Earnings Transcript for TWODF - Q2 Fiscal Year 2020

Operator: Good morning, and welcome to the Taylor Wimpey plc half year results call. Today's conference call will be hosted by Taylor Wimpey Chief Executive, Peter Redfern; and Group Finance Director, Chris Carney, followed by a Q&A. [Operator Instructions]. The accompanying presentation slides can be viewed and download from the Taylor Wimpey corporate website. I will now turn the conference over to the Chief Executive, Pete Redfern. Please go ahead, sir.

Peter Redfern: Thank you. Good morning, everybody. Thanks for joining us. So the odds to do a results presentation over the phone and be sort of working the slides and giving you the numbers, but it's been a pretty odd first half, isn't it? So we probably shouldn't be surprised by that. I will try and give you the slide numbers as I sort of go through and so that you're able to follow. There are some charts on that, that I think are useful. We have gone through the presentation to rather give you the information we think is most useful at this point in time because, obviously, with such a strange sort of first half and, I think, certainly for us and I hope for you, the focus very much on the future, particularly 2021, by giving you enough of a flavor of the second half of 2020, the kind of information that we think is most useful is slightly different. But most of the key information you would normally use is there, some of it in the appendix. So we're not trying to take things away from you, but definitely a different focus today. I'm going to start with Slide 5 and really just reflect very briefly on how we have approached the last 3 or 4 months. Our focus has been on doing right by all of our key stakeholders, including our shareholders, but also including our employees, our subcontractors, our customers and government. And I think we feel that we have got that right and that, that has put us in a strong place. It's clearly been a very poor financial performance in the first half, and I don't think that will surprise anybody. I'm sure there are numbers in there that are tough for you to understand and get scripted, and we understand that. And Chris will spend some time trying to help with that. But the key thing for us has been to get things right from a safety point of view for our people and make sure that the business is protected and as strong as possible going into 2021. So I make most of -- no apologies for spending a lot of my time talking about how we're setting things up for the future rather than going back and reflecting on the last 6 months. So just picking up a couple of points from Slide 5. We did have very proactive management through the crisis. We tended to be the first out to explain what we were doing publicly across the sector, and we feel in lots of areas, the sector then followed us. And that actually helped us and that -- and helped the supply base and the subcontractors to get a clear pattern about what the sector was doing. And then overall, because of that, we're all in a stronger place. And I think if you reflect on what you would have expected in terms of production and sales way back at the beginning of April for the sector, I don't think you would have been sort of too disappointed with where collectively we are now. I'll come back to our own particular sales and production sort of stats and performance sort of later, but I think sort of that leadership and communication has helped. And I'm not going to list, you will be glad to know, all of the things like pay it forward and the care home scheme that we've done through that period, but I do think they are important, and I think they have put us in a strong place with all of those relationships. I think, also, we've seen the benefit of our prior investments in operational strength in our site management teams and in IT systems. But we learned through the crisis as well and actually have been fairly self-critical about our past speed, particularly with IT, of putting together a plan. And so actually, we've seen a number of developments, including -- if I just pull out one example, a new app developed in a matter of weeks. That's customer see virtual viewing, to have precise opening times for all of our customers and to do video sort of calls online with our salespeople sort of through an app. It's a sort of thing that would have taken us far too long in previous circumstances. And I think we've learned from that about how we can use those kind of more pacey approaches to keep costs down and to be more fleet of foot, particularly in the customer and sales arena, than we've been historically. I think though then as we look sort of longer term, it's also been an opportunity for us to look harder at the question we raised before the pandemic, was sort of a focus of everybody's mind, but back at the beginning of the year about outlet numbers and outlet size. And I do think it's created an opportunity for us to invest in more smaller sites on top of the large sites that we already sort of own and that are coming through our strategic land bank to make sure as we go through into a potentially uncertain, which we will definitely come back to, 2021 market and 2022, to make sure that we've got the maximum number of choices. And we all know that higher outlet numbers give more choices. We believe in our strategy on larger sites, but I have never said that, that doesn't mean that we shouldn't want smaller sites as well. And so I think it gives us the opportunity to get that balance right. And obviously, the capital raise was a key focus of both changing the mix of sites, but also giving us the opportunity to grow outlet numbers over the next 18 months, and we'll give you an update later on in the discussion over how that has progressed over the last few weeks since the announcements around the capital raise. Moving on to Slide 6, just giving a quick overview of operations, and Chris will pick up on some of the stats within this in a little bit more detail. But first of all, on production. We said when we announced our return to sites that we expected to get to around 80% of capacity on average sort of by the end of June. We are at that sorts of level today. I know that some of you have expected, based on more recent comments from 1 or 2 competitors, that we might upgrade that number today. I don't think that's right here today. We do have sites that are operating at higher levels than that. And I would repeat what I have said in the past that we would hope by the end of the year to get to a higher level than that 80%. But we're still getting up to full speed in Scotland. There are still some sites, particularly in London, that have slightly more constraints. And we have to allow in how we guide you, particularly in how it impacts on volume numbers for this year, for the potential for localized lockdowns, such as that we saw in Leicester and that we might see over the next few months. So I still think it's good guidance, but it doesn't mean there isn't upside to it. And given that it's the level we're at, at the moment or perhaps a little bit better, then I think it's pretty solid guidance. But what we don't want to do is create a false expectation of the completion volume recovery during the course of this year. We think the implications on costs and speed to build are likely to be limited to 2020. No real change to that. The additional sort of site costs from our sort of COVID-19 measures are not particularly significant. There is no change there. Clearly, the first half impact has been very significant, but that's more about inefficient sort of use of overheads on site or no use of overheads on site as we were not able to build or build any reasonable capacity. And so whilst there is a small impact in the second half, we don't think it is huge. And we don't think that -- our base case is that sort of 1st of January sort of build is relatively normalized. And I do think it's important, our focus has continued to be, and I think this caused some surprise when we returned to sites, but it's been true all the way through, we have continued to and will continue to open new outlets. And you will look at our outlet numbers at the sort of end of the first half, and they are above the numbers that we gave you sort of at the prelim stage. And that is not brand-new line coming through. It doesn't happen that quickly, albeit some of the lots we're buying will give us quite quick outlets, probably quicker than we expected. I think that is a key dynamic for us going into 2021, but particularly going into 2022. So I think whilst some of those may open, sort of new outlets may open in 2021, it's 2022 volumes that they start to help. On the sales side, I'm not going to belabor sort of the impact of IT on the future, but there has been a good sales recovery with good sales rates since reopening of about 0.7 a week. I'll touch on some of the sort of detailed numbers. The main constraint on sales today is production. It's the availability of production capacity for completion this year, which, again, I will touch on sort of as we go through. With suppliers and subcontractors, I think we've been sort of pleasantly surprised. We expected what we described as friction. There was the potential for bottlenecks, and we've not really encountered any major bottlenecks so far. There have been some areas like plasterboard that slowed things, but for a matter of weeks rather than any sort of significant or material way. So -- and I think sort of we have seen some of our subcontractors being slow to have the confidence to bring their people back from furlough, sort of they wanted real certainty of work. But as the broader sector has returned to sites, we've seen those problems gradually ease. And again, when we started sort of the plan to reopen sites, we knew it would take a number of weeks, it has done so. But most of those sort of headwinds are largely sort of gone. So the constraints are about the safe operation of sites. It's about sort of inevitable bottlenecks on car parking and toilet facilities and the like rather than sort of underlying macro issues. If I move over to Slide 7 and look at the sort of underlying sort of structural backdrop for the market. We're still of the view that it remains favorable. And I think that's why we've seen the housing market very quickly return to something like a normal level of activity. I don't like the phrase pent-up demand, but it feels too trite, but there is a bit of that. And I think in those first weeks after opening, sort of the skeptical, I would say, is this sort of just kind of an inevitable backlog from that when this just peter out in a few weeks. And we said at the time, that's not what it felt like. We understand our customer. We talk to them side by side, and it gives us a better feel than you get from the statistics. And you have seen and you'll see in our stats that actually the level of interest and activity on site has continued to be high and, actually, on most measures, has run ahead of the equivalent period sort of last year rather than behind. I think from a political point of view, I think the Stamp Duty change was positive. You can't see a meaningful blip in the statistics. Sort of as a result, we saw some increased interest on those particular sort of weekends, I think, as a sort of more impactful help for the secondhand market, but that's still a positive because I think we have long been concerned that the level of activity in the secondhand market -- the low level of activity in the second half market sort of is a risk for the new build. But we see, I think, a broadly supportive sort of government environment. And actually, sales volume starts returning to normal, but the opportunity for prices to start to move forward rather than sort of be stable or go backwards. We increased our prices by about 1% for the 1st of July. I have to be honest, it wasn't done with the same absolute across-the-board view that we did in January. I think sort of condition's a bit more uncertain. [Technical Difficulty] And on mortgages [indiscernible] change was, I think, a bit of background pressure on nationwide to then return. And so those mortgages are back, and I think that risk is therefore largely passed. And I think the risks, there's the obvious inevitable ones, the risk that unemployment increasing will affect the housing market. I think it's impossible to say. I think it could definitely go either way. I think there's a tendency to think actually it's bound to be a negative and it's bound to impact on house prices negatively. I don't think that's true at all. I think if we've learned anything over the last 4 or 5 years, it's how resilient the housing market is and that it is not inevitable in periods of uncertainty that it will go backwards. I do think, and you've heard me say it before, it's about interest rates. If interest rates stay low and mortgage lending sort of stays resilient, that actually the market stability -- we might see lower sales rates for a time, but market stability can weather most things. And we do start to have to then refocus again on new regulations and policies, particularly Part L and Part F, which the government is still committed to bringing forward, albeit I think now the impact is absolutely going to be into next year rather than late this year, which was the sort of situation we were looking at, at the beginning of 2020. If I move on to Slide 8 and just on sorts of sales momentum, sorts of the normal kind of stats, but we split them by different weeks because we thought it would be more useful. You've seen quite a lot of these apart from the very most recent period. Sort of you've seen them as we've done announcements through the last few months. Probably one though I would pick out that I would ask questions on, if I was you, is cancellation rate. It did peak in the sort of weeks immediately after reopening for sales. It was never high enough to be a concern. As a proportion of a very large order book it was tiny. But on a relatively low initial sales base, it was higher than usual, as you can see, at the sort of 30% level. The last 2 or 3 weeks, that's come down to the low 20s. And with the level of low sales that we need this year, that is a very manageable level. And it's just individual customers. So in some cases, just swapping from one plot to another because of changes in build time. In some cases, changing their mind about buying a house because of their own personal job security. But the fact that, that has already started to normalize, I think, is -- doesn't really give us any concern. Our constraint on sales is absolutely about construction. You'll see in the statement, we're 98% sold for this year. If you work through the math of that, you'll see that means we have roughly 1 plot to sell per site for completion this year. And so trying to generate sales rates of 1 a week consistently through the balance of this year is not going to happen. And actually, it will give us an order book that is difficult to manage in terms of scale at the end of the year. That does give us the chance though to manage any of those cancellations to make sure we've got the right customers in the right places and to make sure that we finish this year with a stronger an order book as possible for next year. And I'll get back to our focus is on making sure that we go into next year with as much momentum as possible, and that order book value is good. I think the other thing that is sort of -- just want to comment is the level of exchanges. Again, they were sort of running lower than usual through the crisis. I think you sort of have to ask the inevitable question as you get back to normal where you're going to see more cancellations and, therefore, less exchanges. Again, we started to see those normalized over the last month and see exchange -- the level of exchanges pick up. It is running slower than it would normally do, but I don't think that should surprise us or concern us when you look at the expectation we have for the second half of the year. And you see at the bottom just a couple of the charts that we have sort of used over the last few years, giving you the level of immediate customer interest. And actually, that plays out across the board. As you've heard me say, the number of brochure sort of requests has dropped off structurally over the last few years, but the measures that we look at, at the moment have increased materially. I would place more store proportionately in the website visits than the appointments booked because, obviously, we're using a different selling approach. And therefore, the number of appointment books is always going to be significantly up, but the website visits, I think, is a much better and sort of more real indicator of underlying demand at this point in time on a relative basis. Just briefly on Slide 9, an update on the NHS and care workers scheme that we introduced during the crisis, both from our existing order book and sort of from new sales. We've had significant interest from that. We went into that scheme very much because we felt it was the right thing to do. I think it was something that we decided as a management team that was appropriate. We've been pleased by the way it's operated. From a reservation point of view, it comes to an end at the end of this year. And obviously, with the level of availability, sorts of the number of additional sales is not likely to be huge. Sort of -- so it is a point in time, but we do think it's an appropriate scheme and will be effectively sort of a COVID-19 cost in the second half of the year. Moving on to land on Slide 10. We still continue to see land market opportunities running at a significantly higher level and at better quality and with less competition than we are used to. I think it's not many weeks since the capital raise. So I don't want to repeat what we said there. But certainly, the environment that we were seeing then has continued to be the case. We have seen, as we expected to, 1 or 2 of our large competitors return to the land market in a more active way, but we haven't seen sort of most of the smaller ones, and that was the dynamic that sort of that decision was based on. I think one thing that has changed is that we have seen more opportunities coming forward at really good returns and with interesting financial metrics and interesting site qualities in London and the South East. And I would want you to focus on the wider South East rather than London in terms of the balance of quantum than we have done in quite some time. And so I think that metric has changed, because at the time of the capital raise, we haven't seen that yet. It felt like it would happen, but it hasn't started to happen. So I think there's some good opportunities. And I'll come back to sort of land investment is about timing, and the opportunity to increase it materially in the first half of this year and the early part of next year sort of gives us the opportunity to grow the business further post the pandemic than we would have done if it hadn't happened and actually, as I touched on earlier, to rebalance the outlook a little towards more smaller ones. I would still maintain the capital was not essential, but it does give us a good opportunity to invest well for our shareholders. The pipeline continues to build. We've done about 26 land deals now. That's the equivalent of what I think was 13 at the time of the capital raise announcement. About 20 were in the first half and about 6 so far in July, and the forward opportunities continue to be good. And on my sort of final slide of the first section, you see what may be the last time that we show it to you, but those mapped out against the sort of quality of land acquisitions over the course of the last few years. It's always very difficult to sort of pick out an average number on any land acquisition. That final sort of smaller silver block, smaller because sort of the purchases in the first quarter were largely canceled and then either not entered into or renegotiated. So this largely represents second quarter purchases, but that actually reflects smaller sites, more or less than waiting and sorts of in many sites, factoring in those Part L and Part F costs, which we're finding is durable with the higher land values in the South and into the better markets of the Midlands and the South West. It's pretty tough in the North. And so sort of actually sort of seeing land prices just in the North may have to wait a little bit more until we see those sort of regulations actually in place. And I will sort of pause there, and I will come back after Chris has spoken and talk a little bit more about outlook and where our tactics are as we look at the next kind of 6 to 12 months. Chris, over to you.

Chris Carney: Thanks, Pete, and good morning, everyone. As normal, I'll start with a summary of the group results, and the impact of the pandemic is very visible on the first half with revenue down 56%; gross profit, including some COVID-related costs, down 78%; and operating loss in the period of £16 million, which I'll come back to and talk about in more detail on the next few slides. Net finance costs of £14 million bring the pre-exceptional loss before tax to £30 million for the half. Following an involved process, we've now agreed a contract for the replacement of the ACM cladding for our Glasgow Harbour site, and we've increased our exceptional provision by £10 million in the period to reflect that. Despite the net loss for the period of £32 million, the tangible net asset value per share has increased since the year-end, which is, of course, due to the equity placing in June. Moving on to Slide 14. This is the first of 2 slides that, together with the margin reconciliation slide, should give you a very good understanding of the impact of the pandemic on our results. You'll have seen that we haven't taken an exceptional charge for COVID, but I will take you through the impacts to our costs and cash flows as I move through my slides. The chart on the left shows weekly build output. As you can see, there was a 5-week period where all sites were closed and not generating any output. At the site of those closures, there were periods of demobilization and remobilization where the output was significantly reduced. This disruption to build, as you would expect, has lengthened production programs, and this has meant that completions in Q2 were significantly reduced, which you can see in the chart on the right. This delayed completion has a knock-on effect and will ultimately push the completions we originally intended to deliver in Q4 of this year into Q1 of next year, reducing 2020 volumes meaningfully. And by meaningfully, we are guiding to around 40% less than 2019 levels, assuming there aren't any significant changes to current circumstances. Moving on to Slide 15. On this slide, you see how the reduction in Q2 completions translate into a reduction in revenue for the half. And that lost revenue, together with some incremental COVID-related costs, is what drives the reduction in profitability period-on-period. The £39 million of costs relating to COVID-19 in the main related to site overhead costs that would normally be capitalized into WIP and recovered as plots legally complete. But because sites were closed and build wasn't being progressed, we are required by accounting standards to expense those costs in the period. So moving on to Slide 16. As ever, this slide provides a great deal of visibility of the various factors influencing the U.K. operating margin in the period. The net market impact of house price and build cost inflation is a relatively small negative, as you would expect. Most of the change in margin period-on-period is the direct consequence of lower revenues reducing our ability to absorb fixed costs that you saw in the last slide. Net operating expenses, which are predominantly fixed overhead costs, and direct selling expenses, which also include a high degree of fixed salary and show home costs, together contribute a reduction in margin of 11 percentage points. The only other significant contributor to the drop in margin is the £39 million of COVID-related costs, which account for another 5.3 percentage points of the margin reduction in the period. Most of that relates to nonproductive site overhead costs during the closure and remobilization period, but it also includes some incremental costs, such as extra cleaning, extra PPE, Perspex screens for sales centers and other items of a similar nature. So although the reduction in volume and revenue in half 1 has generated a negative margin, now that we have all our sites open, build-out put at around 80% of normal levels and strong demand, we have all the ingredients necessary to see a margin recovery in half 2. Moving on to Slide 17. The 58% reduction in U.K. completion volumes is consistent with the reduction in group revenues you saw on the first couple of slides. Underlying house price inflation for private completions from half 1 2019 to half 1 2020 has been very flat, flatter in reality than the nationwide figure we provided in the margin reconciliation slide. The increases in both private and affordable selling prices that you see on this slide are mix related with slightly larger homes slightly more weighted towards the South. The JV result for the first half was also reduced by the pandemic, but we still expect the share of JV profits for the full year to be at a similar level to that reported in 2019. Moving on to Slide 18. Our balance sheet was strong even before the placing in June, so we now have a very strong balance sheet, which gives us options. The increase in net operating assets since the year-end is driven by the growth in work-in-progress and an increase in land, net of land creditors. WIP is higher than this time last year because of the delay to Q2 completions, and I'd expect the WIP balance at the end of this year to be higher than the end of 2019 by a similar sort of amount, reflecting the delay of Q4 completions into 2021. Our short-term owned land bank comprises over 54,000 plots, and I'd expect that to increase further, along with the net land position in the balance sheet, over the course of the next 12 months as we invest the proceeds of the placing into new land. And you can see at the bottom of the slide that the closing tangible net asset value per share was 102.8p. And just to save you running the calculation yourself, the placing increased that figure by 4.3p per share. Moving on to the cash flow. Clearly, the closure of sites and resulting reduction in legal completions significantly restricted both our profitability and our cash generation. Cash land spend in the period amounted to just over £300 million, with around 3/4 of that spend relating to land creditors from prior periods. Supplier and subcontractor payments were about £325 million, less than the same period last year, but still significantly more than recoveries in the income statement. So the investment in WIP and land that you saw on the balance sheet are the main contributors to the operating cash outflow in the period, and those investments put us in a strong position for delivery in the second half and next year. The placing in June delivered net proceeds of £510 million, which is shown in this slide, net of other investing and financing activities, including amounts invested in joint ventures. Moving on to Slide 20. Working through this crisis has really reminded me that when the environment is changing rapidly, it's really important to be clear about where your priorities lie. We're running the business to deliver long-term shareholder value. And for me, that means resuming our focus on cost and efficiency, getting back to generating cash and always retaining a strong balance sheet. We came into this year with our focus on cost and margin, and that has not changed. Whilst the pandemic has inevitably limited what we've been able to achieve in the first half, now that we've unfurloughed all our staff, we can resume our focus on the areas that I set out in February. For example, in May, we launched a new benchmarking dashboard tool, which allows our commercial teams to compare costs across business units, sites, house types, cost heads and resources in a way that just wasn't possible before. And I'm confident that visibility, especially when combined with the introduction of our new tender management system in the second half, will deliver a lot of value for us in the future. I think tight cash management almost comes as second nature to businesses that have had to run for cash in the past as we did through the great financial crisis. One example of that you can see on the balance sheet is that our debtor balance is reduced, and that's no coincidence. We have daily, weekly and monthly cash forecasts, which provide us with a high degree of visibility and control. And we will maintain that degree of control through the balance of this year and beyond as we invest the proceeds of the placing. But at the same time, managing our cash tightly, as Pete said, we've done the right thing for our suppliers and subcontractors by striving to pay them as quickly as possible for the work they had already performed and have even gone a step further with the pay-it-forward scheme. We think the commitment we show them now will pay off in the future. We've operated the balance sheet pretty cautiously in recent years. And I said earlier, when we went into policy, it was with a strong balance sheet. Our operating assets are going to increase over the next 12 months as we invest the proceeds of the placing. That investment will start to yield completions in 2022. And by the time we get to 2023, we should be seeing volume from the majority of the sites acquired, and I would expect the balance sheet to reach a material position in a year or 2 after that when those acquired sites will be approaching the middle of their life cycles. And then moving on to the guidance slide. As you know, we suspended all guidance at the end of March when we closed our sales centers and construction sites. And now that all of our sites in England, Wales, Scotland and Spain are open again and we've had a period of time to assess the implications of social distancing on production output, we feel it's right to return to providing guidance. And most of what you see on this slide is self-explanatory, and I've already touched on the volume guidance. The net cash guidance for the year-end of £550 million to £750 million is intentionally quite a broad range because it's dependent on how much we spend on land in the second half, and that will depend on the number and quality of opportunities we see. We could fall outside that range. But if we do, it will be because the environment and the circumstances support that outcome. I would expect underlying build cost inflation in terms of new tenders to be pretty flat for the balance of this year with Stamp Duty and Help to Buy deadlines stimulating a resumption in demand for labor and materials. We're already well progressed with all of 2020's completion. So the underlying level of build cost inflation on those compared to 2019 is, as we guided to in February, around the 3% level, excluding mix and COVID. Given the dislocation in the land markets and opportunities that it presents, we've decided not to reinstate an ordinary dividend this year. We do understand the importance of the dividend to shareholders and expect to resume ordinary dividends in 2021. And we would also expect to review the special dividend position in 2021 for payment in 2022. Overall, our intent in providing this guidance is to be helpful. But we are conscious that the economic outlook does remain unclear. So it's very much provided on the basis of market circumstances as we see them today continuing. And obviously, those are subject to change. And I think that's probably about it from me. So I'll pass back to Pete.

Peter Redfern: Thanks, Chris. Chris, if my line goes at all and my voice fades, can you reach out because you're the only other one with the live line, and I understand that in the earlier piece, you did fade at one point, but I couldn't tell because, obviously, it's a one-way call when you're presenting. So if I pick up from Slide 23, I'm not going to spend more time on the first box, which we have touched about, but I will briefly comment on the other 4, particularly there, I think the second one, because we haven't really talked about customers and customer service at all as yet. We've been pleased with the customer service performance through the first quarter in more normal times when we were back at the 5-star rating and some of the other measures we use sort of on customer service continue to improve, including the Trustpilot score, we've maintained that through the second quarter. So sort of today year-to-date in this customer care year at sort of nearly 91% customer service score. I think I worry a little about completions in November and December from customers who have been unfortunately delayed because of the production slowdown and that, that will have an impact, but that we will have to watch and manage. And I don't think if we do see that, that it will sort of speak to an underlying shift in the actual service we've given customers, just the unfortunate impact of the pandemic. We have been extremely focused on how we make sure through the shutdown months and in the immediate aftermath, including sort of at the moment, that we're actually sort of able to resource up and deal with any customer issues after completion as actively as we are able to do with construction on sites. Because the sort of message to customers when they can see lots of activity starting up on sites but we're not there to sort their problems would be a deeply wrong one. So we've been very focused on that. And I think I'm also pleased, as you can see on the statement, that the construction quality score continued to improve. Now that's mostly a first quarter measure because the NHBC hasn't been doing reviews in the second quarter, but I think speaks to the underlying trend that we've seen over the last 12 or 18 months. I will pick up on the third, the purple block. We have been very pleased with how the business and the people in it have responded to the challenges of the pandemic, both our systems but also the attitude of people. And I think as I touched on, on some of the IT development, I do think it's sort of given us the confidence that we can adapt and move more quickly than we have done in recent times. And then the last 2 blocks, I'll deal with it together. I've talked about land investments and growing the outlet base, but I put it together because I think I want to sort of set out we're very clear that those have tended to be our 2 challenges over the last couple of years. And we need to use this crisis to really get those right and firing on all cylinders. Chris has said one of his sort of main objectives remains cost and it remains mine as well. As we go into 2021, we need to make sure that our cost base is as keen as anybody else is. And as I say, I do think we're in a strong place to grow our outlet base from here and sort of are seeing the early signs of that. So that will take me on to Slide 24 and coming out of the shutdown period. I'm not going to pick up every sort of line on this slide. As I said, the relationships that we've improved and enhanced through the last few months sets us in a good place. The strong balance sheet gives us choices. And there are some real positives sort of about how we respond to change and react and also how we serve customers who want slightly different things. So by adapting long-term our attitude to the use of offices, to how we sell. There is a big sort of strength of view within the business that the appointment mode of selling, which means we get a smaller number of much higher quality visitors and are able to really focus time and attention on them, which our customers like and our salespeople like, may well end up being the future sort of normal way of working and certainly will be a core part of it even if we have sort of partial kind of nonappointment opening as well. But also the level of kind of communication and relationship with our suppliers and contract base has improved, and we do think that gives us some options sort of going forward. And I think we feel that, that on Slide 25, has really shown the culture and values of the business and some of its underlying strength around its land bank and its balance sheet. So finishing on Slide 26, before we open up for questions, on the outlook. And I'll pick up a couple of things sort of on guidance as well, sort of expanding on Chris' comments. We do have very good visibility of 2020. It's really about production more than it's about sales. I think it is about building an order book that is not just as big as possible, but it's actually right places, right level of resilience, not so big that we will struggle to manage customer service within it and struggle to manage build time lines. But that really starts off 2021 in the strongest place possible. Building on that 80% production capacity, as I said, I do believe there's upside. But our goal is to enter next year as close to 100%, and not just 100% in the sense of we're doing 100% of the work, but that it's being done properly in a structured and organized way. You do tend to find when you rush into these things, that's when future construction issues come out. And we're very committed to maintaining the quality approach over the last few years and not sort of repeating some of the challenges that came out, the sort of challenges of the last cycle. We've made good early progress on land after the equity raise. There was really good momentum on that and sort of we'll follow that through. It's not about focusing on a particular point in time and saying we expect to have spent X by this date and Y by that date. We do expect over the course of the next 12 months to have spent that capital raise on incremental land investment, but the exact timing will depend on the timing and the quality of the opportunities rather than some slightly arbitrary target. But our overall sense of the market remains positive and short-term trading really does underlie that. I think when I said I would sort of pick up sort of some of the guidance points that Chris has made, it's particularly 2021 that I want to talk to you about. I think for us, it's a challenging time to give guidance for next year. And the key decision is actually going to be how we think the market will perform, and therefore, how we set our stall out from a build point of view site by site. If you think back to our high sales rates of 2019, they came because we set our stall out in late 2018 for a higher level of production across the board on sites. And it's hard to be sure at the moment that, that's going to be the right thing to do for 2021 given the uncertainty around unemployment and the broader economy. And so sort of I think it will be a decision we will take through September and October about where we expect our sales rates to be next year. And that's quite a big swing factor on volume because our focus will be on maximizing the margin and optimizing the price. And so actually, setting out with 2 aggressive sales rate target and therefore, bold target might put us under pressure. So it's slightly hard for us to give you really good guidance on that today because I think setting that out 6 months in advance in this sort of slightly uncertain world at the moment feels wrong. And I think the swing factor is between do we target sales rates of 0.8 or do we target sales rates of 1. The reality is likely to be somewhere between the 2. But as you can imagine, that's quite a big sort of balance in terms of next year's guidance. So that's sort of where we sit today. And really what's driven our guidance at the moment, which perhaps is on the cautious side, but I think it's appropriate because that decision remains to be taken in the autumn. And therefore, if we can finish there and open up for questions.

Operator: [Operator Instructions]. Our first question comes from the line of Aynsley Lammin from Canaccord.

Aynsley Lammin: Just two from me actually. Firstly, on the dividend. Obviously, you're saying you're going to reinstate the final ordinary dividend for this year. Just thinking about what that might be. I mean, is 3.8p, I think, is what the 2019 ordinary was, the final one. Should we use that as a starting point? Is it still kind of going to be 7.5%, I think was the number of net assets to drive the ordinary dividend? Will that kind of differ if you see more land opportunities, et cetera? So just thoughts around that. And then secondly, on the kind of getting back up to normal build rates into next year, have you got any kind of idea of the impact on margin, any of the inefficiencies? Or have you actually taken the majority of those costs within the £39.2 million. I don't know if you've got a kind of extra cost per site operate and under kind of social distancing measures in a COVID-secure environment, for example.

Peter Redfern: Should I take the first one, Chris, and then you pick up the second one.

Chris Carney: Yes.

Peter Redfern: Yes. No, I think on the dividend, Aynsley, we haven't taken a Board decision, so we haven't put it in black and white, but we will start from the 2019 ordinary dividend as a start point for our planning. And I don't think that is likely to be flexed because of land opportunities. I think the balance sheet has enough strength and we have enough choices, but that's not a swing factor. I think the only meaningful swing factor is if sort of trading conditions sort of in the back end of this year and very early next year are materially worse than what it feels like it will be at the moment. And that -- then we might look at quantum. I think we are still committed to paying an ordinary dividend. And I'm not expecting us to have to make that adjustment, but it would be wrong to say out in black and white a dividend now when it's not a decision that the Board has taken yet. But that will be our start point in setting a number.

Chris Carney: Yes. And on your second question, Aynsley, looking at half 2, there are sort of 2 buckets, if you like, of COVID costs that we are likely to incur in half 2. The first of the incremental costs or the extra cleaning costs, extra PPE, extra cabin and welfare, rental, car parking, all those sort of things that are related to continued compliance with social distancing requirements and government guidelines. And then the second is the cost of the extension to prelims as a result of production inefficiency. And of course, that will naturally reduce as site productivity increases over the period and we get back to normal output. So you've got a sort of like a reducing balance, if you like. And by the time we get to next year, which I think was your question actually, you would expect that those costs would reduce pretty substantially as the productivity increases.

Operator: Our following question comes from the line of Will Jones from Redburn.

William Jones: I think three for me, if I could, please. The first, obviously, there's a lot of moving parts behind the gross margin and the operating margin, of course, in the first half. But if we just step back and try and move away from volume inefficiencies and lockdown effects and COVID and the rest of it, when you think about the land bank gross margin today and let's call it the contribution margin to make it easier, would you still point us to that bubble chart, obviously, the land buying over the last number of years as a logical average over the last number of years? Is that still a decent point as to where the, I guess, the contribution margin the land bank sits today? Or is there some knock versus that for price versus cost, whatever the moving parts might be? That would be just helpful as a high-level view of the land bank, please. The second, I think you stated it a bit when you were talking about price in July. I think you said you'd look to put prices at 1% in the month. Is that -- and I think in the appendices, we can see a 0.84 sales rate for July. So is it fair to say that the prices went up where you did it and they've been accepted, received, et cetera? And does that put you up, just for the record, 2% year-to-date because of the 1 that you did back in Q1 in terms of where you would say, broadly speaking, spot prices sit today? And then beneath that, you were clear about your 3% build cost guidance for the year on the P&L. Can you just give us a feel for how the spot picture is looking in negotiation, which obviously will be the effect that carries forward into 2021? And then sorry, I've got 4 questions. Just in terms of volume capability, I guess, you're very, very clear you don't want to guide for that and I understand that. But if we think about 100 of volumes last year becoming 60 this year in terms of unit terms, 40% down, is it fair to say that you don't need halfway back up between 60% and 100% to 20% below 2019 levels? Would that -- is that something that next year looks pretty achievable even with slightly cautious view around sales rates and build speed versus where you might be?

Peter Redfern: Okay. So I made the mistake of not writing those down at the beginning, William, and then regretting it when we were halfway through. So I am sure that I'll let Chris or you to come back and remind me of a couple. Starting with the volume one. I think halfway between 60 and 100 probably is at the cautious end of where we are, but it's in the range, sort of -- so I think we would hope it's better than that, and that will come back to the decision in the autumn around build, but that's the sort of the low end of where we'd start and then sort of, I think, try and sort of build up. If you look at underlying gross margins and, yes, the gross -- the margin in the land bank as well, if I take those as sort of one question, I think the underlying gross margins in the first quarter would always have been under a bit of pressure. We were clear about that because the sales price gain that we made from the 1st of January wouldn't have affected those completions. And also because they were slightly more weighted towards the South, where the market has been generally softer and so margins are a bit lower. But if we look at the margins in the land bank today, whether you take the implied guidance in that land acquisition chart or whether you take our medium-term margin sorts of goal of 21% to 22%, so those are broadly consistent, and we still believe those are the right level on what sits in the land bank. The one area, and it's not price and it's not underlying sort of cost inflation, the one area which we flagged in the first quarter, which I wouldn't go away from because it isn't priced into most historic sites, is those government regulatory costs, particularly around sustainability. So that's the one area where there probably is pressure that isn't just going to offset the various different moving parts. And that's why we flagged it as a meaningful thing. But that is not trying to guide you away from those margins if we have to do that as a -- when we finally see that regulation and we see where the mix of land and house price inflation is, then we'll give you sort of -- we'll run that in. But that's the only area that I'll flag as a risk to that. I think our view of the underlying margin in the land bank remains resilient. On price, yes, we came into the year and sort of targeted a 2% increase. And as I think I said to you in the trading update right at the beginning of the year, we sort of didn't ever expect to hold on to all of that, but we've held on to 1%, maybe 1.5% of that. I would say a little bit of that eroded in the early weeks of the shutdown, not directly related to the lockdown, but just sort of mathematically. The 1% that we've sort of put in, I wouldn't expect to hold on to a whole of 1%. But does that take us to about 2% in terms of what I would say our average price is today compared to our average price on the 31st of December? That's broadly right. It does vary a lot from site to site, but that sounds broadly right. I mean do you think that's fair, Chris? I think I would -- I feel comfortable because I've looked at it at 2 fractured different quarters, if you see what I mean. I probably put the 2 together, but that's about right, isn't that?

Chris Carney: Yes.

Peter Redfern: And I feel like there's one question in the middle there that I missed, Will.

Chris Carney: I think it was build.

William Jones: It was build, yes, sorry.

Peter Redfern: Are you able to answer that one, Chris, because I've forgotten the detail of what we're at.

Chris Carney: Yes. No, I think, Will, what you're asking was you recognize the 3% guidance for 2020, and you are more looking at what the spot sort of, I suppose, rate is on current tenders, which really is pretty flat, I would say.

William Jones: Great. And then sorry, just to complete the earlier answer, those [indiscernible] cost, I think from -- it depends where the government I think falls on one option versus the other, but it was potentially a few thousand pounds a plot. Is that -- from memory...

Peter Redfern: It was. It was. And as I said, we're starting to factor them into land and where we've got a historic plan that's got a bit of selling price inflation. So it's quite hard, I recognize, for you to put an absolute number against it. But that's the one meaningful movement that could affect our number of sites.

Operator: Our following question comes from the line of Jon Bell from Deutsche Bank.

Jonathan Bell: Pete, Chris, I think I've got 3, actually. Pete, the line seemed to drop out at the stage when you were talking about the 1% price rise.

Peter Redfern: It's on that price, Jon. It sounds like it's done -- it sounds like it's dropped out twice when I was talking about price. But clearly, my -- I've got mental control over the phone line.

Jonathan Bell: So if you could just run through that again. Yes.

Peter Redfern: So we came into July, and the instruction to each of our businesses was to increase list prices by 1% unless they have sites that had struggled over previous weeks to generate traction on visitors, because again, when you have a site where the prices are not quite right to be in but then just having sort of priced to that never feels right. It was not done with quite such absolute, across-the-board sort of basis that we did it in January, but it was the -- and you can see in our realized prices over the last 2 or 3 weeks that there has been a tick-up in price sort of off the back of that. It's not the full 1%, and we wouldn't expect it to be. When you move price, there are people who have already looked at historic prices. We tend to give our salespeople a bit more leeway to trade in the short term. And I would say, we have to be careful with this because it's off quite small numbers, but I would say we'd probably held on to between 1/2 and 3/4 of that 1%.

Jonathan Bell: Yes. Yes. Okay. My next question, just sticking with the topic of house prices, actually. I wonder what your internal base case is for 2021. And in the stress testing that are no doubt that you will have done, what's the headroom on NAVs thinking a long way forward? And then my final question is just on that productivity percentage number. I wonder whether you could tell us what you think that is on your London sites, please?

Peter Redfern: Yes. I mean, if I sort of answer the sort of our kind of base case on house prices in the London sites. And Chris, you pick up sort of the stress test on NAV on house prices. I think our base case is flat. I think actually, if you ask me to sort of bet some money on a number, it will be slightly up from flat rather than slightly down. But we're talking about 1%, 1.5% because I think the dynamics that we see today, which are price-cautious and mortgage lender-cautious but actually also supply-constrained lead to sort of slight upward dynamic from inflation. But with downside risk of that, if we really see unemployment become such a major feature that it impacts on people's confidence about the underlying economy. And our stress testing on pricing tends to be sort of down to a 20% full kind of worst-case sort of market downside. But that's more of a long-run view of how we stress test rather than any kind of range of prediction for what we see as the downside case at the moment.

Jonathan Bell: And would NAVs stay intact with that kind of price movement?

Peter Redfern: Chris?

Chris Carney: Yes. So obviously, we do lots of sort of sensitivities around that. And you keep increasing the price adjustment. And there comes a point where certain sites will gradually come into that sort of that area. But to give you a feel for it, if we assumed a 10% drop in prices, the NRV resulting from that would be less than £40 million, because, obviously, when you look at the contribution margins that you see in that land intake, there's quite a large sort of headroom between the prices that the land bought at and that allows, obviously, for price reductions.

Jonathan Bell: Yes. Okay. Just the productivity then on the London schemes?

Peter Redfern: Yes. Sorry, I didn't pick that one up. It varies quite a lot. So a mainstream, fairly ordinary London scheme in Greater London rather than the center, probably it's around the 80% market. It's not massively different. It's where you get into sort of Central London, particularly parking and travel constraints, tight access on sites. And actually, in the early stages coming out of shutdown, less certainty on the recovery of the market because whilst London has sort of picked up June, July, it was slower. So a combination of those. It's more like 65, sort of probably 70 at best.

Operator: Our following question comes from the line of Arnaud Lehmann from Bank of America.

Arnaud Lehmann: Pete, Chris, probably three questions on my side, please. Firstly, just following up on one of the previous questions and coming back on slide, I think it's 16, where you give the details of your margin trends. And that's very helpful. Just trying to understand what -- if we take it line by line, what is likely to still be a bit of a headwind into H2? I mean I appreciate the COVID-19 cost you would expect to come -- to improve significantly relative to H1, but what should we think about selling price relative to build costs, the land mix or the share of JV profits, for example? Do you still expect that to be a small headwind into H2? That's my first question. My second question is on the land purchase. You raised £510 million through the capital raise for land purchase. Have you already identified £500 million of potential acquisitions? Or is it more to give you optionality for the next, let's say, 6 to 12 months if and when this opportunity arises? And lastly, just a technical question on the extension of Help to Buy. We heard yesterday that the government was considering extending Help to Buy in the current form, I guess, into next year. I assume this is just a technicality to allow all of your existing customers to benefit from Help to Buy, including let's say, buyers of the second home or the property price is above the cap. So they're not kind of falling out with the change from the new Help to Buy scheme, if you don't mind clarifying that.

Peter Redfern: No problem. Should I pick up the land purchase piece and Help to Buy, Chris? And then you do the margin sort of piece into 2020, 2021. So on land purchase, it's some and some. So we have identified at the point of the capital raise a significant number of sites. If we looked at the pipeline, it actually was in excess of £500 million, but we would never have expected and we were very clear on that for all of those sites to happen in that pipeline. Some sites fall out, some new ones have been added and some of those deals have been done. But to give you a sense of scale, the deals that we've already committed to, total in the mid 300s. Now that shouldn't all -- and this is a fairly arbitrary exercise anyway, it shouldn't all be allocated against the £500 million because we would have expected to do somewhere around £200 million to £250 million of incremental land purchases in the second half, anyway. So if you think of that sort of proportionately, that equates for a sizable proportion of it, but it enables us and I would expect us to continue to be effectively using that £500 million in both cash and commitment terms because not all of it will be spent at the end of -- end of 2020 through certainly the next 6 months and potentially the next 9. So it will have boosted our land purchases over that kind of time line. So it's a bit of both. We've identified a longer-than-usual pipeline, but you can't really allocate any specific size against things we might have done anyway and things that relate to that £500 million. But we have identified a significant number of sites. And on the extension of Help to Buy, yes, I think technical extension isn't a bad way of describing it. What I think we've all been seeking is an extension to the current scheme. And it isn't just about price caps and it being available to nonfirst-time buyers. Even a first-time buyer within the price cap can't just roll it forward on to the new scheme. They'd have to reapply, get a new mortgage, and that would obviously cause a lot of risk and a lot of disruption. So anybody who's home will not be complete sort of by the end of the first quarter because of the pandemic sort of would be then affected by that. And obviously, even those whose homes, say, were now scheduled to complete in February and March would experience quite a lot of additional uncertainty and stress if there wasn't some kind of extension. So the sense we get, and you see it in the press as well, is that there will be an extension. That's what's always seem logical. I don't think it will be huge, but the truth is I don't think in it will need to be. And we probably have somewhere between 150 and 200 customers in the order book who would fall into a category where they were expecting to use that scheme, they need to use that scheme. And without an extension, they will struggle because of the revised completion date on the plot. So that's why we've kind of applicated on their behalf really for that extension.

Chris Carney: Yes. And on the margin rec slide. So when we report the full year results, that will reconcile from the full year for '19, the full year, to '20. And I suppose what you're asking me to do is predict what that will look like. In terms of -- if you look at this half 1 slide, because obviously that will be a component of the full year slide, the 4 biggest numbers on there being the impact of fixed elements, build costs; direct selling expenses, which I said, have a substantial amount of fixed cost in them; net operating expenses, which again are predominantly fixed cost; and then the incremental COVID costs, you would expect as volume increases in the second half that all of those percentages -- all those percentage point changes would reduce quite naturally. And then in terms of market inflation on selling prices and market inflation on build cost, well, we've set out in the guidance slide that, that 3% I'm still expecting to be the same number for the full year. And I don't -- certainly don't anticipate the inflation on selling prices being much different either because, as Pete already said, the -- we're pretty much fully sold for this year. So what we've -- well, our completions are already in the order book for this year. So I suppose as you look to the second half, obviously, the margin is going to increase, and that will be reflected in that margin reconciliation when we get to the year-end.

Operator: Our following question comes from the line of Glynis Johnson from Jefferies.

Glynis Johnson: I have four, if I may. The first one is just given that you say your -- the build rate is now sort of the constraint in terms of what you can do next year, I'm assuming you have a reasonable idea of phasing of delivery. I'm just thinking the 40% of completions that were Q4 this year that move into Q1 next year, does that mean that next year is much more evenly split, H1, H2, given what you're anticipating given what you're budgeting in terms of build schedules? Second of all, in terms of the selling rates, you talk about the very low availability of -- on your site now for the rest of the year. And when do you start selling for next year? I'm really trying to just get an understanding of what we might expect the selling rates for the remainder of this year, whether or not we'll see them come off just because you don't have stock to sell. Thirdly, you talked about the net proceeds that came through that they were net of joint venture investments. I'm just wondering, can you tell us actually how much went into joint ventures? And then also give us an idea of what other cash-outs we need to be thinking about for the second half of the year. If minimal is for joint ventures, where will we see the parting go out? And then lastly, and Pete you're going to wish you've written this down, if I add together all the things I think you're telling us in margins that's related to the lockdown, so the impact of fixed elements and build cost, direct selling, net operating, incremental COVID, when we look at that in an absolute amount, that seems to come to well over £120 million. Your employment cost last year, if I just take an average monthly, was £28 million, which seems to suggest that it's much more than just the employment costs that have been the impact through the first half. Can you just sort of give us a bit more color on that? How much the first half impact was just the labor cost of your direct employees that you have to keep paying, how much were the other costs?

Peter Redfern: Okay. I did actually write it down. I clearly have either learned from Will's questions or I just know what your line is Glynis. So I'm not sure I've written down enough detail, but I think there are a couple in there on JV and cash, please pick up, Chris. And I'll pick up question on phasing for next year, sales rates and selling into next year and then we'll collectively come back to the margin question at the end, which I'm not sure I'm going to find that easy to answer without a bit of paper sat down between us, Glynis, but Chris may be able to. So on phasing, I think in a broad sense, we do have a sense of phasing for next year, which is to very much target -- and this will be one factor in our plans for how we sort of think about total volume for next year will be to target a much more even balanced first half to second half, sort of -- and it's -- those plots delayed from quarter 4 give us the opportunity to do that and get the balance right. Sort of there's not an inevitability for sort of the kind of continue rolling pressure into Q2 and Q4. So it's a chance to address that, and we will take it. I think the slight note of caution, and it's not about that overall principle, is we will be going through and are at the moment and we will probably go through 3 iterations with our businesses of exactly what sort of build plans, on which sites at which levels given the market uncertainty and the changes through sort of the lockdown period through the course of our budgeting process in late summer and the autumn. So whilst at a broad level, absolutely one of our targets is to have the right volume next year that includes a sensible first half, second half phasing and enable -- give the business a strong platform then to sort of grow from that in the right way. And in the same way as outlet, it just means that you sort of actually got a sound base to build on. But we haven't -- that's a very detailed exercise literally site-by-site, plot-by-plot for each business. And we've started it, but it isn't complete. And it's one of the reasons why until we've gone through that and looked at what the market conditions are through the autumn, we won't decide exactly what the right balance is for next year. I think on sales rate for next year, we have already started selling for next year. But broadly, on an ordinary day, we don't like selling more than 6 months out. So we're selling plots for completion in January. So I do think that is keeping -- sales rates would probably be more like 0.8, 0.9 today if we had a full range of availability through the next 6 months because there are absolutely, as you would expect, some customers for whom January is just not quick enough. And I think, particularly at the moment where people want to get on with life as much as they can, that's a meaningful factor. I do think that will continue to hold sales rates down through sort of the autumn, but certainly not the 1 a week that we were doing in 2019, whether it's 0.7. I'm not necessarily sure I expect to see them dip because I think there'll be enough rolling plots each month coming from February and March that we'd probably keep it at the same sort of level. But we are already starting to sell for next year, which would be normal, but inevitably with less sales for this year, we're probably slightly further ahead than usual. Chris, do you want to pick up the JV point and the cash point?

Chris Carney: Yes. So in the first half in JVs was £24 million, Glynis, and we'd expect to sort of get distributions and get probably around about half of that back in the second half. The second half assumptions, I think you were probably alluding to what we got in there for tax and the exceptional provisions. So tax, £60 million; and exceptional provisions, cash payments of £20 million.

Peter Redfern: Yes. And then I mean, Chris, you may be able to help sort of on the last point because I understand that the underlying sort of question you're asking, Glynis, but it's hard to sort of without a spreadsheet set in front of us to sort of reconcile it. The people cash costs and that £28 million is sort of -- it's mix are by far the biggest part. I mean I tend to look at it -- actually, we haven't got sort of -- it's fairly easy for us to ring-fence the incremental costs. It's actually lost revenue is the biggest movement. So our underlying costs, both overhead, fixed sales cost and fixed site costs have been there through the shutdown, and we haven't recovered revenue against it, and that's the biggest impact. But I'm not sure I can directly answer your question. I don't know if you're able to, Chris.

Chris Carney: Yes. Apologies if I'm not answering the right question, but I think, Glynis, you asked about the elements of the £29.9 million COVID cost that relate to the lockdown period and what element of that relates to salary cost for our site, the directly employed site operative. So that's around about £11 million of that amount. So that hopefully helps you sort of reconcile the -- your question.

Glynis Johnson: I'll come back on that question offline. But can I just -- just in terms of cash out, just so I understand, is there anything for pension in the second half?

Chris Carney: Sorry, was there any?

Glynis Johnson: Anything for pensions, any other cash-outs or pensions? I just wondered if that was one of the others...

Chris Carney: There's a slide there that you can see later in the pack that sets that out. But yes, we do have £20 million of deficit contributions in the second half on the pension scheme.

Operator: Our following question comes from the line of Gavin Jago from Barclays.

Gavin Jago: Pete, Chris, just a few if I could as well, please. First one is just about the order book and whether you could provide a bit more detail on the mix in the order book, I guess, by volume and/or value between private and affordable. And I guess, linked to that, your expectations on the mix between the 2 for the full year. You've obviously said you're already 97% sold for the full year, but just to put some numbers on that would be great. The second topic is just around back to Help to Buy and just looking at Slide 38. There's obviously kind of a spectrum in there in the percentage of units within the price cap. So I just wanted maybe your views, Pete, just on where you think the kind of the risks and/or opportunities would lie as we move towards the new Help to Buy scheme, assuming that it stays where it is in March, April. And then the final is just any more detail on regional demand, I guess, particularly since the Stamp Duty changes have come into play?

Peter Redfern: Yes. No problem. If I sort of almost work backwards through those, and then I've got the build book mix to hand, Chris, but you can then give that out. I think on regional demand, I don't think there's any big regional differences that are obvious if I look broadly over the course of the last 8 or 10 weeks. I think Scotland and, to a lesser extent, Wales, lagged in terms of physical opening. So sales rates did lag there. But I don't really put that down to any difference in attitude or demand. That was just a different approach sort of from government returning to site after COVID. I think the one area I would pull out is London, where, as you all know, we've seen London sort of particularly prime London, but to a certain extent other parts of London and the more expensive parts of the South East lag behind the rest of the U.K., certainly in transaction numbers, probably in price growth as well over the course of the last couple of years. And before that, Central London price is actually falling. I'd say in the very early stages of returning to site, London was also slow to come back, whether that be because there was more sensitivity around London and public transport around coronavirus itself because it was seen as a hotspot, whether it be because there's the Brexit uncertainty or whether it be because part of London tend to be linked into the international market. I would say over the last 3 or 4 weeks, generally, that trend has gone or that difference has gone, and London has caught up, potentially, arguably even moved ahead slightly, although I wouldn't pay a great deal of story in that. But that sense of London being weaker than elsewhere isn't there today for the first time in quite a long time. I think on the price caps, obviously, the sort of the move to the next phase of Help to Buy have some risks. I still personally think it's a risk, yes, if you look at it from an overall resilience, stability of the housing market, which I see is in our interest. I think it's a risk we're taking in the sense of, if you take the view that we're going to have to move away from or reduce our help dependence on Help to Buy at some point, I'd rather it was in stages. And that's, therefore, a perfectly sensible stage. I do think there's quite a strong argument that some of the price caps, particularly the North East, run slight -- ultimately the government's own agenda about leveling up. If I'm honest, I think there's a slightly London-centric perspective on what they should be trying to do in the housing market in certain regions. So I think there's a specific about some regions around -- actually, if you look at the North East, what North East needs to level up is actually more better quality housing, not more first-time buyer housing. And so sort of it kind of works against that slightly, but that's more of a political kind of detailed argument. I think from our point of view, we just sit here to manage. It sort of means the scheme might be as prevalent. In the medium term, I think that's a good thing because I don't like the level of dependence on it in the short term. We certainly -- we have to adjust. But I've been, I think, very consistent and very clear, I think the short-term extension is fair and logical and necessary. A longer-term decision should depend on what the conditions are at the time and needs to be thought about very carefully because it has longer-term negatives as well as the obvious. If all you're focused on is your own housebuilder P&L for the next year, of course, you want to continue forever. If you've got a broader longer-term view of the business and the value in it, you've got to deal with that dependence on sort of government for your customer at some point. And it's not about the way to do it. Chris, are you able to give the order book split?

Chris Carney: Yes, of course. So the volume of the order book at the end of the half was 11,686 and the private element was 6,567.

Peter Redfern: And hard, hard for us to meaningfully say to what that split might be at the full year. I have no reason to think that it's going to dramatically change from that proportion or the norm, but there may be a dynamic there. There's a slight difference, but nothing obvious to think about today.

Operator: Our following question comes from the line of Gregor Kuglitsch.

Peter Redfern: Gregor, just before you ask your question, I think we probably, for time's sake, should make yours the last question. I've got one other question that's been asked from somebody who couldn't join, which I'll answer after we've dealt with yours. But Gregor, back to you.

Gregor Kuglitsch: Okay. Well, just looks like you just about made the cut in. So 3 questions, please. So the first one, obviously, there was no call at the time of the equity raise. But could you just kind of flesh out or kind of outline a little bit in terms of land and basically to what level of size and essentially how much capital you're prepared to tie up? Maybe, I don't know if you thought about it in plots or balance sheet value. Please just give us a bit of a sense as compared to the 75,000 plots that you currently at roughly or, I think, 77,000 actually as of H1, how much do you think that can run up to essentially before it kind of starts unwinding, I guess, by -- from '22 onwards? So that's the first question. The second question is on the margin point, just coming back. I guess what we're learning here is maybe the obvious that, obviously, there's more fractionalization of fixed cost and so on than just a pure OpEx. But I guess my question is, in order to achieve that mid-term target of whatever 21, what kind of volumes does the business actually need to deliver? Because obviously, those are, I think, more interlinked than we all perhaps thought. And then finally, on the dividend. So I seem to remember there was a 7.5% of NAV and £250 million minimum maintenance dividend commitment pre-COVID. Just to clarify the question, I think it what Aynsley's question earlier, is that what you're talking about when you're kind of talking about a return? I guess it is, but just for clarification's sake, please.

Peter Redfern: Yes. Yes. No. If I take them again in reverse order. On the dividend, yes, that is what we're talking about. I think we're being reasonably explicit on the ordinary dividend. That's where we start. I think the question about [indiscernible] and pence per share, I don't think we're conscious that having raised capital, simple math, we've got more shares. So I think that's the right way to think about it rather than absolute pound notes because I think after this, where we expect to get back to is the same pence per share. I'm just sort of slightly -- very slightly cautious. And it really is light at this point on giving an absolute number for next year now, but that's roughly what we expect. I think on the special, that's where we would expect to get back to. We haven't started to think about quantum and look at it. I have no reason to -- I'm not trying to stare you down, it just is a different question for a different day, and I'm just not sort of ready to talk about quantum on that at this point. I think on margin, it's a very broad brush answer. But I'm going to say sort of 14.5%, 15%, sort of which I've seen as a sort of roughly the underlying stable number that the sort of business can comfortably operate at. It's not maximum, but it's also not sort of the low point to sort of -- that's almost inherent in that margin guidance. I think I would argue that it should be pretty obvious that there's quite a lot of fixed costs at a site level, sort of -- but that's not particularly a concern or relevant over the long term. But it's very relevant over the short term, certainly over 3 months and probably over 12 to 18 months. And what I mean by that is, as our sites are set up to be able to deliver sorts of higher-than-normal volume -- we put a lot of work into that and actually a lot of training and sort of recruitment and retention into the people. And actually losing those people at this point in the very short term, particularly through the crisis when you don't quite know where it's going to end up would have been very, very, very shortsighted. If actually, we decided that the long-term level of site operation was lower, we have less people per site. Sort of -- but that's not where we are and not what we expect, but we do have to be a little bit patient to let it get back to the normal level. And we are finding that sorts of level of sorts of management cost on site very useful in managing quality and sorts of the health side of the crisis while we go through it. But it does give us a slightly bigger fixed cost per site. I think that's an asset as we return to normal. And I'm not going to cut out just for the 2020 performance. But if we get halfway through 2021 and actually, the market is nothing like normal and those are unrealistic sales rates to achieve, then we have to look at that and address it. So it's a timing thing. But I think it's an asset. But in the short term, it's a cost that we have to cover, if that makes sense. But there's always obviously been fixed costs on sites, but they're set up for a slightly bigger level of site. And going back to land, and these are very broad brush, sort of £500 million, £10 million a site, 50 sites, average size 200 units, 10,000 plots, which answers the direct question about where the land bank could get to. The mix will depend on -- in terms of how much strategic land comes through. That -- those 26 sites are not, for the most part, strategic sites. There's a bigger mix towards more immediate acquisitions in there than usual. But that's the sort of metrics that we sort of are comfortable with. So it's not a massive step change, but it is a change. And it gives us the ability to sort of grow the land at an opportune time and have higher outlook numbers. In most market conditions, higher outlet numbers give you choices. The other question that I had sort of offline from somebody who couldn't join but I think will listen to the call later, so I'll answer it. So that I can pick it up -- there's obviously been mathematically an investment in work in progress and particularly with the lower trade creditors in sort of working capital [Technical Difficulty].

Chris Carney: Pete, you've dropped out again.

Peter Redfern: Is that permanent or long term, take a look at this. it's absolutely not permanent. I think it's long term.

Chris Carney: Pete?

Peter Redfern: I would certainly expect by the time [indiscernible]. I lost you, you lost me there, I can tell. I would certainly expect by the time we get to the middle of next year that, that would largely, if not totally, reverse. But yes, it will depend a little bit on production. So we've gone through those. We should finish, right?

Chris Carney: Sorry, we just lost you again right at the end, Pete.

Peter Redfern: I don't know why you're suddenly losing me. I was just saying, is there anything sort of that we should wrap up with that we haven't covered? Or should we just close the call there?

Chris Carney: No, I think we've covered quite a lot.

Peter Redfern: Great. Thank you, everybody. Thank you for the time and look forward to hopefully a point when we can do one of these in a bit more face-to-face and in person, and take care.

Chris Carney: Absolutely. Cheers.

Operator: Thank you for joining the Taylor Wimpey plc half year results call. This call is being recorded and will be available to listen on demand on the Taylor Wimpey's website later today.