Taylor Wimpey plc (TW) Earnings Call Transcript & Summary

Good morning and welcome to the Taylor Wimpey plc Trading Update Call. Today's conference call will be hosted by Taylor Wimpey Chief Executive, Pete Redfern; and Group Finance Director, Chris Carney, followed by a Q&A. I would now like to turn the conference over to Pete Redfern, Chief Executive. Please go ahead, sir.

Thank you. And thank you, everybody, for joining us, and apologies for the short notice. We've got a lot of people on the call, so hopefully most have managed to get here. There's quite a lot to go through, probably slightly more than the usual trading update, but 2020 has been an unusual year. And as you will know, it's about 3.5 months since our July sort of half year results and so sort of quite a lot to update you on. I'll take a fairly sort of traditional approach to the order I do things, start with the housing market, then our trading, then construction and how we're coping with the current sort of COVID conditions and probably there also pick up sort of what's happening through this sort of second lockdown. Then on costs, including the restructuring that you will have seen in the statement, then land buying, touch on customer care and come back to guidance and then let Chris pick up anything that I've managed to miss on the way through. And I'm confident there will be something on this occasion, because there is a lot, as I say, to cover. I think on the housing market, overall, it won't surprise you, you're seeing it from sort of most commentators, that the housing market has generally performed sort of pretty well over the last few months. It's returned to something like normal more quickly than I think most of us imagined. As you know through the conversations that we have through the capital raise and subsequently, we were confident about the underlying resilience of the housing market, but I don't think sort of we would have called quite how sort of positive it's been over the last few months. I do think, though, we should get that in context, sort of I think it can easily be overplayed. There's nothing in the market raced away in price or volume terms. I think we've seen it come back to something like normal pretty quickly and probably with more strength and resilience than we've seen for a while in the upper end of the market. And I don't mean GBP 1 million-plus houses. I mean sort of areas that are very important to us: good quality, good locations, sort of detached housing, family housing, which has been relatively slow over the last few years compared to a stronger first-time buyer market. We've seen some real strength in that. And our view price, sort of it that we've seen price move about 2% net for us. That's an underlying movement. Probably a little bit better if we excluded sort of our care home and NHS worker discount, which is still in our sort of current sales. That would probably have been about 3%. That's our view of underlying kind of market price movement over the last 6 months or so. I think sort of our average selling price has moved by more than that. The average selling price in the order book, even if we remove a sort of slight positive distortion from our Central London business, the average selling price in the order book has moved about 5%. But I would say only about 2% of that is underlying price movement and impacts sort of our forward view of margins. Our trading through that has been robust. You can see in the statement, we try to be pretty detailed about what we've actually seen. Cancellation rates aren't quite normal, but they're materially lower than they were. Last couple of weeks have been around 19%. We would see normal as anything around sort of 14%, 15%. Not something that concerns us, probably unsurprising, given the amount of change going on in sort of people's lives at the moment. But those remain stable. And I think I'll come back a bit to the second lockdown, but all of the comments I made about the market overall haven't changed in the last week or so. We've seen our customers generally come back to us and say, "No, we want to get on with it. We haven't changed our view." We have 1 or 2 over the weekend who said, "We don't think we need to do a physical visit, but we're absolutely proceeding with the purchase." So we haven't seen any kind of sea change in confidence over the last few days. I think I should spend some time on our sales rate. We've quoted it in a way which is directly comparable, but there is a slight distorting effect of Help to Buy. There are no new Help to Buy sort of sales within that sales rate. We expect to be able to use the new scheme for formal reservations from the 16th of December. We have, as many have, sort of engaged individually with customers. There is no commitment on that, because we can't commit and they can't commit, sort of then take a formal reservation. But we have sort of about 380 sort of informal holds, specific customers against specific plots built up over the last 6 or 7 weeks, that relates to that Help to Buy 2 scheme. But you can see from our sales rates and you know that we are selling well ahead, that we are selling well into the second quarter. When the Stamp Duty changes, sort of will have reversed; and when that Help to Buy 2 scheme will be in effect but Help to Buy 1 will not. But we're still maintaining sales rates into that period. And I think in some ways, in terms of market signal, that's the most important sort of piece in here. Sort of our sales rate for last week, for instance, included 0.23 sales per week that are for the second half of last year and 0.43 for next week, the majority of which will be in quarter 2. So we're still seeing really good forward confidence into next year. Our estimates, if Help to Buy 2 was operating today, given the specific level of plots we have available and customer interest of where our sales rates will be if we got Help to Buy 2 sales, would be more like low 0.9, so 0.9 to 0.95. That is a very sort of broad-brush estimate. It's hard to be specific, because obviously, people who want that scheme don't want to reserve without it at the moment. And so it holds it back. But I think it gives us real confidence for next year in terms of the underlying depth of demand. And I'll come back to that a little bit when we talk about guidance. I think if I move on to construction, probably the biggest direct impact on our confidence in 2021 delivery is where we move on construction. When we talked to you at the end of July, we said we were operating at 80% or a bit better on average across our sites. And that it was important to bear in mind that we'd only just gone back on site in Scotland and the sites in London were still hampered. We have gradually plugged away over the last few months. And as of today, I would say our average level of production is very, very similar to where it was in sort of first quarter of this year and what we would see as normal. There are exceptions. There are sites that are particularly constrained and there are some sites that are running ahead of normal. But overall, we don't see that construction sort of output on a daily basis at the moment being a limiting factor. We still have to catch up and we are starting to now sort of catch up. And that will still impact on next year's overall volume, but that's built into our guidance. We have also not had to constrain our construction sort of during this second lockdown. We went very closely through the rules, but we've maintained the rules that we were operating to as we came back on site in May, sort of -- and actually, the rules that we have to operate to do -- to today will probably be slightly lighter than that. So we still feel we're operating in a safe, responsible manner well within the rules, but able to deliver construction, which is pretty much in line with normal levels. On costs, we haven't particularly touched in the statement on underlying build cost because there wasn't a lot new to say. We're still seeing sort of very little upward build pressure, I think, even given the stronger markets. So that we've still not got production for the sector as a whole at normal levels. So there still are resources out there. We're not making a call yet on next year simply because we don't have any sort of particularly new data, so -- I'm sure we will come back to that in February. But at the moment, very flat build costs. And then specific cost actions that are within our own gift. We talked for a while about sort of taking sort of the additional resource out of customer service and other areas where we've made changes over the last few years as we get to deliver the level of performance and quality that we want, to make sure that having got over the hump, we are then returning to an efficient model. We've seen some of that happen over the course of the last few weeks. More significantly, we've made a series of overhead restructuring changes, which total an annual rate of about GBP 15 million at a cost of about GBP 10 million. Those are principally around head office and our London structure and effectively, what we're doing in London, and we're in consultation at the moment, so sort of it's not fully finalized. But what we are looking at is merging our Central and East London business and focusing more on Greater London than the Central London price points. I should say, and it's not stated in the statement because it's not -- sort of it's not changed, but our performance on our existing Central London schemes continues to be good. We have no concerns about land write-downs in that market and no sort of issues with particular schemes. It's more a strategic view of where planning policy is and where we want the future positioning of the business to be. But those restructuring savings are in process at the moment. Most of them started a few weeks ago, so they're not sort of have been announced this morning, but they're not yet completed as we go through that consultation process. So we obviously have to be clear on what basis we're talking about them. But we expect on that GBP 15 million, pretty much a full year's annualized savings sort of in 2021, because most of them we expect to be in effect by the end of the year. And very importantly on land buying, we were very clear, I think, with the capital raise, that we had already reentered the land market and that in -- without the capital raise, we would have been active in land. We got good early momentum. We had a lot of schemes that we were looking at, at that point in time. Many of those have now come through the process and being either approved or contracted or both. We have, and we summarized it today, sort of the total level of approvals in that period after we returned to the land market later on in the shutdown. That is about GBP 830 million of gross land acquisition, about 70 schemes. I'm very pleased with the mix of those schemes. They are slightly more weighted than normal to smaller schemes, but I want to be very clear, we are not pulling away from large schemes and there are a handful of larger schemes in there. Those continue to be real assets for us, but we want a slightly different mix. I mean we've been saying that since the beginning of the year and this has given the opportunity to accelerate that sort of mix shift. We expect those schemes to give us outlooks through late '22 and through 2023 and to give us real engine room for volume growth in 2023 and 2024. And there is nothing that we said through the capital raise on that, that we are changing. I think in terms of the underlying metrics and where the land market sits, we have seen materially less competition through the course of the last few months. I think that was particularly true through June, July, August and early September, with a stronger market. We have seen more people return to the land market, at least in part, as the autumn has gone on, sort of -- and I don't think that should surprise anybody, given the relative strength of housing. But we were able to take some good opportunities early on. There's a significant mix of different sort of sites in there. There are sites that came new to us completely because of the shutdown and because we were there ready to do a deal and having the capital to do it and those we saw material discounts. There are some more normal schemes that have come through our strategic land bank that show normal discounts but not additional discounts. So there's quite a big mix. But overall, with our existing land bank and those acquisitions, it really underpins our confidence in returning to that 21% to 22% operating margin range that we talked about. I do want to pick up customer care. I'm pleased that we're past the end now of the customer care year, although still returns are coming in. We are confident of being sort of a 5-star level. But I think more importantly, I'm really pleased with the level of performance on those surveys and the 9-month surveys and customer feedback for customers who've moved in, either through the lockdown or subsequent to that. I think it's a real testament to how people have handled their communication with customers and their delivery and the fact that the quality of plots has continued to improve even whilst we've been going through all of this change. So coming to guidance, so obviously, from a market point of view, sort of the key changes, sort of pretty material upgrade to guidance for next year and a smaller upgrade for this year. This year is a bit about those higher selling price points. It's not about an underlying price movement, because we have most of our order book in line for this year. It's more about the mix of plots that are coming through and that gives us more of a sense of upside against that sort of base level forecast than we saw. But yes, as we've always -- as we had sold the majority of our plots for this year, so the impact of that on this year will be small. But I think that -- and some small cost efficiencies. And we expect in our guidance to absorb those GBP 10 million of redundancy costs well. So the underlying cost movement is probably a bit better than it looks on the surface. More importantly for next year, where our focus has been, I think the key thing is we're able to take out the low end of our guidance at this point, both based on where construction progress fits and based on where sort of underlying market has gone to. The fact that we are so well-sold for next year, far better than usual, we are selling well into the second quarter and even the second half at this point and still selling well, even without some of the government incentives in place, we are not assuming next year's sales rates are at the 2019 levels. Strategically, we said at the beginning of the year, even before COVID, that we'd like to edge off those a little and that is still the case. And we're also building in a little bit of caution beyond that. But based on where we think we would be today, with Help to Buy 2 in place, is a reasonable view of what we expect our sales rates to be next year. So that gives us some flex. I think that has let us change our guidance from 80% to 90% of normal volumes to 85% to 90% and take the bottom end of the range out. And I think whereas -- sort of generally, perceptions have gone towards the 80% of that range, we would say that is a reasonable range. We're not saying that we expect to be at the bottom end. There's a broad range around that. And I think with the cost savings coming in, a little bit of selling price coming through, we can also be sort of more positive on our margin expectations for next year as that will enhance the top line and therefore, to overhead efficiency. And all of that put together leads us to sort of our upgraded guidance to materially above the top end of the range. So an operating profit of materially above the GBP 626 million that's currently the top end of the range. I'm not going to -- I know you will ask many questions on this. I'm not going to apologize too strongly. I do still think it is right at this point to have a range of expectations out there, both on volumes and margins. This is not about everything's sort of racing ahead. It's about a return to normality more quickly than we expected. It's about self-help on construction and particularly on overhead costs and it's about the underlying resilience of the land bank. But I do think it's appropriate to still maintain sort of relatively wide guidance on where volumes and margins sits for next year because there are still plenty of risks and plenty of upsides against sort of the numbers that we are giving you. But hopefully, that guidance against the overall bottom line gives you confidence in where we expect to be overall. And we're happy to try and fill in some of the gaps, but please understand that there are still uncertainties and sort of if we put in everything that could happen on the positive side, then inevitably we end up with guidance that is overly stretched. So Chris, I am pretty confident I've missed a few things in there. What have I missed?

Well, not very much, Pete. I'd just probably add that our cash guidance, we think will be towards the upper end of the guidance, which was GBP 550 million to GBP 750 million for the year-end. Obviously, it just depends on how much we spend on land in between now and then. But apart from that, Pete, I think you've covered everything.

No, thanks. I probably should -- and it ties into that cash guidance and into land, probably the only area I kind of think that I meant to cover and I didn’t, is that link between land and timing. Yes, we don't normally quote land on an approvals basis. But because we are reentering the market and with real momentum, we thought it was important to give you a sense of that. That -- there are a sizable number of those schemes that are fully contracted, but some of them are not. And they're still working through the process and the pipeline. We expect to continue land activity at a higher-than-normal level. It might slow down a bit, but we're not sort of, "All right, that's -- that is capital spent. We will now stop." I think we do see opportunities out there. So we expect to continue to drive momentum. But it will take time for that to flow through on the balance sheet. When Chris talked about land spend, he's talking about cash spend. We do expect land creditors to be a bit higher at the end of this year than they were, and that's really the timing of those approvals as they come through. And we continue -- we do feel in this uncertain environment, we absolutely need to have a capital base there to be able to make both land creditor commitments and sort of provisional land bank commitments. So the cash will take time to flow through, but the commitments you'll see come through, some in December and some through the first half of next year. Should we open up for questions?

[Operator Instructions] The first question comes from Aynsley Lammin.

Just a couple. I wondered if you could just elaborate a bit more on your comment that the lending market is holding up well. Just provide a bit more color there on what you're seeing from the kind of mortgage market. And then secondly, just again, a bit more color, it sounds like it's all holding up well, but as we're going into this lockdown, any regional differences, kind of sales rates, cancellation rates changes early into the second lockdown? It sounds as though it's held up remarkably well, but interested in your view there. And then just thirdly, maybe one for Chris. If you could quantify what your expectation is for how much higher land creditors might be this year?

Thanks. If I sort of pick up the first 2 and then obviously leave that last one to you, Chris. I think on the lending market, it's that and underlying interest rates have always been the key questions. And underlying interest rates, obviously, have been helpful. I think on the lending market, I'd say it still hasn't -- it's never quite normalized, but it's been as close to normal as we could ever reasonably have wanted. You've seen sort of the odd lender withdraw deals and then actually, relatively quickly, reintroduce them on higher loan to values. I think 1 or 2 lenders have been concerned that their lending books have got too big and then they've -- so they've increased the pricing on deals. So it's -- actually, there's a slight balancing act to a market that probably could have been slightly stronger. But I see that as healthy. And we still see most of the mainstream lenders in the market with a broad range of deals and most importantly of all, our customers have a choice of pretty low interest rate mortgage deals with a range of fixed rate terms. It has been supportive, but as I say, I think there is an overall sense of the market racing away sometimes when you see press coverage, and I think that's overstated. It's normalized, but with some upside at the upper end of the market in terms of sort of those kind of move-up customers. And in terms of the second lockdown, I think we saw, and I'm talking about the weekend before last, we saw a reduction over that weekend in terms of immediate website sort of interest. And I think before it was clear the housing market was going to stay open, we had our customers saying, "Are you open or not?" And then particularly, the respondent question is, was, "My house that I thought I was going to move into in sort of late November, December, you are still going to finish it? I am still going to be able to move in before Christmas, aren't I?" Yes, rather than, "Oh, do I really want to go ahead?" So -- and I think that's been true across all regions. Obviously, the sort of structure of lockdowns are very different in Wales. We did in Wales go to a virtual-model only for the course of the sort of short, sort of firebreak shutdown. We saw sales rates reduce a bit during that, but we didn't see any kind of shift in customer confidence from people who are already kind of connected. I think, obviously, we're now going into a period before Christmas when we'd expect things in terms of sales rates to slow down a bit and people are focused on moving in. But at the moment, everything we see in terms of the feedback in every region, both from prospective customers and currently reserved customers, is around, "I want to get on with this," sort of they're looking for more reassurance that we're not going to have to change things much than they are suddenly extremely nervous. And I think this is true of the sort of the stock market to a degree as well. I think people are almost taking comfort from the fact that we can have a second lockdown, and actually, it doesn't necessarily feel, unless you're in certain key sectors which are directly affected, it doesn't feel like it has that much sort of impact for many. And I think that people are taking confidence from that. If you can continue to build, then I can continue to buy. I think there is -- and I touched on it, but it is quite a complex dynamic, so I'll probably expand on it a little, this point about Help to Buy 2. I don't know, and you would have to ask them yourselves, if anybody has booked reservations in their sales rate or order book so far. We haven't and we think that's right, because we haven't taken a deposit from people. We haven't got any kind of contractual commitments. We have a person who says, "I'd like to buy that house at that price." And it will probably sort of have that scheme on it. We said, "We'll go and hold that house." That's what we mean when we say a hold. I do think that's likely to -- it's holding back sales rates at the moment, but it's like to artificially boost sales rates during December, but probably more likely January. We don't book those sales until they've gone right through the first round of processing. And then we think that will -- yes, there'll be a bit of a backlog there. So I actually think, yes, sort of what you see in our sales rates at the moment is probably artificially held back and it will probably get an artificial boost in sort of January. And I think we'll be sort of disclosing to you in sort of February what we think the actual underlying rate is, because I think that will be quite important. But that is quite important in understanding our views about where the market sits at the moment and its impact on next year.

And on land creditors, Aynsley, they were at GBP 631 million at the end of June and I'd expect to see them to grow in excess of GBP 800 million by the end of the year. Could be less depending on the timing of when land deals complete, but more likely to be at or above GBP 800 million. But still, they'll remain less than 30% of the gross land balance. And even with land creditors at those levels, adjusted gearing will still be pretty low because of the cash on hand.

And the next question comes from Chris Millington.

The rudimentary 3, if I may, please. Can I first just ask about the weighting of FY '21 profits between H1 and H2? I presume we're going to see a more even profile there, but I'd love some comments around that. Second one, and I understand it's probably not really the forum, but I'm going to ask it anyway, but dividends. I just wonder if you could kind of update us on where your thinking is there. What are your key considerations when thinking about the policy, particularly around specials as we look forward? And the final one I wanted to ask is outlet numbers. At what point do you see the balance tip and you start to grow them in light of that higher land spend?

Yes. So in terms of first half, second half weighting next year, yes, we expect to see a much more balanced business between the first half and the second half. I can't resist the temptation to add "thank God" on the end of that, but yes, it's kind of where we expect to be. I think inevitably, there's a kind of first quarter skew because of both volume production catch-up and because of Stamp Duty. Yes, I do think the key question, sort of from a market point of view, is around, well, okay, how will second quarter and beyond go? But we're seeing some early signs that are encouraging on that. But yes, we do very much expect to see a much more even split. And that will be our focus, obviously subject to growth. In a year of growth, we naturally expect more half 2 weighting, but subject to that, to maintain that sort of balance as we go through the next few years. On dividends, we haven't changed our view. We do expect, as we did -- we said before, we do expect to pay what we consider a normal ordinary dividend next year. I have, I think, been pretty consistently clear on calls that we see that as normal dividend per share as in, therefore, more in total after the capital raise. So -- but we are not sort of about to get into discussions at this stage on quantum of special. We still think it's likely that the special dividend will resume the following year. I think -- and this is not a signal about the special dividend for the following year, it's about how I see next year. I still feel the resilience we've seen in the market, where I think interest rates are now likely to sit for the long term and tapping into new areas of demand that we've always known were there, but have been fairly quiescent through the last few years, gives us more confidence than I've had for a few years about the underlying resilience of where house prices are. And when we're able to buy sites at mid-30s operating -- sorry, mid-30s return on capital and 20% plus operating margins, then I think I see more of an investment opportunity there than I did. I also don't think the planning environment is going to get materially easier. So I think our weighting is a little bit more towards investment than it was and it's not about moving away from special dividends. But it is about actually seeing that as an opportunity and making sure that we have the capital to continue sort of investment where that investment adds value. And that has been a shift over the last 12 months. COVID has given us some really good opportunities, but I think it also underlines sort of where the underlying market sits. And it has made it much more likely that interest rates will sit lower for longer. And I think the last thing I'd add to that is the various facts at the Conservative Party conference, they were starting to talk about sort of how they helped first-time buyers out, sort of longer-term path to the end of Help to Buy should give us confidence the government is aware and feels a responsibility to how they help first-time buyers get on the housing ladder. That might not be Help to Buy, that might be some different structure, but I think all of those are broad positives for the medium-term market. In terms of outlet numbers, sort of I think the one thing that has remained sort of challenging through the last few months is getting the right level of interaction with local authorities. That's not a criticism. They don't necessarily have the IT systems that we've got and they've always been resource stretched. We are still opening outlets. We're still expecting, but it definitely slowed down, not because we're holding them back, but because the resources aren't there on the other side. But -- so we are opening sort of outlets as fast as we reasonably can and we expect to continue to do so. But I think these new sites that we're buying, we've always said it isn't going to be 2021 that they start to open, it's 2022 and it's 2023. And that hasn't changed. But I think that's -- we probably have more forward momentum on that than we've had in several years, but it's still a battle. So we're going to have to keep pushing it. And as we've made sort of some of the restructuring changes, one of the drivers has been to simplify some of the other areas of the business so that our teams, our MDs and divisional [ chairmen ] can really focus on not just buying sites but getting them through the system sort of at pace. And so our budget conversations over the last week, they're partly about delivery over the next year or 2, but actually the bigger focus is how we get those sort of sites open sort of at pace.

And just to be clear there, Pete, I mean are you referring really to maybe just a slight erosion as we go through next year, then it picks up with the new land in '22 or stable-ish next year? Sorry to push you a bit further.

No, it's all right. I think you just described the bookends, if I'm honest, Chris. So there's a chance of slight erosion, just because of that pace of opening new outlets sort of and then picking up. I think our forecast and our fight is to keep them stable through next year and then build. But I think if you look at it from a next-year’s budget point of view, yes, actually, the outlets are already open. So it's not about volume -- it's not about volume risk. It's about then sort of when we can start to pick up volume growth after that. So that's the swing factor.

And the next one comes from Will Jones.

A few for me, please, if I could. I think the first one might have a couple of subparts, but it's really around land and working capital. So just lots of obviously helpful data in the statement and the intro. But when I think about the 15-or-so thousand plots bought since Q2 and you compare that to the 78,000 land bank, would you have a rough idea of how many of those will be represented in the 78,000? Just ballpark, please. And obviously, as a follow-on to that, I think in the statement, you talk about the 78.000 potentially growing by 10,000 over the next year or 2. How much, again, sorry, but how much -- do you have a feel for how much land buying you might need, say, through 2021 versus replacement to obviously grow that land bank net of what you've kind of approved already? And sorry, within that as well, just because I'm trying, again, to get to a view on working capital needs across the whole business for 2021, but would you highlight anything else outside of land and land creditors to be aware of for next year? Obviously, I guess, WIP, there might be a normalization maybe of WIP ratios, but anything you’d focus for '21 working capital outside of land? And then this kind of 3, hopefully a bit more simple and perhaps this one, you've kind of touched on with Chris' questions then, but should we read -- obviously, you've got your jump in volumes next year. You've been clear about accelerating volume growth in '23. Is the balancing item in '22 there, is that looking like it might be more stable? Or could there still be some slight growth? I guess the order book normalization process might take a couple of years. So we can take our views on sales rates aside, but obviously, you will have quite a high looking order by probably still, I imagine, Christmas '21 as well. And then the final one, sorry, was just if you could comment around the leasehold investigation with the CMA? Obviously, the formal side of that has come to light since you last spoke for yourselves and other companies, but anything you've learned since then would be really helpful on that.

Yes. I mean let me pick up that last one first, Will. And Chris, I will probably need you, or you, Will, to nudge me, because I didn't actually get most of those things down. Just on the leasehold investigation. There's not really a lot new that we can say, since we're obviously fully cooperating with that investigation, providing information. But there's not new questions in there that we're aware of at this point that haven't been sort of broadly discussed sort of with you before. So there's not some new kind of piece that's suddenly come into the picture. So there's not really a lot to add. I think in terms of the land, I can't, simply because I don't have the data points, tell you the answer to how many of those plots are already in the land bank. I'm sort of -- I'm tempted to hazard a guess that it's 3,000 to 4,000, it's that sort of order, because I know of how many sites have been sort of contracted and would have mostly made it there, but I don't know the plot mix, so it's probably that sort of order. And -- but I would go back to is when we went through the capital raise and I'm pretty sure we talked about this sort of as a range of numbers in -- at the half year as well, yes, what we said was, we did see this GBP 500 million as being incremental land spend. That was against a baseline which would have been slightly lower than normal because of the pandemic anyway. But through to the end of 2021, that we expected to commit, including that GBP 500 million, about GBP 1.7 billion worth of capital. And that equated to that growth in plot numbers of about 10,000. And we still believe those are perfectly reasonable book ends. We talked about sort of GBP 500 million equating to roughly 50 sites at roughly an average of GBP 10 million per site, which is smaller than our average sort of site size. I think we've got GBP 829 million over 70 sites, that's because there are 1 or 2 larger strategic ones in there. So it's slightly bigger than average, but those smaller sites are all in there. So hopefully, that gives you enough to kind of start to work through the working capital dynamics. Though, Chris, you may be able to add some more specific things that help Will?

Yes. I mean in general, Will, operating assets, obviously, are going to increase over the next 12 to 18 months as that new land comes onto the balance sheet and we continue to make significant further investments. By the end of 2021, you'll see most of the incremental investment reflected in the balance sheet. And as Pete said, it will deliver incremental outlets in '22, completion growth in '23. And I would expect to see that, that balance sheet reach a mature position a year or 2 after that. On WIP, at the end of June, we were at GBP 1.7 billion due to the delay of Q2 completions. That will probably drop back a bit by the end of this year as we sort of start getting back to a more normal pattern of completions, but it's still going to be ahead of last year, which I think was GBP 1.46 billion. So somewhere maybe around the GBP 1.6 billion mark depending on obviously weather and COVID and bottlenecks and stuff. And then I'm expecting that WIP balance to be broadly stable as we go through 2021 because we've been delivering a smoother profile of completions, as Pete touched on, than in the past. And some of the current inefficiency that is persisting from those COVID delays is going to be replaced by WIP investment from incremental outlets.

And Will, sort of to go back to the middle part of your sort of questions and then you'll need to fill in more of the bits we've missed, because I didn't take them down. You asked about whether there is sort of any potential for volume growth in 2022, I think. And the answer is yes, there is potential, definitely. And with -- I go back to, we are not with the story, steering you into to next year being a fully normal year. And our view about what normal should look like for this business has not changed. So -- and again, through the capital raise, we talked about seeing 2021 as being a recovery year and 2022 as looking pretty normal. And I think that's how we see it. And that applies to volumes and other things as well. So obviously, some of the cost savings that we've sort of specifically taken helped that a little bit. And obviously, there is still plenty of risk. But if you're asking about potential, yes, there is potential for continued volume recovery through 2022. That's slightly different to my views of outlet-driven volume growth, which I really do see as being 2023, 2024, if you see what I mean. What's our view of ordinary underlying sales rates in a normal world? Not quite as strong as 2019, but it's not a long way behind 2019. So we still have sort of good-sized sites that are delivering really well for us on sales and margins, so sort of -- I don't think any of those longer-term bits of guidance sort of have materially changed.

And the next one comes from Arnaud Lehmann.

A couple of follow-ups on my side. Firstly, on -- I'm trying to understand your comments about Help to Buy 2.0. What sort of evidence do you have at this stage that the second-time buyers who were able to use Help to Buy are not going to be able to use it anymore are still in the market? And also, for these houses that are above the caps, are you still seeing the first-time buyers going for them in the -- in your early assessment, I guess, without the support of Help to Buy? That's my first question. And just also on your comment about 2021 profit, and thank you for the guidance at such an early stage, I'm just trying to understand some of the moving parts. But basically, to keep it simple, is it a reasonable assessment to assume that your gross margins or your operating margins in 2021 would be very close to 2019 levels to get to your kind of 10% above the top end of the current consensus?

Yes. So on sort of Help to Buy 2, I think we're of the view that -- I mean our sales rates for last week, and I'm picking 1 week because it's simplest statistically, but I don't think it's misleading. Our sales rate for last week included 0.23, so possibly 1/4 of the normal sales rate that is in the second half of next year. That doesn't include any Help to Buy sales in it at all and that's selling sort of well ahead. And that's not been unusual over the last few weeks. Yes, that gives us confidence that there are buyers out there who don't, we expect, to use Help to Buy 2 and are prepared to commit regardless of Stamp Duty or anything else.

Pete, we can just hear you, but you've gone a bit faint.

Sorry, could you hear enough of that for it to be clear or should I repeat it?

I wouldn't mind if you can repeat it, please.

Yes. So sorry. The -- if you look at sort of our sales sort of over the last couple of weeks, and I'm picking out the statistic from last week, but it is representative, we have 0.23 sales a week, per week over the last week that were for the second half of next year. By definition, those won't be using Help to Buy 2 at all and there'll be a mix of first-time buyers and move-up buyers. My guess is about -- and I don't know this for a fact -- but my guess is the vast majority of them will be people who would not expect to, want to or be able to use Help to Buy anyway. So that gives you some sense of the resilience of that market. I think sort of the other thing I'd point to is the number of sort of informal holds that we are taking. And we're not pushing them. We're not actively selling them. And some of our businesses are not using them. So this is a sort of lowball number. Actually, would also give you a component of about 0.23 sort of as a sales rate on Help to Buy 2, just on people who would like to be able to commit and identify a plot. So that gives you confidence that first-time buyers who can use the scheme are using it and aren't sort of too offset by the price caps. And I think the last statistic I would give and a natural consequence of Help to Buy 1 coming to an end and Help to Buy 2 not being in place, our usage of Help to Buy over the last couple of weeks has dropped to about 20% of sales from the high 40s. And yet we're still maintaining that sort of 0.65 to 0.7 sales rate. All of that says all of the customers groups are still moving forward, broadly in the same sort of level as they have been. None of it is perfect in the sense of none of it gives you absolute certainty. I think until we’re actually selling with that scheme and until we're actually selling sort of at those price points without them, we won't know for sure. But those early indicators are all quite positive. And I don't know if you've got -- sorry, go on.

I was -- I think on a question on margins. And...

Yes. Do you want to take that one up, Chris?

Yes, whether the guidance was assuming that the gross and the operating margin was back in line with 2019. No, that's not the assumption. It's certainly closer to 2019 than 2020. But I think if you apply the revised volume guidance for 2021 at between 85% and 90% of 29 (sic) [ 2019 ] output and also the reasonably specific guidance that we've given on operating profit, I think you actually find that it sort of ends up between where 2021 consensus currently sits and where 2019 was.

And the next one comes from Glynis Johnson.

I have 3 if I may, but actually 2 of them are just hopefully quick clarifying ones. First of all, you say your guidance is based on continuation of current selling rates, but you've given us a number with Help to Buy and a number without Help to Buy. So just which number are we -- are you basing your guidance on? Second one is just about really sort of going back to Chris' question, actually. Land cash out, how much of the cash out for land are already in the cash number that you've given us? And how much is still to come? And then lastly, in terms of the order book, selling 6 months ahead is really quite a long way forward compared to what you and others in the industry have been doing over the past few years. Are you going to look to try and bring back that order book, just to make sure that you have all the benefits of being more accurate in terms of delivery and so on? Or is it about derisking and keeping that order book at that 5 to 6 months and as long as possible?

Yes. Thanks, Glynis. I think when we talk about continuation of sales rates, broadly, we're talking about a very sensible assumption of Help to Buy 2 being in the numbers. So just -- and so not getting back to 2019 levels, but not going back to where we would have expected 2020 to have been if there hadn't been a pandemic, but some way towards it. So give or take 0.9, sort of which I think if we got Help to Buy 2 at the moment, even with the informal help we've got, is a reasonable view for where we are at the moment. And I think that also relates, and I'll leave the land cash question to Chris, that also relates to the last question on the order book. We don't expect the order book to stay this long. We expect the order book to reduce slightly in size during the course of 2021. And we'd be slightly uncomfortable if it didn't for exactly the reason that you set out. Our construction is catching up. It will probably have mostly caught up, in current projections, by the time we get to the half year. It should definitely have caught up by the time we get to the end of next year and we're sort of back in balance. That does give us protection against the short-term sort of movements in sales rates. So if we do see a bit of weakness as we move from quarter 1 to quarter 2, then it gives us protection for that. But I still don't think it's sort of quite the right place for us to be sort of long term. I think I will say our construction forecasting and construction delivery has got significantly better over the last 2 or 3 years. So some of the concerns that we did have sort of around being able to forecast delivery properly and deliver properly to customers are reduced. But I wouldn't say they've gone away. So I still think there's a right length of order book sits with them and we're probably sort of above the upper end through these sort of strange circumstances. I am, with that customer service piece, I was nervous that some of the completions that happened during the sort of post-lockdown, we'd get worse customer service scores because simply, plots have been delayed. In reality, that hasn't happened. We worked really hard on the communication and on the timing of that delivery and being very open with customers about where each site sits and where their plot sits and that's actually worked very well. And I think that's reinforced our ability to communicate that compared to 3 or 4 years ago, when it was a real challenge. But I still think the order book sort of will naturally come back in terms of length and scale over the course of the next kind of 6 to 9 months. And Chris, do you want to pick up the land cash out question?

I can't give you an absolutely specific answer to the question, Glynis. I mean obviously, there's a number of deals there and the timing of when they impact is variable. But what I can do is give you a feel for the basis on which the year end guidance is the best. And so looking at the balance of the year, sort of November and December, I'm expecting land spend to be somewhere between GBP 200 million and GBP 300 million in that period.