MJ Gleeson plc (GLE) Earnings Call Transcript & Summary

Very good. Okay, we'll get going. Good morning, everybody. Thank you for coming along. Welcome to MJ Gleeson's results presentation for the year-ended June 2024. We'll follow the normal format. I'll give you a quick overview. Stefan will run through the numbers, and then I'll come back and talk a little bit about operations and strategy before we go to questions. So, well, in the event, FY '24 was probably a more challenging year than I think any of us had hoped for. And so against that backdrop, I've got to be very pleased, actually, with a resilient performance by the group delivering in line with expectations. Gleeson Homes actually delivered above expectations, had a very good year. We achieved a small increase in our number of homes sold, which was very pleasing. Delighted with the progress we made in partnerships, and we'll talk about that, and really pleased that we restored our 5-star customer recommend score, and we were actually 5-star in all 6 regions, which is very pleasing indeed. Also, some great progress by our land team. We've now increased that pipeline to 179 sites over 19,000 plots. And that's really important and provides a fantastic platform for the growth that we're targeting and achieved in an increasingly competitive market for land. Gleeson Land had a slightly more challenging year, still made 4 great sales under promotion agreements, but met some headwinds in planning. Undoubtedly, in my view, looming in the background there was the febrile political environment in a general election year. That has created a bit of a hiatus. We'll talk about it, but a bit of a hiatus in the sites coming through for sales, which will actually mean that the first half of this year has got a gap in those sales, and the performance for the current year is likely to be weighted to the second half in Gleeson Land. But we do have 7 sites with consent, 3 of those currently in a sales process. And I'm really pleased to say that, when we are taking sites to market, the -- we're seeing really strong appetite and strong pricing. And as I say, that's the flip side of the difficult land market. And very importantly, Guy's completed the restructure of the team, which is all around regional focus and embedding our data and data research analysis into the entire process. So turning to recent trading. Well, the eventual base rate cut, as expected, had a real positive impact on confidence, and we did immediately see an uptick in reservation rates, which was pretty strong, as I say, pretty immediate. In my view, that sort of upswing has slightly plateaued in the last 3 to 4 weeks. And I can only put that down to a lot of negative commentary coming out of #11 and #10 around a poor economic backdrop and a difficult Autumn Statement to come. But nonetheless, we have seen, as I say, strong improvement in open market sales. So as you can see, if you look at the 10 weeks since the start of the year, the net res rate is up by some 28% over the comparable period in the prior year. Pricing remains resilient. We're not seeing any general pressure on house prices. We are continuing to support with incentives, but at a steady level, and we're not having to push that harder kind of 4% to 5%. So overall, how would I characterize it? We are seeing a recovery. And I'm we're early in the year. I'm very confident for the -- for our full year numbers. But there's still no real conviction in that open market sales rate, as I say. And I think what the -- what we need to see is that next base rate reduction. So we're seeing the first one was took a while. There's doubt as to there's a delay in the next cut in the base rates. There's continuing concern about what the Autumn Statement might say and continuing poor economic commentary from government. So my sense is that, we are seeing a recovery. There's still a bit of there will continue to be some caution through the Autumn. And therefore, I think that -- we're not going to be shooting the lights out in the first half. But as I say, I do think that we're very -- we're confident about the full year position. More positively from government, we are really pleased to see, at last, a government that is overtly pro house building, resolved to sort out planning and, of course, all about the prioritization of affordable housing. And that's what we need to see. It'll all be about the detail and the effectiveness of the implementation. It's pretty clear that we will see that vital restoration of mandatory targets for local authorities and hopefully also an increase in funding for planning departments, just to speed the whole process of getting planning through. Really keen to see some early clarification around grey belt, around the definitions and the rules that come into play. Haven't heard a lot yet about the important issue of resolving nutrient neutrality, that kind of misguided moratorium on development, which is holding up something like 160,000 homes nationally. We're very keen to hear see something on that. It doesn't look like there's much appetite for first time buyer support. It would obviously help. We're not dependent on it. But as I say, I don't expect that we're going to see anything there. But there is pleasingly some kind of a national consensus, I think, around the need to improve training and apprenticeships, and that's an area where Gleeson Homes is already and will continue to play a very active role. And for me, just stepping back, I think it's really important that whatever framework we kind of end up with that there is a real embracing and facilitation of the important role of the private sector in bringing forward homebuilding and in particular, affordable homebuilding. And I think it's that need for and prioritization of affordable homes that gives me -- that's a key reason for my confidence in our ability to grow Gleeson Homes and the differentiation of our model from most other house builders. We are precisely, as the slide says, building the affordable homes that the country needs. With average selling price of GBP 186,000 we're bringing we're delivering quality and value, but at an affordable cost, which is significantly lower than the national average and also considerably lower than the average just in our areas of operation. The cost of buying and owning a Gleeson Home, a new Gleeson Home, is some 20% lower on average than the cost of renting the same property. If you just look at the graph on the screen, it perfectly illustrates the distortion that's going on in that market at the moment. I think probably around the sort of hostile political environment that private sector landlords are experiencing at the moment. And with that distortion, I don't see that gap closing anytime soon. Of course, we're accelerating our delivery of affordable homes through partnerships. But very importantly, whilst we're bringing these products -- these homes to market at lower cost, we're not compromising on quality as those of you who've had the opportunity to visit our sites have seen. The average Gleeson Home buyer spends 22% of their disposable income on their mortgage payments. That compares with 31% nationally. And with successive increases of 10% in the National Living Wage, a couple earning the country's minimum wage can afford to buy any of our 2 bedroom homes and a large proportion of our 3 bedroom homes, really important differentiation in the model. At that point, I'm going to hand you over to Stefan to go through the numbers.

Thank you, Graham. So we did deliver a resilient result this year with revenue higher in both divisions. And at a group level, revenue was up 5.2%. Gleeson Homes revenue growth was driven by higher volumes, up 2.8%, despite the sales outlets being lower than the previous year. Gleeson Land revenue growth was driven by slightly higher site sales. We sold 4 sites compared to the 3 the previous year. And we also completed on the sale of a site that we sold in 2019 and recognized revenue this year. I'll take you through divisional operating performance on the next few pages. But to add a few additional points here, group overheads at GBP 3.9 million do appear significantly higher than last year's, but last year's included a large credit booked for the reversal of the accounting share-based payment charge on some long term share plans. So group operating profit at GBP 28.6 million. It was GBP 5 million lower than the previous year, driven largely by lower profits in Gleeson Homes. Interest cost was higher at GBP 3.8 million that was driven by the refinancing of our bank facilities, additional refinancing costs over a year ago and higher borrowings during the year as we continue to increase our investment in WIP on-site. The full year tax rate was 22.3%, higher than the previous year. As we know, the corporation tax rate has increased to 25%, but it is lower than that headline corporation tax rate of 25%, because we took advantage of land remediation relief on our brownfield sites. Those low profits and higher tax rates resulted in lower earnings per share, 33.1p. So, looking at divisional performance, first, Gleeson Homes. Gleeson Homes' higher volumes included a proportion of multiunit sales. About 20% of the homes that we sold in the year were multiunit sales. That compares to about 7% the previous year. Average reported selling prices for the year were marginally lower, GBP 185,700. That reflects the almost perfect offsetting of 2 things. So the impact of a higher proportion of multiunit sales, which you will recognize are sold at a discount to the open market value. But actually, the underlying selling price on our open market sales was up 1.5%. So gross prices were up 4.5%. Incentives, we flagged this a year ago. Incentives were up, still reasonably modest at 4.4%, total cash and non-cash incentives. We do continue to achieve modest selling price increases at both a gross level and an underlying selling price level, although the current increase in underlying selling prices is very, very modest. Now, as we had been flagging, gross profit margin was reducing. It reduced to 24.1% in the year. That reflects the impact of multiunit sales, certainly higher proportion of multiunit sales. Those higher incentives, lower extras. The impact of cost increases on older sites, remember in January and then in February we talked about the impact on some of our older sites and extended site durations as we continue to see the expected completion date of sites extend. Now, we do expect to see a degree of further margin pressure in H1, and we will -- but we do expect to see recovery starting from H2 this financial year. Admin overhead costs reduced by 5% to GBP 49.2 million, you'll remember, just over 12 months ago, we completed a restructuring of Gleeson Homes' operational structure that reduced our head count, took it down from about 500 to about 450, which is where we averaged that year. We're currently at about 450 heads and expect it to stay at around about that level this year. Now, we had, as in previous years, a small amount of other operating income. Just to remind you what that is, when Help to Buy was introduced in 2012, I think it was, most house builders who had a shared equity loan book sold their shared equity loan book. Gleeson Homes didn't. We've kept it. And those loans have been redeeming at a small, but very healthy profit. That's what the profit is on other income. We are now down to only GBP 100-odd thousands worth of book value of loans, only about 20 loans outstanding. So don't expect there to be very much more coming through this year or in future years. So, on Gleeson Homes, a resilient result. Operating profit, GBP 30.3 million, operating margin, 9.2% and a return on capital employed, 12.2%. Now, turning to the forward order book. We did see a recovery in our open market sales rate. Reservation rates -- net reservation rates in open market sales increasing to 0.44 per site per week. We had fewer sites, remember. That was 16% increase in the net reservation rate. That allowed us to increase the element of our forward order book that is open market sales from 326 to 366 forward orders. That, with 146 forward orders under multiunit agreements and, of course, our 47 forward orders under the first partnership agreement we've signed brings our forward order book to 559 forward orders. So turning to our build and sales sites. The planning has been tough, as Graham has mentioned, and I'm sure we'll talk about. You will also remember, second half of the previous financial year, like the rest of the sector, we pressed the pause button on land buying and opening sites. There is a cascading effect of that, meaning first, you have fewer build sites and then the following year, which was the year we're reporting on last year, you have fewer sales sites because if you open fewer build sites, some 6, 9, 12 months later, you have less sales sites to open. We only opened 4 sales sites in the year. We ended the year with 62 sales sites sales outlets compared to the 71 we had at the end of the previous year. Now, our sales opening plans step up significantly. We -- this year, we will match our site closures with site openings, at least on a sales outlet basis. So we expect our sales outlets at the end of this year to broadly match where we started to get. But from next year and thereafter, we are aiming and expect to open a net 10 new sales outlets per year. Some use a little lower, some use a little higher, but that's what we're aiming for and that's what we expect. We've got the pipeline for it, and we'll talk about that a little bit later. And it is this sales outlook growth that is going to drive our volume growth in Gleeson Homes. Turning to Gleeson Land. The division had a much better result than the previous year, completed the sale of 4 sites compared to 3 of the previous year. It was beset by planning difficulties and planning delays like the rest of the market. Nevertheless, it actually generated gross profit of GBP 8.6 million. We booked an additional provisions of GBP 3.3 million, so we reported gross profit of GBP 5.3 million. We made modest investment in our overheads. We restructured on a regional basis, and we made some very key hires, and we invested in our Analytics capability. That increased overhead costs from GBP 2.6 million to GBP 3.1 million. As a result, operating profits rose from GBP 1 million to GBP 2.2 million. Now, looking at the group balance sheet. Inventories remained at a group level relatively flat. Gleeson Homes inventories were up GBP 3 million. Gleeson Land inventories were down GBP 3 million. I think in February, we guided that build rate per site would be about GBP 2.7 million, and build WIP per site at the end of the year was GBP 2.7 million. I would expect this year that build WIP per site will increase a little bit, maybe GBP 2.8 million. We have seen most of that GBP 30 million investment we made the previous year. You'll remember, like a lot of house builders, we invested heavily before changing the building regs on the 15th June 2023, and we pulled a further 2,000 foundations or made a substantial start in a further 2,000. Most of those -- most of that investment has now unwound about 3 quarters of it. I would highlight the low level of land creditors on our balance sheet GBP 9.3 million that's less than 10% of our land assets. We continue to pay for our land upon purchase. We don't rely heavily on deferred terms when buying our sites. And we ended the year with a very healthy cash balance of GBP 12.9 million. That increase to GBP 12.9 million that was driven by the unwind in that GBP 30 million investment, which is about 3 quarters of that was unwound. We have a strong and very healthy balance sheet. Now, the Grenfell Tower Inquiry published its report last week, and we were deeply moved by its findings. You will have noted in the balance sheet a provision for our obligations of GBP 12.4 million. That is the GBP 12.9 million provision we booked 2 years ago less costs that we've incurred to-date. As you know, the legacy business developed 17 buildings, over 11 meters that are subject to the Building Safety Act, none of which are high rise, none of which are fully clad. On the table there, we're showing you the status of our work on those buildings. Work is underway on 5 buildings. One of them is going to complete very shortly. The work program on 7 buildings is in the design and procurement stage, and we are aiming to start that work as soon as we can. For the 2 buildings are being assessed. Actually, 3 buildings we were unable to access at the end of the year, rather frustratingly, despite our best efforts. We're now down to, I think it's 2 buildings we're unable to access. We will do as much as we can to access those buildings. We are wholly committed to remediating life-critical fire-safety issues as quickly as possible, and we believe we are making good progress. Now, turning to group cash flow. The group generated operating cash flow of GBP 27.6 million. That reflects strong cash generation in both divisions. Gleeson Homes generated GBP 19 million of that cash flow, converting about 63% of its profit into cash. Gleeson Land's receivables reduced very significantly. And as a result, its cash flow was stronger than its profits. It was GBP 12 million of cash generated in the year. There was a balance of GBP 3 million outflow on group overheads, leading to the GBP 27.6 million operating cash inflow. You'll notice net capital expenditure was quite significantly lower than previous year. That reflects opening fewer sales outlets and therefore setting up fewer sales arenas and dressing fewer showrooms. Our net cash flow, GBP 7.8 million inflow for the year, very healthy, significantly better than the previous year, which forgive me repeating, but the previous year we had that rather significant investment ahead of the changes to building regs. So, we are maintaining our dividend policy of earnings covering dividends between 3x and 5x. And as a result, we're declaring a final dividend of 7p per share, which with the interim dividend of 4p brings our total dividend for the year to 11p, which is covered exactly 3x by earnings. Thank you. I will now hand you back to Graham.

Very good. Thank you, Stefan. Okay. Operations and strategy, starting first with Gleeson Homes. So the market, it's quite a nuanced position, I think. So the fundamentals definitely improved and continuing to improve. House prices are generally higher than they were this time last year. You're reading the same indicators as me. Build costs, pretty stable. We can talk about inflation in all day, but broadly, we've made some savings on Materials. We've given that back to subcontractors, pretty flat across the year. The base rate environment is improving as is the mortgage lending environment, and we're seeing the benefits of that, as I said, in our sales rates. Interestingly, the -- I referred to the -- our customers on the National Living Wage. It has been a beneficial feature for Gleeson over the last 3 or 4 years. The lower earning cohort of the population has seen a greater proportionate increase in their buying power than the rest of us basically. So that's a good thing for Gleeson. And so all of those fundamentals are very positive, and I do believe that, that recovery is underway. But then you it's slightly tempered by this current political commentary around negative economic commentary and a difficult Autumn Statement. So as I say, I do believe that, that recovery will have -- you'll see the brakes on it slightly through the Autumn, which hopefully picks up then once we get that next base rate cut into the New Year. Also important that, we quickly see the new funding settlement for Homes England and consequently Housing Associations. Currently, those really important engines of growth in affordable supply are sitting on the sidelines. They want to trade. We're talking actively with them, but they're out of funds broadly. And the effect on that affects not only Section 106 Homes, which is less of an issue for Gleeson because of the nature of the sites that we build but a significant problem for the majors, not only Section 106, but also additionality, I suppose, bulk sales and indeed, the negotiation and closure of partnerships transactions. So an important that we that is cleared and we can crack on in that regard as well. So turning to partnerships. Well, a year ago, we said that we were exploring opportunities in partnerships. And here we are 1 year later, we've engaged the best marketing brains in the country, and we have our brand, pauses for light ripple of applause. But seriously, we've done a lot more than that. I do believe that partnerships is going to be an important part of our business. It will accelerate our progress towards our medium term target. And you've heard me say this before, but I feel we are kind of in lockstep with what government wants to see here. You've heard both the Chancellor and the Deputy Prime Minister are talking about catalyzing private sector investment in expanding the delivery of affordable homes. Clear benefits of this strategy for the group. We diversify our risk away from pure open market sales risk. We achieve -- we benefit from forward funding, which enables us in turn to access those larger sites, which are more efficient to develop. And of course, we see an improvement in return on capital. The chart on the right just sets out some pro forma indicators and hurdle rates, enabling you to see how those 2 complement each other, those 2 types of routes to market. And I'm really pleased with the progress that we've made. So we've signed 2 partnership deals to-date, the first of those in June with Home Group and the second just a couple of weeks ago with Citra Living, and I'll talk about those in a second. But we continue to progress discussions with a whole range of partners for future opportunities. You recall when we announced our first multiunit sales bulk deals probably this time last year, I was very deliberate that we were selecting the partners we would work with for those sales that we wanted those them to be customers who shared our values and also people who with whom we could continue the discussion and hopefully progress towards more structured partnership opportunities in future. And I've singled out here Castles and Coasts, which is a registered provider in the Northwest. We're already building over 100 homes for them across Cumbria, but we're now building precisely on that relationship and discussing with them multiple opportunities for, as I say, more structured partnership transactions going forward, which is really pleasing to see. Every one of our regions is looking at several opportunities, and I've targeted the MDs that I want to see at least 1 partnership transaction in every region during the course of this year. And given that the first 2 are both in 1 region, we already start with a bonus site, if you like. It's an efficient model that we're using. So we've got a very small specialist team operating at center. It's not a huge overhead for us. They're working very hard. And that team is kind of building the relationships and building our profile, sourcing the opportunities and then working, obviously, hand in glove with the region to take forward the transactions and deliver the opportunities. We're using standard house types, again, a significant saving for us. We haven't got half the technical team working on new partnerships designs. The precise specification is obviously agreed with the partner, but there's no fundamental redesign required. Our partners really like the products that we're already building. And we are selective on the structures that we'll use. So when we're not engaging in low margin contracting, we are all about earning a return for our expertise and capabilities, both in the procurement of the land and indeed, in the developer, Acumen. And so these are the 2 transactions that we've signed, both, as you can see, significant sites, both exciting regeneration opportunities, both with blue chip partners, delighted to be working with Home Group and with Citra Living, both of whom are talking to us about future opportunities. And so just stepping back from this for a moment, and those of you that know me know, I do know a thing or 2 about the complexity of building a partnerships business. And within an organization that pretty resolutely turned its back on the partnerships model from a standing start about a year ago, the team has done a fantastic job, small team, done a fantastic job in building our profile, developing those relationships, identifying the opportunities, negotiating the transactions and to be just 12 months later presenting our first 2 transactions with a pipeline to follow. So I'm proud and impressed by what they've achieved. Also, really pleased with what our land team has achieved. So as I said, we've grown the pipeline up to 179 sites, which is really key to underpinning that growth that we see over the next 5 years. And importantly, despite a land market that is undoubtedly getting tighter, the average cost per plot of the 15 sites that we've acquired during the year was just GBP 17,400 average cost per plot. And that leads to an average cost in the portfolio of just over GBP 15,000. That's significantly lower than 10% of our average selling price and, as I say, really exciting opportunity for us. So how are we going to fulfill that growth? Well, look, we've got the people, we've got the land, we've got the excellent product, and we've got the market demand in a really underserved part of the market. We've got a robust plan, as Stefan's already alluded to, to get the build sites open that we need. And so if you look at the -- with a sales rate and back to a more normal level of 0.6, which is only is less than 10% higher than we achieved last year in terms of 0.55 completions per site per week. And with a robust -- with a build site -- a number of sales outlets up to 100, which, as we've described, is well within our grasp, you can see by the simple arithmetic, that's how we hit that 3,000 homes per annum. So we can see it in our grasp, and we are absolutely getting after that. The partnership's growth will be incremental to that. So you can look at it that is either a higher end point or we get them all quickly, whichever way you want to look at that. But I'm really confident about that medium term target of 3,000 homes per annum. Turning to Gleeson Land. Guy, as I said, has made great progress and has now completed the restructure. And that was all about improving our regional focus. It's not a massive increase in overhead. It's really it's the land teams who need to be local. So we're now operating across 3 regions. But the significant technical and planning expertise that we need across the piece can continue to be served by the excellent team in fleet. We've also embedded our unique data research capabilities, which now underpin the all elements of the process from land identification through to presentations to land vendors and ultimately through to underpinning the planning applications. So it's a really powerful proposition and an opportunity for us to grow that business at low incremental overhead and incremental investment. We had a good year in site acquisitions. The market is competitive, and we've seen some very racy offers, and we're not getting involved in -- we're not cutting our throat in the offers that we make. We're also -- we remain very cautious about the sites that we take on, very conservative. So give you -- we probably reject 9 out of 10 of the opportunities that we're shown, just selecting those that we believe we can bring through and bring through at a sensible return to the business. But we did acquire 5 new sites in the period, which was good news. As I alluded to, very difficult planning environment last year. I was really pleased that we did have some great wins. And as you can see, 5 sites were granted permission. But we had it was a disappointing year in terms of we actually lost out on 6, 5 of those via appeal. And as I say, don't stop me on the politics that was appeared to be in play on several of those. What it does mean, as I said, is that, that creates a bit of a gap in the sites that we're actually bringing forward to market, and that means that the performance of Gleeson Land this year is going to be likely to be weighted to the second half. It's likely that the first half is just going to represent a net cost. We have pleasingly had our first appeal in the New Year and the new government. It's a smallish site in Somerset, but we were delighted to win that one. So back to winning ways. We've also Guy and the team have taken a good look at the portfolio, and we're encouraged by the prospects for, as we get into the medium term, a handful of sites that we think will come forward in time as a result of the likely changes to the NPPF. So quickly, in summary, we're very pleased with results in line with expectations and with a strong performance, particularly in Gleeson Homes. We are seeing a recovery, slightly tentative, but for me, undoubtedly, that recovery is underway and will pick up from here. Delighted to have agreed our first partnerships transactions and others very much in negotiation. We are pleased with encouraging signals from the government on both planning and homebuilding, and we're very much moving ahead with our plans to grow both of our businesses. So in short, we have the people, we have the land, we have the skills and we have the ambition to triple our profitability over the medium-term. Thanks very much for listening. And at that point, we'll be very pleased to take your questions.

Straight off the mark. I think Harry Goad just beat you, Charlie. Go for it, Harry. I didn't even get back to my seat. Excitement levels.

Graham. 2 please on the sort of medium term outlook you were talking about, just to be clear in terms of the sales outlook numbers we were talking about, is the idea, just to confirm, flat this year and then growing at about 10 net every year for the next 3 years, so sort of around 90 units in the 2029 year. And then the supplementary is just the sort of cash flow dynamics that go around that because obviously I presume there's a quite significant cash drawdown related to that. And is the balance sheet in a position to fund that?

Okay. Good question. I think that the -- I think you're broad on sales. I'll get Stefan to talk to you through the cash flow implications, but they're not as daunting as they might sound. On the outlet numbers, I think you're just slightly conservative there. I think -- I would like us to be slightly ahead of that, but Stefan may kick me under the table as I say that. But we are opening sites at pace. We're looking at 20 to 30 per annum. And as Mark will tell you, that is kind of front and center of my Board Papers actually. I've told my Board, judge me by how we're getting these sites open. Stefan, do you want to talk about the cash?

Yes. And just on the average sales outlets this year, it's going to be lower than the year we just reported, 5% lower, something like that. It then grows at pace in subsequent years, so FY '26 next financial year, expect it to grow. Well, I'll take the average for the next 3, 4 years. It'll grow by about 10 net sites, 10 net outlets per annum. In terms of the cash flow, any other house builder then yes, it's going to be a -- it's going to consume cash. We don't expect it will in Gleeson Homes. It hasn't done before when land costs were about 8% of projected revenue of a site. We don't expect it to now when land costs are about 8% of projected revenue on a site. Just to flesh that out a little bit, if you look at the average WIP invested on our 79 build sites at the end of the year, it was GBP 3.8 million land and build WIP, offset by some creditors, typically about 15% of the value of the land and build WIP. At home, it's about GBP 3.2 million per site. So we grow outlets by 10 that's broadly going to be GBP 32 million, I mean these are very rough numbers, because it depends on the site and timing and everything else. But it's on average, you open that many sites, you'll probably get it's about that scale. So 10 sites is going to require GBP 30 million to GBP 35 million. Well, without giving you a profit forecast, that's pretty much covered by earnings in the division.

Charlie? In your new strip.

Yes, Charlie Campbell at Stifel. I've got a couple. I'll do them one by one, if that's okay. Just to follow-up on the site opening plan. Just wonder what the sensitivities of that are. I mean, are you building into that an assumption that things do get better in planning? And clearly, if they did get better, then maybe there's upside. And neutrality, have you got sites locked up in that, that might free up as well just to? And then even if all of those good things did happen, do you have the capacity, the desire to grow any quicker than the 10 you've given us?

Good question, Charlie. So we've got, so you appreciate when we're talking about opening sites next year and the year after, we've either achieved or pretty close to planning on those sites. So Steve and the team obsessing over this day and night. So we -- I would say that, for the -- we're pretty much certain of our ability to get the planning for the sites that we need for the next 2, 2.5 years. That's pretty well controlled. We've got good visibility, good visibility of that. And the budgets that I'm referring to here, we factored in the difficult planning environment that we see today. So to be clear on that, our medium term target of 3,000 is not contingent upon planning suddenly becoming easier overnight. The reality is we know it won't. Even if we see these changes to the NPPF, that's going to take a while to bed down. We'll see that over the kind of medium term. So this is kind of Guy's timescales, not Steve's, if you like. So we've got visibility. I'm not going to be so bold as to say we've got control, but we've got good visibility of the planning we need for that short and medium term. Nutrients is an interesting one. I think, Steve, we've got about 1,000 units, about 600 that are currently in planning and about another 400 that we're getting ready to submit. So that's -- those are the sorts of numbers that we could see come forward, 600 units come forward very quickly, if they resolve nutrients. But there are routes to solve it. We got unreleased of 100 units a couple of months ago through the credit system. That's what operating effectively in the Northeast, but not in the Northwest. Don't start me. It's -- so a resolution of Nutrient's would help the country, and it would certainly help Gleeson.

And then the second one and the last one was just about multiunit sales. Should we expect kind of the similar sort of proportion in FY '25, FY '26? Or does that come down a bit with doing more partnerships?

Too early in the year to say, Charlie. We would be happy with a similar proportion. It's and we certainly have the capability to deliver at that level. As I say, there's -- at the moment, a bit of a dance going on because, as I say, the natural buyers for those multi units are generally also sitting waiting to see how much pocket money they're going to get this year, as I alluded to. So -- but if you worked on a similar percentage, I think that would broadly work. Sorry, Andy, I think Adrian was just ahead of you there. Apologies.

Adrian Kearsey, Panmure Liberum. A few, if I may. On the building safety, you've got 17 buildings that need remediation. Do we assume a similar cost per building? Or is there a quite a spread? Should I do each one at a time?

Yes. No, because that's an easy one. It's yes, it's a broad spread. There's no absolute elephants in there.

Okay, cool. In terms of the time line for the partnership projects that you're sort of got in the pipeline, could you perhaps sort of talk us through sort of what kind of time line you're expecting in terms of how long to secure? How long do you actually get to put spades in the ground? And what's the sort of the likely duration for completion on those kind of projects?

Yes. So they take a while to negotiate. Obviously, they are large and complex. And ideally, you're negotiating them earlier and earlier in the process. So we're not going to be delivering those 47 units to Home Group tomorrow. I think we may get the first ones away at the end of this year. Mark might throw something at me. But certainly, through FY '26, you'll see a very good proportion of the units under the Home Group and Citra deals delivered. And I think the tail end is in '27. So these things that's very typical. But it's difficult to generalize because it depends on whether it's a site where we have planning we're ready to go or whether it's a site that we're just building in concept with them. And then it depends where on the site their units are, if that makes sense.

Yes. So presumably then, as a supplementary question to that, as you sign more deals, your forward order book then starts to benefit quite substantially in terms of....

Absolutely right.

Yes. And then one last question. You put a lot of foundations in the ground ahead of the building regs. And you said that, you've used up sort of 3 quarters or whatever it was proportion. Do you anticipate cost per the build cost to step up once you run out of using those foundations? And here, I'm thinking in terms of what kind of thing we should be thinking of for gross margin going forward?

No. It's the bottom line. No. It's all budgeted into and estimated that cost to complete and our projected margin. So no. And just to put some numbers on those, I'm going to call them substantial starts because they're mostly foundations, slabs, but not all. We would typically have had about 2,000 of those at June 2023. We had 4,000. So we pulled about 2,000 extra foundations or made a substantial start of about 2,000 extra homes. We're currently down to about 2,600. So we've used almost 3 quarters of those additional 2,000 plus. And the average cost of a foundation is about GBP 15,000, at least it is to us, just to put some scale on it. I don't think we're going to see a jump in build costs and therefore an impact to margin as a result of using up something we'd built a year ago. It just won't impact margin.

You've got if you think in terms of, say, build costs, and this is ex-land, the actual cost of build costs, about GBP 68 a foot. Add into that, if you take -- if you least strip out Part L and Part O and all the other good new rigs, and they're going to add another GBP 6 or GBP 7.25 foot to the GBP 68. But of course, we've been budgeting that in for 4 years now. So all of our margins, all of our costs to complete have been taking account of that right through. So the answer to the question is no. But are the building rigs making house building more expensive? Of course, they are. Aynsley, sorry.

Aynsley Lammin from Investec. I think I've got 3 actually. Just first one, the kind of a bit more color, I guess, on current trade in affordability, you've shown still very good for your cohort of buyers. And you mentioned and seem to be hinting that maybe confidence is a bit of an issue. Just wondered what the mortgage market looks like for that cohort, people on Living Wage, the availability of mortgages, appetite to lend, is that quite healthy and supportive going forward if confidence improves?

The answer is absolutely yes. I don't know, if you got the stats in the appendix there. But so yes, we're not the mortgages are absolutely not an issue. It is all about confidence. And it was a hint, Aynsley. I mean, the stats are telling us our res rates are much stronger, 28% up, as I say, and we are seeing that. But of course, I'm impatient. I like it when my Friday night e-mail comes in and the sales are fizzing, and I would say they're good. They're just lacking a little bit of the conviction that I want to see.

Yes. I haven't got I mean, there's last time I looked, the kind of 90% LTV for a first time buyer, there were about 600 mortgages available. And a good accessible mortgage rate for a 90% loan to value first time buyer mortgage now is about 4.75%. That they were as low as 4.3%, but a typical good accessible mortgage rate is 4.75%. That's 1% lower than it was a year ago. Now, if you're at 85%, where almost half of our customers are, if you're 85% LTV, a really healthy 15% deposit, you'll be paying 4.5%. Mortgage rates are higher than we've been weaned on these low mortgage rates over many years up until a couple of years ago, but actually then they're not bad rates at the moment. And there's a lot of product out there. There's a lot of availability. It's a very competitive market.

Great. And then secondly, just on, I guess, for Gleeson Land, if the planning reforms come through as we expect from the government and their kind of intentions around the gray belt and then the NPPF changes, what does that changed operational backdrop that you'd expect look like for Gleeson Land? I mean, presumably, can you bring 3 more sites? Do you lose a bit of value? How does that all play out, do you think?

I mean, I'll ask Guy to give you a little bit of color. I would caution these things don't happen quickly. And I mean, almost to the points of amusement, I'm already aware of 1 authority in our operating region that has within days of the announcement of the consultation had organized a webinar for all residents as to how they could mobilize and resist the changes that were going to be proposed to them. So this is not going to be something that's embraced by local authorities. They will try and find ways around it. So I'm under no illusion that planning is not going to get easier anytime soon. But helicoptering up, an environment whereby local authorities have a mandated target, definitely improves the perception. But Guy, do you just want to comment on the effect on the portfolio?

Yes, sure. So, we've obviously analyzed all of our portfolio under the draft proposals. And I think it's fair to say, given our geography, when you look at the politics, and I think the appendices has got a map which shows the change of political color, certainly for our pricing region. Basically, a lot of conservative areas have turned to Lib Dem with a smattering of labor coming in. So we've still got a local politics issue to tackle insofar as the Conservative and Liberal Democrats have been typically more resistant to housing coming through, but we have a national policy coming through, which is a lot more supportive. So I can see, for the next sort of 2 to 3 years, we are going to see, and it's been more sort of widely documented, an increase of appeal decisions going through. But those appeal decisions will have a greater chance of success because of the mandatory targets coming in. I think in the medium to longer term, when those local authorities have got their local plans updated reflecting the higher mandatory targets, then we can start to see, hopefully, a return to more applications going through the local decision making process. But standing back is, of course, positive. There are a small number of sites, and Graham's alluded to, that we've identified that we'll be able to come forward and that will be on an appeal basis. But certainly, across the whole land bank, I see a derisking of that portfolio because of the better environment, which has got to be hugely positive for us.

And then just finally, just on the partnerships, obviously, 2 already in 1 region. Is there any reason why that's happened? I mean, are they more advanced in terms of the resource or the kind of areas are more conducive?

It's just -- it's coincidence. It could have been anywhere. Or I think it's fair to say that, all of our regions are appealing to partners of one type or another. Some I could bore you with kind of local details, but so we have areas whereby we've got a number of partners falling over themselves to trade with us and areas whereby they're saying, I've got a slightly lower need in that regard. But I'm no reason why we shouldn't have at least 1 in every region. Alastair? Thanks, Aynsley.

Alastair Stewart from Progressive. A couple of questions. One on the sales rate of 0.55. How did that vary during the year, obviously stripping out holiday times? And 0.6 going forward, is that a conservative estimate or conservative guidance here? The long term average for the rest is about 0.7. So that's the first question. Second question is really a bit of color on the buyers of Gleeson Land sites. Has it changed materially in the last 2 or 3 years? Is it a bigger chunk from the top 10 house builders? How are these -- the sort of midsized private regional guys faring?

Let me answer the second one first because it's short and quick. Yes, there has been a change. Good question. But I think I've consistently said the big guys have never gone away. So the death of the majors in buying land was, should we say, a little overstated. What we did see when I first arrived, we were finding that the list might comprise 1 or 2, 3 majors maybe and definitely the regionals piling in there to fill their boots. So we didn't really see a decline in demand, as you might have thought, if you'd read the newspapers. And you're spot on. And the majors are back in there. So as I say, that's why when Guy is taking sites out, we're absolutely seeing.

What about the midsized...?

They're very much still in there. And I mean, you'll see and there's some impressive operators in I mean, you saw Hill's results last week, Bloor doing well. It's a competitive market. And as I say, our lists are strong when they're coming in. So going back to your first question, it's interesting one. So just to clarify that, the 0.55 on that slide was completions.

Yes.

We're talking about completions in the year. The actual rate we achieved across the year was 0.44. And that is, as I say, that is we're definitely seeing an improvement in that rate right now. It was 0.5 over those last 10 weeks. Your question about 0.6, yes, you're spot on. We deliberately used 0.6 as a not very exciting sales rate. So you're quite right. In a steady market, the industry would variously be reporting around a mean of about 0.7. So, and what I was trying to illustrate is that our medium term plans are not predicated on a market that's off to the races. It's predicated on a normal market. Greg?

A few for me. Firstly, on partnerships, both the 2 that you signed and the discussions you're having with further potential partners, how demanding have they been on required build rates? And are they pushing for any adaptation in the product?

Yes, good questions. No. Mark will tell you I'm quite demanding on build rate, so is Mark. You might want to just touch on that, Mark, in a second. But so they are generally accepting of the build rate. But of course, we're not -- what we need to do, and I've said this before, it's probably the key challenge for our business, and I put this on the table, I'm not -- it's not embarrassing, is the migration to right we really cannot afford to slip. Because they will be and should be demanding customers. So that's an interesting change for our business, but absolutely confident we can do it. And we've been looking at this, as I say, for a year. So we know we need to be efficient and our pace of build needs to be strong, but it's I wouldn't say that suddenly we're having to change from black to white. It's just -- we've just got to make sure we're on our game. And in terms of the product, no, they're very happy with our product. Obviously, I mean, broadly, we've got our standard range and our space standards range. And between those 2, they're very happy to select appropriate products. But Mark, did you just want to talk a little bit about build rate?

Well, you answered the build rate point and it's -- that's more about the overall business making sure we maintain a build rate plus, building for tomorrow, if you like, because for all the other pressures on the industry over the last few years, it will be build rate that will be the driver for the next 5 years. And there's huge focus on that. The plotting of the partnership deals, we also make sure that that hits the planners' requirements, what I call a blind tenure approach, so that it doesn't look as though there's a partnership scheme in that light small location. And then it just fits into that delivery plan and that's already preloaded in terms of the contracts that we commit with those partners. And it provides us with opportunity because it's cash funded. And if I want to put the foot down and tell Stefan, I'm going to put another 1 million quid in ground, it's got another bit of positivity that goes right through to the Board. In terms of product and additionality in terms of spec requirements, well, again, we've got NDSS, we've got a in the main 2 storey product that is well liked, it ties into all the grant funding requirements in terms of size and space, the planners love it. And on the new sites in particular, you saw there at Halton Moor and in Bradford at Shetcliffe, they're both new, new sites. So it's new foundations, it's Part L, Part O, Part S, it's air source heat pump, it's all the stuff that they generally want as a minimum standard. It's EPC ratings B+ as a minimum. And then we preload a set of agreed standard extras that they would like and have. That's pre costed and built in. If they get a bit excited about all sorts of other niceties, it's a simple controlled no and they get it. They're getting a lot for the money. Our price point tells them that. So it's exciting times. And again, huge opportunities that will also help drive that appetite on OMS because the more cars you have on the streets, the more curtains up, you naturally drive your open market position as well.

Yes. And then just on demographics in Gleeson Homes. Obviously, you've broadened the marketing strategy to include second and third time buyers. How successful has that been?

It's quite difficult to be precise. Stefan's probably got a stat on it, Greg. What I would say is that and somebody asked me earlier, one of the journalists, how come you've pushed up your sales volumes when most people have seen them come off? And I think that's got to be a part of it. A year ago, we identified that we were a bit narrow. We deliberately, Mandy did a great job, put or -- not put the marketing in the bin, but tone down some of the marketing that was purely aiming at young first time buyers to give us a broader appeal. I think that's undoubtedly been part of that reason. And if you have any stats you want to underpin what I've just said, because if it doesn't, don't say it.

I mean, the shifted demographic is quite interesting. I think the big -- so we used to be 80% first time buyer and that fell to about 50% and it's since recovered by 56% last year. I think that will continue to slowly increase. I don't think we'll get back to 80%. I'm not sure we'd necessarily want get back to 80%. But first time buyers are better customers. They're easier. They're not in a chain. We've seen some other changes in which I think are quite interesting. So the amount of money borrowed as a multiple of earnings has actually reduced in the last year. It's gone down from 3.5x to 3.3x at least our customers combined loan to income. So we're seeing some shifting, but nothing that we wouldn't have expected. And that loan to income, I think that might start to reverse and things go. And I think that's really just conservatism, people hesitating, slightly nervous. They're just borrowing slightly less.

Just last one. I don't know if you'll have the stat, but do you know what portion of your buyers are public sector workers? So obviously, we've seen a lot of wage rises in that sector.

So I don't actually. We no longer track the key worker because the definition of key worker changed. The Cabinet Office changed their definition. They weakened it in my view. And then it was largely gone from the Cabinet Office's website. So we no longer track it. Last time we did track it was the year before and it was 47% key workers. But our demographic is lower income. And as Graeme said, there is a Slide in here. I encourage you to flick through the appendices. There's fantastic information there. There's one in particular that shows over the last 6 years which income category has beaten inflation and had real income growth. And let me tell you, it's not the people in this room. It's those on the National Living Wage and those on the lowest decile of earnings. Their incomes in real terms are 10% higher than they were 6 years ago. Those on the National Living Wage have had the real income increase 10% over the last 6 years. Those on in the upper decile or the upper quartile and upper decile, they've had real decreases in earnings.

Alastair, come around again.

A very quick follow on question. Based on what you've just said, do any of your buyers use the Bank of Mum and Dad? I thought they were always bus drivers and checkout operators.

Yes. Well, they have parents as well. Forgive me, I couldn't resist that one. Yes, they use it less than I imagine, let's say, a more middle income buyer would use, a first time buyer would use. And they do tend to use overtime more. So our customers are predominantly paid for their overtime. Again, there might be 1 or 2 of us here who work a little bit of overtime occasionally. You probably don't submit an overtime pay request because you wouldn't get it. Most of our customers do. They get paid overtime and get time and a half on a Saturday, maybe double time on a Sunday. And those customers, they do that for a year. If it's a couple, they do it for a year. They can have their 15% deposit in a year and maybe a few pounds left over to go to IKEA and buy a bed. So it's Bank of Mum and Dad's less prevalent, but still used but less by our customers.

Sam?

Just one follow-up really on probably one for Guy actually on the land business. If we think about the profitability of that business in aggregate, take the point that you're going to see more appeals. Would each site therefore be less profitable because you have to go through the appeal process, it takes longer, etcetera. But in aggregate, you've got more going into the hopper, more of which will be successful. So should we think about medium-term profitability in that business returning to where it was sort of '18, '19, '20? Or is it going to be structurally a bit lower?

I don't know about '20 as profitability. Probably more like 8, 9, 10. No. So yes, we should it will return. I mean, it is I'll get -- I will let Guy just comment. But it's uneven, Sam, is the answer. And also, it's quite long term. So Guy is kind of working through a portfolio, which is probably acquired over a number of years. I would say the land that we're buying now is brought to a more consistent set of hurdles, which is why this point around you heard me say, we're rejecting 9 out of 10 opportunities. We're also not getting dragged into kind of low margin opportunities because there are some frightening bids out there. So I think that the quality profits, if you like, will steadily improve over time. Guy, I don't know if you want to add anything to that.

I would just say with regard to the costs, typically the cost of appeal are recoverable in any event. Yes, that then comes away from the gross proceeds, but then we're earning a fee. So it's kind of very much diluted with regard to the impact. So it is a deductible cost.

I don't see any more hands in the room. I don't know whether we've got any fizzing interest online, or if we're all done.

We got no questions from the webcast. I'll hand over to you for closing remarks.

Great. Thank you very much. Well, thanks again for coming along. Hopefully, you've enjoyed that. And I think it just remains for me to wish you all a very good day. Thank you.