Watkin Jones Plc (WJG) Earnings Call Transcript & Summary

Hello, and welcome to the Watkin Jones Plc Interim Results Presentation. [Operator Instructions] Just to remind you, this conference call is being recorded. Today, I'm pleased to present Richard Simpson, Chief Executive Officer. Please go ahead with your meeting.

Thank you very much, and good morning and a very warm welcome to the Watkin Jones interim results for the 6 months ending 31st of March. As I've already been introduced, my name is Richard Simpson, I'm the Chief Exec, and I'm being supported today by Phil Byrom, the Chief Financial Officer. If we turn to Slide 2, we'll have a quick look at the agenda. I'll do a sort of HY '21 at a glance as part of an overview. I'll then hand over to Phil, who will do a financial review update. He'll then hand back to me, and I'll pick up the sector review. I'll also make a few comments on cladding and then I'll pick up progress with our development pipeline, before handing back over to Phil to look at illustrative growth over the next few years. I'll then pick up an update on our affordable homes pilot, a few comments on Fresh and then circle back to responsible business program prior to summarizing. And at that stage, clearly, I'll hand back to our host, who will open up for Q&A. So if we move on to the next slide then, so HY '21 at a glance. I'd characterize the 6 months as maintaining momentum across all areas of the business through the pandemic and emerging the other side well set for the future. The financial performance is marginally down from the comparator period for the first half of 2020, but this was both prepandemic and also, in itself, at the time, a record 6 months for Watkin Jones. And I think this helps set the right context for the assessment of this 6 months. So our cash position and balance sheet is strong. The development pipeline significantly deepened with revenue to come of 1.6 -- circa GBP 1.6 billion. Operational performance is robust and the construction activities on track for our 15 current live sites. Fresh, our property management arm, has re-rated positively through the period as a result of its strong performance. And we've seen institutional capital is really focusing on the resi-for-rent, or as it's also known, the living sector, during this period of time, too. And in fact, we've seen BtR, build-to-rent, continue to re-rate positively through the pandemic, again, because of its underlying performance. And in fact, calendar Q1 '21 investment volumes are at record levels. In the purpose-built student accommodation, PBSA, sector we've seen investor confidence recover materially over the last 6 months, and calendar Q1 '21 volumes are at circa GBP 715 million, which is demonstrating a recovery back towards prepandemic levels. So my final highlight before handing over to Phil is just to touch on the affordable housing pilot. It's progressing well and it's increasingly giving us confidence about potentially scaling this element. So on that note, I'm going to hand over to Phil.

Thank you, Richard. To lead on from Richard's introduction, I will run through the financial highlights for the group for the half year period. So beginning on Slide 5, where we look at our earnings performance. Clearly, for the 6-month period, we demonstrated a really very robust operational and financial performance. Our operating profit for the 6 months at GBP 29.1 million, only slightly below the record half year performance that we reported for the prior period, which was very much before the disruption caused by the COVID-19 pandemic. Revenues for the period GBP 178.4 million, demonstrating an increasing contribution from BtR, which accounted for 33% of our revenues for the 6 months, up from 22% 12 months ago. Within that revenue performance and the operating performance that we've delivered, all of our developments in build are progressing well, on track for delivery. Encouraging, our gross margin has remained strong and indeed increased slightly on prior periods, and we delivered a gross margin for the 6 months of 23.2%, up from 22.8% last year. The Board has declared an interim dividend of 2.6p per share, based on our normal dividend policy, which will be for the full year to pay a dividend 2x covered by adjusted earnings and paid, broadly speaking, on a 1/3, 2/3 basis. Turning to Slide 6. We look at our financial position. Here, our financial position is broadly unchanged from the year-end position at the end of financial year '20, with perhaps the one noticeable element, our inventory and WIP has increased GBP 63.3 million compared to the prior year-end. That very much reflects the investment in new land opportunities that we have been continuing to make through the period, but also the investment we've made in buildings and the 2 developments in Leicester, 1 for PBSA and 1 for BtR and at the half year points with work in progress. We had about GBP 42.3 million associated with those 2 developments. We expect to complete on the sale of those in the second half of the year and, therefore, that should all convert into cash before the financial year-end. Provisions in the balance sheet stand at GBP 9.0 million, and this relates to our future cladding cost, which we obviously announced in the previous year. In the half year period, we spent a further GBP 0.9 million on that, so I'm reducing the provision to GBP 9 million at the half year point and wait for that continue to be paid, the remainder of that over the balance of page 1 -- financial year '21 and financial year '22. Liquidity for the group remains strong. Gross cash at the half year position GBP 88.7 million, an increase of GBP 16.3 million on the prior half year position and net cash stood at GBP 31.7 million, which is before deducting the lease liabilities. As well, liquidity overall, our total cash and our available facilities stood at GBP 146.3 million at the half year, broadly speaking, in line with where we were over the same period of last year and continues to support the ongoing investments in our development pipeline. Turning on then to Slide 7. We have a little bit more of a look at the segmental performance for the group. And again, here, the pie charts on Slide 7, just to demonstrate the contribution from the different elements of the business. But the increasing contribution from BtR really standing out quite clearly on the pie charts that are shown there. So BtR, itself, that generated revenues of GBP 59.1 million, and that actually was an increase of 43.3% on the prior period, very much driven by the forward sale developments that we have in build, all of which are on track for delivery in the current financial year. For PBSA, revenues were GBP 104.8 million. And this revenue is actually -- the development of revenue underpinning that we're a little bit ahead of the prior period last year, again, demonstrating the good progress on sites for the schemes in build. But the site reduction on last year was a reflection of the fact that our figures last year included the full sales value of GBP 23.5 million from the completion of a scheme in Chester that we have sold on a turnkey basis. For Fresh, this business sort of resilient really, given the difficult circumstances of the pandemic, its management fee income is largely fixed. And its revenues broadly unchanged from last year. A little bit of a reduction there because a small amount of their revenues is variable based upon the level of student occupancy that obviously has been impacted by the pandemic. But nonetheless, the reduction is relatively modest overall. I think importantly, the performance of Fresh through the pandemic has been very professional, and they have really continued to grow their, sort of number of beds under management, I think, in recognition of that. Beds under management at the start of the year were just over 20,000, about 3,000 up on the previous financial year. And during the period, they were successful in winning mandates for a further 3,424 beds. The residential business really continues, as expected, 33 sales completions in the period compared to 73 in the prior half year -- the previous half year, that includes 35 apartment sales from the scheme in Chester that we completed on a turnkey basis. I think encouragingly for the residential business, underlying sales momentum is strong. And for the year so far, including 25 reservations, which started the year, we have so far sold 80 units for completion in this financial year. On Slide 8, referring to the gross profit performance, again for the segments. You can see here, again, the contribution from the different elements, with BtR particularly strong in the period. Indeed for the BtR segment, the gross margin achieved was 21%. And that's quite a step-up on the half year last year and really reflects a strong contribution again from those 4 developments, which we build for completion in FY '21 as we gain further clarity on the final cost to complete those developments. Within PBSA, gross margin largely maintained at just over 24%, and again, with all developments in build progressing well. Accommodation management, the Fresh margin at 58.4%, slightly down on last year's equivalent, which just reflects the impact of the slightly lower level of variable fee income within its revenue mix. And for residential, finally, the margin here, reducing on last year's provision, down to 14%. Given the relatively low number of sales overall, about very much is a reflection of the sales mix in the period with last year really benefiting from higher margin sales at our developments in Stratford. And if I can then hand back to Richard?

Thank you, Phil. So turning to our sector review then. We're going to look at resi-for-rent, which, of course, for us includes build-to-rent and purpose-built student accommodation sectors. We're then going to look at the underlying consumer demand trends and see if there's been any movements there, and then look at the corresponding investor activity and investment volumes, which have been growing as a consequence. So turning to Slide 10. I guess the first point here for this sort of topco, this sort of header slide, is that the first point for resi-for-rent is that even before the pandemic, the assets were increasingly attractive to institutional capital. And that's been the case as it's been building over many years. Why is that? Well, I guess it's a combination of some pretty obvious, but sort of macro factors, long-term performance of residential, this historical hedge on inflation and the transitive nature of both occupy demand relative to the economic cycle. We're also seeing that real estate has been a growing component of a balanced portfolio and within these alternatives, of which resi-for-rent is a very important part, have been increasing their share at the expense of commercial real estate over the last few years too. So in many respects, the pandemic has been a further catalyst to this, and that's because of the relative outperformance of resi-for-rent compared to commercial real estate. Of course, real yields in yield-styled world would impact structural growth story are highly sought after. And interestingly, we've seen investors increasingly looking to blur the lines between the subsets of the resi-for-rent sectors and looking to invest across them all for balance and diversification. An example there is a couple of PBSA investors who've also been talking to us about affordable housing and build-to-rent. If we turn to Slide 11 and we focus now on BtR, and look at sort of consumer appeal. So increasing attraction for build-to-rent over traditional PRS for consumers and tenants. A recent survey from a BtR review platform home view shows that BtR is ahead of BtS, build-to-sell, and the traditional PRS in every category explored. And that's from the land of the star rating, the overall star rating, its facilities, design, location, value management. And that's not just this year. That's actually the second year in a row that the survey has come up with that conclusion. And it was a decent sample, so 7,000 tenants across 130 BtR residences in 13 U.K. cities. The BtR definitely viewed more positively than traditional PRS further, as a result of the pandemic, and I'll give you an example. The landlord support in resi-for-rent during the pandemic seen as benign, as being sensitive, being prepared to look at the payment plans, et cetera, stands in stark contrast to the spike of evictions in the traditional PRS by landlords at the start of the pandemic. To such an extent, of course, the government have to step in and put a moratorium on those evictions. But equally, the facilities in BtR, such as the communal spaces, the managed service, the secure and the cleanliness of the environment, plus also the working from home facilities have really come into their own. So in turn, demand for BtR has remained resilient. Occupancies averaged 90% and rent collection has been circa 95%. And there's, of course, the rental growth in most towns and cities across the U.K. London and the Southeast are notable exceptions, but this is very much lockdown-related. So if we look at institutional demand and how that's translated to institutional buyers, the institutional demand for BtR has been continuing to build. It's been breaking new ground as it goes. The COVID year of 2020 was a record year for BtR transaction sort of GBP 3.5 billion, and Q1 -- calendar Q1 '21 was a record first quarter at GBP 1.2 billion. Yields are well supported and significant new entrants are coming into the space to acquire and own build assets. I think Lloyds Banking Group's recent announcement is a good example of this. The outlook for BtR growth remains strong with Savills forecasting 1.7 million units at maturity versus the current 190,000 units, which are rather built all in the development pipeline. So if we turn to the consumer and student accommodation. I think tenants -- very similarly to BtR, I think tenants are seeing and valuing the benefits of the quality landlords, the managed service and the additional facilities in purpose-built student accommodation over the traditional sort of PRS student digs. Here we see that 69% tenant satisfaction with the handling of the pandemic in PBSA versus a much lower 25% in the traditional PRS. There's lots of data recently, which demonstrates the fundamental demand for higher education is robust in the U.K., and will return once the pandemic is under control. These data points are about enrollment and application. So the current academic year enrollments are up year-on-year by 5.4% to 570,000. And of course, some have been unable to attend due to the lockdown, but that doesn't change the enrollment number. And then, of course, looking to the next academic year, which will start this autumn in September or October, applications for that academic year were up 8.5% year-on-year. And U.K. is up 12% and non-EU international students are up 17%. I think all of that is well supported by the U.K. government's very vocal commitment to further growth of overseas international students. So if we turn then to institutional demand and how that's translated into activity. I think, certainly, this application data for this year and next year is showing investors the pandemic hasn't changed anything, even if the physical restrictions today are currently sort of restricting physical participation on campus, which might drag a little bit. Nonetheless, that is a short-term aberration. The investment market is well on the road to recovery. You can see that from calendar Q4 '20 volumes as well as calendar Q1 '21 volumes recovering well towards pre-pandemic levels. Current yields and current capital values are well supported. So if we then turn to cladding. I'll make a couple of short points here. Overall, this is proceeding in line with previous discussions and guidance, and I just want to introduce the government's recent announcement where they intend to introduce 2 taxes, in respect of this and are launching a consultation. The first is a residential property developer tax and the second is a levy on new developments over 18 meters. The current stated aim, in respect to the first, is to raise GBP 2 billion over a 10-year period. And we, of course, will engage fully in this consultation. So turning to the development pipeline then, to Slide 18, and we will start with BtR. So as you can see here, the BtR pipeline continues to build well with secured pipeline just over 5,000 units, 10% up from the previous position in Jan and a revenue to come of circa GBP 950 million for delivery over the next few years. With a strong cash and balance sheet, we will look to deepen this pipeline further, and there's good signs of real depth to this market, which we can scale into. Schemes, which are on site, as Phil already mentioned, are on track in terms of construction activity and are proceeding well, and that's our schemes in Reading, Stratford, Sutton, Wembley and Leicester. So our sites in Brighton & Hove; Lewisham, London; and Leicester are all in advanced legal positions to forward sell, and these are expected to be executed shortly, which will further build the momentum here in BtR. So turning to Slide 19, PBSA pipeline. This also continues to build well. Secured pipelines growing to just over 8,500 beds, that's up 7% on the prelims position in Jan, with an embedded revenue to come of circa GBP 625 million. Again, we're looking at market opportunities to deepen pipeline, given the balance sheet strength. All financial year '21 completions are forward sold, and we've recently secured attractive development sites in Edinburgh and Swansea. And the schemes on site are proceeding on track. So on that note, I'm going to hand over to Phil, who's going to talk through our illustrative build for the next few years.

Thank you, again, Richard. So [ without a long ] on the rashness to the development pipelines for BtR and PBSA, which Richard talked through. If we could look at Slide 21, first of all, which it's a slide which looks at the potential revenue growth within build-to-rent. And this is an update on the slides that we tabled in January '21 and shows the progress since that previous addition of this. And the top chart on the right-hand side shows the revenue anticipated revenue growth within build-to-rent, based on the build-to-rent pipeline that we set out before. And is valuing that pipeline, that's a theoretical GBP 220,000 per apartment. What it clearly shows is that with the benefits of our forward sale model and the forward sale of the size occurring over the coming years, we see a progressive step up in the contribution from build-to-rent increasing to around GBP 300 million by FY '23. One addition to the chart at the top right of the slide here, is to show here the contribution to those revenues that is anticipated from how development works for those works that are progressing, how those sites are going build, but also the land sale contribution. And that is important because of the difference in margin mix between the revenues from development builds and from land sales. The overall margin target for build-to-rent is 15%, and we maintain our guidance on that overall margin. But within that, the land sale can typically be between 0% and 10% margin on the land sale. And commercially, we target to achieve a 10% margin on the land, but it does vary on the outcome of those discussions. So the development phase of the works, then the margin typically is between 16% and 19% on the development works. What is apparent from the chart on the top right is that for FY '22, you can see there that there was a significant contribution from anticipated land sales in the financial year '22. In the middle chart the -- there's a table at the bottom, we continue to show the progress in developing the pipeline. And unfortunately, again here, what we can see is in terms of the revenue contribution over the 3 years ahead, that is substantially now covered by the sites that we have secured, but with a degree of work still to go in terms of bringing those sites through the planning process. Turning now to Slide 22. We show the same revenue growth profiling for student accommodation. And here, again, modeling the pipeline that we set out previously on a theoretical basis of GBP 100,000 per student bed, and we're already targeting 3,000 student beds per annum for FY '23 onwards, which equates to about GBP 300 million revenue value. So at that point, FY '23 indicatively BtR and PBSA, both contributing about GBP 300 million revenue to the group. We can see here again for PBSA development contribution between land sales and development revenues, in the top right-hand chart, again, with the land sales in FY '22 being a little bit higher than normal. At the sites commission planning are expected to be forward sold. The margin here for PBSA continues to target 20% overall gross margin, with, again, the margin of allowance sale varying between 0% and 10%, leading to the anticipated higher margin on the development works itself. In terms of progress of the pipeline, that continues well. We're continuing to secure size there for the PBSA pipeline. But in terms of the ultimate sort of revenue position for FY '23 and that target 3,000 beds per annum sort of going forward, some further size bringing in to complete the picture there for PBSA at this point. And perhaps with that, if I hand back to Richard?

Thank you, Phil. And we're just going to look at the affordable homes pilot and the opportunity there. So if we turn to Slide 24. We're still viewing, as I mentioned upfront, affordable housing is a really interesting opportunity for us. I think, overall, the pilot is progressing well. Our discussions with Homes England on grant funding proceed in line, progress with institutional investors to forward fund development goes well, and we have secured additional pipeline sites. Just to give you a little bit of color on that. Negotiations to sell on a forward fund basis, our site in Crewe are in an advanced position. Additionally, we have exchanged on the sale of 23 affordable units in Wrexham, and that was in line with underwriting. And we've put a new development site under offer to buy with the benefit of a forward fund offer for 133 units sitting alongside it, which is, again, sort of good evidence for us of really strong institutional demand. So the overall pipeline there has increased to 485 units for delivery over the next few years. And of course, now it is the right time for us to start to consider how affordable housing may feature as a part of our business going forward, and we'll update once this has concluded. So turning to Fresh, Slide 26, our property management platform. As it has already been mentioned by Phil, and I touched on it upfront, Fresh has performed really well through the pandemic, and it turns out that its reputation has been enhanced. And this has been reflected in the growth in beds under management of circa 3,400 since the start of the year and the fact it's been voted the #1 third-party operator in the U.K. It's also got the leading growth rates of beds under management of any operator across the country. And as Phil has mentioned, the revenue is largely insulated through the fee -- fixed fee structure model of the business. So it's good to see that resilience. We are, at the moment, enhancing capability to grow, especially within the sort of build-to-rent space, and we're continuing to leverage the consumer insight into our product evolution, which we do see as a strong competitive point of advantage here. Returning to our responsible business program, Slide 28. And really, as an update, I think, suffice to say, that we're continuing to make good progress as a business in defining our detailed plans and road maps here. This work builds on our long track record of doing what's right for customers and clients in any regard. And our commitment to targets and plans will be summarized in our sustainability section of the annual report for this year, and our progress in activities will be very visible from there on in. So just turning to our summary. I think the business continues to perform well through the pandemic. This validates our business model, our strategy, the underlying operating performance. We're continuing to grow deep in the pipeline, embed -- and embedded revenue to come really grows with it. The investment market for our assets is robust and recovering well, and we do have exciting opportunities with affordable housing and also the growth opportunity within Fresh. And all of this is clearly being delivered through the lens of our keen customer focus and our highly responsible business approach. So that concludes the formal part of the interim results. I'm going to hand back to our host going to open up for Q&A.

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

Just a few for me, if I may, to start. I mean first, I suppose, on build cost inflation or build costs, it's something that has been a bit of a team of late. I know that your model protects you quite well against it seems like build cost inflation. But I just wondered to what extent you may have seen any availability issues? And whether there's anything going on in the supply chain that might concern you at this point in time? And second question then, just on the affordable housing update that you gave in terms of the new sites that have come on board and the forward sales going on there, I mean I suppose in the rest of the resi-for-rent sectors, we're used to seeing maybe one buyer for each site. Would it be typical do you think -- or do you envisage in the affordable home sector that because of the different tenures involved, you're likely to see multiple buyers on each site? And then from your own perspective, does that create an opportunity in terms of larger buyer pools? Or whether that might, I suppose, increase the complexity of the sales process of those sites?

So thanks for that. Good questions. Let me -- on the build cost side, certainly, we're seeing build cost inflation. I think it's worth pointing out from the start that when we underwrite and acquire any development sites, we factor in a number, about 3% annual build cost inflation within our underwrite. So it is currently that we have some insulation there. And of course, we're currently seeing about 3% build cost inflation blended across the U.K. Clearly, it is -- there's quite a bit of regional variance within it, but nonetheless, it does blend to 3%. And by and large, I think this has been well reported on over the last few weeks, limited labor cost inflation, much more on the material side. In terms of availability, of course, unit costs and availability go hand-in-hand. They're the opposite sides of the same point, aren't they? So there are some materials which are clearly more scarce. And again, they've been well reported on use of steels, concrete, insulation, plasterboard, et cetera. Your comment -- your question was right there, of course, where we have any of our schemes on site, we have them all back-to-back with various contracts with trade packages, supply chain manufacturers, et cetera. So we have those areas derisked. And of course, in our preparations, just like others for hard Brexit, we did look to sort of forward purchase and forward lock into rates and availability of materials quite often. We'd actually bring them into the U.K. ourselves. So we are -- we're sort of well positioned at the moment. We are seeing an element of stretch in supply chains. I think, by and large, because of our long-standing track record with our suppliers and our partners, we're working extremely well to sort of navigate around it for the moment. But it is [ undoubtedly to watch and it is something which we are focusing on quite sort of carefully. But I would say, for the moment, I think we're still well paced in the inflation side of things. It's running in line with what we would have expected and certainly what we factor into our appraisals. On your second question, it's a good question on affordable housing. I think we're kind of learning as we go here, which is the whole point of the pilot. And you're right, we are seeing the very sort of multi tenures being of interest to different institutional purchases. And what we're briefly seeing is that an institutional purchaser is inclined to purchase all the affordable housing, plus a single-family build-to-rent in one. And then they would have a blended unit, but also they'll have a blended rent from which they can sort of manage a range of offer within the build product they have. And I think increasingly, we're likely to move down that route sort of ring fence the BtR single-family, plus the affordable housing and really sort of work within individuals with institutional purchases there, which from a sort of risk and from a capital structure point of view, it's advantageous, of course, because then you could forward fund the entire development at -- or actually at the beginning and not have necessary any or 2 many build-to-sell units to sell through in a more traditional way, which is better for our IRRs and return on capital and potentially better from a risk perspective as well as it will allow us to sort of increase the amount of affordable housing provision, which has been provided on those sites, which, otherwise, would be encountered through local planning authority policies, et cetera. So you are right. There is a sort of multi-tenure aspect to it, but we are seeing it sort of aggregate to potentially sort of 1 stock for a single institutional purchaser.

Our next question comes from the line of Glynis Johnson from Jefferies.

I just have one actually, but it probably does come in 2 parts. The land market, I wonder if you can just talk us through a little bit more detail on what opportunities you're seeing in the land market, particularly in terms of location or type of build? I'm just wondering if there's been any changes in the last sort of 6 months to 1 year, just in terms of what's available? And then just sort of adapt of following that thru a chosen pipeline, so you obviously talked about some of that pipeline is yet to be purchased development. I'm just wondering when we should expect to see an update on those that will help sort of bring more confidence into that pipeline as a whole?

Great. Glynis, thanks for that. Another good question. I would say that the land market, the way that I would characterize it, is it's certainly picked up in competitiveness over the last 6 months and certainly in the sort of second half of the 6 months. And I guess that would be very natural wouldn't it? It goes hand in hand with the general sort of confidence, which is returning as we look to recover through the back end, hopefully, of the pandemic. So we are seeing more sort of land purchasers who were sitting on the sidelines so much of last year steadily return. But of course, they still need to access debt capital, and that is still quite tightly restricted for SME-type developers. But nonetheless, we have seen competition increase over the last few months. The one comment I'll probably make there is most land in our sectors is sold on options or sort of conditional contracts. And therefore, the vendors, the land sellers, need to have a very high degree of confidence in the counter-party which they're contracting with that they can deliver. They can go ahead and they can secure the planning. They can raise the capital. They can make good on their options. Otherwise, clearly, the option agreement itself is just a sort of hallucination. So it's really important that they are contracting with really proven counter-parties. And I think Watkin Jones has got a fantastic reputation in that space. I think the other point is we demonstrated our balance sheet credential last year by staying in the land market the whole way through 2020, and that's really put us to the top of the list of most vendors to the back books as it were. So I think we're in a good position there, but, undoubtedly, the market is getting more competitive. And I would say that most sites are still subject to planning. Most sites are still option agreements. But we have noticed in some of the sort of primary locations, all the sort of key locations, that because of the competitive tension, some of those bits of land are now slipping to unconditional land sales, where the delta between unconditional land and subject to planning land is -- has narrowed significantly. In terms of land availability itself, we're still seeing good opportunities across the U.K., there's no doubt. Arguably the rental softness in London is presenting unusually good opportunities in London and the Southeast, and that's something we are monitoring very closely. But we're very much town and city center, and sort of edge of town and city center location buyers. And of course, that is presenting some really interesting opportunities with the effective change in -- changes in some landscape of demand for retail and arguably for commercial, too. So we know we've got tailwinds there on planning to see that regeneration come through in relatively short order and certainly we're working up a number of potential projects there. And then on the pipeline point, we are expecting to continue to secure sites with business as usual. So we would expect to continue to make progress over the coming period and therefore, expect to update a sort of larger pipeline at our next sort of scheduled catch-up.

Our next question comes from the line of Clyde Lewis from Peel Hunt.

I think I've got 3, if I may. One was, I suppose, around the point in which you're sort of getting the investors to sign up to the deals. Do you think that's been brought forward at all in terms of the pipeline, i.e., sort of closer to the start than the end? I suppose sort of one question that's sort of around the sort of confidence in the desire for the institutional investors to get onboard early rather than later. The second one, I suppose, around the affordable home side. Can you sort of explain a little bit what you've done? I appreciate it's still very early days, but what you've done in terms of sort of setting up the management team there? Where have you pulled the team from in terms of sort of getting that business sort of up and running? And the other one, I suppose, was around Fresh. And obviously, you flagged the desire to sort of grow that business a little bit. And I suppose there's sort of 2 -- 2 sort of parts to the question. One, would you be able to? Or would you want to look at sort of acquisitions of other portfolios that are currently being run by other businesses? Would it make sense to acquire any of those? And would you be looking to take Fresh into the management of the affordable housing sort of side of the business as that starts to develop?

Clyde, it's -- yes, Phil here. I'll take care of these questions set for me. So I think the first question was in terms of investor confidence and the sort of timing of investor activity. I think there's no doubt that we have clearly seen, over the last sort of 6 months, as we really started to come out of the pandemic, the increase in investor advertising confidence for not only BtR, which is really significant, but also within PBSA. And I think increasingly what that is leading to is certainly much earlier engagement with the institutional clients from a forward sale perspective. So in terms of our normal forward sale model, where we are looking to achieve forward sale of land sites and either simultaneously with or fairly shortly after procuring planning, that very much we anticipate to be the normal gain sort of going forward. So when we think about some of our schemes that are going through planning at the moment, we do already have engagement with sort of a number of institutions in relation to some of those, which we would affect to translate into forward sales in due course. In terms of the affordable homes side of the business, indeed here, alongside the general sort of good progress we've made in terms of both sites acquisitions and forward sales, the operational side of the business, I think is now sort of well positioned to sort of look to the sort of future opportunity here for affordable homes. Very much so leveraging of the existing residential management expertise that we have established operations that we have in the Northwest of the business already. And so in terms of the kind of core overhead structure for the affordable homes proposition, that is largely already in situ. Where we have made a distinct sort of change actually in the 6-month period has been with regard to evolving our sort of partnership relations with potential institutional investors here, and we have brought into business a sort of partnership director effectively who will lead on a lot of those relationship sort of matter as we go forward to just strengthen our capabilities within that particular area. But in terms of operational delivery, I think we very much have in place the team that we need to be able to do that. And then turning to Fresh, we see growth opportunities within Fresh. I mean clearly, it has and is continuing to grow the unit numbers under management really quite progressively. To a degree, that is still quite driven by the student accommodation side of the Fresh operations at the moment. And I think, fundamentally, the real growth opportunity for Fresh lies in the -- in that broader build-to-rent market. And we're very much sort of positioning Fresh to leverage off that sort of PBSA expertise that it has and really to take a sort of leading sort of position in the management to build-to-rent going forward. So increasingly and encouragingly, we are seeing a number of opportunities sort of starting to evolve in that arena as well, which then, hopefully, we'll be able to give updates on subsequent announcements. I think in terms of sort of acquisitions, it's a good question, Clyde, but I think, in reality, in terms of sort of suitable sort of propositions out there at the moment, that isn't really something that would be on our sort of agenda or radar, particularly at this point. I think we see much more opportunity to grow Fresh through the organic routes at this point in time. And with regards to affordable housing. Certainly, that is clearly a point of interest here. In terms of managing a single-family housing, that is a possibility for Fresh as we go forward. So I think as we look to evolve the opportunity within affordable housing, the potential role of Fresh in that, it's certainly something that we can be looking to take on board.

[Operator Instructions ] Our next question comes from the line of Alastair Stewart from Progressive Equity Research.

A couple of questions. First of all, it's probably a follow-on from the question earlier about affordable housing, which is the focus on the investor appetite for it. But can you give a bit of color on how that's developing operationally? How -- what sort of feedback are you getting from the planning authorities, from housing associations, your clients? And do you think your private for sale activities are likely to be received certainly on the planning side being received more favorably because of the affordable housing approach? That's the first question. And then on co-living, it's obviously early days, but can you give a bit more detail on that and how could you see it develop in terms of numbers over the next few years? And could it be integrated in one of your build-to-rent developments? Could you have a, let's say, 2 or 3 floors of co-living, and the rest with more standard BtR apartments.

Thanks, Alastair. So just picking up your first question there in terms of sort of consumers and general market across the affordable housing reception to date, et cetera. So how the associations have been really, really positive about our potential sort of work into their space. Increasingly, they are looking to partner, of course, with developers to deliver their sort of appetite and aspirations for growth in units anyhow. There's another sort of national developer with a long-standing track record within the residential for rent space. It actually worked extremely well across the piece. Institutional investors to appreciate -- we sort of touched on this, but everybody shouldn't be -- they shouldn't -- we've gotten actually how much interest is growing into the single-family affordable housing space at the moment. We are seeing an awful lot of interest. We're having awful lot of discussions with sort of private capital as it were, which is looking to come and invest in this sector. And again, that has been really well received. Local authorities, as you would imagine, are really very receptive to the sorts of proposals we have where we would look to sort of over-index, i.e., provide more affordable housing on a development site in their local policies or even central government's policies from a planning perspective, which would require -- we've even found ourselves going back in, actually, in one of the schemes which was consented recently and actually increased the amount of affordable housing provision on that. And you can imagine how, obviously, that has been within the local planning authority but with local counselors and within the local community, too. So it really is a very favorable, very positive thing. Of course, what that naturally does is then it pushes you into the sort of partnership approach doesn't it? Because local authorities then want to work with you. They potentially want to start having discussions about local authority owned land, which could be freed up in time for development, et cetera, et cetera. And in terms of the balance there, yes, of course. If we're looking at providing a significant increase of affordable housing onto a brownfield development site than would otherwise would never be required, then of course, it then purchased the private for sale, the sort of build-to-sell houses into a very, very different light from a planning perspective, of course. So all of that can be self-supporting. I think just in terms of the build-to-sell element, I would just sort of point again to the comment on the rates a few minutes ago about we are keenly watching the kind of return on capital employed, the kind of IRR benefits of capital-light forward sale as opposed to the more traditional sort of build-to-sell model, which is to release -- put more capital in that front, much more consumptive and then release it slower, but potentially the higher margin. And actually on balance, we quite like the capital-light model. So that probably sort of points towards the percentage of build-to-sell, which is likely to feature in our developments going forward there. And then on your second point, Phil, I don't know if you want to pick up Alastair's second question there?

Yes. So I think in terms of [ pick how many ] points, Alastair, regarding sort of co-living and emergency, indeed for this sort of 6 month period, we announced that we have secured planning consents for co-living on the scheme in [indiscernible] . And co-living from this point of view, effectively sort of sit to a degree between student combination and built around really to sort of sure this is some effects of being sort within build-to-rent offering to the factory tens of essentially studio-type bedroom with a broader sort of communal facilities for shared services. So it has quite a nice bit of set between us between 2 -- PBSA BtR is actually that we refer to. You're quite right, Alastair. I think it does open some really interesting opportunities from that point of view, a number of schemes that we are progressing on at the moment and are build-to-rent do have a co-living element to those. And it is the case but yes, you could indeed might want to both schemes to do exactly that where you have an element of co-living alongside what we see is the more traditional sort of BtR or so. I think it does open up an interesting dynamic to the sort of broader build-to-rent piece for us. It really should sit very well, again, alongside our current PBSA and BtR offering.

Thank you. There are currently no further questions. I'll hand back to the speakers for some closing remarks.

Thank you very much. And I think, therefore, we sort of draws our interims presentation to a close. And my sort of closing comment is really just to thank you all for your time this morning, and very much look forward to catching up with you in the near future. Thank you.