Glenveagh Properties PLC (GVR) Earnings Call Transcript & Summary

Hello and welcome to the Glenveagh 2020 Interim Results Call. My name is Rosie, and I'll be your coordinator for today's event. Please note, this conference is being recorded. [Operator Instructions]. I will now hand you over to your host, Stephen Garvey, to begin today's conference.

Thank you. Thank you, Rosie, and welcome, everyone to Glenveagh's interim results call. Joining me here in Maynooth at a safe distance and my colleagues, Michael Rice, our CFO; and Conor Murtagh, our Strategy and IR Director. We are pleased to report on the continued progress of the group in creating Ireland's leading volume homebuilder in what has been an unprecedented turbulent first half of 2020. To begin, can you please turn to Page 4. COVID-19 represented an unprecedented challenge for our growing business. We recognized early the need to move quickly and effectively to prioritize the health, safety and well-being of our people, our customers in the wider community. I am pleased to say that COVID-19 operating procedures are now embedded across the business and all our sites are operational. However, as we move forward and with the risk of regional lockdowns increasing, we must ensure that we do not get complacent. We, therefore, continue to have extra vigilance and oversight and enforcement controls delivering internal and external validation on these operating procedures. Not only are we conscious of the need to construct prudently, but we are also emphasizing financial prudence to ensure that the group is well positioned in the event of future restrictions if they are introduced. On Page 5, we highlight the financials for the period, which Michael will cover in more detail later. Given the complete shutdown experienced in Q2, the 123 units delivered represented a satisfactory performance, approximately 20% behind prior year. Our targeted WIP investment has given the group good visibility on delivering a strong outturn for the current year and indeed into 2021. We have conservatively focused on maintaining a strong balance sheet with the group's financial position, leaving the business securely paced -- placed to expedite growth objectives. Turning to Page 6. To further focus resources on our core segments, we are accelerating the sales of our noncore, high-end developments. Approximately 2% of the group's 14,500 unit landbank relates to noncore, high-end private customer units. Accelerating the sales strategy of these developments will allow for significant cash to return to the group. We expect to realize greater than EUR 100 million of proceeds within a 12-month period versus 48 months at historic sales rates. We believe this is the right thing to do for the business at this time and will enable the group to optimize future opportunities in our core markets. Turning to Page 7. We took a controlled and disciplined approach to construction, prioritizing health and safety and investing in both near-term completions and positioning the business to deliver a strong outturn for the second half of 2020 and into 2021. The expediency of the group's response to COVID was reflected in the investment we made in our customer and their digitally and socially distance home-buying journey. This investment resulted in significant increase in the quantity and quality of our leads, which in turn, translates into strong reservations and outturn. Despite the challenges faced, the group continued to make good progress towards positioning the business for growth across the 3 target verticals. If anything, the events of the last 6 months have underscored the strength of the group's product offering and strategic focus. 906 units are now sold, signed or reserved, excluding any PRS, with the pace of performance increasing in the period from June to August, where reservations were up 213%, visibility now on delivering 650 core units in 2020 and infrastructure and capacity maintained to deliver 1,000 core units in 2021. We also were awarded the First Partnership scheme on approximately 800 units. Turning to Page 9. I'm outlining what we've seen in the operating environment more generally. Ireland's lockdown was one of the most stringent and long-lasting when compared to our European or global counterparts. Following a number of weeks of reduced activity, the country completely shut down at the end of March with no opportunities to resume construction until the middle of May, necessitating a further period of time to allow for the ramp-up again. The complete shutdown of the economy required significant financial measures to be introduced by the Irish government to support those effectors, with most of those supports remaining in place. With the easing of lock on restriction, unemployment numbers are improving but remain elevated. It should be noted that we are yet in Phase 3 of a 4-phase governmental reopening of social and economic life in Ireland. While housing supply has been by the affected, housing demand has been less impacted, evidenced by the group's strong reservation numbers post lockdown. Page 10 highlights where we've made progress on the political front since we spoke with you. A new government is in place. And while COVID, of course, is the main priority, housing is a key pillar of their program for the next 5 years. Their focus is reflected in a series of initiatives unveiled to date, which we believe will be helpful in terms of delivering additional volume into the market within a shorter time frame. Of note, is this expansion of the help-to-buy to EUR 30,000, which removes the requirement of a deposit at the group's average suburban ASP of approximately EUR 300,000. The remainder of the initiatives are generally positive overall from a supply's perspective. However, a number of potential supply negatives are yet to be finalized, and we need to see more detail before we can comment. However, there are a number of indications that a shared equity scheme may be introduced. In the absence of any concrete details so far, it's too early to determine how beneficial or otherwise this may be. But suffice to say, we would welcome it. Turning to Page 11 and taking help-to-buy in more detail. The revised scheme allows first on buyers to claim a tax rebate of up to 10%, previously 5%, of the value of a property up to EUR 30,000, previously EUR 20,000. Following these changes, less than EUR 5,000 is now required to access at 82% of Glenveagh's suburban portfolio, which again underscores our confidence in delivering significant volume from the group's wide range of strategically located sites targeting the starter home market. On Page 12, we covered what happened in the PRS sector. COVID was a period where the attractive characteristics of PRS really shone through and the sector differentiated itself from other asset classes. Rent collection remains strong. Occupancy levels remained at recent highs and all despite significant economic shock. Not only is the sector attractive, but Ireland remains an attractive destination for a wide range of international PRS investors to deploy capital. Taking this together with recent conversations with institutional investors, PRS has moved upwards in the hierarchy of asset class and counterparty reliability will be a key element of future transactions. Notwithstanding that, we believe the most opportune time to run a process focused on international PRS investors will be in H1 2021. At that stage, investors will be able to travel, have more certainty on rent stabilization, rent levels and greater confidence in receiving product on agreed delivery dates as the impact of the new operating procedures and supply chain restrictions become easier to qualify. Moving on to Page 13. We would like to highlight that the strong -- we would like to highlight the strong performance of the residential as an asset class is backed up by the fundamental need for housing in Ireland. Population growth is driving a housing need and supply side needs to grow in response to what is required in the long term. In the 12 months to April 2020, population grew by 1.1% or 56,000 split between a natural increase of 27,000, a net migration of 29,000. A large cohort of the population are now a key home buying phase. Further growth is expected to 2030, 8% or 380,000 people, meaning we will see a significant further cohort of prospective homebuyers over the course of the next 10 years. In the background remains the fact that Ireland's headship rate is one of the highest in the EU. The housing need is clearly there, and we have acquired our strategically located portfolio, that is, to address this first -- this need firstly via true starter homes from a diverse portfolio of sites, and secondly, via affordable PRS. Turning to Page 15. Our strategic focus is unchanged despite COVID, and we're consistent about where our landbank is targeted and where we are focusing our efforts. We continue to make disciplined investments across the 3 targeted segments of suburban, urban and partnerships. We continue to deliver for our customers in places they want to live and at prices they can afford. We continue to scale and standardize our operations and construction capability. We continue to optimize capital employed in land and WIP. All the while, we are pursuing our environmental and social agenda and focusing on scaling the business to deliver strong returns for shareholders. Importantly, the fundamentals and delivery platform continue to support the delivery of 3,000 homes per year. On Page 16, the attractions of our complementary business units are evident. Suburban demand and alignment of buyer. That means affordability, high-quality homes in locations of choice in addition to product, which is responsive to the new working arrangements due to COVID. Fragmentation, due to the challenges exacerbated by the pandemic in terms of funding and regulation restrictions, smaller firms are finding it difficult to survive. Easier optimization of construction process. The manner in which our operations function enable us to deliver a product efficiently and consistently on time and on target across multiple sites. Urban is affordable PRS in locations that work for both the tenant and the institutions. As mentioned previously, the upward shift of PRs in the hierarchy of asset class has proven its resilience. The current supply imbalance remains, and the increasing need for institutional investors is evidenced in the recent data. These institutional investors need reliable, appropriately scaled delivery partners, which Glenveagh is. With the current government commitments -- sorry, in partnerships, with the current government commitments to deliver 50,000 social units, partnerships gives us a huge opportunity, the benefit of which are strong return on capital employed for the business, increased business resilience and reduced risk fits perfectly was both suburban and urban segments and provide access to both land and deliveries. We have invested early to position the business to deliver on this. And as outlined earlier, we have recently been chosen as a preferred bidder on the first scheme of 800 units. On Page 17, we outlined how we are organize to deliver across the 3 verticals. We set up the business to scale to 3,000 homes -- 3,000 units per annum. Our central functions of underwriting, planning, design, procurement and corporate supported delivery across the 3 segments. We split suburban delivery into teams posted around distinctive geography areas. This is on top of an already established dedicated site opening teams. Urban apartment delivery is a specialist skill set and the team we've assembled are already delivering for the business on those apartment projects. This is the group's -- turning to Page 18. This is attractive portfolio's highlight on Page 18. Over the course of the past 3 years, we've assembled an excellent land portfolio, which falls within the 3 core segments. Our portfolio is Dublin-centric with approximately 90% located in the Greater Dublin Area, combined with a particular focus on the deepest segment of the residential market being starter homes [ some ] EUR 350,000. We have a true starter home focus suburban landbank with no site concentration risk. In addition to affordability, we've placed an emphasis upon accessibility through transport links, particularly train lines and local employment. We are attracted to assets which provide multiple exit options, which is demonstrated with 15% of our portfolio have either a private or PRS exit, and we expect this to increase as demand for single-family homes from institution -- institutional buyers evolves over the next 12 months. Moving on to Slide 20, which is the opening slide of the operational review section, where we provide an update on our operation and sales activity as well as our recent initiatives within the business. Overall, our operational focus in the first half of the year was primarily centered around efficient management of the challenges brought by COVID-19 pandemic. This meant that we have to focus on safe product delivery whilst maintaining financial flexibility, particularly in the early stages, where we had no clear visibility on time line of getting back to complete units. Following a period of reduced activities, our sites were formally closed from March 29 until May 18. During the closure period, we spent a significant time developing and implementing updated health and safety protocols in order to make sure that our sites could return to operation once that became possible. We also implemented a redeveloped digital strategy to ensure a high-volume of prospects viewed our homes digitally. When operations resumed in May, our focus was on completing existing phases where signed contracts or reservations were in place to reduce the financial and operational risk to the business. To further maximize cash generation while maintaining our focus on starter homes, we decided to accelerate the sales of the group's remaining noncore, high-end developments. We anticipate that this approach will facilitate a substantial exit from the core units within 12 months versus more than 48 months at historic private sales rates, delivering a net cash inflow of greater than EUR 100 million. We are already witnessing the benefits of this move. As a result of these actions, all of the group's construction sites are now fully and safely operational with high levels of productivity. Ongoing reservations over the summer period have been very strong. And our robust financial position ensures that we have maximum amount of internal financial resources available to capitalize on attractive future WIP and land investment opportunities in line with our investment plan. Turning to Page 21. We give a breakdown of our construction progress in the periods. We are now actively constructing on 18 sites, which are capable of delivering in excess of 4,900 units. It is worth noting, operating under more restrictive operating procedures, our suburban portfolio productivity is now approximately 80% of pre-COVID levels. These open sites and productivity gives us comfort on our revised 2020 and 2021 deliver targets of 650 and 1,000 core units, respectively. Moving on to Page 22. The closure period as a result of COVID was utilized to accelerate the pace of innovation across our business. These initiatives are helping Glenveagh to scale our operations in a sustainable and cost-effective manner, whilst also exceeding the expectations of our customers. We are continually finding new ways to deliver product more efficiently and improving on our customer offering. In order to address the needs of our customers -- sorry, excuse me, in order to address the changing needs of our customers to work from home, we began adapting product designs and offering an option to install home office pods in their homes. We are also -- we also redeveloped our digital strategy, which we'd like to discuss in more detail on Slide 23. Page 23 outlines our redeveloped digital strategy, which is aimed at facilitating online and private viewings led customer journey. To deliver the best-in-class to our customers, select show homes now operate with smart technology, which facilitates a contactless walk-through of the home with our agents providing a virtual assistance via video calling. These initiatives, combined with driving more customer traffic directly to our website, improve the quantity and quality of customer leads, which grew by 35% since inception or 115% year-on-year in the period to June to August. Moreover, average weekly sales rate per site grew 213% year-on-year, June through to August. The improvements made to customer offering has had a direct impact on leads and conversion rates, which has helped deliver strong reservation performance, which I will now discuss on Slide 24. The combination of revised digital strategy, COVID-proof customer experience and pent-up demand helped to produce positive results from a sales perspective, with 906 units sold, signed or reserved as of the 7th of September across 17 selling sites. Of these 442 have completed or have signed a binding contract in place. The performance of some of our launches over the summer period was exceptional. Despite only having 1 customer in the house at any 1 time, got some schemes from reserving 40 units over a 3-day period. Sales of our noncore units are progressing well, with 90% of the housing at Marina Village reserved, and Proby and Holsteiner now fully reserved. Our expectation for the full year is to complete the sale of approximately 650 core units, assuming no further restrictions are introduced. We are now building a strong order book for 2021 and that's before we explore the PRS opportunities that exist both in the suburban and urban segments, which we can deliver into 2021. Moving on to Page 25. I'd like to finish the operational review section by highlighting Glenveagh's commitment to our environmental and social agenda. Our approach to this agenda is increasingly shaping our governance, risk and strategic management processes. Having outlined the main reasons of focus for the group at our Investor Day in January 2020, we are now recommitting to these objectives and reporting on the group's journey. As part of our enhanced approach to disclosure, the group recently participated in CDP, Climate Disclosure Project 2020, and we'll shortly launch a new sustainability section on the group's website to facilitate a simpler review of our credentials by our stakeholders. Suffice to say that creating a sustainable business continues to be to the forefront of what we do as a company, and we are working to give investors more access to our overall approach and performance. Now I'd like to hand you over to Michael to discuss the financials for the period.

Thanks, Stephen, and good morning, everyone. As Stephen mentioned, we have faced an unprecedented set of circumstances in the first 6 months of the year due to COVID-19, which resulted in site closures, new working protocols and general uncertainty in the market. I believe that as a business, we reacted quickly and appropriately during all stages of COVID-19 to date, initially preserving cash and focusing expenditure on units closest to completion. And now ensuring the business has the necessary structure and funding in place to take advantage of any opportunities that may arise now that we're hopefully through the worst of the restrictions. I'll start with the income statement on Slide 27. We generated EUR 37 million of revenue for the first half of the year, which is 19% behind the same period last year. And we feel this is a solid performance given the COVID-19 restrictions in place. Our revenue reflects 123 units closed in the period, which is 35 units or 22% behind H1 2019. Our ASP of EUR 300,000 is slightly stronger than the EUR 287,000 we saw in the same period last year. This variance is largely driven by development mix and some HPI from price increases in the second half of last year. The group's underlying gross profit of EUR 5.1 million reflects a gross margin of 13.8% versus the H1 2019 margin of 16.5% and a full year 2019 underlying housing margin of 17%. This reduction in margin is due to 2 main factors: the additional call of complying with the COVID-19 operation protocols and the negative mix effect resulting from COVID-19 and our inability to deliver higher volumes for -- from our already active higher-margin sites, but also our inability to open any new higher-margin sites. It is important to note that much of the impact on margin from COVID-19 is expected to abate in 2021. As a result of management's decision to accelerate the exit of the group's remaining noncore, high-end units and sites within 12 months, we have booked an asset impairment of EUR 20.3 million in cost of sales. This decision will result in quicker and significant cash inflows of more than EUR 100 million over that period and provides capital that can then be invested in our core business. To preserve cash in the first half of the year, we reduced our central cost to EUR 9.8 million for the period, which is approximately EUR 2 million or 20% lower than budget. Some of these cost reduction measures continued into the second half of the year, and we would now expect central costs, excluding depreciation and amortization for the year to be approximately EUR 21 million. Moving over to Slide 28. And despite COVID-19, we continue to focus on and invest in the initiatives that will bring medium to long-term benefits to the business. We continue to innovate and challenge our house types, designs and site layouts. In the first half of the year, we opened our own facility for the disposal of inert material and commenced the supply agreement for timber frame production from our own factory. As highlighted significantly at our Investor Day, we continue to invest and utilize technology wherever possible across the business. All of these initiatives will contribute positively to operating margin in the coming years, but will do so significantly when the business is at scale. Slide 29 shows our balance sheet at June 30 and the main category to highlight as always inventory at EUR 884 million. This is split between land investment of EUR 659 million and construction expenditure of EUR 225 million. The land investment has decreased slightly since year-end, but this continues to be one of the main areas of focus for the business as we reiterate our commitment to reducing the net euro investment in land by EUR 100 million in 2021. Our construction expenditure of WIP balance is EUR 225 million, but 2 of our sites, Marina Village and Shrewsbury Road, contribute approximately EUR 60 million of that balance. Excluding these 2 sites, which are noncore, high-end sites and close to completion, our core WIP balance is EUR 165 million, an average of EUR 9 million per site, which is reasonable given our build cycle is weighted towards H1 and also the impact of COVID-19. As in previous years, our WIP position per site will unwind in the second half of the year. The group completed the High Court process in the first half of the year, which redesignated EUR 700 million of share premium to retained earnings, and this is reflected in the balance sheet for the first time. Our short-term objective remains on maximizing liquidity and maintaining a strong balance sheet, and therefore, we have no current plan to make any distribution to shareholders. Slide 30 gives some further detail on our continued commitment to reducing our net euro investment in land, while not reducing the number of plots we control. We expect to achieve this reduction from the continued refinement of our landbank, where we recycle out noncore, higher land cost sites and replace them with core suburban sites, which carry a significantly lower site costs, strategic and structured land deals where we have access to the land without paying first upfront and partnership deals which deliver units on behalf of state agencies. And you've -- and as you've seen from this morning's announcement, we have been selected as the preferred bidder on the first project that we participated in. Slide 31 gives a little more insight into our reasons and the benefits of accelerating the exit of our noncore units and sites. 2% of our overall land investment is in noncore, high-end units and sites. The group's focus is on the more affordable end of the market, and therefore, we, as a management team, decided to expediate the sale of these noncourse units and sites. As previously mentioned, EUR 60 million of our construction WIP relates to Marina Village and Shrewsbury Road. In addition, the site cost for these 2 developments is EUR 180,000 per unit versus our average portfolio of EUR 46,000 per unit. This level of land and construction inventory has a significantly negative impact on our working capital. By accelerating the exit from our noncore sites over the next 12 months, we will generate over EUR 100 million in cash, significantly enhance the capital efficiency of the business and invest in sites and initiatives that are core to our business. On Slide 32 and from a cash flow perspective, our main focus during the first half of the year was ensuring that we invested our available funds appropriately. As you can see, we significantly reduced our investment in inventories versus the same period last year, EUR 64 million versus EUR 182 million in H1 2019. This reduction was done through a predetermined reduction in our investment in land, in line with strategy, but also fully focusing our spend on units closest to completion and not starting new phases or new sites in the period. We utilized our debt facility in the period to the tune of EUR 70 million and had EUR 110 million drawn from our facility at June 30. We didn't utilize the full facilities at any stage during the period, meaning we had an additional EUR 15 million of committed funds and EUR 125 million of uncommitted funds available to us at all times if needed. We are currently renewing and expanding our debt facilities, and we plan to have this completed by the end of the year. Slide 33 was my concluding slide at the Investor Day in January, obviously, pre COVID, but it's still relative given our continued commitment to that strategy. We are reiterating our focus on reducing net investment in land, accelerating the disposal of our noncore units and sites and our preferred bidder status on our first partnership deal will both contribute to that. Our increased unit output will continue, albeit we've experienced a bump in the road due to COVID-19. 906 units currently sold, signed or reserved and our target of 1,000 core units in 2021 should demonstrate that we are still very much focused on growing our delivery targets. We continue to focus on and invest in medium- to long-term initiatives that will deliver operating margin improvements to -- for the business. We will continue to invest in working capital in our suburban segment by exiting the noncore units and sites within 12 months. We have the optionality to invest those resources in our suburban business. Our commitment to our urban assets and the PRS market remains very strong. And we will still look to forward fund our large urban projects, but as Stephen has outlined, we believe the most appropriate time to run formal processes focused on international PRS investors in H1 2021. Finally, our strategy has not changed due to COVID-19, and we continue to make decisions and rollout initiatives that will enhance our return on capital while maintaining the appropriate level of debt. I'll now hand you back to Stephen for his concluding remarks.

Thank you, Michael. In conclusion, while we have journeyed through an extraordinarily difficult first half, we navigated this steadily, assessed where we needed to adapt and took prudent decisions to ensure the long-term success of the business. Our recent experience in the market has reaffirmed our belief that the group's strategic focus continues to hold the best proposition for the Irish residential market, namely unaffordable starter homes for sale, building quality affordable PRS product in sustainable rent locations and place-making with local authorities to our partnership business. We remain confident in and committed to our ambition to scale the -- our business to 3,000 units per annum. We have the people, the balance sheet and the processes in place to optimize on the opportunities for doing this in a considered and timely manner. On a final note, you may be aware of the announcement that our colleague, Lady Barbara Judge, sadly passed away last week. One of her final wishes was to raise awareness for pancreatic cancer and to fund research and support for others. I would just like to acknowledge her contribution as an inspiring colleague and a friend. On behalf of Glenveagh, she will be missed. Thank you all. I would like to pass you back to Rosie for any questions you may have.

[Operator Instructions] And our first question comes from the line of Colin Sheridan from Davy.

Just a few for me, if I can. The first is on build costs. And I wonder if you can just give us a feel for build costs, both from the perspective of the underlying rates going through at the moment, so excluding any kind of COVID impact? And then COVID impact more generally. I mean when you look at the effects that social distancing is having on build costs, is there a quantum that you could place on that in terms of inflation or in terms of gross margin that is just driven by social distancing right now? Then just on your guidance for next year, your 1,000 guidance, I mean, you flagged already that you've return to about 80% of production. I just wonder what kind of assumption you're making in terms of if that 80% is going to move upwards substantially in order to get to that 1,000 guidance? And what kind of quantum might be assumed there? And then finally, just on the partnerships business and in relation to your comments around reducing the absolute amount of euros in the land bank. I don't know if you can give us a feel for what might be a typical partnership deal, is it likely to have a 0 land value? Or will there be some land value, but it will be very low compared to the rest of the landbank? And where exactly we'll see the lower quantum of capital employed come through in the business?

Thanks, Colin. So I suppose just build costs. And what we would say is, first of all, due to the impact of COVID, it's probably too early to see the overall effect of what build costs are going to look like for the year. And that's predominantly because -- in one sense, because we were shut for a long period of time. I would say what we're seeing out there on the ground, excluding COVID, is that in fairness, still, costs are pretty neutral. And it's more people. We're just trying to get sites back up and running properly. So in fairness, subcontractors and suppliers are working with us well. There's obviously an element of cost of trying to implement COVID on sites. And they really -- they're really -- the role across there is predominantly on prelims and setting up your sites. What I would say is on the social distancing, the suburban side of the business and your housing sites can probably best deal with COVID. And social distancing is much easier to implement. You're working on a bigger base and the amount of workforce is reduced on the housing side. The urban side of the business is slightly different because you have a much larger workforce in a more condensed area. So it's a little bit more difficult. And obviously, you'll have time lags where, obviously, the number of people that can work in the development has to be reduced or certain trades have to come in, in different times. So there's different dynamics out there. Overall, we would see the base case of CPI remaining quite low to flat. But obviously, there's an element of cost, but we really need to see that follow through to the whole year and see where things are. And obviously, the initial set up, there was cost that we just have to implement to set our sights up properly to deal with that. And on the 1,000 units for next year and obviously, the productivity that's out there at the moment, I suppose we would have very good confidence in delivering those 1,000 core units at this stage. Obviously, we can see the infrastructure that we've in place. We can obviously see the sites as they're ramping up and obviously, we can see the sales progression as well across the board, which is, I suppose what we're seeing on the sales side is it's not any one site outperforming. It's very steady across the business. That's what we're seeing. So I suppose the confidence we have is that every site is now producing, it will hold that momentum at this moment in time. And obviously, if there's no further restrictions implemented, we'd remain quite confident in that. Obviously, on the partnerships, and this -- obviously, we spoke a lot about this at the Capital Markets Day. And I suppose it was just to give, obviously, our investors an update on how we're seeing progress. You would have obviously seen from the government formation, there is a very large commitment to delivering 50,000 social units, and affordability is one of the key pillars of the program for government as well. I don't want to go into the commercials of the deal itself, obviously, for commercial reasons. But just suffice to say, the land payment element is extremely low because you are delivering approximately 50% of the product. And I'd say approximately 50% because they can vary back to the local authority or the state. So really, the land element is quite low because you're delivering that at a set price. And obviously, an element of it just pertains to the private element.

The next question comes from the line of Ronan Dunphy from Investec.

I just -- first of all, maybe just to clarify, just a follow-up on sort of Colin's point there about productivity being at 80% currently. Just -- is that essentially the timelines that are impacted there? That's what the 80% refers to, just everything has taken that 20% longer to sort of coordinate and that translates then into how long it takes to finish a property? And then just on demand. So demand certainly seems to be quite strong at the moment. The year-on-year pickup in June to August was very impressive. But I guess, we're working through some of that pent-up demand that was there from the last 10 or 12 weeks. So I guess, once that washes true, do you think demand seems to be broadly where it was pre COVID? Or is that a bit optimistic? What -- I guess there's an element that the lower new supply that is coming through this year anyway is going to help. So I guess, where do you see demand settling maybe towards the later stages of the year?

Yes. So I suppose, obviously, I'll answer the last one, first. The overall demand is quite positive. I would say that the normal sales market that we would normally, we see it between, say, March and the end of May, obviously, had to change because the physical operation had totally changed and how people view their homes. So you are seeing that pent-up demand definitely come through with June, August number. I think what -- if you said to us, if we said, probably, when we first went to shutdown, would you see this demand level, we wouldn't have thought so. But overall, demand is quite strong. I think there's a little bit -- and just what I'm seeing is what we're certainly seeing in the market, and this is just a description of how we're seeing this, where we would have seen an awful lot of people come into our show homes over a weekend. You might have seen 200 or 300 people, and you'd see a high reservation rent and then -- a high reservation level and then you would see a percentage of cancellations. What we're really seeing now is the quality of the customer that is coming through. What we're seeing is that someone does an awful lot of their research online is walking through the house. And when they get to see the house they're making their decision very quickly and are fully ready to go. So the buyer looks to improve that status. How it will follow through to the year? Obviously, it's dependent on how the economic circumstances evolved. But what we're seeing across from our customer base at the moment, that COVID hasn't had a real big impact on them. Some people haven't suffered pay cuts. Some people still have their jobs and they're in a good position, if not better. And the big thing that we're seeing, a big thing that we hear from our customers is their discretionary spend that they had pre COVID has suddenly gone. So their asset class or the main asset class, now that they're focusing on is their actual home. Their home has now suddenly become their cinema. It's become their workplace. It's become everything to them. So there's an element of that coming through the system as well.

80% productivity.

80% -- yes. So I suppose what we're seeing is, it's more how we can get the sites up to that production level. It's not a case of the total time lag. It's actually running the site in a safe manner, using all the protocols and just having the workforce properly based on the site. So it's more a case of just the element of how many people we can. But obviously, that's refining. We're becoming better and better, and we'd hope that will move up as things become clearer. But obviously, we've got to be very conscious of local lockdown restrictions could be implemented across certain things. So we've got to take that into account. And I think the construction industry in fairness to it versus other industries has proved its capability in being able to live and work between COVID.