land sale we did externally, gross margin up 22.4 percent, as Greg touched on, you know, that is reflecting the market we had. So flat sales inflation in the first half and a decrease in the second half, cost inflation in the first half, and flat in the second half. But also importantly does reflect the improving embedded margin in our land bank and the operational improvement including our margin initiatives, and I'll come back to that in a moment. So take the overhead percentage of 5.4 and you've got the 60 basis point increase in operating profit to 17%. So sales prices, construction costs just touch on the two numbers in the circles, So, private sales price per square foot up 1%. I mean, broadly, broadly flat out there, but that does reflect the location of where we've been building. Really pleasing number is the other one circled, which is finally the construction cost per square foot showing a 2% decline. So that's despite inflation in the first half of last year and absolutely does reflect the changes we've been putting through the business. So the lower cost of the Phoenix house type range, all the work we've been doing on specification, as well as I would say, giving our commercial teams the tools to do the job in terms of new systems. Cashgenerationstrongoperatingcashgeneration We also spent a bit more on land during 2019 than the previous year, 185,000,000, both settling land creditors and new land. The dividend payment, was looks down from 2018, but that actually reflects we paid the special dividend from 2019 as a special bonus, share. Cash flows from joint ventures reflects the formation of the Wellingborough joint venture, and the loan from Holmes England going into that joint venture. Non trading items, the usual things in terms of tax, interest, and pension, and then we had the successful placing in November raising over 150,000,000. So closing net cash 362,000,000, but that position did change quite quickly at the beginning of this year. So as Greg said, a very successful year again in terms of land activity, the dots on the map show you where we have been purchasing land. So the gray dots are where we've been acquiring land out in the open market. The darker dots, please say are those that we have pulled through from our strategic land bank, and we continue to feed strategic land bank, so the red dots are the new strategic options. So over 4 and a half thousand plots bought across 18 developments, And again, following our strategy of looking to buy more sites with 2 and 3 bedroom houses, only 7 of those plots we bought do we expect to sell for more than £600,000 in due course. That conversion of strategic land, so 2146 plots including conversions, comma, Tron, Campbell, and they have been a number of years in the making, very good margins on those sites coming through. We have got further planning on 1131 plots in the strategic landbank, so that will continue to flow through. And all that land, as Greg said, bought on average at a 27% margin, and I'm pleased to say we are very active in the land market as we start this year. So already secured another seven sites across the business. And finally, in terms of the balance sheet, so looking at our optimized balance sheet at the end of last year. Land creditors at 36% of gross land, still happy to buy land, if we can buy now pay later and in the mid thirties percent, that's okay. And within that, we've actually got a number of pretty long term sites with creditors out a little bit further. The work in progress does reflect investment in some of our larger sites where we're already operating on a number of outlets. The investment JVs reflects the increase from Wellingborough going in there and we entered into a further joint venture at the end of the year with Metropolitan Thames Valley at Campbell. Overall net asset per share at 857 p and just a bit more guidance or just reiterating what we said at the acquisition that we're looking to get that gearing, including land creditors down to just under 30% by the end of this year and then decrease it again to the end of 2021. And with that, I'll hand you back to Greg. Great. Thanks, Hill. And if you're not funny, use the old joke. Have someone walk in late and get him to trip up on the stairs. Fantastic. And with my improved there, IT skills, and I've been struggling to sleep lately. I am fair. Just ordered a copy of IFRS 16 on leasing so I can, read that through to help my, my sleep pattern. So, so we're uniquely positioned, as I say, as a top 5, house builder, district group. Two areas, house building, high quality housing provider, 2 leading house building brands, Boberson, Linden, national scale and coverage, valuable land bank, very good strategic land bank, and capability, and controlled volume growth and margin opportunities. On the partnership side, I think we are the leading provider of partnership housing in the country. Excellent reputation and I've, you know, Stephen would have said that at the time with acquisition, Stephen Tiegel, and, and I've obviously done my due diligence, and I would underline that and firmly established, relationships National scale and coverage, high growth, countercyclical revenue model, and I've been fold over already in the 2 months, that we've owned the business of how many opportunities are coming through the door and some of the scale of those opportunities. Supported by, of course, 2 leading house building brands, Bobus and Linden, and significant, not just, you know, significant revenue growth and margin ex expansion expected. And if you see at the bottom there, you've got our 3 customer placing brands, Bovis, Linden, and Vistry, and it's important to note having had a discussion and meeting with the HBF that be cumulative of the HBF customer satisfaction scores for those 3 businesses put the Victory Group as a 5 star house builder. So you add the whole three together and we are a 5 star house builder, not just bogus. The group's strategic aims are exactly the same, as we put in place at Bovis, 3 years ago, which has put us in very, very good stead. Number 1, front and center. No doubt about it. People satisfaction or bills around do the right thing. We take health and safety of our people very seriously as we do of our supply chain. On customer satisfaction, if you don't look after your customers in Vova's homes, really do know this, you will not go forward. Let alone make a profit. Even more so today than maybe in 2016, 17. And I think it's a great testament to, the people of the company, And if you look at the last 3 or 4 months leading up to, 2000 Christmas 2019, when the acquisition was on you know, really going into it really into the due diligence, and then even more so, the 1st 2 months of the acquisition, January, February, when there's been, you know, absolutely all hell on, closing 4 offices, redundancies, lots and lots going on, our customer satisfaction score since the 1st October has actually risen. So as a group now, we're at 92% well well in the 5 star. So if if I really had to describe how culturally the customer is front and center, everything we do, In spite of everything that's been going on in the 4 or 5 months, leaving up to Christmas and the 2 months since Christmas, the customer satisfaction scores are rising. If you get all three of those right, enhanced shareholder returns will follow. We've got a highly experienced operational management team. On the house building side, Daryl White, Bovis, Andrew Hammond, Linden, Michael Steerup, Bovis, Dara Maddox, Linden. It's it's pretty well spread. The whole thing I'm treating, as a merger. And on partnerships, Steven Tiegel, CEO, Stewart Brody, Stuart Monroe, James Warrington, everybody on that list has been around for at least 5 years. Some of them even more, and my script says you know, it's a great balance between young enthusiastic leaders and more mature, older, dour, even, leaders. And if you, I'm not sure who wrote the script but looking around and they're all in the room, I'm not sure where the, where the young ones are, but, I'm sure they're there somewhere. So on house building, our strategic priorities, we're looking to maximize output through controlled volume growth. So there'll be no growth. It's a standstill in house building in 2020 exactly as we said at the time of the acquisition because that is where most of the integration, issues things to deal with are, but we were looking for a steady, incremental volume growth from 2021, and we would look to get to 8 thousand units, as soon as practical. Really excited, and it's one of the main strategic aims, benefits of the deal of the dual branding, the dual branding will enable us to sell quicker, on our existing sites and make us even more competitive, I think, in the land market. We're continuing to invest in our people, and going forward, it's still all about hands on leadership, not leadership from computer screens, hands on leadership getting out there, and the focus remains on having quality site managers and quality site teams. And Linden and Bovis want to be the partner of choice for our supply chain, as well as local authorities and housing associations. Fistry Partnerships, we are looking there's less integration issues in partnerships. It's pretty much, as as it was, so we are looking to continue the aggressive growth in 2020. So no real growth in housing on, on unit numbers, but there will be growth in the partnership side on on day 1 because there's less integration going on. So the 6000 units, that's, that can be achieved in the medium term, and that's from 4000 units today. Importantly, though, we are looking to increase, the growth is gonna come from what I would call house building as opposed to acting. So we are looking to increase the amount of house building that the partnership's side of things does, but retain the very important contracting revenues or maybe grow them slightly, but not at the same rate as, the house burner side. And we are looking to expand into new geographies, and Graeme will touch on that, in a minute or 2. And we do expect and are confident to see a step up in the margin from around 5.6% to 10% in the not too distant future. And that will come from the house building side, which will be, generating operating margins of between 14 18%. So exciting times for, fishery partnerships. We've got a very, very good, land bank. So pro form a with 40,135 plots, we're continuing to target a three and a half to four year owned, supply, and that and we are seeing, an increase in land supply for Vishi Partnership to get them up to that 10% margin that we are, expecting demanding even. Increased competitiveness. This has all given us a increased increased competitiveness in the open market, on land. We were already, as we've said, we bought land at 27%. We bought a lot of land last year but bringing together Linden and Bovis and the 2 current house type ranges that they've got, the Phoenix range, and the Linden collection, which Graham is currently leading the charge on tweaking, slightly to bring in the best practice of both. I've already seen evidence in the 1st 2 months of the year where our land bids are even more competitive than they were. So I think we're even more competitive going forward than we were in that important important area. Significant opportunities from, strategic land, and I've been around for a long time, and I do think the strategic land team, that Bovis have got is exemplary. I haven't really worked with, too many better. There are some great people, and that strategic land team has nothing to do with me being a very, very good bedrock for Bogus over the years and continues to be, and we continue to go through a golden period. Within Bovis, and now the Vistry Group with strategic land coming through. Nearly 32,000 plots within the strategic land bank nearly 9000 of those already have some form of consent. We made good progress in 2019. They were just under 2150 conversions, and we would expect that to continue this year and next year with a strong pipeline of high quality developments coming through, Cullingtree already done in the 1st 2 months, Salisbury, Macclesfield, Cobbleshore, and, and benefit. And strategic land will continue to be a focus, and we're continuing to invest in it, this year and going forward. Graeme. Very good. Many thanks, Greg. Morning, everybody. Those of you that, those of you that know me know that, I do believe passionately in the, in the strategic and the, the operating the operational potential of of Vistry Group. And the transaction was was put together in a in a in a in the right spirit in a kind of collegiate and constructive nature, the way that we constructed the negotiation. And I'm really pleased to say that the integration has started in the same way. And indeed with with many of the same jokes, which is nice, it's it's very, very funny. Seriously, there's, there's a huge amount to do, obviously, with this integration. It's comp complex. It's demanding. And in in obviously in the area of people it cat is very, very difficult as well. But we are setting about it with energy and pace, and I'm really pleased with the with the progress that we've made we've made to date. As Greg's mentioned, we've reorganized house building into 2 divisions North And South. I'll talk about that in a moment. We rebranded Vistory partnerships on day 1. We had to do that. There's a fantastic effort by the teams, and we are really focusing hard on increasing the proportion of higher margin land led and mixed tenure work that we bring through that business. As Greg said, our divisional chairs and MDs are all in place and the majority of our business unit boards are confirmed as well. The, the difficult process of consultations of the people consultations. We're well on with that, and we will be through, quite early next month. We're making fantastic progress, on the procurement renegotiations, and that's both in price alignment in of both who's got the best deal and then of course seeking improved terms for the significantly improved for the significantly increased size, of the business that we now we now are. As you know, we're targeting some £15,000,000 of savings, from in that area. And, John Byrne and his team making great progress in, in already. We've also refocused our land teams already on the on larger communities because, of course, the increased size gives a makes means that we can, really start to play in those larger sites where The competition is just slightly less. And of course, that represents a real opportunity for us. We've aligned our 2 strong health and safety systems. Keith's done a great job, and they're we're pretty much there in terms of a single group policy, which is, which is important and quick, which is which is great. And on the Phoenix range and the Linden collection, too excellent and and quite quite new, quite new ranges, and we're working hard to optimize, to compare and contrast and optimize both of those It builds on the margin initiatives that have obviously been, thriving at Bovis last year. We're reviewing both the base specification to get the best of both where one can learn from the other and also revisiting and refreshing some of the finishing specs as well. And on in IT, obviously, a huge exercise there, a huge amount of work already done and lots to do, but we've got that we're well on with that significant work streams in bringing Linden onto the Bovis coins platform. We'll have that done within the next 2 or 3 months. Bigger exercise to bring partnerships into its own coins platform and then of course we need to rebrand and rationalize the whole network. So it will take us a few months, but the guys are doing a great job. So lots of pace and lots of progress. Just turning then to, to house building specifically, as as Greg said, we're going to 13 regions. That does mean that we're we're closing some four offices. We're well on with that. Sadly, that means we will be losing, something like just over 250 positions. That's the whether where the redundancies is is is is coming out. Importantly, as I said, divisional chairs and MDs all in place and the majority of the boards are confirmed. We've also taken the opportunity to have a good look at our business unit, structures and our teams so that we can harmonize those and optimize our operating structure. And very importantly, where the restructure has meant that sites are changing, are changing I. E. Reporting into a different office, we've we've take we've grabbed that very quickly because it's vital that, we retain control of those sites, that we continue to pay our subcontractors and that we continue to look after our customers, as I say, well on with that, and and got that under control, which is which is very important. Turning then to, to partnerships, obviously, partnerships significantly less affected by the whole, integration process, no change to our region experience, regional MDs, as Greg's mentioned, and the business unit teams are largely continuing as they were, although in some cases, slightly expanded, which is great because it's creating opportunities for some of the talented, talented individuals that we might otherwise be losing from the, Lyndon and Bovis businesses, so that's that's very good news. As I've said, we're focusing hard on increasing that proportion of mixed tenure. And not forgetting the important process of of growing that partnerships business. You know, we've been growing it aggressively for for the last 2 years within Galaford's and so it's important and exciting that we're already on with our next regional expansion. And those of you that would have heard me in September will realize that this represents a bit of a change of strategy. I think we were gravitating towards East Anglia, because it was the gap in the map, but actually we had a good look at the market kind of during last summer And Stephen and the team came up with a conclusion that actually it was Thames Valley that was pulling us. The market pull was coming from that part of the country. A number of our clients are offering us opportunities in the Thames Valley. So we've said actually that's where we're going to direct our focus, for now. We're already on with that. Very pleasingly, We've got a great resource, a guy called Nick Lahhan, who came out of, Linden Chilton, who's gonna take on setting up that, that Thames Valley region. So the small team that is setting that up is already in the business and, reporting to Stuart Monroe, the regional director in the regional director in the south. Customer service, clearly, really important for all of all of our businesses. And all three, BOBIS Linden and partnerships have made fantastic progress, as you know, in the last in the last couple of years. And as Greg said, already on trending on the 8 weekly we're we're at Five Star, which is fantastic. But we can we're absolutely determined to go further. We're already focusing on the on the 9 month survey and stretching ourselves as to what we can continue to do, to stay ahead of the game. The bar is raising externally as you're aware, the announcements on the Ombudsman last week, we welcome that. We think we're in great shape, to make the make the very best of that and and and and work with that initiative going forward. And an interesting aspect, of this for me is, the rolling outs, the boats have got a fantastic CRM system called Keys. We'll roll that out across the whole business, but we'll actually enhance it with some features of Lendon's sales and prospects tracking system, which was also superb. And so we'll take the best of both, and, and optimize that. House types and branding is really, it's a fascinating area. It's a new, it's a new proposition really for both. We both just had our own brands before. Now, we have the opportunity to to to play with too. It's a complex area. We recognize that And, so we said that's we've created a new position of Group Brand And Marketing Director, Debbie Holmes in the room, have a coffee with her afterwards, fascinating area, and it's been an really interesting, interesting debate. But the we had a bit of luck in the two ranges actually in that they both excellent ranges, but they set out from different places. So very much, both focused on location on quality and on value, but Linden approached the exercise very much around starting with buildability and cost, of course, not forgetting the customer whereas Bovis started from the principle of kind of distinctive design, a sense of space and luxury, but not forgetting buildability and cost. And what that means is that we start out with 2 highly complimentary ranges. It's it's a real bonus for us because they could have obviously had much more of an overlap, but they don't. They make great stablemates. We're working on both of those ranges to extend the depth of the offer to our customers and to accommodate some types which partnerships need within the ranges, and when we finish that that work, what we're absolutely clear on is that we'll be absolutely rigorous in enforcing those brands, around around the business. Really important that we don't undermine our own efforts by messing around at the edges there. And so those, and the way that we'll operate is that each of the house building businesses can offer both of the both of the brands, and partnerships can offer both of the brands. As I say, once they deploy that brand, they stick to it religiously. And the two ranges is exciting because it gives us flexibility in, in in in our location and our land our land buying and, indeed, the prospect of dual branding, on on our larger sites means that we can will help us to accelerate the pace of development and the returns that we can earn from those sites. And finally, just some of the key principles with which we're approaching this whole this whole exercise. Absolutely, as I think as Greg said right at the start, it's about the best of both businesses we really are looking at both and take and optimizing, taking the best of each. It's not about smashing one business, into the other. Where we resolved early that we were going to make our decisions quickly and execute them efficiently. We fully recognize that in some areas we'll make the old mistake, we might take the odd suboptimal decision, but I'm convinced that the cost of those hopefully small mistakes would be far outweighed by dithering or delaying and not getting on with the integration and starting to realize the benefits. And absolutely, as I've mentioned in one or two places already, adherence to group principles is paramount. We're having the debate now, we're taking the views, we'll make the decision, and then we will stick to those group principles, be that in branding, as I've just mentioned, or in procurement. There'll be no grubby local deals to get an extra throttle to take any discount and then undermine the whole integrity of the of of the group deal. So that's very much a key principle for us. And I think important to end on a real sense of of of one team. We're going to make this opportunity work in the market. That's how we have to operate. So we absolutely face our markets as clear and distinctive propositions, but internally, we work as a single operation. We're sharing our opportunities and best practice, developing our people, and absolutely leveraging our size. It's vital if we're going to deliver on this opportunity. And I would say there's been really great. I think I can absolutely speak for all the Galliford team. The well we've received a great welcome within the group and there's a real positivity right across the team for the fantastic potential in in this combination. That's Graham. Not sure how much time we got left after that, but, I'll on the, on on the market environment then, you would have heard this before. There definitely increased market certainty, political stability, progress on Brexit, Fundamentals historic low interest rates are gonna continue competitive mortgage market and getting more competitive by the day, I would say, strengthening wage inflation, high employment levels, government support for the sector all lead to a good, housing market, which leads us on to, you know, strong demand in the year to date, which I'll touch on in a minute, Sustained demand from housing associations, I mean, during the course of last year, I think Bob has sold an excess of 500 Houses outside the section 1 of 6 agreements to housing associations, and that appetite from the housing associations continues to be there. We've done very few deals, so far in the 1st 2 months because of the strength of the actual market there's a number of deals bubbling away, but, it's it's good to know that there is a sustained, that's a sustainable, area for house builders to go to. And the land market, of course, as we proved last year with, the land we bought at 27% remains, attractive. So finishing things off then on the outlook. Graham said it, Earl said it, and I'll say it again. The integration, the 1st 2 months, I mean, we'd more than take where we are today. A huge amount of work, but, we can already start seeing light at the end of the tunnel, and it's kind of been seamless, and it's been, you know, not every day. Sometimes you haven't gone home thinking god, but, you know, more more days than not, it's been it's been a very, very good experience. We've had a great start, to the year. So underlying average sales rate at 15%, positive momentum on underlying pricing. So for the 1st 7, we with just under £2,000,000 up on forecast. So all very good stuff. A strong forward sales position, and this is interesting. So we're 48% sold on private house building or on our house building business, exactly the same place as where bogus were this time last year. If you'd have said to me, what was the number on the 1st January, it would have been behind because obviously it was a difficult time for any consumer facing business, including house building, leading up to Christmas with the election and Brexit. But in 7 weeks, we've caught up that position, such as being the strength of the market since Christmas. We've seen we've got an increase in mixed tenure forward sales, from Victory Partnership is great to 244,000,000 from a £159,000,000. That's exactly where we want Victory partnerships to go. That will be the higher margin stuff. And on the contracting side, an incredibly strong, what we call work on the bench, which is contracts nearly signed, in the last knockings of the negotiations of £1,500,000,000 and a contracting order book of £890,000,000, down from £960,000,000 a year ago, but about the same, And if you listen to what I said earlier, we're not looking to grow as aggressively the contracting side of the business as we are the house building side of the business, so you shouldn't expect that to go forward. But we are on the contracting side of it in great place, this year with 88% of the work we need, to achieve consensus. Already secure. So we're in great shape, and we're in a pretty good market. So, we're delighted with how things are going. And on that we'll take, any questions. Thank you. Thank you. John Fraser Andrews, HSBC. First question is on the sales rates. The step up from Bovis Homes, to 0.64. Can you say where where you see that heading? Is that is that the natural rate for this old Bovis Homes, Linden Homes, from recollection was, was sort of half a tick higher. So, so where's that sales rate going? Is there more structural growth in it that Bovis has achieved over the last couple of years? So that's the first one. Let me let me do it. I won't remember otherwise. So, I would say is point, you know, last year was point 57.58, and that was up from point 5. That's probably because of our build quality, our customer, satisfaction scores, our reputation, being better, and both Bovis and Linden have said now for about 18 months that on our land going forward, we are looking to do more, bring our ASP down, are you doing more 2, 3, and small four bedroom houses than the 5 and 6 bedroom houses So as you bring that comes through and it started to come through last year and will come through again during the course of this year, you would expect to see the sales rates increase So, you know, somewhere between 0.6 and 0.7 is where we were aiming to go with our new mix. And Linden and Bobis, all I can say is in the first 7 weeks of the year have been selling at approximately the same sort of rate because their mix isn't too, too similar. Thank you. 2nd question, partnerships, mixed tenure margins, the 14% to 18% Can you just sort of flex where the variations in the types of developments are, in those margins? And is the strength of demand has there been an underlying any underlying increase in that margin in the last year or so? Steven, do you want to take that one? The margin that we achieve on-site is a reflection of the extent to which we pre sell. So, if some of our sites have 2 thirds presold as PRS or affordable housing, then that contributes to the overall site margins. But our margin that we aim for on the mixed tenure outright sale is exactly the same margin on as you'll see in the house building business, and Greg mentioned, 27%. So that's the sort of threshold that we look for for our outright sale. But obviously, if twothree of a site is affordable than you're looking at a lower margin on that percentage. And just the last one, current trading any regional mix in the sales reservation rate rise and the pricing increase that you've seen? Yes. On the pricing increase, it's interesting. On the pricing increase, I would say, the south is slightly stronger than, the north on the sales rate. It's the other around the the sales rate has been more encouraging in the north and the south, both up, but the north has been better, but I would put that more down to the integration, within the business. So the north, led by Daryl, has got, a lot to do with integration. But not as much as the south, and that must be impacting, the sales rate, or at least that's what Andrew Hammond's telling me. So I I, you know, so we're we're encouraged with the sales rate in both areas, but there is a difference, slight difference in the rate between north and south north being ahead south are ahead on prices. Chris Munington at Numis. I'd just like to firstly ask just on synergies. It sounds like you're making pretty good progress on the integration. I'm just wondering kind of what line of sight you've got and maybe just gives us a bit of feel as to kind of the exact split there. That's the first one. Second one is just about embedded land bank margin between the two groups. I don't know if there's been any distortion there. And then really just how you're feeling about the Help to Buy price caps. Help help to buy price caps, after that, and then Erl will take your first two questions. The Help to Buy price caps are exactly as the government said when they initially announced the scheme, so we're we're pretty happy with them. If if if we, try to get any of them changed through the HBF, it was the West Midlands So we think the West Midlands is a bit low. We think other areas are quite generous. So overall, we're we're not really concerned, but if if you puss me at the West Midlands is a bit tighter than the other areas. Bill, first two questions? Yep. So in terms of synergies, obviously, at the time of the acquisition, we talked about 35,000,000 dollars, $15,000,000 as was mentioned for, around the procurement, which as Graham touched on, we are progressing very well with, and, John's doing a great job who's with us today as well. And then in terms of the site on the operating costs, savings of 20,000,000 in terms of, you know, the difficult process of restructuring, we can see good sights on how we will achieve those synergies as well. So you know, on target, as Greg said, we are ahead of where we might have hoped to have been with the integration in terms of delivering those you know, through this year. So we are we're definitely ahead of where we expect it to be, and because we're ahead, we're very, very confident of of of the overall number. Okay. In terms of the embedded land margin, terms of Bovis, which we've given you, holding that steady at 24.8% same as June. Really pleased with that, in fact, given as we've said, you know, pricing pressure in the second half of last year, which is all that reflects because we did that in, land bank margin at the end of December. So we've been able to counter that with some of the cost savings and, I think the natural increase, so pleased with that. We haven't quoted a Linden margin at the moment, but, you know, it was similar, when we put it out at the time of the acquisition, and look, we're gonna have to do some work and the accountants will, make me look each of the sites as part of the acquisition accounting, so we'll come back and actually give the numbers in due course, but, you know, they were similar, landline margins. There's going to be no I think it will complement it. Will Jones from Redburn. A few as well, if I could please. The first, can you just help us maybe establish what the pro form a basis on various metrics? Because we've got different year ends at the versus JVs, lack of JVs, I'm thinking particularly the base housekeeping volumes, say for calendar 'nineteen if possible against the 8000 long term target? And then just obviously one thing is landbank gross margin, but in terms of the P and L gross margin, I think roughly Linden reported 24 gross their last financial year and you guys, although this was circa 22. So is it is 23 roughly the kind of carry forward into calendar 2020 on P and L gross margin. Just on on on that point, and I'll pass back to, Earl, on on margin, I mean, we are happy to go out there and say we're looking at an operating margin as a combined business for 2021 of 18 and a half to 19% and add your overhead onto that, and that will get your, your gross margin. And for 2020, we're very much in the camp of put aside the margin. You know, we're happy with consensus. And we're which is in line with what we said at the time of the acquisition, which will be, against consensus at the time of the announcement, about 10% EPS growth on, against consensus of where bulbous worth of 2020. If you just put that at EPS growth again, been the results we've just announced at a £188,000,000. It's probably near a 14 to 15% growth in 2020 from 2019. That will obviously do things to the margin, but we're gonna keep quite on the margin this year, but we are happy to put out there that 2021, 18a half to 90 percent operating margin. Earl? In terms of volumes, so talking about flat house building volumes, you've obviously got 3860 7 was the Bovis number. I think I'll probably take you back to a 12 months to June for the Linden number, but assume that for the 12 months, that we are in, you know, you're going to be somewhere 6 and a half to 7000 in terms of house building units. And remember, the quantum of JVs that are in there. So they are gross numbers that that are quoted, in terms of what what you'll see coming through, and that will then step up in due course, but not this year. And the partnerships are about 4. Thanks. And then just perhaps you could update us on expected balance sheet evolution 3.60 net cash, but then the money's gone out in January. And I know you gave some indications at the time of the announcement, but has any of that changed? And I guess at what point would you be happy to reduce that dividend cover that lower again as you indicated to the 1.75 times kind of level? Yep. We've probably got different answers on that word, but go on. Yeah. Well, healthy tension indeed. Guidance is exactly the same as at the acquisition. So as I said earlier, you're looking to get the gearing, land creditors and debt down to just below 30 by the end of this year, looking to get that, down to about 25% in the in the subsequent year, you know, the exact mix of debt and landcruise will depend on on the land market and, you know, how much we can, as I said, buy now pay pay later. And and yes, there's a period of integration and deleverage, you know, before we look to reduce the dividend cover to 1.75 and I'll let Greg give you the slightly different answer. No. No. I'm fine. You're alright with that one? The final one was just around, you've indicated that you're potentially looking to move the mix down a bit of the business going forward. I think the old bovis landbank ASP is 299 or something. Is that had is that coming lower or all else equal or Happily, if that is, you know, I mean, Graham, you chip in, I mean, Linden were on exactly the same, same path. So, yes, so so Graham was right on that. He had the same strategic, aim as as as we did. Yeah. You're happy holding that circa 300 mark. Yeah. Very much. Hi. Yeah. Some coming from from Berenberg. Couple from me, on dual branding. I think you said you've got 50 sites that are dual branded. No. We've got 50 sites, that are being transferred. Front cert. Okay. So we will have, within within this next 12 months, I'm gonna say we'll have 10 sites dual branded. The fifty sites is just was a number that I think Earl put out there. It's a it's a number actually in one form or another. We are in some form of joint arrangement, so I was trying to give you, you know, be honest, giving you some guidance on number of outlets we've got, but just remember some of them are, you know, same with 50% actually, attributable to us. So so so this year, we will we will dual brand. I mean, a great example is if you go down to Sherford in Plymouth, or just outside of Plymouth, 5000 units that was bought 3, 4 years ago by Bovis, Linden and Taylor Wimpey. It's already your brand as it were. So as of today, you can go on to the site and there's Linden there and there's bogus there. There are a couple of other sites like that, but there are other some other opportunities during the course of this year that we can actually, accelerate our, our unit numbers maybe push some other things back by introducing a second outlet. So this year, I would say 10, the 50, as well as, what Erl will I was talking about aren't from a JV perspective is just putting into context the amount of work we've got to do with the integration because there are getting on towards 50 sites that are moving from business unit a to business unit b to business unit b to business unit c. And those of you that have been in the industry before, and understand how these things work. When you transfer a site from one business to another, there are lots and lots of their fun and games in shenanigans go on with the, the new business unit managing director not being quite as happy as the previous, business unit managing director with what he's just inherited. But, I'm hoping we can keep that to, the minimum, but it, but it's a big job. Okay. Thank you. And a kind of a follow-up to that. As draw branding increases, what does that mean for average site sizes? You said kind of going up the exercise. Where are you now? Yeah. We we will be looking, without any shadow of that, the land market is soft. The land market for 4, 500 unit plus sites is is softer again. So that is a land market that we will be buying more land from. So what however many sites we've got at the moment, I don't know if you know the answer to that. I don't have top of my head that are over 4, 500, will rise over the next couple of years because of our ability to dual brand. Where we've, most of our large site we've got now in fact, all of our large sites we've got now have come from our strategic land bank, which generally means, what how competitive we've been in the past on bidding for large sites, you know, not not as competitive as smaller because we've had to put a margin and a return on capital, importantly, based on one sales outlet, bulbous. Going forward, we can already see when you talk to our land teams, you know, the fact that we can have 2, and even bring onboard partnerships means that we can get through those larger sites quicker than we could have done, which will mean we will equal our a hurdle rate of 25 percent return on capital much easier. So, yeah, we will be buying larger sites, more than we have in the past. Which should be, less competitive and overall when you're actually on the ground, it's easier to run a business with, 10 1000 unit schemes and 25100 unit schemes. It is just more straightforward. Thank you. Just the just the last thing. On the four offices that you've closed, is that kind of 2 of each is that 4 babies, 4 Linden, is it? Is there anything to note there? No, they are. No, they're 4 they are 4 Linden, offices. But if you take, Exeter, for instance, you know, as an industrial estate, they're called or business park called, South Industrial state. And within 500 yards, you had Bovis, partnerships, and Linden. So although we've closed the Linden office, I mean, it's a game of chess, the partnerships business is gonna move to those lending offices because they're better than their offices. And then the Victory Homes team is the best of both worlds. So just because we closed the Linden office, unfortunately, we have to put everybody on notice in the Bauva's office as well. And, you know, so it's been it's, yeah, it's that office that's closed, but there's a good mix of Linden and Bowers people in those particular offices. The other, offices that have been closed the the 2 main ones are Abingdon and Fairfield. And if you look at, the customer care scores of, Linden during the course of last year, they were the, areas that were bringing, the schools down. If if, you know, easy to say, but if if Lyndon didn't have, Fairfield and, Abingdon, I would suggest that their customer care scores could have actually been the best in the industry, but as I said to Graham, you know, you you gotta look at things properly, you know, you make your own luck. But, but but, yeah, so we've closed those two offices, which, in in a in a swoop, will, deal with some of the customer issues that we're around about the place. Okay. Thanks. And then in your shipping is merging 2 into into 1, just make his way since it's not really a closure. It's a merger. Scott Clyde Lewis at Peel Hunt. 3, if I may, please, Greg. Firstly, on the contracting part within partnerships. Obviously, you've you've flagged the mixed tenure and and, you know, the increased mix that we're going to get from that part of the business and obviously going to be a big driver to the margins. But within the contracting part, given how strong the demand profile is, have you got any hopes for pushing up the underlying margins within that part of the partnerships business? I think so that the the the the majority of the contracted bid is done in is done in London. More than half, more than half, and and the team that we have in London on the contracting side. So first of all, going forward, all but one of their clients, and I think that job's actually finished our housing associations, or RPs or joint ventures with RPs, So we're moving away from any private client, private private developers. And, yeah, I can see, margins on on the contracting side of 8%. Gross. So yeah, we can. And I think housing associations more and more are looking for 1 deliverability, 2 quality, and and someone that they can trust. And in London, I think we've absolutely nailed that, nailed that down. But because of the growth coming from the house building side, those of you who've been in construction for some time, it gives us the ability to walk away from a scheme that we think is not quite right, more often than not and and delighted that in the last week, Stuart and his team in London have walked away from quite a big job, with with with with an RP. And that they've been working on for 12 months, and and it's with us, but but it would have been the wrong thing to do. But the opportunity levels that are out there now with a stronger balance sheet and the fact that we can do more things ourselves give us the opportunity to do that. So I would hope the summary of that is we've pushed the margin up a little bit, but I would hope what drags construction margin down isn't necessarily those margins you you're actually saying you're going to do. It's the, the number of jobs that go wrong, bringing that margin down, and I think the ability to turn things away, I'm looking at the guys now, it is greater than it was yesterday. So that will be how we drive the margin at less jobs going wrong, a tweet to the margin. The second one I had was on procurement and the 15,000,000 that that you're talking about there. Presumably, you know, you had an expectation of how much from labor and how much from materials, probably more materials than labor, but I'm just wondering in terms of the initial discussions you're having with the suppliers and and you know, the, the, the work gangs out there. What what's what's your sort of current feel for how that mix is evolving? Is it shifting in one way or the other in in terms of sort of where the bigger savings might be coming through from? Well, I mean, I think the procurement gains as a whole is the is the real area of opportunity. Things, you know, discussions with our supply chain are are going well in terms of you know, what's really the materials element, but I suspect the real opportunity is getting into the specification taking the best of both Lendon collection, the Phoenix collection, and putting that all together, and that's the real opportunity that we are looking to expand as we as we get into it. So, I suspect we will do better on both elements, but the real opportunity in the second one to get after. Sort of the procurement, the materials want, you know, we would hope to be knocking that on the head in the next, 8 weeks, or even a lot of work and we're we're delighted with progress on on that. And there are some areas around the country where we are now particularly strong and stronger than anybody else that that is the areas we'll concentrate on the labor savings because we're too big, from a subcontractor perspective, to ignore. Earl said earlier that we've actually dropped the cost of, build in Bovis in that, 12 months. That was done, by a few initiatives out there, a quest for a quid being one of them, where we were out there looking at the specification. We had 2 or 3 goals at that. And in the next month, as Graham said, we are looking at the best practice of specification, the base specifications of both Linden and Bovis. And on pretty enthusiastic on what the number is yet, but I think we've got a pretty good number coming through on a further specification. Bringing together that will on top of the procurement games and put us in good stead again. The the third one I had was on pricing. I mean, you touched on it a little bit, but are you worried that because there's so much going on in the group that the guys actually out on-site are not as focused on trying to maximize the price rises as they possibly could because there's so many other things going on, and the focus is maybe not as sharp as as it might normally be. But I'm I'm massively worried it'll progressively get less, but for the 1st 2 months, there's, you know, you've got so many people on notice, you know, HR is a great thing. Why why worry three people and you can wear a 1000? I mean, so, you know, there's so many so that must impact on the overall performance somewhere or other. I'm delighted to say, I mean, the guys are really, really performing well, but there must be an impact so whether it's on putting one brick on top of another, whether it's customer satisfaction, where the KPIs are saying it it's actually gone up actually, which which is great, but actually driving that best price, by a sales adviser on-site, there must be an impact. That is gonna, go away as we get through March, and we're through that, initial integration process. And I think we're pretty much, can see light at the end of the tunnel now. But we have, you know, to help with that, we have had discussions with all the divisional manager directors, and we have put prices up across the board. So that there is absolutely no loss of focus by 1% in the last 2 to 3 weeks. There will be some exceptions on plots which are sticking or on individual sites, which are which are struggling. But overall, across the board, we've increased prices by a percent. Brilliant.