Crest Nicholson Holdings plc (CRST) Earnings Call Transcript & Summary

Welcome to everybody here to Wycke Place, Maldon, for our Capital Markets Day. I'm Peter Truscott, Group Chief Executive. Now I was going to say something about the weather because when I woke up in the middle of the night, it was pouring with rain. And in fact, we had a session here yesterday. And it was just wild and windy, and we couldn't hear anything that anybody was saying. So we did worry a little bit about that. But hopefully, the weather is going to hold for us, particularly for this afternoon. But of course, as you know, we can organize a lot of things, but we can't organize the weather. A couple of things on housekeeping, if I may. If you're asked to leave the facility, it will be for real. So please follow any instructions. If anybody needs to use the toilet facilities, they are at the rear of the building out through the entrance, turn right or just ask one of my colleagues. There will be a couple of coffee breaks, 1 in the morning, 1 in the afternoon, and also we will be providing you with lunch. Both sessions will also give you an opportunity to talk to myself and my colleagues and ask any questions that you might have outside of the formal Q&A. So the formal Q&A, we've really restricted to 2 sessions: 1 at the end of the morning and 1 at the end of the afternoon. The reason we've done it that way is simply to avoid having questions to answer which are going to be answered in, say, an upcoming presentation, that's all. So why a Capital Markets Day? And why here at Wycke Place in Maldon? Firstly, Capital Markets Day, we set out our strategy in January 2020. That strategy included a fix of our operational performance in the organization and the restructuring of our balance sheet. Now that's been done. We didn't plan for a pandemic, by the way, but also we managed to navigate that successfully. But that was then, this is now, and now we start to look forward over the next 4 or 5 years, and we start looking towards growth. We're looking at continuing the margin rebuild, and we want to grow the business. Grow the business, both in terms of our existing operational divisions and also into new geographies, so some more of that later on. And Wycke Place, Wycke Place is -- I think it's an excellent example of some of the work that myself and my colleagues have been doing over the last couple of years in terms of the operational performance of the business. This is a strong site operationally wise. It's got our new house-type range. And I think it's an important and perfect example of some of the work that we've been talking about around constantly looking again at how we can just drive more value from the business, more value from our sites through replanning. And Alex will touch upon that. Alex Stark, who is the divisional MD in Eastern. Next, I want to introduce you to the management team that we've got here, the leadership team in Crest Nicholson. This is the strongest management team that I've worked with in my 37 years in the industry. It really is a credible team with over 250 years of housebuilding experience to draw upon. And this is the team that will be taking us through this next growth stage. I just want to introduce my colleagues and ask each of them just as I introduce them to stand up. Tom Nicholson, Tom is our COO. Tom joined in the summer of 2019 from Linden, where he was on the executive team there. Tom is from a land and sales background. Duncan Cooper, our Finance Director. Duncan didn't come from the industry. Duncan was at Sainsbury's prior to joining the organization in, again, the summer of 2019. And then we have 2 longer-standing members of the team here, who've been at Crest for some time: Jane Cookson, HR Director; and Kevin Maguire, General Counsel and Company Secretary. We recruited Kieran Daya from Galliford Try Partnerships, now Vistry Partnership. Of course, Kieran was on the executive team there and prior to that was at Barratt. And Kieran's background is on the legal profession and also from land. David Marchant, our Production Director. David joined us from Bellway, again in the summer of 2019. And David's from a technical background. You'll know Jenny Matthews, our Head of HR. Jenny, of course, is responsible for a lot of the organization today. So thank you very much for that jenny. And then our divisional MDs: David Brown. David joined us from Berkeley Group in January 2020. There is actually a bit of a theme about when people joined. Most of them joined in January 2020. I won't give you the specific dates, of course. But David joined from Berkeley. And prior to that, worked with me at Taylor Wimpey, where David was a regional MD. Mark Connors. Mark, again, joined in January 2020 from Linden, where Mark was the MD in the Yorkshire business for Linden, having previously worked in the -- at both Taylor Wimpey and Barratt. Adrian Sims. Adrian joined us again from Linden in January 2020, and Adrian's background was at Barratt prior to joining Linden. Our newest MD recruit is Ralph Hawkins, who joined us in January of this year. And Ralph joined from Taylor Wimpey, where he was the Regional Managing Director in the Southwest, and he is our Southwest Regional Managing Director. And finally, Alex Stark. And Alex will be telling you a bit about the site later. Alex joined in January 2020, and he joined from the -- from Redrow, where he was the Regional Managing Director in this area, and he's the Managing Director for us in Eastern. I think what's interesting about the group of people that we have is the wide-ranging sector experience, not just in length of service, but also across numerous organizations, which cross-fertilize our plans and our ideas. And the other factor is also just around the disciplines. The executive team are represented by people from land, sales, finance, legal, secretarial, human resources and technical aspect. That gives us a great strength in depth. And similarly, with the regional managing directors that we have: one from a land background, 1 from production, 1 from commercial and 1 from sales. So we've got that breadth of experience to draw upon. And this essentially is the team that will be delivering this plan that I'll be setting out to you this morning. Just a bit about the agenda. I'll start with a bit of market context. It's important when devising a strategy for the organization to have some view as to what we think the market conditions are likely to be in this strategy period over the next 4 to 5 years. And then I'll be setting out what that plan is in some detail. Duncan will present some of the numbers and also talk to you about the investment proposition. And Kieran Daya will talk to you about our multichannel approach of partnerships and strategic land function that Kieran heads. Why multichannel is important to us in terms of our land acquisition, short-term land, strategic land and also from key partners and selling into the PRS market, affordable homes and predominantly to individual purchases. In the afternoon, Tom Nicholson will bring this strategy to life for us. If the morning session is more about the how, the afternoon session and Tom's session is more of -- sorry, the morning session is more about the what, Tom's session is more about the how. And we take our climate change responsibilities very seriously, and David will present on how we're going to be tackling some of those issues, the race to 0 and also in terms of future homes, very important agenda. Just to recap then on the progress so far made against our strategy that we set out in January 2020. So fundamentally, the turnaround of the business has been completed. Operationally, we now have a really strong and consistent operating platform. The balance sheet has also been transformed. We didn't have a weak balance sheet. We just simply had an inefficient one. We were a 4-star housebuilder 2019, in fact, in many years prior to that. We are now a 5-star housebuilder, and have been for the last 2 years and currently are also trending to the same category. The house type range is probably the most important facet of getting our strategy to work in terms of the operational efficiency. It was literally the first thing we did as a management team when we joined in the summer of 2019. House type range is important for a number of reasons, 3 really key facets of that. You've got to have the right product that you're selling to the market. It's got to be attractive for the buyers. It's got to be very efficient in the way that it plots to enable you to be competitive in the land market. And similarly, it's got to be simple and efficient to build and safe to build. So those are the 3 things that you're trying to get. And every time I've been involved in designing a house type range, I've always felt that it's the best range that I've seen, and I still think that that's the case. It improves every time. Now there's a bit of a competitive edge about who's actually mostly responsible for the house type range. I think we all want to take quite a lot of credit for it, including me. It probably was more down to David and Tom, of course. Overheads and selling expenses in terms of industry standards were out of sync. They were too high in Crest Nicholson when we joined. Those have been significantly. Overheads have been reduced by nearly 25% and the selling expenses by nearly 1/3. And those changes have now been fully embedded into the business. And actually, due to the simplification, we simply operate more effectively and more efficiently. Our build costs have been reduced, number of reasons for that. Firstly, because we introduced standard specification across all of our operations, strong specification than many respects, better specification than the previous one. But it's more about leveraging our buying power, something that wasn't done before and is done now. That, alongside the new house type range this year, we will complete around 28% of our houses from that range. It will be more going forward. So that will continue to drive pressure downwards on our building costs. And there is now an alignment with our work in progress. I mean it was one of the starkest things I remember in the first set of budget meetings that I had. There was just a complete disconnect between what we were planning to build in the coming year compared to what we were trying to sell. Not anymore. Now there is a complete alignment of those 2 things. And finally, noncore assets and the name check really here is with the Longcross film studio that we sold our share of that to our partners, Aviva -- our joint venture partner, Aviva, for a cash consideration of GBP 45 million, which has been received, and that also provided us with a healthy profit for this year. Name check really to Kieran's team for bringing that to life and making that happen. But that cash injection can now be utilized to drive the growth that we have in the organization. It will be utilized in our core business going forward. So a bit about market context. Supply and demand has been a core driver of the strength of the housing market for some time now. There has been an imbalance and imbalance in our favor. So it's important to think about and consider whether or not that's likely to continue to be the case during next 4 or 5 years in this strategy period. So let me just start with why that is. What are the drivers of demand, drivers of demand. I think 2 main reasons. One, simply population growth in the U.K. Since 1945, population growth of about 19 million people, 40%. Those people need houses, that drives a requirement for those homes to be built by private housebuilders. And it's left England as one of the most densely populated major economies on earth, and I'll come back to why that's important a little bit later. And the second area really is around average household size. This has been falling really since Victorian time, but I'll concentrate just on the period from 1970, where it's fallen from an average of 2.9 people per home to about 2.42 now. It's been stable, in fact, for the last 10 or 15 years. That's different to what's been happening in other parts of the world, particularly in North America and Western Europe. In Western Europe, it's actually down now to around 2.25. The reason that we don't think that's happened in the U.K. is simply around the cost of housing that naturally that would continue to fall, but people have just been unable to access housing because of that cost. And if the supply side were to significantly ramp up, then there is that in-built additional demand side that would at some time come through. And at the same time, the supply side, we talk about here for a generation, actually, it's more than a generation, it's probably 2. There has been a fundamental undersupply of housing in the U.K. You see the graph here. I know this graph is utilized quite often. We've plotted there the line at the 300,000 housing completions target that the government has set out. Private sector housing actually has been reasonably consistent, a little bit lower than the period in the '50s and '60s, but actually reasonably consistent. The thing that's falling away has been around the subsidized sector. There is a very good reason for it, and that was a political choice that was taken in the early 1980s to significantly try to drive up home ownership and reduce the reliance upon subsidized housing. That strategy has never really come to fruition really for a couple of reasons. Firstly, in the early part because high interest rates made the cost of the affordability of housing out of reach for many people. And then secondly, and I think over the last couple of decades, we've seen just a significant reduction in housing supply, which has kept housing costs up. So you can see that, that gap there is what is really driving that supply and demand equation in the U.K. So what are the housing market drivers? Now in any other sector with that supply and demand imbalance, prices would just continue to rise. That's less the case of housing, and there are a couple of reasons for that. Firstly, there is simply the affordability issue. There is an affordability ceiling. And secondly, it is highly regulated. It's -- the mortgage market is regulated, and also government regulation seeks to try to dampen down the peaks and troughs of the housing market. So unlike other sectors where you would have a ceiling and a bottom and the -- and supply and demand will be in balance, and it would, broadly speaking, just move between the 2, but average around the center. Because of that imbalance of supply, but also because there's an affordability ceiling, the market tends to trend towards just bouncing along at the top of that ceiling. But the height of the ceiling, of course, is not defined. It's defined more by affordability and the relationship between surplus income and the cost of servicing debt, so easily articulated in average earnings and mortgage rate. But essentially, if earnings were to rise significantly ahead of the cost of borrowing, then the house price ceiling, the affordability ceiling should be able to rise. If the cost of borrowing was significantly ahead of the cost of servicing debt -- was ahead of income's growth, then, of course, there will be pressure downwards on pricing and the ceiling would start to fall. So you can see that over the last decade or so, there has been a reasonable balance between the supply-and-demand equation. So if you look at the graphs on the right, the first one is showing that relationship. So in the top graph, periods where you've had very high interest rates, the earnings-to-house-price ratio is naturally lower. And the period, and we're in this period now and have been for some time, where interest rates are structurally lower, there is the room for average house prices to be higher in relation to earnings. And it's the stability between those 2 factors. There, you can see better illustrated on the graph to the bottom. If those 2 factors are reasonably in balance and they have been, then we have reasonably stable market conditions. It is when there is a interface between the 2, the transition from one to the other that creates significant volatility. But there are other factors at play. I think one of these is just around consumer choice. We are able to keep that housing market at ceiling because consumers in the U.K. value their housing accommodation very highly. England is one of the most densely populated countries on earth and people value housing. They deploy more of their surplus income, their surplus disposable income in the U.K. on housing than is commonly the case in Western economies. Now if that continues, then there is no reason why that affordability ceiling won't continue to be high. Mortgages are also really important here because we've talked about the supply and demand imbalance. But if you think about it, the supply and demand position was exactly the same in 2008 as it was in 2007. The difference was much of people wanted to access the housing market, they couldn't. So we do rely upon third-party participants in order for the housing market to function properly. Confidence is also another factor that's really important in considering the housing market. And I think confidence is expressed in 2 ways: firstly, because people take on very high levels of debt to service their housing needs in the U.K. And if they've got confidence that they're going to be able to keep a job that pays enough money to service their debt, whether their existing job or be able to get another one, then they will take on those high levels of debt. And secondly, people want to believe that house prices will be either rising or at least stable for them to want to participate in the housing market at any one time. If they don't, what you tend to get is a liquidity issue as opposed to a pricing issue, at least at first. You have sluggish sales rates while people wait and see. We do have more stability in the housing market now. And if we look further forward, I think that I would expect to see some cyclicality, but those wild swings that we've seen in the past, I think, are unlikely to materialize during the strategy period. I mean, again, that graph on the bottom right shows what happens when that interface between earnings, incomes and mortgage rates or other factors can significantly disrupt the market. Then there could have been, over the past decade, a couple of times when similar situations could have occurred. For example, the post-Brexit vote and then more recently with the pandemic. But that didn't happen. And I think some of that is down to maturity of the stakeholders now in the market. Mortgage market regulation has meant that participants are less likely to be able to buy homes that they can't afford. There is an element of stress testing there. I think the mortgage market has been far more sensible in terms of a wait-and-see approach to instructing down valuations. So you don't have that situation where it becomes a foregone conclusion that prices will fall because value will start pushing prices down. That hasn't happened. I think the behavior of individuals and the housebuilders is also important. Householders are not as stretched as they once were. The threat of repossession isn't quite a stark. People are less likely to fire sell their properties. And housebuilders with much stronger balance sheets and much stronger order books are also able to just take their time and assess market conditions, and take a little bit of lower liquidity before they have to start thinking in terms of price. And I think also, just in terms of this aspect, you have to say that the government has behaved appropriately as well. I think some of the markets stimulus just at the right. And some of the things such as Help to Buy, the stamp duty holiday have got criticism in some quarters, but they have just injected a bit of confidence at the right time. But as I said, I think that there is always going to be cyclicality. I expect to see some cyclicality and some volatility in the market over the next 4 or 5 years, but it will be far more muted than we will have seen in the past. And we are very well adapted as an organization to be able to deal with that. We're far more disciplined in our approach. We've got really experienced management. There is a much better relationship between build and sales. Our multichannel approach means that we can still continue to buy land without spending cash, and we can also sit behind much bigger, stronger order books, which can see us through those short periods where we need to wait and see. But fundamentally, the balance sheet does mean that you are under less immediate pressure and can just assess market conditions in a way that I don't think market participants could necessarily have done in 2007. So what's happening on the supply side? This is very interesting. The government were elected, part of the manifesto was to significantly increase housebuilding in the U.K. Housing was a really big agenda item in the last general election. The target was set to build 300,000 houses a year regularly in the U.K. I don't think the government could have foreseen the pandemic. So the fact that, that wasn't achieved last year, I think we'd give them a pass on. There are only 2 ways, in my opinion, that you could deliver 300,000 houses a year in the U.K. You either have to significantly increase the housing land supply in the areas of the strongest demand, i.e., the south of England; or you've got to find ways to stimulate significant demand in the areas where it's easier to release more land or there's more brownfield land, i.e., in the north of England. And I think the political choice originally, and if you go back to the Planning Bill that was introduced by Mr. Jenrick, I think it was designed to increase the land supply in the south of England. But I think that's now become politically very difficult. One could even argue politically impossible. And the introduction of Mr. Gove as the new Secretary of State, the leveling up agenda, the naming of the department, the leveling up agenda leads me to believe that the strategy will now be changing and that the way that the nation will seek to develop 300,000 houses a year. Indeed, if it is 300,000 and the target isn't reduced, will be by increasing the demand side in the north of England and keeping housing land supply in the south more constrained. It's not that, that is a bad strategy. It's not one that can't be delivered. I think it can be delivered, but there is a hiatus between moving from one model to the other. And I'm pretty convinced that during this strategy period over the next 4 to 5 years, there is not going to be a significant release of land in the south of England. Market conditions will remain very tight on the supply side. The demand side will continue to be strong. And it wouldn't surprise me if at some point, the government again have to start introducing measures to help bridge out affordability gap because of the high cost of housing in the south until such time as more land is released and more demand is created in the north. And with the market conditions that I've described a strong supply and demand imbalance, why is it then that there aren't lots of other people looking to come into participate and take advantage of the market that we have here in the U.K.? And there's a pretty simple reason for it. It is very difficult to be a housebuilder in the U.K. We have one of the most complex, opaque and difficult planning and regulatory environments anywhere in the world. It really is difficult for everybody, but just try explaining it to a housebuilder from the United States or the Far East or Western Europe who decide that they want to come in. The inconsistencies that you see, the lack of rules. It is incredibly difficult to see that happening. And if you're a small housebuilder that's looking to grow, you want to grow scale, that's also rather difficult because you just have those inconsistencies. If you're a small housebuilder, for example, in Hampshire and all of a sudden, the environment agency write a letter which effectively stops all housebuilding in a whole subregion indefinitely because of nitrates going into the solent, that's going to create a problem for you. If you get some terrible planning decision because you should get planning, but a lot of protesters give counselors the fright and all of a sudden, you have a delay, that's again going to cause you problems. And I'm not suggesting that those problems don't exist for us as the major housebuilders and largest participants either. They do. But we simply have the experience and knowledge and people in our organization to just navigate these and get us better outcomes. We also have, in our case, 36,000 plots of land. We have 60 or 70 outlets at any 1 time. We just have the ability, if you get a bad planning decision or you get an issue like the nitrate in the solent to move some production elsewhere and continue to operate. So being a volume housebuilder, having scale is important and it does give you benefits. And it is equally difficult for somebody to come in and just build up that scale from scratch because the land market in the U.K. has always been tough. I was from a land background, I know. Over the last decade or so, it's actually been a lot easier, but it is still tough to buy land in the U.K. You can't ramp up your land bank very quickly. So that's not a really credible option for somebody either. So there is an inbuilt and natural advantage for the incumbents in this sector to grow versus new people coming in. There are and always will be short-term challenges for us. Just now around the supply chain, materials and labor, for example. Materials, twofold. Some, I think, is -- are short-term issues. Some of the problems that arose from the pandemic around some of the factory capacity. Some of the lorry driver issues, just getting materials to sites. And some are probably a little bit more structural the way that the supply chain is, limited participants in some categories. There's always going to be some interaction between the rate of sterling and commodities. So I think some are shorter term, and will just work through. Some are probably a little bit more long term and more about the pricing effect. And as far as we're concerned, these things are short-term problems, but again, we have experienced people, and we do find ways to navigate them and get the production that we want. Labor supply in the U.K. is gradually diminishing as we have an aging population. We do have newer, younger recruits coming through to take the place, but not necessarily quite at the same pace. The gap historically was filled by workers coming in from other parts of the European Union, particularly in Eastern Europe. And I think that at present with the volumes that we are currently building, this doesn't present a near-term and immediate problem. Also, I'd say because the supply of land is likely to continue be constrained in the south of England, I don't think necessarily in the terms -- in terms of this strategy period, labor shortages are going to be the biggest constraint. It will be something that we'll need to navigate and manage. But of course, we now have strong operating processes and procedures. We have standardized products. We are an attractive proposition to that labor force that can earn good money working on our sites because we are efficient and organized. But increasingly, we will need to be looking to off-site manufacture, modern methods of construction, whatever terminology is preferred. Part of our strategy around multichannel, for example, we want to be a multichannel buyer of land, multichannel seller of our homes to different sections, different segments. And similarly, over time, we'll have a multichannel approach to our production. I don't think that we will be moving all of our production to off-site manufacture. But over time, gradually, it will become more important to us, particularly in terms of individual components, but then in time also on a volumetric basis. And David Marchant will cover some of this with his strategy. There are also regulatory areas in which we need to deal with in the short term. Not in my 37 years in the industry have I seen quite so much changing at any 1 time. I could actually have had about 20 dots here of things that have changed, are about to change or will change shortly around the regulatory part. I'm just going to pick up a couple now. Planning reform. This is going to be interesting because I don't really know which way this is going to go. Without the benefit of a significant release of land in the south, we don't want the new Planning Bill. If we have all the disadvantages, but none of the advantages, I don't know if that's going to be very good for us as an industry. I think the existing system that we have, whilst it doesn't function that well, with some tinkering, could be made to function satisfactorily. So my vote goes with Mr. Gove please just tinker with the existing and don't introduce a new if you can possibly help it. Future home standard and our response to the environmental agenda, the race to zero. Again, David is going to pick up. But this is just about the fact that once again, there is a lot of change coming through all at once for us as housebuilders to manage. The agenda around quality, the new homes, onwards, and I think this is something that the industry, and we would be included in that, are perfectly happy with. It's something that we can manage quite well, and I think will be positive for the sector. But again, it is just another set of processes for us to manage. And then finally, of course, there's the changes to corporation tax and the specific taxes around cladding that need to be factored into our business plans. And these are factored, of course, into our business plans and our cash flows. So to summarize, overall market conditions, we expect will be favorable in the strategy period as we go ahead. There is a structural supply and demand imbalance. Housing does have strong political support, actually. It's not just this government, but all other potential governments are big proponents of more investment in housing in the U.K. They might have different agendas in terms of what that tenure mix might look like. And of course, we do have a multichannel approach. But politically, there is strong support for continued housing development in the U.K. And there is also good support from the mortgage market. This remains a very good business. And I think with the mortgage market regulation, it is a more consistent business as well for those participants. Of course, there are short-term challenges, which we have to navigate. I've talked about some of those around the supply chain, some of the regulatory changes, which are coming, which have to be managed. We can manage those. Our strategy is designed to navigate us through all of these issues through some of these risks and opportunities. And we are, of course, very well placed to succeed in that context. And I would once again just remind people about the strength of the management team. I've been in the business for 37 years entirely in housebuilding. My colleagues, collectively, another 250 years. We have seen most things. I didn't see a pandemic, by the way. But we have seen most things and have got the experience to know how to deal with the challenges as they arise, and, of course, also take advantage of the opportunities. So what is our vision for the future? Well, that business transformation that I've talked about has given us options. The operational, financial turnaround has been completed. And that turnaround does give us options, particularly the strength of the balance sheet. We could do a number of things. We could, for example, maintain the scale that we've got at the moment and simply distribute cash that is produced from the profitability. Or we could convert that profitability into growing the business. And that's the option that we think is important for us. And that opportunity for growth is hugely compelling. The market fundamentals that are set out are really positive. And we have that strong leadership team that will help us to navigate through risks, but importantly, to take advantage of the opportunities. I've set out why it's easier for us as incumbents to take advantage of these conditions and to grow versus perhaps new people coming into the market. And that really efficient platform that we've got means that we can grow with a confidence around the consistency that we've got. But when we grow, we will maintain really core principles. There will be a discipline around what we do. We need to build on the positive legacy that we have. Crest Nicholson has got a great brand position. People want to buy our homes as in our existing areas, but that brand strength can also be utilized elsewhere. And we have the strong reputation, enviable reputation over many years, long proceeds myself and this management team, for our ability of placemaking. Placemaking being defined, I think, in many respects that when people drive up to a site, they instantly think this is the place that I want to live. It's something that we're very good at. Our house type range is perfectly adapted to suit that agenda. And it's also, actually and we'll come on to this, something that will give us an advantage in new geographies as well. Customer service has been addressed. It's important that we remain a 5-star customer service housebuilder, we have been for a couple of years. We are now. I think as this new house type range is rolled out, we also have more consistency around the quality and that quality aspect as well as customer service is also something that we'll continue to improve. And the quality of the land portfolio gives us the options to grow within the existing geographies with our existing land. But also, I think importantly, when we buy new land, we need to make sure that we don't compromise on the quality of the sites that we buy. We are now really efficient, and we are very, very competitive in the housing market. So there's no reason why we can't continue to buy the right sites in the right locations. The scalable model that we've got really can be leveraged. The standardized operating processes and procedures are very easy to replicate and they do give us a consistency of performance that you would otherwise have concerns around if you grow too quickly. We just have a really consistent platform in which to operate. New house type range, of course, can be utilized. This is very, very strong in terms of the floor plan approach that we have, the engineering behind those floor plans that we have flexibility with the elevations, which mean that we can respond to local conditions. And Tom is going to spend some time on the house type range during his presentation. And the multichannel approach will help us to drive land acquisition, short, medium and long term as we seek to grow the business and also that model that we have to sell to private individuals, the PRS market, the affordable homes market will give us different channels, different routes to sell our homes and build the strength of the order book that we need again for that consistency of performance. But finally, let me just say we're not going to be compromising on our KPIs in terms of margins, return on capital employed or the operating efficiency. We have got the operating platform. We have got the strength and competitiveness to buy land at pace and at scale with the right margins, in the right locations. In order to grow, of course, we will need some new people. And we will be able to leverage the experience of the people that we've already got. People know people and people are attracted to people in terms of wanting to work for the winning team. So we will hire people with the right knowledge, the right local knowledge, particularly if we go into new geographies. We need to make sure that if we have land buyers that those land buyers know the geography that they're buying land in, they know the key land agents. So the commercial teams know the subcontractor base and where to source materials from. The technical people know all of the intricacies and nuances of the regulators, the planners, the engineers, the [ high growth ] departments in the areas in which we're moving into. So you need people with local knowledge. And whenever we take on people, they will always be people with the right values, our values and the right attitude, and that attitude is a real can-do attitude in our organization. There will, of course, be opportunities for our existing teams to grow. As our business grows, then people can grow with us. We'll be expanding both in our existing geographies and in new. Opportunities will exist in those existing geographies for people. And as we move into new areas, certainly in the adjoining regions, that also creates opportunities for our people. Inevitably, there will be some overhead deleverage as we start to grow our business and move into new geographies. But again, that is fully factored to our business plan. So our approach to growth. We have got an established operating platform that, as I've said, is scalable. With our existing divisions, we have 5 divisions, they are not yet all at maturity. We have a capacity within our existing divisions to build up to 3,250 dwellings per year. But we will also be expanding geographically into new divisions as well. Now in the early stages, of course, growth in our volumes will come from our existing divisions. But those new divisions over time will then take up the batten of that growth in the latter part of the strategy period. So why new geographies and why not greater regional absorption in our current area? You may recall that in January '20, we set out a plan to have a sixth operating division in Southern England. Well, that comes right back to that slide that I talked to you about around the planning options. I think thought that the Planning Bill was going to drive significantly more land release in the south, it made more sense to have more absorption in the area that we already know. It's far more likely now that, that growth will be outside of Southern England, into Northern England. So that option, therefore, is changing. So the 2 geographies that we've chosen, Yorkshire and East Anglia, they're highly attractive locations, highly attractive markets for different reasons. I think Yorkshire has got a strong and mature economy, and it's got really good transport links and networks and some very attractive housing markets. It's got population growth, and it's also got housing land supply growth. But also if you think about the leveling up agenda and that strategic choice that the government have about increasing the demand side in the North and the land supply in the North, Yorkshire is an obvious place where that will come first. So this is not just for this strategic period. It's not just for this strategy in the next 4 to 5 years, this is very much a longer-term strategic option for us. East Anglia has a lot of characteristics, which are similar to the markets in which we already operate. It functions in much the same way. East Anglia has one of the strongest population growth projections in England, and there is a really strong and visible land supply pipeline that can be taken advantage of. So again, that is a very obvious option for us to move into. But we're not going to -- I am almost sounding like a politician. I was going to say we're not going to stop there. But we're not going to stop there. We're going to also, during the strategy period, open a third divisional region. We haven't chosen which yet. There are a number of options available to us, Northeast of England, the Northwest, Far Southwest or of course, we could once again revisit having an addition divisional office in Southern England. We will evaluate those options later on in the strategy period. But first, we'll be concentrating on the 2 geographies that I've already mentioned. And in terms of management experience in these new geographies. Well, my colleague, Mark, was of course MD at Linden in Yorkshire, so he knows Yorkshire. But Tom, although Tom doesn't speak with a Yorkshire accent, Tom is actually from Leads, and if anybody knows much of that house retirement program, Tom's ancestors built Leads. So we know Yorkshire. And I know East Anglia very well. In fact, I have the fortune -- misfortune some people would say, of having operated across all of England, Wales, in my career, never in Scotland, but this plan is not about Scotland. So we do have management experience in these areas. We're not going into the unknown. And our product offering is absolutely suitable for these geographies. I think what we offer, particularly in areas such as Yorkshire is this place-making option, which I think will give us some advantages in the market. The house type range is highly scalable. We've got those platforms, the floor plans, the engineering that we can elevate them to react to the vernacular, which is required in each of the new areas in which we go into. I will just touch upon organic growth or M&A. This plan is very much presented on the basis of organic growth. It is in our control. It does require some investment, and it does take time for divisions to reach maturity. So we will be looking to open these 2 new divisions during 2022. But in reality, it's not until 2024 that we will start to see significant volumes coming from those new divisions. And significant growth in our profitability arising simply from those new geographies as opposed to the expansion within our existing ones. M&A is an option, and of course, we continue to review any appropriate assets as they become available. And it would be an opportunity to accelerate these ambitions and the delivery of targets. But sadly, there are always going to be a limited number of assets that would be at the right fit. And of course, it would also have to be at the right price for us. So to summarize, the operational and financial turnaround of the organization is now complete. We now have a consistent, scalable model to leverage from. We've got a very strong balance sheet, and that cash generation does provide us with strategic options. As I've set out in these slides, the market context, context where we continue to see a supply and demand imbalance, particularly in Southern England, does lead us to a growth strategy. And in those new geographies, we will go into Yorkshire and East Anglia first. And this is an organic growth plan that has been outlined today. But M&A, of course, will be considered as an option if the right thing becomes available. So what is the growth plan about? 2 things, continuation of the margin rebuild as well as volume growth. We will continue to rebuild our operating margin consistently across this strategy period. And this volume growth gives us the benefit of scale. The volume growth will be, firstly, driven by our existing divisions where we have existing capacity. And then more so in the latter part of the planned period through growth into new geographical areas. Firstly, Yorkshire and East Anglia, and then taking advantage of the opportunity to open a third division later on in the strategic period. So this really is a very exciting opportunity for us and the outlook is also very exciting. And I'm looking forward to joining my colleagues and starting this exciting journey for us. So at this point, I'm going to hand over to Duncan Cooper, who is going to fill in some of the numbers for you.

Good morning, everyone. Thanks for making the journey here today or if you come to listen to this on the recording later on the webcast. And we were going to originally do this in the summer, but I wouldn't sign off the air conditioning unit higher. So hopefully, October felt like a good compromise, albeit I hope you bought your [indiscernible]. As Peter outlined in the agenda earlier, I'm going to cover now the 5-year financial plan and investment proposition before we take a coffee break. And my section is relatively brief, and I'll start with this slide summarizing how well we consider the recovery plan has gone so far. And how it now equips us with the financial strength and the resources to expand and grow and give you confidence in that. If you remember back to my first prelims in January 2020, I gave some color on how the earnings in the business was in a process of structural decline. And we've sought to address that swiftly as pulling the levers that we knew we could by introducing the operational efficiency program, and we've made real progress with that, and Tom will talk a lot to you about that this afternoon and bring that to life. But the onset of COVID-19 also necessitated our highlighting of the poorer schemes in the portfolio that were impeding margins and needed decisive action as well. And it's perhaps, to some extent, contradictory to talk a strong progress and having strong foundations and then highlight on this slide, 4 pictures of the types of scheme I'm referring to. But indulge me briefly, and let me, as CFO and relative newcomer to house building, try and bring to life my perspective on these sites and how I view their relative economics. Walking around Sherborne Wharf at the height of COVID-19 health and safety restrictions in tower building corridors and stairwells made me realize how difficult that site has been for the team to manage. Still on the top of Old Vinyl Factory, Hayes and listening to the site manager explain how he needs to liaise with Network Rail, to fit balconies late at night that are adjacent to an overhang the high-speed Great Western rail line into Paddington didn't sound particularly straightforward from someone who doesn't have an engineering background. And stood on the top floor at the time of Centenary Quay tower, I got an education from our crane operator as to how little the wind needs to blow to shut down a crane for safety purposes and it's next to the [ solvent ]. So my point is these schemes are all complex, cash and time hungry. And in a post-COVID world, with demand for private sale apartments being impacted by changing lifestyles and changing habits, they would have undoubtedly attracted a poor sales rate over the medium term and realized a poor margin in the process. But what's pleasing is we've been able to secure deals with third parties to give us confidence to carry on, building out these schemes to plan with the certainty of back-to-back cash and knowing that we can swiftly then recycle capital back into what we should be building, which sits outside this marquee and you're going to see later on today. So I've already previously highlighted successes in securing deals for Sherborne Wharf, Birmingham and Old Vinyl Factory, Hayes. And today, I'm pleased to announce further progress we have made with bulk sales agreed for Centenary Quay, Southampton and elements of Brightwells Yard, Farnham. So when I say building on strong foundations, it's because we've been able to move schemes like this out of the portfolio at pace and can now focus on a different offering in the future. Trading some margin for cash in poorer schemes has only been part of the contribution, however, to a much wider reaching balance sheet transformation. We've instigated a disciplined approach to land spend and work in progress, Peter has touched on that, and that has to date and will remain so until this year-end meant that we've run on a net cash basis throughout full year '21. In September, we received the GBP 45 million proceeds from the sale of the Longcross Film Studio, which again reflects our focus on cash generation. And as you look to the other constituent parts of the balance sheet, the strategic land portfolio is mainly held under option with only around 1.5% of it actually on the balance sheet. We do remain active in the short-term land market and, again, Tom will give you more color on that this afternoon. And finally, our financing position is secure with GBP 100 million of senior loan notes maturing from 2024 to 2029 and an undrawn GBP 250 million RCF facility, which expires in June 2024. And so you put all these elements together. And what I hope it conveys to the room is how strong the group's balance sheet now is and why we are confident that we have the adequate resources in place to press on with the growth strategy. On the next slide, I want to outline in more detail how we see capital allocation and provide a framework for this overall plan. So starting top left. As Peter has already said to you, this plan is built on organic growth assumptions. And with that plan comes a commitment to open and expand new divisions in the same highly controlled environment that we've managed to now instill across the legacy business. We're only going to open new divisions when we are confident they are established, appropriately staffed and critically, where we can fuel these new expansion aspirations from within our own growing levels of cash generation. Moving to top right, there may be an opportunity in the future for us to acquire an existing land portfolio or an existing house builder, focused in those regions that Peter has alluded to already. Under this scenario, we would ensure a very, very disciplined approach to any appraisal. The transaction would need to offer accretion metrics that were significantly superior to our own organic growth plans. And it would only be right if we were acquiring a high-quality, proven management team with local knowledge and the business represented a strong fit to our operating standards, values and culture. To bottom left, we have a clear and sustainable dividend policy of 2.5x cover, which based on the plan and targets we've announced today represents a growing dividend payout in line with our expected earnings accretion. We remain confident that the policy gives us the right balance of returning capital to shareholders and fueling the next stages of our growth. And if we move to bottom right, we will retain a strong focus on capital efficiency, the same focus that has led to the strong turnaround of the current balance sheet. And as Kieran will outline in his section later on, we see our growing partnerships business as a complementary and additive component within the group and supportive to an improving ROCE position over the plan period. And finally, coming to the commitment that underpins all elements of our capital allocation policy, we will maintain a robust balance sheet. As Peter has outlined in his market context section earlier, our sector is a cyclical one, and we will ensure we maintain adequate levels of liquidity for all scenarios. Although we see the use of land creditors as a sensible component of commercial negotiations for land, we will not see our total land creditor position exceed 30% of net assets during the plan period. On to the next slide, and I want to give you a sense of how we will invest for growth. There is, of course, a necessary investment cost to set up and establish new divisions. And on the graph at the top right, you can see how the new divisions start to add to our overhead base over the plan period. We expect to open 3 divisions by full year '26. And again, Tom will talk to you the detail of how that will happen later but as those existing divisions start to become more productive and reach maturity, combined with the sales growth from our existing divisions, you can see from the chart on the bottom right that we expect to see some initial overhead deleverage, followed by the ratios improving as the group becomes increasingly more productive. And finally, as we think about the cash resources required to grow, we would expect to maintain a similarly sized short-term land portfolio as we currently have of around 5 years. On to the next slide, and I outline future guidance on our operating margins. And in our own heads, we see this being delivered in 2 phases, which is why we've given some targets to '24, some to '26, and I'll come on to that shortly. In Phase 1, we continue to see the benefit of gross margin rate accretion occur as we lose the remaining poorer sites out of the bottom of the portfolio and replenish them at the top with new land utilizing the new house types and delivered within a better controlled operating framework. This correlation to the gross margin rate we are buying new land at is not immediate and not exact in its nature. We still have sites like Farnham and London Chest Hospital, which will impact gross margins in the future. We also start to see the impact of maturing JV schemes, which are not necessarily reflected in gross margin but do contribute to operating profit, such as Harry Stoke. And finally, as I've outlined, we start to see some increase in overheads as we set up our new divisions. But what I want to convey with confidence is we can now see a clear and visible pathway to operating margins getting back to that industry normal range of 18% to 20%. And thereafter, from full year '24 to '26 in Phase 2, we start to see the benefit of volume growth coming through new divisions and the additional scale benefit this gives us. Overhead efficiency continues to improve and ROCE also starts to grow as our Partnerships business becomes more mature. I want to now outline and summarize the key financial targets that underpin our 5-year plan. As I already mentioned, we've split these into targets by full year '24, full year '26 and at an undefined point across the plan period. Firstly, on volume. We expect home completions to be greater than 3,000 units by full year '24 and then greater than 4,200 units by full year '26. And by that stage, have the 3 new divisions Peter referred to opened and operational. Our revenue composition guidance is similar to that we delivered in full year '20 and is consistent with previous guidance we've given you of how we see the group's revenues being derived going forward, namely circa 60% from private sales, 20% to 25% from affordable and 15% to 20% from PRS or bulk. Operating margin of 18% to 20%, I've already referred to on the previous slide and with that comes an improved ROCE across the period. And finally, land creditors and again, the dividend policy I've already touched on. But the overall message I want you to take from this slide is that realizing these targets as inputs to our financial performance will inevitably result in the enlarged group delivering strong and consistent earnings accretion across the plan period and beyond. My final slide outlines why we, as a leadership group, continue to see a compelling investment proposition in Crest Nicholson. The 6 boxes on the left summarize our key strengths and opportunities. And I hope what we have managed to convey to you by the end of today is a clear strategy for growth, but also a strategy that has unambiguous investment principles and outcomes. We will maintain a robust balance sheet. We will remain disciplined in our acquisition of land, work in progress management and investing in incremental overhead. And as David will come on to talk to you about in some detail later, we are committing to a strong ESG framework that reflects our responsibilities in the core to climate change action. As Peter said in his closing remarks, I think we've got a fantastic opportunity ahead of us. Certainly, when put into context against the overall housebuilding sector, but also, frankly, when held up against other growth agendas across the board generally. We can offer a comparable level of dividend yield to our mid-cap peers, but at the same time, deliver significant shareholder value creation over the medium term. I'm confident you'll take away from today's tour that we have a strong leadership group that can be trusted to deliver on that ambition. And with that, I think I'm the only thing standing between us and a coffee. So we'll take a break. Thanks very much. [Break]

Okay. I think that's just about everyone. So hello. My name is Kieran Daya. I'm the Managing Director of Crest Partnerships and Strategic Land. I won't be as familiar as Peter, Tom or Duncan. So I'll take the opportunity to provide you a short introduction. What I found since joining Crest, before I get into my main section. My background, and Peter touched on it in his introduction, I previously sat on the senior leadership team at kind of the Try Partnerships, which is, of course, Vistry Partnerships now. I was one of the leaders in the merger with Bovis, which is a deal I thoroughly enjoyed. Before that, I was a Director in Barratt and again, that was a role in the business I enjoyed. And going further back, before joining the industry, I was a solicitor in the Northeast. I joined Crest in January '20, took over 2 businesses. The first was Crest Strategic Partnerships, which was the strategic land business; and the second was Crest Regeneration, which was a public land regeneration specialist. The Crest Strategic had a core of a good business. It needed additional focus and discipline on investment decisions. Crest Regen was perhaps confused and confusing. Both businesses were involved in stress deals for period ends, whether it be land sales in the case of Crest Strategic or securing presales in the case of Crest Regeneration. Crest Regeneration managed several high-profile joint ventures, some of which I'll discuss with you later today. Emerge these 2 businesses, setting up the aforementioned Crest Partnership and Strategic Land, and I'm looking forward to sharing with you the exciting partnerships platform that we have developed and explain how this will contribute to the Crest business in the coming period. I'll kick off my presentation by giving you an overview of what the Crest Partnership and Strategic Land platform actually is, highlight how this is different to what has gone before, before going on to explaining why the current executive leadership team believe this revised structure adds a dimension to our play, which translates to demonstrable value across our operation. During the match, I'll set out our partnership credentials before passing over to discuss how we are building upon our already strong land procurement team, before concluding on our national relationship management and how we have put our partners at the very heart of what we do, so we can give our divisions the oxygen to keep striving forward with pace. Our relationships is one of our strengths, and this is a theme throughout my section and the note that I'll lend on. Moving on to my next slide. You'll have noticed that I call the Partnerships and Strategic Land operation a platform and that's because that is exactly what we are. We are a platform that adds value to our divisions and hopefully helps with the green shoots of growth elsewhere, and I'll explain how. We centrally manage our relationships with investors, commissioners, firms, partners, public bodies and quangos, such as Homes England and the Defence Infrastructure Organisation, which I abbreviated DIO when I discuss it later in my talk. We provide a single point of contact at the executive level and make every effort that our entire business is totally aligned. We have sector-leading mixed tenure experience within the team and operate with high levels of skill. We have a total understanding of our partners' environment and speak their language. We understand their social drivers and their economic drivers both equally as important, which ensures we maximize any opportunity. Our platform generates an environment where we can reduce our capital requirements and reinvest in other areas, perhaps positively contributing towards a growth agenda, which is being discussed today. We have a revitalized and refreshed strategic land team and public land team and have added real firepower across the piece. We are able to swiftly review opportunities and respond to the market with speed and with certainty. Now moving on to the mixed tenure housing. To give you context, I'd like to summarize the domestic housing market, highlighting the tenure groupings that are present. To assist with this, I've set out a Venn diagram, which shows a number of things. Firstly, it breaks out the 3 headings of the domestic housing market. The percentage number shows the percentage of Crest's total output within each grouping. As I discuss each heading, I'll provide some market context and have included some commonly known tenure types within the diagram for ease of reference. So you can see the open market is our largest or core market, at 60% of what we do. The barriers to entry for this tenure are economic. Customers will typically need a deposit and to be able to obtain a mortgage. The next segment is a Section 106 affordable housing program. This is what developers provide by way of planning obligation. The Section 106 affordable housing will typically be 20% of what we do. Again, for market context, the barriers for entry are assessed on vulnerability and need. As I've previously mentioned, we have a specialist team focused on affordable housing and we can confidently say that we maximize our value in our activity within this group. The third segment is intermediate housing and comprises of a number of tenures, including PRS, which is private rented sector, and some of the supported tenures such as shared ownership. When we talk about doing a presale, it will be within this group and this will account for between 15% and 20% of our sales. Interestingly, if the circles in the diagram were bigger or smaller to take into account size of the market or demand, the intermediate tenures would be the biggest. There are more people in their 40s and under here than in any other segment. It's for anybody that can't or doesn't want to buy a house on the open market and doesn't qualify for the Section 106 affordable housing program. So combined, this is the melting pot, and the market conditions are extremely attractive for institutional investors that are seeking longer-term countercyclical revenue streams. Moving on to our partnership model. We have seen the partnership space growing momentum within the industry. To set the scene, I'll highlight what a typical partnership business looks like before I share with you what our partnership program looks like. Delivering in partnership is a fast asset turn business model. It's about pulling the levers in a way that increases return on capital employed and reduces risk, with margin taking the strain. Typically, a partnerships business will secure a presale position of, say, 60%, which drives return on capital employed to the 40% level. If all goes well, a good partnerships business will aspire to achieve operating margins at the 10% level. This presale position will be towards the affordable housing end of the spectrum and given this is the majority of the site, schemes would be seen as affordable housing schemes or a scheme focused on affordable housing. The Crest platform pulls the lever slightly differently. We get the benefits of working in partnership, but our answer is more appropriate to a business whose focus is on the open market delivery. As we said, if the levers of a traditional partnership business was 60% presold, 40% return on capital employed with a focus on affordable homes, in the same vernacular, our model generates a 40% presale position, pushing our return on capital employed in excess of 30%. But our increased presale position is focused on the mid-market and supplements our open market sale. Our partnerships want to be on a Crest Nicholson development as they will enjoy all the focus on place making and community generation that you can expect from Crest Nicholson. We push to maximize the capital receipt or minimize the discount a partner would expect for buying in bulk, again, in the vernacular enjoying the benefits of working in partnership, but only at a level whereby we manage the impact on our margin. And because we are only a partnership platform and not a partnership business, the divisions would typically buy the land without a presale factored in. If a presale didn't work for us on our terms, we would be happy to deliver traditionally. Importantly, we have no exposure to low-margin contracting sites or contracting plus sites where a partner would use our house types. Now I've compared our model to a traditional partnerships model, let's take a look at how our model complements a traditional open market house builder. On the table on the right-hand side, we see 4 indicators for a traditional house builder and for Crest. Our operating margin will remain in the 18% to 20% range but our return on capital employed will rise circa 5 to 10 points, taking it above the 30% level, while our capital requirement and sales exposure will both be reduced. Both great players on the team sheet for growth and the insulation of economic cycles. If I can move your attention over to the graph on the left-hand side, what this is showing is the stages of progress we have made in our journey so far, where we have been, where we are and where we are in what we are securing. Quite neatly, this graph can be roughly seen in thirds. The first third is Crest's historic performance with presales in the marketplace, largely apartment blocks that were either not designed specifically for PRS or on occasion where they were specifically designed but didn't strike the right commercial balance to minimize the discount to open market values. To add further strain on the discount, there were clear signs of deal stress caused by dealing too close to period ends. The result is a discount at the 20% level. The second third coincides with a period under the new leadership team and shows a refreshed approach to our presales. We have taken often similar product types or capture deals that were in the pipeline, but not yet finalized and revitalize our commercial terms and commercial practices. In this period, we have reduced the discount to the 12% to 15% level. The final third shows the future deals we have procured and deals that we are procuring and shows the shift to well-designed suburban PRS, something I'll explain further in my presentation. We are narrowing the gap with a discount to open market values being in the 6% to 9% range. Now these dotted lines on pure jam tomorrow. They aren't what we just will hope will happen. They represent deals that are currently being secured. We know that by utilizing the right product from our new house type range, on the right housing schemes, with the right place making, we can regularly operate within this range. If I can take you back across to the lower table on the right-hand side, this showcases the deal that we have secured, but not yet transacted on with a large fund at Towergate in Milton Keynes. We have worked with this fund already in the period, and I would expect contracts to be in place in the coming weeks. I have chosen this site not just down to its financial indicators, which are strong, but because this site provides multiple examples of what I'm discussing with you today. The site was procured through Homes England for 150 homes. On review of the business plan, my team retendered the Section 106 affordable housing, where we achieved circa 5% uplift in values. We then secured a bulk sale for 55 units at a discount of 8% to market value. This deal is with a fund whose focus is on key worker accommodation and they fought hard to secure homes, which fits perfectly within their fund. Moving on to the next slide. The rate of growth in the intermediate housing segment is notable. You can see from the bar chart that the PRS sector has been growing at pace for 10 years now. The bars are segmented by color, which represent from bottom to top: completions; units in construction, which are the first 2 colors; and units in a different stage of the planning system, which is the top 3 colors. For ease, the first 2 colors of what is and what is being handed over and the final 3 colors is what is to come subject to the various permissions. The graph also helps illustrate some of the facts and figures that I've highlighted. 300% sector growth in 5 years with 2021 almost certainly surpassing 2020's investment level of GBP 3.7 billion. What's also interesting is that 70% of funds are now committed to suburban schemes outside of London. This highlights the recent shift from urban PRS schemes to suburban PRS schemes. Urban PRS are typically city center apartment blocks occupied by education levers through to the young professionals, generally premarriage or perhaps co-inhabiting. Average tenancies here are 14 months. Suburban PRS schemes are focused on single-family housing, 1 family per house with their own front door, car parking space and garden. Average tenancies are over 3 years and growing. Demand is rising with many commentators citing COVID as a possible agent for further acceleration, a well-discussed topic of the importance of green space and its effect on well-being. Suburban PRS captures a wider demand base of young workers through to young families perhaps saving to get onto the property ladder. Different PRS providers will target different types of renters but premiums of between 10% and 15% will be achievable above general rental availability in the area. In summary and to be clear, we are talking about good quality family homes that are well built, well maintained and well managed. Suburban PRS providers encourage renters to feel like homeowners while they're renting. Now moving on to another core competence within the team. Crest Nicholson have got highly skilled procurement teams for both strategic and public sector land. Our strategic land team are managing and promoting land that can accommodate over 18,000 homes. And I'll further explore strategic land in my next slide. We also act as a lead developer and can demonstrate to the market that our management of large sites is second to none. I've chosen 3 sites by way of example. The first site is Longcross Garden Village in some Longcross Garden Village in Surrey. This is a large brownfield site that we hold in joint venture with Aviva. We have successfully delivered 186 homes on part of this site, created a world-renowned film studio, which we sold to Aviva for a deal in excess of GBP 45 million for Crest and perhaps most importantly, recently obtained a local plan allocation for 1,700 further homes. In my opinion, this is either the best or one of the best residential development sites in England. Moving on to Kilnwood Vale in Horsham, a site we have pulled through our strategic land team. This is a large site of 2,750 homes, which required significant ground remediation as well as infrastructure. We have created a new community at Kilnwood and are proud of the place making and environment that we've built. Finally, at Arborfield Garrison, a site owned by the DIO, where Crest have been appointed as master developer or master developer now that I've moved to Surrey. As master developer, we have been managing and controlling remediation and infrastructure so we can bring forward sub parcels of land to the market. Crest's reward is a proportion for the land receipt, but also the ability to draw down half of the 2,000 units that are on offer. Again, a large brownfield site with complexities but what we have created is a great example of new community generation and place making. Time and time again, we've been able to push values to a level that beat local comparables. The public sector team control upon all of these experiences when we consider public sector land, being able to provide live case studies showcasing our ability to participate in site of scale, stakeholder management and place making and community generation. This puts us in a great position when we respond to the question of best value. Central to public procurement opportunity is Homes England and their role of continued disruptor and enabler within the marketplace. Homes England have land positions across the country and where can be summarized as taken land positions, which are often large, whereby the marketplace is stalled. They then unblock whatever constraints were present and bring land forward and sell to developers. When they sell land, it's often with certain stipulations attached, minimum build speeds, modern methods of construction. They may want to encourage smaller developers or they may want to encourage regional developers to expand into new territories, an opportunity with obvious attraction to Crest at this time. As I've set out, Homes England hold over GBP 1 billion of land assets and are currently disposing of over 100 sites with a capacity for over 16,500 homes in the coming period. You can expect this quantum of sites to be rolling, that is when sites are sold, new sites will be ready to be brought forward. There are, of course, other sources of public land, and in particular, I've highlighted the DIO, who have a number of good sites coming forward in the period as well as local authorities who we see more and more wanting to look to joint ventures to unlock their land potential. I would now like to move the conversation on to our strategic land portfolio. Strategic land is land that does not have the benefit of an allocation in the local plan process. We are currently working on achieving the status on land we hold in some form of long-term agreement, which is typically an option. The total opportunity is for 7,000 homes in this or the next round of local authority plan making, which could be expressed as within 10 years. We have had a good year thus far. We have achieved this milestone of local plan allocation on circa 4,000 homes across 4 sites, which are now with the divisions whom are working through the planning system. A health warning, the planning system is a complex environment and it will take time for each of these 4 sites to obtain the permissions needed to commence development. So good news, but still work to go. Under the new leadership team, there is a disciplined focus on securing opportunities that sit within these time scales that I've been discussing, i.e., in this or the next round of local plan making. This gives us greater visibility of risk so we can focus on opportunities that have good planning merit. We are less attractive to more speculative sites, which have long or very long lead-in times regardless of the potential upside if the stars ever align. You will see some market commentary on the right-hand side. In summary, it's telling us that we are in an environment whereby the local plan system is not identifying the land that is needed. We believe that this is an opportunity to bring sites forward earlier or secure a local plan allocation on site in the time scales I've discussed. All in all, we believe that focused investment in strategic land will bolster the medium-term land bank with sites which will deliver good margins and pave the way for sustainable growth. Moving on to key relationships. Crest are absolutely motivated to be the best possible partner we can be, whether that is with a small Section 106 affordable housing deal or a large for-profit RP. We want to maximize the opportunity and maximize the relationship. In terms of presale, it may be with a modest fund wanting to invest small and often, like the deal we did at [ Alrewas ] for 9 units at an 8% discount or a large fund wanting to make sizable acquisitions like the proposed deal at Centenary Quay where we are transacting on 165 units at current market achieved values. We have the team that can speak our partners' language and understand their drivers. We have full visibility at executive level and our partners know if we say we were going to do something, then we will do it. That, in essence, has been the cultural change within Crest. We have transacted with several land promoters where our regional businesses have been on land brought to the open market. By acting like a true volume housebuilder, things that Tom will discuss after lunch, our land teams are able to swiftly generate robust land appraisals. Time and time again, we can demonstrate we can work with speed and with certainty. And finally, in public procurement and working with public bodies or quangos, the Crest team have the specialism, which allow us to work hand-in-hand, navigating the additional complexities of the regulated environment. I mentioned earlier on that Crest have added real firepower to the team. We can maneuver with real sophistication and an agility and offer our partners a certainty of business planning that we haven't been able to do in previous periods. You will see some of the organizations that we have been dealing with in the financial year. It's not an exhaustive list, and it certainly doesn't capture the partners that we will work with in future periods. In summary, there has been a cultural shift. We can say with certainty, not with hope that if we say we will do something that, that is the very least we will do. We have the skill set within the team to maximize our presale positions for both Section 106 affordable housing and within the intermediate tenures. We will only do presales on their merit and only if doing so, it has an acceptable impact on our margin. Our strategic land and public land teams are focused on sites that add real value and not complication, maintaining integrity throughout our operation. Thank you.

No -- just put your hand up, then we'll bring the microphone to you. Thank you. And if people could just mention, for the benefit of the room, your name, where you're from, even if we know.

Glynis Johnson, Jefferies. I'm not even sure you can that in the floor. Three, if I may, and two of them in part in terms of the [ EPS ] and then [ own plus ]. So firstly, the land bank. You talked about a 5-year land bank, but you talk about how much of that you think you need to own? How much of that can be conditional or future drawdown? I'm really thinking how much is going to be actually sitting on the balance sheet? Second of all, off-site manufacturing, you talked about modern methods, construction [ by the lots ]. We've seen some of your peers invest in facilities. Is that something think you need? Or do you think there is sufficient supply of off-site manufacturing that you can utilize elsewhere? And then lastly, just in terms of the PRS, how forward sold do you actually take that? Do you just sell 1 neutral further forward? Or are you recognizing revenue 2, 3 years in advance?

Okay. Well, Duncan will take 3. Let me take the first 2. And in terms of the second one David will actually be covering some aspects of site manufacture during his presentation. But more philosophically, I think it's a direction of travel that the market will go to over time. The biggest impediment to real investment at pace and at scale is really still around the planning system. The planning system still favors things being very different, individuality as opposed to things being similar. And in order for off-site manufacturing to maximize its potential as many components as possible should be the same. And that's just not the way the planning system currently is designed or the direction of travel that is going. So it's more likely to be a response first, at least on a component type basis, but David will also touch on that. So perhaps we'll also pick that up in the Q&A afterwards. In terms of the land bank, there isn't a specific target, but there is always an understanding of the land that we hold will be on the balance sheet. We utilize land creditors where we can. Essentially, it is free borrowing and conditional deals also give you an element of balance sheet -- of a favorable balance sheet. But of course, they're conditional for a reason that there's an element of risk associated with the delivery. So there isn't an exact target on that, but there's an understanding that it will be a mix of all 3. I mean, frankly, if all of our land could be on deferred terms you take that because there is no economic cost. There usually isn't. Most land owners don't think in sophisticated net present value way when they evaluate the price of land. They think in terms of the price that they want to achieve and then we negotiate terms to pay it. So that tends to be how it operates. Duncan?

As you said, I think you can take all 3 but as you -- on the PRS one, I think they're just coming to that 1 first. I think the -- what Kieran has outlined is, I think, the model that gives us maximum flexibility and optionality in the way that we see the partnerships business working and having that ability to engage on a spot basis rather than having a sort of deeper set of contractual relationships. Is it to our advantage? And we actively discuss all of those deals as they come up on a case-by-case basis, and see what the right economic arrangement is. And on the land banks, to build on Peter's point, we've run a range of scenarios around the cash out versus the land creditor position out and any of those positions come off the relative position of strength that the balance sheet will be at the end of this year as well. So we don't have concerns around either the balance sheet efficiency or how we'll finance or fund that land growth in the plan forecast period.

Just to be clear, what is the amount of conditional land on the balance sheet of what you have right now? How much of it is inside the balance sheets? Is it more?

We will disclose at the year-end but I'm not giving you that now.

Thanks, [ Gregor ]. It's John Fraser-Andrews, HSBC. Three for me, please, Peter. The first one is you seem to be aiming at about 600 completions per region. Is that how we should think? And perhaps you can share with us which regions have got a bit more mileage to go to that 600 within the existing 5. That's the first one. And then the next one's -- couple are probably for Duncan. Second question, the new divisions, Duncan, your chart on operating margin seems to be that you're still progressing despite taking on the new regions. Clearly, that's the land that's coming through the new house sites, et cetera. Perhaps you could just set that out in a little bit more detail. And then thirdly and finally, on the legacy sites. Is it fair to say that you won't be starting any more high-rise development. And perhaps Duncan, you could just update on sort of where you are in terms of trading out of those legacy sites you flagged.

Sure. Just in terms of the first one, I'm not going to too specific about which divisions have capacity, which have not because it does change from year to year. But we see the capacity in each of our divisions has been somewhere between 600 and 700 actually, with 650 being the average, hence 3,250. The reason there's probably a little bit more capacity than I would historically have said is around the PRS market because those aren't additional outlets, that's more production based. So it's not that you've got complete flexibility to build, I don't know, say, 1,000 houses, but you can do probably a little bit more the 600, 650, which would be the more traditional range. I think you could push that up a little bit. So 600 to 700 is probably the range, average of 650, probably 3 of our divisions have still got capacity to a -- are a lot closer to their current -- or in their capacity I've described.

Yes, John, taking on your other 2. I mean you led the witness on the second question in any event. So yes, I mean, we previously announced the expansion plans today. We talked at the last time we announced around an improving gross margin rate position just through that function of removing for our sites and then continuing to mine out the portfolio, benefit of lower sales and marketing costs. Again, Tom will talk to you about that as he'd come on. And the light of spec savings and the replotting and the efficiency of the new house types starting to come into the embedded land portfolio as we start to realize that into the outer years. So that would come through in any event, agnostic of these expansion plans. What we'll get is then the benefit of that volume and growth accretion starting to come out in the outer years from the new divisions. On the legacy sides, yes, we'll be -- I won't go through this in detail. We've touched previously on Sherborne Wharf, down in Old Vinyl Factory, Hayes and it's contractualized but will run into towards the end of this year and from a time perspective. But again, done I touched in my element this morning if it was missed and Kieran touched on as well around Centenary Quay and elements of Farnham, but there's still other parts of Farnham that need to come through the P&L. And there are other -- some other sites still which we have in the portfolio, not many, which continue to recognize over the coming years. But what we've described previously is the legacy London portfolio, i.e., everything in suburban London, it will be fully reserved or sold through by the end of this year. So we're continuing to make progress in line with expectations and have a core or existing business that's in continuing and improving route health before you layer on the growth prospects.

I think the only other side that we just need to reference is the London Chest Hospital, which is held in a joint venture with Clarion and that still got some way to go in terms of its planning. And in all probability, that's something that we wouldn't necessarily tackle as a development ourselves. But let's get the planning first and then we'll review what the options are available to us. But that would be the only site that would sit in that sort of category of large complex, relatively low margin, lower than the average, but there is margin in that one.

Just to build on that. I mean, coming in Tom's section later and Alex's as well when he talks to Maldon, I would encourage everyone to have eyes-wide-open, ears alert to the some of the case studies Tom will talk to around bringing this to life because it's easy talking about it in terms of it being more philosophical around the margin, but it's when we're able to put some case studies up later, which we will, I think it will go a long way to helping sort of address those questions.

And the last one, Peter, was is at the end of high rise in the future is low rise, high capital turn development either in open market or in the affordable sector?

Yes, we've got a further phase of mid-rise to come at Centenary Quay, but yes, no more high rise.

Gregor Kuglitsch from UBS. I've got a couple of -- well, actually 3 or 4 questions. Two of them are a bit technical. So here we go. On joint ventures, I believe your volume targets or volume, how you reported includes sort of 100% of JV. So if you could just give us a sense kind of how much of those targets are really yours and, I guess, the share of JVs or whichever way you'd like to define that? The second is, obviously, you're going further north. So I'm guessing you'll have a bit of a mix change. Can you give us a sense of what your kind of ASPs you're looking for, particularly in the sort of northern regions and how that dilutes the overall mix? The third question is around the return curve. So obviously, you've got a return on capital target, but I'm presuming there's a dilutive effect for both the cost and the capital deployment and, I guess, the land that you need to find these 2 new divisions and then the third division in due course. If you could just give us a sort of sense how that works out because I believe on that guidance chart is sort of across the period. And then maybe just a sort of broader question is like what happens if it doesn't work? So if you start your divisions and you don't find the land that can return requirements, what would you do? Do you just come back and say, well, I'm not going to end up doing this or postpone it? Or are you that confident you can do it?

I'll ask Duncan to answer the -- I'll answer the first 2. As far as the last one is concerned, we are entirely confident that this will work. I mean we've got a lot of experience collectively as a team, moving into new geographical areas. There is no reason why we shouldn't be highly competitive in the land market with the product that we've got. We would take on land buying expertise from those regions to understand the markets and the important land agents in that area. So I'm entirely confident that we can execute the plan that we've that we've set out. In terms of the dilution, it is factored already into the plan. And it's really just around the overhead. We're not anticipating any dilution in terms of the quality of earnings, we will be buying sites at similar margins to those that we buy in our current core regions. I mean there is a small dilutive impact in terms of the return on capital because we will be carrying a little bit more asset, but that would be the case whether you grow in your existing divisions or externally, and cash resources to fund investment is not a concern that we have currently. Is there anything you would add on that, Tom?

I mean after lunch or later, when I do my presentation, I hope to give you a little bit more confidence in why we think it's actually a very deliverable and achievable growth strategy. So probably wait until my section, Peter?

Such a tease. So on your first 2 questions, I mean, on the JVs, so you're right, just to say we've moved to the 100% report. I mean, look, the first thing to say is self-evidently it's not in my interest as CFO for us, for this organization to be pushing volume growth targets for the sake of it that doesn't drop through to the bottom line. It's why we anchored the guidance to the operating margin and not the gross margin because that 18% to 20% remains intact. If you take what we've got at the moment, we'll have a growing proportion of that, but it's not material in nature. If you look, we've got Walton Court, Elmsbrook, Harry Stoke and London Chest wouldn't feature in our organic plan in the planned time frame anyway. Would that be drawn on given guidance specifically around what JVs we might open in those new territories? No, because we'll see what the -- see what the arrangement is at the time. So I wouldn't suggest there's any reason to be -- to think that's cloudy or ought to be concerned, Gregor. I think on the north piece, as we move further north in the mix, you're right, there's 2 forces at work. Obviously, there's the sort of as you take the year-end from this year and into next year, there's the sort of final unwinding of the London sites, which starts to drop out and an inevitable geography mix moving further north. We'll continue to see that ASP trending downwards throughout the course of the year. Look I'm -- to try and be helpful, but not to be held as firm guidance, that number could be down towards 300,000 by the end of the plan period, but that would be -- that's spurious to some extent on the basis there is no specific -- we're not giving composition or mix in those regions, so -- but it will continue to reduce.

And sorry, just one more point, which I think is helpful and that one of the benefits of northern markets and some of the characteristics are also their in the Midland is that they operate slightly differently to the south. They tend to have stronger return on capital, stronger asset turn because the proportion of selling price that you're paying for your land is typically lower, and the opportunity tends to be there for better deferred land terms than perhaps in the south because the south is so competitive, you tend to have to pay more of the money upfront and land as a proportion of the selling price tends to be higher. Also, you just have more integrated schemes with a little bit more complexity. That just means that they're more capital-intensive to develop. So northern markets tend to be less WIP hungry than southern markets, so there is an overall benefit, albeit a dilutive effect at a group level.

Rajesh Patki, JPMorgan. I've got 2 questions. I think Peter, you mentioned in your initial remarks that you don't see labor as a major or single largest constraint for the medium-term plans. Could you elaborate on that? And what do you think is the single largest constraint for the medium-term plans? And secondly, in terms of M&A being an option for growth, what do you see as key factors determining whether a particular asset is the right fit? And if you could elaborate a bit on the threshold returns, what you expect from them.

Okay. Thanks. I'll ask Tom to add to this as well. But with labor, labor is increasingly becoming a problem but in a relatively small way, so it is just a drip-drip effect of weaker labor markets in the areas that we operate. And I think that will continue at the current pace, which is a drip effect as opposed to something more fundamental. And how we're dealing with that is that gradual move to more off-site manufacturing, more component base, which means that you just have less requirement for directly employed -- for labor on site because more of the components are put together offsite. We will get a disproportionately better outcome because of our standard processes, our efficiency, our product type, which just makes us more attractive to work for if you're an operative than if you're building more complex projects where, typically, you'll be sat in the canteen poring over plans, trying to work out how to actually do something. If you've got regularity, if you've got standardization, you are just more productive. So -- but the fundamental reason I think that labor will be okay is because I don't think that there will be a significant uplift of construction activity over and above, say, 2019 levels in the south of England during this plan period. I think if you go further out, I think the risk starts to increase. But over the next 4 to 5 years, I think that we'll see across the industry in the South a gradual increase in production but probably not significantly more than, say, we saw in 2019. I'll let Duncan just touch on the M&A, and then I'll pass on to Tom to add to any of these comments.

Yes, Rajesh. I might surprise you to say that we're not going to give you a threshold because any asset which we were appraising, we'd have to appraise on a kind of a stand-alone basis and each and every one is individually different. So I'll go back to my comments in the script earlier on, which is that we would only do it if we felt it was a more compelling financial proposition in the round than doing it ourself and allowed us to accelerate and turbocharge progression. But as Peter touched on, limited number of assets, got to be the right fit and got to be at the right price.

Thanks. Just to go back onto -- build on Peter's piece in terms of the labor. There's no doubt what we've delivered through our platform is actually -- we've actually got more people wanting to work for us. So although there are challenges to our subcontractors in terms of wage and other subcontractors trying to take away their core resource, actually, it's not causing us a huge impact. These are manageable problems. Everybody is aligned to deliver for us, as well as I'm sure our peer group, the delivery programs that they've got. We spend a significant amount of time providing guidance direction to our supply chain, so they've got visibility of what's happening, not just as an immediate 1-week delivery piece. We're giving them the 6-month, 12-month period. So they are resourcing themselves to deliver for our demand. So I think the wider labor changes, Peter has referenced. But today, we're managing it successfully -- with some challenge but managing it successfully. So we don't see that as a core impact. Probably just to pick up on the one question that you raised in terms of biggest concern in terms of the challenge for the growth strategy. I think as Peter covered in his slides, there is good market conditions for this growth strategy to be delivered. Inevitably, we don't have control over the market. But you look at the core components of it, there are things there. So labor, I think, will deliver through the plan period. The materials and what we're doing ourselves as self-help will achieve -- enable us to be robust during the plan period. And I think market conditions, again, should stay strong. So there's nothing specifically jumping out at me which is saying that we've got a problem around the corner.

It's Charlie Campbell at Liberum. Just one question, and it's rather broad, I'm afraid. But as someone who's been to a few Crest Nicholson events over the years, we would have spent, I think, quite a lot more time in the past talking about strategic land. And I noticed there's only 1 slide on that. Is -- am I reading too much into that; that, that is being deemphasized? And perhaps as the group becomes -- you're talking about simplifying build, simplifying sites. Does that mean actually that the strategic land just becomes kind of a smaller part of the Crest story, a smaller part of where land is sourced from? Or am I reading too much into that?

I think you're probably reading too much into it. I think the difference is just how we are articulating its relative importance. It is an important part of what we do. It will provide a proportion of our completions. And when it does, it gives us a better margin. But I think perhaps, in the past, a little bit too much emphasis has been placed on that great rocket fuel that goes in one end and not enough around the quality of the sputtering engine in the middle. So we think we've concentrated our efforts where we probably need to, which is fixing that engine, the operating platform. And the strategic land element becomes business as usual, and that's what Kieran's team have specialism doing. It is a very important part of our strategy, but it's just one strand of it, not head and shoulders above everything else.

Yes. And just to follow on, will strategic land follow you into these new areas? So is it as important in, say, the North and the East as it is in the South and the Southeast?

It will be but it's clearly a lower priority for us than, say, getting out and buying sites that are going to produce in the short term. But as part of the mix, particularly with public procurement and the partnerships that we have with people like Homes England, we would hope that, that could contribute to relatively short-term land supply as well. I mean clearly, government agencies like Homes England are tasked with helping expansion. So we would think that would be a suitable source of land. But just participating in the open market with a really competitive product, we are highly competitive, and we will buy the best land expertise that we can in that area.

Sam Cullen from Peel Hunt. I've got one kind of broader question and one kind of simple one really. So the broader one, I guess, is you spoke about kind of Mr. Gove and the various kind of planning reforms. Articles we've picked up in the press are kind of suggesting that he's looking at whether increasing housing supply is the route to increasing homeownership in the country and perhaps shifting mortgage and lending requirements, relaxing LTI gaps. What are your thoughts on what -- the impact that might have on the overall housing market, the relative attractiveness of new build versus existing homes and how that changes your business model, particularly with thoughts around the attractiveness of kind of family-led suburban PRS within your model?

Yes. That latter scenario would be -- in the short term, would actually be very beneficial, very attractive to us. But frankly, there is only one way that you're going to resolve the housing crisis in the U.K., and that's to increase the supply side. Whether you can increase the supply side of land in the South where there's current demand or create more demand where it's easier to increase the supply side in the North, that is ultimately the only longer-term way around this. And short-term fixes that help to bridge the affordability gap might be helpful for us because we've got product that's in short supply. And if people want to pay more for it and government agencies want to help them do so, that's not going to harm us but it won't help the stability in the market in the long term.

And second one is you said that in your -- you kind of factored in the various tax increases, including the residential property developments, back into your forecast cash flows. What are you forecasting it for the last...

We're not going to tell you. We've got a pretty good idea of the range that's being discussed. But I think -- because some of those conversations are meant to be in confidence, I won't share that. But we've got reasonable visibility around what that range would be. Duncan?

Yes. I mean we'll find out more, obviously, in the upcoming budget. And yes, you expect me to say as if I were -- I'd say we're more at the prudent end of what that might be. But yes, it's factored in, Samuel, from the timing of when it would kick into.

Jonny Coubrough at Numis for Chris who's away. Another question from me on the land market, please. And keen to hear what you're seeing at the moment in terms of whether you're seeing any structural changes there beyond the very high levels of demand. Thinking really in terms of the changing regulatory environment that you spoke to and whether that's driving the way you're buying land. And then also, the Future Homes Standard coming in, are you currently acquiring land for those -- for the Future Homes Standard in '25? What assumptions are you making there in terms of incremental cost? And is that factored into medium-term guidance?

The latter part of the question around future homes, David will be covering in his presentation. But I'll just let Tom talk to you a little bit more specifically about the land market at the moment.

Jonny, the -- so land market is competitive. So you're probably used to sort of a number of years where people have gone from it's benign to soft. It is neither benign nor soft, but it's not ridiculous. So it is -- people who have not been in the land market now need to be in the land market. Every house builder is looking to build up outlets, and we are in that market. I think it's true to say that you have to work really hard on land acquisitions and you have to be hugely competitive. Fortunately, we're both, and we've been successful in securing some really good assets across all the divisions. With regards to the provision of future homes, absolutely, we are buying -- knowing that we'll be delivering beyond 2023 and beyond 2025. So we're making our assessments. And as Pete said, David will highlight that this afternoon with regards to the stages that we're going to have to implement for both fabric and beyond that in the delivery of the home. So yes, we're building that into our land appraisals. I won't give you the specific cost because I think others may use them.

Just one more thing to add on the land market, which I think is really important, and that's -- this is where our scale really helps us because we are on the top table here, highly experienced land practitioners. This is what we've done as a day job. And being relatively small does help us because we get involved directly in every deal. You don't have a situation where the local land buyer has to talk to the local MD who has to talk to the divisional MD and the divisional chairman and the chief operating officer and then the chief exec and somebody finally makes a decision down the line. We have visibility, us here, of all the land transactions that we're looking at, at any one time and talk directly to landowners where necessary to give them the confidence that we are behind the bid and we'll support it and we will transact. We have a high degree of reputation for reliability. When we say we'll do something that we do, that is really powerful in the land market where you have 3 really important words subject to contract, where anybody can say anything with impunity. Reliability really means something, and we've got it.

Aynsley Lammin from Investec. Just 2 for me. On the 5-year financial targets, am I correct in thinking that you aim to be operating with a kind of net cash balance throughout that 5-year period? And then secondly, just interested here what you've assumed around Help to Buy. That just disappears in '23 and that's the end of it? Or do you think there might be an extension? Do you think the market can be quite resilient with that fading away of Help to Buy?

I'll pick up the second one. Help to Buy is going to be phased out. I don't think that it's impossible, at a later stage, some other government scheme which helps to bridge that affordability gap in the South can be introduced. But we haven't assumed that in the strategy period. But the house builders working with a number of the financial institutions have got a product called Deposit Unlock, which is not dissimilar to say the New Buy product that the industry was utilizing just before Help to Buy came in. It's a very good product. It works in a similar way to Help to Buy. It is not as attractive but it's very nearly so. And the financial impact of that is very visible to us. It tends to come out of the overall gross to net deal, so there's no margin impact as such. So it's not a product that I think is going to get massive traction when it's competing directly with Help to Buy. But if Help to Buy is phased out as is planned, I think it will grow in importance and help bridge that gap. Tom?

So we've already got -- announced 2 lenders: Newcastle Building Society, where the product is live; and Nationwide, very imminently. And as Peter said, that will provide the 5% loan-to-value -- as said, the 5% deposit and then unlock the loan-to-value mortgages available for them at competitive rates. So we're seeing interest already in the product. But as Peter -- and for some of our sites which fall outside of the Help to Buy regional caps, particularly in the Midlands business, we're already trading; in effect, not utilizing Help to Buy. So the market demand remains strong in those areas, and we're able to secure good sales rates.

Yes, Aynsley. On the cash piece, I mean, I'm not going to put another piece of guidance that we'll be bound by. I don't think we need to be. I think what I would ask -- what I would say is if you look at what will end up turning on net cash through the end of this year and you put our volume growth over the top of it, you'll come to your own conclusion in your model as to how you think that cash profile goes out over the next 5 years.

Sonya from Aberforth. I'm wondering what your thoughts are on the macro impact on the housebuilding sector in general. Will inflation and interest rate rises be a good thing or a bad thing for house builders? In one sense, NPV decreases with rates going up, but in another sense, houses historically have been seen as an inflation hedge. So I'm a little bit torn between the 2 schools of thought.

Yes. I think it's around the interaction between 3 things. I think 3 things are going to happen. There's going to be an element of consumer price inflation. I think we're seeing some of that now, but we're also seeing it beyond consumers. And then you've got at what rate will interest rates rise. We know they're going to rise. But at the moment, the music is it will probably be small and late. And then, what happens to wage growth. We're seeing some of that wage growth come through. So if all 3 are broadly in tandem, I think we'll see relatively stable market conditions. But as I set out in the market context, if we would see wage growth really get away very quickly, and it's the surplus income that's the important bit because that will be what could be deployed to the housing market, and we started to see house price rises growing quickly, exponentially even, ahead of mortgage rate rises, I think that could be quite difficult for the market. But so long as these things work in tandem with each other, I think we'll see a stable market. I think the element of hedge, I can see that in the event that they're working in tandem but not otherwise because if they don't, then some correction will be required, which will create more volatility. I think we've got one more. And then it's neatly 12:00 and lunch.

Jon Bell from Deutsche Bank. I've got 3. But I promise they're quite quick ones, and then everyone can have a bite to eat. The first one is the Crest Nicholson brand is certainly going to be new to Yorkshire folk. Is that a problem? I suspect that will be a quick one for you to answer. Another quick one might be on bricks and other constraint really on production. Have you or would you consider concrete alternatives? And the third one, your Achilles heel in the past, certainly before you guys took the helm, was around margins. It's pretty clear that you've addressed the swollen cost base part of that. Is there anything structural around margins in the South and Southeast that you'll effectively be diluting yourselves away from by expanding into those new regions?

No. And in terms of the third question, I'll answer that first. No, absolutely no intention to dilute margins or returns. And no, there is nothing structurally wrong with this organization which would mean that we couldn't have exactly the same margins as our peer group. In fact, in the -- and Tom will come onto this when we look at some of the slides in his presentation around what we're buying land at. But fundamentally, it comes back to your input price and the assumptions behind that, which is your land. And we are buying land at margins which support the margins which we're projecting in this business plan. I mean on the piece around brand and moving into Yorkshire, I think brand is more than a name in housebuilding. It's more about how your sites look and feel and how the product will appeal to the local markets in terms of the elevational treatments, the vernacular. So if you like, the badge Crest Nicholson, whilst it will be unfamiliar, I'm perfectly confident that we can compete in any of those northern markets on the quality of the placemaking and the product itself. I think you said there was 3. Did I miss one? Oh, bricks. Tom?

But I'll also mention the brand. So I've re-badged quite a few house builders in the past, including Linden in Yorkshire actually, which is an unknown brand then, and it really doesn't impact. What it does, it gives you the opportunity to -- negatively impact. What it does, it gives you the opportunity to really put something fresh into the marketplace with a differential. And as Peter said, fundamentally, it's what you're building and how you deliver to your customers. And I'm very confident we can replicate what we do down here and as we go further north in Yorkshire. And of course, Nicholson is a familiar name in Yorkshire. So with bricks, now -- one of my pet subjects, and the guys here know how much I embrace the use of concrete.

Clearly visible.

We use concrete bricks across -- not all of our outlets but across a number of our outlets across all divisions. And fundamentally, it's because they are a good brick. I would challenge anybody to spot the difference. I have some bricklayers who have now got slightly bigger muscles because they tell me it weighs a little bit more. But we can deliver pretty much the same output with the modern concrete brick as we could do with the clay. There are lessons you have to learn, and you have to understand how to lay them and the platforms that need to be provided for the teams to deliver on. But once you've learned that, and you learn it very quickly, it is a very good alternative to a clay brick and has a number of other benefits.

Thanks very much. So let's now break for lunch. We're due back at 12:45. [Break]

Well, good afternoon, everyone. Really good to see you. I'm not going to take it personally, but I think I'm the only one who hasn't had a musical introduction. So -- but anyway, as you've heard, I've been tasked of bringing our strategy to life to an audience after lunch, so no pressure. We set out our strategy -- our strategic priorities for the business just under 2 years ago, identifying key -- existing key strengths, our reputation for placemaking and our land portfolio. That could be further strengthened with a new focus on operational efficiency and 5-star customer service to reestablish Crest Nicholson as a sector-leading volume house builder. Key to achieve this has always been to establish a highly efficient, sector-leading operating platform that would allow delivery and alignment to our strategic priorities. I'll be taking the next 20 minutes or so to highlight the significant progress achieved within the adoption of a culture of best-in-class operational standardization, incorporating new house-type range and overhead structures, resulting in an enhanced customer experience, land bank optimization and a market competitiveness that has delivered the margin evolution we have achieved and are forecasting. Finally, I will be providing further detail on how and where we'll be replicating this effective operating platform to deliver sustainable growth in volume and high-quality earnings in the new identified geographies. On my next slide, in January 2020, I set out the plan to deliver the operating platform that would also ensure the strengthening of the Crest Nicholson brand as a house builder of quality homes, delivering great placemaking and a 5-star customer experience. To successfully achieve the full operational benefits of standardization, we had to have an effective housing portfolio that would be fully adopted by all the operating divisions, delivering efficiencies to all departments across the development process as well as the aspiration and requirements of our customers. At the time, I think I conservatively said I had over 128 house types being delivered across the divisions. I think if I was truthful, it's more than about 150. But at the start of the 2020 calendar year, we had developed and issued our new specification, enhancing quality and consistency and our new range of 24 core house types with 14 further, what I call, toolkit options that provide the teams with variations to some of the core house types to be able to respond to market dynamics, customer aspirations and local design guides by taking some of the 2-story homes and making those 2.5, 3 stories on the same footprint, providing increased accommodation and varied street scenes. The houses gave the land department, during the acquisition process, the ability to fully optimize value-enhancing coverage with optimum frontages. The procurement and production process was improved by the standardized engineering within the structures, reducing complexity and management time to not only our own teams but also that of the supply chain. Our sales team's knowledge and understanding of our houses increased and increased the robustness of our pricing and target market knowledge as well as ensuring capture of value-add features. And finally, of course, our customers benefited from optimized accommodation and improved quality. The new house type range has been further refined with a reduction now to 20 core house types and 12 toolkit options that are now being utilized across all the divisions. And I'm delighted of the excellent progress that we've now achieved by the divisions with over 74% of our open market houses within our land bank now reflecting our new range. The immediate adoption also underpinned our ability to enhance value not just in our short-term land bank but also in the strategic land pull-through and in new acquisitions. We are forecasting that this year, the new range will reflect about 28% of our open market completions. In the full year 2022, this increases significantly to 80% of the open market housing completions, with over 85% in 2023. The next slide covers the operational efficiency delivery. And as I stated, the core house type range needed to deliver both being impactful to our customers but also impactful to our supply chain, delivering for our customers in terms of aspiration and requirements whilst also achieving the targeted commercial benefits from our supply chain and allowing us to deliver on our core strategic objectives of quality, excellent placemaking and a consistent 5-star homebuyer experience. Now these photographs show a great example of how our Keswick house type delivers a very different appearance on 4 of our developments, clearly highlighting the flexibility of elevational treatment. Now this gives the autonomy to the local teams to ensure that they can address local planning requirements and deliver excellent placemaking whilst benefiting from the standardization of the core engineering, allowing full operational efficiency and cost effectiveness to be achieved. Now colleagues in the front here will be delighted to hear that I'm under strict time constraints. I will therefore refrain from highlighting the differentials designed into each house type because once I start, they know I tend to get quite animated. Needless to say, Peter may try and take some of the credit, but they're all mine and they're really good. In summary, the houses maximize the use of space, and you'll be able to see the Keswick and Romsey house types later with -- when Alex and his team take you around the site, and how we have optimized the floor plans to achieve accommodation that delivers to our customers. Whether wanting their first attached 4-bedroom home such as the Romsey or the next stage, Keswick, both allow for a kitchen family dining area and utility, which is so important to these customers, with the Keswick additionally providing the ground floor study or now home office work space and larger bedrooms. Operationally, since the house type range has been introduced, all divisions have seen an increase in the number of subcontractors now seeing Crest Nicholson as a house builder of choice. Our subcontractor supply chain, despite market demands, has increased on the back of this. Because of the standardization and increased quality of our working drawings, we have seen a doubling in the return of our tender packages, previously 2 to 3 has increased to 4 to 6; on significantly reduced time scales, now 2 to 3 weeks compared to the 6 to 8 weeks that we previously saw once our subcontractors had received our working drawing packages. With the new house types being built across our sites, subcontractors and our own site teams are now experiencing the new engineered efficiency and we've -- that we've designed within the units, which is reducing not only our management time, but also the build risk profile to our subcontractors. And this has been reflected in reduced build costs and build times: on average, GBP 8 a square foot on our superstructures and 7 weeks on average on the build periods. The operational efficiencies that we've put in place has enabled us to effectively manage the current supply chain challenges. In addition, a comprehensive suite of standard working drawings and details has resulted in a reduction also in our technical plot fees. On average, we've reduced these by just shy of GBP 1,800 per plot. And the wider benefits include enhancements of our health and safety policies and having set -- and introducing a set of robust preprepared temporary works packages to address known delivery risks. The standardization and optimized designs has also contributed in achieving our ESG objectives of reducing waste and securing a high-quality supply chain aligned with our sustainability criteria. With regards to divisional overhead structures, on the next slide, the standardization of the product offering has allowed us to implement and deliver simplified divisional structures that give clear responsibilities and ownership to the departmental teams and job roles. This has removed the overlapping and the previous complex ownership for delivering targets pre and post securing planning and starting on site, resulting in reduced time scales and departmental head count. We've implemented positive change across the divisional leadership teams, both at the MD -- divisional MD level, as Peter highlighted, but also in the director-level teams as well in the regions, both through external recruitment as well as, I'm pleased to say, promotion from within our existing teams. The decisive actions we took to put in place these experienced teams has allowed us very quickly to implement and embed new standard processes and procedures. The introduction of functional forums for the key disciplines, which is now -- which have now been established, and these are attended by departmental directors from each division and is chaired by one of the divisional managing directors. These forums continually assess all aspects of our delivery, whether it's our own operational process or assessing potential external regulation changes and to develop best practice. The objective is to produce the single most effective way of delivery, which, once agreed, will be adopted fully by all the divisional teams. The utilization of benchmarking provides a visible performance indicator of what good looks like and I know colleagues, again, will agree with me, maintains a positive focus for the teams. However, the results reflect the success of this approach with enhanced productivity achieved, with full year 2021 forecast to show a 33% improvement, increasing to 100% by the end of the full year 2026 when compared to that of 2018. Because of this increased efficiency and productivity, the operating divisional overheads as a percentage of turnover continue to reduce, delivering ongoing improvement to operating margins. Our building teams for the future is a key part of our strategy. And we're delighted with the success of our management trainee program with further 25 new colleagues joining, and we now have 50 trainees across office and site-based disciplines on this 2-year program. The implementation and full adoption of the standardized approach across the divisions has ensured that we have also been able to deliver on our strategic priority of 5-star customer service. The homes we have designed and now delivering to our customers, as highlighted before, provide us with the ability to enhance the quality and brand consistency of the customer experience not just in the build quality but also in our team's product knowledge, ensuring an overall more professional and rewarding experience for our homebuyers. This has been reflected in the 5-star customer satisfaction rating that we have achieved over the last 2 years and tracking positively for the current year. But we're also seeing this improvement reflected in other independent customer performance measures such as Trustpilot, where we've taken a star rating which is just above 3, 3.2, this year, and if I was giving you the speech yesterday, to 3.6. I'm delighted to say however, and I checked it this morning, we're at 3.8, 4-star green rating. So a huge improvement being delivered by our teams to our customers being reflected this year. Not that we're satisfied with this, and I'm intending that we improve continually to drive improvement on this measure over the next year. We've invested and delivered a new CRM platform and a new website. Our website has enhanced the customer experience. And both platforms allow our teams far greater visibility to our customer journey and ensuring measurable and visible lead progression. A rollout of our new brand guidelines ensures that we deliver a consistency of message, have increased the quality of our marketing material and increased the effectiveness of management time and investment. This has reduced delivery times by half for sales opening on site and increased the effectiveness both in discretionary marketing spend, shown here with a significant reduction in cost per lead by over GBP 300; as well as the core marketing collateral both -- such as show areas and brochures, both reducing costs in this area by circa 66%. This slide focuses on the achievement to date within our existing land bank and recent acquisitions, which is setting us up to deliver on our strategy of volume and margin growth. We have been reporting on the enhanced value and operational efficiency benefits embedded or identified in the short-term land bank, now delivering the margin evolution achieved to date. In addition to the new land secured in 2020, the land acquisitions approved year-to-date in 2021 is at an average of 26.6% gross margin after sales and marketing. And the pull-through from the strategic land bank is forecast at 27% gross margin, again, after sales and marketing. And this underpins our ability to achieve our objective of achieving sustainable operating margins between 18% to 20% by the full year 2024. The house type portfolio and operational efficiencies have now delivered the regional divisions with increased competitiveness to secure new land in the open market with hurdle rates aligned to our strategy. With this competitiveness established, we have been able to secure developments with a lower risk profile, development of traditional housing schemes in core regional markets and not relying on the complex developments or an aspirational premium on local sales values. The replans achieved plus the new acquisitions of housing-led schemes as well as build out of apartment-weighted developments sees the reduction of apartments from our -- from over 40% of the land bank in 2019 to under 20% in 2024, obviously ensuring far greater efficiency in work in progress and ongoing improvement to our return on capital employed. So no presentation complete without a case study, and here it is. So this is Highlands Park, Henley. The case study shows clearly the strategy we have been implementing, and you will see further evidence of this with Alex' overview later on our scheme at Wycke Place here at Morton. So the Henley size is about 3 miles from the center of town. We secured planning in 2017 with a mix that reflected 2-bedroom apartments from about GBP 450,000 and larger family homes up to GBP 1.5 million. Although Henley is a strong regional market, the mix and pricing -- with an average selling price of GBP 824,000, limited the target market. And this was reflected in the unsustainable or, I would say, unacceptable sales rate achieved from the launch of the development in February 2018. A full review of the scheme was implemented by David and the team at Chiltern, and revised planning was secured in August 2020. This increased the coverage and changed the mix, removing the future product extremes and delivered homes to reflect market demand and pricing. The new house type range was used and reduced average square foot of the homes to 1,230 square feet and the average selling price to GBP 637,000. The outcome, we're now delivering increased value and an acceptable robust sales rate. But as both Peter and I have previously highlighted, optimization is an ongoing process, and a further identified enhancement has been secured via a nonmaterial amendment. That's something which has been agreed with officers, doesn't have to go back to committee, on 8 of our 2-story core house types, optimized from the toolkit and turning them into 2.5 story homes, delivering additional bedrooms and a further GBP 200,000 to the margin. A key part of this -- of the success of this optimization, not only to have an effective housing portfolio but it's also the engagement that the team has undertaken with the local community and planning offices, building trust and confidence in our commitment to develop responsibly and deliver developments at high-quality placemaking. This has allowed us to promote a further opportunity, and if you look on the slide, it's called the Northern Field and it's the -- funny enough, the land to the north on the site plan that you can see; and relocating existing commercial units, which I've highlighted in the red circle to the south of the existing site plan, to a more sustainable location and deliver wider community benefits along with additional residential units within this area. The logos, and you probably can't see them but hopefully, you can read them in the pack, highlight the wider community benefits we identified through our engagement. And we promoted those when we promoted the site. And pleasingly, we secured local support to include our proposals within their local neighborhood plan for about 110 units commercial and community buildings on the Northern Field and around 30 homes on the land vacated by the current commercial land to the south. Now Highlands Park is an example of what we are achieving not just in the Chiltern division but across all our divisions and what will be achieved also in our new divisions. Now Peter has already highlighted the areas identified for geographical expansion. And I have shown how our operational platform is now one that can be replicated to deliver continued sustainable growth not just from our existing business units but also from the planned new divisions. Both of the new geographies are known and both provide strong market dynamics. We have identified divisional office locations which will allow excellent access to the regional markets. The location for Yorkshire will be south of Leeds and Wakefield. And both Peterborough and Bury St Edmunds are viable options for the East Anglia division, and we'll be finalizing this shortly. Both geographies provide opportunities across a significant number of strong regional centers. And whilst there are known planning constraints in some of these, there are a significant number of local planning authorities that positively support development and the investment that, that results in. We see demand continuing to be robust and opportunity to increase the new build market share in these locations. The priority is to deliver growth with no compromise either on the quality of the homes or the quality of the service that we deliver to our customers, and we certainly will not be compromising on the quality of earnings and on our land investment KPIs. The previous slide shows that this can be achieved and will be delivered. Our plan reflects an established playbook that we have implemented previously. We have commenced initial investment into establishing core teams. These will be land led but with both technical and commercial roles in support. During the first 12 months, finance, sales and wider delivery teams will join, all with operating knowledge of the regional supply chain and market. In the immediate term, our existing divisions will provide necessary support initially as required. During the calendar year 2022, we will have core teams established for both divisions, with first land opportunities secured to contribute to full year 2024 delivery. Within the plan, our investment profile reflects average selling prices of the new regions and incorporates PRS delivery aligned to our strategy. Our land investment profiling, including provision for anchor sites, will see the new divisions increasingly contribute and with our disciplined approach, maintain sustainable growth during and beyond the plan period, as reflected on the graph. Well, thank you very much. I'm now going to hand over to David who will be taking you through the sustainability and future home strategy.

Thank you, Tom. Good afternoon, everyone. As Tom said, I'm going to look at how we're adapting for the future. Before I do that, just a little bit about me because you won't all know me. So I'm David Marchant, Group Production Director, part of Crest's executive team. I'm going to outline how we're going to be adapting to the new world. So as Group Production Director within Crest, I manage a number of our group functions such as technical, sustainability, safety, health and environment, procurement, quality assurance, those sorts of internal functions that -- or group functions that provide an advisory and support service to our divisions and an extra assurance layer to ensure that we're working in the way in which we set out as an executive team. I lead the development on some of our strategies for dealing with an unprecedented amount of regulatory change. You have all seen it. It's primarily driven by climate change but it's not just the climate change agenda. And I'll touch on some of the other drivers shortly. In the early part of my career, I was in the design side of our sector as a chartered structural engineer. I then moved to the regulatory side of our sector with NHBC and more recently, in large home builders. And I joined from Bellway Homes to Crest in 2019. And I'm hoping that this varied experience at all the different sides of our industry will equip me well, and I'm sure it does equip me well, to understand the new regulatory change and convert it to practical implementable solutions within our business. So I suppose, amongst the executive team, I -- you could refer me as the -- to me as the techie one. So there is an unprecedented amount of regulatory change. The momentum behind the need for climate action is irreversible globally. Of course, we've got COP26 on the doorstep shortly. The U.K. has set targets for net zero by 2050 and interim targets of 78% reduction by 2035. And there are other changes in the offering around consumer protection and building safety, particularly on the back of the Grenfell tragedy. They are all hugely important issues. We're taking them very seriously. We've committed resources to all of them, and we think that's the responsible thing to do. We think it's what we should do. I think it's what you as stakeholders would expect us to do. What's interesting in homebuilding is that there's a really strong and developing regulatory framework which supports this area. So we've got the new Future Homes Standard. We've got changes to the building regulations that would deliver new thermal standards to the buildings, new standards to prevent overheating in our buildings, EV car charging, new accessibility standards. The Building Safety Bill will deliver a new regulatory framework, and it will impose a new safety regulator in the HSE. And we have the new homes ombudsman. And all of those areas will require us to develop and hone our formal processes for quality assurance and consumer protection, and we're going to embrace that because that is what's required. On top of that, you've got the Environment Bill, which outlines our requirements for things such as sustainable drainage systems, biodiversity net gain. And I have to say, I mean, I've worked within the industry for almost as long as Peter. 37, 40 -- well, 40 years actually slightly longer than Peter, if you -- I don't reckon. It is 37 years. 40 years, and I've never seen such a tidal wave of regulatory change, those we're experiencing now. The way we handle this change and the way we adapt for the future will be an essential part of us delivering strong, sustainable financial performance as well. Next slide. Thank you. Look, we're very proud of the fact that we've got strong ESG foundations in place. ESG within our business is fully integrated. We believe that is the most effective way of doing it. It's far easier for initiatives to stick if there's a win-win scenario for business and environmental and social outcomes. And I'll give you some practical examples of this later. The climate change whirlwind coming in. Can you still hear me? We've set ourselves really challenging short-term environmental objectives, and we were one of the first homebuilders to drive immediate action by also linking this to executive remuneration. We've made good progress on preparing for the financial regulation, this forthcoming known as TCFD or the Task Force for Climate-related Financial Disclosures. And this requires companies, such as ourselves, to disclose financial risks and opportunities emanating from climate change. And we were really pleased to be in the top 3% of companies and 1 of only 3 homebuilders with A grading for the climate change management benchmark called CDP or Carbon Disclosure Project. And the most recent recognition is -- we've got widespread recognition for our ESG credentials. And the most recent one was the FT climate change leaders. So our commitment to ESG is unwavering. We'll continue to integrate it within everything we do. I'm going to spend a bit of time now talking about how we're preparing for the Future Home Standard and developing our climate change strategy. So I think what I'll start by doing is telling you a little bit more about the Future Homes Standard. It was developed by a task force of 19 individuals from across our sector, co-chaired by the HBF and an independent organization appointed by government. And they've developed a framework for the industry to develop sustainable future homes. The framework covers a number of categories that you see on screen. So the homes that we build is one of the elements of this framework. And this will largely be delivered through the building regulations. It covers things like thermal efficiency, preventing overheating, internal air quality, safety, accessibility, et cetera. So it's the attributes of the home itself. And then it covers the places that we build. So this is about beautiful, sustainable placemaking, local access to transport, et cetera. And this will be delivered largely through the planning requirements. It will also cover things like managing flood risks, sustainable drainage, biodiversity net gain, et cetera. And the last 2 areas that you see on screen here are very much about us as a business. It's about our production processes, our business operations. So it's the way we build our homes and how we can reduce our impact on the environment, how we can reduce carbon -- embodied carbon, reduce waste, reduce the water that we use and generally, our carbon footprint. So this is the framework that has been developed by leaders within our industry, and it sets a bit of a road map between now and 2020 -- sorry 2050. Okay. Let's go ahead. So let's look just at what a Future Home might look like. For those of you who are in the audience today, are not listening online. My colleagues and I will be really pleased to point out some of the attributes of these homes when we go out on site at Maldon generally. I've got some samples at the front of the room of the gizmos that we'll be building into our homes of the future, if you want to talk technical with me at the break. And I'm happy to receive a call at any time if you want to follow up on this. So the future homes will be delivered to start within 2 phases, 2 stages: From June 2023, every home that we start will have to have an increased energy efficiency of 31% on top of the current requirements. And then there will be a further improvement in -- sometime during 2025. And then homes will have to be 75% more energy efficient than they currently are. And they also won't be connected to fossil fuels. There will be no gas on sites from 2025. Now the government hasn't precisely outlined the requirements yet of future homes. So what I'm going to do is take you through our interpretation of what this means to the homes that we build. So I'll give you the recipe or the mix, if you like, as to how the homes will change. So starting with the diagrams at the top of the slide that you see on screen. You start off -- the first part of the recipe of the mix is that you start off with a highly thermally efficient fabric of the building, the envelope of the building, the roof, the ground floor, the walls. So you'll see better insulation in the cavity walls, which you see top left. You'll see better insulation in the ground floors, which you see in the top middle on the diagrams there. And you'll see in quite a lot of homes, probably triple glazing rather than double glazing. You then add to this a highly efficient fabric, a detailing that stops heat escaping. So you use -- the type of detailing that you see middle-left photograph there, that's lintels, which has got polystyrene in between the external metal and the internal metal so that heat can't escape through the metal infill. You do things like make the home very airtight, so that warm air can't escape. So fabric and then stop the heat escaping. And then you add to that mix, that recipe, highly efficient technology, okay, and you use heat recovery systems. In 2023, we'll probably be having to use more heat recovery systems. And what you see in the center of the -- the center diagram there depicts warm water coming from a shower. And as it comes through the waste pipes from the shower, it heats up cold water coming into the home such that the gas boiler don't have to heat up the water quite so much. So things like that to make our gas boilers and our heating more efficient. And we're likely to have to put more PV panels on the roof, as you see, middle right. So that's the sort of things we'll have to do in 2023. And then from 2025, the changes will be much greater. The wall constructions will be even more thermally efficient. You'll need even better insulation in them. There will be no gas boilers. Heat pumps are the government's preferred solution. And at least in the short term, I think that electricity will be the only game in town in terms of the energy. And what I've given you on screen is an example using masonry, but you can equally apply this to a timber frame. So summarizing, the -- your cake mix is highly efficient fabric, stop the leaks, and use innovative technology. Okay. Externally, you won't see a lot of difference to Tom's house types. They'll still look beautiful. Let's just look at the impact of future homes. And there are both risks and rewards to this agenda. There must be opportunities, mustn't there, because this new home is a low-carbon home. It's more energy efficient. You've got an increasingly environmentally conscious consumer, conscious about their energy bills. And there should be a good news story for the new homebuilding industry for our product versus the existing market product. But there are also risks for us to manage very carefully. The supply chain will be stretched, particularly during the transition periods as the regulations are introduced. They'll use new technology, new methods, need new skills. We'll have to work with our customers. They'll have to get used to a way -- the new ways of using a home. They won't be able to come in through the front door, switch on their gas boiler and be nice and toasty warm within 10 minutes. They're going to have different heating systems running at lower temperatures on for a longer period. And we are going to have to educate customers or we will get complaints. And we'll have to manage the transition from the gas infrastructure to an electrical-only infrastructure, and we'll have to be really careful about the technology that we choose such that it doesn't cause us risk and our customers risk. But we're in a really good position to deal with these changes. I'm a member of the Future Homes Hub oversight committee. The Future Homes Hub is an organization that's been set up to develop practical solutions for the industry to take on board these regulations. So I'll have really good view, early view of what's going on and the ways in which we can deal with it. A number of my colleagues are on other, more technical committers. We'll have a research and development program in place. We're already working with our supply chain, looking at the potential solutions and what those solutions might cost. And we'll undertake trials of all of these solutions. And the trials will become more frequent over time, actually, because more of our partners will wish to work with us to develop the trials, for example, Homes England. And in some areas of the country, the planning authorities are already asking for higher levels of thermal efficiency. So we will have trials through that mechanism as well. So we've done the early design work here. We expect the final requirements to come through from government late this year or early next year, along with the software that we can test out the designs that we've put in place. We'll then hone these designs over time, and we'll develop them into repeatable standard approaches. As for the costs of future homes, you'll appreciate there are a range of outcomes here. The -- a detach time, when you apply these standards to a detach time, it will cost more because there are more external walls and more space to heat, et cetera, whereas for a smaller terrace home, snuggled up next to his neighbor, the -- there are fewer external wells, less heating required, et cetera, and the cost will be less. And we estimate that the average cost per plot for phase 1 of this change in 2023 will be in the order of GBP 5,000 per plot. And we think that from 2025, there will be an additional GBP 10,000 per plot. And we've costed these into our business plan, and we cost them into the land acquisitions that we make in the future. We do believe that off-site manufacture will become a larger part of the mix. We use off-site manufacture very frequently now. We use -- we have timber frame developments, and we use a lot of component off-site manufacture on a smaller scale through roof trusses, dormer windows, et cetera. But we do think that this will be used more in the future. As an organization, though, we don't think there's a first-mover advantage in developing any new off-site manufacture products or systems or making any acquisitions as such. We'll continue to use tried-and-tested solutions developed by others. So we're taking a pragmatic trailing edge adoption of such OSM, rather than a costly and risky leading-edge development solution. Okay. Moving on to climate change. We're really proud to have taken a positive position and positive early action to reduce our impact on the environment. The targets that you see on screen are those we committed to 12 months ago to reduce carbon, to reduce waste and to increase the use of renewable electricity all by 2025. And I'm pleased to say that we're ahead of target in all of these areas. For carbon, we expect to deliver reductions in excess of 10% this year, a trajectory which is well ahead of the target that we set ourselves. And if I just give you a few practical examples of the way we're doing this. We try hard to get rid of diesel generators really early in the development of a site. So we try to get our compounds onto the electricity -- mains electricity really early. We rightsized our diesel generators. And if you need a small one, we have a small one. If you need a big one, you have a big one. And we monitor by spying the camp-type technology how our on-site plant and machinery has been used. So we can see whether a forklift truck is standing around idling with the engine going, for example. So we have used far less diesel this year, and this is the biggest component of the CO2 we produced. We've used far less diesel this year, and it's a great example of that win-win that I was talking about earlier. It's a win for us because we spend less on diesel. It's a win for the environment because we've used less diesel. We've also piloted on at least 2 sites per division biodiesel and had some really good feedback on that pilot. And we've saved over 300 equivalent tonnes of CO2 through that method. As you can see on screen, we've massively increased our renewable electricity use, 32% to 55%. And our waste reduction this year will be in excess of 10%, again, largely by Tom's house types, no doubt. So -- but that's -- seriously, that standardization is a massive part of reducing waste on site. So we're really pleased with the progress that we've made in reducing our impact on the environment. But we now wish to accelerate this and take more action. So we're really pleased to announce today that we have become signatories to the Business Ambition to 1.5 degrees and joined the United Nations Race to Zero campaign. So in doing so, we commit to achieving net zero emissions across our whole value chain by 2050 at the very latest. And we commit to developing ambitious interim science-based targets, independently validated by the Science Based Targets Initiative. Now we already report on our scope 1, 2 and operational scope 3 emissions. But as you can see from the depiction of the iceberg on the right-hand side of the slide, this is actually a relatively small part of our carbon emissions. 90% our carbon emissions are emitted from the products that we use and the homes that we build when they're in use. Now whilst the future homes agenda will make a really big dent in that carbon that's used in the homes that we build, we will have to engage very strongly with our supply chain and work collaboratively with them to ensure that through our whole supply chain, we're reducing carbon within our organization and with our -- in our industry. It's another example of the importance of our supply chain that Tom touched on earlier. So we're really excited about this new part of our journey. And we're going to report again in spring 2022 on our finalized interim science-based targets. So in summary, we've got strong ESG foundations in place. We're recognized as a climate change leader, and we're committed as an executive team to remain so. We think that's the right thing for us as an organization. We're committed to delivering a positive impact on society. There is unprecedented regulatory change, more than I've seen in my 40 years in the industry. But we're in a really strong place to adapt to the new world. We've prepared well for this regulatory change. We've costed the regulatory change into our plans. We're proud of the start that we've made to reducing our impact on the environment and excited about the new challenges from the Race to Zero and science-based targets. So thank you for listening.

On the first section.

Glynis Johnson, Jefferies again. I'm going to repose the question on off-site manufacturing, particularly about the surety of supply, which you said are [ bound ] by an off-site manufacturing business in the U.K., with another one up for sale. So over to you -- wanted to understand your thought process behind your move towards off-site -- increased use of off-site manufacturing and securing supply to make sure you can build. And then in terms of Future Home Standards, [indiscernible] they all come to you. You talked about phase 2 costing approximately GBP 10,000 per plot. Government earlier this week talked about planning to reduce the cost of an air source heat pump from GBP 10,000 to GBP 5,000. So maybe you can give a little bit of color about what goes into your GBP 10,000 because over time, the cost of the air source heat pump will not be much more.

And it's an additional GBP 10,000. That's GBP 5,000 plus GBP 10,000 that we had for phase 2. But David, would you like to pick those up, please?

You might want to pick on...

Yes, I'll add something on the off-site manufacturing.

Yes. The -- this is quite -- as I've mentioned earlier, this is really variable, dependent on the size of the home and the layout of the home that we have. So the GBP 5,000 that -- for the first phase takes you up a level in terms of your fabric efficiencies. So you get most of your fabric efficiency from the first GBP 5,000 that we talked about. There is a small addition of it, assumption for increased fabric for 2025 as well. The GBP 10,000 allow us for some supply chain upscaling and some supply chain costs, so increased costs for our subcontractors fitting the technology. It accounts for the technology itself. So these are actual numbers that have come from our suppliers of air source heat pumps now. So I'm not sure where the government's figures came from, but so...

[indiscernible]

Yes. So we do have the benefit of buying things in quite a lot of bulk. So this fabric, this new technology, it's supply chain costs that have all been factored in. And we've done this across 10 of our house types, across a range of our house types. You have to appreciate that the government hasn't even finalized their requirements yet. So we are -- these are really strongly educated guesses. We are seeing beta test software at the moment to enable us to do this. And it actually ranges quite significantly from -- even phase 1 ranges from something like GBP 2,500 to about GBP 7,500. So that GBP 5,000 that I gave you was -- very much swings around and about. And when we do our land acquisitions, we will look at the mix of homes on a particular site. And if we've got a lot of smaller homes, you might end up with less than GBP 5,000 and GBP 10,000 per plot. And if the mix is different, it will be different numbers. So I don't know -- how so I answer that. It's sort of -- I'll give you, sort of it depends on, haven't I? But it's very variable, the subcontractor and the product costs are included.

Okay. And to be clear, the air source heat pump step change is in the 2025 and not with respect to the '23.

Yes. So in 2023, you will be seeing more things such as, I've got at the front here, the heat recovery systems for wastewater where you -- and it's quite interesting. The -- I mean that will save about 25%, 30%, 40% gas just because you're warming your water by about 15, 20 degrees. So you've got wastewater heat recovery and there's another wide box of tricks down there, which is a gas flue heat recovery. It's like a box that sits on the top of a gas flue. And again, it warms up the water before the gas boiler warms it up. So you use that type of additional technology on top of the gas boilers in 2023. By 2025, we're totally off gas onto our source heating. So...

Let me just touch on that off-site manufacture. And we're not trying to teach granny to suck eggs. If you go back to basics on this, if we were like other sectors, if we're like the motor industry where we simply, as a sector, have to just meet a technical requirement, then there's no reason why you wouldn't invest in a factory to go and produce something. Because the only regulatory concern, if you like, would be around can we meet that technical challenge. Our sector is different because every product that we have, every planning application that we make, goes before a planning committee, and an awful lot of those decisions are highly subjective. So we can't have the situation where you invest considerable sums of money upfront, but then have that production efficiency wholly compromised whilst you wait for delayed and inconsistent decisions. We simply have a planning system at the moment, which is not user-friendly for large-scale investment in a completely different way of producing housing in the U.K. Now it might for certain subsectors, for example, around affordable housing, PRS, it could work better because you get advantages of speed that you wouldn't necessarily get with private individual home sales. And also -- so I'd say I have no doubt that in the future, in the longer term, this is where we will all go and need to go. But as David said earlier, there's no real first-mover advantage here. During this strategy period, there still will be enough plumbers, electricians, plasterers, roofers, bricklayers to service our need. But we will have to get more productive. We will have to increase our efficiency in order to reduce the need for maybe 10%, 20% of the labor that we currently have through use of off-site components and just through standardization and efficiency that we can drive ourselves. So that's really our strategy. But I agree, in the longer term, there probably will be a different answer, but it's not for now. John?

Thanks. It's another one for David, actually. Where is the supply chain for sort of 200,000 or 300,000 air source heat pumps by '25 in the U.K.?

The -- already we're using this technology. And you're right to point out that one of the risks is can the technology we're using now in a relatively small case -- small-scale basis be ramped up. We -- our sector, believe it or not, is a very small element of the current use of this type of technology. It's almost there. It's like an air conditioner in reverse, isn't it, an air source heat pump. So there are Mitsubishi, Baxi. There are lots of manufacturers of these products that I'm pretty confident will have enough products by 2025. And I think we've actually priced into our assumptions the price, for example, of those products as they're manufactured now. And I wonder if there's a little bit to come our way through the extra volume of these products later. But it's technology that's used now. It's just not used to scale. And it will be interesting how organizations like British Gas and the other big suppliers and fitters of these type of services move. I can imagine they're having Board meetings at the moment, saying -- excuse my tone of phrase, but what are we going to when there's no gas. And I imagine that they're going to be repurposing a lot of their fitters, their vans, et cetera, to be dealing with this type of technology. So it's quite early. And I'm sorry I don't have every answer for you at the moment. But the -- what we've got is an existing supply chain, which can provide us these products now. We know the cost of these products now. And I think it will mature over the next number of years. As an industry, we're pushed that way. The government's policy is interesting. As a home building industry, we've been trying to get them to organize planning departments. Because planning departments have got lots of different planning -- local plans at the moment, and some local authorities are already requiring these standards now. And I -- it's a bit of a double-edged sword. In some respects, it's great for us in the industry because we're happy to test this, and we're happy to be part of this. But in other respects, we'd like certainty, we'd like repeatability and we actually would like the planning department all to do the same thing. But I'm not sure where I'll come out. I don't know if Tom's got a view on this. But it's sort of quite convenient that they happen to pilot some of this stuff, and the supply chain is happening to gradually ramp...

Just not too often. I think I'd endorse what David is saying in terms of the supply of the material, the raw material to produce the heat pumps. I think in terms of the labor, it will be more difficult. I mean there are certainly enough plumbers. We're already talking to people now, and there will be a gradual introduction. Of course, with the government scheme announced yesterday, there will be more of these skills created, and there will certainly be a period, I suppose, from 2024 onwards where an awful lot more plumbers will be trained. There could well be a difficult interface as you move from one regime to the other. I don't think we're kidding ourselves that we might not have a difficult few years in trying to manage some of the stuff. But if you think about the destination, it is perfectly achievable. It's just the interface as you move from one delivery platform to another, I think, that there will be an element of risk.

And the upside of this, Peter, is given what happened to energy bills, the new build is going to be seen as more attractive.

Yes. I think it will, for the first time for a very long time, create a clear differential between new build and secondhand. But no, I can speak with confidence here, because I received my quarterly payment for my heat pump only this week, GBP 365 having installed one and it felt very good. So I'm sure this will be in the Maldon sales brochure in 2025.

Last one for me, if I may. Just in the Partnerships business, Kieran, and perhaps this is for Peter as well. That the 15% to 20% intermediate, it sounds like, with those discounts having narrowed so much to sort of single digit, that this is a very attractive space for you. Is that 15% to 20%, will that be increasing potentially? Is it a proportion you're hitting at the moment or is that an aspiration?

No. I'll ask Kieran to add to my answer, but that's what we're setting out in our plan. It is a range. Because it's a range and we're not going to really build on that. But just in terms of pricing, one thing to bear in mind is that, that discount is before sales and marketing costs. So of course, we save on the sales and marketing costs and also the, if you like, the cost of money and the prelims benefit. So the true economic cost of deals in that sort of range is actually less than, say, 8% when you factor in the other aspects that are beyond just price. Kieran, is there anything you'd add?

To reaffirm, we are a partnership platform, and that partnership platform is to supplement the open market sale. So the proportions that were in the Venn diagram on our presentation, that's certainly the range that we want to be within the period.

Greg Kuglitsch from UBS again. So a couple of questions. So the first one is just on CO2 in the supply chain. Do you actually measure how much bricking it -- concrete bricking it is. Is that actually something you track? Is it even a criteria when you procure? I mean what I heard before is that you're happy with [ other ] concrete bricks, which are most certainly more CO2 inefficient, I think, than a clay brick, if I'm not mistaken -- as an example.

Depends who you ask.

Right. Sure. But the question is, do you have proper way to track this, right? And if you properly ordered it and managed [ concrete], does it even matter what you just talked to [indiscernible].

David?

The -- what the industry is going to have to do in the coming year is just go through quite a phase of carbon labeling and measuring the genuine carbon through supply chain. And I think you're going to see a lot of carbon labeling come out so that we can track it a little bit better in the future. One of the brick manufacturers at the moment, Ibstock, for example, has just opened up about their new factory where they claim to be delivering a product, which is going to be carbon neutral, a brick product that is carbon neutral. And the way in which they do that, I've not looked into yet. But I think -- so at the moment, when we develop our science-based targets over the next 6 months and we report back in the spring next year, we will use standardized factors as to how much carbon on average is used and how much waste on average is used for different products that we bought. And over time, we'll have to hone those measurements as more is known about how you even do that. The whole supply chain is looking at that, how to find a precise measure for these sort of claims.

And we're not looking to get to our target in one leap. It is going to be over time. So we're always going to have to take decisions and trade-offs between the environmental impact and benefit versus cost. I mean that's just a trade-off going forward that we will continuously have to make. And that's why there is a time scale to achieve these targets.

I guess the question is do you have some kind of mechanized way, internal carbon prices. Because otherwise, this is like...

The straight answer to that now is no. But we will be needing to develop those tools in order for us to measure. But a lot of it, as David said, will come externally. So it's not something we will have to add up. It's something that the producers will themselves have to provide.

We had an interesting communication from Tarmac, who supply our blocks, a while back. And they've just added a surcharge for a tax, for example, that they've received for carbon -- effectively a carbon surcharge for their blocks. And so you will find that it becomes actually a cost consideration as well in the future. Because if all of these products are going to become carbon neutral, the ways in which they achieve their neutrality within their organization will presumably affect product pricing.

Okay. And the second question is, I have confess I'm a little bit surprised about the GBP 15,000 total. I thought maybe a touch higher than I would have thought. But in any case, if we say, I don't know, you're procuring 300,000 homes or buying 300,000 plots at, say, GBP 60,000 a plot, right, 20%. Are you really saying that you're knocking 1/4 of the land values right now to make that whole? Is that actually...

No, because the cost doesn't come all through at once. So if we're acquiring a large site now, it will very much depend on the throughput of those costs. So it's only plots beyond 2025, for example, that would have the full impact of that.

But ultimately, that's what you're procuring at.

Yes.

For the marginal -- I mean, I appreciate just GBP 5,000 for now, then essentially -- it's a big number, right? I mean it's like 25% of the land value, if you're truly passing this on to the landowner.

I wouldn't necessarily say it's a straight 25% reduction to the land value. It's an additional cost that has to be borne by the development. So you go about it a number of different ways, find added value in your development. Therefore, during the procurement process, you need to find additional effective coverage, find added value, and that's what the team do. We have our -- the core hurdle rates. You look at the other base costs that are going into the mix, and you have to work your schemes hard. But there's no point -- what we don't do is stick our head in the sand, thinking it's not going to happen. So it's recognizing the acquisitions we've got secured and over 4,000 approved year-to-date. So yes, it's not impacting our ability to buy land.

And also, to be fair, I would expect the vast majority of our peers will be doing exactly the same thing. There might be a difference of opinion about whether it's GBP 4,000 or GBP 5,000 and whether -- or whether it's GBP 7,000 or GBP 10,000 beyond 2025. But everybody will be factoring in something, so the marginal difference will be relatively small. But essentially, the land value in some way, shape or form will be taking some of the hit, yes. Alastair?

Yes. Alastair Stewart from Progressive Research. So half an ultimation and half a question. Just for everybody that you introduced seem to have come from a rival fairly recently, I think, in most cases. And Peter, you were saying that you're going to be basically buying up expertise as you head into new areas. How is the opposite playing out? Are you getting higher sort of senior and sort of mid-level staff being approached? If so, how are you fighting it off? And yes, it's like it might be a question for an HR director.

Yes, Let Jane answer that one.

Thank you for the question. Yes, we are seeing some levels of approach to our staff, but we are actively looking at our salaries at the moment. Through the year, we have made market rate adjustments to those individuals at that levels to keep up with the market rate. So we are actively being proactive in this area.

Is it just about sort of salaries? Or is there a sort of career development paths where -- or sort of deferred bonuses, that sort of thing?

I think it's mainly salaries at the moment. The market rate, the salary rates, are increasing across the piece. So it's mainly that. We are doing a lot around the development of our staff at the moment to also combat those new people coming in through the organization so we can move that talent up through the business.

Yes. There's a wider piece as well. In our sector, let's face it, there is a shortage of talent in some of the areas across -- particularly things like site management. But I can assure you, every time somebody's left, we have recruited very quickly. We've recruited from competitors. And almost always, we've ended up with somebody that we think is probably better than the person that we've lost. And why would anybody want to leave with this really exciting plan that we've got here, such great people to work for as well. I'm partly kidding. We have got a really exciting opportunity here. And I think people recognize that, and they want to come and work for us. We have recruited really good people because we've got a great story.

James Ayling here from JM Finn. One of the questions I wanted to touch on was how you think about passing through those cost increases on to clients. And how you've historically done that with inflation costs coming through the business? How do you think about that time horizon? So obviously, I accept that the land will absorb some impact. But obviously, clearly, consumers will impact the other parts of it. So how does that dynamic play out?

We obviously can only pass on for the market we take in terms of our house price. So new homes do carry a premium over the secondhand market, and that's recognized. And that's supported through mortgage valuations. The business just -- we just need to continue to -- we will continue to drive our costs as we get to know new technologies, but the land will take the burden because it has to be -- it's an additional land tax. So that will be a level playing field that we'll all then be working to. Customers, the evidence of the market research would tell you that they all want it, but they won't pay for it. So they want it and they'll get it, and the price will be in the how. Because we obviously have an investment model that requires us to buy the land and sell and deliver the margins and the returns that we're looking for. So we just have to work with -- work hard within that operating model.

We are largely price takers in the market rather than price makers. There's a little bit, there's a small premium, perhaps up to 5% for new homes, but it's not really much beyond that. A couple of other questions? There's one.

Yes. Charlie Campbell, Liberum. It was a related question to that, actually. Just wondering whether you have surveyed customers and whether they are prepared to pay for better energy efficiency. And on a related point as well, we're starting to hear about kind of green mortgages. Obviously, kind of the average new homes as being rated on. They may be even moving towards A as these things move through. Average existing house is D, I think. So a lot of energy improvement move with an existing to a new. So wondering kind of whether mortgage lenders have a part to play in that as well. Because they've got their own green agendas as well to follow through.

Tom?

So you're right, Charlie. So the lenders, we're confident will be bringing out green mortgage products so -- or sustainable mortgage products linked to sustainability of the properties that they're lending on. They obviously have a huge book of which will be varied. So -- but you can see that becoming part of an initiative, and I'm sure there'll be a number of lenders who want to be at the forefront of that. With regards to market research, we continually review and annually put out a survey to not only our home buyers but also to people who are on our database and the wider SurveyMonkey piece as well. And the evidence to date is that they want it and they won't pay it. They may pay some, circa GBP 1,000, GBP 1,500, but they would not take the cost of a GBP 15,000 cost increase. They just wouldn't do that. But they are all aligned to the green agenda and saving the environment. Yes.

Okay. I think we'll wrap up on the Q&A there. We've just got -- I will just do a quick summary, and I will keep it fairly brief because we want to make sure we have plenty of time for the site visit. And Alex is also just going to touch upon the site itself for you. But just to summarize what you've heard today briefly. Stage 1 of the operational turnaround in the organization is complete. We now have a really strong, consistent, standardized process backed up by a house site range, which growingly, is being rolled out into the field. The balance sheet is in a much stronger position. We've got the balance sheet that we need to give us options. And the option that we've chosen is to grow. The financial improvement will show strong accretion over the strategy period over the next 4 to 5 years. That will be achieved in a number of ways: not least through additional margin; the land that we've got; the improvements that we continuously make to that; the new land that we buy; and also increasingly, through just the efficiency and the leverage we get from that volume growth. So there really is strong visibility for us to demonstrate how we're going to grow the profitability of the business very strongly over the next 4 or 5 years. It doesn't come without an element of risk and opportunity for us. Certainly, there are some shorter-term risks, I think, around the supply chain materials not being available at the right time and the right place. Just some of the difficulties around managing the huge number of regulatory changes all coming in at once. We've got a plan to navigate that. We've got the experience in the team to deal with that. I think the opportunity really is around the market itself. I think that we are anticipating in the next 4 or 5 years strong market conditions in our core areas. We think that income growth will keep pace with cost of inflation, the cost of borrowing. We don't want to see really strong house price inflation. That doesn't do us any favors in the longer term. I think I've been expecting to see some house price inflation probably in the 3% to 4% range, perhaps annually consistently, and probably build cost inflation in the same sort of level in the round. So probably playing out a draw. And I think that we'll probably see the inflation and the wage growth just keep ahead of the increased cost of borrowing as well going through this period. But the key risk in the market is just if the interface between the 2 just becomes distorted and out of sync with each other. We very much accepted the challenge around climate change. And David set out our plans, signing up to net zero and some of the other initiatives that we're well on the way to accommodating within the business. Importantly, though, we have a team to execute the plan. I've introduced you to the wider team. Hopefully, you've had a chance to speak to people during the break. But also rest assured, beyond the executive team, the wider leadership team with the MDs, we also have a very, very strong layer of functional directors and senior staff, and then a rising number of talented people coming up through the organization. So the question was raised at one point about -- by I think it was Alastair, around people. When people leave, that does create opportunities for others, and we really do have strong bench strength now in Crest Nicholson. So I'm very excited about the opportunity that we've got. Seems to me that the gods are, too. They've given us a tailwind. So it's onwards now for the future, and it's going to be a great future for Crest Nicholson. And I'll just take this opportunity to thank you for your attendance. I'll pass on now to Alex, who will tell you a little bit about the site and the arrangements for the site visits as well. Thanks.

Good afternoon. My name is Alex Stark, and I'm the Managing Director for the Eastern division here. And I'd like to welcome you to Wycke Place at Maldon. I'll just provide you with a brief history of the site, and then I'll set out the logistics for the site visit this afternoon. Hopefully, the wind dies down, but I think we've escaped the rain. I probably shouldn't have said that though. So Wycke Place consists of 394 new homes, 7 acres of commercial land. And our parcel forms an integral part of the wider master plan called Limebrook Park. It consists of 1,000 new homes, a primary school, childcare facilities, a local center, allotments and sports playing fields. We completed the purchase of our parcel in August 2019 at an agreed margin of 25.7%. Following the acquisition, the new house-type range was introduced, which enabled us to review our proposed scheme and introduce the far more efficient new house types and optimize the layout. By doing this, we're able to provide a more regularized plotting, a far more diverse street scene and desirable accommodation. The effects of this was we were able to read our cost base on the pure house build, along with savings related to efficient plotting, i.e., regularized drives, patios and fence lines. By using the house site range to create a more diverse street scene and staircase new products, we were able to review the marketing prices. And the culmination of this was an improvement in margin to 27.2%. However, following competitive tendering and subcontractor -- sorry, subcontract base recognizing the efficiency of the house types, coupled with a successful sales launch, we are now realizing a margin of 29.8%. And I think coupled with that, with the example that Tom gave earlier, that just shows how the new house type ranges can be used to further increase our margins. But furthermore, to just what we've done on the current phase, we have redesigned development using a 95% usage of the new standard house type range. And this has allowed us to increase our plotting densities and increase the opportunity of numbers on the developments. So we're now looking to optimize the development by a further 60 new homes and provide an output of 450 homes. And this realized an additional gross margin of GBP 6.5 million. I would now like to provide you with some detail of our first phase, where we are today and where we are current selling and building. Our first phase consists of 106 homes, 74 private and 32 affordable. We launched the development in April 2021, utilizing our 2 4-bed show homes, which you'll be able to view later. The launch was a huge success. And to date, we have sold 41 properties with a further 2 sales taken this weekend. We commenced construction in November 2020 and have completed 40 new homes to date, with a total of 21 completions forecast for our financial year-end. Of the 14 occupations, we have 100% recommend rates from the NHBC surveys, and you will see the pride and attention to detail when you visit the build area later. This has also been recognized by the NHBC when carrying out their inspections. We currently have a reportable rate of 0.05 RIs. This means of the 219 stage inspections, only 15 items have been recorded. In order to achieve an excellent customer satisfaction and good quality product, the initial setup and occupation strategy must be well considered. Our build route considers the most effective build sequence whilst considering completed properties to ensure our purchasers move into their new home, they're in isolated area, away from construction and move into a community, not just a building site. I'd now like to invite you to view the development. And by doing so, it's a bit like going back to school. We're going to split you all into 4 groups. And you will have a number on your label, which is 1, 2 and 3 or 4. Groups 1 and 2 will visit the construction area first. So I'd invite you to go outside of the marquee, where you'd be able to get a hard hat, high vis and some particularly attractive wellies. Groups 3 and 4 will be visiting the sales center first. So just all out of time, I'd like to invite you to grab a coffee at the back, and then in sort of 10 minutes, we will venture over to the marketing suite. And then what we'll do is we'll swap over in groups, 3 or 4 out of sites, get boots up for 1 and 2 in the sales office. So hopefully, the rain holds off. The wind seem to have died down. So now seems a good time to go. So thanks for your time.