Barratt Redrow plc (BTRW) Earnings Call Transcript & Summary

Good morning, everyone. I couldn't start until the music has stopped, and we dialed in our global audience. Good morning, everyone, and thank you very much for coming along or to dial into our presentation. So I'm going to start with an overview of the year, then move on to current trading and talk about our priorities for FY '25. Steven as normal will then take you through our operational performance and Mike, of course, will cover our financials. I'm then going to come back and talk a little about industry fundamentals, revisit the rationale in terms of the Redrow transaction. And then we'll open up for Q&A and John Messenger is going to facilitate the Q&A. So I just need to highlight before we start. Sorry about this [ dull ] I know. But I need to just highlight that of course we are going to revisit the rationale around information on this other than the information that we disclosed in February and through the offer document and the prospectus. That's our disclaimer down. My point of view, I believe that we've really delivered a strong, solid operational performance in what has clearly been a very, very challenging operating environment. So I know that I would always do so, but I would particularly like to emphasize and thank all of our employees, subcontractors and our supply chain partners for really contributing to what I think is a good outcome in a challenging backdrop. So total home completions at 14,004 down by 18.6%, but our return on capital employed at 9.5%, clearly very impacted by the decline in profitability. We maintain a very strong cash position at GBP 868 million. And this position has been maintained, notwithstanding the fact we paid out [Technical Difficulty] GBP 868 million. And this position has been maintained notwithstanding the fact we paid out GBP 271 million in dividend, and we spent around GBP 92 million in terms of our order approval for the Redrow acquisition in May and also to legally complete the acquisition in August. But as I touched on, we are now waiting to obtain CMA clearance we hope, in October. In terms of current trading, I mean, you've seen the summary of current trading this morning. So I think overall, I'd say it in the context that the first 6 months of the calendar year were definitely more stable than we had seen during 2023. Our reservation rate for the current trading period of 0.58 for the time through to the 25th August. So 38% ahead of the prior year, which clearly for current trading is very strong. We recognize that the prior year is a weak comparative. But nonetheless, that is a very good start to the year. We're still seeing impacts in terms of reduced consumer confidence and clearly affordability. The average outlet position in line with what we said in July, we've seen reduced land buying during 2022 and 2023. And it's only really in the second half of financial year '24 that we've come back into the land market. So we're seeing reduced outlet numbers. We will see reduced outlet numbers during FY '25, but we'll then see a sharp recovery of that as we move into FY '26. And then 42% forward sold in terms of private completion position, so something that I think is going back to a more normal pre-pandemic position in terms of our forward sold position. Just in terms of priorities, I mean, clearly, as a stand-alone business, we obviously have a priority in terms of Redrow. But we set out post the autumn of '22 and the market disruption that we saw at that time, 4 very clear priorities. So first of all, to drive revenues, really to make sure that our sales teams are having their best day every day. So doing lots of mystery shopping and ensuring that our sales teams are absolutely on it. And we feel that we've been very successful in relation to that. Always to emphasize to our potential customers, the low running costs of our homes relative to secondhand market alternatives and then doing everything that we can do to help our customers with regard to the affordability challenges in terms of our homes. We said that we would do more in terms of private rental. So pre the disruption of 2022, we had signed a partnership arrangement with Citra as a subsidiary of Lloyds Bank. And therefore, focusing on that partnership with Citra and also with other private rental investors, we've been able to increase our participation in the private rental sector. And we would expect that to continue as we move through FY '25 and FY '26. Controlling our build activity and costs. I know I'm biased, but I think if you look over the last 3 or 4 years, where we've seen a number of events COVID market disruption in '22. we have demonstrated that week to week, we can control our build activity in line with demand. So continuing to do that in the current year, whilst ensuring that we're also getting all of our new outlets open on a timely basis is very, very important. And then cost, we said that the cost position was very, very important. So to look at build and also look at costs, I think the notable highlight I would pull out from that is that our recruitment freeze has made a huge difference in terms of our headcount. So whilst we didn't close divisions, we have seen our headcount down by about 12% since September 2022. So a big reduction in relation to headcount. And then optimizing land buying. So we stepped out completely, as I said in the second half of the financial year to June '24, we've stepped back into the market around 12,500 plots approved in that period. We're closing the year, and Steven will talk about it more shortly, but we're closing the year with 4.9 years of land supply at FY '24 levels. And we continue to see attractive opportunities in the market, particularly given that both demand and build costs appear to have stabilized. And finally, very much aligned to our purpose and values, we remain absolutely committed to lead the industry in terms of quality, service and sustainability. And if you look at all three of those credentials, all three of those areas, our credentials have been substantially strengthened in the year. On FY '25 completions, our view is unchanged from July, and we expect to deliver between 13,000 and 13,500 total home completions. And the CMA, once the clearance has been received, then we will commence the delivery of what we expect to be a smooth, efficient and effective integration of the Redrow business. So thank you, and I will now pass over to Steven.

Thank you, David, and good morning, everyone. So today, I'll take you through the usual operational update. Our sales performance is detailed here on Slide 7. Our wholly owned private residential rate at 0.58 was 5.5% ahead of FY '23. Our reservation rate improved as mortgage rates eased lower from August 2023. And whilst we didn't see a particularly strong seasonal uplift in the autumn selling season, reservation rates held up right through to the final weeks before Christmas. Then from January and through the seasonally stronger second half, we saw reservation activity sustained at a better level, although our sales activity has remained highly sensitive to mortgage rate affordability for potential home buys. We also continue to drive sales for our alternative channels both to the private rental sector, along with other multi-unit sales, primarily private sales to registered providers. Average sales outlets 346 were 5.7% lower in line with our guidance a year ago and reflected the trade through of outlets where sales activity was extended with a step-down in reservation rates from the third quarter of 2022 as well as a solid opening program with 57 new outlets opened in the year. This year, as we flagged in the July update, we expect total average sales outlets will be around 9% lower. And this is a function of our reduced land buying activity in 2022 and '23 and the annualized impact of sales outlets, which closed in the second half of FY '24. We do, however, anticipate this will be a temporary decline with significant net sales growth plan to support FY '26 delivery. On our current plans, as we highlighted in July, average sales outlets in FY '26 will be above FY '24 levels. Here on the Slide 8 is the private reservation customer mix. And there are really two points to highlight. Firstly, the increased use of part-exchange, which supported 16% of reservations in FY '24. Part-exchange is an important sales tool, but we're keeping a very tight control in our part-exchange portfolio and continually pushing our teams to secure onward sales. And this has worked very well. At the year-end, our balance sheet investment in part-exchange homes was just GBP 10 million higher than last year. However, the number of unsold part-exchange properties was actually lower. Secondly, you can see the stabilization and slight recovery in demand from first-time buyers, who accounted for 27% of private reservations in the year. However, it's worth keeping in mind that at 27%, this range dramatically below the first-time buyers share seen in FY '19 and FY '20, which exceeded 40%. And as an aside, [ Help to Buy ] scheme accounted for less than 1% of reservations in FY '24. Turning now to completions on Slide 9. We delivered 14,004 total completions in FY '24, 18.6% lower than FY '23, but at the upper end of our guidance range. The lower order book at the start of the year and muted demand in the first quarter saw a 28.5% decline in total completions in the first half. However, with the sustained demand recovery from our second quarter onwards, our completion declined slow to 8.7% in the second half. The importance of our drive to secure sales from alternative channels can be seen here too, with PRS and other multi-unit sales delivering 1,815 units or 13.5% of our wholly owned completions, and that's more than doubling on the 708 [ TMs ] and 4.8% share in FY '23. On pricing, here, we've given you the various moving parts to help with your modeling. But I'd just highlight applying our like-for-like matching house types and sites, we estimate an underlying price decline of 2.8%. On the bridge from 2.8% to reported 4.8% decline in the private sales price, this essentially reflected a significantly lower share of completions from London in FY '24. House price declines were tightly banded across the country with our Southern, West and East regions seeing greater declines in London and Central both better than average. London was, however, supported by its longer lead time from reservation to completion. The increase in the average selling price from our PRS and other multi-unit sales was accounted for by broadening geographic mix and a slight increase in the average size of home completions. Now turning to Slide 10. I now want to cover some of our key metrics around health and safety, productivity, customer service and build quality. Health and safety is our #1 priority. It's something which everyone in our business takes very seriously, and it's striving to improve. It is therefore disappointing about the area where our performance dipped in FY '24 was around our injury incident rate, which increased in the year to 302. I am able to report that a renewed focus on health and safety has helped reduce the industry incident rate by 5% since the start of FY '25. On build activity, our site management teams have done a great job again in FY '24, aligning activity with a reduction in sales outlets and lower completions. Across the year, and including joint ventures, our site teams delivered an average of 257 equivalent homes each week. And with legal completions averaging 269 each week, we've managed to reduce our construction work in progress by GBP 78 million in FY '24. In FY '25, we are again aiming to balance construction activity between the expansion in sales outlets for FY '26 and anticipated completion volumes. On HBF customer satisfaction scoring, our customers awarded us the maximum 5-star rating for the 15th successive year, a unique record amongst the major house builders. The 2024 NHBC Pride in the Job Awards program began in June, and we're delighted to announce once again that we led the industry with 89 of our site managers securing this coveted award, making it the 20th successive year, which we've secured more awards than any other house builder. Our industry-leading build quality was also maintained once again through FY '24. We ranked first for the fifth consecutive year amongst the major house builders group throughout FY '24 with average Reportable Items, RIs, at 0.13. Turning now to Slide 11 on build cost inflation. Our view for FY '25 remains unchanged from July with total build costs expected to be broadly flat in FY '25. On build material pricing, we saw inflationary pressures easing through FY '24, and we achieved price reductions in some key product areas, notably bricks, blocks and steel, which have helped FY '25 material costs. At the year-end, we have supply agreements in place for 85% of our material needs to December 2024 and 19% through to June '25. And we're looking to secure improving terms over the coming months when deals become due. Around our labor costs, we've seen a more stable and steady picture across all our regions, a reflection of the slower market. Many of our capital-intensive subcontractors are looking to secure work to maintain their capacity, and this is delivering competitive rates with limited inflationary pressures. So putting it all together, we see broadly flat as a realistic view on total build cost impact in our income statement for FY '25. Turning now to land bank on Slide 12. As we highlighted in July, after an extended pause, we delivered a significant acceleration in land approvals during the second half and particularly during the fourth quarter. And as a result, we reported net approvals of 12,439 plots. Our decision to reenter the land market was based on the identification of some very attractive opportunities, notably some larger sites and many of which we've had on the back burner since the autumn of 2022. We have, however, maintained our disciplined approach to land buying and ensuring these sites meet our gross margin and ROCE hurdle demands, reflecting both lower completions as well as the pause in our land buying activity. The duration of our owned and controlled land bank has extended to 4.9 years. And importantly, over 69% of our owned land bank had detailed consent at the year-end. And I can confirm now, we have detailed consents in place for all FY '25 planned completions. We've also made good progress driving conversions from our strategic land in FY '24 with 3,723 plots converted into our owned and controlled land bank. So in summary, we delivered a solid operating performance in FY '24. We also have to recognize that mortgage rates and mortgage qualification have been and will remain key to our reservation rate as we look ahead. Total build costs after unprecedented rates of inflation over the last 3 years are expected to be broadly flat in FY '25. And we're back in the land market, but we have been and will remain both selective and disciplined in our approach to land over the months ahead. And finally, as you heard, our divisions are focused on expanding our sales outlook position to ensure we deliver the most attractive sales outlets, and appealing house-type choices across the country, supporting completion growth from FY '26. So thank you, everyone. And with that, I'll hand over to Mike.

Thanks, Steven. Good morning, everybody. So I'm going to take you through the key aspects of our financial performance now. But as David said earlier, this all relates to Barratt on a stand-alone basis, both in terms of the year just gone and any guidance. And we'll come back probably at the half year with more information on Barratt Redrow. So turning to Slide 15 and stepping back for a second from the results, I think, as you've heard this year was challenging for a number of reasons. Our volume declined on the back of weaker demand or incentive use and, at the same time, ongoing build cost inflation, both of which squeezed our gross margin. As you know, we said, we wanted to maintain the scale of our business to take advantage of future growth. And therefore, we didn't close any divisions. But again, we saw the impact of reduced volumes on our operational gearing as a result, resulting in operating margin decline as well. Overall, our adjusted operating profit was GBP 376.6 million. [ 56% ] already touched on the impact of pricing and build cost inflation, and I'll cover the key drivers around overheads and operating margin in a moment. Our results include GBP 214.5 million of adjusted items relating to building safety and the cost of the Redrow transaction, and I'll cover both of these items in more detail in a second. Adjusted EPS was 28.3p that's 57.9% lower. And based on our dividend policy of cover at 1.75x adjusted earnings, we'll pay a final dividend this year of 11.8p per share taking the total to 16.2p for the year. And finally, we continue to manage the balance sheet carefully, and we ended the year with net cash of GBP 868.5 million. So moving on to the adjusted margin bridge. And you can see here the impact of the main drivers in the margin from FY '23 to FY '24. And first of all, as I said, the impact of those lower completion volumes which reduced our margin by 300 basis points in the year. And on inflation, the net impact of build cost inflation of around 5% and underlying softening in selling prices, reduced margin by a further 430 basis points. As Steven said, the trajectory of build cost inflation has been lower, and we continue to expect broadly flat build cost inflation in the income statement in FY '25. We also saw benefit this year from 2 of last year's items reversing in their impact. Firstly, as Steven touched on London development equating to 60 basis points and also a more normalized charge for our completed development costs contributing a further 20 basis points. And other changes in sales mix and the impact of administrative expenses made up the final 70 basis points of the year-on-year movement. And now on to admin expenses in a little bit more detail. So we ended the year broadly in line with our earlier guidance, and we've continued tight management of overheads during the year, including maintaining our recruitment freeze throughout the whole financial year. Adjusted admin expenses were up by 16% in the year to GBP 314.5 million, and that was mainly driven by the normalization of employee performance pay, the annual salary increase, which was around 5% and also increased IT investments in some of our core platforms during the year. Offsetting these, we in-sourced more of our work on the building safety unit. And we also saw Redrow transaction costs of GBP 22.4 million, which we reported as an adjusted item. And we expect the final tranche of our stand-alone transaction costs of a broadly similar level in the first half of FY '25. Looking forward, I would expect adjusted admin expenses to remain around this year's level with our annual salary increase of around 3% being offset by cost savings elsewhere. So moving on to adjusted items, and these all relate to items that we reported before today. On Building Safety, the portfolio under review has started to reduce, and we saw 16 building reduction to 262 at the year-end. 137 of these buildings, so that's more than half, are now at the tender stage, mobilization or in active remediation. And that means that our visibility of potential future costs continues to improve. The net charge of GBP 125.3 million for external wall systems in the year, comprised the charge of GBP 61.4 million in the first half relating to increasing contingencies as well as the latest cost information from the Building Safety Fund. And in the second half, GBP 63.9 million for the complex development we'd flagged as a contingent liability at the half year. The reinforced concrete frame charge of GBP 66.8 million, largely reflected the recognition of future remediation costs on 2 developments we'd flagged last year as contingent liabilities. And in relation to Scotland, there's still no conclusion to the ongoing discussions in terms of the standard of remediation required. And so we continue to provide for the buildings in Scotland on the same basis as those in England and Wales. So moving on to Slide 19 and cash flow. I'm going to take you through the bridge from our reported operating profit of GBP 174.7 million. So first of all, net interest and tax payments of GBP 28.4 million during the year. And then we saw GBP 159 million reduction in working capital, which came largely from the noncash increase in provisions and the net impact of movements in our trade payables and receivables. With the good progress made on Building Safety, we spent GBP 91.5 million on remediation during the year, and our net work in progress decreased by GBP 53.5 million. So that was driven, as Steven mentioned, by careful management of our build rates but was partly offset by part-exchange holdings increasing and some additional contracts in Gladman. We've got tight controls, as Steven said, around reselling part-exchange homes. And at the year-end, nearly 3/4 of the homes on the balance sheet had already been sold. On land, we saw a net outflow of GBP 125 million, which reflects a higher level of land activity in the second half and total spend of GBP 674 million for the full year. Together with the net GBP 26.4 million impact from JV investments, the group generated an operating cash inflow of GBP 115.1 million. Other investment and financing expenditure totaled GBP 45.4 million. And so after the payment of dividends, which totaled GBP 270.6 million, we saw a net cash outflow of GBP 200.9 million for the full year. And now to update on the position of our land bank and gross margin detailed here on Slide 20. And I think the main point to make here is that the gross margin in the land bank has stabilized in the second half of the year. And as we bring in new land target hurdle rates, hopefully, we're now at the low point of the cycle in terms of margins. Again, as a reminder, here, we're pricing the whole land bank on today's prices, today's build costs, and today's sales rates, so we're not including any assumptions about future inflation or improved sales rates. As you can see from the chart, just under half of the land bank plots have an estimated gross margin of more than 20%. And over the coming year or two, it looks like margin recovery will be gradual because we're not seeing any benefit in sales prices and build cost inflation while stabilized isn't continuing to fall. We're, therefore, very focused on driving volume through opening more sales outlets across all of the brands, which will help to improve our operational gearing and consequently improve margin. And now on our usual guidance slide. And again, just a reminder, this is [ barred ] on a stand-alone basis for FY '25 at this stage. Given our activity year-to-date and current trading levels, we continue to expect to deliver between 13,000 and 13,500 total home completions for the year, as we guided previously in July and that includes around 600 homes from joint ventures. On finance costs, we expect an interest charge of around GBP 25 million with cash receipts of approximately GBP 15 million and noncash charges of around GBP 40 million, and then with land spend anticipated at around GBP 800 million FY '25, we expect to report net cash of around GBP 500 million at next year-end. And so finally, in summary then, as expected, the results this year reflect the impact of lower volumes, net inflation and lower outlet numbers. The margin pressure we've seen over the past 2 years will take some time to unwind through the land bank. So the underlying margin position is unlikely to materially change in the short run, [ absent ] stronger sales rate. We're making good progress on building safety with better visibility of the risks in the portfolio and over half of the buildings at tender stage and beyond. And our strong balance sheet gives us a good platform to return to outlet and volume growth into FY '26, which will feed through into increased assets and return on capital. And as I said earlier, when we next report at the half year results, we should be able to give more guidance around our expectations for Barratt Redrow. And with that, I'm going to hand back to David.

Thank you very much, Mike. So now moving on to look at market fundamentals as we would normally do. So I think everyone recognizes that as a country, we face an acute need for more homes across all tenures. So if you look at rent inflation in the private rental sector, clearly a significant shortage of properties available for rent, huge waiting lists in the affordable housing sector, a shortage of affordable houses across the country and mortgage affordability remains an issue for those who are looking to move into home ownership for the first time or to move up the housing ladder. So we welcome the new government's prioritization of housebuilding and the early steps that they have taken. Customer service tell us that the vast majority of the population want to own their own home. And we can see that whilst employment remains robust, the cumulative impact of inflation, cost of living pressures are acting as a drag on consumer confidence and also the consumer's ability to save a deposit and to meet a mortgage affordability requirements is a challenge. So if we now turn to the next 2 slides to look at planning in the land market and then mortgages. So this is a slide that we shared on a very regular basis. Looking at planning consents, net new build additions in England, along with Savills Greenfield Development Land Price Index. I think in summary, the planning consents on an annual basis have remained ahead of new build home additions. But as you can see here, the annualized consents peaked in June '21 at around 336,000. And they were running something like 30% below this level through to March '24 at just over 236,000. The planning situation was still on a downward trend through the first quarter of 2024 with detailed planning consents 13% lower than the first quarter of calendar '23. But I think that's the bad news out the way. We clearly now have very positive momentum post election, given the new government's recognition that housebuilding and growth are national priorities. Their plans to date are centered on addressing the supply side constraints in the market. So we welcome the reintroduction of national targets to deliver 1.5 million homes over the 5-year term of the new government. We're pleased to see the fast tracking of the proposed reforms to the National Planning Policy Framework, and we also recognize clear logic and the need to review the redevelopment of brownfield green belt or grey belt, which offers significant opportunities in many parts of the country. And finally, we are pleased to see the government act with urgency as highlighted by the recent New Homes Accelerator Initiative. There are clearly ongoing challenges on the demand side, notably around affordability. And in particular, for first-time buyers, as well as also challenges around financing for affordable housing providers. But we welcome the government's focus on our industry and the early steps that they have taken. Again, a chart on mortgage affordability and mortgage lending that we've shown a number of times before. So on the demand and financing side of the equation, these charts really look into more detail on affordability and mortgage rates. The left-hand chart showing the proportion of average post-tax income being spent on monthly interest and capital payments based on the average Halifax house price. There has been a welcome easing in this affordability measure helped by the decline in mortgage rates and the benefit of reduced national insurance costs. As a result, the average Halifax house price Home absorbed 41% of post-tax income in the second quarter, down from almost 44% in the fourth quarter of 2023. The chart on the right details average monthly mortgage rates at 75% and 95% loan to value lending from January '20. And I would highlight the easing in mortgage rates from August 2023 through into January 2024 when rates fell back by almost 150 basis points. The more gradual rise in mortgage rates from February through to May 2024 before a [ welcome shift law ] in June and July. Affordability at higher loan-to-value lending, essential for first-time buyers, clearly remains a challenge for the industry. Moving on to Barratt Redrow combination. We believe that the combination with Redrow will help us to address the country's housing shortage by creating an exceptional U.K. homebuilder in terms of quality, service and sustainability. The combined business is clearly going to be capable of accelerating delivery through our 3 high-quality and complementary brands. And in doing so, we'll improve our combined asset turn. We believe, too, that the combination can realize significant cost synergies, and we can achieve these synergies rapidly and efficiently. Barratt Redrow is also going to maintain a robust balance sheet, better protected to operate through the cycle and a strong platform from which to deliver improved shareholder returns over the medium term. And finally, the combination will deliver significant benefits for our other stakeholders, including our highly skilled and dedicated employees, our suppliers, our partners, and more price points. As an industry, we face a challenge in accelerating the speed of development and restoring asset turn against the backdrop of the low reservation rates that we've seen since the autumn of 2022. We've seen through David Wilson and Barratt applying a multi-brand strategy drives the ability to have more sales outlets. You may remember the example given in February of Grey Towers Village, a site up in the Northeast near Middlesbrough. We made the clear decision during COVID to dual brand Grey Towers, adding Barratt Homes to the site with a separate sales outlet and [ show home suite ]. As you can see on the right-hand side of the page, what dual branding delivered in terms of performance across the site. Completions increased by over 110% from the pre-COVID average. The reservation rate increased almost 100% to an average rate of 0.94 in FY '22 and FY '23. So you can see why we are excited about what 3 distinct brands can do. We can accelerate the delivery of homes from the combined land pipeline by introducing the Redrow brand to appropriate Barratt sites and vice versa and have brands -- sites that contain all 3 brands as well as the strategic and operational benefits of the combination, there will also be material financial benefits. We have estimated at least GBP 90 million of pretax cost synergies which is clearly a material number. But we are confident about the delivery of that. The savings are going to come from both Barratt and Redrow's cost bases across the following areas: Firstly, procurement-related savings primarily from direct materials and other efficiencies in build cost overhead are expected to unlock some 38% of the synergies. Secondly, optimization of the divisional office structure was expected to crystallize 37% of the total, and finally, consolidation of central and support functions will deliver the balance of approximately 25%. The associated one-off costs to allow this delivery of synergies will be approximately GBP 73 million. I would just make the additional comment that clearly there will be a phased impact in terms of the delivery of the synergies and there will be a phased impact in relation to the GBP 73 million of one-off costs as set out on the slide. So then just moving to the transaction time tables very briefly. So we've laid out the time line in hopefully simple terms, we achieved shareholder approval in the middle of May. We made a decision to complete the acquisition of Redrow really to give us certainty. And we were able to waive the need for CMA clearance and therefore, legally complete the acquisition, which we completed on the 21st of August. We made a submission to the CMA on the 15th of August for the undertakings that we would give in relation to the single overlap in structure, which was identified through the CMA's Phase 1 process. Based on the CMA's standard timetable, we would expect a decision to be made around the 18th of October after a period of public consultation. So to conclude, we delivered a very solid operational performance on what has clearly been a challenging year. We maintained and we improved our industry-leading customer service, build quality and sustainability positions. We have had a solid start to FY '25. We remain focused on our 4 priorities, and we are very excited about the future potential for the Barratt Redrow combination, particularly our ability to accelerate sales outlet openings and also to be able to achieve or improve on the cost synergies. So thank you very much, everyone. We're now going to move to questions. John is going to facilitate questions. I will take questions from the audience first, and then we will move to questions if there are questions online. Thank you.

Thank you, David. [Operator Instructions] If we could start actually Aynsley is most persistent with these hand-ups. So Aynsley, over to you.

Aynsley Lammin from Investec. I think I've got three, please. Just wondered if you could give a bit more color around kind of pricing incentives, how you tactically play in that going into the autumn selling season? And then two, just on the merger. I understand, obviously, CMA just interest here a bit more detail, maybe how easy are they to resolve those issues? What are the risks that it could go beyond the 18th of October? Just provide a bit more kind of confidence around that. And then [ tech ] accounting one, just on consolidation, assuming it goes through in October, CMA approve it, does the kind of Redrow business get fully consolidated from the late August when it completed or the CMA approval or before just any guidance as well?

Aynsley, because you build it as a [ tech ] accounting question, Mike will answer that. And I'll pick up the other two just briefly. So in terms of incentives, I mean, I think everyone understands that if you went back to the first half '22, we said at the time that we would have been running incentives at around 2% to 3%, that sort of order. And whilst we've seen variations in incentives since then, I would say as a generalization, we're running incentives around about 6%. That's the kind of order. One of the drivers for us on additional incentives is the increased utilization of part-exchange. But again, if you go back over time, you'll see that us having part-exchange levels in the order of 15% to 20% is not unusual. And part-exchange is obviously a key way for us to compete with the secondhand market. So that's a big driver of incentive cost for us. Over the last 6, 8 months, I would say incentives are reasonably stable. So -- and we're not expecting any particular step up or step down in relation to incentive levels. In terms of the merger and the CMA, I'll sort of walk through this. I mean -- so because of the overlap that was identified and the CMA obviously reported on that overlap, we were then required to give the CMA undertones in relation to how we would deal with the overlap. And the CMA said publicly, they have said publicly that they're kind of minded to accept, but they haven't accepted, but they're sort of minded to accept the undertakings. So that's point one. And point two is in line with the time table, we expect it to complete around 18th of October to get the CMA clearance around the 18th of October. And there's nothing that we believe should disrupt that timetable. The [ tech ] question

On consolidation, so we'll consolidate from August. I'm not allowed to know if what I'm consolidated until October, but yes, consolidation from August.

Go to Ami, just behind Aynsley and then we'll work it back up the row there.

Ami Galla from Citi. A few questions from me. One was on the land market. If you could give us some color as to the land opportunities that you're seeing currently? Is the availability back to normal? And in light of the recent potential budget announcements of capital gains tax. Is there any dampen or change that you're seeing on how the land market or the land vendors are reacting to that? Second one was really on Gladman. What is the sort of contribution that Gladman currently has in your business? And where does that number sit versus what you would consider as normal contribution from that business? The last one was on the combination. I understand you can't quite talk much about it, but on -- in terms of the supply chain renegotiation in terms of the agreements, how long do you think that really takes once you kind of start integration? How quickly can you kind of revise your sort of material agreements or subcontractor agreements on pricing?

Yes. Okay. Well, I think if I could ask Mike to pick up the Gladman question. I'm sure Mike will answer that without actually giving any numbers, I predict. But I think if I can cover the other two areas, okay? So I think in terms of land opportunities, I mean, we see generally really good opportunities in relation to land. And I would say that there are two drivers for that. First of all, a lot of companies, including ourselves have not really been as active as normal in the market since October '22. So there is clearly some pent-up land in the market is the first point. And I think the second point is that the government has delivered a very clear message to the local authorities. They've made public announcements. They've written to every local authority and every local authority Chief Executive. And they've made it clear that they'll need to deliver the housing numbers. And if they don't deliver the housing numbers and they don't have a plan in place to do that, then obviously, they will be subject to appeals if planning approvals are declined. So without any change to the National Planning Policy Framework that will already start momentum in terms of the land market. I understand that different land owners will have different drivers as to why they're selling one. Some of it may be that they're just selling one piece of land and they don't have any more land, some maybe that they run a business in terms of the buying and selling of land. But I would say in the round, I wouldn't expect any major changes to landowners behavior in relation to government announcements because I think the landlords understand this is going to be the backdrop for the next 5 years and potentially the next 10 years. So I think what we've tended to see is that if the government changes the position on planning, the market adjusts over a period of time and then moves on.

I'm glad, Ami. I think if you think of the two parts of that business is being securing planning and then selling the land. Obviously, it's been a tough year in terms of land sales through the first half in particular. So the focus has been very much on securing new planning consents and sort of filling the hopper, if you like, for future land sales. So they did secure 8,500 new plots through planning and new agreements in the year, so very positive. But as you would expect, the land sales piece has been a bit muted. In terms of expectations, I think they're performing in line with our expectations. So I don't think -- we're still very pleased with that as a long-term acquisition, and we think it will contribute to the growth of the business into the long run.

Just in terms of timing of purchasing -- you're parsing discussions, I mean, I think the reality is not really appropriate for us to get too far into that. I mean, we don't have CMA clearance at this point. We clearly can't engage with the suppliers until we get CMA clearance. And I think we gave some guidance in February in terms of how we expected the synergies to flow through for Year 1, Year 2 and Year 3. But inevitably, it will take time because there's got to be in negotiation with a large number of suppliers, and it will take time for that to flow through in terms of the related benefits.

Great. I will just carry on at the row there. So if you could pass back to Cedar, please.

Cedar Ekblom from Morgan Stanley. Just a question on your outlet guidance. Can you give us any color on how you see outlets ending FY '25? I know you've guided to down 9% on average, but it would be quite helpful to get a little bit of visibility on the exit rate. so we can think about how that sets you up into '26? And then just on planning reform, how do we think about where the risk to margins or pricing is. Is this more of a topic that land owners potentially need to see their pricing lowered to the extent there's more affordable units needed if planning requires that in the future? Or is it a case that the house builders take a margin hit because your economics are different, but the land market doesn't adjust. It would be helpful to get a bit of color in terms of how you are thinking about land reform for landowners versus house builder margins?

Okay. So if Mike picks up in terms of outlet guidance and I'll pick up in terms of the position for landowners.

Yes, sure. So I think we're sort of coming into the low point of outlet numbers around sort of 300 as we come into the next quarter. And then through the second half of the year, outlet numbers, we'll start to build back. The only guidance we've given on sort of forward number, Cedar, is that the average number in FY '26 will be higher than the average number that we had in FY '24. And obviously, there will be a little bit of phasing as we get those sites open. But we're not guiding to a sort of closing number for FY '25 as such, beyond the average guidance that we've given.

Yes. I'll just add to that, that in general, in terms of our guidance, I mean, we're looking at sites that we have under control. The sites clearly almost by definition, don't all have planning, but we have them under control. And given that we're back in the land market, as we acquire more sites, there's a potential for them, I suppose, really sort of land value capture and how that [ plays ]. I mean, at a headline level, we are buying land on a subject to planning basis. And therefore, we're not sitting with our freehold land bank that is potentially going to be impacted from a value point of view in relation to further land value capture, affordable housing coming particularly from, for example, green belt or even from grey belt. And also in relation to the proposal for new towns that would be higher levels of affordable housing provided. So there's clearly a mix there between the level of affordable housing, the impact for the landowner, the impact for the house builder. But we feel that we're pretty well positioned in terms of protecting our position in relation to that. And I think historically, we've demonstrated that we're quite well positioned because of our land purchasing model.

One follow-up. So just to understand, the stuff that you have permitted already, you have very good visibility on what the margin is for those sites. And then if we think about future land purchases, which maybe come under a new regime for affordability, et cetera, it would basically be a discussion between the margin you're willing to accept and the price that the landowner would be willing to sell at.

Yes. And I think also, if you look at what the government are saying is that the government aren't saying that universally, they're seeking the provision of more affordable housing on every site. What they're saying is that you see that there are certain types of site where the level of affordable housing should be provided. So almost as a trade-off, if land is going to be leased from the grey belt or there's going to be land committed for new towns, then there should be a higher level of affordable housing provided. So it's not that sort of across the board.

Great. If we could just passing back up the row to Harry, if I ask Harry to ask the question. I'm sorry, David, can you just let your hands away from your mic when you're answering. Apologies. They're not getting the words of wisdom as clear as they would like at the back.

John, I'm not going to ask you to do this again.

Harry Goad from Berenberg. I've got two, please. So firstly, on the share of units from PRS/partnership. I think the number has been sort of mid-teens-ish in the last couple of years. Should we expect that number to sort of trend upwards? And can you give us some feel for maybe what you feel a normalized number around that would be? And then the second one, a different topic and probably a couple of years away, but in terms of the government's volume aspirations, how are you thinking about both subcontract labor availability and building materials availability if we get anywhere back close to or get close to where sort of government's ambitions on volumes will be because, I guess, clearly, we were struggling at lower levels than the sort of 300,000 [indiscernible] could that be met?

Okay. Harry, thank you. I'm very anxious about my hands now. Yes. So Mike will pick up in terms of PRS, and I'll just talk about outlook for volume. Look, I think, first of all, I would say it's a really nice challenge to have. The idea that as a business or as an industry, we could be looking at a situation where we're presently well sub-200,000. And we're talking about can we grow the business or can we grow the industry to 300,000. So you think, okay, well, that's quite a nice problem to have is the first thing. The second thing is the industry has demonstrated a number of times since 1990 that we can get above 250,000 units. And it's a challenge or accept it's a challenge at that level. But I think what the industry has done a lot of in the last 5 years, and you can go through the different participants, the industry has done a lot about changing production methodologies. So as an example, but not confined to the adoption of timber frame. So we made an acquisition of Oregon in 2019. And then we opened a new factory in Derby around 18 months ago. So we now have two sort of full on timber frame factories, which really enhances our capability. But there's plenty of other initiatives that are taking place that make the build process on site more straightforward. And I think the industry has got to deliver on more of that over the next 5 to 10 years. And then the other point is that the government have been very clear that they themselves and the industry, not just in housebuilding, have to do more in terms of encouraging apprenticeships and bringing more people into the industry at a trade level. And that's obviously particularly driven through the industry's inability to continue to bring labor from Continental Europe, which is clearly the way we've satisfied labor. And I think that, that shortage of labor. So when all of our [indiscernible] his review of the industry, that shortage of labor is around very specific trades, I won't name them all. But for example, bricklayers, because bricklayers really just work in the new build market. They don't relatively do much activity in the domestic market or the commercial market. So it's much, much more about housebuilding. And therefore, we need to ensure that we're training sufficient bricklayers. While at the same time, we're looking at alternatives to break.

And then just so on affordable, Harry, I mean the proportion tends to hover around 20%, so high teens into 20%. And obviously, it depends which part of the country you're talking about, slightly higher in London and sort of site to site can vary. I think for FY '25, we've already talked about the profile of site outlet openings being sort of second half weighted this year. And because typically affordable will come quite early on a site life. The proportion will be lower in FY '25. So I think it will be around the mid-teens rather than the high teens for this year. And then in the long run, as David said, in terms of government policy, directionally, it could be higher into the medium term, but we need to wait to see how that plays through. So I think if you think about it as mid-teens for this year on a normal level being sort of high teens to 20%, that's reasonable.

[indiscernible] to share partnership type deal [indiscernible], but we seem to expect that number to be trending...

Yes. And so that number will trend up slightly over time. I don't think we're going to move to any extremes on partnership activity. And as you know, we've got the PRS relationship with Citra and others where we're delivering around about 1,000 units a year. So over time, we'd potentially expect that to increase slightly as well.

Great. If we could come down the front to Will.

Will Jones, Redburn Atlantic. I'll try 3 if I can, please. First, you made several references understandably to the rate sensitivity of customers as lenders have been trimming rates through August. Has that had any impact on leads as you look towards the autumn market? Second was whether you would be willing to talk about any of the moving parts for gross margin in '25 -- akin to the bridge you gave for FY '24 within that as sort as one thing we know is that I think you exited on price at about minus 3% like-for-like as per the July update, built costs flat. What should we think of the price cost spread in '25? And would you be willing to call out what your bulk sale completion gross margin is compared to average? And then the last one is maybe just a reflection and maybe you've touched on it already. But in the land market 6 months ago, you were on a net basis probably doing negative or I think now you're back at what looks like 1x plus replacement. Back 6 months ago, was that really about the absence of macro confidence to press the button? Or has something fundamentally shifted on the supply side since that enables that big change in strategy? And then just within that, have you moved already to the 24% gross margin target post retro as it were? Or is it still on 23% at the moment?

Okay. Right. Thank you for all those. So if I just do the easy one, we haven't moved to the 24%, we're a stand-alone business. We need to fully complete the acquisition and receive the CMA clearance. So that will be the first one. And then on the land market, what I'm going to do is I'm going to start and then Steven will talk a bit more about what we're seeing in terms of land generally. But -- and Mike will pick up gross margin and the other question on bulk. So just in terms of the initial question in terms of what we're seeing, look, as you know, we're not going to disaggregate the current trading period. What I would say is we recognize that current trading is up against a soft comparative for the prior year. But I think what we've got to do is just bank that and move forward. And the reality is that relatively we're seeing a strong current trading period through July and August. If you look at the consumer confidence index, it has improved substantially from where it was 12 months ago or where it was 18 months ago. And therefore, whilst I know that's not just covering housebuilding, but there is just a bit more consumer confidence out there. We are definitely seeing higher levels of inquiry and that's flowing through in terms of us being up on reservation volume. So I think that's -- that's kind of pretty positive backdrop. Mike, do you want to pick up in terms of part 2?

Yes, sure. So I mean, in terms of the margin, the building blocks will clearly, sales, as you say, sales price inflation is going to be muted. So I think for the full year, if you thought about that as being broadly flat, that's not unreasonable. And we've given guidance on build cost inflation also being broadly flat. Outlet numbers are down. And obviously, we've guided to lower completion volumes as well. So there's a little bit of an impact on that on the carrier fixed cost. And I think if you put those moving parts together, you can sort of get to a gross margin number. In terms of the discount on -- we call the multiunit sales or in bulk sales, but the discounts vary, obviously, as you would expect from deal to deal. And we would always want a discount level that was acceptable to us in terms of the overall business. I think we've said previously, typically, they tend to be sort of low double digits against private sales incentives of 6% and so on. So they are slightly dilutive versus private sales, but we're able to close the outlet earlier, and we can make things work in that way. But we don't disclose the sort of aggregated discount number, but it varies deal to deal.

I think just in terms of the land market, and then I'll pass over to Steven. I mean, so just a couple of points to make. I mean, one, we've announced approvals at 12,500 for the 6 months period. And I think that clearly, that's way beyond what we would expect as a normal run rate. Because if we're doing 13,000, 14,000 completions, we're obviously not going to be replacing at 25,000 per annum. So I think that's the kind of first point. And the second point is that there is some pent-up land within that because clearly, what the land teams have been doing is trying to protect the position since the autumn of '22 when we stepped out the land market and where we're in a situation now where we're seeing as we've said, more stability in terms of build costs, more stability in terms of reservation rates and reservation pricing then obviously, that's a good opportunity to go back into the market. But Steven will maybe give you a kind of flavor of the type of stuff that we're seeing and sort of around the country picture.

Yes. Thanks, David. Yes, I was also to say that one of the driving factors is we've seen more stability in our sales rates, our incentive levels and selling prices. I think if you look back to sort of mid-'22, sort of spring and the summer of '22, prices were in higher and high. That was certainly the peak for land for some time. And clearly, we've not bought anything in those 18 months, but since there's sort of stability, we felt more confident. And I think the landowners have become more realistic in some of the terms. So we've seen our land buying see a lot more conditionality around detailed planning consent, whereas previously, it would maybe be bought with an outline [Audio Gap] a lot of the site we bought have been subject to detailed planning. We've seen that deferred terms, which, again, when the market was getting hotter, there was more cash on completion. So we've seen that. Generally, I think the positive situation is find we've been out of the market, but a lot of the other housebuilder's have been on the market at the same time. So there is a good pent-up supply of land available at the moment. So a lot of the sites we've been buying in the last 3, 6 months, have been -- that have been on the back burner for the 18 months or so. So we've pulled a lot of that sites through arguably on much better terms in terms of [Audio Gap] impairment and conduct still got neutrality issues is an issue. Dynamics of the market is -- I think as we've said before, there are a lot of large sites coming through. So we've reported in our announcement today there is some pretty large sites what we've put through 600 units here, 1,000 there, which are ideal to sort of split for dual brand or potential third brand if in the future, I'll sell a piece of. So a lot of good signs [Audio Gap] we should ideally see.

Gregor Kuglitsch from UBS. So I've got maybe sort of a 2-part question on margins. So I think you're sort of flagging give or take, flattish, maybe slightly down margin for this year. I guess my question is, [ is it correct be ], your midterm ambition, I guess, you got 23% growth. Are you kind of thinking this business should be making sort of high teens margins in the medium term? And I guess, I mean that's may be a bit tough for you to assess, but what sort of time horizon of something like that would look like? That's question one. Question 2 is, so I noticed your land with detailed planning dropped to sort of sub-70%. It used to be more like 80% of your own land bank. I want to understand if you think that's a temporary position and if that rebuilds, is that, in essence, the driver or one of the drivers to get site back -- site count back up and running to a sort of a higher level? And then a third question on volumes. I guess do you think there's any reason why the company either stand-alone or pro forma couldn't return back to the volumes that it may be produced in '22 on a sort of reasonable time horizon?

Okay. So Mike will pick up in terms of margin.

Yes. So I mean, I think, as you say, we've sort of walked through the moving parts. So I don't think there will be any significant short-term movement in margin. When you look at -- as we said, sales price is broadly flat, build cost inflation broadly flat. There aren't any margin drivers in there. I think in the medium term, you would expect it as volumes increase on the back of the increased site outlet openings into FY '26. So as volume increases, we see the reversal of some of that operational gearing effect that we've seen on the way down as volumes contracted. And so that will be one of the drivers for taking margin above its current level. So again, I think -- I mean, we're in the sort of slightly odd position at the moment where we can't talk about the combined group and where we'll be. But when we come back at the half year, we should be able to give you a bit of visibility on medium-term aspirations and how long we think it will take together.

I think just picking up on the sort of 2 points, I mean in terms of volume aspirations for the group. I mean, I think the short answer is that there is no reason why an individual house builder can't grow back to the levels they were at or ahead of the levels that they were at. We are close to 300 in terms of site numbers, let's say. But I mean we know that we can operate 400 sites. I mean, historically, I think we've operated 500 sites. The reality is it's the operation of the sites is just a byproduct of the number of divisions that you have. So a division can only operate a certain number of sites. The division management team need to visit the divisions, visit the sites and ensure that the sites are operating as they should be. And they can't do that if they've got 50 sites, but they can do that if they've got 15 to 20 sites, say. And then the other part of the equation is the rate of sale. So I think if we're looking at rates of sales that are in the order of [ 0.6, 0.65 ], we know we can handle far more sites but that obviously takes time to get those sites through planning. So I think we're guiding to quite good slight increases in FY '26 as a stand-alone business. And therefore, we would expect as we go back into the land market during FY '25, but perhaps the tail end of '26 will benefit from that, and then running into '27. So we would definitely expect to go back to higher volume. There's no structural reason why housebuilder can't do more volume. I mean in terms of the detailed planning point. I mean I don't really think there's much in that, Gregor, to be honest. But I think that my sense would be that average site sizes are rising. There is no question that average site size is rising. The planning system was grinding to a halt. And hopefully, with the new government, the planning system will be reinvigorated and start moving more efficiently. So I would think the combination of those 2 things are most likely to impact the percentage of detailed consent sitting in the land bank.

I'll just finish off on the front row if we go to Charlie, and then we'll come back to Alastair.

This is Charlie Campbell at Stifel. I've got 2, were both quite quick really. Sites for FY '26, so you're promising more than FY '24, just wondering kind of if there's upside to that because I'm guessing you haven't really factored in much in the way of an improving planning system. So perhaps that could come through and deliver on that. And I guess we could also see some resolution to neutrality by then as well. So just to confirm that neither of those assumptions are in that statement about FY '26. And then secondly, just a quick question on price. Just wondering if you're asking any movements in headline prices sort of July, August, September. You're very grateful to hear about that if that is going on to...

Yes. Charlie, I think really very straightforward. I mean, I know it's difficult to kind of predict the future in planning. But I think when we look at the backdrop just now, and you're looking out to, let's say, the end of '26, so we're all the way through to June '26. It is very, very hard to see given what the government have said that we're going to see a downside to planning given the way we forecast, I mean we're just saying this is the stuff we've got in the pipeline already. We're not assuming some heroic assumptions in terms of -- we'll get planning in 12 weeks or so, we're just assuming that everything will take ages as it normally does. So I think that on normal planning, I struggle to see a downside to what we're seeing, firstly. And then secondly, I think nutrient neutrality is just a really good point for you to highlight because there is something like 160,000 homes across 75 local authority areas tied into that issue of nutrient neutrality. And -- we understand that protecting the environment and the sustainability credentials of businesses, sustainability credentials of local authorities and central government is very, very important. But it is hard to see that there is a justification for stalling 160,000 homes. Now whilst they can't all be delivered in FY '25 and FY '26, I think it is realistic to assume that the government will unlock this over the next 12 months. Because the reality is if they don't unlock it, it won't be 160,000 homes. It will be 200,000 homes and then 250,000 homes, and it won't be 75 local authorities. It will be 100 local authorities. So they've got to find a solution to it, that works for everyone, which I think is possible.

Sorry, on price?

Yes. I mean, in terms of pricing, I mean, generally stable, I think stable through July and August, we're not seeing anything unusual in terms of pricing.

Great. Thanks. And we'll come back to the middle, Alastair and then [ Chris ].

Alastair Stewart from Progressive Equity Research. A couple of questions related to previous ones. On the 0.58 current sales rate is obviously very strongly up in last year, but that was probably a low point or near to it. But it is a quiet time of the year with holidays. Can you cast your mind back to, say, FY '19 that so -- yes, FY '19, the last normal year, what would the sales rate have been around about during the holidays? That's the first question. Second question was the multiunit percentage fell from 17% to 14% during FY '24. Did that very much quarter-by-quarter as the land market picked up and you maybe saw better opportunities, keeping it in-house as it work?

I mean I think on the first one, I don't have to figure also. So I don't want to kind of speculate on the figure -- I'm not even going to speculate that it was higher. So -- but we'll answer that offline because we've got the figure somewhere. I think on multiunit, I mean, my answer to that is just, more that it's really getting deals agreed, I think, is a factor. There's more and more house builders who are doing multiunit sales, there's more and more participants coming into the market who are interested in a multiunit product. And so I think it's just more about getting a pipeline that really moves forward and saying, well, these are the 4 or 5 companies that we're going to deal with on multiunit sales. And I would assume that all house builders are facing that challenge. If you want to add to that, Mike?

I think the only other driver for the move year-on-year is at the end of '23, we did quite a big deal with Citra, as you remember that we announced in June. So there's a little bit of sort of timing. They do tend to be lumpier deals, as you know, because of the size.

Are you more inclined just now to actually hold on, you're always going to have the Citra type deals, but are you more or less inclined to have that sort of level of multi-unit sale? .

Yes. No, we're still keen to engage. I mean, we see it as a way of helping to drive volume through the business. But as I said earlier, I think the discounts have to be realistic. And they have to stack up for us in the context of each individual deal that we're looking at. So in principle, yes, we're happy to do them. But we won't do them at any price.

Great. I think we go to Samuel and then Chris, if that's okay.

Sam Cullen from Peel Hunt. I've got 3 as well, please. Mostly follow-ups, I think. If you think about sales rates, and I think Steven touched on kind of first-time buyer percentages where they were now versus 2019, absent any impact from kind of the Redrow transaction? What's your sense of where first-time buyer percentages could get to on a normal -- in a more normal market? And essentially, how far back to normal inverse commercial prior sales rates do we think the business can get to, going forward? That's number one. Number 2 is just a better sense idea of the tension in the supply chain in terms of if you see volumes recover 5% to 10% from here. How far can they extend before price increases or price inflations or cost inflation rather start to become a feature of the market again? And then the last question is, in your statement, I think you got a figure around MMC kind of penetration at kind of 30%, 35% of your completions. Do you have a figure in your minds of where that should get to over the medium term, going back to just your comments, David, earlier about kind of volume outflow increases across the industry?

Yes. Okay. Thank you. So -- if I pick up on the sales rates and the supply chain and then Steven picks up in terms of MMC and just our thoughts on that. I think in terms of sales rates, quite right, I think we should be cautious about sales rates. And I think you can see from the announcement this morning that I think our focus is much more on outlets. So I mean, I think broadly, we're assuming something similar. So let's say that we're at 0.6% or thereabouts. I mean that's the kind of assumption that we've got. We know that sale rates differ by house builder, obviously. But we know that our sale rates could be as high as 0.75%, 0.8% on an annualized basis. But equally, that was with significant demand side support in the market. And lastly, demand side support that was aimed at the first-time buyer, I mean we believe that the overall equation would benefit from demand side support and the industry and Barratt as a participant, I said that we would be happy to pay for demand side support, and we've always said that. But the reality is, I think demand-side support is some way off. And we are in an unusual position. I mean if you look over the last 20-plus years. This is a period of time where we have no demand size support and that hasn't been the case for 20-plus years. So I think it's right that we should just be cautious about those rates to sale. And if we can end up at a stage, 0.6%, then I think we're broadly happy with that kind of level. In terms of supply chain, I mean the reality is the supply chain is absolutely fine. And there aren't the sort of pressures on the supply chain because we've delivered in [Audio Gap] now in 2024, we're going to be sub 200,000. So the reality is that whilst I'm sure the supply chain will say everything is not straightforward, I mean we're 25% plus down on volume as an industry. So the reality is the supply chain is fine. The availability of labor, the availability of materials is fine. But I think we know where some of the pressure points are as volumes start rebuilding. And therefore, as we start thinking about how do we get back to 225,000, 250,000 then we know some of the pressure points. And also, we know we've got more to do in terms of changing our methods of production and therefore, doing more factory-based production, that is definitely something that we need to do more of, which is a really fantastic segue across to Steven to talk about MMC.

David, yes, as you said, some -- clearly, as David mentioned earlier, we opened our David factory went on stream July '23, and it's now up and running. It's producing good consistent production levels. We've extended our -- in the process of extending our original factory in Selkirk, which we bought with the business in 2019. So putting those 2 factories together, we'll have in excess of 9,000 timber frame unit capacity per year. That will also include closed panel construction, it's not your open panel. So we see a lot higher proportion of timber frame units open panel as well as closed panel coming through. Looking ahead, we've got teams working on how we can bring in more MMC other than just frame construction. So we've got a lot of penalized rules, ground floor, precast concrete insulated slabs, which we're using extensively now. So we're using more MMC construction in every element as we go forward. There's lots of other potentials in terms of pod construction in terms of bathrooms and even kitchens. Other joinery items, smaller items, [indiscernible] because that's pre-fixed and pre-finished as to be bolted into. We've got a program of activities where we're continuing to increase the level of MMC, which, as I say, will complement the volume recovery.

Thank you, Steven. I don't know, David, if you want to say a few words, we are running out of time. So I'm afraid we will have to halt it there, but I'll just pass back to David. If you got any final words.

Okay. Yes. Look, thanks very much, everyone, for coming along. I know we've got one point to follow up on in terms of our 2019 rates of sale. So we're going to be on that, I mean, [ John ], but yes, thank you very much, and you know where John is if you've got any more questions. Okay. Thank you.