Redrow plc (RDW) Earnings Call Transcript & Summary

Good morning, everyone, and welcome to Redrow's interim results presentation for the 6 months ending the 31st of December. For those of you who have just been to our presentation, you will see we already put [indiscernible] on all of our houses. And I do appreciate that you have rushed over here. So we intend to follow our familiar agenda, which we -- will be detailed but concise, with me giving a quick overview, followed by Barbara covering the financial results, Matthew taking you through the operating review, leaving me to wrap up with a summary and outlook. You'll then obviously have the usual opportunity to ask us questions. So let's get things underway. Redrow has, once again, delivered a robust set of operational and financial results that were in line with expectations. Turnover in the first half was GBP 870 million, down by 10% due to completions being more weighted than usual to the second half mainly as a result of the timing of apartment block completions. You will recall, we highlighted this would be the case last September, and you will see from Barbara's presentation that actually private house completions were up by 3% in the period. The lower turnover reduced the first half pretax profit by GBP 28 million to GBP 157 million. Positively, against an uncertain and political and economic background, the group traded strongly in the 6 months to the end of December, and secured a record number and value of private reservations. The value of reservations was 18% ahead and GBP 936 million. Given the group's ongoing strong earnings and cash position, the Board has declared a dividend of 10.5p, a 5% increase on the previous year. For the reasons I have explained, we budgeted to deliver significantly more completions than usual in the second half, and we are on track to do so. We continue to expect to grow both turnover and profit this year in line with expectations. Before I hand over to Barbara, I would like to say a few words about the management changes we have announced today. My appointment as Executive Chairman and Matthew's promotion to Chief Operating Officer earlier last year was integral to a smooth transition following Steve's decision to retire. That transition has gone well, and I believe the time is right for me to step back to a nonexecutive role at the financial year-end and to retire in 2021. Matthew will take up the position of group Chief Executive from the beginning of July to coincide with my stepping back. I am confident that under Matthew's leadership, supported by Barbara and the wider executive team, Redrow will continue to go from strength to strength. Now let me hand over to Barbara, who incidentally celebrated 10 exceptional years with us last month.

Thanks, John. Good morning, everybody. Right. So I'll start off with the highlights. As a result of the well-flagged split of homes turnover for 2020, 40% to the first half and 60% to the second half, our first half homes turnover was GBP 863 million compared to GBP 961 million in 2019. The first half gross margin was 23.9%, and I'll explain the movement from last year's 24% shortly. Earnings per share were 37.2p against 41.5p last year. And our return on capital employed was 25% compared to the exceptional 28% last year. Finally, we ended December with net back of GBP 14 million, which, as you know, was better than we'd originally anticipated. Now if we look at the income statement itself, as I say, homes turnover was GBP 863 million. We also had some commercial and land sales, which generated GBP 7 million of turnover. So overall group turnover was GBP 870 million compared to the GBP 970 million in the first half last year. Our gross profit was $208 million with the gross margin at 23.9%. This is 10 basis -- only 10 basis points lower than the 24% in the first half of last year. And that's because the 50 basis points headwind that we expected from net build cost inflation was mostly offset by a 4 percentage points reduction in affordable revenue as a percentage of total revenue. Our operating expenses increased by GBP 3 million, as our Thames Valley division was fully operation in July 2019, and as we continued to invest in growing the overall business. As a percentage of turnover, they were higher at 5.6% compared to 4.7% last year due to this turnover phasing. That resulted in an operating profit of GBP 159 million, and with unchanged interest of GBP 2 million, gave a pretax profit of GBP 157 million. Now if we can just look at plot cost in cost to sales, you can see here that the plot costs reduced slightly from GBP 84,000 to GBP 82,000. And actually, this is not surprising because the average selling price of our private homes reduced by GBP 4,000. And therefore, the plot cost remains steady at 21% of average selling price. Now if we look at the geographical distribution of revenue, we saw decent growth in the North of England at 5.5% because the outlet numbers, which, as you know, over the last couple of years were down. They picked back up again. And so the revenue was picked back up again as well. The Central region declined slightly because they've got an outlet issue. Their outlets were down in the Midland Central area, and that will start to pick back up again in 2021. As I highlighted in September, however, the turnover in the South and Greater London is down in the first half. And that's predominantly due to the timing of apartment block legal completions in London and the higher weighting of apartment schemes in the Southern divisions in the first half of 2019. We expect the shortfall in the South of England to return -- to reverse in the second half. However, the London revenue for the full year will be down on 2019 with a number of apartment block completions happening in the first half of the next financial year. Having looked at geography, now let's look at mix. As you can see on this slide, revenue from private houses increased by 3% to GBP 704 million, as did volumes, also increased 3%. However, revenue from private apartments reduced by 41% to GBP 94 million as a result of the timing of these apartment block completions in and around the M25. Affordable turnover was down 44% to GBP 64 million, again, predominantly due to the reduction in apartment block completions. In fact, of the total reduction in legal completions of 416 homes, 352 of those or 85% were apartments. In terms of average selling price, the private average selling price was marginally down at GBP 387,000 and the overall average selling price was up by GBP 14,000 due to the change in tenure mix. In the second half of the financial year, I expect a significant increase in affordable revenue, such that it will represent around 11% of turnover for the full year. And it will be 11% in '21 and '22 as well, and that compares to 12% of turnover for the 2019 full financial year. Now moving on to private turnover. You can see here that the Heritage Collection increased to 80% -- 87% of turnover compared to 80% last year as a consequence of the apartment scheme reductions. Help to Buy legal completions were 866, almost identically number to the prior year, and therefore, 42% of private legal completions compared to 40% in 2019. We saw an increase in the use of help to buy in London during the year, with reduced usage in Southeast England reflecting fewer apartments and more Heritage Collection homes in the Southeast. Help to Buy represented 34% of total legal completions. First-time buyers represented 31% of private legal completions and 25% of total legal completions. So having looked at revenue, let's just -- let's move on to cash now. The lower EBITDA reduced our operating cash flow by GBP 26 million. The anticipated cash outflow of GBP 84 million on land creditors was partly offset in the first half by a reduction of GBP 51 million in gross land holdings. This is expected to reverse in the second half. So our net investment in land was GBP 33 million for the first half. There was a GBP 104 million increase in work in progress. This was due to a combination of the phasing of legal completions, I've already mentioned; the build stage is on a number of apartment blocks in London, expected to complete in the first half of 2021; plus in the regional businesses, both an increase in active outlets and build on new sites expected to become active outlets in the second half. The movement in other working capital reflects the increased spend on work in progress is mainly trade creditors. As a consequence of all of that, our cash conversion reduced to 28%. For the full year, though, I still expect it to be over 50%, which is what I said in September. As planned, we paid GBP 77 million in corporation tax, more than double the prior year's payment due to the change in HMRC rules on the payment of tax. And our dividend payment was up 3% on 2019. So the net cash outflow was GBP 110 million. And as I said earlier, we closed the period with positive net cash of GBP 14 million. Our average net cash was lower than last year at GBP 62 million, but I continue to expect our net cash balance in June 2020 to be marginally above the GBP 124 million in June 2019. And now if we look at the balance sheet, I've already been through quite a lot of the net investment in inventory. But basically based on the phasing of homes turnover, work in progress at the end of December 2019 was just over 40% of annualized revenue compared to 37.5% in June 2019 for the reasons that we've already discussed. For the full year, I expect work in progress to be up on June 2019, but certainly not by GBP 104 million, and I think we'll be below 40% with -- to turnover at the end of the year. Our land creditors at GBP 354 million were 24% of gross land value, in line with guidance that we gave in September. The other working capital movements, as I've already said, is predominantly trade creditors, but also the impact of IFRS 16. The increase in fixed assets is also mainly the other side of the entry for the impact of IFRS 16, the capitalization of leases, but also includes the building of our new office at Castle Donington for the East Midlands division. So our net assets at the end of December were GBP 1.6 billion. Now if I just look at the plot cost on the balance sheet, you can see here that the plot cost has, in fact, moved by less than GBP 1,000 in the 6 months to December. So no significant movements in plot cost across the group. And with that, I'll hand over to Matthew.

Thank you, Barbara, and good morning, everyone. Following John's decision to step back to nonexecutive Chairman, I'd like to say how proud and honored I am to be taking on the role of Chief Exec of Redrow in July 2020. I've had the pleasure with working with John for all of my 17 years at Redrow. And on behalf of myself and all colleagues, I'd like to thank him for the pivotal role he's played in helping to make Redrow the success it is today. As part of that transition, I'm looking forward to continuing to work closely with John, as both Executive Chairman for the rest of the financial year and in his new role as a non-Executive Chairman. And looking far forward with Barbara and the rest of the Redrow team for an exciting future at great company. Moving to the presentation. I intend to cover the areas of land, outlets, sales and update you on some operational changes we've been developing over the last year, which continue to allow Redrow to differentiate itself from the competition for both its customers and its shareholders. Finally, I will hand back to John to conclude with a summary and the outlook. Firstly, the sales market highlights. Clearly, purchaser confidence has been effected over the last 6 months by the uncertainty around Brexit, which led to a slowing in closing sales, especially around extended chains. Even with the backdrop of political uncertainty, the group recorded a record number of private reservations in the first half. As we previously reported, we concluded a PRS sale at our site in Colindale in the first 6 months of the year. It has been particularly pleasing to report that we are starting to see an improving London market with all our developments in the capital reporting additional activity in inquiries, visitors and reservations. And although it is still too early to predict if this is a trend, it is a very encouraging sign. Prices have remained stable across the country, and we have ensured a disciplined use of incentives. Help to Buy continues to support the market with 42% of private buyers, excluding the PRS deal, utilizing the scheme. Stamp duty continues to have a negative effect on higher-priced homes. And although, our exposure to this is negligible, it does affect the wider secondhand market. Our record total order book value at the end of December remains high at GBP 1.2 billion. The group achieved a record number of private reservations in the 6-month to the end of December with the value of reservations up 18% at GBP 936 million. Excluding the Colindale PRS deal we announced in September, the value of reservation was 3% ahead. The weekly sales rate was 0.73 and 0.62, excluding the Colindale PRS. The cancellation rate was a touch below last year at 15%. Reservations in the first 5 weeks of the second half have been robust. Private reservations in terms of value were up 15% and GBP 24 million ahead of the previous year at GBP 180 million. We're currently operating from 134 outlets with a sales rate of 0.7 per outlet in comparison to the sales rate of 0.65 in the first 5 weeks of 2019. Outlets. Outlets remain at the same level as half year 2019 with 129 across the group. As I previously stated, we are currently operating from 134 outlets with the new outlets having been opened in time to benefit from the stronger new year selling period. As reported in the full year presentation, we highlighted we were targeting the purchase of larger sites, which have the advantage of relieving pressure on replacement sites and ultimately slowing down the rate of outlet closure. As the number of closing outlets slows, this will allow us to significantly increase the average number across the full year. Land. In the first half of the year, we acquired 1,946 plots across the group. As we stated in the full year presentation with all the political uncertainty, we were taking a cautious approach to land acquisition, which has resulted in a lower number of purchases and pull-through from our forward land. We did, however, ensure the teams were proactively looking for and securing opportunities. And now that political uncertainty has eased, and with our confidence from recent trading, we intend to complete those purchases in the second half. The movement in the current landholding shows an overall decrease in our landholdings by 441. We have already concluded a number of land purchases in the first few weeks of the second half and except --- expect to accelerate acquisitions in the second half. The forward landholdings increased in the first half from 31,500 to 33,300. Whilst we remain cautious for immediate land purchases, we secured a significant number of additional forward land plots. Overall, our forward landholdings continues to play a significant part in delivering the homes the business needs to maintain our overall growth. Current land holdings by geography did not see any significant changes in the first half of the new financial year and remain weighted to the South of the country. As explained at full year presentation, we are targeting forward land in the South of the country. And from the chart, you can see this strategic objective has resulted in securing a significant number of plots in this region. Moving on to operational highlights. We remain dedicated to delivering much-needed quality new homes and continuing to develop lifelong positive relationship with customers. This approach underpinned by our in-house and integrated technology, is complementary to our efficiency review across the business. Our cost-saving initiatives, including waste reduction and improved quality control, are helping to ease cost pressures. And we anticipate underlying build cost inflation will reduce in the calendar year 2020 to around 3%, and will largely be offset by modest house price gains. In the first 6 months of the year, on a like-for-like basis, our waste costs have reduced by around 18%, which is nearly 4,000 tonnes as we continued to focus on reducing the amounts of waste we produce and benefit from the effective cost savings. We have an initial target to reduce this by a total of 30%. Our tablet-based quality control system continues to be rolled out across the business, with site managers and subcontractors giving positive feedback and improving efficiency for ourselves and our supply chain. This system ensures we now have a full computerized and logged quality control system across the business at all stages of build. We continue to improve quality across the group, and our customer satisfaction, as just by the HBF survey in the latest figures, shows our satisfaction level at 91.8%. And with only a few weeks left of the current survey, we will retain our HBF 5-star award for customer service. This is only one of several measures we use to ensure quality and customer satisfaction across the group. All other metrics, including, but not limited to, trust pilot, an HBC reportable instance and HBC construction quality reports continue to trend significantly in an upwards direction. Our online reservation system continues to be welcomed by customers and strengthens compliance and provides clear reassurance to our customers and ourselves what information has been provided. 95% of housing sites are using the system and 90% of reservations on those sites are taken online. The group continues to benefit from the award-winning Heritage Collection, which is rolled out across England and Wales in a unique -- in its unique and aspirational -- it is a unique and aspirational product within the new homes market. We are constantly looking to refine and improve our product range without the need for any wholesale changes. In 2018, we introduced the Lifestyle range. This offers -- this offering has less bedrooms, but each one has an en-suite incorporated. Customers can now buy the same quality new homes, but with a greater variation in bedroom numbers and sizes. The wider offering now appeals to an even greater range of customer circumstances. This is just one way in which we continue to lead market through product design and offering choices for our customers. Our long-standing strategy to invest in great places to live that respond to our customers, growing awareness of the environment and need to address climate change and enhance biodiversity. As part of this commitment, today, we have published our social impact review: Creating Communities - Giving Our Customers a Better Way to Live. The view, which is available on our website, sets out how our business makes a meaningful social impact and strives to leave a positive environmental legacy. I'll now hand you back to John for the summary and the outlook.

Thank you, Matthew, especially for your kind words. And let me summarize and give you our thoughts on the outlook. As you would have seen from Matthew's slides, the first 5 weeks of trading has been very encouraging, and there's every reason to believe this will continue. Political uncertainty has gone and confidence is returning. The planned changes to the Help to Buy scheme are likely to create more demand this year from those that will no longer qualify in 2021. We've certainly seen an increase in inquiries over the past month. Next month's budget is expected to be positive and should help stimulate the economy and wider housing market. We expect house prices to be stable and offset any build cost inflation that has itself eased in recent months. As Matthew spoke about, a couple of years ago, we took a strategic decision to acquire larger sites to help stem the rate of closures. At long last, that strategy is working, and as a result, we expect to return to stronger outlook growth in the second half. We do have more than usual to do in the second half for the reasons we've set out, but we are on track to do so. Taking everything into account, the prospects are encouraging, and I'm confident Redrow will once again deliver growth in turnover and profits for the full year, in line with expectations. Thank you very much, and I'll now open up the floor for questions.

[indiscernible].

Getting good at this. First of all, congratulations to Barbara for your 10 years. If I can just go with -- actually a couple of questions. Help to Buy, you very nicely told us how much your first-time buyers were a percentage of completions, and that was about 10% lower than your Help to Buy was as a percentage of completions. How should we think about your business post-2021? Should we anticipate just that Help to Buy to come back or is there something in terms of mix? And then it was just in terms of the outlets. And here, I'm going to sort of look at the crystal ball or perhaps ask you to look at a crystal ball. Given what you're seeing in terms of your sites, your land buying, is there any guidance you give us in terms of outlets for the next year and the year after? What should we anticipate in terms of a longer-term growth profile for Redrow?

Okay. And I'll take the Help to Buy one, and perhaps Barbara will probably just give you some views on where we expect outlets to be. What I would say with Help to Buy, you're clearly aware that we've got some regional price caps being introduced next year. I mean, those price caps have been published. Whether it'll be reviewed or not, we'll have to wait and see. And also, one of the other key changes, of course, is it will be first-time buyers only. If you look at our Help to Buy usage in terms of first-time buyers, it's just over half of the Help to Buy sales we do are first-time buyers. So just under half will be excluded moving forward. The price caps, if I broadly talk about them, you've got the Midlands and the North, where the price cuts range from GBP 224,000 up to GBP 262,000 in the areas that we operate. We expect that help -- if those caps remain, it will have a significant impact on sales in those areas in terms of not been out to use Help to Buy. That doesn't mean to say that we haven't got measures that we think will mitigate, and I'll come on to those reasons shortly. If you then look at the Southwest, we think there that price caps are round about GBP 349,000. It will have some impact potentially, but not as significant as in the North and Midlands. And then lastly, you've got the East, the Southeast and London, where we think the impact is small and probably in London, negligible, if any at all. If you look at our private Help to Buy sales, our private sales -- round about 24% of our private sales are above the Help to Buy cap. Now that clearly is an average, and it's a much lower figure in the South and a significantly higher figure in the North. So what are the measures we've got? And I think we sort of touched on this, I guess, last September. The one thing I would say at the outset is that 80% of Help to Buy buyers, according to the report produced by the government, didn't need to use it. And so it's also interesting to perhaps make a note, but over 20% of our buyers are cash. We actually expect the market to adjust. The conditions of the market, now and looking forward, are very, very different to what we were in 2013 when you look at mortgage rates and when you look at deposit levels and everything else. So we expect it will adjust. And we sort of draw some comfort from, I think we've told you before, our positive experience in Wales where our average in selling pricing in Wales is GBP 350,000 and the cap is GBP 300,000 and Help to Buy in Wales is around about 20% for us. So I think we have adjusted quite well there. Ironically, when you talk about the gap, it's quite helpful for us for where our average selling price is because we are quite a bit above the cap. So it really precludes us of even thinking about, well, we're going to change the mixes and try and drive everything down to the cap. Because I think if I look at some of our buyers in the Northwest who take advantage of the scheme, they are -- but they're buying 4-bedroom houses at GBP 350,000. They're not going to rock up and say, "Well, I won't buy a 4-bedroom house at GBP 350,000. I've suddenly decided I'm going to buy a terraced house at GBP 225,000." Not going to happen. So we're confident that actually, the market will adjust for that. And we think there's an opportunity also to gain a larger share of the secondhand market, particularly with the more Lifestyle product that Matthew talked about earlier. The one thing everybody needs to understand, of course, is that it finishes in 2023, and we think we've got a good plan for our transition to get through to that. So we're pretty comfortable. It will have some impact, but we're pretty certain that the market will adjust to it and it will not affect our growth plans. Whether the government will look at it again, I don't know. I think they've missed a bit of a trick. I think David Thomas might have said earlier, there might be a finite funding issue there. Well, why didn't they reduce the 20% to 15% and the 40% in London to 30%? Because the mortgage market would very easily deal with that change. So I think they might -- I would recommend they just go away and have another look at it. So hopefully, does that give you a good steer on where we are with Help to Buy? Barbara, do you want to do the outlets?

Yes. I mean our growth in -- at last, we've achieved some growth in average outlets this year. So we're expecting to see our average outlet of 131, which is up 4% on the previous year. I think looking forward to 2021 and 2022, given the success we've had in the land market in the last year or 2, we're expecting to see that outlet growth to be in excess of 5% average outlet growth. So that really matches up with our expected growth in turnover, I think. So we're happy that we'll now actually finally see some consistent outlet growth.

Will Jones from Redburn. Three if I could, please. First, just coming on to the land market. I think you made a comment about specifically targeting more forward land in the South. Just wondered why that was? Is that a tighter area of the market in the open land market? Or is there something else at play there? I guess, just any more general comments you got around the land market. Second, was just the PRS sales you've done, both Colindale and I think in Southall and there's some quite chunky numbers there. Could you help us at all with when they dropped, just for the purpose of volumes? Because I guess, it could be quite material in terms of affecting just the group number. And then lastly, just when you think about group priorities beyond June '20, the good old fashioned interplay of growth and cash generation and cash returns, you've made a -- you made the comment that you probably can do the B share equivalent every couple of years. And I guess, this year, cash is still growing slightly despite the tax issue. I suspect it grows more significantly next year. Is that still on the agenda, I suppose, for FY '21? And just how that balances against growth plans.

Okay. Thanks a lot. And I'll make a quick comment on the land, and I might just hand over to Matthew, just to add any other comments he has. I think if you look at forward land, I think we've probably upped our game on it because I think as more and more local plans come into play, there's less opportunity for windfall sites. So I think we're getting back to a cycle that we had many years ago that you need to acquire forward land, promote it through the local plan system. So I think that probably is the reason for it. Do you want to make any more comments on land?

Yes. I mean size of sites as well. I mean we said that last year, obviously, we're being very cautious in the media. And therefore, there's clearly opportunities in the forward land to get sites on board. But no, I mean, effectively, the largest sites in the South is what we really wanted. We've got a historic base in the North. So there's a clear drive to get down there. We set the base with Harrow down there, just an outpost really to look for strategic land down there, and this has borne fruit, really.

Okay. Barbara, do you want to take the next 2?

Yes, absolutely. Yes. So as far as PRS is concerned, the site that we've just done, the 347 units, they won't actually legally complete until 2022 and 2023, and it's 2/3 in 2022 and 1/3 in 2023. The other 2 PRS deals, which we have, as you rightly say, is an existing one at Colindale and the Southall one, which is 350 units, and they will all legally complete in 2021. In terms of cash, right. So terms of cash, as I say, this year, we expect to be marginally up on the June 2019 figure. This -- then into 2021, you're right, there is significant cash generation. The question is whether there will be sufficient cash generation for a cash return. A capital return. It's probable, but it just depends on the land market and what opportunities come along. And so the Board is conscious of that, but the Board isn't going to make a decision on it until we see where we are at the end of this calendar year. So there is no decision, there is no commitment, and it just depends on how the land market goes in the next 12 months because, obviously, our overall priority is to make sure we get that outlet growth.

Just adding one point to the PRS, Will. I think, and it's partly about where we are with apartment blocks and particularly in Colindale, that as we've moved closer to the front of the sites, the blocks have got much taller, so they're taking longer to build. So that's partially the reason why some of these are some way out from where they were. Chris?

Chris Millington, Numis. I just wanted to ask, firstly, on the phasing of profits. Obviously, we've got a little bit more second half weighted this year for all the reasons you've mentioned. Now there was a reference, obviously, to apartments landing earlier next year. So does that kind of rectify that? And kind of where would you like to see that, is the first one? Next one is really about appetite for bulk sales as we stand at the moment. The markets picked up a bit. Are you going to kind of withdraw from that a little bit? And the final one really is, is incentive levels. I don't know if you can possibly give us a feel to how they trended through the first half of your year. And I understand we're looking at a very thin sample size in the start of calendar year 2020, but have you seen a material change?

Right. Okay. I think phasing of profits, if I'll let Barbara deal that one, and then I'll pick up the bulk sales, if you like. And then perhaps, Matthew, can you talk about the incentive side?

Sure.

Yes. Well, I mean, our normal phasing historically has been 46-54. I'll talk at turnover now because profit follows along with that, so it's turnover that matters. This year, as we said, it's 40-60. Next year, it doesn't fully recover back to 46-54, I think it's somewhere going to be in between more like a 44-56, and then in 2022, it gets back to about 46-54. So yes, we get -- the balance of turnover doors come back towards what it was before. So I think this is very much a one-off year.

And in answer to your question on PRS, I think it is a bit about of gauging where the market is. The PRS deals we've done exclusively been limited to London. And clearly, the workforce at Colindale quite well. We've got a planning application in Colindale out at the moment to increase the numbers by 1,200. So we'll look at where the wider market's going. In fairness, at the moment, Colindale is selling very, very well to the open market. So at the moment, there's no plans to do any more. So Matthew, do you want to just pick up on where incentives are?

We've always been pretty low in incentive costs. We keep them pretty tight, probably 2.5% maximum from -- well, probably averaging 2.5%. And the reality going forward is that will probably decline and we'll be lot less than that. In the first 5 weeks, it's very difficult to tell, but you would expect in the longer term and that will come down, if the sales rate continues to improve.

Just a quick follow-on. So if we were to kind of go back to 2016, pre the referendum, what sort of incentive levels will you see in around that? I mean, relative to this 2.5%, you're talking about now, Matthew?

So we're still -- we're 2.5% over that period, including that time.

Yes. And Chris, we became very disciplined on incentive levels probably about 5 years ago now and have not fluctuated much between 2% and 3%. Are you probably saying London at being a bit higher? But it tends to be the nature of the London market than anything else. But certainly on Heritage Collection, it's well retained within that band of 2% to 3%.

This is [indiscernible], UBS. I've got 2 main questions. Firstly, can you provide some more color around margin expectations for this year? As far as I remember, from September, you guided for 20, 50 basis points margin compression in 2020. Can you provide some more granularity around this target? And what are the assumptions on build cost and ASP inflation for this range? Have it moved, given the conditions have changed? And the second question is around land investments. And have -- has your approach changed with -- after the elections? And generally, like longer term, will you target the same level of land -- bank land? Or would you potentially consider some step-up in land investments? And what is the embedded gross margin hurdle rate you target?

Okay. Do you want to deal with the margin?