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Good morning, everybody. I've got to say I'm absolutely delighted to be talking to you for the first time as the Chief Executive Officer of MJ Gleeson plc and I would say what are we 6, 7 weeks in that I am, having now settled in, even more excited about the potential and prospects for this fantastic group. I thought I would perhaps start with just, if I could get this working, some initial observations on the business. This seems to have stopped moving the slides. I don't know why. There we go. Yes, some initial observations. The group is blessed with some great people. We've got a skilled and cohesive senior team, several of whom are in the room this morning, and a culture that develops and promotes our brightest talent throughout the organization. We've got an excellent land bank and we're seeing a good stream of good opportunities coming through and absolutely winning our fair share.We got an excellent product. We've refreshed the product. It's now simpler to build, but it looks and feels superb and it will absolutely stand toe to toe with any of our relevant competition. The business purpose is absolutely sound. I'm very confident in the fundamental model and we've got huge market potential ahead of us. And we have announced yesterday to the team that we're launching a restructure of the business in part to rightsize us for the current market conditions, but much more importantly, to set the foundations for exciting future well controlled growth. In Gleeson Land, we've also got a fantastic portfolio of sites and opportunities and again a really strong talented professional team. We got a great new MD in Guy Gusterson, who's here this morning, and superb prospects for medium-term growth in that business. So as you can tell, we're going to be pretty busy over the next 2 or 3 months.But we are looking forward to inviting you to a Capital Markets Day sometime early in the summer where we'll be able to share with you in a bit more detail our medium-term plans. So turning then to the first half. Clearly impacted heavily by the effect of the mini budget along with all of our peers and the havoc that that wrought in the mortgage market and the impact on confidence and that effect on results was compounded for Gleeson by our low brought forward position, which was kind of structural. It was an intended place, but Stefan will talk a little bit more about that in a few moments. What we've seen since then is that leads are strong, much improved confidence is generally tentatively recovering and the net reservation rates I would say are consistent with the recovery, but it's far too early to say that that's conclusive if that makes sense. We'll just have to see how that plays out. But we are seeing mortgage rates reducing as you're well aware.It remains in almost every case cheaper to buy a new Gleeson home than to rent. Selling prices remaining remarkably robust. No real pressure to reduce those headline prices. We are making more use of modest incentives, but they're limited and very much targeted. And so bringing all of that together whilst we're still giving ourself a landing zone for where we expect the full year to end up, we are pleased to narrow that range this morning down to somewhere between 1,650 and 1,850 units for the full year. And over in Gleeson Land, we continue to see strong demand for our excellent product obviously located in the higher value southern part of the country. And as a bit of a spoiler for the full year we've already, delighted to say since Christmas, concluded on 1 transaction and Mark has put out a second excellent site in Wiltshire to the market and both of those are at prices that underpin the fact that there is still very strong demand out there for our prime development sites despite what others might tell you.And as I referenced, we have yesterday announced to the team that we are launching an organizational restructure with the overriding aim of getting the business tight and lean and fit ready to deliver the next phase of growth. I suppose the lull in the market has been to our benefit in some degree in that it's taken the pressure off the sheer volume of build and that creates a nice moment for us just to reset. So we're looking to deliver real clarity and control for our teams so that as we grow, we can be absolutely confident in our ability to grow whilst continuing to deliver high quality of product and customer experience. Importantly, we're maintaining our capability and our capacity in all of our regions. We're not closing any offices and we are continuing to buy land in all of our regions. But we're going to run those 9 regions using 6 regional management teams and those management teams will be organized into 2 divisions rather than the current 3 and you can see on the slide how we're doing that.Those regions will be supported by lean, focused and professional central services and each region will be organized on a standardized format, all of which helps that clarity and control. It's really vital that every region is able to operate at an efficient level. The effect on people numbers, if you take the position say back at in November when we brought in our freeze on recruitment, the actual reduction from that point will be about 15% of that number which is 140 to 150 roles. However, following the freeze on recruitment with natural attrition and of course with removing from the business agency and temporary staff, I'm happy to say that probably 2/3 of that number have already left the business. So the actual process, which is never a pleasant thing, but the process itself is that it will only result in some 40 or 50 redundancies.So at that point, I will hand over to Stefan to take you through the numbers. Stefan?
Thank you, Graham. So while the first half results were lower than prior year, they were very much in line with our expectations. The group delivered turnover of GBP171 million and profit before tax of GBP16.1 million. I will take you through the divisional operating profit on the next few pages in a bit more detail, but to highlight a few additional points from the income statement. Interest cost was slightly higher at GBP700,000. We did have some drawings on the bank facility, small drawings during the period. And our tax rate of 20.4% reflects our expected full year tax rate and you'll remember, corporation tax is rising from 19% to 25% in April. RPDT, that's the residential property developers tax, commenced April last year at 4%. And of course we take advantage of some land remediation relief on the remediation costs on our brownfield sites that slightly lowers the average tax rate.Turning to Gleeson Homes. Turnover was 11% higher driven by very strong average selling prices, which more than offset the small reduction in volumes. Average selling prices up 15.6%. The underlying price was up 11.2%, which was slightly higher than regional market price increases. And most of the difference between underlying prices and the headline 15.6% increase was driven by a different bed mix. So our 4 beds during the period were 13% compared to 9.3% of our sales in the previous year being 4 beds. So slightly richer mix. Now gross profit was up 5% to just over GBP46 million. The gross profit on every home sold increased by GBP4,400 to GBP51,500. However, the gross margin percentage was lower at 27.7%. Whilst, as I say, underlying selling prices were quite strongly higher, we did see quite significant build cost inflation in the year 10.3%. And of course with the slowdown in demand, site durations are extending so costs have increased a little as well.Overhead costs were significantly up, up GBP6.4 million and that was driven by 3 elements. So there was strong growth investment so we increased headcount by 18% year-on-year and we opened a new regional office in West Yorkshire, which was fully effective from the 1st of July -- fully operational from the 1st of July. We had obviously pay increases, which is circa 6% on average and we were operating on more sales sites so we had increased sales and marketing cost. And just on that last point, I've mentioned it before, but we take quite a conservative approach to how we recognize sales and marketing costs. We recognize them through the income statement as soon as they're incurred unlike many other housebuilders who typically put their sales and marketing cost as a site cost, they capitalize it and then it's charged through the P&L as homes are sold. We recognize it much earlier, just bear that in mind.Now Graham explained the operational restructuring that we are undertaking. A strong positive element to reorganizing and structuring the business to be able to grow -- continue growing from this position in a well-controlled and sustainable way. That will take GBP4 million off the current annualized overhead costs and there will be a oneoff cost of GBP2 million which will be recognized in this second half. So the increased overhead costs more than offset the increase in gross profit resulting in a reduced operating profit of GBP18.2 million. Operating margin also fell to 10.9%. That 4.1% reduction was really driven by 2 things as you've seen; 1/3 by lower gross margins, 2/3 by the higher overhead spend which was spread across and recovered across the lower volume and lower revenue than we expected. Despite that, return on capital employed was still pretty strong with 24%. Now as Graham said, let me just take -- I'm going to take you through the forward order book.So our forward order book has reduced significantly in the last 18 months for 2 reasons. Firstly, as you'll remember we've talked about it, James and I talked about it last year, we have been releasing plots for sale much later in the build process and we were doing that for 2 reasons. Firstly, to take advantage of very strong price increases. You release later, you can capture more of that price increase. But also it improves the customer journey, they have a shorter time to wait between reserving and moving into their home which improves the journey. But the second reason for that fall in the forward order book is the halving of net reservation rates in the sector. Average rates have fallen by half and our rates fell by half between September and December. So we entered the second half with a lower forward order book than we like and that makes our second half and full year volumes much more sensitive to the rate of net reservation that we're experiencing now and over the next 10, 11 weeks.So Gleeson Land. So Gleeson Land had a typically quiet first half. You'll remember that business typically has a very strong second half and quite often that's a very strong Q4. That compares with 1 site sold, gross profit of GBP3.1 million, which compares to the first half of the previous year which is a very strong first half; we sold 3 sites, gross profit was GBP7 million. Overheads were up slightly in the first half. We employed another 2 senior land people. We're investing for medium and long-term growth in this business. We do see really strong long-term growth potential in Gleeson Land. So for the first half, Gleeson Land reported a profit of GBP1.4 million. Return on capital employed was slightly lower, but that was largely due to the lower first half profit and the unusual balance in last year's profit between first and second half.So turning to the balance sheet. As planned, inventories increased significantly over the period to almost GBP327 million. Land WIP increased by GBP17 million, we own more sites and more plots, and build WIP increased significantly by GBP63 million. That build WIP increase was driven by more sites; we had 88 sites a year ago, we had 92 at the end of December actively building on 92 sites. So we're actively building on more sites. Build cost inflation, which over the past 12 months has been over 10%. And very importantly, which we flagged last year, we are making significant investment in work in progress on sites especially as we run up to the end of this financial year and we prepare for the transition to new building regulations. And we'll talk about that a little bit more later. As a result, average WIP increased to GBP2.2 million per site. Land creditors increased to GBP3.7 million. We acquired a couple of large sites with some of the payment terms deferred.Other assets reduced to GBP33 million. That was largely driven by lower receivables in Gleeson Land and the unwind of a corporation tax debt that we had a year ago. Other liabilities increased by almost GBP27 million. That was driven by the GBP12.9 million building safety provision that we booked in June last year and increased trade payables and accruals as we increase build activity and increase the number of build sites. We ended the year with a healthy cash balance as expected GBP13.5 million. Looking at cash flow. Working capital increased by GBP29 million driven largely by this increase in Gleeson Homes working capital. We now have more substantial starts, more foundations laid and more WIP equivalent on our sites than we've had and we're in a good position as we head towards the end of June and start the transition to new building regulations.Finally, on dividends. We are declaring an interim dividend of 5p per share paid to shareholders who are on the register at the end of business on the 3rd of March, it will be paid on the 3rd of April. As a reminder, remember 18 months ago we announced the completion of a review of our capital allocation policy. We increased our dividend -- earnings to dividend cover range to between 3x and 5x so dividends would be covered by earnings between 3x and 5x. That remains in place. And the final dividend to be declared in September will be determined by earnings and that dividend cover policy.Thank you and hand you back to Graham.
Thanks, Stefan. So the operational review and starting with Gleeson Homes. It's a properly inspiring vision building homes, changing lives. And I would say I've been very positively struck as I go out and meet people around the business and I have tramped through a lot of -- tramped on a lot of building sites as you might imagine in the last 6, 8 weeks including, and I will get Mark Knight back for this, taking me to Cumbria in the second week of January with sideways rain and hailstones that big, but fantastic to see it. But that mission infuses and infuses our people right throughout the organization and it's very powerful and really good to see. So the big question at the moment, net reservation rates. What are we actually seeing? Well, just to kind of give you a picture of how the year seems to be playing. So in that first quarter reservation rates were similar, just a bit ahead of the prior year and we were achieving 0.51, which was consistent.If you remember things were steadying down a bit, but that was manageable sensible rates of sale. Then the mini budget and the effect on the mortgage markets, catastrophic headlines and what have you; gross reservation rates plummeted of course, cancellations spiked and we dropped to as you can see in the 10 weeks up to Christmas a rather miserable net res rate of 0.25. Now what we've seen since, bit of a slow start in the first week or 2 of Jan; but over the last 4 weeks, actually that net res rate has doubled to 0.5. As I said, that would be consistent with the recovery. Now it's a bit below where I would like it to be. January and February should be our -- not strongest, but very strong selling months. That is a decent rate of sale. But it's not linear. I'd be lying to you if I said yes, it's getting better week on week on week. And my sense is that not just for Gleeson Homes, but for the industry, it's a bit tentative; some weeks improving, some weeks cools off again.So that's why I do emphasize consistent with the recovery, I'm happy with where we are but not yet conclusive and if any of you has a crystal ball, that would be great. I would just caution against over-focusing on the difference between January this year and January last year. We've given you that comp. But remember January 2022 I think the entire industry was selling faster than it could build. It needed to come down from there. So just to say that the sort of 0.91 I suspect is not entirely valid. So just summarizing ops for the first half. We opened 3 new building sites in that first half and we were building on an average of 87 sites during that period. We were selling from an average of 66 outlets. What we're doing right now is sensibly delaying the opening of new build sites. Obviously you get a significant spike in working capital when you open it up, when you put in the initial infrastructure and we want to be able to see our way to recovering that working capital before we go off and invest millions in opening up the site.We're watching this at a very rigorous and granular level. Why? Because what we don't want to do is to impede or impair our ability to deliver into the recovery as and when that comes. And so it's almost a day by day, certainly a week by week exercise to make sure that we are controlling the WIP, but vitally giving Mark the cash to get on and get those build sites opened and those sales outlets ready. The land bank is in very good shape as I said. We're slightly up on where we were to 16,500 plots on 168 sites. That equates to about 8.5 years supply and it's at a very healthy price per plot of GBP13,000, which is not something I recognize from my recent past and a very happy place to be. I mentioned earlier that we're refreshing our product. Mark has done a great job here and overall what we've done is simplified the appearance, but I think improved it in a number of ways.So it's actually in my view a more attractive product, which improves the appearance of a Gleeson site and the experience of the owner of a new Gleeson home. We've done a number of things. We've enhanced both our standard specification and our range of options. We're not by the way pushing massively at market. These are small changes, which I can talk to you in detail or Mark can talk to you for a long time and if you'd like to discuss that, we will. These are small changes just to enhance that product and make it really feel sharp for the new purchaser. Slight improvements to kitchens and to bathrooms and to the options that the customers can add. And interestingly, I'll show you in a moment, the improvement in our sales of extras. So a lot of these enhancements are not actually costing us. We're getting the customer to pay for them and of course the margin is much higher on sales of extra.So really thoughtful and insightful in improvements. We've also broadened our palette of elevations, if you like, which again just creates a bit more interest on sites and that product really does look superb. And I hope that when we invite you to the Capital Markets Day in the summer, we'll try to take you somewhere where we can show you that in the flesh as it were. We're really well advanced on the requirements for Future Homes. So a great technical team and our guys are participating fully on the Future Homes hub, playing a strong role in that. We're actually deploying air-source heat pumps as part of our solution to the Part L requirements, which obviously kick in in I think June or July this year and so we're obviously on with that technology.We've actually sold some homes with air-source heat pumps in them and it won't surprise you that we're keeping in very close contact with those customers so that we can learn the lessons of that implementation. And where there are things that we can tweak or change to improve the customer experience, we'll absolutely be doing that so that we optimize the position when we roll this out at scale. And also working with Mark and the team on some interesting ideas around both site layouts and slightly tweaking the range of product and that will enhance the viability prospects for our land buyers and again the experience for our customers. So very excited about what we're doing with the product itself. However, the product itself does remain affordable.And just I want to be very clear that it remains and will remain the critical case that a couple earning the national living wage will be able to buy a house on any Gleeson site and that's a realistic and live proposition not a sort of just 1 bed at the end of the site. It's a genuine proposition and our land buyers are very clear on that. But the affordability does remain strong. The average Gleeson purchaser is spending just 25% of their take-home pay on their mortgage compared to the national average which is closer to 40%. The average selling price of a Gleeson home is some 30% lower than our peers within our -- than the average selling price of our peers within our regions and something like 45% lower than the national average. And of course the pressure in rental markets is only increasing and it remains the case in almost all of our locations that it's cheaper to buy a sparkling new Gleeson home than it is to rent. As we said, it's good to see that competition is returning to the mortgage market.It seems that each week we're seeing the banks are improving those terms. We're seeing both pricing and availability are improving. Good to see also that we're not picking up any significant decline in interest from the end of Help to Buy. It's very much the case that the challenge for our prospective customers is not affordability. It comes back to that key thing of confidence. As I said, leads, website visits, visits to sites; all significantly up on what we were seeing at the end of last year. It's all about that having the confidence to convert. And more generally of course at our lower price points, the absolute challenge of raising a mortgage is simply lower -- sorry, having the equity to support a mortgage is simply lower in absolute terms. As I said, our selling prices remain firm. We're not seeing any particular pressure to reduce them. We are increasing our use of incentives as you'd expect, but not to a particularly troubling level.As you can see, the average was about GBP2,000 so you're sort of in the range of 1% to 2% there. So we have modest discounts that our teams can offer -- modest incentives that our teams can offer without reference and anything above that and any more significant discounts if you're sort of pushing up towards 5%, well, that's going to come across Mark's desk. It's targeted and very limited. I mentioned earlier the improved range of options and I'm really pleased to see that the sale of extras is increasing. We reached in the first half an average of GBP3,250 and that's quite significant. That's the average across all of those 894 sales and when you compare that with our average selling price, that's quite a significant number. And that's really good for our customers, but it's good self-help and the improvement in that range of options that we offer. And interestingly, even with the pressure that we've seen in the market, that hasn't come off.Year-to-date we're still GBP2,700 on average. So really pleased to see that level of extras and it's certainly an area that we're focusing on enhancing still further. So what are we actually seeing? What's the context for the range of 1,650 to 1,850? I thought it might be helpful just to give you some granularity on that. As I said -- sorry, my screen just disappeared, but I'll look at that one. So no signal is the message for that slide. So what we are seeing, web traffic has significantly improved as have visitors to site. The issue is all about confidence to convert into an actual purchase. So to give you that context. If we were to hit the bottom of our range of 1,650 units, we need an average of 0.37 sales per site per week to hit 1,650. To hit 1,850, we need an average of 0.61 units per site per week and our average over the last 4 weeks has been 0.5. So I don't have a crystal ball, but you can see that that's why we're reasonably confident about that range.So turning then to Gleeson Land. And it's perhaps ironic that the increasingly burdensome planning system, which is exacerbating the scarcity of the prime development sites in key areas of the country where people want to live. And of course that, as I say, exacerbates the scarcity and enhances in fact the opportunity for a business like Gleeson Land. We're very excited about the potential for that business. It is a Top 4 promoter and the recent corporate activity that we've seen in the last 12 to 18 months, we think has actually enhanced the appeal of Gleeson Land because of its perceived and real independence. The model is strong. The investment of working capital is not significant. We have a very high success rate on planning as I'll show you and it's interesting that land promoters actually continue to deliver some 40% of large sites to housebuilders. As I said, it's undoubtedly true that the lack of supply is supporting prices in that area.We continue to see as we bring sites to market good interest from smaller housebuilders, from housing associations and indeed from the majors despite what they may be telling you. So we see good medium-term growth potential in this business. The portfolio is excellent. As I say, planning just gets more and more difficult. It's a real headache, but we do have a superb team and I back Guy and his team to deliver. Any consent that's available out there, they will find it and they will get it. As you can see, we achieved 4 permissions in the first half, which is fantastic, and we submitted a further 4. We've currently got some 16 sites awaiting a decision. So as I say, high confidence in the prospects there. And just an overview of the portfolio. We currently have some just under 19,000 plots on 71 sites and we have 1,500 plots on 6 sites, which have some form of planning permission. So we're in a good performance.We have confidence for the second half, but even more confidence about the medium-term growth prospects for that business. And when we get together in the summer, I'll certainly be asking Guy to share with you some of his good ideas around how we can continue the development of that business. So to the summary and outlook. Good to see the machine is holding me up to the last slide. So we are seeing initial signs of recovery, but the pace and strength of that recovery is as yet uncertain and we expect to deliver somewhere between 1,650 and 1,850 units for the full year. Momentum is building amongst potential customers with mortgage rates coming down. It remains cheaper to buy a new Gleeson home than to rent and it's all about having that confidence to convert. And finally, as I said, we're launching a restructuring of the Homes business. That is in part about rightsizing us for the current market, but much more importantly putting us in a great place to deliver on that opportunity for future well controlled growth.Thanks very much for listening. And at that point, I would like to invite any of your questions.
Greg from Singers. 3 from me, please. Can you just talk a bit about the profile of land sales in H2 and when you expect those to land? And then on Homes, you obviously intentionally slowed down the rate of which you forward sell in the build schedule. Has that changed as a result of the current market? And thirdly on extras, what's the margin profile on that?
Okay. So that was the profile of land sales in H2 in Gleeson Land. So well, it's not something that we actually give a specific forecast on. I mean if you like, I can ask Guy to give you a bit more detail on the circumstances. So we have a number of sites. We've got 1 that we're currently marketing and 1 that we're about to launch the marketing, but it's really all about the planning that we're expecting to achieve sort of in the next couple of months, which will determine what's available to take to market in that fourth quarter. So we don't really put out a specific forecast on the profile of those sales, but that's where we are. And I think consensus is in a good place providing the planning comes through as we're currently intending. On Gleeson Homes so your question was have we changed the profile on forward sales?Well, I think to some extent that corrects itself because go back to my comment on what was happening in the whole market in sort of I suppose it was the end of '21 and through to the spring of '22 whereby demand was just much higher than the rate at which people could build. And so the whole industry I think was faced with a challenge of look, do we just keep -- and prices of course were increasing quite significantly at the time. So the whole industry was faced with do we just keep selling and our forward order book grows and grows and how far down the field do we want to sell, how many months in advance do we want to sell. I think that has self-corrected at the moment given the position of the market. So we're not having to make a decision today on look, do I want to sell that plot that Mark can't build till 9 months' time. It's less of an issue. So I think that's kind of self-corrected. And on extras, I would say the margin probably kind of 40% to 50%. I was going to say 40%, Mark's saying 50% so I'll hold him to that.
Adrian, Panmure Gordon. 2 for me. On Slide 20 you've got the reservation rates and they were 0.9 this time last year and you made the observation that that was an elevated number. Would you be able to provide sort of what a typical reservation rate would be this time in the year? And then the second one just before I forget because I'm terrible at that. On Slide 14, you talked about increasing WIP being driven by the increase in the number of substantial starts presumably in relation to Part L. What kind of level is WIP likely to be by the time we get to June?
So I'll let Stefan have a think about the second of those questions. But just on reservation rates. I mean for me to be entirely comfortable, I think we'd want to be at 0.7, 0.75 for January. That would be the business absolutely ticking along and January being 1 of our higher selling months. Who knows where it should be for now because January doesn't normally follow the kind of Armageddon that we saw in the final quarter. So I'm not panicking that we're currently at 0.5. It just depends on where it goes from here and how that confidence picks up. But 0.7, 0.75 would be a good rate for January I think.
And on the build WIP question so it's a mixture of things. By the end of the financial year, we'll be on fewer build sites because we are pausing at least for the time being opening new build sites. So we will have fewer sites, but we will have much more WIP on those sites. So we are busy, we are busy putting infrastructure in and making substantial starts to constructing homes. So just to put some kind of numbers on it. The moment we have just under 3,000 substantial starts -- homes substantially started, I'd expect to increase that by another 500 by the end of the year. As a result of that, the GBP2.2 million build WIP per site that we had at the end of December, expect that to increase to possibly GBP2.5 million, GBP2.6 million by June this year.
Charlie Campbell at Liberum. So a couple of questions really. One is I just wondered if you could help us in terms of seeing sort of new customers, people who might have kind of been trading at higher price points in the past. So what you're seeing in terms of more affluent customers coming towards you, just any evidence or kind of just color to help us understand that switch would be great. And secondly, you've not said much about sort of planning delays to the Homes business. I mean it'd be very easy to think that that's more a problem in the south than the north. I mean is it as straightforward as that or are there still planning delays in the north as much as the south or a bit less? How do we think about planning delays in terms of site openings going forward in the Homes business?
So yes, in terms of new customers, both anecdotally and I think statistically we are definitely seeing interest from customers who would be typically buying from 1 of our more expensive peers. The shift in the mortgage -- so the mortgage rates have improved, but there has been a shift. So property is more expensive than it was and undoubtedly we're seeing people who previously might have been looking at 1 of our more expensive peers, who are now looking over the fence and saying well, actually there's a very nice Gleeson home there that I can now using that same budget afford a Gleeson home where I can no longer afford the 1 I was previously looking at. I think we've got that stat in terms of that.
Yes. So I looked at -- we looked at. So we collected a fair amount of data on understanding our customers. And if you look at the -- if you rank customers who've reserved over the last 6 months compared to the customers who've reserved a year earlier in terms of their earnings, the Top 10% are earning 15% more than the Top 10% earned a year ago. Might take a few moments to just process what that means. What that really means is that those what we call value driven buyers that would have typically bought more a expensive home from another housebuilder actually looking at Gleeson Homes and going this is a high quality home that's just going to cost me substantially less. And so we're seeing actually this shift in the demographic, a little bit of a shift in demographic so that the average income of our buyers, certainly the higher earning customers, has increased really significantly. And we're seeing it throughout slightly lower loan to value number, slightly higher deposit for our customers still a healthy deposit. But that demographic shift is absolutely definite and we were anticipating it a year ago, we've actually seen it in the last 6 months really significantly.
To our second question, Charlie, I'll ask Mark to comment on that as well. But no, planning is no easier in the north and it's no easier anywhere. We are seeing planning delays Hopefully, the reason you don't hear me moaning about it is because it is what we do. It's the market we operate in and you don't want me standing here telling you how difficult life is, but it is tough. We've got a very strong land team as I said, I do think we're good at it. We're good at getting close to the local authority, good understanding of what they need and of course the product that we're delivering is the product that they really do need. We are also regenerating a lot of brownfield, which again is something that the local authorities are keen to see. But Mark, do you want to give just a minute on what we're specifically seeing in terms of planning.
Well, like the industry, NPPF planning change, government policy change that's with us now and obviously coming down the road, we've set our team up to make sure we can deal with that at a granular level. We've recently acquired an internal senior ecologist because of BNG. That approaches us in November 23 as you're all aware. And in the main LPAs are trying to work where they're not committed to BNG as an example, they want to get planning consents in actually. So we're seeing some real positive engagement with a large proportion of local authorities that actually don't want to commit to policy on that until they're absolutely demanded to do so. That said, certain locations are more stringent than others. Leeds is an example where they've really gone in hard and they do with everything around policy.As far as blockages-wise in terms of risk to planning consents at site level is probably mainly kept around Tees Valley area where neutrality is still heavily in the ether. We'll find ways around it. Some of it can be done and can be worked on sites and where it can't, we obviously push those deals backwards, but they won't go anywhere because they're dealing with the simple facts of where policy sits. So I think neutrality as an industry is something that we're still working out at regional and city and town level. But everything else in terms of where BNG is coming through in November, you've got a lot of planning committees wanting to get consent through and the other side of it is that affordability piece in the product. We used to be a business several years ago that was quite aggressively engaged with planning authorities and I think we've said this for the last few years.We are now very collaborative. We're working with a product that's workable to their needs and demands and we're working tirelessly as we speak in terms of that transition into space standard house types and our old size product is going to be defunct in the next 12 months. The new product coming through is exciting the planners and more importantly the working committees around them so ward members are getting spoken to. So there's is a problem, it's more policy driven I think and I think the wider base and I think Greg will jump in, the SLAs that each LPA push in, they're using some of the government current language to say actually we were going to commit to a plan and now we've got so many problems, we're not going to. That could create problems and there is nervousness around it where that takes us and Greg's probably more qualified than me.
[indiscernible], Berenberg. Just a couple of questions. I suppose given all the changes in affordability and market dynamics you've seen in the past few months, who you see or do you expect many changes in the competitors playing in these markets in terms of people pulling back or other companies seeing it as an opportunity even the private market or listed market? And secondly, just on organizational structure, clearly taking some cost out and kind of I guess reducing the management overhead in there. If you're kind of looking at the medium-term view, do you view that as a temporary change to get to the current market conditions or do you view it as the right base restructure to kind of potentially scale the business materially from here on a multiyear view? So your thoughts around that would be helpful.
Okay. So competitors I'd have to say not significantly. We clearly have competition and a lot depends on the sites so locations and the appearance of the site. I think most of our peers -- if you've been asking me about the types of sites if I was sitting here in my role a year ago, it's all about buying absolutely prime sites in prime locations. And 1 of the compromises that we make why we're able to do what we do is that we will take on those difficult secondary sites and secondary locations and we make a virtue of it and guess what, we're able to sell houses very effectively in those locations. But if I'm Bovis, I'm not particularly wanting to build in Acklam Gardens in the center of Middlesbrough, which is a great site for Gleeson Homes. So we do have competitors obviously; Keepmoat compete with us, Vistry Partnerships compete with us and you can imagine I enjoy that one. But I haven't seen a surge, if you're asking me am I seeing the majors all coming over to try and eat our lunch, not really; no real change in that regard.Organizational structure, good question, is very much about the look forward. So as I say, it is almost kind of coincidental that it's helpful to trim ourselves, maybe lose a few pounds to make sure we're fighting fit in the current market. But what we're doing, the standard structure for the regions, the role clarity and the clarity between the regions and the center and trying to make sure that each of the regions is operating at an efficient level. This is absolutely about the future and making sure that as we start to open more sites, as we start to put our foot on the volume accelerator again, we can purr away rather than creaking and groaning and we can do it knowing that we've got the people and the systems and processes in place that will ensure that as we accelerate, we're not compromising on product quality or quality of customer experience and that's really what we're doing.
Sam Cullen from Peel Hunt. I have 3 if possible. First one is on pricing. You called out I think, Stefan, the change in the mix this year. Should we expect that to change going forward? Is it going to get richer or less rich going forward? And then also I guess a couple of comments really around mortgage capacity of your buyers, how that's shifting post April and what kind of a new cheapest home on a typical Gleeson site would be for a national living wage couple would be helpful. Secondly, on your question about kind of selling further forward than perhaps you might ideally want to a year ago. Did that involve any sort of remediation costs that you may have incurred because you didn't hit various targets or the build quality suffered little bit and so you had to kind of go back and fix things that you may not -- mistakes you may not make as the build rate slows or normalizes going forward? And then just lastly on the land buying piece, you've indicated you pulled back from land buying. If we see reservation rates continue to stabilize or improve, when do you need to get back in the land market and how comfortable are you kind of putting through your existing land bank to serve the volume needs?
Just on a technical point, Sam, I think that was 4. So I will take the -- I'm not sure what. You've confused my numbering completely now. So I'll talk about pricing, I'll talk about selling further forward in the land buying. I'll let Stefan talk about mortgage capacity if that's okay. So what do we see on pricing? So really important to distinguish sort of the 15% increase in ASP. But as Stefan has already explained, the underlying was about 11%, which is kind of broadly in line with kind of national average, just a little bit ahead possibly. Some of that to do with those improved extras, which are of course voluntary on the parts of the customer. I think it's really important to keep that in mind because I would hate for there to be some sense that we're drifting away from our core market. We're absolutely not. As you heard me say earlier, vital to me. The success of this model is about us keeping focused on our purpose and on that core strategy.But there is such a thing as an affordable large home if you see what I mean. And 1 of the things that Mark and I have kicked around, and I don't want to give away secrets, but we don't build any 5-bedroom homes. But actually, and it's getting into a bit of detail, we have customers in certain areas that want 5-bedroom homes for particular reasons and so not inconceivable. We're kicking the ball around now, but we may introduce that. We may expand the range a little bit. That will obviously push up the average selling price, but it won't be changing the fact that we're selling into an affordable market. So hopefully, that is what you were asking. Just on selling further forward. No, I don't think -- it's not so much a problem of this isn't a rearview mirror. I think this is something that James and Stefan took a very clear view on at the time. And to be fair, the same debate was taking place around every exec table.You have a rising market, but you're locking in selling price today and putting yourself under that build pressure. And of course it's much more difficult to tell a customer which day they're going to be moving in 9 months out than it is on a house that's almost ready, 2 or 3 months away from completion. So great question. Has that meant that you're kind of really running to stand still on delivery? And undoubtedly as I referred to earlier, we had a lot of -- the sheer volume of build did put pressure on the system. But I think the guys did a great job and we haven't seen a particular raft of problems coming through from that. Just on land buying, we're not holding back on land buying at all. Most of our land buying is secured on a conditional basis on getting that planning. So if you think about it, the land that we're buying now is for development starting on site on average I'm going to say kind of 12 to 15 months hence.And so we've seen a lot of activity. I see along with Stefan and Mark, we chair land bid meetings every week and those have been getting longer not shorter. Some great opportunities coming through and great pricing. So we are not letting up on land buying. What we are holding back right now and as I say is under the microscope is just being very careful not to launch in and put in GBP2 million, GBP3 million worth of infrastructure on a site where we might find ourselves in 3 months' time that the confidence has worsened. And we'd say well, look, the GBP3 million is now going to sit there for 18 months. So that's the decision where we're being cautious, but we are watching it carefully. Stefan, did you want to talk about mortgages and capacity?
So the national living wage increases, as we all know, in April from GBP9.50 to GBP10.42 per hour. If a couple working full time earning that national living wage were to borrow using a 90% LTV and a 4x loan to value so not overstretching themselves, they will in April be able to afford a home costing over GBP192,000. So affordability really is there, I mean it's quite extraordinary. Our average selling price is GBP186,000. That means they could afford to choose -- a choice of more than half of the homes are most 3 beds, all 2 beds and on some sites couple of 4 beds. I mean affordability is just extraordinarily strong. And as Graham said, we sell at a price that is 30% lower than where the other housebuilders are selling in our regions. So that affordability really now as a consequence, it puts up costs because people who are payroll cost increase have to increase because people who are earning national living wage or slightly above it also expect that same increase. So every silver lining perhaps has a bit of a cloud.Just on the mix question though, it's a really good question because there will be some mix movements going on. So you remember we were replotting our sites 6 years ago with a richer mix of 4 beds and a slightly thinner mix of 2 beds. Still we're taking that core 2/3 3 bed. So we saw in the first half let's use the average number of beds, which was 2.9 beds. That was an increase from the first half last year. I would expect us to stay around that for the time being, maybe increase a little bit, it will be marginal increase. I would expect a bit of mix in the regional mix and of course northeast price is a little lower than northwest, which tend to be the highest. But overall I would say if prices continue to be flat which they have been, as Graham said, over the last 4 months; if they continue to be flat, I would expect that overall our ASP to remain flattish.
Adrian from Panmure Gordon again. Sort of through the presentation, you made a reference to refreshing the elevations. Would you be able to provide, to use that horrible American phrase, some extra color in terms of where are you on that journey? Have you actually started selling any refreshed elevations? What's the motivation? Is it is it perceived sort of attractiveness? Is there a cost benefit? Just a general sort of overview in terms of that journey if that's okay.
Absolutely with some caution because there is a lot of enthusiasm with Mr. Knight in this. I'm going to ask him to come back with some detail. But the reason is actually if you walk on site and it's been fantastic for me, Mark and I have walked countless sites in the last few weeks and just the team have got a great eye for this. So if I look at the older Gleeson, it looks great. But then go to and I think it is Acklam where you can see -- no, it was Safari where you can see the old product on 1 side of the road and the new. It's just I guess fresher moves on. It looks really sharp and we've seen some absolutely spectacular examples. But Mark, do you want to just give a couple of minutes on that?
Yes. If you turn to Pages 3 and 4 of the presentation, you'll see some examples. So we operate 3 styles if you like; urban, contemporary and rural. You've got contemporary and rural in the slide deck and if you just look at Page 3, that's the contemporary product. And at the moment pre-space standard, we've not plotted too much of this. But places like Leeds and Newcastle and Nottingham are starting to ask for this type of product. So you've got your black window profile doors, you've got clean elevations, rather lots of cobbling, you've got a larger visual on the window style. So that's generally the contemporary product. And again we're increasing the color of [ paletive ] bricks as well as roof tiles. The rural that you see on Page 4, again you got a different coloration for the door a sage conservation green, you've got sweat windows and different window fenestrations and then simple sympathetic brick work styling together with open rafter feet to the roof flying, which again a lot of planners in particular around Cumbria and down the East Coast which we're doing a hell of a lot on really work and again add some real value.And then our Urban 21 is a very simple design clear of details, but a grey garage door rather than what you'd see in terms of the old style; cobbling, white doors, white windows, white [ garage doors ]. And then simple refreshes together with a controlled change from gravel drives to tarmac drives, which might sound what you're talking about. Well, we've been through a journey on all this and we're seeing real added value on that front of house impact. And simply these things are cheaper to build simply because they are cheaper to build from the labor and the time to build them, we're using less product in the actual elevations and we're enhancing that product. Less is more I think is a way to finish off on that one.
We are building on several sites in the north.
Yes, we are. And we'll try to show you in the summer. But does that give you some...?
We've got a question from the conference call. So maybe, Sharon, you could take over the conference call.
[Operator Instructions] We will take our first question from Andy Murphy from Edison Research.
I've got 3 little questions if I may. First of all on the demise of Help to Buy, I assume most of your customers are not in a position to get involved in part exchange. But I was just interested to know what activity you're seeing in terms of other replacements for Help to Buy. You mentioned in the presentation 1 or 2 initiatives that were at play there, I wonder how much they've taken off with you. Secondly, can you give us a flavor for what your expectations are for build cost inflation through the rest of this financial year and this calendar year? And then finally, just on that improvement in your reservation rate. I was wondering what your thoughts were on the trigger for the improvement. Was it just realization that interest rates are beginning to stabilize and come down? Was it something that you or the industry have been doing in terms of promotion or something else?
So let me take the inflation and reservation rate improvements and I'll give you my thoughts on Help to Buy and just in case Stefan wants to add anything on that. So taking the point of build cost inflation this year, interesting and getting that out of John Gilbert, our Commercial Director, as you can imagine is never easy. But no, John and his team doing a super job. So as Stefan said, we saw cost inflation over the past 12 months of about 10.3%, which I think is in line with what most others would tell you. Undoubtedly, that will ease significantly in the current year. There will be a split there between materials and subcontractors and there'll be a split within both of those categories. So on the trades whereby they're broadly selling their labor to you, brickies and in our case ground workers, we already see some quite significant savings probably of the order of 10% because that is a simple question of supply and demand and with the entire industry holding back doing what we are doing in fairness on controlling working capital, there is simply less demand for those trades.On the materials as well same point around supply and demand. We went through obviously not as bad as 2021 when you couldn't even get materials. But through 2022, the manufacturers could sell everything that they could manufacture. They were also obviously suffering significantly from the increased cost principally of energy, also their logistics costs were very, very high and so they were passing them on to us. Now those underlying pressures in energy costs have not gone away. I think logistics has calmed down a little bit, but there are certain manufacturers are still seeing significant cost increases in their own manufacture and there you're looking particularly at the guys who use a lot of energy; bricks, blocks and so on and so forth. So that's quite a tense market in terms of those types of products so I would be lying if I said to you yes, bricks going to get much cheaper. They're not. Those guys are still looking for an increase.But again they have got to be careful because the demand is not where it was and we have started to see reductions from certain suppliers and I think that will build, that will continue to -- the reduction will build over the course of the year. So as I say, I could keep kind of sub analyzing. But if I come back up and I would expect that we will see cost reductions over the current year in aggregate of around 4% to 5% is where I would be. And John will kick me when I go back to the office because that unsurprisingly not the number he gave me, but I factored it for the Commercial Director's caution. So that I think is where we'll be. I just covered up the questions. So reservation rates, what was the trigger for the improvement? Well, you can probably guess, your guess is as good as mine. But what I would say is that my view is that the fundamentals have not been as bad at any time as the press would have us believe. We had a significant event in the mini budget, which spiked mortgage rates.And any economic factor which happens overnight and is so dramatic and then is amplified in the press will always scare the consumer, will stun people into inactivity. Most people will now -- professionals and financial technocrats will say well, we've got a new normal in the mortgage market, it's calmed down and so on and so forth and the fundamentals not as bad as we thought, we didn't go into a recession last year, et cetera, et cetera, et cetera. It takes a while, however, to re-nurture that confidence in the consumer. So I think it was always going to be -- Christmas was always going to be a natural fire break. We were never going to see a pickup post September. We were never going to see a pickup before Christmas. It was all about what happens in January. And I think what we've seen is that people have absorbed the slightly more positive news, they've seen what's happening in the mortgage market and they are coming back.I do stress again and I'm repeating myself it's tentative, but reservation rates of 0.5 and they are mirrored across the industry. Others are telling you the same thing. That's consistent with a recovery. We just need it to hold and we need it to run for a few months before it's conclusive. So coming back to Help to Buy, we are using the replacements. As I think I mentioned, First Homes it's a great idea, but it's terribly complicated. It's terribly complicated for the local authorities who have to administer it and we're really not seeing that taking off in any numbers. We are supportive of it. We're absolutely trying to work with the local authorities to deliver this. But we're finding in most cases the plots that we would earmark for First Homes, we're selling them before we're actually getting -- before the local authority is ready for the wheels to turn for us to sell it with the 30% discount. But we are deploying them. It will be great for that to take off.Deposit Unlock is another mechanism. I think again consistent with I think what others would tell you, it's a great product. It's more of an advertising hoarding so it brings people to the site. We will do. We will participate in Deposit Unlock. But what we're actually finding is that for most customers, they can get a cheaper mortgage elsewhere. So it's a useful invitation. In most cases they don't conclude with the Deposit Unlock mortgage, they will find a better product elsewhere. And that's because, as I've said and as Stefan said, most of our customers are able to raise the equity share that they need to support the mortgage. I don't know if there's anything you would want to add on that, Stefan.
So well, on the Help to Buy bit, it's been really impressive like customers aren't -- there wasn't a rush to get Help to Buy before it closed for new applicants. Use of Help to Buy had been declining as we approached the end date. In the first half, the forward order book has a handful of Help to Buy purchase in only a small handful. We're just not seeing the impact on that element of the decision-making from our customers. So our customers are -- the average loan to value has fallen; it was 3.3x a year ago, it was 3.1x 6 months ago, it's now 3.0x. So actually the level of leverage is reducing. Our customers typically get paid overtime and like I suspect anyone in this room and so they work for 9 months so does their partner 1 night a week every other weekend, they've got their deposit. And so non-Help to Buy customers and we've been tracking this now for a few years have been coming to us and they have typically really, really healthy deposit, 15% deposits. So we'd love Help to Buy to come back, but we don't think the market needs it, certainly we don't.
There are no further questions at the moment. Graham, I'd like to pass it back to you for your closing remarks.
Very good. Well, thanks very much for coming on this morning. I'd say great to be chatting you in the new role. A good set of questions, thank you for that. It's gone on slightly longer and I hope so we haven't made you late. But really enjoyed that and happy to carry on chatting over a coffee if you'd like to stay. So thanks very much.