Hello, and welcome to the Barratt Developments PLC trading update conference call for the year ended 30 of June, 2023. Please note, this call is being recorded. For the duration of the call, your lines will be on listen only. However, you will have the opportunity to ask questions at the end. This can be done by pressing star one on your telephone keypad. If you require assistance at any point, please press star zero and you will be connected to an operator. I will now hand you over to David Thomas to begin today's conference. Please go ahead. Thank you very much, good morning, everyone, we appreciate you joining us this morning. I have, as normal, Steven and Mike with me. I would like to just begin by thanking our employees, our subcontractors, and all of our suppliers for their huge commitment in delivering what is a very strong performance in a challenging year. The housing market has seen significant volatility in FY23, which is reflected in the reservation rate movements that we have reported throughout the year. For the year, we have achieved a net reservation rate of 0.55, which is down some 32% on FY22. We have supported this by increasing reservations into the private rental sector and also to Registered Providers of social housing, and this has contributed 0.1 to the annual reservation rate. We began laying the groundwork for growing sales into PRS back in 2021, when we formed a strategic partnership with Citra Living, part of Lloyds Banking Group. This relationship is now playing an important role in supporting our reservation and build activity in what is clearly a tougher private sales market. Since our last trading update, from April 24th through to the year-end, we achieved a private weekly reservation rate of 0.67, relative to 0.7 in the prior year period. This clearly reflects our focus on driving sales. The 0.67 rate included a 0.24 contribution from reservations taken from the private rental sector and Registered Providers. We will remain focused on driving sales in this market, recognizing that private, affordable, and PRS are all key channels. Average sales outlets at 367 were around 11% higher than the 332 in the prior year. This increase arose for two reasons. Firstly, the strength of our land bank, particularly its planning status, allowed us to open 104 new sales outlets during the year, only marginally lower than the 118 opened in FY22. Secondly, the slower private reservation rate, which extended the sales activity of several outlets, which we had previously anticipated would close out in the year. For FY24, we are guiding to a 6% reduction in sales outlets, but it is worth highlighting that we still expect to operate from more sales outlets in FY24 than we did in both FY21 and FY22, which is clearly a reflection on the strength and planning status of our land bank. Total completions at 17,206, reduced by around 4% when compared with FY22. Our total order book consists of 8,995 homes, down around 34% on FY22. Our private order book position has been supported by our drive to secure future revenues from the private rental sector and RPs, and consisted of 3,884 homes and an order book value of GBP 1.33 billion. Whilst the order book private ASP is down 8.7%, this has been impacted by factors that are detailed in the statement. We estimate that the underlying price decline of our private home reservations to customers is down around 3.5% over the year. We actively managed our build activity to lower levels from the second quarter onwards, responding to what was clearly a slower sales environment. Our weekly build output reduced to 322 equivalent homes per week, 8.5% below the 352 built in FY22. We've done this without compromising customer service or build quality. We've been awarded five stars by our customers for the 14th consecutive year. This is a unique position among the national house builders. Last month, we were awarded 96 Pride in the Job awards for site management, more than any other house builder for the 19th consecutive year. As we've guided, our build cost inflation was between 9% and 10% in FY23. As we indicated in our May update, we expect around 5% total build cost inflation in FY24. On the land market, our approach remains cautious, given the strength of our land bank and ongoing uncertainty around sales rates and house prices, with only a modest reduction in land value seen to date, our approach looks set to continue for the foreseeable future. Pulling all this together, we anticipate delivering adjusted profit before tax in line with current market expectations, which, based on the latest Bloomberg data, is a consensus-adjusted PBT at around GBP 880 million. Our balance sheet position also remains very strong, with net cash at GBP 1.07 billion at the year-end. This morning, we are also reporting full-year costs totaling GBP 180 million, associated with legacy properties and building safety. GBP 115 million is related to cladding following our signing of the Developer Remediation Contract, and this reflected the increased number of buildings that came into scope as a result, and the work our Building Safety Unit has done in this area in overall terms. There is then GBP 60 million, which is a GBP 40 million second half charge, related to the final buildings, looking at the reinforced concrete frame review that we announced back in July 2020. In addition, we've identified two further developments where reinforced concrete frame remediation may be required. GBP 5 million has been incurred to date. The position is actively under review, and we've given a total cost indication of GBP 40 million that we will update in September. We remain absolutely committed to playing a key role in leading the industry around sustainability. We completed the construction and started the testing of the eHome2, our concept home, developed in conjunction with Saint-Gobain and the University of Salford. I know that a lot of you have already seen that. This project will help to inform how both Barratt and the wider house building industry can design homes that are genuinely future-proofed whilst cutting bills for consumers. Sitting alongside that, all of our developments submitted for planning are now establishing a minimum biodiversity net gain of 10%. Our implementation timescale is well ahead of legislation. I mentioned earlier in the year our recognition in the CDP Climate Change A List for leadership. Whether you look at CDP, ISS, Sustainalytics, or Next Generation, Barratt is a top-ranked national house builder, both around our commitments and our actions. Now, before I close, just turning to outlook. We clearly recognize that there are significant macroeconomic headwinds. We are focused on areas that we can control, driving sales, controlling costs, and being disciplined around the land market. For the coming year, we anticipate total home completions will be between 13,250 and 14,250, and we will continue to adapt as the market evolves over the months ahead. Thank you. We are now going to move to questions. Thank you. Ladies and gentlemen, as a reminder, if you would like to ask a question on today's call, please press star one on your telephone keypad. That is star one for your questions today. Our first question comes from Rajesh Patki of JP Morgan. Please go ahead. Yes, good morning. I hope you can hear me. The first question is on the operating margin. At the last update, you mentioned around 12% seems to be the right level of expectations for 2024. With an increased focus on bulk sales, do you think that's still possible to achieve? What would be the key moving parts there? Second question is on sort of mortgage rates. Could you help us in understanding how the mortgage rates of an average married customer have has trended over the last, say, 6-9 months, and where it currently stands versus October last year? Thank you. Yes, good morning. If, I think Mike will pick up in terms of operating margin and also bulk sales. I mean, the only comment I would make there is that we're giving some guidance about the level of bulk sales that we anticipate in FY24. It's clearly still going to be a relatively small proportion of total sales, but just to make that point. In terms of mortgage rates, look, it's a big subject, and obviously there's plenty of data available, but what I would say was that we saw a dramatic and very short-term spiking in mortgage rates post the mini budget in September last year. We clearly saw a very, very difficult trading period through to December. As we moved through January and February, we saw that, say, on a 2-year fix that had gone above 6%, that those rates were moving downwards, and there was a number of steps downwards during January and February. What we've seen more recently has clearly been the increase in bank rates. That has fed back into the mortgage rates, and when you look at, say, a 2-year fix, you're back at the sort of levels that we saw at the beginning of October last year. I think the 2-year fix was reported last week as being at a 15-year high. You know, that gives you some context. I think that overall, whilst that clearly impacts the whole market, we would say that the principal impact of that is against the first-time buyer. It's clearly a significant impact against the first-time buyer. I'll pass over to Mike. Hi, Rajesh. I think if you think about margin for next year, there are probably three or four moving parts to it. I mean, the first is if you look at the volume guidance that we've given for the year, at the midpoint, if you strip out the JVs and PRS, that's down 25% from this year. Clearly, there's a drop-through from that in terms of operational gearing. We've given some guidance on how we're seeing pricing in the order book. On a like-for-like basis, that's down 3.5%. Again, you can, you know, throw that forward and think about how pricing will come through. Then we've guided that we're still seeing bill cost inflation being reasonably sticky at about 5%. You know, again, you, you can play that through. To your point on PRS, I mean, I think as David said, the volume of PRS that we'll do in the guidance is not that significant. You know, we're guiding for about 750 units for the year. Clearly, as you know, they come through at a discount of, you know, broadly 10%-ish in the P&L. I think when you sort of use those building blocks, that will get you to a margin position for next year. You know, as David said, we will come back with more granular guidance for FY24 when we announce results in September. That's great. Thank you very much. Okay, thank you. Thank you. We're now moving on to our next questioner, which is Aynsley Lammin of Investec. Please go ahead. Hi, morning, all. Thanks. 2 questions from me, I think. Just on the kind of recent trading, that you hopefully give that sales rate, 0.67. Obviously, if you strip out the PRS, you're down at 0.43. Just wondered, kind of, you know, how the recent weeks, are we actually as bad as it was back in October, November last year? Obviously, you've mentioned that a bit in that context, but just interested how that's fallen. What sales rate on the underlying kind of private sales do you assume in your guidance? If we took the midpoint, for example, obviously the, you know, forward order book's lower, so what would you need the sales rate to be? Just secondly, on the pricing and incentives, obviously it's down 3.5% underlying, but has that been more stable in recent months, and now you expect that to fall again? I mean, how much risk do you see on the pricing and incentives, given what you've just said about mortgage rates and sales rates? Thanks. Okay. I think, maybe if I just pick up on both of those points. First of all, in terms of recent trading, I mean, we've said in the statement that at headline level, it was 0.67. The underlying private rate, i.e., adjusting for PRS and sales to registered providers, is at 0.43. In terms of volatility around that, well, clearly there's been weekly variations around that, but I don't think it's the case that it's substantially weakened as we move towards the end of the year. There is no question, as I touched on earlier, that the movements in the bank base rate have impacted that. The overall position is 0.43. When you compare that to pre-December, I mean, we traded through for pretty much a 12-week period at round about 0.3 on private sales. Whilst 0.43 is not an attractive rate, it is clearly very substantially better than we saw in the 12 weeks through to December. In terms of pricing, we're seeing for our business and across the market, that there are more incentives out in the market. You know, we're running different offers in the marketplace. For example, we have an offer that is applicable to the NHS and to other blue light services, and we also have an offer to more general customers in terms of first-time buyer, second-time movers. We have recently increased those incentive levels, and typically, those incentive levels would be up to 5% as a cash incentive, and then maybe 1% or 2% for other incentives. We've said that overall pricing is down by around 3.5%, and you would sense that from where we are here, there will be more pressure in terms of incentives as we move through, certainly the first half of our financial year. Right. Just on the sales, like, if you take your midpoint for the completion guidance for 2024, what's that assuming for the underlying private sales rates versus the kind of 0.43 we've seen since April comparison? It's probably slightly ahead of that, Ainsley. I think if you look at the range is sort of mid to upper point fours across that guidance range. You know, at the upper end, it would be sort of touching point five. Slightly ahead of what we've seen in the last few weeks. You know, obviously remains to be seen how we'll trade through the next few months, so we'll obviously keep that under review. The range we've given, if you think of it, as sort of mid to upper point fours. Great. Thank you very much. Thanks, Ainsley. Thank you. We're now moving on to Chris Millington of Numis. Please go ahead. Thanks very much. Morning, everyone. Just a few from me, please. Firstly, I just wonder if you could break down the cost inflation components you're thinking about when talking around that 5% for 2024, perhaps just between labor, materials, and anything standing out in particular. Second one's just around what you plan to do with your build rate in 2024 versus 2023. You obviously brought it down quite materially in 2023. I presume there's another big reduction during 2024. The final one I've got is just really whether you've had any engagement with government more recently. Obviously, there's a bit of talk around there's some sort of Help to Buy type scheme in spring. I'm just wondering if they've evolved their thinking on that and perhaps planning as it got any better as well. That's all. Thank you. Okay. Chris, first of all, good morning, Chris. Perhaps if, you know, Mike and Steven may want to comment, pick up in terms of the cost inflation and the split between labor and materials. Steven can just talk about build, but we've clearly given guidance on completion volumes, and we're also going to be adjusting build broadly in that direction. In terms of government, if I just pick that up briefly. I would say that there has been quite a lot of engagement with government at different levels. Both from ourselves and from the HBF, and clearly other house builders are engaged with government. That has probably been focused primarily around planning, and as a subset of that, around nutrient neutrality. I mean, those are the two really big areas that there's been discussion over the last, certainly quarter. I think the discussion in terms of Help to Buy and any replacement for Help to Buy, I would say that there has been no discussion regarding that, and it's not something that we anticipate taking place. I mean, we see that private sales rates are very challenged, but equally, the Help to Buy program, it was clearly set out as to how the Help to Buy program would be exited. The timing, you know, it's easy with hindsight, but the timing has clearly been very unfortunate, that as we've exited Help to Buy, we've seen a very substantial step up in terms of mortgage costs. You know, I would assume the government will look at that, but we're not anticipating anything. On planning, there has been some suggestion that we may see some movement, which will unlock some of the issues to do with nutrient neutrality, which clearly have become very substantial, not just for housebuilding, in fairness, but really for any development, of any type, whether it be commercial or residential, it's causing very substantial issues in terms of the planning system. I'll pass over to Mike. I mean, Chris, just thinking about the sort of components of inflation for this year, we've talked about 9%-10%, and that sort of broke down as probably nearer 14% for materials and about 6% for labor. I think as we move into next year, broadly speaking, we're expecting both of those to halve. You know, materials to be running around the 7% and labor to come down around 3%, and that's how we blend out to 5%. I mean, we are seeing, you know, particularly on the energy-related materials, you know, cost reductions coming through. You know, to be honest, it is a bit stickier than we'd expected. I probably, to be honest, would have expected to go below 5 when we were talking back at Christmas, but we see it being 5 for next year. Maybe Steven can give a bit more color. Yeah, add a bit more on, Chris. In terms of materials, we've seen some good decreases coming through over the last few months. I think last update, we mentioned timber prices have sort of dropped. Steel dropped at manufacturing level, and that's now sort of hitting some of the components like lintels and garage doors, so we've seen reductions on steel components. More recently, we've seen some good reductions coming through on bricks, which have sort of haven't moved down for until recently. I think one of the factors affecting some of our suppliers is energy hedging. Some of the hedging fits until, say, the end of this year. Until we see some of that hedging unwind, we won't see further price reductions. We'd expect more price reductions at the end of the year and into 2024. We certainly see a lot more price stability from our suppliers. You know, 6-12 months periods are being offered at this point in time. In terms of content, we get a lot of pressure on cement. That doesn't seem to be coming down at the moment, cement and concrete products. You know, we're guiding for 5%, as Mike said, with roughly half in the level of inflation we saw last year on both materials and labor. Mm-hmm. You've mentioned productivity. I think last year we were able to demonstrate, we were able to adapt our construction levels to align with the slower market backdrop. I think we started off Q1 last year, building something like 365 ASPs per week, but with the downturn in September, we moved it down to 302, and then we sort of still averaging, what? 333 for the half and then 310 in the second half, to give us an average of 322 ASPs for the year. With a further backdrop, you know, we feel we're able to adapt our construction and productivity levels to achieve and match the sales rate we need to achieve. Just for clarification, thank you for that, Steve. Would you expect, you know, that circus 20% reduction year over year, or do you think you're gonna have to have a little bit more finished stock on the ground just to help sales? Yeah, we work to strict disciplines in terms of work in progress on our sites, in terms of the number of stock and the number of unsold units beyond roof. We will be applying those disciplines there. I mean, there's some sites we'll need a bit more stock. Generally we're in a pretty good shape with, you know, the right level of show houses and advanced units. There isn't a great deal of change needed. Chris, that sort of stock correction, if it, that's the right term, I think has really taken place in FY23, because in FY22, we were very short of stock and work. You know, that was I think, a feature for the whole industry, but I think that is largely corrected in FY23. Understood. Thank you so much, guys. Thanks, Chris. Thank you. Up next, we have Will Jones of Redburn. Please go ahead. Morning, thanks. 3, if I could, please. The first on price. The first part of that question is just a technical one. I think you talked about the potential for more, the likelihood of more incentives through the path. My understanding was incentives would only be a portion of ASP anyway, from a lender perspective. Have you maxed out on what that can be? Therefore, if there is an adjustment, it's more gross price as opposed to incentive. Just really any comments on the tactical interplays, those of price and volume. If your volume guidance for the year ahead is based on a sub 0.5, I think, or up to 0.5, but not more view on sales rate, including some bulk sale effect, you're not pushing it to, say, the 0.6, or attempting to push it to 0.6, that you've kind of previously talked about. Does that give you a bit more scope of the margin to play value over volume? Or will the market be the market, and you need to follow? Second one was just around cladding, and just if you could maybe give us a bit more insight into what led to that increase in the building count of roughly 50. I think my understanding from the half year commentary was that that looked, had looked, you know, reasonably secure. Just any moving parts around the cash flow for us to think about for the year to June 2024 would be great. Thank you. Good, Will. If I, if I just pick up in terms of pricing and volume, and then Mike will pick up on cladding and cash flows. Just in terms of incentives, I mean, you know, the interrelationship with mortgages, as you say, is that we can provide incentives of a cash incentives of up to 5%, and then we can provide some additional non-cash incentives, say, typically of 1%. For example, the provision of carpets. What we've seen happen during the year has been that as we came through a very difficult calendar Q4, we saw incentives step up slightly for us to 5% cash. As Q1 was clearly trading better, incentive levels stepped down a little, so perhaps more like 3% at a headline level for cash. We're now back up at that full 5 incentive, not adjusting gross price as such. You're absolutely right, that beyond that, there would then be adjustments in terms of gross price. I think in terms of guidance, you know, we're trying to give our, we see as being a realistic guidance, given the market. I referred in my opening comments about volatility. You know, we have seen some dramatic volatility quarter by quarter during the year. If we're guiding, as Mike said, in a sort of mid to high 4s, you know, 0.4 something, I think that seems to us to be quite conservative guidance, and we will push hard to drive revenue. I mean, I think it's absolutely key that we drive revenues, and therefore, the different channels that we can push revenue, whether it be private, PRS, working more closely with the registered landlords. You know, all of those areas we'll push very hard on. So volume is important. I mean, we have good capacity, we have plenty of outlets, and therefore driving that volume through the business is important. Mike? Yeah, morning, Will. Let me pick up on cladding first. Two moving parts, really, in the new building. The first is, as you know, we signed the contract with government back in March, and there was an obligation on us under that contract to write to all of the building owners for buildings that we've built over the past 30 years, and that was buildings over 11 meters in height. Really, we'd been more focused, I guess, on the over 18-meter buildings up to that point. There was a step up when we contacted the owners with buildings coming in. Then the second piece is really the remediation standard. When we'd been assessing buildings previously, we'd been looking at EWS1 certificates. The contract that we signed, we moved that to using the PAS 9980 framework for assessing buildings. There were a handful of buildings that held EWS1s that, under PAS 9980, came into scope to require remediation. They were really the two moving parts. I think just on the cost, more generally on cladding, you know, we are now at a place where we're about to start remediating a good number of buildings. We're also in a tender process, you know, some form of tender process, covering about 60% of the costs in the provision. We are getting, you know, a better view of how much we think it will cost to fix the buildings. You'd hope as, you know, as we move forward and go through time, those estimates are being, you know, refined and made more accurate. That's on cladding. On the cashflow, we'll give more granular guidance on cash when we come back in September. There are probably a couple of moving parts to call out. On land, you know, even although we haven't been approving land, we're committed to about GBP 500 million of spend, you know, as we go into this year. You know, we've obviously given guidance on the level of dividends and so on. The second moving part, really then, on just thinking about the provisions. On concrete frame, we're carrying about GBP 100 million of provisions. I'd expect roughly half of that to crystallize during the coming year. On cladding, more generally, we're carrying about GBP 540. Again, I could see, you know, potentially up to GBP 100 of that coming through this year, as we get onto the remediation of those buildings, and we've got some payments to make to DLUHC at some stage, as we've talked about before. There's a couple of, you know, reasonable building blocks there, but I'll come back with more granular guidance, as to how to think about it in September. Thank you. Too early to say around what may happen to with point to point, I imagine? A little bit. I mean, you know, we're obviously, you know, we're guiding on the sales volume, and as Steven said, we'll be matching the build rate to that sales rate. We're obviously, you know, we're tightly controlling what happens to WIP. You know, so yeah, you're right. It's probably a little bit early to say until we really understand how the market's evolving through the next few months. Thank you. Thank you, Will. Thanks. Thank you. From Morgan Stanley, we have Cedar Ekblom, with our next question. Please go ahead. Thanks very much. Good morning, gentlemen. A couple of questions from me. The first one on planning: If you got approvals to bring sites to market that are stuck in the planning system, would you even build them in the current environment? I'm just trying to understand how material change in planning would be in the near term, even if it's potentially a nice positive in the longer term. Secondly, when we get a volume recovery, can you talk about how quickly you can increase your build rates and increase outlets, just to understand the cadence of potential volume growth at the right point? Finally, on fixed costs, could you remind us what the whole number is for the group, and how much of that sits in the gross profit line? That would be really helpful in terms of understanding operating leverage. Thank you. Cedar, hi. Hi, good morning. If I pick up initially on planning, and then I just pass across to Steven, and then I'll cover in terms of sort of volume and speed of recovery. Then Mike will pick up in terms of the fixed costs and so on. I think in terms of planning, Steven will cover the specifics, but the reality is: we are in a really good position for planning for FY24. You know, from our point of view, I think that's key, is we don't see that we have planning risk, for FY24. Clearly, we will have planning risk for FY25, inevitably, but against the existing sites, I would say that planning risk would be relatively low, including our London intake is not substantial. If you look at changes to planning, so for example, if the position with nutrient neutrality was unlocked, my sense is that those sites would become available reasonably quickly, because I think a lot of those sites have already got an outline consent. Having received an outline consent, they've been refused when they've gone in for a detailed consent. They are already kind of within the planning system. More generally, in terms of planning, I would say it will take time for the system to start operating again. Steven can talk a little more about our position in terms of FY24 and planning generally. In terms of a market pickup, two things, I know, which are both very obvious, but, you know, I think worth setting out. We've always talked about the ratio between the number of plots that we have and the number of active sites that we have. To us, that is a very, very important ratio. You know, if you've got lots and lots of sites that are very big, you might only have one active outlet or two active outlets, but you've got 1,000 or 1,500 plots. Outlets is what allows you to respond to a recovery, and therefore, we've done a lot of work over the last few years, really, in terms of dual branding sites, swapping sites with other house builders. You know, really trying to make sure that our land bank is as active as possible. We feel that even with our guidance of being down 6%, as I said, we've still got a lot of sites out there. We have at least as many sites as we had in FY22. The second part of volume recovery is capacity. You know, we are doing everything that we can to try to maintain our capacity. We recognize that in a very challenging market, there are pressures on costs. You know, we're managing costs, you know, we have our recruitment freeze in place. We've seen significant reductions in our headcount, but we also recognize that if we shut down capacity, or indeed, if our supply chain shuts down capacity, our ability to recover quickly is substantially constrained. I see that as being one of our biggest challenges presently, given the kind of sales numbers that we're seeing, is to maintain this balance between managing the cost structure and retaining capacity. Steven, do you want to talk a little more about planning? Good morning, Steven. In terms... I think there's a bit of a question around there, would we develop some of the sites as well, if we got planning? Just picking up on the planning position, we're in a good position to move forward. We're sat at 99.4%, to be precise, of our sort of forecast units. We've got detailed planning, so they're all implementable. The planning market really has got really difficult over the last couple of years. Last year, we got about 12,500 consent, which was down 17% on the prior year, which, you know, influenced by nutrient neutrality issues, planning targets being withdrawn in local authorities, and generally, lack of planning department resource again, in local authorities. A lot of our sites which are, haven't got planning at this point in time, are subject to the Planning Commission. There is our discretion whether we would proceed, and we would therefore proceed on the basis that the sites were financially viable, and we're happy to take them forward on that basis. In addition, we need to remember, we've got, you know, a fair proportion of land coming through our strategic land bank, which is going through the planning process, and values on those sort of sites are determined at the point we get planning permission, generally at a discount to the market value. Sites coming through, the strategic land bank, and currently we're producing around about 25% of our volume from strategic land, is subject to the market conditions and values at that point in time when consent is granted. Hopefully that answers your question. Thanks. Can I just come in on the overhead piece there? There's probably three things. We'll touch on the growth, and then we've got an admin cost, and I'll talk a little bit about what we're doing just to manage costs in the current environment. Starting off in cost of goods, broadly speaking, if you think about the overhead is about 10% of our sales, you know, that will give you a, you know, rough idea for how much we carry through COGS. We will obviously be seeing some inflationary pressure through there because that carries, you know, a decent labor component, and there will be other cost inflation going through there. In terms of overhead that goes through the admin line, we guided, I think, at the start of the year, that would be about GBP 300 million. It will be coming in lower than that, probably, you know, of the order of 10% lower than that for the full year, which is a mixture of the actions that we've taken, and a reduction in, you know, the sort of variable compensation that we have for people through bonuses and so on. That will be lower. Then in terms of the actions that we've taken, I mean, we're sort of lucky in a sense that our financial strength has meant we haven't had to take any big knee-jerk reactions in terms of people or our geographical footprints. We put a recruitment freeze in quite early in September, and we've held that through the year, and that's allowed us to take out something like 5% of our headcount, across the course of the year, without having to go through a big redundancy program. We're obviously controlling discretionary spend across the business very closely. There will be areas that we're investing in, so we're obviously investing in sustainability, and we believe that's the right thing to do. As you know, we've got the Building Safety Unit that we've been building up over the last couple of years, who are, you know, looking at cladding and so on. We've been careful to ring-fence spending in those areas. Elsewhere across the business, we've been very tight on managing discretionary spend, and that's helped us to keep that overhead under control. That's helpful. Sorry, I just need to follow up one question on planning. Just to understand your discussions with government, is this around planning being bottlenecked because there is not enough people to make the judgment calls based on all the new rules around ecology and ESG and all this kind of stuff? Is it really around watering down some of those rules so that it's not so expensive to build? I think this is just important for us to understand, is government willing to step back from onerous requirements that are actually increasing your build cost and potentially impacting the margins on some of your plots? Are they talking about finding the right people in the right departments to actually look at the plans and make approvals? It's got different economic impacts, right? I understand. I mean, this is also a big area, but just to be brief, I would sort of split the discussions into three areas. The first one, as I touched on, is nutrient neutrality. That's a very specific set of circumstances, I mean, I absolutely understand that we should be focused on protecting the environment and the, you know, the cleanliness of our rivers, is clearly very important. I think it is generally accepted that house building or building commercial buildings are not significantly contributing to that issue. I think that Natural England and the government have said that they believe that that is the case. Nonetheless, it needs a legal solution, if the situation is going to be unlocked. That is discussion one. Discussion two is the whole subject of, are the government committed to building 300,000 or a large number of homes, or are they not committed to building that? What message are they putting out to the planning authorities, and to what extent are the planning authorities or the local authorities actually looking to build more homes? The third part of the discussion is about resourcing. In terms of resourcing, the local authorities are under-resourced. The government published data to say that the planning departments within local authorities had seen a real reduction in expenditure on those departments of around 50% over the last 10 years. As you say, the complexity around what the planning departments have to do has increased dramatically over that period of time. The government are consulting on higher planning fees, at least in part, to try to address that. I would imagine during the balance of this year, that will be resolved, and the higher planning fees will be implemented. In terms of our economics, whilst there will be higher costs, they're clearly not material, and hopefully, that will free up more money to be spent for the planning teams to try to deal with what they need to deal with. None of that is a discussion about reducing their requirement to do traffic surveys or ecology surveys or such like. It's not about rolling back any regulation. That's fantastic. Thank you so much for the color. Thank you. Thank you, we're now moving on to a question from Gregor Kuglitsch of UBS. Please go ahead. Hi, good morning. Maybe just one from me. I just wonder, sort of what you think is a likely outcome regarding, you know, the planning residual, or sorry, the land residual values, obviously we have a situation where, you know, sales rates are weak, incentives are up, yet planning is constrained. There seems to be new layers of cost coming in. I want to understand, you know, I can you even sort of see land in the market that sort of remotely meets your hurdle rates, or is it just too difficult to tell? Well, actually, maybe a second one, you know, you answered the question with discussion with government. What about discussion with the opposition regarding their plans, potentially after an election, next year? What are you picking up, what they want to do? Thank you. Okay. I think those are two slightly different points, Gregor, but let me just try and answer them both. I think, first of all, if you look at, for example, the Savills Land Price Index, and, you know, we publish that every 6 months. Savills publish it, I believe, on a monthly basis. What that is showing is that there has been some modest reduction in land prices. If you factor in what happened in terms of selling prices and build costs, you would have expected that land prices would have reduced more rapidly. Part of it is that we're clearly going through some sort of market change, and it probably takes a little bit of time for the seller to get to the same point as the buyer. I think we saw that back in 2008. I think the second part of it that you touch on, is that regardless of what's happening in terms of the wider economics of house building, there is a shortage of land with planning consent. One thing that, just as an example, would change that quite substantially, would be if the issues regarding nutrient neutrality were resolved, then clearly there would suddenly be a lot of land. I mean, I think the HBF estimate 145,000 plots that would flow through to the market, you know, let's say over an 18-month, 2-year period. That could make quite a substantial difference to the land, the, you know, the sort of economics of land. Just now, prices are staying high. We believe that there are opportunities out there, where as long as you're making assumptions of modest pricing declines, in terms of selling prices for houses, then we believe there are still good opportunities out there. We've said before that typically, larger sites, where we can dual brand larger sites and so on, is probably the best opportunity for us. In terms of the Labour Party, this is not just true of house building, you know, you just have to look at Keir Starmer or Rachel Reeves' LinkedIn accounts, you know, they are very, very actively engaged with business just across the whole sector. All aspects of house building, whether it's individual house builders or the HBF, have a very, very good access to the shadow cabinet. I think Labour have, whilst it's not, you know, at a manifesto level, but I think they have published quite a lot of their intentions with regard to housing. I think we would have said, generally, 5 years ago, 10 years ago, that Labour's view of housing has always resulted in higher numbers, because in principle, they tended to have a view that more affordable housing is required. You know, I think they've been very public, that they're pro-housing and pro-home ownership, and they, and they've very actively been engaged with the sector. Thank you. Thank you. We're now moving on to Anthony Manning of Bank of America. Please go ahead. Hello, good morning, thanks for taking my questions. I think we've covered most things. Just briefly on, can you give us a sense of the demand in the PRS sector? I know you've announced your deal with Citra, but I think that was a pre-existing partnership. You know, have you been speaking to any other operators? Then, kind of related to that, you know, you talked about demand from kind of social housing providers. Operationally, how different is that for you to accomplish? You know, is it only on certain sites? How easy can you kind of adjust designs for that? Thank you. Yeah, thank you. Good morning. I mean, if I take them up, I mean, first of all, in terms of our affordable housing providers, the registered landlords, it's very easy for us to accommodate and provide houses that the landlords want to take on. I mean, that's very straightforward. They're not looking for different specifications or different requirements, and therefore taking homes that we had originally felt would be designated as private and entering into an agreement with them is very straightforward. The challenge will be the extent to which they have funding to allow them to do that. I think that varies dramatically by housing provider. Some of them have significant appetites to do that, and some of them don't. Therefore, it tends to be very much by geography. In terms of PRS, I mean, I'd say overall, it is a very active sector with a number of participants. Like many things, following the budget in September last year, we saw a significant change in that market in terms of the appetite for some of the participants to transact. Costs of funding changed rapidly, and so on. I think the market is settling. We found that, with Citra, we've been able to transact on quite substantial quantities. I mean, we announced on an individual transaction for slightly more than 600 homes. We are obviously talking to other providers as well, and we'll just continue to keep that position under review. Thank you. Very clear. Thank you. Up next, we have John Fraser-Andrews from HSBC. Please go ahead. Thank you. Good morning, gents. Two for me, please. First one is in the land market. Gregor's question touched on hurdle rates that are available. Could you comment on those? Given that land pricing has hardly fallen within channels, are the available hurdle rates, like, much? Could also touch on activity. John, sorry, John, just so your line is kind of breaking up a bit. I think we got most of that, but just to say, it's breaking up a bit towards the end, but land and hurdle rates and so on, yeah, fine. Yes. The second part of that was Gladman, how active Gladman is, and the overall activity in the land market. That's the first one. Secondly, could you sort of share with us the debate that will be or the subjects of the debate at board level about surplus capital returns, given your being out of the land market? Heard, of course, that you have got GBP 500 million committed, perhaps, you know, where you may be, if you're not buying land and generating cash in the downturn, where that debate about surplus capital is. Thank you. Yeah, fine. Okay, great. Thank you very much. What I'll do is if I start off in terms of the land market, Steven can just update in terms of Gladman and, you know, how Gladman are seeing the market presently, then Mike will pick up in terms of surplus capital and thoughts around surplus capital. Look, I think if you know, you know that we have been very consistent in publishing our hurdle rates in terms of both the margin that we expect to bring land in at, and also the return on capital employed that we expect to achieve. I think I'm right in saying that we've published that since 2010. And we've adjusted it two or three times over that period of time. As market conditions have altered, we've published changes to those hurdle rates. Therefore, if there was any significant change in the market where our hurdle rates were either higher or lower, I mean, I think in this situation, the inference being lower, then clearly, if we felt that was a long-term trend, we would publish those rates. What we're seeing presently is that we are able to access opportunities where we can bring land in at, you know, in line with or ahead of our published hurdle rates. However, what you've seen from our updates during the course of this year is that we've canceled pretty much as many contracts as we've entered into. And unquestionably, part of that cancellation process will be where we don't feel that the site is achieving the hurdle rates that we felt it was going to achieve originally. That is just an ongoing process for all of our divisions to be assessing and reassessing opportunities against the hurdle rates. I think that, you know, we said in the statement, I touched on it in my overview, we don't feel under pressure to buy land. There'll always be some geographic variations where a division is particularly short of land, but in overall terms, we're not under pressure to buy land. We've got a lot of consented land, and we've got a large number of outlets, and therefore, we don't need to be rushed into anything. If we do see that there are long-term changes, then we'll obviously update the market accordingly. Steven, do you want to just talk about Gladman? Yep, yep. Morning, John. Yeah, I think the current market conditions, you know, provide for a great opportunity for strategic land, you know, planning for the future, planning for recovery. In terms of Gladman, we're really pleased with the acquisition, and, you know, it's making a good contribution to future land requirements as we see it. The integration is completed. It went well. There's been no issues, and it's fitted in well to support existing operational functions. In terms of how is their business going, as I said, a good opportunity in the current market condition is on strategic land and promotion land. Gladman in the year achieved something like 9,500 additional plots into their portfolio. They've managed to grow the portfolio, which will be promoted through the planning system over the next few years and eventually start contributing to the wider market. They also managed to get 18 planning consents in the year, which was a good result for about 2,500 plots, which show a bit good out to the market in due course. One of the main things which we've seen a massive advantage from, currently, is their highly skilled strategic planning team, and they're working on a number of Barratt strategic land sites, about 20 sites, promoting those sites through the planning system, which could come through in the next 12-18 months or so, and contribute to the Barratt land bank in the future, when we want to draw that land into our land bank at an appropriate time, at the appropriate value. Very, very pleased with the way it's going. Thanks. If I just pick up on shareholder return, John, we touched on some of the uses of the cash on the balance sheet in one of the earlier questions. I think, the framework that we use to sort of look at that is consistent and, you know, it's in line with what we set out over the past couple of years. The first priority absolutely is balance sheet security. And we're obviously heading into, you know, quite an uncertain market over the next 12 months, so we need to obviously bear that in mind. We're also committed to paying sustainable dividends, you know, and we've put the guidance for 23 in the statement today. Beyond that, you know, in principle, we'd look to distribute excess cash to shareholders, and we obviously need to look quite carefully at what we have, what we believe to be excess cash. You know, we've got building safety commitments. As I said earlier, we've got land commitments, but for the next 12 months. We'll look at all of those things in the round, as well as what we believe market conditions to be. Then we'll determine shareholder returns from that point. You know, we're not changing anything today. We're not giving any new guidance today, but we'll come back in September with full year results and be very clear about where we are. Thanks, Mike, and, those other answers. Thank you. Thanks very much. Thank you, John. Thank you. Our next question comes from Harry Goad of Berenberg. Please go ahead. Yeah, good morning. Thanks for taking my question. I just wanted to come back a bit, please, and maybe it's a question for Steve, and with regard to the comment you made on labor rates. I think, Mike, you were saying an expectation of about 3%. I guess the first question is that a pretty consistent number across different trades and across regions, or does it mask a big sort of divergence? I guess more generally, I guess a little bit I sort of thought some of your subcontractors would be bidding a bit more aggressively to win jobs. I mean, you're talking about volumes being down sort of circa 20%. Do you think that is still to come, or we're just in a sort of new paradigm of wage inflation? Thank you. Okay. Harry, yeah, if I just pass that across to Steven, he'll talk through it. Thanks, Harry. Yes, morning, Harry. The figure on labor rates is generally an average figure, we've seen a variation, quite honestly, in terms of which trade it is and some geographic as well. If you look at the last year or two, where the substantial labor increase has been on bricklayer content as opposed to, say, joinery. The joinery rates tend to be flat, we're seeing sort of reductions coming off on the labor content for bricklayer. That's sort of part of the reason. The other area would be groundworkers. The groundworker trade is putting foundations in, paving, fencing. These guys have been very busy. Part of it was due to parcel of the building regulations coming in June this year, the transition changes. The groundworkers have been very busy putting a lot of foundations in pre that date. Again, what we've seen is the groundworkers have got a lot less work to do, so we're seeing sort of reductions in groundworkers. Groundworkers and bricklayer levels are sort of reducing compared to perhaps joinery and plastering and plumbing, electrical trades. It's a trade specific and geography specific as well. Okay. So far- Thank you very much. Thanks. Thanks, Harry. Thank you. Our last question for today will come from Ami Galla of Citigroup. Please go ahead. Yeah, thank you, guys. Just a couple of questions from me. The first one was just, if you could give us some color on how does the scale of discounts vary between the units that you sell, the private units that you sell to Registered Providers versus the units that you sell to the PRS market? The second one is just a follow-up on the cost inflation point, again, is if you could give us some color as to how far are we contracted out for the material side. The 7% material cost inflation that you kind of penciled in, does that assume any moderation in material costs, say, into calendar 2024? Fine. I think Steven will pick up in terms of the materials and the contract rates on that, Mike will pick up in just in terms of what typical discount levels are for private, affordable and PRS. If I just start, Ami, on the pricing piece. I mean, we've talked about the level of incentives and so on that we give on private sales as being, you know, 5%, 6%, 7%. Typically, when we're looking at RSLs and PRS, the discounts will be broadly around 10%. I mean, it really varies, and across the deals that we've done this year, we have had a real range of levels of discount. I think if you think about it as that sort of level, and, you know, sometimes it's slightly higher than that, but we obviously benefit from some savings in marketing expenses and so on as well. When we do those deals, you know, we're not selling those homes to private to private individuals. You know, we obviously will keep that under review, and we'll see how pricing moves as we go through this year. Yes, morning, Ami. In terms of material pricing, 75% of our material pricing is fixed until the first half. The remaining 25% tends to be timber, which is in line with European pricing, is only sort of fixed currently on a three monthly basis. We continue to see timber prices sort of hovering around or, slightly dropping in some cases. We are expecting further, material price reductions in the second half, in terms of the energy costs, where some of the high energy content, suppliers, materials are hedged. The energy rates are probably a bit higher rates than what they are currently running at, we'd expect to see some of that hedging unwind, which will see further reductions in the second half, and we've been given that commitment by a number of suppliers for that to happen in the second half. Hopefully that sort of answers that question. Okay. Thank you, Mike. Thanks, Steven. Thank you, Ami. Okay, I think we don't have any more questions. thank you very much for your questions, and I think as we say in our statement, we're back on the 6th of September for our full year results. I'm sure you've all got that in your diary. thank you very much, everyone. Thank you. That concludes today's call. Thank you for your participation. You may now disconnect.