Harworth Group plc (UK6A.SG) Earnings Call Transcript & Summary

Good morning, everybody, and welcome to Harworth's half year results presentation covering the first 6 months of 2023. I'm Lynda Shillaw, Chief Executive and I'm delighted to be joined by Kitty Patmore, our Chief Financial Officer. It's great to see so many of you join us in the room here today. And I'd also like to welcome everyone who's watching online too. This slide shows here the agenda for this morning. And I'll begin with an overview of our performance during the first half, commentating on the market backdrop and reporting on the progress that we're making in delivering our strategy. I'll then hand over to Kitty to take you through the financials and then I'll provide an operational update and our outlook for the remainder of 2023 and beyond. We'll then close the session with some Q&A. And just a reminder, if you're watching online, you can submit questions through the webcast page, and we'd like to answer as many of these as we can at the end. So before I talk about the first half and because I think it's important given the speed at which both our markets and wider economic factors have changed since the pandemic and through to Half 1, 2023. I'm going to spend a few moments talking about Harworth's unique attributes as a business, as a context for both our Half 1, 2023 performance but also unlocking the long-term potential of the business. These are central to our strategy, and they underpin our resilient operational strategic performance throughout the cycle. So firstly, we have the unique skill set of Harworth regenerating large, often dirty and complex sites. We've got decades of unrivaled in-house expertise in areas such as acquisitions, planning, remediation, infrastructure development and building delivery. And as a long term through the cycle business, we have the patience to do this where necessary over a longer period of time, which means that we can unlock the potential of challenging sites where others have struggled or avoided them all together. Secondly, we have an extensive land bank, which we largely own or control and which we have successfully grown through targeted acquisitions. Our consented residential and industrial and logistics pipeline alone has a GDV of GBP 2.4 billion, and there is significantly more latent value across our longer-term unconsented pipeline. Next, and as I'll come on to shortly, we focus on structurally undersupplied markets. Almost 60% of our portfolio relates to the industrial and logistics sector, where drivers of demand remain largely intact and supply, particularly in our regions remains low. We have a strong financial position and low gearing. We have significant available liquidity and no refinancing requirements until 2027. And finally, we're a responsible business, and we're guided by the Harworth Way and our net zero carbon commitments. We're leading the way in supporting new homes, jobs and investments across our regions. So together, these factors are what makes Harworth such a successful and sustainable business. Provides us with a platform for growth and enables us to deliver long-term value to our stakeholders and deliver large-scale regeneration that has a lasting and positive impact. So turning now to today's results. Harworth has had a strong first half in which we progressed our strategic objective and delivered a robust operational performance. This was underpinned by the resilience of our through-the-cycle model and the sustained demand for our service residential land and industrial and logistics assets. And I'd like to pick out just 3 key takeaways from these results. So firstly, our management actions and the sustained demand for our products have resulted in an uptick in valuations during the first half, while our EPRA NDV remains broadly stable over the period. Secondly, our markets remain generally in good shape with resilient demand for industrial and logistics products and the BTR sector continuing to grow, particularly in single-family and regional markets. The headwind stating the traditional housebuilding sector are well publicized, but we're seeing a good level of demand for our differentiated and derisked service land products. And finally, as I've already touched on, we have a really strong financial position with low financial gearing and significant available liquidity. Combined with the fact that we own or control most of our sites and can, therefore, determine the timing and pace of development. This gives us a huge amount of flexibility and firepower. So delving a little deeper into our focus markets and starting with industrial and logistics. As I've mentioned, the structural drivers of demand seen in recent years remain with the growth of e-commerce, on-shoring and near-shoring and an increasing focus amongst occupiers on securing modern sustainable spaces. The chart on the left gives us data from Savills and it shows that although take-up of industrial space in the first half of 2023 was lower than the record-breaking levels we've seen in recent years. It was broadly in line with the pre-pandemic average. There also continues to be a diverse range of sectors driving demand with manufacturing accounting for a record proportion of take-up in the first half. The decline in demand during the first half, so a corresponding rise in supply, and Savills estimate a market-wide vacancy rate of 6.3% as at June 2023. So this has increased from about 3% a year ago. But it's broadly in line with the long-term pre-pandemic average and it's expected to gradually fall a speculative development in the market is curtailed. The chart on the right-hand side shows that this correction is already taking place in the market with levels of spec building in the first half, much closer to the historical pre-pandemic levels. And finally, it's important to consider regional dynamics. Across our focus regions of Yorkshire and Central, the Northwest and the Midlands, vacancy rates remain below the national average with less than a year's supply based on current take-up underpinning the particularly favorable supply and demand dynamics of our regional markets. So residential markets, consumer demand remains subdued and as a result of higher mortgage rates, challenging affordability and lower consumer confidence, albeit interest rates appear to be nearing that peak. Reporting from housebuilders suggests reduced construction volumes over the coming year and a more selective approach land acquisitions. Despite this, we've seen good levels of demand from a wide range of house builders, both national and regional. And the chart on the left of this slide indicate one of the main reasons why. The U.K.'s challenging and complex planning system is constraining the supply of land for new homes. With planning decisions taking longer than ever before and the lowest number of decisions for major residential sites delivered in over a decade. And against this backdrop, you can see why our consent to service land product is attractive to house builders as it's derisked from both a planning and a cost perspective, allowing housebuilders to quickly start and sign. So turning to build to rent. This segment has continued to see strong growth, demonstrating the defensive nature of the product and the acute shortage of rental homes in the U.K. Savills reports that investment volumes in the sector had a record-breaking second quarter in 2023 bringing the total investments in the first half to GBP 2.1 billion. The U.K.'s BTR stock now stands at over 88,000 homes, representing a growth of 12% in the last year alone. With regional markets growing faster than London, and as you can see here from the chart on the right. Despite this, only 11% of the built stock is single-family and transactions remain focused on multifamily, which have accounted for around 60% of investment over the last year. Our BTR single-family homes and affordable homes portfolios of sites are particularly well positioned to address the acute supply imbalance as these markets mature. So before I hand over to Kitty, I want to take a moment to review our strategic scorecard. It shows the progress that we've made against all 4 growth drivers of our strategy to reach GBP 1 billion of EPRA NDV. Starting with direct development. Earlier this year, we completed 110,000 square feet at Gateway 36, and we're now on site with 166,000 square feet at the advanced manufacturing park, which is already 44% pre-let. We're continuing to see good levels of occupied demand for these sites, which are in prime locations and have both just become part of the UK's first investment zone. In terms of accelerating sales and broadening the range of residential products, we continue to see good progress here. With 92% of our budgeted plot sales for the year now either completed, exchanged or in heads of terms. Our single-family BTR portfolio is progressing towards exchange, and we've been securing these all important planning consents across a number of sites and our affordable housing product launch in April has received strong levels of interest, and we are working to select our preferred investors. In terms of scaling up land acquisitions and promotions, we've acquired land representing 1.1 million square feet of industrial and logistics space and 700 plots, which is continuing to refill that hopper, maintaining our land supply and supporting our growth strategy. And finally, the transition of the investment portfolio to 100% Grade A is well underway. With GBP 70 million disposals so far this year of older assets where we've maximized through our asset management initiative values. Importantly, these were completed in line with December '22 book values, proving the ability of our team to secure sales in a changing market. Combined with the addition of new space through our direct development activity, this means that our investment portfolio is now 29% Grade A. So as you can see across the bottom of this slide, over the last 2 years, and despite the challenging macro backdrop, we've made a lot of progress operationally and we're making good progress towards our GBP 1 billion goal. And with that, I'd like to hand you over to Kitty to take you through the financials.

Thank you, Lynda, and good morning, everybody. I'm pleased to be reporting a resilient financial performance for Harworth during the first half. And now I'd like to take you through this in some more detail. So starting with our income statement. Sales of service land and property, in addition to income from rent, royalties and fees resulted in group revenue of GBP 18.2 million in the first half. This was a decrease from the GBP 62.6 million reported in the prior year period where we have accelerated development sales into 2022 and which included a large sale at our Waverley land site. This year was therefore a return to our normal development land sales profile with infrastructure works over Q2 and Q3, preparing for year-end sales. Combined with the investment portfolio sales, which is we execute the development strategy will become increasingly important to our funding total property sales during the period were 44% higher than the same period last year. Revenue from the income generation portfolio reduced following sales of investment properties, but rent increased on a like-for-like basis. Looking forward, 98% of budgeted sales for the year are either completed, exchanged or in heads of terms, creating a strong revenue pipeline into the second half. Administrative expenses increased by GBP 3.4 million from the prior year period. This is principally due to a provision for bad debt and impairment of lease incentives caused by the recent administration of one of our tenants in our investment portfolio and also due to higher salary costs resulting from increased employee numbers last year to support our growth strategy. Headcount growth has materially slowed now in 2023. Revaluation movements are an important component of our performance as seen in both the income statement and the balance sheet. In the income statement, we can see increases in the fair value of assets held for sale and investment properties. These consist predominantly of our investment portfolio, our strategic land and our Natural Resources portfolio, but do not include any changes in the fair value of our development properties. Tax charges decreased due to lower unrealized gains on investment properties and all these factors combined resulted in a profit after tax of GBP 2.8 million. compared to GBP 79.1 million in the prior year, which is heavily influenced by valuation gains. And as I previously flagged, the bringing forward of land sales into the first half of 2022 to take advantage of the market conditions. Finally, the Board has decided on an interim dividend of 0.444p per share. This represents a 10% decrease on last year's interim dividend, in line with our dividend policy. Our EPRA NDV remained broadly stable year-on-year and was GBP 631.3 million as at 30th of June, equating to 195.7p per share. This is a result of a modest increase in valuations being offset by small increases in net operating costs, interest expenses and tax through an increase in net debt. Net debt was GBP 63.7 million, increased from its position at the end of 2022, largely due to spend on site infrastructure and development works is line with normal and expected to decrease with the completion of land sales and lettings in the second half. In fact, net debt as of the reporting date has already reduced to GBP 53.6 million with post-period sales proceeds. Combined with the dividend, our broadly flat EPRA NDV movement led to a positive total return of 0.1% during the period. I'll come on to talk more about our valuations in a second, but I thought it might be good to look at the EPRA NDV per share movement as a bridge from year-end 2022 to June 2023. There are 3 key points to take away. First, EPRA NDV has remained broadly flat at 195.7p per share. Secondly, the main component of the growth is from our value gains, which have added 2.3p per NDV per share in the period. The biggest reduction is 1.3p from our losses excluding value gains, which means our net rental service charge and fee income less the operating cost of the business. These have increased recently due to higher overheads as well as lower one-off fees during the period and following sales from the investment portfolio. I do expect that rental income and fees will offset operating costs again as we execute the strategy and direct development projects complete and become rent-producing supported by development management and planning fee income. Now looking at our valuation movements in more detail. This slide shows the component parts of our GBP 7.5 million valuation gain for the first half of the year, which compares to gains of GBP 110.3 million in the first half of 2022. Starting with residential. The land market was stable during the first half. And as Lynda has covered, supply of service lands remain constrained and house prices were maintained in our regions. Progress towards development land sales on our major development sites continue to demonstrate demand for our service land product and underpin our valuations. However, cost of construction increased over the period, and this offset the gains from our management actions to result in a modest loss of GBP 2.2 million. In Industrial & Logistics, following significant investment yield increases in the second half of last year, the market remains stabilized over the first half with small outlets yield movement and increases in market rents. Management actions progress sites towards development and supportive valuations, although again, cost of construction increased, albeit at a lower rate compared to last year. And combined, this resulted in a small revaluation loss of GBP 2.3 million on major developments. Across both portfolios, strategic land valuations increased due to the progression of planning applications and site strategies. Investment portfolio property yields moved in line with the market and our management actions securing sales, new leases, renewals and rent reviews resulted in a GBP 2.5 million value gain and reflected an initial yield moving 30 basis points to 5.9%. Although sales transacted the book value, we incurred some small losses on sale due to transaction costs and some minor adjustments to site-wide infrastructure costs which were allocated to prior period sales. This slide provides a breakdown of our GBP 738 million portfolio as at 30th of June 2023. Industrial and logistics land and properties shown here in shades of green now account for around 60% of our portfolio by value, with residential land and properties shown here in shades of blue accounting for most of the remainder. The table on the right-hand side summarizes for each segment, the pound per square foot and their industrial and logistics sites and the pound per plot for residential site, and it shows quite clearly the significant value that we generate by taking sites through the planning system, putting in place infrastructure and services before in the case of industrial and logistics, developing them and letting them to occupiers. It also shows the huge potential value of our currently unconsented strategic land pipeline, which has increased due to acquisitions in the half and now represents 33 million square feet of industrial and logistics space and around 21,000 residential plots. The chart on this slide bridges the increase in our net debt position from GBP 48.4 million at the end of 2022 to GBP 63.7 million as at June 2023. Here, the main driver was an increase in development spend and acquisitions as we continue to progress our growth strategy. This was largely offset by sales proceeds realized during the period and which have continued over the summer. This chart shows the headroom afforded by our cash position and revolving credit facility, which I'll provide some more detail on now. Our financing strategy remains to be prudently geared with a target net loan to portfolio value at year-end of below 20% and a maximum of 25% during the year. At June, our net loan to value was just 8.6%, slightly higher than at the end of 2022 and prior year period, but well within our target levels. And post period end, sales proceeds have continued to reduce our net debt position. So in summary, the first half saw a robust financial performance of the group, and we remain in a strong financial position with low loan to value and cash and available facilities of GBP 163.5 million and no major refinancing requirements until 2027. And with that, I'd like to hand you back to Lynda to take you through the operational review.

Thank you, Kitty. Now I'll provide some more detail on our operational progress during the first half. Slide 16 provides an overview of our 37 million square foot industrial and logistics portfolio, while over half of which is held freehold or in joint ventures. Over 5 million square feet of this space has a planning consent and includes mature sites such as our Advanced Manufacturing Park and Gateway 36. Both of these have been huge and successful schemes. And as I said earlier, we've seen good levels of demand at these sites during the first half as we brought forward the next phases of development. Our planning consents also include sites such as Chatterley Valley, where site preparation works began towards the end of 2022 for what will eventually be a 1.2 million square foot of employment space at the heart of the Ceramic Valley Enterprise zone in Staffordshire. Over 7 million square feet of development is progressing through the planning system, including Gascoigne Wood in North Yorkshire and Skelton Grange in Leeds where we continue to make progress. During the period, we acquired Parkside East, a site with the potential to deliver 0.8 million square feet of employment space at Junction 22 of the M6. The site was allocated in the recently adopted [ Knowsley's ] local plan and forms part of a wider regeneration area supported by the council. Harworth is now developing a master plan, which will be submitted for planning approval shortly. Table on the top right shows the potential growth development value to come from a selection of these sites, which could be as high as GBP 1.7 billion. Demonstrating a significant pipeline of development over the medium term and signaling the potential value that we can unlock as we continue to assemble schemes and work them through the planning process. Turning to our Residential portfolio, which has the potential to deliver over 28,000 housing plots, of which over 6,500 have a planning consent. Our residential land sales are typically weighted towards the second half of the year. Therefore, the focus in the first half has been on progressing transactions and carrying out land preparation and infrastructure works across our development sites. Shortly after the period end, we completed the sale to Barratt and David Wilson Homes of the land for sale at Thoresby Vale for the construction of 174 homes. And as we mentioned earlier, we're continuing to see a really good level of bid activity and pricing across several of our sites. Acquisitions added 700 plots to the pipeline and planning the secured for just under 400 homes at our site in Killamarsh in Derbyshire which is now being marketed for sale. As a master developer, we pride ourselves on investing in residential sites to provide great infrastructure, amenities and green space residents. One of the highlights during this period has been the opening of a new 50-acre park at our Cadley Park development in Derbyshire, providing an extensive green space for residents and the local community to enjoy. And finally, as we touched on earlier, our service residential land product is a key differentiator for us, and we've continued to see good levels of demand with an average of 7 housebuilder bids received for each land parcel that's been marketed so far this year, which is in line with the average number of bids we typically receive and importantly, average bid prices are ahead of book values. Staying with residential, one of our key strategic objectives is to broaden the range of our products. Offering these products alongside a traditional service plot product has many benefits. And while by value, they account for only a small proportion of our portfolio, they provide us with important diversification. They allow us to accelerate the delivery of our residential size and they give us the opportunities to control, build quality, innovation and sustainability. All of this is critical to retaining a sense of place, preserving land values and meeting our net zero carbon goals. Some of our budgeted residential sales for the year relate to our single-family build-to-rent portfolio. Here, we're now starting to see our reserve matters planning applications come through for several of the sites enabling us to progress towards exchanging contracts with our preferred investments and construction partners. As a reminder, this is one of the first portfolios of scale in the U.K., and it's been a complex process whereby all sites in the portfolio have had their master plans reformulated to change the housing typography to institutional quality BTR units that don't need to be retrofitted. Owing to the planning environment, time lines for the portfolio become protracted, however, for us, this is not about delivering just any transaction, and it's about ensuring that we manage the risk as the market has shifted around us. But it's also been critical throughout for us to identify partners whom we can develop a long-term relationship based on shared values and ambitions. Our affordable housing portfolio comprises approximately 400 homes that meet the national planning policy framework criteria for affordable housing which tells entails social rents, affordable rents and a range of intermediate rent-for-sale products such as shared ownership. With good levels of interest so far in the portfolio, which will allow us to further accelerate the delivery and enhance the vibrancy of our residential sites. So looking further out, we're now preparing planning applications for our first small-scale pilot programs of our net zero carbon product at the Waverley and Prince of Wales sites. We're also looking at senior living opportunities across a number of our sites and we look forward to updating you further on these plans in due course. During the period, we accelerated our plans to reposition the investment portfolio with the proportion of grade A space within it rising from 18% at the beginning of the period to 29%. This was driven by a significant sales program of assets where we'd maximize value through asset management or development initiatives. The sales totaled GBP 52.1 million in the first half, with a further GBP 17.9 million of disposals completed after period end, all prices were broadly in line with the December '22 valuations. Sales were made to a broad range of buyers, including occupiers, highlighting the ability of our team to find investor pools in a challenging market. In addition, over 90% of the floor space sold was EPC, C rated or below with over 40% D rated or below, meaning that these sales have significantly improved the energy ratings of our remaining portfolio. Our investment portfolio sales program has effectively concluded now and will likely explore further selected disposals as direct development work is complete and our grade A space enters our portfolio. So looking now to our GBP 240 million investment portfolio in some more detail. This portfolio delivers an annualized rent roll of GBP 15.8 million and this has reduced over the 6 months due to the previously mentioned sales. Continues to deliver robust financial metrics. And you can see from the chart at the top right of this slide that the occupier base is diverse, is focused on those sectors that are currently driving demand, such as manufacturing and third-party logistics. You can see from the bottom right of the slide that the operational metrics remain strong with a long weighted average on expired lease term of 12.5 years, a low vacancy rate of just over 1% when excluding direct development work was completed in the prior 12 months and a 98% rent collection. During the first half, we completed 277,000 square feet of lettings, adding GBP 0.9 million of annualized rent and all transacted premiums to previous passing rent and ERVs. Occupier Ilke homes, which represents 7% of headline rent roll and to administration during the period, but has remained in occupation to date. The related space is, therefore, classified as occupiers for the purpose of the vacancy calculation. The group is currently exploring options for the site included reletting, refurbishment or redevelopment of the unit. So we now turn to the outlook. Harworth is a long-term through-the-cycle business. Most of our sites will be in development, planning or land assembly through the next few years and well into the next decade. Our land bank is significant with the ability to deliver over 37 million square feet of industrial and logistics space and 28,000 homes. And our near-term sites have a combined gross development value of around GBP 2.4 billion. Crucially, we have the team and the specialist skill set to look through the near-term market conditions and deliver these schemes and where we need to invest to create future value and returns that we can allot from our sites. The economic outlook for the U.K. is likely to remain challenging in the near term, although there are encouraging signs that the inflationary pressure is easing and interest rates are approaching their peak. For the industrial and logistics market, the structural drivers of demand remain largely intact while supply remains constrained, particularly for Grade A energy-efficient buildings and also across our regions where supply represents less than a year of demand. For residential, while affordability challenges are weighing on house by demand, our sites are located in the more affordable regions and house builders remain attracted to our service land product which has planning approval and all the necessary infrastructure and is derisked and ready to build on from day 1. At the same time, our new residential products such as BTR and avoidable housing, will provide resilience and exposure to significant growth markets. So to conclude, our business is resilient, and we continue to make progress against our strategy with our management actions driving and preserving value across our portfolio. And with that, I would like to open up to any questions, and we'll take those from the room first, and then we'll move on to this from the webcast. Thank you for listening this morning.

Colm Lauder from Goodbody. Great detailed presentation as always. Just pick up on a couple of points and just maybe ask if you could define them a bit in more detail, particularly on that 98% of budgeted sales figure, obviously, at the halfway point, it's a very strong number. But obviously, you referenced that it's either completed in legals, contracts exchange, et cetera. Could you perhaps give us a breakdown of that 98% in terms of how much is completed, how much is in legals or heads of terms and also your views on timings around those completions?

Yes, absolutely. So it's broadly about 50% that's completed already with about 50% to go towards the end of the year. And this is not untypical for us for a sales profile actually. So I've looked back and over the last couple of years, we've actually been at 98% of budgeted sales for the last couple of years at this point. Prior to that, it was lower. So very, very consistent level. And for us, it's all about doing the infrastructure on our sites over the first half into sort of Q3 and the tail end of the year and then completing sort of those sales as we get towards the end of the year. So there will be some completions that will complete between now and the end of the year, but we are always quite back-ended as we get into December, and I expect that to be the case again this year. So there's lots of work to do between now and the end of the year to close those sales out. Again, that's nothing that we're not used to. We're always sort of working through getting sites that have progressed and sort of dotting the Is and crossing the Ts on the contracts at this time of the year. So very much as a business progressing as normal.

Okay. Great. And maybe just one other point as well on sales and obviously related to the industrial and logistics asset sales. Could you perhaps give us a bit of detail on the yields achieved on those disposals? I say obviously, the portfolio yield comes back to 6.6% from 7% over the 6 months. Any guide on what the average yield of the disposals was?

Yes. So these were -- these are assets, as Lynda has already referenced, which were probably sort of more secondary in nature out of the portfolio. They were assets with lower EPC ratings, lots of tenants, multi-let in almost all instances, I think over the course of the sales, we've removed about 100 tenants from the portfolio. So it's really sort of moving that the portfolio forward to being sort of units that are more institutional grade, both in terms of quality but also for management and rental income qualities, too. So these assets were towards sort of the higher yielding that have ended the portfolio that we had before. So sort of well above that of 6% that we have across the portfolio at the moment.

Colin Sheridan from Davy. Just a few more from me, if I can. Just maybe to start on the rental environment and tenant in particular, if you could maybe just give us a feel for those units in the investment portfolio that just complete or to be complete, what's the outlook looking relative to sort of recent history on tenant demand there. And then just a question on land buying as well, which you've obviously flagged today. A lot of talk about land market in relation to the homebuilders, but where you're buying land has -- you've seen similar trends in that part of the market? Or are you seeing something else going on there? And finally, I know, Lilly, you mentioned the planning environment at a sort of a national level and we're pretty up-to-date with all the kind of challenges going on there. But Harworth specifically, it's clearly an area that you guys specialize in? Are you feeling a little bit more comfortable about planning than maybe some of homebuilders and other construction companies that are struggling with that at the moment.

So we're occupiers. I think it's fair to say, so of occupier demand through probably the first quarter of this year was pretty okay. We were sort of seeing reasonable sort of levels of viewings and then like as the market year was still uncertain and like sort of no sign of immediate improvements as we moved into quarter 2. It did quite down a bit, and I think that's quite widely documented by all the major agencies. Interestingly, the sites are all different. The advanced manufacturing park has been pretty hot, actually sort of throughout the last 12 months. We've got a lot of interest for bespoke building for occupiers, pre-let interest as well as sort of the units that we're bringing forward speculatively. Gateway 36, we had an early let in, we've got a unit in heads and over the last sort of month or so is occupier viewings really, really tick up. So the occupiers are coming back sort of into the market. What they are is more cautious. So there's inordinate amount of due diligence going on. Transactions are taking longer to get over the line, but rents are still pushing on so we're still sort of seeing rental growth, and we're quoting rents and sort of an issue in term sheet is sort of ahead of ERVs. So it feels solid. It just feels slower is what I would say. And some of that is just due to like the sort of $64,000 question as to how long is this going to go on for? Are rates going to really sort of start to come in. I think there's probably a general acceptance of underlying inflation might be sort of with us sort of higher interest rates for a bit longer. But occupiers can't pause their decisions if they need new space indefinitely. And that modern grade A space is actually trying to occupy us because of all of the attributes that it has. And then we have land market trends. So one of the big challenges in the land market is there isn't a lot transacting. And actually, you haven't got a flood of sort of sellers waiting to put their land on the market. In fact, you've actually got people sitting on there saying actually, sort of we'll wait until things got better because we don't actually need to sell. And the land market is always different to sort of selling standing buildings. So we have got acquisitions teams in our regions as well in the center. We've got real specialists in this with big regional networks. We're still managing to sort of assemble sites and [ e-count ] sites pretty much in the same way that we've done sort of in previous years. It's patient. It's a long game. It's about our flexibility and our ability to take that long-term view. We're acquiring at or around or marginally above agricultural prices when we're assembling sort of units of land and sort of we are seeing a good response to the teams on the ground where people have got land to sell. I think actually what always helps is when they know they're working with a counterparty who's got a track record of transacting. We don't mess about if it's the right land for us and it meets our underwriting criteria we transact.

I think you'll take because we're buying -- if you think about the valuation we're buying early-stage strategic land. So that's quite different from land that you want to sort of build on immediately. So our strat land is at sort of 5,000 plots or so GBP 6 a square foot. So is right, sort of down there. So I think it's about finding the right side, yes, isn't it? Because when we're looking at the underwriting, it's not necessarily about getting the cheaper sites, it's about getting the right sites that we can drive the right value from going forward.

And they've got to stand a chance sort of being allocated in the longer term, so not every site that we buy today will have as a Parkside, for example, has an allocation. Not every site that we buy in fact, the vast majority don't. So we actually look at -- if you look at 5-year planning cycles, which planning cycle, do we aim to have that land sort of allocated in and -- but let's say it has to stand the chance of getting an allocation, which is part of our skill set assessing that. And then planning. It's really tortuous actually. And it's been, I would say, challenging probably for the last decade plus. And that's really because whilst governments keep trying to reform it, vessel is not reforming it effectively. And I think I said when we presented our full year results to really support growth in the U.K. economy they've got us all planning out. They've got sort of planning out to make investors feel confident to invest and occupiers feel confident to sort of come into places. And I think things like the investment zones are also not a huge amount of government money sort of being allocated to us and they're a positive move because at least what starts telling an investor in an occupier is that actually the development and the investment is welcome there, and it's supported. But it's really hard. And I was talking to a very senior planning officer only last week, he said 25 years ago, like it is nowhere near as complicated as it is today. And what that means is basically, just applications are taking a lot longer to work through the system. There's an awful lot more expert views that need to be taken by planning officers to be able to make a recommendation. And that's just something that you've got to embrace and invest in otherwise you'd never put an application in. I think the startling stuff was the stats that came out. The analysis reacts had done the other week, which shows that since 2016, major applications, whether they're resi or employment have dropped off quite significantly. And then what is going through, which is the reduced number is taking longer, and that's sort of -- that's one of the things that's supporting sort of the market dynamics at the moment.

John Mozley, Liberum. Could I ask you 2 questions on the housing side, please. In the statement, you say you're seeing on average something like 7 bps per plot, and that's roughly what you saw this time last year. That sort of feels slightly out of sync with the words that every house builder uses at the moment. So I'd be interested in what your comments are around that? And then the second question is on the build-to-rent portfolio. Obviously, that's taken rather longer than we all hoped initially. Is it still roughly the same shape as it was when it was initially outlined to us.

Yes, absolutely. I mean I think the sort of what we've seen is that we spent a long time at building a portfolio where we've got sites in the right locations, the housebuilders want to be on. So if I think about sort of our Ironbridge site, which a number of you have been to. It's a really special location as the opportunity to outperform the market. Our Waverley site, our Coalville sites, we've got proven market demand in those locations. So over the course of this year, the summer in particular, we're always out of marketing our sites. We don't always go [ farm ] wide. We sometimes select a number of house builders that we know that we want to work with to come and bid but I think absolutely what's encouraging from the numbers that we look at is that we are continuing to get the house builders interested in those sites. And I think that's down to the product, and that's down to the locations. And working with Harworth and those relationships that we've built over a number of years. So yes, so the bids are remaining relatively steady. I think we talked a little bit about a year-end about seeing some of the regional house builders starting to bid a bit more. And I think more recently, we're seeing the nationals sort of come back in. So we've been able to maintain that mix and the bid levels that we're getting are all in line with or ahead of book values as well to those service line values are also holding up to, John.

A mix of conditional and unconditional bids, so it's pretty much what you would expect. I think you've also got to remember the regional markets are much, much more affordable as a multiplier of salaries and they're keeping -- and the housebuilders are keeping sites moving. And in some regions like the Northwest is a real scarcity of allocated sites. So there is like -- there are some it's very local actually some of what is happening.

Definitely. [indiscernible], as you say, has taken a little bit longer than we expected. I think we initially sort of underwrite in the first half of last year. We marketed it and the market was particularly strong at the time that we went out to market. And that market have adjusted quite rapidly as interest rates have came up. The way that we look at it now is still actually in line with that original underwrite that we did in the first half of last year because we didn't necessarily underwrite the frost that was in the market initially. But it's always been for us about giving us the optionality of accelerating scales, sales, giving us diversification away from the house builders and benefiting from the development fees that we can deliver. So we still have the optionality to put sort of sites back almost to the house builders, if the house builder demand is stronger. So it's not that it's changed shape, but we still retain the optionality that was there in the first place, I suppose and continue to think that it looks attractive when we look at the investment into the build-to-rent sector to continue to bring that product forward. So it's now very much about sort of knocking down those final planning hurdles and then getting it to completion.

And I think the difference that probably isn't necessarily like understood is what I referred to today, we actually remaster planned those phases for a institutional quality, 2025 REG compliant sort of BTR products. So we're not taking like what was originally sort of there and actually just pushing it through and then saying we can do it. It was really quite specific. We wanted to make sure that we actually have something that was high quality that will be delivered. And that's the thing that, as we've taken it through reserve matters has taken quite a lot of time.

Any more questions?

So you've got 1 question at the moment to the webcast. Just a reminder, if you'd like to submit any questions, you can still do it through the browser, and we'll read out as many as we can. The 1 question is what are the management team's views on the current discount to NDV that the share price is showing? And what actions can the management team take to close this discount for shareholders?

Well, you can imagine like probably our investors, we're not very happy about it. And we think it really doesn't reflect the underlying -- well, A, the performance of the business, but b, actually super, which is an amazing long-term land bank, not just to get us to the first billion, but sort of keep going sort of into the future. As a management team, it's very difficult because we can't control what's going on, and it's not just hardware. I mean the point here is like the whole of the factor is being impacted U.K. plc is pretty sort of an investment offer at the moment. For me, this is about sticking to the knitting, it's about continuing to execute our strategy. We are long term through the cycle. This is just a part of the cycle that nobody likes, including us and actually make sure that we consistently deliver. We consistently perform, we keep our eye on the cost base of the business. We're really sort of closely in touch on a change to the markets. As Kitty said that flexibility that we have in the product that sort of we can now deliver across our sites is really important, making sure we secure pre-lets to get some of the bigger and earlier phases, the work some of the bigger sites we've got coming on stream, like Chatterley and Wingates, we're really focused on at the moment. But for us, it's about continuing its heads down. It's continued to deliver, hopefully, continue to outperform and get through this sooner rather than later. Would you add anything?

No, any they will continue to sort of work with shareholders to understand the business model, improve our disclosures and deliver on the structure.

Which hopefully, again, you've seen as investors, we've gradually sort of begin to improve those disclosures over the last years, and we will continue to do that.

Great. Thank you. That's all the questions we have from the webcast.

Thank you, everybody. Thank you for listening.