Earnings Call: H1 2018

Sep 6, 2018

Morning, everyone, and welcome to Beaumont's happy results to, to June 2018. Normal agenda, and we will try and make it as interesting and and even funny in places as we can. I say we, I will. Obviously, I'm not sure, it was actually learned how to tell yet. Although there is a a story going around that he said something half only back in March, but, it's yet to be verified. So, I will do the, wait for your turn. I will do I'll do the highlights. Earl will do the financial review, and then I'll come back in and give an operational update medium term outlook and, and, sorry, medium term targets update as well as an outlook. So it's been a great period for Bubba's homes, which has transformed itself into coming up with a strong performance with a 41% increase in PBT well ahead of our expectations. We've had another controlled and disciplined period end, so that's the 3rd on the trough, and that will definitely be how it is going forward. The group is consistently delivering high levels of customer service, which has been brought on predominantly by a step change in build quality, much more on that later. We've moved to an average net cash position in the period. We've got excellent visibility on land, future profits, with 99% of land required for 2019 already in place and 78%, which is, an astonishing figure in my, experience for 2020. The sheriff at JV, has exchanged contracts, and we've agreed heads of terms with the housing association for our large scheme in Wellingborough, which we would hope to contract by the end of October. We're well on track to deliver at least £180,000,000 worth of cash from our balance sheet initiatives by the year end, and all of that adds up to the interim dividend at 27% and the special dividend of 45p, which we paid in November alongside the interim dividend. Owen. Thanks, Greg, and good morning. And Now there will be, no disappointment, no intentional jokes during this section. So following the step change in our business last year, I'll take you through that significant increase in profit. More importantly, the increase in the margin as well as the progress on our balance sheets and the average net cash position we had through the first half. So our income statement, shows that 41% in profit before tax, just over 60,000,000, and that was ahead of our expectations, driven by the increase in the margin during the period. So revenue up 1% to 432,000,000, driven by a 4% increase in volume, a 4% increase in our private price per square foot, but offset by an increased proportion of affordable in our mix in the period. Gross profit up 17% to 90,000,000 and lower admin costs, reflecting a stable business following the changes we made last year, but our ongoing investment in IT, training, throughout the business. Operating profit of 63.1 and a profit before tax of 60,200,000. Our finance costs reflect the lower interest charge from having an average net cash in the first half. We've got a lower imputed interest charge from, deferred payments on land acquisition, but that is offset. We used to get an interest credit for holding our shared equity, and that's gone since we disposed of it last year. Tax rate, in line with the underlying tax rate, and there are no exception items in this year. There was, of course, last year, 2,800,000 of costs relating to the bid approaches and a 1 off 3a half 1000000 of customer care in the gross profit. So in terms of the selling prices and volume, we are seeing firm underlying prices Our private average selling price was flat year on year at around 335,000, and that reflects improvements in pricing, offset by a lower proportion of higher valued product in the mix. For those of you that here, you would have heard me talk last year. Same period last year, you could have bought, a £1,000,000 house of five sites from Bovis, We've sold out all of those in terms of the top end product that was in just last year. Overall, our total ASP is down 5% driven by that larger proportion of affordable housing, so for about 35% of the mix in the first half. We expect that to come back to about 30% for the full year. And that will be aligned with where we were last year and our expectations going forwards. So overall, total volume up 4%. Got a bit of other income, £3,000,000 from the disposal of some minor commercial assets, and we recognized 7,900,000 of turnover from our sales of our PRS units. So strategy to exit our PRS joint ventures, we're now recognizing the revenue we'd third when we originally sold homes into those joint ventures. So profit split housing and and the one land sale that we did in the first half of the year. So you can see the gross margin at 20.9% a faster step up than maybe we expected and we expect to hold that level of gross margin through the full year. Taking the housing itself, a 290 basis points increase in the gross margin coming from the value that is embedded in our land bank, the controlled delivery we continue to do, so getting it right first time, reduced customer care costs, and the initial impact of those margin initiatives. So pricing and an underutilization of contingency in our cost base. In terms of land sales, let's say we did one land sale in the first half, still managing the balance sheet, and we'll receive 6,300,000 of cash during the year. We have in fact, done a further land sale since the end of June, which is our first land sale at Wellingborough, and we could still look for the 1 or 2 opportunities in our land bank going forward. But overall, coming through with a 20.9 gross margin with stable admin overheads and operating margin of 14.6%. So sales price is construction cost usual slide. I'll just talk about the two numbers that are circled. Private sales price per square foot, as I said, is up 4% driven by market, our initiatives, as well as mix. Difficult to isolate the individual impacts of those, but certainly we see the market moving about 1, possibly 2% in some of the places we operate, and that is supported by house price indices you would see for those areas that we operate in. We are getting some momentum behind pricing, controlled delivery, and focusing on that pricing, sales advisers incentivized to deliver against headline prices, reducing daily margins, having an impact. In terms of costs, so 7% movement on cost per square foot. We continue to see inflation across both labor and materials around 4% expect that to continue in the current market. While at the moment, we are not seeing any significant impact of Brexit on our supply chain. We are working with both material suppliers and subcontractors closely to see how things are emerging, and then a 3% movement from the mix of product. Strong cash coming through in terms of the operations, housing receipts, was impacted by the timing of cash flow from our housing association partners and the circa 8,000,000 of deferred revenue from PRS, the vast majority of that cash goes to repay debt in the first instance, for the bank debt that is in those vehicles. Our construction expenditure similar to last year. So continued investment certainly at Wellingborough and then investment in to deliver the higher level of completions we expect in the second half. £81,000,000 out on on land, reflecting the unwind of our land creditor and a modest expenditure on new land in the first half. We expect that to tick up in the second half, and I'll talk a little bit about that in a couple of slides' time. Higher dividend payment comes through for 2017. Their non trading items got the usual tax and interest, but we did pay £5,500,000 into the group's defined benefit pension scheme in the period, and that follows the, conclusion of the latest valuation and the closure of that scheme to new accrual. Overall, a net cash outflow of 102,000,000, leaving net cash of June 42.8 compared to the debt of 32.4 last year. More importantly is that movement in average net cash So we had average net cash of 6,000,000 through the first half versus average net debt through the first half last year of 96,000,000. So in terms of land, the map shows, the sites secured so far to date And we have increased our activity. So we've been investing in our land teams. We've pointed 2 new land directors so far this year, and that's already showing in terms of an uptick in acquisitions, 5 developments secured in the first half, all of which we expect to deliver at least a gross margin of 26%. And we have secured a further 2 sites since June. And those 7 are all shown by the blue dots that are on the map. The dark blue dots at Edwardton And Staplehurst show that we're still pulling through good sites from our strategic land. In more pleasing, further 8 sites with terms agreed to come through this year, and again, 3 more sites from our strategic land bank including the significant investment we've got at North Whiteley. Also investing in the longer term, so 6 new strategic options, 944 plots. And that strategic land bank, still coming through. So 678 plots got planning within our strategic land bank. And overall, we expect that land coming through to deliver at least a 26% gross margin and a 25% return on capital. So balance sheet, our land is showing the impact of optimizing our balance sheet as we head towards a three and a half to four year land bank by the end of the current year. Land creditors reducing, but with our land activity, going up, very happy to see those land creditors as a proportion of land increase again in time. Work in progress, funded, as I said earlier, Wellingborough investment going in, and the investment required to deliver the homes we're looking for in the second half. Please to say most of that increase in work in progress is our housing work in progress and not roads and sewers. So it is about, having all our roofs on by the end of September or those homes even further progressed in order to deliver another controlled period end. And finally, in terms of our balance sheet optimization, just a little update I've mentioned the 2 land sales we've done already this year. A couple of commercial disposals. We dispose of an out of area, out of area site. The Sherford joint venture, will bring in £13,000,000 of cash over this year and next year. And we are looking for that, JV from Wellingborough to come through, by the end of October. Around work and progress, really pleased, reduced our usage of part exchange significantly in the business, also reflected in a further £10,000,000 reduction on the holding balance at the end of June and that partial disposal of properties in the PRS helping. Further opportunities follow 1 or 2 areas of land we're looking at optimizing that work in progress position, looking at the timing of our cash flows coming in, and finishing the exit from the PRS. And with that, I'll hand you back to Greg for an operational update. Thanks very much. That was really exhilarating. Thank you. Right. Onto, the operational update. So, we're in a very, very strong sales position. So we're focusing on price optimization whilst, maintaining our sales rate. The sales incentive scheme, which was rolled out to our great sales advisers, in March, April of this year, is really taking off, and this gives our sales advisers a chance to add an additional, not not in in place of an additional commission if they can achieve the advertised price or close to it, which was never in any of our packages for sales advisers previously. That's the big thing driving our price optimization. We've launched the one size does not fit all specification. So we still have the old Boulder specification, which is probably best described as all in. Particularly on some consortium sites where we think we need a USP compared to our competitors. But on the vast majority of sites, we have reset our specification. And we are still achieving, the same prices, but customers can upgrade their specification through the select, through the select brochure there. So we still have a very good base specification compared to our our peer group, particularly, the likes of Persimmon, Whereas we know, a roof is an optional, extra only, only joking, of course. We significantly, and this has been a huge transformation in the business, reduced our, exposure to part exchange. So in half 118, We only had 8% usage of, part exchange compared to 28% in 2017, which was over 30% in 2015 2016. So that's come right down, which is, which was a move because I didn't think it was under control, but strategically, it's turned out to be a good obviously, there was a difference between the second hand market and the new market. So the less reliance we have on it, the better, although I'm quite happy to see 8% move up a little bit, and I'm sure it will. Most importantly, it's no longer loss making. We're actually making money or at least breaking even on our part exchange. 42% of private completions used, help to buy at an average selling price of £321,000. We've seen the first completions from our, halo home reach scheme. And 21 new developments were launched in the first half with 4 new developments to launch in the second half, all of which are imminent. And again, as we were last year, we're in a great position for 2018 with 96% of sales already secured, and that's a great position to be in. Great to see on the photo oh, sorry there. On the photographs there. I don't know if you can make it out there, but that's Earl visiting the Wellingborough show him in his normal weekend of time with one of his accountant, friends there dressed up as well. Doing the right thing for customers, which is what it's all about. So the group is consistently delivering high levels of customer service. We've had our 3rd on the trot controlled and disciplined period end. We have rigorous inspection procedures now before our purchases move in. And that's translated itself into some great scores. So since the 1st October, which is the HBF year, which finishes the end of this year, we are currently trending at 86.7 percent, and that's from 1230 responses. So I'm pretty sure we're gonna end the, as a 4 star, house builder, which is a great performance. And that's consistent and great, credit to our 7 managing directors are all in the room here. That's consistent across the piece. So we are currently have 3 of our 7 house business units on 5 star, and 4 on 4 star. So none of our business units are operating at less than 4 star, which I suspect not many other people, could say. So that's a huge transformation. Go back a year and bovis, 2 of our, 7 business units were 1 star, 4 were 2 star, and 1 was 3 star. That a huge transformation in a little over 12 months. It remains a key priority across the group wherein we've agreed an investment of a CRM management solution for our customer care teams, again, where there's been a lack of investment in IT, and we've also joined the Institute of Customer Service. And all of that adds up to happy customers. And that photograph gives you a good demonstration of some happy customers. We're even making the dogs happy these days. So it it's great to see. And the other big takeaway from, that photograph there is we seem to be employing an awful lot of short site managers, which we're also working on. So the new housing range, the Venus Collection, it's great. Launched in April 22 28, sorry, leading house types. We've replanned 61 of our sites, which are going through, planning. 6 have already got planning. The rest will follow on, I'm sure, and it's really it's it's really has uplifted the whole group having a brand new housing range coming through. We're expecting the first legal completions to come through in spring 2019, and we are very confident, because they were involved in the design, that it will deliver added value to our customers, optimize pricing, reduce production costs, and take away a lot of risk by the fact we won't be building too many if any double story bay windows with improved build efficiency. It will also enable us to be more competitive in the land market than we've been in the past. And I would suggest that in in round for terms, what we're looking per developer acre, we will be looking to, putting an additional 3 bedroom house for every additional acre that we build on new Lampage, which will give us a bit more of an edge there. And the photograph on the right, the first house that will actually be completed, from our new Phoenix range is at Stadhampton near Oxford, and that will be a show home, and that should be finished in November, stroke, December. Step change in build quality. So All construction for 2018 is well progressed. We've had a huge investment in high quality site managers and site teams. I I kid you not. There is, the word on the street, and this is a true story with the NHBC and our peer group is that Greg Fitzgerald is having a loving with the site manager fraternity and is sending all the bogus home site managers, fresh flowers every single morning. So much is his, affinity with them. But it's reduced and it's working. We're we're attracting some great site managers. When you get the best site managers, they follow the subcontractors follow. So best site managers, the best subcontractors follow because that's where they know they can earn the money. It's very, very straightforward. The site manager head count turn is a churn sorry, is reduced to 19 a half percent from 42.6% in 2017, and it was over 60% in 2016. Best practice is being shared amongst the group. Our 5 new construction directors, that's 5 out of 7 business units, and construction directors are now well embedded and making a real difference. And we've moved away from the NHBC on health and safety, and we're now doing that in house, which is much more proactive in the feedback again. Is tremendous. The NxPC reportable items, this is where the NxPC inspector goes around and finds, hopefully, not too many, but things wrong with the houses is down 66% since the beginning of December, and you can read that quote at the end, which is from the NHBC. For the NHBC, the chief exec downwards, are openly saying to our peer group that the changes in build quality in, bogus are outstanding over the last 18 months. And that's resulted in us winning 6, pride in the job awards, and here's a photograph there or photographs of our 6 great winners. The last time bulbous won more than 6 was back in 2004 when we won 7. So that really does show how far the organization has moved on. And the other thing I would say from, the photographs there, I'm not sure how it's happened, but Bovis have got some great young site managers around about the place, and they really are showing and coming through. Oliver, Cookson there is only 28. And last year, this is his second award. Last year, he made it all the way to the final in London, great achievement, particularly for someone who's 28. And Jack Allen here is only 23. And to win a pride in the job award at 23 is absolutely incredible for for a twenty three year old. Let's hope by the time he's 24. He learns how to do his tie up, but, but, but he's a great he's a great builder. So commercial and IT, huge investment following a lack of investment over the last 20 years in IT. So it's the biggest investment I think ever, Earl, would say, in a sis in a scheme we've invested in coins, which is well used throughout the whole, whole sector for commercial and finance. Phase 1 is pretty much complete, and all of our commercial teams are now starting to see the benefits of that implementation. Those benefits being accurate consistent cost reporting and forecasting, increased commercial visibility across the sites, And most importantly, for me, it gives them more time and should enable them to spend more time on-site than in the office. Phase 2 will kick off, very shortly. Again, with our people, as with IT, there was no investment at all, really, over the last 20 years, so we're playing catch up again. We've now got a learning and development director, comprehensive learning and development program across the entire business, including sales, customer service, build, health, safety, IT, and leadership. I've even had some training this year to help me through my GDPR, tests, which I managed to, pass first time. I have, you know, But what will help there was I decided to do it. I didn't want anything to go wrong with my computer, so I decided to do it in the group's IT hub at Bishop's Cleave. So I turned up there at 9 o'clock with 25 of our IT, people walked into the room and the excitement and the exhilaration in that room pulled me through. Let me put it this way. I didn't have to say can you be quiet please? It was like being in a bloody it was like being in a ghost town. So anyway, The new trainee assistant site manager programs being launched. We've taken on in the last 12 months, 36 apprentices, taking our total to 80. We're really pleased about that. The leadership program is ongoing. And the big, big takeaway from that slide is the bottom point there. We are now a very attractive company for people to come to work for. 12 18 months ago, who wanted to come to work for Bovers, not many people. Today, we are getting lots of requests for people wanting to move from our peer group to come and work for Bo such as being the change. So it is really, really good. We can now attract the best people into the organization. For those of you concentrating on the photograph there, not to worry. Earl has promised and is actually now on a diet. He couldn't actually get his, hands into his pockets there. So, I'm sure this will either Earl's made a huge schoolboy error by putting that photograph in, or there's gonna be a massive witch hunt around who actually did put it in, but it wasn't me. Our land bank remains exceptionally strong. Bovis is all about family homes in prime locations. 87% of our plots are under £500,000 within the land bank. No exposure whatsoever within the M25. 87% of our land bank is on greenfield sites, much less risk than brownfield sites, of course, Only 5% of our land bank is apartments, and I don't really think we've got anything really over three stories, maybe the odd scheme here and there. So it's it's very, very, very low risk, and it's balanced. No business unit is short of land with with a business unit having too much land. It's a pretty balanced portfolio. And as I said at the start of the, presentation, we've got excellent forward visibility with 90% 99% of 2019 already secured. 78% of 2020 already secured. If you take into account the land we've currently got with terms agreed and solicitor's instructed, The 99% turns into a 100 and the 78% turns at 86%. So we're in great shape for 2020. The average gross margin of land that we bought or currently are buying, in this financial year is at least 26% The other two points there I would, point you out to are that 17.3% of the plot cost ver versus average selling price in my experience in the house building sector is very, very low, and the average gross margin has moved up from 23% to 23 point 6% reflecting some of the margin enhancements we've put through, but it doesn't include the 1% that we're generating from Phoenix. Sherford and Wellingborough. Some of our, you know, our biggest individual aims, over the last 12 months have been getting these 2 huge schemes, both very good good schemes. But they're just too large for Bowers Homes' balance sheet or probably most house builders' balance sheets. So Sherford, we've managed to, get over the line. We've entered into delighted to say we've entered joint venture with Clarion Housing Group who are a huge housing associations. So that's also a strategic aim to improve where we are with housing associations And on Wellingborough, we've now agreed heads of terms. Again, I won't name them, but with another large housing association, so with a target date of entering into contract at the end of October. So by the end of October, we would help Sherford's done. Wallambrew will come in, and that's at least £50,000,000 generated as part of our balance sheet initiatives that Earl talked about earlier. The other great thing about Wellingborough is the show home, which is the bottom photograph there, was opened, in August, and it was one of the most successful sales launches, bogus, or I've been involved in 12 taken over the weekend, and that's continued. So Bovis, the Wellingbrook scheme seems to have been talking about for the last, you know, kind of 50 years or or whatever it is. Today, it's up and running and is about to start generating profits. It's a great site, just too big. Strategic land, great strength, and continues to be a great strength are bogus. We expect to deliver, circa 10,000 plots over the next 5 years from our strategic land bank at returns expected to be above the minimum 26% that we are setting. And that, 10,000 is underpinned here with so I keep doing that. With the 7800 we're planning agreed, or the 4900, 696 with planning applications in. When we put a planning application in, it's already got a form of planning application, a planning approval. So we basically have 12 and a half thousand plots within our strategic land bank with either detailed planning ready to go, but we haven't signed a 106 agreement or with at least an allocation or probably an outline kind of admission. So you could easily say our land bank is 16,000 plus 12a half 1000, gives us great flexibility and visibility again. 167 plots converted in, first half of 'eighteen. Planning granted over a further 678 plots in 2018 and we've got a strong pipeline of land going through the motions at the moment, which will add 955 plots to our land bank by the year end. And we are continuing. So there's still a huge investment in our strategic land bank. This is not we're not just taking from the past and not reinvesting. So Got a big team there, and there's 6 strategic options that have been entered into in the half year, totaling around 944 plots. So a real positive story for Belvus. Affordable housing. We're enhancing our relationships, with our affordable housing providers. Again, we've made great progress. I'd still say there's a fair bit to do on this. But how our housing association partners will perceive both us going forward will be greatly changed when we, actually complete the deal at Sherford Reciring Housing Group and the large housing group that we are about to enter contracts with at Wellingborough. They will see we are a true friend, a true partner with long term relationships, which we've not been in the past. Market environment, fundamentals remain strong. Our sales rate so far, this year is 0.51 compared to 0.49 last year. The summer period's been broadly the same, and that's despite all the talk on them on Brexit, which I'll take some comfort in. So there's a huge level of consumer demand, strong support for the sector from the government, of course, low interest rate environment, a very competitive mortgage market, and high employment levels. There are alternative routes to the market, which we are already dealing with with HALO and their home reach scheme, and I would hope through the housing association movement, particularly with our new relationships with Clarion and others going forward, They are starting to look at shared equity schemes, shared ownership schemes as well, which might be a long term replacement for Help to Buy. On Help to Buy, we await in anticipation for the government to say what's gonna happen with Help to Buy beyond 2021, and we're firm believers that they should do that sooner rather than later that would give us some encouragement in buying long term land. And we do believe at Bobaustat, the government will, take a Help to Buy on, but we also believe and probably agree with that it should be tweaked somewhat. We don't we're not in the camp that that, why should someone who can afford a £600,000 house outside of London, get government help? It it it seems too high. So we're in favor and believe they will, extend Help to Buy but tweak it to make it more affordable, maybe. The letwin review has obviously caused some spurs, but bottom line is the letwin review has basically said it doesn't really agree with house builders are land banking, to to push at profits. And we continue to see the ongoing, ongoing uncertainty from Brexit. But again, I keep things very, very simple. I can't really believe that, at some point between now March, it's going to become less uncertain. It might be good. It might be bad depending on where you are, but the uncertainty is going to have a way, and we've still sold houses with probably when we look back at it, the most uncertain period that there's been over the last 3 or 4 months because no one really knows where we're going, and we're still selling. So medium term targets. This is what we said back in September last year. 4 star customer satisfaction, were looking to do that by 2020. I'll eat my hat if we're not a four star house builder, when it gets announced next March. 4000 completions per annum. We'll still say in 2020, the restructuring is complete. We're maximizing economies from our current structure. And we will see between now and 2020 a very much controlled, volume growth. 3a half to 4 year land bank, expect to get there by the end of this year, a 23 and a half percent gross margin. Again, we're very confident of that by 2020. We've seen a significant increase in our margin in the first half, and we're, and there's still, a potential, probably better than a potential of that 23 a half percent increase, particularly from the likes of, Phoenix where we're openly saying, you know, we've we're we're we're happy that that's gonna Phoenix is gonna increase overall land bank by at least 1%. And by that, just clarify that a little bit. Our land bank, over here, has got some very large sites in its share for instance, it's got a very difficult design code, and that's fifteen hundred plots we don't think we can bring Phoenix into into Shervin. We've also got lots of foundations and houses ongoing. And sometimes it's just not practical to do. Where we are implementing a phase with, Phoenix, we are probably increasing the margin from what we had before somewhere between 2 and 4 a half percent. But when you add that all together and go back to our 16,000 plots within the land bank, it equates to a 1% average. 5% overhead, we're very happy that we'll get there by the end of this year, a minimum of a £180,000,000 of balance sheet improvement by the end of this year, Again, we're confident we're gonna achieve that and the 25% return on capital with the disciplines that are now in the business, the cash management, we were in, you know, we had a cash position on average, let alone at the period end in June, and that will, that will only get better as we go through in the second half. I'm confident that 25% by 2020 is very doable. The major margin initiatives pretty much exactly as we said to, most of you in the room at the Capital Markets Day, at wooden, in May. So price optimization, we think that's adding a percent to our our margin. Specification review, as I touched on earlier, again, we think a percent cost reduction. This is basically employing better quality site managers. You get it right first time without too many things being having to be done twice. Is adding about 0.3% to our overall margin. And the new housing range, you know, circa 3% margin on on, you know, to where we can put it on, but overall, taking into account the 61 planning applications we've got running or have already got approved, we think it will add about a percent to our overall margin. Enhance returns to shareholders. So we have a strategy of maximizing sustainable dividends to our shareholders. The interim dividend for the half year, up 27% to 19p. For the full year 'eighteen, we expect a 20% increase to around 57p reflecting improved profit profitability and a great outlook. And we expect the ordinary dividend cover to drift to two times by 2020. On the special dividend front, capital returns totaling a minimum of a £180,000,000, which is a 134p per share in the 3 years to 2020. The payment of the first, special dividend, 60,000,000, which is 45 people share, will be in November alongside the interim dividend, and the board is committed to reviewing these capacity for further returns over time. So there it is. We have a great we're in great position and have a strong outlook. Strong sales position, confident of delivering completions in line with our expectations. We're gonna continue with continued volume growth, control volume growth, sorry, and maintain our high levels of customer satisfaction that we're currently witnessing. We expect to deliver record profits for 2018 at the top end of the board, expectations, and that follows a robust summer trading period and increased visibility on these margin initiatives starting to come through. We are in September, and we're on track to deliver a minimum of 180,000,000 of net cash from the balance sheet by December. This combined with increased profit, we expect to deliver a significant improvement in our return on capital, and all of that will mean a significant increase in our dividend payouts, which is already gives us an attractive yield. So the main takeaways I would say for today are that we've got great visibility with our very, very good land bank for 2019 20 and beyond. And we're no by no means of finished article yet, but we've made huge, huge improvements, to everything we do over the last 12 months. And Boberstone should be seen now as very much back in the game within our peer group. So on that note, we'll take any questions. Morning. Glynis Johnson, Deutsche Bank, 3 if I may. The first one in terms of your strategic land, pots were planning agreed. The average size looks very large of the sites. It comes out the pure pure number comes out and seems to come at 8:6:7. Can we expect as that planning comes through on those sites? Become so respected that actually they may be put into further JVs or you may look at land sales on those larger sites. So I would prefer to do joint ventures with strategic partners rather than land sales, but I expect it with both. And the reason I prefer to do joint ventures is it keeps the number of flags down on a particular site. So if you can enter into a joint venture, particularly with a housing association, which keeps the cash under control, All the units on that site will be sold as bogus as opposed to as soon as you start selling the land, you're you're generating competition for yourself. But we can assume that Bovis won't necessarily look to run the entirety of those sites independently. Either they won't come onto the balance sheet in full necessarily. Maybe 1 or 2, but some of the big ones coming through North Whiteley, for instance, which will be the next big one to come through probably into a joint venture. And we're already having early in initial discussions with housing associations. Okay. Some of them will come through in phases anyway. So they are much larger sites, but they'll come through in in phases. So two coming through in the second half, one to North Whiteley, That should look around 500 plots coming through in the in the second half. Out of 1700 altogether. And, there's about 400 at Tavastock we're likely to share in half. As a as an example. Okay. The second question just was in terms of just clarification on the first half margin. There was obviously a larger proportion of social. Did impact the gross margin that you reported in any shape or form? No. In truth, we we take a a margin across across the whole site. So, but it's just the same margin that will come through. Hence, we're, you know, happy that we think we can hold that margin through the full year. Last one was just in terms of the cost per square foot. I was quite surprised there was a mix that actually increased given that you've reduced down the contingency costs you're taking out some of the over specification that you may have put into some of the homes. Let me get the specification 1. You know, that was only really introduced in March, April, so the impact of that would have been minimal. That would be a bigger impact in the second half of the year. So the mix impact going forward could be a negative reduction in terms of the cost inflation. I'm in theory. Yeah, overall our average selling price is going up. You know, in terms of where we are building homes, I suspect we will still see a mix that will follow the average selling price, mix going with it. Just to be clear, does that give you a cost inflation that sits roughly in line with market? Does that to Yeah. Yeah. So we're once the other. Yeah. We're we're seeing, market inflation across labor and, materials in terms of other movements, as I say, we are building in in more expensive places, both in terms of the selling price of our homes, and that will have an impact on on our cost base as well. Yeah. There's a couple of couple of quick ones. Andy Murphy at Meryl's. Hi. Just on the IT spend, I was quite interested in in in what you're doing there. You just talk a little bit about the lack of investment previously and perhaps more importantly, what you're introducing or what costs if it if that's actually relevant over the next couple of years. Coins is is, well, basically, the commercial and, finance teams in Velveis are working on a the sports scheme that was introduced in 2003, I think, oh, around about that around about that sort of time. And it basically is, defunct and doesn't, and doesn't really work. So we we we really had to do it. And the cost of coins is about £3,500,000 on phase 1. It'll be a similar amount, 3,000,000 in phase 2. I think it's got a bit less than that. Maybe a bit less than that. And we're writing that offer over a three and a half 4 year period. The initial license is four and a half years. 4 and a half years. Thank you. And the second question, just on the sort of shape of the group, can you give us a flavor for the number of average sites that are expected to be open for this year and for next year? So we've got 4 to open in the second half of this year. And as we go into next year, I would suggest that we'll be around about 20 sites will open during the course of next year as 20 probably finish. It will it's going to be broadly a similar amount finishing as as as do open without, you know, there might be 1 or 2 more overall next year. I mean, what have we got now? 90? We're currently out here. We're we're about 90 now. We'll probably end the year with 90, and I think we'll probably go through 2019 2020 with no more than 9596. So it's broadly gonna, as they finish that'll be replenished. Alright. Thank you. Thanks. Hi, John. John Bell from Barclays at 2 from me. I think you've referred to a expecting PBT, at the top end of your expectations. I just wonder whether you could just quantify for us what those expectations are. And then the second question is, Greg, you've told us in the past that BOGUS has never really got affordable housing right. In a former life, you always expressed a lot of love for partnerships. Should we expect a partnerships division to be added on a medium term view. That that is a very interesting question, and it's very close to the top of our strategic games at the moment. So we were we're we're we are really looking at that, John. We think it's a very, very good model. I thought it was a very good model. I still do. I think it's a it's a it's a growth sector. And the first part of doing that is to, actually have decent relationships with your housing association partners. We've made huge inroads in that over the last 12 months, and but there's still some work to do, but we're well on track to do that. The second part of doing that, which is exactly what happened at Gallipa try is starting to do become really friendly with the housing associations joint ventures, with them as partners so that they, you know, they're they're being encouraged by the government, in fact, they have to, use their money to do go into development, and we're finding more and more that the the housing associations would rather do that in a JV rather than doing it themselves. They are very, very good at renting houses doing share ownership. Maybe not so good at 10 being developers. So we are on track at that which is why I was very, very keen at Sherford and Wellingbrook, we have had our other offers that we were to do to joint ventures with housing associations as as opposed to other types of organizations so that In 12 months' time, we can very much look at, yes, we now got very good relationships as opposed to good, I would say, at the moment, with housing associations. And yes, housing associations can see we are bringing something to the party as far as they're concerned. And as Glenn has said earlier, who knows on some of these other large schemes we've got we will bring others into the into the pack. The next step then could easily be, let's launch a partnerships business. So, nothing decided yet, but it is well on it it's not far off the top of the list on the, on the strategy. With regard to your other question, which is much trickier. Not at all. I mean, John, I'll take you to as much consensus as a range out there. Top end of consensus as of this morning would have been about 163. I think the key change we're flagging today is our margin has, stepped up quicker than maybe we expected. So that gross margin is 20.9. We can see us holding that for full year position as well. So that would mean that would take it to about 165 then. Something like that. Something like that. Thank you. In English. Thanks. Ainsley Lammer from Canaccord. Just one you've obviously done a good job optimizing the balance sheet generating the kind of 1,000,000, and you're seeing the capacity to pay out more capital is under review. Should we expect that mean the 180 goes up within the existing time frame or is it a further commitment in terms of time? Would you consider share buybacks? Just wonder what your thoughts are on that? We'll we'll consider, anything. But, where we are at the present moment in time is we've said that we would pay £60,000,000 over 3 years. With the first one now confirmed, for November, and that was on the basis of £180,000,000 being generated. We're confident we're gonna generate a minimum of £180,000,000. So the board will sit down and look at that, but, you know, it it wouldn't be it wouldn't be daft to think if we if we raised more than that. If we did better than 180, those capital returns could be could be greater. Amigala from Citi. Hi. Just two questions for me. The first one on the market, if you could give us some color on your private sales rate over the last 9 weeks, Yeah. And what the order book private order book looks like at this stage? Yeah. My second question was really a clarification on the gross margin new land investments. Is that your new hurdle rate that you're setting for the for the business and to what extent this is a reflection of the market and that is sustainable versus specific plots that you had bought in the first half. So on on the land, we do have a hurdle rate of 26%. That doesn't mean to say I won't at times approve something less than that. But if we approve it at less than that, it's in the middle of the best town in the area, and it's gonna really sell well, and and there's a reason for doing that. We wouldn't wanna see the average drop to lower than 26%. And in the 1st 8 months of this year, with what we've bought or what we have terms agreed, it's in not gonna say what the number is, but it's in excess of the 26%. On top of that, the big thing that we have and the MDs have, to grapple with on land is that, we are more competitive in the land market with Phoenix. So we're still currently assessing those sites on the old portfolio range. The big thing for us is do we increase our hurdle rate to allow for the Phoenix range rather than giving the money to the, additional money to the landowners? That's that that's in debate. So we are right at the crux of doing that at the present moment in time. I I think there's some scope to increase that hurdle rate with our new housing range. As if we don't, all that means is we're giving additional money to the landowners and maintaining the margin. So we've we've we've eked out a 1% margin improvement in our overall land bank where we where we've got it on a particular phase, it's nearer to 2 a half to 4%. So that's what it's kind of adding. Don't particularly really wanna give 2 a half to 4% more to land owners than we currently do, and we're still and we're buying land. And Sorry. The first question. Oh, the trading in the in the in the 9 weeks. The trading in the 9 weeks has been point, 49. Sorry, point 48. Per outlet compared to point 5, per outlets of point 02 down on 12 months ago. But don't forget that we did a deal with halo, towards the end of last year, which was 275, two and three bedroom units, and you can't sell, houses twice. Because I'm sure Belb is to try to do that as well back in 2015, 16. But, but we but so therefore, I would actually say slightly down, but once you take into account those 75 units on on halo already being sold, and they were the kind of units that we, you know, you'd be very, very competent of selling 2 and 3 bedroom houses would actually say we've had a better summer than than than last year, which kind of might be a little bit different from some of our peers. Chris? Yeah. Good morning, Chris. Just following on from your point about halo there, just wondering if there's further opportunities. And in the statement, you talk about alternate routes to market PRS and stuff, just a bit more detail around that Chip Martin? Or could do the PRS, but we but we are having, whether they'll get anywhere, some initial discussions, with halo as we speak, about a further, very large deal. So, and I like like a little bit of certainty in and around about the place. So if we can do another deal with halo, we will, which would underpin, you know, and and and enhance massively our carry forward position going into into next year, which is uncertain with Brexit and everything else, so it might be a reasonable thing to do. So we have a great relationship with them and we'll see. It would it would it might impact on the price a little bit, but we'll see how we go on that, but but price certainty it's it's it's an interesting conundrum, but we are having some discussions. That's correct, Daryl, isn't it? That's correct. And you're confident you're gonna do it, aren't you? And PRSO. Now on on PRS, I mean, the the the 2 things I mentioned, we did 2 bulk disposals out of our PRS joint ventures. They've remained PRS with different companies. And, certainly, those 2 companies are interested in doing more PRS of of new build. And I think there are opportunities on some of our larger sites potentially to carve out some some phases to do in that way, and and look, we're advancing those discussions and know, there's some funding advantages potentially, from those in terms of, funding the construction, just about getting the commercial deal in the right place. Next one I've got is on slide 11, you're breaking broken down the balance sheet optimization and you've got the non returning asset category there of 50 to 60. Sorry. I'll let you get that. And I'm just wondering how far through that portion you are. The the vast majority through in truth, I mean, because the the shared equity was a big part that, some other elements last year. So the the one single opportunity left is the remaining investment in PRS, which is just over 7,000,000. And then, you know, it is managing, I suppose, more of the day to day working capital. So those housing association, cash flows. Got it. And the final one's just really kind of a checking query. Just about the ASP profile, quite a lot of distortion caused by the timing of social in the period. And just kind of how you see it panning out for the year and maybe beyond it looks like there's distortion in the half year. There there is an, when you look at the total at ASP, you know, the private is not a bad guide, but it, ASP will come back and we think it'll be a bit higher than last year, o overall. That's just, I think, Clive. Clyde Lewis at Peel Hunt 3, if I may. I'll get the geeky one out of the way for real, in terms of land creditors, is that percentage now as a percentage of the total land holding, is that the low point now, or do you think it actually goes a little bit lower over the the next 6. I think that's the low point. I think it'll start going back up in the second half just as we step up our land acquisitions more. So there's been an average and unwind for for a period. Okay. And and, I mean, it probably tied in with a with that a little bit, but sort of Sherford And Wellingborough now in terms of the land holdings, mean, I think, Greg, you talked about the 50,000,000 of cash that you'd expect to come in from those 2 in the second half of the year. What does that mean in terms of profitability and also will you just lose half of those plots from your land bank, or will you take them all out? Because they're in JVs, just to sort of We'll lose half. We basically lose half. You'll take half. Yeah. Okay. And we because it's been a stated aim and a name of us for a long time, all of our forecasts going forward assumed we would do it. So they all assume that, you know, 2019 ended 2018, if you like, for, well, in 2019, 2020 and onwards already assume that, those two schemes would get into a JV. And and in terms of the the the, I mean, because again that's that shouldn't interfere with any of our numbers that that Yeah. No. No. That's fine. And and and in terms of sort of the average land cost, because, again, the big big sites and and I suspect the land cost as a percentage much is that gonna move the overall group average? It will move. I mean, the the 17% that Greg pointed out earlier, that will move up excluding those completely out of the land bank. So that will give completely clear, disclosure on the JVs as well as as the land bank because they will be you know, there'll be a one line coming back in as profit and loss, but the 17% will will tick up, on the back of both of those going. But you'd expect that. I mean, that seventy is very, very low. Yeah. Yeah. The other one I had was, I mean, your your Phoenix claim market leading. Lovely. Yeah. You haven't you haven't yet completed any yet, but it's market leading. On on that on that on that basis. Well, on that on that basis, is it market leading in terms of margin in terms of looks in terms of good point. Speed. Yeah. Fair enough. What what what makes it market leading? Well, it's the most basically, we've taken into consideration everyone else's layouts, what customers have said. It it it's market leading because it's the most up to date. So, next year when somebody brings out a further, range, I'm sure they will take over as market leading, but let's hope they don't make the same error as we've done without saying the market leading until they sold them. But it's, yeah, just the fact just the fact that it is, and the feedback we've had from the organizations and people that we've spoken to, we're we're very, very we're very confident that the product that we start selling as we go into 2019 is hugely better, than the the product that we're selling over the last few years and now, and just as importantly, much easier to construct Maybe we'll have a chat afterwards, Clyde. Brilliant. Okay. Thanks very much, everyone. Cheers.