Bellway p.l.c. (BWY) Earnings Call Transcript & Summary

Thank you. Good morning and welcome to Bellway's half year results. I'm joined by Shane, who most of you have met already. Simon is with us too and accompanied by a few of our senior management team. If I could take you to the first slide. We've had a strong first half performance, with completions up by 12% to almost 4,600 homes. And that has driven a healthy increase in profit. The trading environment is much improved too. And while trading started slowly at the beginning of our financial year, there's been a notable pickup in both homebuyer enthusiasm and reservations since the start of the calendar year. Demand feels more robust, less fragile and supported by relative stability with mortgage rates. And that leaves us very well placed to deliver our full year target of 8,500 homes. And to pick out a few highlights from our results. The order book has grown by around 20% to over 4,700 homes. Outlet numbers are up and averaged 248 in the period. And we have a strong land bank totaling some 95,000 plots, of which over 30,000 have a detailed consent. Now looking at the figures on the slide, I'm pleased with our land bank. I'm pleased with our outlet position. And when coupled with our operational strength and our track record on delivery, Bellway are well placed to execute our multiyear growth story. The real focus here, the real opportunity is the box on RoCE. And at 9%, it's not good enough. There's clearly room for improvement. And Shane is going to offer his early thoughts and ideas on how we can deliver capital efficiencies through the group and drive a meaningful improvement on return on capital employed. I'll provide some more detail on ops and outlook later this morning, but first, our financial review, Shane?

Thank you, Jason. And good morning, everyone. As you know, this is my first set of results since taking on the role of CFO in December last year. And I can see a few familiar faces in the room. Before I cover the financials, I'd like to just take a bit of time maybe to introduce myself and share some initial views on Bellway. During my career, I've worked in a variety of sectors, including most recently 4 years at listed homebuilder Cairn, where I was also CFO, so I do have strong experience in the industry already. In my first 4 months at Bellway, I've had the opportunity to spend a lot of time with our colleagues at head office as well as getting out to visit several of our sites and divisional offices around the country. And it's clear to me that Bellway is a very well-run business with a quality land bank and an excellent culture. The systems and controls in the business are very strong, and the teams across the group have a consistent focus on providing quality homes for our customers. I'm confident that we have an excellent platform to drive growth and increase returns for our shareholders, particularly with a sharper focus on capital efficiency, as Jason has said. And with that, I'll turn to the financials. As Jason said, we've delivered a strong financial performance in the first half despite some market headwinds. Our healthy order book at the start of the year supported an 11.9% increase in volume output to 4,577 homes. The growth was driven by private output, which was up 17.5% to 3,617 homes. Social output was 5.3% lower at 960 homes, as the proportion of social completions reduced to a more normalized level of around 21%. The ASP was just over GBP 310,000, and that was in line with expectations. Whilst underlying pricing remains firm, the slight increase in the ASP is more reflective of some geographic and mix changes, as there's been little or no HPI over the last 12-month period. And this is partly reflected in the gross margin of 16.4%, which is a similar level to last year. The backdrop over that trading period really was one of flat HPI and modest spot build cost inflation. There's also higher embedded cost inflation carried from our work in progress, and that remains a headwind to margin in the near term. And that said, it's been worked through, and the gross margin was 100 basis points higher than it was in the second half last year. And that reflects an improving trend. And I think more broadly what we'd say is, should the interest rate and trading environment remain stable, combined with the high build cost inflation in recent years having a lessening impact on margin as we go forward, we'd like to think we're well positioned to drive improvements in our margin percentage therefore in future years. And this would be supported by a more favorable HPI-BCI dynamic, as seen in previous cycles, and combined with the benefit of new or higher-margin land in the mix. As we previously guided, our overhead expense rose by 10% to GBP 77 million. This follows 2 years of broadly flat overheads and is reflective of our strategy to offer competitive rewards packages to our staff; and the ongoing investments in critical areas that support group expansion, including the initial setup costs of our timber frame factory. Underlying PBT was 11.9% higher at GBP 150 million. And the interim dividend has been increased to 21p per share. Turning then to the balance sheet. We have a strong, robust and well-capitalized balance sheet. We have a high-quality land bank and a strong WIP position to support our plans for multiyear growth. With a more stable market backdrop, our land investment now has started to normalize. This is from a low level during the first half, together with some of our strategic sites gaining planning permission. Our land balance has risen by GBP 107 million to GBP 2.5 billion. The increase in land activity is also reflected by the land creditor balance rising to GBP 290 million. And this remains modest overall and represents only 11% of our overall land balance. Jason will cover more detail on that later. Turning then to work in progress. This balance, which includes site WIP, show homes and part exchange properties, decreased in the first 6 months by GBP 57 million to just over GBP 2.2 billion. This decrease has been driven by the growth in volume output in the period and also reflects our infrastructure spend for ongoing opening of outlets. Whilst our WIP balance has started to reduce, there is much more work to be done here. And I'll cover that shortly. Regarding build safety, housebuilders and the government have committed to work together to accelerate remediation, with a joint plan signed in December. There has been limited movement in our provision in the period, which partly reflects our focus on accelerating assessments and no material changes therefore in the underlying provision. The provision at the period end was GBP 502 million. And the second half, we expect build safety spend to be around GBP 30 million, with a significant increase then to start from next year to around GBP 100 million. And that will also include reimbursements to the government build safety fund. To finish on the balance sheet. As you can see from the bottom of the slide, our adjusted gearing including land creditors remains low at 8.5%. And net asset value per share is GBP 29.60. This is underpinned by a land and WIP balance with a value well in excess of that. If current stable trading environment is maintained, with the dividend underpinned, coupled with low levels of debt and the strong cash generation that will come as our elevated levels of WIP start to unwind, we believe that the value creation opportunities that will come from that will be significant for our shareholders. And related to that, turning to cash flow. We've generated good operating cash flow and ended the period with low net debt of GBP 8 million, which is in line with our expectations. The chart shows the decrease in site WIP in the first half which I referred to earlier when I was talking about the balance sheet, and that was GBP 60 million. And the monetization of land through cost of sales was GBP 266 million. After other working capital movements and tax, the operating cash generated before we make investments in land and distributions to shareholders was GBP 350 million. Land spend in the period, including settlement of land creditors, was GBP 302 million. And the payment of the FY '24 final dividend was GBP 45 million. As we refresh our approach to capital efficiency, I'm ensuring that our 20 operating divisions are adopting a common approach to assessing and optimizing their own cash generation. This will enable the Board to make more informed decisions around capital allocation across our divisional network to provide greater returns for the group as a whole. It's a critical KPI, which a number of you in this room will be aware of, which you'll hear more from us on as we refine our capital allocation strategy for the next number of years. Operating cash flow is effectively the oxygen that allows us to create further investment opportunities for the business and ultimately greater value creation and returns for our shareholders. And turning to value creation for our shareholders. As I said in my introduction, Bellway is in a very strong position to deliver growth in output and returns in the years ahead; and these remain our strategic priorities. To deliver this growth with a supportive market, we have a well-invested land bank, outlet network and WIP position. Within our divisions, we've got highly experienced teams with operational strength and their significant structural capacity to deliver organic growth. Our focus on growth will improve asset turn and increase cash generation. Delivering strong volume growth will enable us to work through the top tier of the land bank more quickly, which has lower embedded gross margin. These plots will be refreshed with higher-margin plots, including those from our strategic sites. Whilst 20%-plus gross margin will remain a requirement for land acquisition, we'll be taking a balanced approach to viability assessments. And the key [ underpinned ] when we're making those assessments will be on higher levels of capital employed from those investment decisions that we make. Maintaining a strong cost discipline across the group remains a key focus. And we will continue to invest in our commercial teams to further support margin improvement as volume grows again, so therefore, we'll increase our RoCE. However, it's not just about increasing volume and driving margin. We also need to improve our underlying capital efficiency outside of that, so in terms of our capital allocation framework, our strong balance sheet and our well-invested land bank, they will remain the bedrock of the business and support our balanced approach to achieving growth but also delivering greater returns to our shareholders. I'm now 4 months into the role, yes. And I believe we can deliver greater cash generation from our land and our WIP through a combination of growing volumes and by running a more efficient balance sheet. Overall, I'm confident we can enhance our returns. And I look forward to providing a fuller update on capital allocation in -- later in the year and the targets within that. Turning to guidance, for a summary of guidance. It's unchanged [ from last that ] we provided in October, in our FY '24 results. We are well forward sold for the year. And we are targeting volumes of at least 8,500 homes, of which 1,900 will be social. The average selling price will be around GBP 310,000. And the admin overhead will increase by about 10%, for the reasons that I set out earlier, to slightly below GBP 160 million. The operating margin will approach 11%. And dividend cover will be about 2.5x underlying earnings. I'll now pass back to Jason, who will cover the operating review and outlook. Thank you.

Thank you, Shane. Trading. In the first half, we achieved a private sales rate of 0.51, with January being the strongest month at 0.6. And that momentum has continued to build through the spring. Improved sentiment and affordability have both helped that recovery. Mortgage availability is good. Rates are stable but a little too high. And you can see from the chart that a 5-year LTV still costs around 4.5%. That said, overall, the market is in a much better place. And cancellation rates have steadied to around 14%. Current trading. In the first 7 weeks since the 1st of February, we've achieved a private sales rate of 0.76. Bulk sales in the first 7 weeks totaled 169 homes or the equivalent of 0.1 per outlet. Clearly there is good underlying demand for new homes, and that appetite has extended well beyond the stamp duty deadline. And from a geographical point of view, divisions in Manchester, Milton Keynes, East Midlands and Glasgow have all delivered strong numbers this year. Trading tends to be a little softer or more deal led in the South West and South East of England. Headline pricing remains firm, with incentives unchanged at between 4% to 5%. We are over 95% sold for the current year and hold an order book of GBP 1.6 billion or 5,600 homes as at the 16th of March. The next slide shows our land bank, totaling some 95,000 plots, 50% of which are owned or controlled and 50% are strategic. I am happy with the size and the shape of the land bank. It's more my intention to maintain the current level rather than grow or invest any further. And alongside that approach, we intend to target a higher number of completions from strategic land. We currently have 37 applications either running or about to be submitted, totaling almost 7,000 plots, that will make a good contribution to FY '27 and FY '28. And that controlled investment in land and that maturing strat land bank are both designed to improve our capital efficiency across the group, which Shane has already outlined. In the period, we contracted on over 5,000 plots across 32 sites. And we have already secured detailed planning consent on sufficient plots to meet next year's target. And as a consequence, we have good visibility on sales outlet openings. We plan to open 50 outlets during this year and a further 60 outlets in FY '26. Average outlet numbers, never an exact science, but we do expect to hold around the 245, 250 mark for both this year and next. Turning to production. Overall, cost inflation remains modest at 1% or 2% and slightly weighted towards materials. There are good levels of availability for both labor and materials, which is understandable given the lower volumes across the industry. Our Artisan standard house type range is now reaching capacity and will represent over 80% of housing volume in FY '26. And that reflects our standardized approach and our efforts to become ever more cost efficient. And as announced back in October, we are progressing to plan with Bellway Home Space, our new timber frame facility. And within this calendar year, we'll have a management team in place. The factory fit-out will be underway and the machinery and technology will begin to be installed. In the period, we have made good progress with Better with Bellway. And I'm keen to mention the performance and efforts of our operational teams in delivering great-quality homes. We achieved a record 45 NHBC Pride in the Job awards, including 10 seals of excellence and 3 regional awards. Our construction quality review score, a metric to determine build quality, is also a record high of over 92%. And finally, outlook. We are on track to deliver at least 8,500 homes this year. Our outlet numbers and the building of our order book underpin our confidence to deliver at least 20% volume growth across the 2 years to FY '26. And speculating beyond FY '26: With our land bank and a trading environment that could support an average sales rate of 0.6, we have the capability to deliver 10,000 homes for FY '27. And finally and most importantly, as Shane has set out, our focus will be to drive capital efficiency across the group, improve cash generation and deliver greater returns for our shareholders. Thank you. We are now happy to take questions.

Ami Galla [indiscernible]. Just 2 questions from me. The first one was on the capital efficiency plan that you've laid out. And I agree, I admit that this is early days, but can you give us some framework in terms of the time line in terms of how many years would you think you would take to come back to that optimal level that you're targeting? The second one is on the land bank length. Tied to the capital efficiency plan that you've talked about and the sort of the guide around 10,000 units in terms of volumes, what sort of optimal land bank length do you think you would want to sustain over time? And maybe tied to these 2 questions. '27 and beyond, do we kind of think that most of the measures that you are implementing today, i.e., on strategic conversions becoming a bigger part of the story forward and getting back to a more normalized level, we can think about a more effective dividend strategy from there onwards?

That was more than 2 questions, Ami. We'll do our best. If you can start with capital efficiency...

Yes. I mean I think, first and foremost, as I said, I'm here 4 months now at this stage, so I don't think any would thank me for sitting up here today with our capital allocation targets and framework, but myself and Jason were very keen to emphasize that it's something that we're very focused on, so it will be underpinned in the amount of cash that we're going to generate as a the business. So I can probably answer 1 or 2 of those questions in relation to that. I think where the opportunity for us clearly is going to be around harvesting more from the WIP that we've actually invested over the last number of years. And I think that investment that we made in WIP was a very -- it was a very strategic decision that Bellway took. We maintained our platform capability. And now I think we're very well positioned as interest rates start to stabilize and, hopefully, stay there. And there's no point in speculating around where that can go. You guys have as good a view as we have around that, but we think we're very well positioned, as long as interest rates remained stable, in the context of the WIP that we've invested, but that WIP balance has probably gone up by 0.5 billion over the last number of years for very good strategic reasons. And now is the time, I think, that we'll be looking to monetize that, in particular through a combination of volume growth and just having a really relentless focus around asset turn as well as gross margin. So I think, when we do come back on that, it will be completion of our next 3-year cycle. We'll be talking about operating cash flow and what we think the cash flow generation of the business will be over the next number of years. And then I think we'll talk about like that provides the framework then for how much cash you can actually return to shareholders and reinvest. And I think it's fair to say we will be returning more capital to our shareholders than we have done heretofore, over the next cycle, but the but in that is that, if we are going to invest, we'll be making that reinvestment decision on the basis of the hurdle rate that you will obtain from actually reinvesting that money from an IRR perspective rather than returning it to shareholders. So that's the language that we'll speak to you when we have those discussions. So I think all I can really say today is that it's something that we're very focused on. We want to get the return on capital, in the first instance, to double digits. Then we want to get it to -- into the teens. And who knows after that? But the focus will be very much on margin recovery and improving asset turn. I think the first hurdle we have to get to is that we get our asset turn back to 1 as soon as we can without impacting the underlying momentum in the business.

Ami, just on land bank. I like the shape of it that we've got, half owned and controlled, half strategic. I think, as an industry measure, 4.5 to 5 years in owned and controlled is something you'll be familiar with, but my third metric to look at is -- and certainly allows me to sleep at night is the fact that I've got 3 years of DPP land bank. That's really important. So 30,000 plots consented, that's why we talk about the strength of our land bank. That's a real positive. And you will remember that we overinvested in land a few years ago to compensate for a dysfunctional planning system. And now that's a benefit to us going forward, so that gives us the strength to grow the business. Was there something on dividend as well that you asked for? You've covered that, yes.

Will Jones from Redburn Atlantic. A couple, please. First, I guess, is your latest tactics around pricing. I think, 6 months ago, you talked about -- where sales rates were edging north of 0.6, you were having, I think, a look at moving prices up. How did that go? And is it the same strategy now with regard to need to hurdle that level to attempt to move prices on? And then the second is really just the blend of comments around new land buying. Could you just talk more generally about the terms you're achieving? I think there was a reference in the remarks to 20%-plus gross margin. I had in mind in the past more like 23% rather than 20%-plus. Just wondering if there's a tweak there. And just when you think the new land you've been buying since prices corrected, when does that start to make a decent contribution to the P&L?

Okay, thanks, Will. I'll start and may need a little help, Shane. In terms of house price inflation, I think it's a good question, Will, because often I talk to people in London and the South East. And they lament or complain about house prices and house sales, but the wider picture is much rosier. And certainly we're getting modest house price inflation in better-selling areas, like I mentioned in the presentation, Manchester, East Mids, Glasgow, but that's only probably 1/4 of our business. A lot of the U.K. is still flat on house prices. And some parts further down here, it's a little more deal led, but certainly we haven't enjoyed much or any HPI across the year, so we're quite grateful to get some in certain parts of the U.K. But it seems to be there's enough to offset build cost inflation, Will. In terms of your question on land, there's no change in policy on land buying. Shane has just introduced, if we can get a higher -- a lower margin but higher return on capital employed on an acquisition, then that's good enough. And to use some examples: Out of the 5,000 plots we bought this year, the margins have ranged from 21% to 26%. And they average 23%, but we'd certainly look at a gross margin of 20%-ish if it had a good return on capital employed. That's all it is, so it's just another dimension. And the land market per se, I don't think I've got anything intelligent to say what's happening. When we're bidding on bigger sites, Will, we sort of bump into Barratt Redrow. And when we are bidding on smaller sites, there's plentiful regional players competing. But we're not desperate to buy land, so we're being fairly selective, Simon, aren't we? And we're getting enough wins as it is. Is there anything you need to add on that, Shane?

No. I think you've covered that, Jason.

Yes...

Just [ the lag ] between buying [ and it ] hitting the P&L. I know it varies by site, but rough rule of thumb these days...

What, from how quick it's going through the system...

Yes [indiscernible].

With land we're buying today, it's '27. Really that's when it's fitting into the P&L. Because I'm sitting there with consented land for '26. So I wouldn't say our business is written for '26, but if the market continues as it is, it's pretty clear.

Sorry, sneaking in. Glynis Johnson, Jefferies. Actually two for Shane, actually. Just in terms of the land that has potentially lower margin but has a higher return on capital employed, can you just give us a little bit of color about is that about what you're delivering, i.e., more bulk, more affordable on there that's at a lower margin but you might get forward payments? Or is it about just less infrastructure? Just to try and understand a little bit more about that. And then actually maybe Jason will step in on this one: the land bank, the 3 years DPP. Should we assume therefore that, that land or DPP increases as your completions increase? But what about owned versus controlled, are we going to see a much lower portion of owned and a greater portion of controlled? And is that one of the ways which you'll look to reduce the capital employed in the business?

So if I understand the first part, you're trying to understand the capital employed unwind from the current WIP position. Is that -- just so I understand...

[ So in terms of ] the new land that you're buying, if you intend to send -- sell more bulk; and that's what reduces the margin, that speeds the return on capital employed. Or is it that you're looking to buy sites which are small and that have less infrastructure upfront?

Land that we're buying, I think, will be all of those things. It's still 20%-plus margin. I wouldn't get too hung up on whether it's 21% or 23% or 24% or 25%. Really what we're trying to convey is that the main lens that we'll be looking at is the return on capital lens. The underpin will still be a 20%-plus margin. I don't think we'll be blind to any of those routes that you've spoken about in terms of bulk sales, for example. It's not a huge part of our business. I don't think it ever will be, but if that becomes a slightly larger part of our business and there's good counterparties there and we're not carrying BCI risk into a long tail, why would we not do more of those as well, whether that's forward [ fund ] or forward purchase? So absolutely that's something that we'd look at. Infrastructure, that will be just a blend decision. We are conscious around the fact that our asset turn does need to improve, so as well as looking at capital employed, we will be looking at payback on projects as well. And into the short term, our focus will be on probably monetizing a lot of what we have on our balance sheet at the moment so that we're in a more -- a position to make more balanced decisions around longer-tail capital employed projects that we might deploy down the road, yes, but fundamentally what you will see is, when we talk about our capital allocation policy, again it won't be just around returns to shareholders. But it will be, if we're holding onto the money, why does it make sense from a time value of money to hold onto that rather than give it back to shareholders? The second part of that question...

On land, yes. And it's always difficult, Glynis, to control the shape of the land bank year-on-year. It just feels, where we are, 50-50, 100,000 plots, that sort of thing is good. Yes, we are willing to increase the number of controlled plots -- and a greater use of land creditors, but certainly the focus on Simon at the moment or the pressure on Simon is probably to work that strat land bank as hard as we can because that's new to Bellway. We've invested, as you know, 5 years into that space, so we'll be looking to get as much out of that across '27 and '28 as we can. So that's the driver really.

Can I ask how much capital employed in that strat plan [ right now ]?

Capital employed...

In the strat land bank, it is...

Do you know that, Simon?

[indiscernible] 120.

[ We're 120 ] [indiscernible].

Can I just -- coming on one point, Glynis, on the margin point you mentioned [indiscernible] just on the margin point there because it's not just, of course, the infrastructure. The other thing that we're looking at is, if you're buying a site with DPP, clearly you'll pay a premium for that, but it means, when you spend the money, it's an outlet that you're immediately on with, whereas quite often we're buying sites with an outline. And it may take 18 months before you get reserved matters. You've spent the money, but you can't get on for 18, 24 months, so there's an approach change there perhaps as well which is more RoCE led than margin led.

Chris Millington at Deutsche Numis. Just a couple of things on the potential for capital return. I understand it's early days, but firstly, is there any danger of write-downs or kind of a margin hit as you accelerate some of these schemes and get out of them? Or would you say it's incremental to what you're doing at the moment? Next one is, if there is cash to return, and you've talked about an IRR approach, what would your current preference be around buybacks and dividends? Perhaps you can just talk around the thought process there. And then the last one is just around the margin in the various tiers of the land bank. You're obviously kind of churning through the DPP as we go on, but strategic is going to become more. Can you just talk us through kind of how these things are going to progress over the next few years or so?

Are you okay to do all 3? Yes.

Yes, yes. The margin point, maybe to deal with that, first of all. The margin on the forward order book is around 17%. The margin on pipeline is early 20s. And then the margin on the strat land is probably about 23%, 24%. You will see an evolution where strat will move from about 10% to about 20% of the overall share of our overall completions probably as you go out to around 2027, so you're looking at an evolutionary journey in relation to that. In terms of the mechanism around how we would execute returns to shareholders, I think it's fair to say, based on the expectations that myself, Jason and indeed the management team have for the business, they're a lot higher than they are today. Think about housebuilders out there. In normal trading conditions, they're quite easy to value. We're trading at a significant discount to book at the moment. Our ambitions are to get the return on capital up to -- why not get it back to levels where we were before? The question of when we do that obviously is still being determined, so I think it's fair to say any surplus cash that we have for the foreseeable future would probably most likely be returned by way of buyback rather than cash returns to shareholders. We would see buybacks like everyone else does, as a vote of confidence in the share price and the forward prospects of the business in overall terms. In relation to your first question...

It was just if there's any danger to margin as you go down this route of capital efficiency.

Yes, yes, yes. No, I don't think there is. I mean, just to cover the question off in terms of for completeness, I think the only thing you might see, and I'm not saying we're seeing this at the moment, would be: If there was a scenario whereby we wanted to move on some slow-moving stock, that could have an impact whereby the overall gross margin percentage might be slightly lower, but your volume output for a period of time might be actually higher, in which case, you'd be throwing off at least as much operating profit. But I don't think we're looking at anything like impairments or anything like that. Does that make sense?

It does.

Yes...

Allison from Bank of America. Just 2 questions. So first, on the volume growth for the next 2 years, just to confirm it's still at least 20%. Because I see the wording change a little bit and I don't know if that's material or not. And the second is on the fire safety or building safety levy, which we got more clarity yesterday, that we see it's delayed for 1 year, but we see more visibility on the cost. So how does that compare with your internal estimate? Is it pretty much in-line? Or you think it might have impact on the margin in the near term.

If I take building safety levy first. We've made no allowance for any future levy, so there's no impact on the business, Allison, going forward. And I haven't read the detail. All I know is it pushed out for 12 months. Your first question was on the volume, wasn't it? Listen. In terms of -- it's early to offer volume guidance for the next financial year. That's something that we will set out in October, at our prelims. I think the message for today is we can deliver at least 20% volume growth across the 2 years to FY '26. And if the current sales environment continues, there may be an opportunity to do a little bit more, but we're not there yet. We'd look to finish this year and set some guidance out in October, Allison.

Clyde Lewis at Peel Hunt. I think I've got three, if I may, one probably sort of on the government. And we've got the Spring Statement tomorrow. You've sort of just touched on the building safety levy, but in terms of sort of other changes, other policies -- I mean the government obviously making moves around planning to improve the system there, but are they getting the message that obviously more needs to be done if they're going to get anywhere near the -- either the 1.5 million or the 300,000 a year? So it would be interesting, on your take there, Jason. The second one was really around Ashberry and the brand development there. It would be useful to get an -- again an update on whether you see more of an opportunity to -- just to differentiate between the 2 brands to try and help the sort of asset turn, particularly on the bigger sites. And the third one was on build costs. You've indicated it's fairly flat. Which way do you think it's going? Do you think it's going to actually sort of get closer to 0, or do you think the next move is sort of more upwards? And which area do you think that's going to be coming from?

I'll start with the politics and we go from there. I mean, from a planning point of view, I give it a tick. It doesn't keep me -- things are improving. It doesn't keep me up at night. I'm comfortable with it. I mean we just spoke about the building safety levy, and on its own, it's not really material. It's not significant, but it's difficult to see how the government can want or aim or target 1.5 million homes when you've got an industry that's now taxed at 30%, which is the highest in living memory. We've got no demand-side support even for first-time buyers. We've got mortgage rates at 4.5% to 5%. We've got significant building safety obligations and commitments going back 30 years. We've got a CMA inquiry. It doesn't add up to deliver 1.5 million homes, so difficult to see realizing that ambition. Your other comments, on Ashberry and brand. I mean the -- worthwhile discussing because Ashberry -- and I think I said this back in October. Ashberry does 10% of our completions. And we think we can do a little bit more. And this is a Chairman-led thing really, so we are reviewing the relationship between Bellway and Ashberry to see if there's a separation or identification between the two. And we've got a great guy that's just joined the business called Matt Grayson, who's doing that piece of work for me, but I don't think it's going to be ready until towards the end of the summer or the autumn period. But it seems like there's an opportunity to use it as a return on capital employed tool even more than we're doing at the moment. We think we can be better at it. And your final question was on costs, Clyde. I don't think costs ever go down today, but I'm a bit more confident, I would say. Since you and I were boys really, cost inflation and revenue sort of followed themselves, didn't they? The only time that didn't happen was across the pandemic, when you had sort of rampant build cost inflation and flat revenues. It seems to me we're going to return back to where we were. And that modest inflation that will continue will be followed by some HPI and it will be offset.

Alastair Stewart from Progressive. A couple of related questions. On the 10% increase in admin costs, is that kind of a one-off and you'll go back to the more standard rate of inflation? And you mentioned competitiveness. That has been one of the issues. Were you losing people to rivals or not gaining them? And what sort of level of -- what sort of roles were you perhaps being less competitive in?

I would say a similar level of increase, I'd say, into next year, Alastair, but probably a moderation, I would say, after that. It's just in the context of the...

So 10% and 10%. And then...

Yes, yes, I think, and probably leveling off after that. I would say, in relation to your second question, that's really more a preemptive point in terms of us just being a very strong employer of choice that Jason would have alluded to when we were talking about the Better with Bellway program. We do have good staff attrition levels, but we are very conscious, notwithstanding that there's capacity in the sector, that it is a very competitive sector and people can move down the road, so we want to make sure that we are rewarding our people appropriately. It's nothing more than that.

This is Charlie Campbell of Stifel. Just sort of to continue on the WIP questions, I suppose. Should we think about the product mix changing? So do we think that apartments come down as a percentage of sales? Is that one way of achieving that? And then the other question about trying to tie in land and WIP is, will you find yourselves looking at smaller sites, do you think? I mean that might be another way of reducing WIP per site, getting smaller sites, but obviously those smaller sites become more competitive, so how do we think about that dynamic as well?

I think the apartment thing is a good point because we do less apartments today than we did. So we'll see natural attrition with regard to that. And our business in London now is down to 2% or 3%. And it was a lot higher than that. You remember, Charlie, so certainly -- and I think, on the land side, of course, if I was to buy all smaller sites, then my return on capital will improve. I think I will continue to take quite a balanced approach because I'm mindful of where I invest, what management teams I invest and return on capital employed. So I just think it's a balanced approach. I'm not just going to solely buy small sites for the short term. Well done, [ Tilly ]. Thank you very much indeed. Good to see you.