Earnings Transcript for BWY.L - Q4 Fiscal Year 2022

Jason Honeyman: Good morning and welcome to Bellway's Full Year Results. We have a number of things to talk about this morning, not least current trading and outlook. But first, I would like to mention a few highlights from FY '22. Housing completions grew by 10% to a record 11,200 homes. Underlying PBT rose by 22% to £650 million. Dividend per share increased by 19% to 140% [ph]. And importantly, we have a land bank now approaching some 100,000 plots which provides flexibility for the years ahead. And our strong results demonstrate the progress that we're making against our key components of our strategy, namely, volume growth value creation and Better With Bellway, our long-term commitment to run the business in a responsible and sustainable way. And both of these subjects are covered in more detail later in the presentation. Now as we navigate through a period of uncertainty, it's worth looking at Bellway's shape and resilience. Our early reinvestment into the land market in the summer of 2020 enables us to open 120 new outlets in FY '23 and increases the overall number of outlets in the second half of our financial year. Our WIP investment is focused on cash collection and notably, our construction programs are biased towards social housing completions. We have a strong order book of over £2 billion and a resilient balance sheet with substantial net cash. We have an experienced senior operational team, some of whom are here today with a proven track record on delivery of working in challenging environments. So, whilst we move through a turbulent period, our long-term model is our strength. We already have the platform to deliver above-sector volume growth but also retain the short term -- also retain the flexibility to retain -- sorry, to respond to short-term changes in the market. And if I could close on a positive note, there remains underlying demand for new homes. And politically, whilst I would prefer more stability, as I'm sure you do too, there is cross party support for new housing which is very encouraging if you was to look beyond the near term. And now for Keith with our financial results.

Keith Adey: Good, thanks, Jason. Good morning, everybody. So I'll start with the financial performance for the year just gone which was strong with an underlying operating margin of 18.5%. And as Jason has already said, a 22% increase in underlying PBT to £650 million. Housing revenue increased by over 13% to £3.5 billion which is a new record for the group driven principally by volume growth. In line with the plans we set out this time last year, the number of homes sold rose by over 10% to a record of almost 11,200. And this has been driven by a 16% increase in a number of private completions which has more than offset the reduction in the number of social homes. And that strong growth on the private line also meant that the overall average selling price was higher than previously expected at £314,000. In the year ahead, construction programs are much more weighted towards social housing and this will help to underpin total volume output in a slower market. It will also mean that the overall average selling price is likely to moderate, particularly in the second half of FY '23, with a full year outturn likely to be around £300,000. The market has been strong across the U.K. with demand most pronounced for good quality family housing. We used Ashberry in over 8% of completions, where demand in sight lots support more than 1 selling outlet. Its use accelerates return on capital on larger sites but it also helps act as a mitigant to weaker market conditions. Under 8% of homes are sold in London which is where the usage of Help-to-Buy was most pronounced. But our average selling price in London is relatively affordable at under £390,000 with investments still focused on the outskirts. Mix changes driven by our land buying criteria in recent years mean that both volume and selling price are likely to fall in London in FY '23 and this will help to provide some protection as Help-to-Buy draws to a close. The underlying operating profit was £653 million, an increase of 23% compared to the prior year, driven mainly by the extra volume and improvements in the underlying gross margin. And that gross margin of 22.3% is still slightly below our usual land intake margin of around 23% and that's mainly because there was still some legacy costs sitting in within site valuations in relation to COVID site extensions. In relation to the administrative overhead, expenditure in FY '23 will be tightly controlled but considered in order to ensure the long-term health of the business. So I currently expect the cost base to exceed £150 million and there are a number of reasons for that increase. Firstly, upward pressure in relation to employee-related costs, including salaries, pension contributions and incentive schemes. And this will ensure we remain an attractive employer in a labor market which is still very competitive. Secondly, there will be no new officers but there will be necessary yet restrained investment in divisional teams to support outlet openings and secure our longer-term growth ambition. The increased overhead will also include the cost of within our new Building Safety division and general cost inflation across most headings. The range of outcomes in relation to the operating margin for FY '23 is more uncertain than usual. But assuming current prices and volume output similar to last year, I expect that we will achieve a full year underlying operating margin of over 18%. Our share of profit from joint venture completions rose to £9 million but as I've mentioned in prior presentations, I do expect a small loss perhaps £1 million or so in FY '23. And this reflects lower volume but also upfront financing costs on a longer-term scheme. It's worth noting that the underlying interest cost will increase next year because of high interest rates. And mainly this relates to the unwinding of the discount on land creditors. And roughly speaking, based on current interest rates, this will be an extra £5 million but it could be more if there are further rate rises. Also, as of Friday, the full year effect of the residential property development tax, together with the planned rise in corporation tax means that our standard effective tax rate in FY '23 will increase to around 25% which is a slight amendment to the printed booklets that you have in front of you. It will then rise again to around 29% in FY '24. In line with previous guidance, we've set aside an additional £327 million in the second half of the financial year as a result of entering into the building safety pledge and the Welsh pact Including this amount, the net charge for the full year was £346 million. And the total amount that we've set aside since 2017 is over £0.5 billion and the £442 million of that which remains on the balance sheet at the year-end relates to apartments in England, Scotland and Wales. In very simple terms, the remaining provision includes 2 broad categories

Jason Honeyman: Thank you, Keith. I'm going to start with trading. I won't spend too much time on FY '22, as I guess you're more interested in the current environment. If I could refer you to the first slide, you will see that in FY '22, we enjoyed a strong trading period with reservations up by 7% and house price inflation up by 8% to 10%. Underlying demand is apparent from our visitor rates and modest cancellation rate. And whilst that demand meant that our order book remains strong, it also meant that we traded through outlets more quickly and had limited stock availability towards the year-end. Moving into the current year, in the first 9 weeks since the 1st of August, we have seen overall reservations down by 12% and private reservations down by 27%. And our cancellation rate has increased very slightly to 14%. Year-to-date, we have achieved a private sales rate of around 0.55 per week. And it's worth breaking down that 9 weeks into separate months. And as you can see from the slide, August sales continued largely as expected, although still suffered a little from limited availability. In September, you can see there is a marked change in reservations with a reduction in private sales of around 40%. And there are 2 reasons behind that performance. First, we had the passing of the Queen with an extended period of mourning and more laterally, the sudden changes in the mortgage market following the negative response to the then Chancellor's program of support and tax cuts. Early signs of trading in October suggests a similar rate or pattern to September. Customers are cautious about committing to a house purchase and are adopting a wait and see approach principally due to the uncertainty around mortgage rates. And that situation is not helped by our WIP position as much of our build is in the early stages of construction. So a new home purchase from me today would likely attract a completion date of spring '23 and that is beyond the period of a mortgage offer. So understandably, customers are unwilling to commit. Now despite the slower start to the year, as at week 9, we are strongly forward sold with an order book approaching 7,300 homes of which 71% is contracted and most of which will unwind during the financial year. Overall, we are 77% forward sold for July '23. And for me, it's too early to write off the housing market. There are many reasons to suggest that beyond the near term, a slower but more normalized trading environment will return. There remains, as Keith has mentioned, long-term structural demand for new homes. We can offer attractive, lower running costs due to energy efficiency. There are benefits from new stamp duty savings. And we still have very strong employment levels. And if I could take a quick look at the mortgage market, in late September, some lenders stopped accepting new applications and removed many products from the market. The majority, including all the majors, are now lending again, having repriced in line with higher interest rates. Today, typical mortgage rates are between 5% and 6%. And to ease affordability, some purchases are taking out longer-term mortgages increasing the period from 25 years to 30 years or more. That said, there is likely to be a period of slower sales as the market adapts to higher interest rates. And whilst those higher interest rates were anticipated, we anticipated them to be over a slower or more gradual period. It's the immediacy, the pace of change that's led to the caution in the market. And I also think it's worth mentioning the running costs of new home ownership and the energy efficiency benefits from our homes. A new study from the HBF has shown that a typical new build house produced savings of around £2,000 per year compared to the running costs of a secondhand property. Turning now to land, you can see our land bank is in good shape, now approaching 100,000 plots. And our early return to the land market in the summer of 2020 allows us to be very selective with any future investment. All land purchases are approved by myself and the land team at head office, so we cross-check the due diligence carried out by our divisions. And this disciplined approach ensures that we can -- before any decision is made, we can cross-check risk hurdle rates and return on capital employed. We have acquired around 1,000 plots year-to-date and I will continue to be very cautious with any further investment. Where I do intend to continue with investment is in strategic land which is less capital intensive. And you may recall that we restructured our strat land department some 18 months ago. And I'm particularly pleased with the performance of our strat teams as historically, this has been a smaller part of our business with bigger teams, bigger investment, our strat land bank has matured to some 36,000 plots and the majority of these plots have a realistic chance of securing planning success within a 3- to 7-year time frame. Turning now to production. Despite the volatility of recent weeks, it's still worth remembering that supply chain issues still persist. That said, we delivered a record volume this year of over 11,000 homes. So clearly, the issues are becoming manageable. The biggest obstacle that we encounter is the envelope, the structure of the home, sourcing enough bricks, blocks, roof tiles and windows where the cost pressure is still proving to be a challenge although once inside with the internal trades, programs do tend to become more consistent and more reliable. Strong relationships in our supply chain are a big help and we do our best to mitigate the problems. We may use concrete bricks in lieu of clay bricks. We are using more timber frame in lower block work and we often build retaining walls from timber or concrete instead of clay bricks. And in addition, our Artisan range of standard house types is very much maturing and offering efficiency through repetition. Artisan is now plotted on 95% of all new sites and will account for around 40% of completions within this financial year. Now to touch on Better with Bellway. I'm very pleased with the results of our recent employee engagement survey, where 95% of our colleagues recommend Bellway as a great place to work. In the year, we've also made progress in a number of other areas, increased pension contributions and new low-emission car scheme and we actively promote an inclusive culture right across the group. A big challenge for our industry is retaining and attracting new people. So being an employer of choice is a critical part of our success. And we are very focused on training at every level and every discipline, particularly in our earn and learn roles where we hope to grow to 12% of our staff within the next 2 years. And now importantly, for our customers, we are a 5-star house builder as measured by our customers. But I'm not sure that, that holds the same way as it may have done, say, 5 years ago. Our recently launched Customer First program is designed to take quality and service a step higher. Our 8-week survey is already a very impressive 94% and our 9-month customer survey has now improved to 82% with our ambition to grow towards 90% in the next 3 to 4 years, not easy to achieve -- but many of you who enjoyed our fund day at great Dumo last month would have had an insight or would have seen what we're trying to offer to our customers and meet the builder approach, our cleanliness, our site tidiness, they're all designed to be more customer facing. And this approach has enabled us to be 1 of the first house builders to sign up to the new homes quality board. And finally, outlook. It is worth reiterating that bill weight is in a resilient position. We have around £250 million of cash in the bank and we have a strengthened land bank that supports less investment in the year ahead. But that said, clearly, we are in the midst of a period of volatility. And whilst we had the capacity to deliver 12,200 homes for FY '23 that -- the market is unlikely to support that now and I'm not willing to chase sales at the expense of margin. Operationally, we are strong. Outlet numbers are increasing and will help offset weaker demand. WIP is biased towards social housing completions and will help underpin volumes and our order book is in excess of £2 billion. So finally, as guidance for the full year, a volume similar to last year of around 11,200 homes feels more realistic today. But this may, of course, change as we move through the autumn and spring selling seasons. Thank you. Keith and I now are now happy to take questions.

Q - Aynsley Lammin: Aynsley Lammin from Investa. Just 2 for me, please. On the flat volume assumption. Just wondered if you could give us some insights to what you've assumed around sales rates and the expected split between private and social underlying that? And then secondly, just on build cost inflation. I just wondered what it was currently running at and what you expected to run for the FY '23. Any kind of more insight there.

Keith Adey: I mean on the set sales rate, I’ve probably spent so many times here saying don’t focus on a per site, per week basis but I’m probably going to do that now to answer the question. So we came into this year with an order book 65% if by 11,200 target which is unusually high. It’s been there for the past 3 years because of COVID. A more typical carried forward position would be maybe 45% to 50%. And -- so we expect the order book to unwind anyway. And we think if our order book unwound to that sort of level, you could deliver a private sales rate somewhere between and 0.55 and 0.6 per week for the full financial year. Now that is in line with what we’ve delivered in the first 9 weeks, albeit that exit rate as low as you see in the presentation. So it doesn’t feel like a particularly resi sales rate to get to that sort of level of output but it does require the September position to improve from where it’s been.

Jason Honeyman: Aynsley, build costs, it's not an easy question to answer. If I can just give you the facts. So the material line is where the pressure is at the moment. And those where I mentioned about the envelope of the building. Those costs, bricks, blocks, roof tiles, where there's a lot of energy in producing those materials. That's where we're finding the most cost pressure at the moment. In terms of labor, we're just starting with our contractors to go out to retender prices for '23 to see if we can get better prices as the market cools down a little bit. So we might see some softening in some of those labor prices as companies start to look for workload for '23 and '24. Overall, best guess is cost pressure feels like 7% to 10% at the moment but I'm hoping to see some of that give in the new year.

Ami Galla: Ami Galla from Citi. Just 2 for me as well. The first 1 on trading, it's quite helpful color that you've given but regionally in that 9-week period, are there any stark differences between, say, the urban areas versus some of the regional markets? And the second one really on the land market. You've mentioned you will be selective on land acquisitions going forward. I think most of the house builders are giving us similar commentary. What sort of activity levels do you really see in the land market today? And tied to that, on the SME builder side, is there any color that you can give us in terms of what's the underlying health of that subsegment -- are there any liquidity issues or funding pressures that they're seeing in the market today? And does that also mean that labor costs probably come down a lot more sharper.

Jason Honeyman: I'll do my best. Trading I can't pretend that there's any difference U.K.-wide Ami, I've got such a small window. There's just been a sudden change since the Chancellor's intervention and the whole market is down. That's my reading of it. In terms of land acquisition, it's difficult to predict what will happen in the land market. I can only comment on from Bellway's point of view. We don't need to buy any land certainly not in this -- in our first half. We'll probably sit on our hands for the best part and then see what the world looks like in '23 in the new year. It's difficult to predict whether there will be any fourth sellers in the market but I would suggest that most house builders are adopting a similar position to us. And sometimes, I mean, you can still buy land but with a little bit of wiggle room, so you can sign up conditionally and say, look, we'll pay this price but we'll have a walkaway clause if the market deteriorates. So we would be willing to do something like that on a limited basis. And at SMEs, for me, the problem with SME is not the land market. These guys suffer from the planning regime, not the land market. And whereas we've invested heavily in land, so we can mitigate the problems of the planning environment. SMEs don't enjoy that luxury. So sometimes they're committing to an investment and it's taking them a year plus to get planning. So I'd suggest SMEs are suffering more from planning than they are than in the land environment.

Glynis Johnson: Glynis Johnson, Jefferies. Four if I may. First one, in terms of capital allocation, Keith, you gave us all sorts of caveats to -- or what you've included in your capital allocation thought process -- but maybe if we can push you a bit further, what kind of downside do you believe that, that payout ratio is still applicable for in terms of how the market progresses? Second one, actually following up on Ami's question on land buying. -- of the 1,000 plots that you signed for, what are you assuming? How do you come to the value of that land? Or is it that it has that conditionality Thirdly, just in terms of incentives, it seems to be the tool of choice for the next couple of months or so. Can you just talk us through what kind of incentives you've seen a step up in the last few weeks, in particular? And then lastly, another 1 for Keith. -- cash outs, obviously, cladding cash out is something you probably have less ability to flex what about land creditors through the next 12 months -- are there any other cash outs that we need to assume must occur? And what do you have flexibility on.

Jason Honeyman: You do the first and the last.

Keith Adey: Is it, yes. So on the capital location point, I suppose, a lot bit of history, as you know, we've always paid as a listed company, probably the only household, I think, who's always paid a dividend and we want to keep that record. And I suppose the way I'd answer it is if you're in a bit of a blip and it's a little bit of a wobble, you don't really want to change that allocation policy if it's something more pronounced, more prolonged and long term and more drastic where it brings not a question mark but where you want to maintain that resilience. That's when you look to maybe flex that payout ratio, I'm not envisaging that on hope and that's not going to be the scenario. But in either of those answers, I think the position is we still want to be able to maintain a dividend and we'll make the final decision at the time depending on the circumstances at the time. And then in terms of cash outflows, what sensitivities -- do we have well, assuming we do like 11,200 this year in the sales market improved to a more normalized, albeit subdued level. we think a land spend of something like £850 million might be the best case scenario in terms of cash out the door. That compares to £1.1 billion last year. So you can see going down. And of that £300 million is contracted land creditors. But I do want to put a caveat around that. That's based on a reasonable scenario. If the market falls away, it doesn't recover. Clearly, we can't pull that back towards a much lower figure. And then the cladding piece in terms of commitments on the cladding, despite our best efforts, we probably spent less than EUR 30 million on cladding in the last financial year. So whilst we were likely to spend more in the year ahead, it's not going to be a sort of £100 million figure. It's probably somewhere in between what we spent last year and that under £100 million, £50 million, £60 million of that sort of order. And I can't think of anything else, particularly where you've got a big cash commitment. We haven't got big apartment blocks or anything like that.

Jason Honeyman: Just on the land point, Glynis, I've only bought 5 sites this year which make up that 1,000 plots, 2 of those had what I call a walker -- a walkaway clause in it, so we can decide if we want to buy them in the future. One was a much larger site with a very strong margin in it, it's difficult to make assumptions at the moment. I get your question. What we do is we make sure that we cover all the future homes costs from '23 into '25. We ensure that the divisions put in slower sales rates. So we've got a downside scenario or more realistic selling environment going forward. So that's all I can explain on that sort of short number of sites that we've got to date. And we're very aware that we could be in a flatter revenue environment with still some pressure on the cost line. In terms of incentives, incentives are just a normal part of business for house builders. We've just got used to not having incentives because of COVID for 2 years. So then coming back is not unusual. Certainly, from a Bellway perspective, we won't panic to bring out incentives. And the reason I say that is I've only really got 100 or 150 plots to sell for half year. So I might use some incentives on tidying up those sales. But I'm really selling Glynis into spring '23. So what we thought we would do is in the new year, when, hopefully, the politics have calmed down a little bit of settled, then we'll have a new incentive campaign that we'll roll out U.K.-wide that might be focused on energy. It might be focused on mortgages. It might be focused on the specification of the house but that's something we'll do for January, February.

Jon Bell: Jon Bell from Deutsche Bank. I think I've got 3. The first 1 is actually linked with Glynis' question. Jason, when you talk to your sales teams around the country, what are they saying at this stage that they need? Is it more part X? Is it greater price flexibility? Is it everything? Just keen to know what the messaging is from them. The second one, when the government asks you what you need which presumably they do from time to time, does more Help-to-Buy ever come up for discussion? Or is that a complete non-starter? And then the third one, you included in the pack the line more sites to help offset softer demand. Does it make sense to open those sites at this stage given the environment or maybe hold off and keep them fresh. What kind of flexibility do you have there on those sites?

Jason Honeyman: I'll start with your first 1 in terms of sales teams, Jon. This won't come as any surprise to you. But as you travel around the country, the sensitivity, as closer you get to Westminster, the more sensitive the sales teams are to what's going on in the world, where they're more relaxed if you're in sort of the Northeast or in Newcastle and that was very similar to Brexit, I remember having the same discussion then. So I think what they're encouraged by sales team is that whilst reservations have come down by 40% suddenly, there's still interest there. They're still getting inquiries they're still get an appointment. So they're buoyed by that. In terms of Help-to-Buy, I think it's a well-asked question. I've got no dialogue with the government but they've managed to fill their entry up on their own, haven't they. But what we should be doing because with mortgage rates at 5% and 6% in this is going to hurt first-time buyers. They're the ones who are going to suffer first because they've got no wiggle room in their finances. And if the government could think about a Help-to-Buy product, or a skinny Help-to-Buy product, as I call it, Jon, that's 10% that will keep that housing ladder moving that would still give first-time buyers the opportunity to get a deposit to move in. I think that would be a very healthy scheme. I'm not sure we need 40% deposits in London. I think that sort of distorts the market sometimes. But skinny Help-to-Buy for first-time buyers would be very good. And I did mention it to someone here that I might write Liz Truss a letter and recommend it. And they said, make sure you put a first-class stamp on it, Jason. And your one on outlets going forward, I think my approach to that I've got 2 ways to run the business. I've got a short-term approach, Jon, about controlling costs, less land spend and moderating WIP. And I think that's where that category comes in. So we will look at moderating WIP going forward. So any sites that we've got starting beyond our half year normally, we might have been quite aggressive and we've put all the roads in. We may put 100 foundations in. Well, just at the moment, we might only put in 50 meters of road now. Come off the gas a little bit. Let's just put enough foundations in to serve the first sort of street scene and just cool down a little bit until we can see what the horizon looks like in '23.

John Fraser-Andrews: It's John Fraser-Andrews, HSBC. Three for me, please. First is on the sales rate, appreciate, Keith, you. It sounds like per site is not your favorite topic but I think your sales rate in September, if outlets are lower, then clearly, per site is not as bad as down 39% on private. So I wondered if you have that in mind. So there's a year-on-year comparison. Second one is on pricing. It sounds, Jason, if you haven't rolled out incentives at all, so have prices in current trading being absolutely firm with the year-end exit rate. And then the third one is on the cash position, the average cash, is that a commitment, Keith, to sort of being positive? So if market conditions do deteriorate, you'll just come off the land investment. And as you sell particularly with your forward order book, you will actually end up quite strongly cash generative over the year if you don't do a stable year-on-year completions.

Keith Adey: Yes, yes. So on the sales rep per site per week, you’re right, the decline of 40% in private sales. If you look at it on a per site basis in September isn’t as declined. I think we had 236 average outlets in the first 9 weeks of this year. That was 255 this time last year. So if you work it out, you’re right, you said it’s probably about a 35% decline or something that sort of order. I must be perfectly honest, I think if you’ve got a 40% decline in sales, adjust it for 4% or 5% or so. It’s neither here nor there. The market slowed down. It needs to recover to get back up to that 0.5, 0.6 level, 0.55, 0.6 for the rest of the year. We’re just taking the view that we’re in the eye of the storm and hopefully when just higher interest rates, that things will calm down a little bit. And then in terms of cash generation, I mean, I maybe describe is there’s more certainty over H1. I expect us to broadly be in an average cash position of £200 million or so in H1 of this year. And then we don’t want to go into debt. I’m not saying you’ll never give in to it very modestly. You’ve got £0.5 billion facilities. But in the current market, I think that strength of having a bit of cash just makes you feel better about the world. And I wouldn’t be surprised if there’s a similar cash flow last year when we end the FY ‘23, July ‘23 with £250 million plus. Now you’re right, if the market really slows down and you don’t get those completions through, you’ll probably throw off more cash because you’ll pull back land spend even more. But that’s probably got a greater benefit in that scenario to the start of FY ‘24 rather than the end of FY ‘23.

Jason Honeyman: Just in terms of pricing, Jon, as we sit here today, I've got no down valuations. I've got no pricing pressure across the group. But I suspect there may be some in the new year. And we will approach it on a regional basis or even a site-by-site basis, Jon. I would guess, Manchester is going to be a little bit more robust than then probably Somerset or something like that. So we will look at pricing levels in the new year, just based on where you are on the site. So if you've only got 10 to sell on a site, we may take a view if we want to move on to the next outlet. So it's a site-by-site basis, Jon, for us.

Alastair Stewart: Alastair Stewart from Shore Capital. A couple of questions. Are your 120 new outlets all going to be in existing regions? And forgive me, I can't remember offhand whether you were planning any new regions but are they still going ahead if you were planning any? And Jason, you mentioned the smaller house builders were suffering more under the planning system. Do you see any opportunities to buy any of the smaller guys? Not really acquisitions per se but as land deals if the opportunities come your way.

Jason Honeyman: In terms of the new outlets, I think it's a very good point that you make, Alastair, because new outlets are quite strong for house builders. We all get consumed by numbers of outlets. But an aged outlet of 10 to sell doesn't do a lot for us. Whereas launching new outlets, that new interest that really does spike sales rates; for us. They're all in existing divisions across the group with established sales teams. Keith alluded to in his presentation that we've put the 1 or 2 divisions that we've planned on hold for the time being and we'll just monitor that into '23. So we're not making any progress in that regard. And -- do -- am I interested, I'm not sure whether your question is an M&A question or a land bank question but...

Alastair Stewart: Purely land bank it’s not…

Jason Honeyman: Yes. I mean most of the land -- 3/4 of the land I bought over the last 2 years was probably agreed or purchased in the summer of '20. So I've got the benefit of probably some HPI in there and I'll have to put up with a lot of cost inflation as well. I don't need to buy too much land, Alastair. I'm in a very strong position. So it's not something that interests me per se.

Charlie Campbell: It's Charlie Campbell at Liberum. Just a couple of questions, please, if I can. Just wondering what the take up of variable rate mortgages is. Clearly, there's not been much of a thing in the last few years but clearly, they were in the past and the headline rates are obviously much lower on those. Just wondering if those are appealing to your customers at all. And then secondly, just I wonder if you could just take us through the rationale for the strategic land acquisition and maybe a number on the assets. Maybe it might be helpful just to get an idea of the size of it.

Keith Adey: On the variable rate mortgages, I mean, we don’t necessarily get those stats from the brokers your clients tend to use, that’s between the brokers and the customers. But what we are getting is feedback is that more and more people have taken out longer-term mortgages. So something like 2/3 of customers in the start of this year have had mortgages of terms in excess of 25 years and that makes quite a difference in terms of the affordability -- and also, you’ve had a period of time at the reds a little bit but where you’re getting a better deal on a 5-year fix than you are a 2-year fix. So we’re seeing those 2 things as being a bigger part of the market. And I think that will continue. It’s an easy way for people to keep those payments down as a percentage of take-home pay. And then the second question on the strat land acquisition.

Jason Honeyman: Yes. Charlie, on strategy land, the first company we bought was small and it was just in the Midlands area. It was in a place where we perceive there will be growth. So it wasn't big numbers. It's a dozen sites. But we've recently acquired another that's probably 30-odd sites. So it's that sort of scale that's manageable and can be digested into our strat and planning team so we can process it internally. And we quite like that because it gives us a little bit more visibility on the pipeline of sites coming through the system. So it's quite healthy for us while we sort of pull out the land market at the moment.

Keith Adey: And this first company, it's less than the cost of a site but it's given you a dozen or so options. It's not a huge cut for outlay. It's a long term, fairly modest in the size of the business, just part of that longer-term line play.

Sam Cullen: Sam Cullen from Peel Hunt. I’ve got 3, 2 of which are fairly straightforward, I think. The first one on the build and safety pledge and your kind of 2 buckets. Can you give us an idea of what the split of that 44 is between those 2 buckets what you’ve surveyed and what’s the sort of known unknown within that? Secondly, you talked about first-time buyers bid you disclosed kind of first-time buyers at the back of the pack. Do you have a number on the number of cash buyers you have each year? And then lastly, I guess, tying in to Jon and Glynis’ question and your comments, Keith, around margin preservation. Do you have a sense of how much pain the business is willing to take on the volume front over the next 12, 18 months, should demand continue to fall at the rate it has in the last 6 weeks what you’re willing to see in terms of volume declines?

Keith Adey: On the build and safety plans, I was hoping somebody would ask because I've got pages of analysis on this. So it's broadly 2/3 of us of that provision relates to that first bucket which is the known issues. And even then there are uncertainties around it. But that's roughly what the split is there. On margin and volume, what are you prepared to take? I mean I’m never sure that the dynamic work start mathematically or scientifically to an extent it’s driven by what the market is. I think the sentiment is we don’t want to -- we go blindly pursue volume to hit an arbitrary target, especially in a slower market because that can be value destructive. So we take the view, it’s a balanced approach. We don’t want to chase the sales right, just for the sake of chasing the sales right because the more you give away in incentives, you talked about incentives earlier on, as soon as you open the flood gates on that, if you open them too widely, you’ll have an incentive on every plot that you don’t need. So you’ve got to have that considered, disciplined approach. So I can’t give you a figure what it’s all going to be market dependent but the sentiment, I think, is important to understand. And cash buyers, again, it’s not a figure we necessarily get from our mortgage brokers. I think when we did a bit of a survey, it was something like 10%, 15%, probably don’t need a mortgage of that sort of range. Now whether that changes going forward, it probably will a little bit because I suspect people if they can wonder avoid that mortgage. And we’ve also had less reliance on first-time buyers over recent years as well which obviously plays into that market as well.

Jason Honeyman: All done. Thank you, ladies and gentlemen. Thank you.