Okay. Great. Okay. We'll make a start. Very welcome to you all, to the Bovis Homes full year results for 2018. This is an audio cast, if you could all turn your phones off or put them onto silent, that would be great. I'll start with an admission. This was going to be our first webcast. Unfortunately, we were due here, Earl and I, at 7:00 A.M. this morning. Problems with the tube. We got here 10 minutes late. Ended up at makeup. I was okay, but makeup decided that they couldn't do enough with Earl in the two hours that we had left, so we've had to revert back. I do apologize, and we'll try again in six months' time. The agenda today. Highlights. That'll be done by me. Earl will obviously do the financial review.
I'll then come back in with an operational update and update on our medium-term targets and outlook, which is very strong, and then we'll obviously take any questions and answers. That photograph there is of the group's largest development, Stanton Cross, Wellingborough, which has been in people's minds over the years. It's been around for years and years and years and years. Delighted to say, as of today, we've got a show home, and we had 27 completions to Christmas, more completions since, and it's probably one of our, maybe our best-selling site to date. That site is actually happening as we go forward. The highlights, and there's lots of them. It's been significant operational improvements, which have delivered a step change in the business and financial performance. Record year of profits with 47.4% increase in PBT.
Transformation in build quality and our customer service. More on that later on. June and December, our period ends with both controlled and disciplined. Significant improvement in the operating margin, up 390 basis points to 16.4%. Along with that, a step up in return on capital employed to 19.3% from 13.7% last year. Excellent progress on our balance sheet optimization. We're today announcing that we're expecting that to rise to GBP 250 million from the initial target of GBP 180 million when the expected completion of the Wellingborough JV, which will add in just under GBP 70 million, completes. Very strong period on land acquisition. In fact, the second half of 2018 was as strong a period as we've had for years.
Strategic land conversion, which has given us excellent land visibility. We've successfully launched the new Phoenix housing range with our new sales specification, and the first two show homes of the Phoenix range are now open. Great news that we're going to launch a new partnerships housing division. More on that later, during 2019. We've seen great demand, Brexit and all, in the first eight weeks at our show homes with a sales rate of 0.58 over the eight weeks. It's over 0.6, well over 0.6, if you just take February. That's sales rate that the group haven't achieved for years and years and years. That puts us in a strong position for 2019, where we're slightly up on the same time this time in 2018, with 48% of consensus 2019 revenues already confirmed.
I've been around for a long time, that really is a strong position to be in. Good progress towards achieving all of our medium-term targets and expect to make a lot of further progress during 2019. Against all of that, the board has recommended a 20% increase in the ordinary dividend, reflecting the strong performance and confidence in the group's outlook. On the back of our performance on the balance sheet cash, the group obviously remains committed to reviewing further capacity to give more back to shareholders over time. Earl.
Morning. Pleased to hear that the case file gets bigger for me, Greg, so thank you for that. You're looking at the screen at our first development joint venture at Sherford in Devon. Joint venture we completed, entered into December last year. That will be ex-year accounted going forwards. The development you see, we will finish off the current phase ourselves, but new and future phases will all be in joint venture going forwards. I can now take you through that significant step up in profit and, more importantly, margin that has come from controlled growth and a real focus on margin in the business. Revenue up 3%, driven by a similar increase in volume. Pricing was ahead. We have had more affordable in the mix in terms of how that's come through, and I'll take you through that in a moment.
Gross profit up 25% to GBP 230.9 million. Again, more in a moment. Admin overheads flat year-on-year. That reflects the optimum structure we put in last year. We have had additional costs in respect of training and IT as we invest in the business and a better way of working going forwards and increased employee costs in there. Operating profit of GBP 174.2 million. Got interest costs slightly down on last year. We have got lower average debt. Also slightly lower imputed interest on our land payment deferrals. We have lost the benefit of an interest credit we used to get on shared equity that we held. We obviously sold that during 2017. Overall, profit of GBP 168.1 million, up 47%.
Tax at 18.7%, largely following the tax rate with a small adjustment in respect of prior year. Looking at sales prices and volume, say we're pushing prices forward. Private sales price up 1%, but at GBP 337,000, still a very affordable product. Affordable price also moving forwards, reflecting the tenure and location where we're operating. Overall, no move in our price as that greater proportion of affordable has an impact. If I take you back a little bit in terms of affordability, you'll recall 2017, we sold our last GBP 1 million homes. If you look now at the number of homes over GBP 600,000 that we're selling, we completed less in 2018 than we did in 2017, and that trend will continue as we go forward, and you'll see that in our land bank in a moment as well.
Affordable proportion approaching 32%, lower in the second half than the first half. When you think that we buy land, tends to have 30% or 40% affordable, that is quite a natural level at the moment in terms of our construction routes around the site. Combine that together, 3% up on housing revenue. Did have GBP 20 million of other income. The largest part of that is GBP 10 million coming from our PRS joint ventures as we dispose of those. That was revenue that was deferred when we originally went into those ventures, now coming back through our income statement, and there is about GBP 1 million of profit with that. Other in there is some small land sales and some commercial revenue, normal course of business.
In terms of our profit split between housing and the sales of development land, shows that significant step up in gross margin to 21.8% and a total of 360 basis points on the housing margin, driven by a number of things. Firstly, the improvement in the embedded land bank margin, and you will see that progress going forwards. Doing it right first time in terms of our build costs, and certainly lower costs, with customer care post-completion, and the initial impact of our margin initiatives. Pushing price, impacts on the cost base, and the Phoenix housing range coming through. Again, the overhead ratio at 5.3%, down from 5.5% the year before. We are still expecting to get that to 5%. There may be a bit of an adjustment for joint ventures as we progress. Overall, operating margin forward 390 basis points to 16.4%.
Pricing and costs, just look at the two ring numbers on the screen. Three percent up in terms of private sales price per square foot. I am not going to claim I can accurately identify every impact in here, but we certainly estimate pricing inflation in the markets we are in at about 1%, certainly supported by external house price indices as well. Got an impact of mix and higher value locations, but also that pricing initiative, pushing prices, getting our sales advisors incentivized on the net price and reducing our dealing margin. Construction costs, again, we have seen a 3% increase, but actually we have been seeing inflation run around 3%-4% and continue to see inflation. Arguably, a little less inflation pressure just at the moment with the market backdrop that there is.
We will have seen costs up again from mix and the locations we are building on, but offset by specification change and underutilization of contingency, so delivering just the 3% increase in the year. Most importantly, the operational improvements, the change in processes, a new system for our commercial teams, leaves us in a great position to control our costs going forwards. Cash generation, good cash generation in the year. Compared to last year, we did have 2017 saw a big inflow of housing association monies. Excuse me. Still a strong position for 2018. Little impact from those PRS disposals I mentioned, because most of the cash there goes to the bank in the first instance. We have still got effectively our cash to come as we finish those disposals.
The construction expenditure reflects our further investment in Wellingborough during the year, it also reflects an increase in our housing work in progress. As you'll see on our balance sheet in a moment, we had about an extra 100 homes in construction at the end of the year. Cash expenditure on land, GBP 174.5 million, reflects both the unwind of the creditors and the new land investment during the year. The dividend payment reflects the first GBP 60 million of special dividends paid out in November. The non-trading items are largely tax, and we did make a special pension contribution of GBP 5.5 million following the closure of that scheme to new accrual. Overall, GBP 18.1 million outflow, and a closing net cash of GBP 126.8 million.
As Greg mentioned, we expect to see a cash benefit of around GBP 68 million as we move into joint venture at Wellingborough. That will be both a cash inflow of GBP 32 million-GBP 33 million, as well as the impact of the Homes England loan going off the group balance sheet of about GBP 35 million-GBP 36 million. Again, as Greg said, the most active period we've had for a long, long time in terms of the land market being the second half of 2018. You'll see the dots on the map are largely all the new acquisitions in the year. Certainly, the white or gray dots, along with the red dots, and the red dots specifically are those sites coming from our strategic land bank. 47% of our land coming from strategic land bank. Pinpoint 2, particularly.
Development at Alphington, near Exeter, and North Whiteley, near Southampton, both significant strategic investments now coming into our land bank. You can also see the investment in the future. The blue dots are new strategic land options, so continuing to invest in the future of the business with the strategic land. Again, good period for strategic land, so a further 2,134 plots gained planning consent in the period. All the land that we have bought during last year, we expect to get at least an average 26% gross margin and 25% ROCE. All that activity giving us great visibility. We are on and building pretty much everything for 2019, and 97% of 2020 land already secured. I won't dwell on this, but just to give clarity on our land bank, total land bank 17,328 plots. Within that are 1,496 that are in the Sherford joint venture.
If you net that down, 15,800 roughly, and our target 4,000 completions a year, that's a four-year land bank. You can see the average sales price has gone up just a little, but the average cost per plot has moved in the same proportion. Importantly, the average gross margin in the land bank moved forward significantly, reflecting both those margin initiatives starting to come through, and the quality of the land that we're buying coming in. The 26% in terms of acquisitions. Strength in the land bank. 96% of our private plots are now under GBP 600,000 looking forwards. In fact, 42% under GBP 300,000, and only 1% of the plots that we bought in 2018 are in fact over GBP 600,000. That trend in terms of ASP in the future, will come through.
Won't see that necessarily in 2019, but you will see a drop in ASP in 2020 onwards. Really pleased, balanced portfolio across the business, and no region is in any way desperate to buy land, so it's controlled land buying. In terms of low risk, 4% apartments and 91% on greenfield. Low risk land bank. In our balance sheet, you can see that investment in land since the half year. You can also see it in the land creditors. The land creditors are at 34% of land. Within that, I mentioned the two big strategic investments we've made, so in Exeter and North Whiteley. Around GBP 38 million of the land creditors are accounted for by both those sites. As we said previously, mid-30%s we're quite comfortable with in terms of land creditors, particularly with that profile of site coming into the land bank.
Work in progress investment reflects about GBP 25 million further investment at Wellingborough at the year-end. It reflects that extra 100 homes in production, and they are homes that are further progressed than the previous year. Pleasingly, we've actually got less investment in roads and sewers as we control the infrastructure investment on the ground, and we had a little bit less part exchange again this year. A further reduction year-on-year. Other liabilities are down, reflecting actually where we are on payments on account from our housing association, a little bit around timing of payments at year-end. Overall, net assets per share, GBP 7.90. Finally, we've been looking to optimize our balance sheet over the last 18 months or so it's when we started midway through 2017.
As Greg said, we're now aiming to get to GBP 250 million, and the slide shows both progress to date and the opportunities still to come. Land disposals, GBP 66 million. Entering into the joint venture at Sherford. Great progress on our work in progress, particularly in part exchange. Other areas, the complete disposal of our shared equity portfolio, disposal of fixed assets, including our four owned offices, a reduction in debtors, and the ongoing disposal of our PRS joint ventures. There is more to come. Wellingborough being the big part that we've mentioned a couple of times. But there is still the PRS joint ventures to conclude. Most important now with a better shape balance sheet is managing that tighter balance sheet going forwards, and that's what we're doing, to embed the right behaviors right across the business. With that, I'll hand you back to Greg.
Thanks so much, Earl. Operational update. I'm sure our health and safety team have scoured that photograph to make sure there's nothing wrong. Doesn't seem to be, but I'm sure they've had a very good look. We've transformed, absolutely transformed our customer service. Customer satisfaction is central to everything we're doing, definitely in 2018 and definitely going forward. Massively helped by controlled and disciplined period ends, which both Earl and I have talked about. Delighted to say we are now a four-star house builder for 2018, and that's up two stars from 2017 and ahead of target. Jumping two stars in one financial year is very rare. It's been done before, but not very often. Better than that, all of our seven regions were at least four- star. Two of them were five- star. It's absolutely spread across the business.
For those of you who don't know, the HBF year where the star rating goes from one year to another starts on October 1st, finishes end of September, of course. I can tell you now that with just under, as of this morning, 500 responses, the majority of those coming through from our December completions, which is the usual pinch point, we're currently trending at five- star. With four of our business units at five- star, one just under and two at four- star. It's getting better and better, and that is underpinning our financial results. That wasn't a flash in the pan. It's getting better and better as we go forward. Customer service remains a key priority for us. We're implementing our new CRM, customer relationship management system in May. Really excited about that.
Input from our home buyers, sorry, panel, which is purchasers of our houses giving us feedback. Collaboration with the Institute of Customer Service, where we're now members, and of course, ongoing training and development. Huge step change in build quality. To get good customer satisfaction, you've got to start on site. Further progress on build quality, six NHBC awards in 2018. We have to go back to 2004 when BH won more than six. NHBC reportable items down a massive 66% since December 2016. High caliber construction directors, site managers, and site teams across the regions, which if someone says to me, "What is the most you've done at Bovis Homes?" This is the area I focused the most on. Huge hands-on approach now is embedded throughout the business. Increased standardization and best practice across the group, and we're investing massively in health and safety.
It's great to see with all those photographs, the ladies on site that we still are employing the odd bloke on our building site. Probably not supposed to say that, but there we are. The Phoenix Collection, our industry leading housing range in my mind, Clyde. Excellent progress on implementing the new housing range. 34 sites replanned, totaling 1,664 units. 19 further sites currently in planning, and we're confident we'll get it. Two new show homes have been opened with excellent customer feedback, and the first completions are expected in spring. Circa 15% of completions in 2019 are going to come from Phoenix, and that will ramp up dramatically as we go forward. We're very confident that the new range will deliver improved sales proposition and value-added stuff to our customers.
Improved build efficiency and reduction in cost, that's coming through already, and definitely increased competitiveness in the land market. Overall, as we said to you before, we're expecting to deliver circa 3% every time we change a portfolio house, our previous standard housing range to Phoenix. That will probably balance up to a 1% increase in our overall land bank. I can just see the quote there. I can just see one of our purchasers turning up saying the open modern living areas with classic architecture were hugely popular. High quality and skilled workforce. We are now investing in people and in processes. In-house training center, which was nominated for a couple awards last year, covers all business functions, including subcontractors. The leadership training program is well on, and to date, 140 of our employees have gone through that.
20 trainee assistant site managers with the group on a program. We've nearly got 70 apprentices, and that's a big focus for us, and that's rising. A steady improvement in our Peakon engagement survey. If you score seven, we're told by Peakon, that's a really good score. The last score in January showed us at 7.9, which is getting towards top of the tree. The big takeaway from that slide is two years ago, it was really difficult to attract people to join and keep people at Bovis Homes. That is no longer the problem. We're not using headhunters to bring people to Bovis now. People like what we're doing, particularly on site, and we're getting lots and lots of emails looking for people to come and join the business, which is great and definitely different from where we were a couple of years ago.
We're building about. Is it me or is it cold in here? Sorry. Just need to warm up slightly. Building a better Bovis Homes. We're 18 months into a 3.5-year major program of business change. COINS, which you'll all be aware of, that was successfully rolled out during the course of 2018, and we're making significant progress with that. The process reporting, cost control, all much better, and the second phase is being rolled out during 2019. Other process changes include consistent automated, this is called Viewpoint, consistent automated document management system, sales website enhancements, which might be one of the reasons why our sales rate has gone up. Business planning and modeling, learning management, and HR and payroll solution. All of that alongside our CRM, which I mentioned earlier, and our Phoenix housing range.
These initiatives are definitely driving forward our margin and our profits. Value from our strategic land bank. As I've said all along, it's a great asset for Bovis Homes. There's no getting away from that. Very well positioned. We've made major progress in 2018 with some significant land coming through. We're delivering high quality developments in the very near future. There's been a step up in strategic land pull through during 2018 with a conversion of 1,958 plots at an average margin of 29.9%. We expect the. If you look at planning agreed and planning application there, which is just over 9,000 plots, I've got no reason to think they won't come through in the next couple of years at similar or even better margins. We're continuing to pursue new strategic land opportunities. It's a very good department for us. In 2018, we secured 1,415 plots.
We're basically securing what we're bringing through into the current land bank. Strategic land is definitely demonstrating its value to the group. Partnership housing. We are launching, during 2019, a new initiative, our partnerships housing range. That will be led by Keith Carnegie, who's been with the group for a long time as CEO. I would ask Keith to stand up, but those of you who know him, it would be difficult to get him to sit down again, so we won't bother with that. Bovis Homes, and I do have some experience in the affordable housing section, is very well positioned to maximize this area. It's going to be a land-led strategy. We're not going to be going out there tendering. This will all be done through our land bank and particularly through our strategic land bank.
Over the last 18 months, obviously, we've done a lot of rebuilding of our relationships with our private clients. I would actually say to you the relationship building that we've done with our housing association clients has been even greater. I would say today we've got a very good relationship with them. I've had in my mind for a long time, let's bring in Partnerships Housing. What's the point if you haven't got a good relationship with the people that you've been working for? Today's the day. Relationships are far, far better. Still, some work to do, I'm sure, but we're in a good enough position to launch this exciting new initiative. We've got a track record of doing it already during 2018 at Wokingham, Boorley, Sherford and Tavistock. There is availability, obviously huge availability of funding from the housing association movements.
Massive benefits for the group: deliver the best returns from the land opportunities, facilitate better working capital management, an additional less cyclical revenue profit stream in time, and it's a safer area to be in. That's where the major growth from Bovis Homes will come from over the next few years, with some growth, of course, but limited on the private side. With everything that's going on, we need a new brand. We're introducing it today, the new brand identity for Bovis Homes. The existing brand has been around for over 20 years and has been a little bit outdated. The whole brand, we're trying to reflect the increased pride in the group internally and better reputation externally. Now, I'm not into, my input has been very limited, I'm not into all of the airy-fairy stuff, but I have to say, if you look at Bovis Homes and the way the hummingbird's gone there, I do think it looks pretty impressive.
Market environment. Fundamentals remain strong. I'm sure you all know that. High level of consumer demand, strong support for the sector. We were delighted with the Help to Buy extension and no issues at all with it being just for first-time buyers. My own view, for what it's worth, I think it would be harder to stop Help to Buy in 2023 when it's just relating to first-time buyers as opposed to stopping it in 2021 when it's up to GBP 600,000, but time will tell. Low interest rate environment continues. Competitive, very competitive mortgage market, high employment levels.
There are alternative routes, of course, to the market through Heylo, which I think we're right up there with anyone on that, PRS and partnerships available. Of course, it would be remiss of us not to mention Brexit. If you didn't know that was going on, of course, the shambles that it all is. We are trading well through that and we are focusing. We're not whinging about Brexit. We're focusing on putting one brick on top of another and selling houses. That's what we can control. We can't control what's going on elsewhere. I think in the first two months of this year and leading up to Christmas, we're doing pretty well on it. Particularly from an analyst aspect here, Earl touched on it a little bit as well. We're a well-positioned, low-risk housebuilder.
We've got a new housing range, which is family houses. It's a very good housing range. Typically, locations are on the edge of a town or a village. We have absolutely no exposure to the London market. We're not even any developments within the M25. Only 4% of the owned land bank is over GBP 600,000, next to nothing. 42% is under GBP 300,000, which is a very safe place to be. That's growing. If you just looked at what we bought in 2018, those statistics would enhance that. 91% is on lower risk greenfield developments. We only really build two-story standard houses, very limited apartments, and there's hardly anything over three stories. It is as low risk house builder as you are going to get. We got a very strong sales position for 2019.
With our sales advisors, we're continuing to focus on price optimization along with controlled growth. The new sales specification, which is a reduced specification, has been successfully launched. Our upgrade system, which is called Select, has only just started to kick off in the second half of last year, and there's huge opportunities for us. We've only just scratched the opportunity of that. The input of Select, where people come in and want customer extras, it's hardly touched. It's peanuts in 2018. I suspect that to grow quite strongly in 2019 and 2020. Help to Buy remains a very important scheme for us. 38% of private completions in 2018. Very happy with the extension, with the vast majority of those Help to Buy completions being under GBP 400,000. Part exchange, very positive sales tool for us. Only 8.7% of completions in 2018 were from Help to Buy.
I'm very happy to use part exchange up to 20%. 15% of sales in 2019 so far have been from part exchange. No problems as long as it's well controlled, and it is well controlled. We only have three properties in our stock portfolio on part exchange over three months old, and they've only just come into three months old in the last week or so. It's a very well-managed scheme for us. There are increased opportunities for private sales with Heylo and well-established housing associations. 14 new developments are expected to launch in the first half of this year. As I say, forward sales represent 48% of consensus for 2019. I haven't said this before, but just over 5% of sales, 2020 private sales are already in the bag. The medium term targets for Bovis, running through these quite quickly.
Four-star customer satisfaction rating done, and we're currently trending at five- star. 4,000 completions. Well on target to achieve that. A little bit of a step up in 2018. Three and a half, four-year landbank. Earl said earlier, four- star, tick. Minimum 23.5% gross margin by 2020. Big jump in 2018. Well on track to achieve that. 5% overhead. Expect to get to there in 2019. Minimum GBP 180 million worth of cash, tick. We expect that to rise by about GBP 70 million with the anticipated completion of Wellingborough. 25% return on capital. Again, a huge jump in 2018. Well on track. Margin initiatives. We've got the four. They're the same four that you've seen before. There's no change in any of our outlook for that. The price optimization, 1% margin opportunity, definitely starting to see that coming through. The specification review, we've reduced specification.
We're getting the same prices. That's happening. We've only just scratched the surface on the potential of Select. There's a huge, I think, input there that will help our margin and profitability again. Cost reduction, we're not using 1% of our contingency because of our better site managers, better supply chain on site. That's actually coming through at 0.3% as predicted. The big unknown still is the Phoenix housing range. We're fully expecting 3% on a like-to-like basis, 1% on our overall land bank. We've just opened up the show homes, two new show homes, more to come very quickly. We've just sold our first unit. The feedback's very good. We might be holding a little bit back on that, but that is coming through very well. Enhance, sorry, cash returns to shareholders. A strategy of maximizing sustainable dividends to our shareholders continues.
Full year total dividend up 20% to GBP 0.57, as I've said. The ordinary dividend cover will reduce to 2x cover by 2020. The special cash returns totaling GBP 180 million, GBP 1.34 per share. In three years to 2020, it was based on a balance sheet optimization target of GBP 180 million. The first payment of GBP 60 million was made last November. The balance sheet optimization, as you heard Earl and I say, we're now aiming to get to GBP 250 million, and the board is committed to reviewing what we do with that extra money in due course. We've got massive amount of work over the last couple of years at Bovis Homes, which has put us in a very strong position and gives us a very strong outlook. Strong sales position, 0.58 sales per week per site in the first eight weeks.
Over 0.6 if you just take February. That's 15.7% up on the prior year, we've not achieved those sales rates for years and years. 48% of 2019 revenue already in the bag. Controlled volume growth we are going to maintain building high quality units with high levels of customer satisfaction. We're investing for the first time in years in people, process, and systems and that's starting to build a better Bovis Homes, which is starting to come through the bottom line. The first completions of the Phoenix housing range are expected in the next couple of months. Excellent land visibility. All land, all planning for 2019. In fact, we're probably on site building everything for 2019. It's better than that. 97% secured for 2020, that 3% is all identified and being worked through.
Really excited about the launch of the new partnerships division, we are very well placed to maximize our strategic land going down that route. We expect Wellingborough to complete pretty shortly. There's a 20% increase in the ordinary dividend, the board is committed to looking at further capacity for returns. Overall, we're expected to make further operational and financial progress, but there's no doubt about it, 2018 following an awful lot of work in 2018 and 2017 has been a great year for us. On that, with our new logo there, which the hummingbird's starting to look like a bird of prey there, I think, which I don't have a problem with. We'll take any questions. If you'd like to say your organization and wait for the microphone.
Morning. Chris Millington, from Numis. Three if I can. Firstly, to start about the Phoenix rollout. You mentioned it's going to rapidly increase as we go through the next few years. I just wonder if you'd give us a bit more meat on the bones there.
15% this year, probably about 60% as we go into 2020. That'll be the biggest jump, Chris, and then it will be gradually over the next couple of years to 100%. Never 100% because things like Sherford will be around for a while, but to about 90%.
Okay. Next one was just really on this partnership business and kind of where you see the potential. Is it all incremental to the current private homes business as we stand?
I would say it's a mix. It's not totally incremental, but it will definitely put some growth that we haven't indicated before to the unit numbers. Did you want to add anything to that, Keith?
No.
Thank you. We've said at the moment we have a target of 4,000. We can do 4,000. We could probably do 4,200 from our existing seven business units. The introduction of the partnerships division, nothing really in 2019, but as we go into 2020, 2021, it will come through. That will give us the ability, but I don't want to get carried away to increase those numbers.
Very good, thank you. The final ones really. We're hearing a bit from a few of your competitors about planning delays due to community engagement. I appreciate your land mix is a little bit different from most in the greenfield bias there. Are you seeing anything to that? I mean, it looks like you're in a pretty decent place with regards to visibility.
Planning isn't easy, but I think we're pretty good on community engagement and all I can see in the last couple of months is planning coming through. I'm looking at the James and Dale. Planning's coming through pretty much on time for us. In fact, it all depends on what you allow at the land acquisition. Are you realistic with how quickly you're going to get planning? I think we're very realistic, probably on the side of being pessimistic. Whether we're doing it any better, but we're definitely doing it within the timescales that we predicted. No issues from where we sit.
Thank you.
Thank you. Glynis Johnson, Jefferies.
From where?
Gillingham. I'm going to go with five then. Thanks, Greg. The first one is joint ventures. Can you give us a little bit of guidance, actually, in terms of joint ventures, what we should anticipate in terms of profit flow, what might come out of admin? Also maybe tag on to that the partnerships. Will partnerships likely come in as a joint venture? Do you think you'll actually have them consolidated?
I'll let Earl answer the joint venture one. On the partnerships, as I've done previously, 2019 and 2020, the profit will stay within the business units, but we will extract at the half year and full year the benefit of what we've achieved from partnerships housing. The intention would be by the time we get to 2021, we'll bring it out all together and it'll be a separate business stream. Joint ventures, Earl.
I mentioned on Sherford that we're actually constructing out the current phase ourselves, so there'll be minimal impact in reality on 2019 and growing into 2020. Wellingborough, we expect to put into joint venture in the first half to the first completions last year from the point we're in joint venture, obviously. That will start coming through our share of profit, which will be half of that. Our admin expenses I would expect to keep running. What the joint venture accounting will do, we'll take the revenue out. We'll be transparent in terms of gross volumes, net volumes, and what's happening with that, in terms of how it's running. Does that answer your question, Glyn?
You gave me absolutely no numbers in that whatsoever.
No.
Is there any numbers you can put on it?
We did 27 completions at Wellingborough. This year, we're looking to deliver at Wellingborough about 100 odd completions around-
2019.
2019, there'll be very few at Sherford in joint venture during 2019, growing into 2020.
Okay. Next question, just in terms of coming to the margin initiatives. The 3% at like for like in terms of the housing range going down to the 1%, is that just a factor of the number of sites you think you can roll out-
Yeah
on-
If you take something like Sherford, although there is a chink in that, up until a month ago, Sherford was a special case and we couldn't change any of the units to our Phoenix range because it had to be designed specifically. We have had a little bit of movement on that. The 3% goes to 1% because we're halfway through a phase and we can't change it, or there's a particular development like Sherford where we can't change it in any case. Where we can change it's 3%.
Importantly, it gives us more land that we can look at because we're obviously better equipped and more competitive in the land market than we were beforehand because we've got better square footage per acre and we've got cheaper build costs in building that bigger square footage because the unit's more straightforward to build whilst I think retaining their curb appeal.
Next one's just in terms of your number of show homes has actually gone up, or the value of the show homes has actually gone up. I know your width has come down, but that element has actually gone up. Can we use that increase as a guide to what's going to happen in terms of site openings? Or is it just that you're building more show homes or higher value show homes on each site?
The number of show homes is broadly the same. Our number of outlets around 87, and we expect to remain consistent. We said 14 new outlets in the first half. We expect roughly the same to close. I'd expect that through the year. The number of show homes on the balance sheet as much reflects how many we have or haven't sold. We do sell some and lease them back. That's what's reflected on the balance sheet.
Two more. Strategic land. Are you seeing the size of the site coming to change? Forgive me, I can't remember what that slide looked like last year, but in terms of what's coming in, is it getting bigger? Is it reducing?
I would say it's getting smaller.
Yes. It's getting smaller. In terms of some of the large schemes, they are the ones that are coming through. We've got the first 800 plots come through in Exeter, the first circa 500 plots at Whiteley. There are more to come on both of those sites, but they are the larger developments. Obviously there were, I think, about seven dots on the map and about 1,500 plots on the new sites that have gone in, so getting smaller on average.
Okay.
It's interesting that the accountant is giving more answers there with numbers on strategic land than he did on the numbers. That's fine.
Thanks, Greg.
That's fine. One last more top line question. We saw reference in the papers over the weekend about potentially what could change in terms of Help to Buy and maybe linking it to quality. How are you thinking about that in terms of how you're running the business? What measures do you think are the right measures the government should be using to assess quality?
Well, I would have been very nervous this morning saying record profits, we haven't moved the dial and we're still a two-star house builder. The fact is, the reason we've got record profits is we're not spending as much on our customers. We've got a better reputation. More customers are coming. The sales rates are up. We're doing better on the back of it. From a government perspective, and we've had no conversations whatsoever, we've got record profits in the right way, where we are driving customer satisfaction up, and it's quite a dramatic change. That change is costing us no money. In fact, it's saving us lots of money. I'm delighted to say we're even going up further, I suspect. We were 86.5%, let's be clear about that, for that four-star. That's closer to five-star. It wasn't a scrape at 80.5%.
It was 86.5% with whatever it is, 1,700 responses. With 500, which is still a long way to go, but it's not insignificant, we're trending at five-star. I think the government, my own view is two years ago, Help to Buy, we want more houses built. When I started at Bovis and was inundated with people writing in complaining about X, Y, and Z, every third email was written to an MP, the local MP. I think today you'll see the government want more houses, but they would like them built properly as well. I think there's a subtle change there. I think we can say we're growing slowly. We were where we were. We are where we are now. Profits are rising, but they are rising on the back of much better, much, much better customer satisfaction and build quality.
You think the star rating is the way to assess that?
I'm not sure how else they could do it. If someone wants to come up with something, but I don't think a star rating lies. The fact is, if you ask me how many emails did I get on April the 18th, 2017, compared to February the 25th, 2019, it's a hell of a lot less. There is a correlation, that's the point.
Thank you. Clyde Lewis at Peel Hunt. Three, if I may. Coming back to the partnerships bit, and I'm just trying to get a little bit more of a flavor about exactly what you're going to do within that business. Is it just Clarion and LiveWest that you're going to work with-
No
or is it going to be a broad spectrum?
No, It's a broad spectrum. That's the two that we got permission to use their logo. It'll be an absolute spectrum, and we are working with a lot more, and we're talking to a lot more than those two. Wellingborough is a housing association, but I won't get another bollocking and mention the name. It's housing associations across the country.
When you talk about a land-led strategy, is it your land that's leading it, or is it actually the housing association land that-
My experience is it will be our land that will lead it to start with, but as we take in land and help housing associations out, which helps their program, my experience is, and you build up better and better and better relationships, and the trust builds, they bring some of their land in as a quid pro quo, as a benefit to us. It'll start with our land, particularly the strategic land. If you've got something, take North Whiteley, 1,750 plots. Do I really want to sell 400 plots, 500 plots of those to Taylor Wimpey or Barratt and have another flag on the site? Not really. I'd much rather do a joint venture with a housing association where there's one flag, one brand, which will be the Bovis brand, and the housing association will be behind us.
We can probably make a turn on as we go into the JV, so we still get the benefits, probably greater benefits of a land sale, but you still only have one house builder on the site, and you work from that. Here we are, whoever the housing association is going to be, and I think we know who it's going to be already, and it's none of the two that were on that list, clarifying that. You then say, "We're bringing things to you. What about you bringing things to us?" What we're not looking at doing at the moment, and that's exactly what's happened in my lifetime previously. What happens is more things come through. You just set up a joint venture company and put nothing in, but sites follow. Sometimes from us and sometimes from the housing association.
What we won't be doing in the foreseeable future, if ever, is actually becoming a contractor and tendering for work with housing associations. It will be land-led.
In terms of product, would you see this again, largely housing with very, very little apartment?
I think at the end of the day, Clyde, to start with, yes, because that's where we can actually see where the land is. In due course, that would have to change and we'd have to learn how to climb a ladder and go to four stories, I think. It would have to be some apartments, I think.
What is the read-across from that to your appetite for doing PRS stuff? Are they mutually exclusive or?
No, the PRS would go with that new team. At the moment, we get lots of offers on PRS. It just doesn't quite seem to quite stack up. We'll be looking for land going forward with that focused team on not necessarily buying it to sell, buying it for PRS, understand the model, and then build it from there.
The other question I had was on forward sales. You've obviously flagged a very healthy start and obviously a big chunk of activity already locked in for 2019.
Yeah.
What does that allow you to do now in terms of talking to the sales teams and your regional directors about pushing prices a little bit harder and in terms of sales rates? Are you doing that now?
We're businessmen, we're further on than we expected. We will be pushing prices, and we have been pushing prices over the last week. If we're doing the odd deal to a housing association where we're not quite as in the same position as we were, a month ago, we're doing harder deals. There is a number of deals that are on the table at the moment, I think aren't included in those numbers. We're just holding our ground a little bit.
Okay. Great. Thank you.
I've just got two questions, really. One point of clarification. In the forward coverage that you talked about, are you including the proceeds of the Wellingborough sale within that number?
No.
That's purely on residential sales.
Yeah.
Yeah. Second question I had more generally, sitting through the presentation, the number of things you highlight, such as the higher caliber site managers, the new CRM system, even right down to the new partnership division, which appears to actually be having its own infrastructure to deliver, even though initially it sits within the divisions.
Yeah.
I'm sort of quite surprised the admin expenses are flat and that they haven't actually gone up. The implication is all these things that you're talking about, there seems to be a lot of cost gone into it.
No
From the point of view of.
I get what you're saying. I would suggest to you, and hopefully Daryl and James will back me up here. We have a lot of people in customer care, and those people in customer care were when we were a two-star house builder and dealing with lots of legacy issues. If anything, I'm still looking to make savings. The partnership housing side, strategic side, yeah, there's a bit of an increase in that, but we've been able to absorb that. The better-quality site managers don't come through admin. Yes, Daryl and James put forward some losses on the sites when we took on a site manager for GBP 10,000-GBP 15,000 more per annum than we were paying before.
A site manager, you get a good site manager, he will build the scheme as close as you're going to get to the original budget. He won't better the budget because the budget was done on a sunny day in an office, et cetera. I'm telling you now, if you get a bad site manager or an ordinary site manager with some ordinary subcontractors, you lose GBP 10,000-GBP 15,000 every day. That's what was going on with Bovis Homes. We had our whole infrastructure and our bill costs were based on, oh, we've had to build that two-story bay window again. Better make sure we put some of that in down the line to do another one.
What's happening, what's coming through with our cost reporting, which is much more accurate because of our COINS system, is we've pretty much leveled out, and we're pretty much doing it right first time. We'll obviously be making mistakes, of course, but those mistakes are few and far between, whereas the mistakes we were making in the old Bovis were the norm.
Okay.
So-
There's no sort of hidden jump that's expected on that-
No
admin line going forward.
No.
Okay. Thank you.