Barratt Redrow plc (BTRW) Earnings Call Transcript & Summary

Good day, and welcome to the Barratt Developments' Full Year 2022 Trading Update Call. Today's conference is being recorded. And at this time, I'd like to turn the conference over to David Thomas. Please go ahead, sir.

Thank you, and good morning, everyone, and thank you very much for joining us. Steven and Mike are both with me. So I'd like to begin by thanking our employees, our subcontractors and our suppliers for their commitment in delivering what has been a really excellent performance in FY '22. The housing market has remained strong across the country and throughout FY '22. Our sales performance has reflected the strong demand with private sales rate at 0.81, 3.8% ahead of the 0.78 recorded in FY '21. We have also seen strong underlying house price inflation with pricing on reservations taken in the year, improving by 8% across the country. Average sales outlets at 332 were 3.2% lower than the 343 in the prior year. The reduction in average outlets reflected 2 main factors. Firstly, the strength of our private sales rate, which has remained stronger than we anticipated throughout the year. And secondly, some planning delays on new sites where local authority resourcing and the impacts of the pandemic have created delays to some site openings. We have, however, seen sales outlet numbers recover towards the end of the year. And we ended FY '22 with 352 active sales outlets, just 6 below the 358 at the end of FY '21. Total completions at 17,908 grew 3.9% versus FY '21. And we are really delighted to have grown completions back to pre-pandemic levels, which for us was a key milestone. As we have flagged in the statement, total completions were impacted by the deferral into FY '23 of a London apartment block of 221 homes. This reflected resource-related delays in the building control process. The positive is that we have, in any event, delivered a strong performance in FY '22. And our order book remains strong. Our total order book consisted of 13,579 homes, down 5.3% on the record order book at the end of FY '21, but 4.3% ahead in value terms at GBP 3.6 billion. I'd also flag that our private order position is particularly strong, up 17.9% in value terms at GBP 2.3 billion and consisting of 6,108 homes ahead by 6.7% on the June '21 position. Our standout in FY '22 has been our build performance. Our site teams and subcontractors continued to improve our build output, which reached 352 equivalent homes per week, up 13.2% on the 311 in FY '21. Key to this impressive build rate is the attraction and retention of high-quality subcontractors, which we see as being based on 3 main ingredients. Firstly, creating safe, well-organized sites. Secondly, benefiting from our centralized procurement to ensure that we have security of material supply for our subcontractors. And thirdly, our increased use of standard house types as well as more timber frame construction. Our construction teams have delivered this growth in output without compromising customer service or build quality. We have been awarded 5 star by our customers for the 13th consecutive year. This is a unique achievement amongst national housebuilders. And last month, we were awarded 98 Pride in the Job Awards for site management, more than any other housebuilder for the 18th consecutive year. Our order book, in combination with our build performance, gives us confidence in our ability to deliver farther completion growth in FY '23. Now on build cost inflation. As we highlighted at the interims and confirmed in May, build cost inflation was around 6% in FY '22. We continue to experience upward pressure on build costs during the second half, reflecting in part the escalating energy cost backdrop that impacts production and transportation costs. We exited the year with total build cost inflation running between 9% and 10%. Our priority remains, as we've outlined before, ensuring the security of building material supplies. And we continue to work with our supply chain partners to secure sustainable, but competitive pricing. The result of both our strong sales build and also the completion performance is adjusted pretax profits will be between GBP 1.050 billion and $ 1.060 billion, slightly ahead of current market consensus expectations. Our financial position also remains very strong with net cash of GBP 1.1 billion at the year-end. Just a few other points to highlight from our statement. We are absolutely committed to playing a key role in both addressing the U.K.'s housing shortage and leading the industry around sustainability, whilst also being the industry's employer of choice. On growth, we have opened 2 new divisions in the year, Sheffield in our Northern region, and Anglia based in Norwich in our East region. We will also open an additional timber frame facility in England to complement our Oregon plant in Scotland. The new plant near Derby will add significant timber frame capacity from FY '24. In leading the industry on sustainability, we launched our first air source heat pump based development in Somerset, and completed the Zed House, the first beyond zero carbon house developed by a major housebuilder. Both are important steps as we drive towards our zero-carbon homes in use target for 2030. In our drive to be the employer of choice, we recognized the cost of living issues that so many people are facing. So we brought forward our annual salary review from the 1st of July to the 1st of April, awarding a 5% increase to all eligible employees. And we recently introduced a salary supplement of GBP 1,000 for all employees below senior management to support them over the 6 months through the 31st of December 2022. And so to outlook. There clearly continues to be a shortage of homes in the U.K. Customer demand continues to be strong and mortgage availability is good. We recognize that there are significant macro uncertainties, both political and economic. But we are not complacent. We remain vigilant, and we will respond to changes in the market and the wider economy as they develop over the coming months. Based on current market conditions, we expect to grow total home completions in line with our medium-term target of 3% to 5% in FY '23. And we also continue to buy land at our minimum gross margin hurdle rate of 23% and return on capital employed of 25%. So overall, an excellent operational and financial performance, and we will now be happy to take your questions.

[Operator Instructions] We will now take our first question from Chris Millington from Numis.

A few, if I may. First one is just really on visibility over London planning for FY '23. How much you've still got pending there and what risk may relate to that? Just a line to that one as well, just kind of what you're thinking about outlet numbers this year? I see you've made quite a good run towards the end of the year. And then the final one is just really just on your kind of discrete trading periods over the last month or so. Just what your experience has been down valuations, cancellations, ability to keep pushing prices and whether there's been any big regional variation there?

Chris, so I'll pick up on these sort of discrete trading periods and talk for a moment and not really give you any more information. And a seasonal pickup in terms of land and planning where we are for FY '23 and also in terms of outlets as well and our thoughts on outlets for '23. So I think in terms of discrete trading -- and Chris, you'd understand that obviously, we've looked at this very closely. I mean, I'm not going to start giving out numbers on a weekly or monthly basis. But I think the reality is that when you look at the numbers as we reported back in May, we have seen an improvement in terms of our trading, second half compared to first half. And those trends have been pretty consistent throughout the second half of the year. So looking at customer inquiries, looking at reservation rates, we're seeing very, very strong levels of customer interest. Now we also monitor availability of mortgages where, again, we've seen a step up in terms of higher loan to values, and that's been a consistent trend during FY '22. Primarily, I think as the banks ready themselves for the expiry of Help to Buy and knowing that they need to be operating with higher loan to values against that backdrop. And then other areas such as cancellations and down valuations, which we're monitoring on a week-to-week basis. And we're just not seeing any changes in terms of those trends. So hence, you can step back from it and say, if you look at FY '23 overall -- FY '22 overall, we are seeing consistent and very strong trends throughout the year. Steven?

Yes. Thanks, David. In terms of London planning for FY '23, virtually all the planning we need is in place. We need something like about 160 plots of planning, which we'd expect to have in this month. So no big issues on that front. In fact, the planning we need is -- the sites have already got an outline planning, so any of the reserve matters coming to us, I'd say we'd expect them to come through in the next few weeks in time. In terms of outlets, as you can see, we've grown our outlets considerably in Q4. We ended the year at 352 active outlets. In terms of next year, we've got more outlets to open next year than we opened in '22. And in '22, we opened 118 outlets. We've got a few more than that to open in '23, we plan. So we'd expect outlets to grow slightly in '23. So clearly, we'll be giving more detail in September.

We will now take our next question from Gregor Kuglitsch from USB.

I've got a question on your land acquisition. So you gave us a number of 19,000 plots, you say GBP 1.4 billion. So I think that works out as like GBP 73,000 per plot. And I guess, I'm wondering how that squares with kind of your normal ASP versus something -- I mean, it's obviously a very high number compared to prior years. Or whether there's something else going on here? And I guess, the underlying question is, whether we're starting to see some erosion in profitability because of perhaps the competitiveness in the land market, that's the first. And second question is just, I think if you work backwards, it feels to me like you probably delivered, let's say, a 25% growth last year. I don't know if you agree with that, roughly. And I guess, I want to get a feel for what the directionality of that is from here considering your comments around pricing and cost, please.

Gregor, thank you. Can I pass those both over to Mike?

Absolutely. Thank you. So if I start on land acquisitions. I mean, I think undoubtedly, the average cost per plot that we've acquired this year is higher. And I think that's probably in line with what you would expect, because we've seen higher sales prices through the year. And obviously, lands bought on a residual sort of pricing basis. The other thing that's going on in the mix is that we've bought a higher proportion of sites for the David Wilson brand this year compared to the previous year. And they tend to be in more sort of prime locations and do tend to carry a higher land value in any case. We bought some very strong locations around sort of Edinburgh, Southwest of England and parts of East in England as well. So I think that's playing into that. And in terms of erosion in profitability because of that, I would say that we're still buying in line with our hurdle gross margin rate. So we're not compromising on the hurdles that are coming through. So we're comfortable with the land that we're acquiring. And then just coming on to your question on gross margin, I mean, I think you're right, the consensus for our gross margin for '22 sits at about 24.5%, which is clearly very strong. And if you think about FY '22, we've had a full year of very good selling prices and strong house price inflation coming through. And the cost price inflation, we've only really seen since Christmas. So looking forward into FY '23, we're obviously going to face out a tougher build cost inflation environment. We're seeing that going up to 9% to 10%. And we'll, obviously, have a full year of those higher costs coming through as well. So when you factor all of those things in, it's not unreasonable to expect the gross margin percentage to decrease next year. And we'd see it probably moving back towards that hurdle rate of 23% to sort of 23.5% probably for FY '23. So I think that's, broadly speaking, the direction of travel.

Can I have a follow-up to question one? Could you -- would you be able to tell us what sort of the expected average selling price is rather compared to that GBP 73,000?

Well, I mean, look, I think the best...

I think perhaps GBP 1 million, it sounds like very high to me.

Yes. I think the best guidance we can give you on average selling prices, if you look into the forward order book, really. We're not going to give any sort of guidance further forward than that. And in the order book, the average selling price is currently sitting about GBP 375,000 on a private unit, which is -- that's 10% ahead of where it would have been this time last year.

We will now take our next question from Aynsley Lammin from Investec.

Just 2 for me. I wondered if you could just give a bit more color on the kind of build cost trends, labor versus materials? And obviously, you've got the GBP 1,000 supplement going through for wages. Are you just seeing more kind of pressure on labor now versus the material side? And then secondly, just on the kind of mortgage market, obviously, interest rates are moving higher. What your view is on how that's affecting the market? How you'd expect that to affect it going into the kind of autumn selling season? Is lending appetite still good, and just the kind of customers' reaction to what we've already seen on the interest rate front?

Aynsley, if I pick up in terms of mortgages and mortgage rates, and then Steven will pick up in terms of build costs and the trends on labor and material. So I think -- I mean, first of all, you've got to set it against the context of the numbers that we're reporting. We're obviously, reporting numbers in terms of reservation rates right up to the end of June. And we've said that our trends have been consistent during the course of the year or so. The customer interest and customer appetite is high. And we recognize that against that, there are challenges around cost of living seen interest rate increases. But nonetheless, customer interest and customer appetite to actually completing transactions is very high. In terms of mortgage availability, I touched on it, but generally, I would say mortgage availability is good and the banks are expanding loan to values. So I think we saw some contraction of loan to values around the events to do with COVID and the bank having a slightly more cautious approach in terms of the availability of higher loan to values. But we've seen a number of the major banks step up in terms of their loan to values. Most recently, Halifax moving their loan to values for new build homes. So that mortgage availability is good for the consumer. I think interest rates, I mean, they are a factor, but we know that the market is operated very successfully with significantly higher interest rates than we're seeing presently. So we continue to monitor the market in terms of availability of mortgages in terms of consumer demand, obviously, on a week-to-week basis. But we don't see anything in there that's causing us any concerns. If I pass word to Steven.

Yes. Thanks, David. Yes, in terms of build cost inflation, I mean, probably it's been more about material inflation. And as I've said earlier, on previous discussions, we've talked about the priority of cost is ensuring we have the -- a good supply of materials. We've seen build cost inflation move steadily higher quarter-by-quarter throughout FY '22. That's been really dominated by materials. And we've experienced some high levels of inflation in certain materials, particularly the timber, steel products and less on other components, appliances and kitchen units, et cetera. But in terms of what's coming through, clearly, there's limited far visibility. Supplies are not coming fixed prices for much greater than 3 or even 6 months. And we're seeing that sort of a typical trend throughout the industry. But on the basis that they have got very limited visibility of the input costs coming through to them. Labor is certainly less from an inflationary pressure point of view. And the main pressure we've seen on labor is particularly on groundwork trades, foundations, drainage and roads and sewer type trades. So that's where we are in terms of build customization.

Thanks, Steven. Thanks Aynsley.

We will now take our next question from Clyde Lewis from Peel Hunt.

Can I just follow up on Aynsley's question there around sort of build cost inflation? Because I suppose, Steven, you made that very interesting comment that it's continuing to climb higher quarter-by-quarter. Is this 9% to 10%, do you think the peak? Or does it go another 1%, 2%, 3% higher, do you think as you go through the new financial year, I suppose? And -- because, I think, we're all trying to work out, obviously, that balance of sort of selling prices versus cost pressures. And obviously, on one hand, with seeing some commodities roll over, particularly timber and steel. But will that sort of that softness get offset, I suppose, by increased wage costs? That was the first one. The second one was on land creditors, I suppose one for Mike, around sort of appetite for sort of land creditors as you go forward. And I suppose a little bit around, do you start to think about changing those hurdle rates on land buying, again, given the uncertainty maybe around build cost pressures?

Clyde, so if I pick off just in terms of the general comment about inflation, particularly build cost inflation and then Michael pick up, as you said on land creditors and hurdle. So look, I don't think we're going to start calling whether this is the peak or it's not the peak. I think if we went back 12 months ago, I mean who would have said that we were going to report 8% selling price inflation and be closing out talking about 9% to 10% build cost inflation. So I think we recognize that both on the sales side and on the cost side, inflation has far exceeded estimates. What I would say on materials, which I do think is an important point is that, we understand that the input costs are a driver and very difficult to predict where the input costs will go, particularly in terms of the energy-related costs. But I think also availability is a driver. And there is no question that if you went back 6 months ago, the availability of materials was far more challenged than it is today. And I think you can look at that sort of across the wider sector in terms of availability of materials and say that there is better availability than there was. I think we've always been in a strong position in terms of availability, as I touched on, in terms of our group procurement function. But across the whole industry, availability of materials is definitely improved position. That should at least help in terms of dampening price inflation. But in terms of the input cost side, I think we've just got to see how that evolves over the next few months.

I'd just pick up on land creditors then, Clyde. So I mean, the level of land creditors that we have has been pretty stable over the last couple of years at sort of 21%, 22% of the land bank. I mean, I think we're comfortable with it at that level going forward. And I think the advantage -- one of the advantages we have in the land market is the strength of our balance sheet, means we are able to offer cash terms if that helps us secure land or helps us secure on better pricing. So we look at it very much on a case-by-case basis. But I don't think looking forward into next year, certainly, we don't really see that proportion of land creditors moving very much. And as I say, we just look at it around as we're going through acquiring land. I was just going to say, in terms of hurdle rates, I mean, we're not planning to change hurdle rates. We're very comfortable. And obviously, in assessing the hurdle rate we're putting in current costs, but also the current selling price. So we're very disciplined in applying those hurdle rates for the acquisitions.

We will now take our next question from Glynis Johnson from Jefferies.

I just have 3, if I may, and actually a quite big picture ones. In terms of the land market, we've had a number of your peers talk about the land market becoming increasingly competitive. But particularly, I'm interested in where you've seen this bigger pickup and where you've been focused with this maybe growth in the more prime locations. Is that how we should think about where Barratt is looking to position itself at that top end, that second step or bigger homes? Or is this just the lumpiness of land buying and things will revert to more normal or lower ASP products being -- or land being purchased going forward? Second of all just in terms of planning, again, it was talked about how tough planning is. So the fact you have [ surgical ] planning to do for the next 12 months ahead, actually saying very impressive. Can you give us an update on where things are in terms of planning Nutrient in cost base and work other things? Is it even just your book has a better assumption in terms of timing? And is there something in terms of your geographic exposure that means you haven't seen it as aggressively as others? Just any color on that? And then lastly, politics. Obviously, a few things right off the new Housing Ministry yesterday. I wonder if you can give us a Barratt view on what came out yesterday and any implications that you may have worked out so far?

Glynis, thank you. Okay, the last one sounds quite difficult. So look, if I pick up the question in terms of politics and then maybe if I just make sort of an overarching comment in terms of the land market and then Steven will pick up on the land market and really how we're positioning in terms of land, David Wilson and also pick up in terms of planning and specifically can pick up on the nutrient point. Look, I think in terms of politics, for us the immediate impact of the events for the last couple of weeks have been that we've had another change in terms of Secretary of State and the Housing Minister, which is not something that we welcome. Clearly, the less change better. So that's our starting position. In terms of Greg Clark coming back in as Secretary of State, albeit we recognize it may be on an interim basis. If there is going to be a change, then when we see that as being a very positive change. Greg Clark has already demonstrated within a week that he is getting hold of certain issues and moving things forward. And when Steven talked about planning and nutrient neutrality and water neutrality, these are fundamentally important issues, which can be solved by government. And therefore, people being focused on these things are very important. In terms of the wider political agenda or the wider political happenings, I mean, I think we just like everybody else need to wait and see as to how it unfolds, because we can spend a lot of time speculating. But ultimately we know there is going to be a change in leadership, and that will be resolved over the summer. If I could pass over to Steven, and just in terms of the land market. I would say that overarching from our point of view in the land market, there is no change of strategy. We have always set out that Barratt is -- is very much a value for money. It's a proposition that is coming in at the larger market level and house types are typically small. And David Wilson is more aspirational, larger house types and therefore has a higher price point. So there's absolutely no change in terms of that strategy. Steven, can I pass over to you?

Yes. Yes. Thanks, David. I think, again, to reimpose what David was just saying there in terms of the sort of product mix we're going and buying. We're buying everything from Barratt, from a sort of 1-bed 500 square foot dwelling right the way up to David Wilson 5-bed, 2,500 square foot. So we operate across the full market mix. And the brand is tailored to the quality of location and sometimes, obviously, the size of the site. In terms of the land market, generally, we've had a lot of success -- just short at 19,100 plus in the year. And that sort of is on the back of some of the planning consents which came through in the last few years. I think 307,000 to March '22. 319,000 contents in the prior year. So we've seen some good sites coming through. And I think as I've indicated in the past, one of the sort of dynamics of the land market we've seen is our larger sites coming in. So typically, a lot of sites around 500 units, which is, again, ideally sort of tower of operation where we can sort of split the site 2 ways with maybe going at 30% perhaps to 500 units and then split it 50-50 between [indiscernible]. So 500 unit is sort of ideal. We did a study recently, and that sort of showed the sort of trend of the sites coming through in the planning system, and there's something like 600 sites in various stages of planning with over 1,000 units coming through. So one of the things we're going to see in the future years is larger sites. And again, that suits our business model where it's ideal for dual branding, potentially 3 or even 4 outlets to Barratt to David Wilson. In terms of -- final thing I'd say on land, our sort of hit rates, it's running around about 1 to 3.5 offers. So 1 to 3.5, 1 site of success for 3.5 offers we make, which is our sort of usual level, which we've operated out for number of years. So land is good. There's plenty coming through. We've got a number of terms agreed, which we'll also see come through in the next 6 months. In terms of the planning system, the planning system, clearly is no better, if anything it's worse with purely a lack of resource in government departments that demoralized the planning teams generally in local authorities through lack of good staffs. And in some cases, political interference, local government, political interference in terms of decisions. The other question you mentioned was nutrient neutrality. And the HBS estimate, there's about 120,000 firms currently held up in the system due to nutrient neutrality issues, which are coming through. I think that's across 74 local authorities now, because that was extended in the last few months in number of local authorities with nutrient neutrality issues. These tend to be sites, which are at the very early stages in terms of sites being allocated, coming to the planning system. A lot of the sites we buy already have an outline consent. So generally in those instances nutrient neutrality doesn't apply. And if you look at the nutrient neutrality issues from a Barratt perspective, clearly, there's nothing in our FY '23 year. And when you look out to sort of our portfolio, we have about 10 sites currently impacted, and they're delivering maybe 200 units, 220 units in FY '25 and beyond. So it's not a major issue at the current point for Barratt. They are solvable. We have a couple of sites where there has been issues and we've managed to come up with solutions that address that terms. So hopefully, that gives you a bit of background.

Thank you, Steven, and thank you, Glynis.

We will now take the next question from Ami Galla from Citigroup.

Just 2 for me. The first one was just generally on the build rates. The build rates that we've achieved in the second half is that fairly an optimal level? Or is there any scope for further operational efficiency pushing this rate higher? And the second one was just on demand and pricing. Are there any regional patterns emerging in the trading that you've seen in the recent couple of weeks?

Ami, in terms of build rates, Steven will pick that up, and I'll pick up just in terms of the pricing. I mean, I think the short answer in terms of pricing is, there's nothing in terms of recent trends with regard to pricing. I mean I think when you look at it both from a volume and a price perspective, I think we've seen pretty consistent trends, whether that be over the last 4 weeks or over the last 6 months. So I don't think any significant changes in terms of those trends. But obviously, we keep monitoring that, and we talk about that on a week-to-week basis within our executive. Steven, can you just talk about build rates?

Yes. Thanks, David. Yes, in terms of build rates, and as David mentioned in the opening statement, we're very, very pleased with the progress we've made over the past year. Our construction teams and subcontractors, suppliers have an absolute tremendous job and we're now exceeding pre-pandemic levels in terms of build rates. So as we said, our build rate, which we measure in equivalent units per week for FY '22 is something like 252 EUs per week. That is based on H1. Our first half average was about 341 EUs per week and second half which is 364. Second half generally is a higher productivity. It's better weather. So that is pretty typical in line with our historic norms in terms of build levels in H2. So we're back to generally where we were pre-pandemic. And from a sort of build point of view, the other key thing I think you need to mention is in just about build rates, it's about the quality we produce, and we measure that in a number of ways. But one of the key areas is our reportable items, which are measured independently by the NHBC. And we have maintained our position of -- in the lowest reportable items in the peer group for the last 12 months impact in terms of reported items. And as David mentioned, the NHBC Pride in the Jobs where we had an outstanding performance with 98 Pride in Job Awards. So overall, build has been positive, and we're very pleased that we've got it back to the pre-pandemic levels.

Thanks, Steven, and thanks, Ami.

We will now take our next question from Rajesh from JPMorgan.

I've got 2 as well, please. The first one is if you can provide some additional color on the deferral of the London apartment block. Do you see it as a one-off issue? Or have -- this issue elsewhere? And the second one was around Gladman. Could you talk about the contribution this year? And what do you expect it to deliver next year?

I think if I could sort of split the second question slightly. So just in terms of the first question, I mean, Steven will pick that up in terms of the London apartment block where we saw the delay over the year-end. I mean, in terms of Gladman, I think Steven can also just pick up in terms of how Gladman is going generally. And then Mike maybe just talk in terms of contribution against the acquisition. Steven?

Yes. Thanks, David. Yes, in terms of the London apartments, it was one building, 20-storey block apartments with 221 units. It relates to building control delay. And it's the only building we had with that issue. As you say, it's been sort of delayed from '22, and it will happen in '23. Unfortunately, it's related to resource issues, and it's something we're typically seeing in the public sector. These days it's pretty common place where there is a lack of resource, whether it's building control, perhaps or even planning, there are issues that are industry wide. And it's something we're having to work through to deal with it. But the key thing is that the units are built, are finished and they're just awaiting legal completion once the building control notices are issued, which should happen pretty soon hopefully. In terms of Gladman, before I hand over to Mike. Yes, from a sort of Gladman point of view, we completed the transaction in end of January. We've been integrating the business for the last 5 months. That's gone to plan, and we're very pleased with the way things are going. We've been busy renegotiating some of the promotion agreements and converting them into their options or in some cases, 3 old purchases. As I said, at the early stages, but everything is going to plan. We've had a number of successes where we've taken those sites from promotion into our option land bank. In one case, the site actually agreed and it contracted last week, which was a 500 unit site in the West Midlands, where the site has an outlined transition and we were able to negotiate that site off market and bring it through into the Barratt land bank, as I said, last week. So we're pretty confident that the rationale we gave in January that the business would contribute around 500 units a year from FY '25 will be achieved, and we are on course to deliver that, certainly. And across to Mike.

Thanks, Rajesh. Just picking up on the numbers. I mean, clearly, we paid $250 million for Gladman in January. Still very early days in terms of our ownership overall. As we said at the time, the EBITDA performance of that business is around GBP 20 million per year. We're working through finalizing the acquisition accounting. We'll get out with the numbers in that in September. But it's performing absolutely in line with our expectations at this stage. And as Steven said, we're pleased with the performance.

Thank you.

We will now take our next question, Arnaud Lehmann from Bank of America.

Just one left on my side, and it's slightly big picture. In your statements, you confirmed the target of 20,000 home completions for the medium term, and you seem to imply you could go beyond that. I guess, the macro is getting a bit worse. As we discussed, there is meaningful cost inflation in the system that could put a bit of pressure on your gross margin. So the question would be from a strategic standpoint, does it still make sense to chase more volumes? And it would be any big time to slightly adjust the focus on, let's say, the supply, the values, the margins while adding more volumes in the system.

Yes. Look, I mean I understand it's just terminology, but we're definitely not chasing volume. I mean that's certainly not what we're doing. I mean, I think we set out very clearly back in '16 that principal focus as a business was the improvement of our improving our margin -- A, improving our margin, but improving our margin well to our peer group. So we set that strategy out in '16, and we've executed that strategy over the last 5 or so years. More standard house types and really looking at every cost component within our business in terms of build cost, overheads, et cetera. And I think you can see in terms of the relative margin performance that we've executed that well. We've also set out growth targets, but those are relatively low growth targets. We've set around 3% to 5% per annum and it will clearly take time to move up towards 20,000 completions. But we do see that there is growth in the market. That there is an undersupply of housing and there is opportunities for growth in the marketplace. So when you look at our specific guidance in terms of FY '23, we clearly have got a very strong forward order position. For reasons that we've already discussed, we're rolling over an apartment block from 1 year to the next, which is in itself is giving us more than 1% growth in terms of completion volumes. So I think we're comfortable to sit behind that growth position for FY '23. But clearly, we've got to continue to monitor the market on a week-to-week and month-to-month basis, which we will obviously continue to do.

There are currently no more questions in the queue. [Operator Instructions] There are no further questions.

Okay. Excellent. Thank you very much, everyone, and we will be back on the 7th of September. Thank you.

Ladies and gentlemen, that will conclude today's conference. You may now all disconnect.