Good day, welcome to the Persimmon Trading Update Analyst Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by 1 on your telephone keypad. If you would like to withdraw your question, please press star 1 again. For operator assistance throughout the call, please press star 0. Finally, I would like to advise all participants that this call is being recorded. Thank you. I'd now like to welcome Mr. Dean Finch to begin the conference. Dean, over to you. Thank you very much. Good morning, everybody, thank you for joining us this morning. As usual, we'll say a few words and then hand it over to Q&A. I'm joined this morning by Jason Windsor, our CFO, Paul Hurst, our U.K. Managing Director, and Martyn Clark, our Chief Commercial Officer. Today is an important update. Whilst we only spoke 3 months ago, a lot has changed since then. This uniquely disruptive period is being reflected in our trading, obviously more on that shortly. I want to begin by taking a moment to go through 3 key issues: trading, capital allocation, and cladding. Jason will set out our new capital allocation policy in detail in a moment. First, I wanted to say something on the decision we're announcing today. I recognize, of course, the importance to our shareholders of their dividend. What we're announcing today is that our ambition remains to pay an excellent dividend to shareholders, obviously any dividends need to be sustainable from the cash flows of the business in order to secure the long-term prosperity of the company. Through careful management, we'll prudently manage cash flow, maintain a robust balance sheet, and generate firepower to pursue the opportunities that I believe will arise through this turbulence. I genuinely believe Persimmon is in the strongest position in the sector. We have, for example, maintained our very disciplined approach to land investment in the last 2 years. Some others have been bidding at a lower margin, there are already examples of these deals returning to the market. This is 1 reason why I'm so confident that we'll be seeing a lot of opportunities ahead. We've also made an important announcement today on cladding. This increased provision reflects the latest discussions with DLUHC, a much better understanding of the amount of work in scope, the number of buildings that we need to fix. We now also have a much more detailed set of costings from our tendering of the works required. With a number of tenders now in place on the larger developments, we have greater clarity of the likely costs over the next few years. As best we can tell, this is a full provision for the likely cost of our remediation bill over the next 3 to 4 years. I'm confident we remain at the forefront of the industry in protecting leaseholders from the costs of the works that need to be done with 31 developments now cleared and a further 18 at least tendered. You can see from this, we are nearly halfway through in terms of the number of our developments that we need to remediate. Turning now to trading. In August, I was accused at the time of our half year by some of being too bearish, certainly compared to peers. Equally, I don't want to overdo the doom and gloom. We're on track to hit our year-end targets. I'm still optimistic about the long-term strength of the sector and Persimmon's particular opportunities within it. For me, we need to look at the present situation across the short, medium, and longer terms. To take them in turn, in the short term, we came into the year in a strong position which continued to the first half with good sales levels. This, together with our improved bill rates, means we're on track to hit our year-end targets, which I've previously said are 14,500 to 15,000. We're on track to build 15,000 houses. We've sold 15,000 houses. There's some uncertainty as our increasing cancellation rates show. We still have to exchange at around 1,700 of those sold. We're seeing cancellations running at about 50 a week with about six weeks left of trading. We're being proactive. Our new head of sales, who has long experience in the industry, has reviewed our approach and is putting in place new sales processes that includes helping to de-risk our year-end number through enhanced group-wide use of Part Exchange and breaking chains, for example. We're being proactive and working hard to deliver the quality homes our customers have bought or reserved, and in so doing, hit our year-end targets. In the medium term, things are more uncertain. We've been through a turbulent few months. Sales were significantly impacted by the mourning after Her Majesty The Queen's death. Added to that are the effects of the ongoing war in Ukraine, the uniquely disruptive political uncertainty of the Truss interregnum, and the increasing economic uncertainty. The Bank of England has obviously recently added to this with its prediction we've now entered the longest, albeit shallow, recession in modern recorded history. We're seeing an impact in customer behavior as our recent sales rates show. Forward sales and slight deterioration in average selling price on reservations also demonstrate this. Help to Buy, of course, also now closed to new customers. We don't know the full impact of all of this yet. It's still too uncertain. We won't be making any firm predictions today about next year other than we expect to build fewer homes than this. I think you will see from our statement, we are being very transparent in our disclosures today and you are seeing what we are seeing. I do want to say something on what we can manage and control. I've asked Paul and Martyn, who have many years, decades indeed, of industry and Persimmon experience across many housing cycles to say more on what we're doing to manage this uncertainty. Of course, they'll be around for Q&A. I'd also like to add a few thoughts of my own. We go into this period of uncertainty with a robust balance sheet, strong cost and cash controls, and having protected an industry-leading margin. The land we've acquired is at great embedded margins and will maintain our industry-leading position. We've not chased volume when investing in our land in the last couple of years, and I'm very glad we made that call. We're a five-star builder with a much improved reputation and better customer service. Our uniquely strong combination of quality and price provides an attractive opportunity for customers looking for value in an uncertain market. Our new housing range provides more flexibility in terms of the sizes of the homes we can offer, and this is something we'll focus on to target first-time buyers, movers, and downsizers looking for value. We'll also closely manage work in progress and cash, of course. For example, we'll be prudent on new outlet openings and expect to spend much less on land next year unless, of course, we see excellent opportunities. As you'd expect, we're already reviewing recent uncommitted land agreements to see where there's opportunity for new deals to be done. On existing sites, we shall look again at our mix, our build rates, and how we maximize the opportunity. Indeed, we'll apply this discipline across the business to ensure we're managing costs and protecting margin. Even on a lower volume, we'll still be a highly profitable and cash generative business as we manage to build what's sold. Through this prudent cash management, we'll also be able to deploy our firepower at the right point in the cycle to buy land. As I said earlier, I'm sure there will be opportunities out there. With an experienced operational team managing Persimmon's core strengths, I know we'll prove more than resilient in the face of the market uncertainty. Equally, I'm excited by the longer term opportunity. I want to make sure we're ready to capture it. Despite the uncertainties, it's important to step back and take a longer term view and recognize the fundamental strengths of our sector and Persimmon. Constraints on housing supply and the ongoing demand for homes in the U.K. mean the longer term outlook for the sector is positive. Just as our strengths will help us navigate the medium term challenges, we're looking to sensibly invest to enhance them further so that we're well-placed to respond and capitalize on the future upturn. With our relentless focus on cost efficiency, our new product range and further investment in our vertically integrated factories, we've further opportunities ahead. If we take the new Space4 factory, for example, this will be a state-of-the-art factory increasing the number of timber frame homes we can build and enhancing our ability to deliver higher quality more consistently. Timber frame homes are quicker to build as you can get the superstructure up quickly and then have trades working inside and out at the same time. It's quicker, better, and more cost-effective. Our programs to enhance build quality with training, stringent standards, and independent oversight and review will continue, as will the work to further improve customer service with an enhanced CRM system that will also benefit sales due to be introduced being an important investment. To conclude, we're on track to hit our targets in the short term. The medium term is more uncertain, but we enter this period in a strong and resilient position. We've opportunity to build on that, and we shall. In the longer term, I remain excited by the opportunities for the sector and for Persimmon, in particular, to meet the demand for the high quality, energy efficient and good value homes our country needs and customers want. I see it as my responsibility as CEO to make sure Persimmon navigates this downturn prudently, and to ensure it's best placed to maximize our undoubted opportunities when the cycle returns. We're making disciplined decisions to maintain our strength and capitalize on our opportunities. I'll now hand over to Jason to say a few words on the new capital allocation policy. Thank you, Dean, and good morning, everybody. I'm just going to cover one topic today, that of capital allocation. As you know, Persimmon's approach over the last 10 years or so has been a capital return program delivering fixed dividends with periodic top-up payments. The board has decided to conclude that approach and replace it with a new capital allocation policy. Of course, today's uncertain political and macroeconomic environment, compounded by higher taxes, makes now a challenging time to set out a new approach. With that in mind, the policy sets out a series of important principles. First, long-term sustainable performance, of course, through selective land investment and other operational investments. Second, financial prudence. We will not over distribute or put undue stress on the balance sheet. Hence, ordinary dividends will be well covered by annual profits and cash flows, thereby balancing payouts to shareholders with the investment needs of the business. Now moving on to financial year 2022. The board will propose a dividend alongside the full year 2022 results in March next year. This will, of course, be based on the new policy and will reflect the business performance, financial position, and the outlook at that time. As a final point, let me just say that as we move into these more uncertain times, there will be no change to the financial priorities of Persimmon. We will prioritize strong margins and return on capital, selective approach to buying high quality land, and retain adequate cash in the business while offering shareholders a sustainable dividend. With that, I hand over to Paul. Thanks, Jason, and morning, everybody. Just by way of introduction, I've been with Persimmon for 27 years. I started as a commercial director, moved on to being central divisional chairman, and more lately as U.K. MD. As Dean has already mentioned, the uncertainty is something that we've managed before. While each time is different, there are some key quality disciplines we can apply. Firstly, in the short term with our customers, clearly some are feeling very nervous about buying and some are finding it harder to secure the mortgage at the right rate. We're looking after them. We're helping them through this sales process, looking at alternative mix of houses where appropriate, tailoring sales incentives as per mortgage lenders' requirements, and part exchanging if necessary. Our prices provide good opportunities for people seeking better value. We're also carefully managing housing chains and working hard to reduce cancellation rates. We're using Part Exchange more widely and, if required, chain breaks to ease stubborn chains. I've been through a number of recessions, and as Dean has said, we're heading into a period of increased uncertainty in a strong position. We've made some good investments in land over the last two years, and with our existing high quality of land holdings and diverse outlet network, we'll be carefully protecting and managing our cash and working capital position for increasing selective new land acquisitions while maximizing value from the sites we are already on. New land additions will drop next year as we seek to secure only the best deals available on our uncommitted pipeline. Judging from the experience of previous downturns, some great opportunities will arise. We're already revisiting and reassessing our uncommitted opportunities to see if we continue to offer value in a difficult future market. On existing developments, we have already introduced even tighter controls on future work in progress spend across the business. We will ensure that we retain rigorous cost control to protect our cash position, which is what we do anyway, so doubling up going forward. These are challenging times, but we've been here before. We're a strong and resilient business with an experienced team to help us navigate through. I'll now hand you over to Martyn, another long-serving member of the team, who will describe how we are managing our land investment and pipeline opportunities. Thanks, Paul. Morning, everybody. Some of you will already have seen me at our 2021 year end and 2022 half year presentations. It's good to be with you again today. Dean and Paul have mentioned that, as you would expect, we are going to sensibly manage our new land investment opportunities and our working capital position over the coming months as we go through this more uncertain period. Our existing high quality land holdings with industry leading embedded margins give us the ability to be highly selective in our future land investment and to invest at the appropriate time in the cycle. Ensuring we invest in the right sites, in the right location, at the right margin. We already have a well-established track record of executing this strategy, which we will continue. Our experienced group land and planning departments, working with our local teams, are going through a rigorous reassessment of each of the new and uncommitted U.K.-wide land opportunities that we currently have coming through to determine when and whether we take the opportunity forward. The assessment will involve a careful review of the market conditions and demand within the local area, together with an assessment of appropriate use of capital. Where those opportunities work, we will invest. For those opportunities and deals that we want to execute, we need to secure planning consent as quickly as possible. At the half year, we described our new placemaking framework that ensures we put forward design-led, attractive schemes to maximize the chances of achieving consent quickly. Our group land and planning teams will be assisting and reviewing the schemes our local teams are putting forward, ensuring we share best practice across the business and submit schemes that will be considered favorably by both the local authority planning departments and the local residents. We are sensibly and carefully reviewing our land investment opportunities to invest in only the very best deals. Once invested, we are putting measures in place to ensure we realize those opportunities as effectively as possible. With that, I'll hand back to Dean. Thank you. All right. Thanks, guys. Okay. Enough from us. Let's take any questions, please. At this time, I would like to remind everyone that in order to ask a question, please press star then the number 1 on your telephone keypad. We'll pause for just a moment to compile the Q&A roster. Our first question comes from the line of Rajesh Patki from JPMorgan. Rajesh, please go ahead. Yes. Hi, good morning. I've got two questions, please. First one is on the building safety provision. The number of buildings in scope has gone up from 33 to 71. Can you provide some color on the increase in estimated cost per building? What has changed in there? You referred to non-cladding fire-related build defects. Can you confirm this is not related to the snagging defects from four or five years ago? The second question is on the net cash guidance of GBP 700 million. Can you help us in the key moving parts in there, please? Thank you. Okay. Good morning, Rajesh. Why don't I have a bash at the first one, and Jason, you have a bash at the second, please. In terms of what's changed with the provision for us. Obviously, quite a lot. In total, we've gone up from 26 buildings to 71 buildings. What's changed is scope. Only towards the end of August did we get visibility on what DLUHC were really looking for in terms of scope. That's played into this. Obviously, we've seen build cost inflation play out. I know you want to look at an average cost per building, but I'm not sure that's really desperately helpful, to be perfectly honest with you, because every building is different. I think the real issue is, you touched on it, Rajesh, in your question, is how much is this is cladding related and how much is this legacy build defects that are fire related? The answer is, more than half of this additional cost is build defects that are fire related. When we originally put our provision together, we assumed that the build cost defects we'd have to repair was something like 20% of the original cladding cost. Now they're well in excess of 100% of the cladding cost. That's clearly a big driver in this. Look, we've taken a pretty prudent approach to this as well. You might ask, why are there so many buildings out there that we were not aware of? Obviously, a very good question. Records have been poor. We've done a very detailed and extensive trawl of the database of what buildings we have built and are responsible for. We've looked far and wide as well in terms of identifying them, as have DLUHC, who've done desktop exercises encompassing many thousands of buildings. That has all played into this. We had originally thought we'd be able to recover VAT on this. We're no longer assuming that. We're also not really assuming at this point in time, this is a gross provision and we're not making an allowance for any recoveries, although clearly we will go after those. Hopefully that gives you some picture of what we're looking at here. As I said in my opening remarks, I realize there's a sticker shock to all of this. We got our estimates wrong, as best we can tell them at the moment, this is sizing the problem for us, and enables us to define what that envelope is going to be to fix our problem. We've got now the benefit of working through nearly half of the population that we've identified. Jason, do you want to cover cash? Sure. Nothing untoward to point to. We've indicated GBP 700 million of cash, which is slightly down from the June position. GBP 350 million went out of the door the first week of July on dividends. The only profitability, as I say, nothing untoward to flag. The only thing that we put in the statement, you can see we spent a little bit more on land this year than last, and we've got another GBP 115 million committed through the year. That's why we anticipate ending the year around GBP 700 million of cash with land credits not that different to where they were in June. Great. Thank you. Our next question comes from the line of Glynis Johnson from Jefferies. Glynis, please go ahead. Thank you. I know I was very cheeky and tried before. I thought I was going to come later and some of them would have been asked. Cancellations. Can you just talk a little bit about the cancellations? Are you seeing them on exchanged properties? Is the cancellation rate increasing week on week? Second one in terms of that deterioration of selling price. Is it that it's the net selling price? Is it the incentive? Is it the carpets, curtains, tariff? Is it Part Exchange? Is it actually that the whole asking price is coming down? Thirdly, just in terms of the outlets being flat in 2023. If you can just talk us through why that is. Is it because the land just isn't coming through? Is it that you're holding back because of the upfront infrastructure that might require? Lastly, I'm going to push you again in terms of that cash. The guidance for net cash is effectively down GBP 500 million year-on-year. Where is that GBP 500 million going to, it's not really the difference in terms of the operating profit. Is it land? Is it WIP? Is it something else that we're missing? Morning, Glynis. I'll attempt to answer some of your questions, when I get stuck, I'll run out the room and ask somebody else to answer. On cancellations. They've been about flat really over the course of the summer in terms of absolute numbers. They've been running at around 50 a week, obviously as a percentage as sales have come down a bit, the percentage has increased. Where are we seeing the cancellations? Well, during the full weeks, we're also seeing cancellations as we come to complete. That's why we are taking the actions that we're taking to chain break, really looking at three down the chain. Very difficult to get a lot of intel, you're picking up your uncertainty and chain break at about three down to give us more certainty as we go into the year end. Obviously, with exchanges, we don't know what we don't know. You only get to it at the end, which is why I'm flagging that risk in terms of the year end. Look, there's been a hell of a lot of uncertainty out there in recent weeks, hasn't there? People have had mortgage offers withdrawn. They've not been able to get mortgages. Rates have gone up. They're receding a bit now, there's been huge uncertainty in this area. In terms of price. Well, we're dealing. I don't know, Paul, whether you want to comment on either of those questions, really, about cancellations and price, we're sort of dealing to get deals done incentive level, aren't we? Yeah. Certainly in the hazy days of Truss in the first three or four weeks in September, it was chaos. The mortgage lenders just withdrew their product and people got very nervous about, is it the right time to move? More recently, we're obviously working through our customers to ensure that their nervousness is eased and we are incentivizing them to stay on with their sale, to keep their sale going. As people get their minds around more expensive mortgages, that pressure We are seeing it ease off in the last week or so. In terms of sale price, what we are doing, we are tailoring more sales incentives to ensure that our customers carry on with the sale, quite frankly. It's the deal led to ensure that we get to, firstly, our year-end position. Look, although we've seen volume tail off, it's not shabby out there. If I look at last week's average sale price across the group for the units we did sell, we were at GBP 305,000 for PD at 34% off site gross margin. I don't think it's terribly shabby out there. It's just got tougher. In terms of outlets, the reality is that Paul, Martyn, and I started paring back on land purchases about six months ago. It could count that it's remarkable if we go on holiday and there's nobody around to sign a piece of paper and we're pulling out land committee meetings from the diary that we stop buying land, isn't it? We still have a problem with planning, though. Well, we do have a problem with planning. That is certainly holding back our supply. We are looking at tactical strategic sites where we are certainly delaying some of the major infrastructure in the next two or three months just to see where the market goes. If the uncertainty lasts, then we'll hold back and then we'll come back- Come back even stronger for whenever the recession ends. The answer, Glynis, to the outlets point is a combination of both. Planning has not eased, but also we've got a lot more cautious. As Paul says, we're not going to be stupid about this. We aren't going to spend tens of millions of GBP worth of infrastructure spend to get an outlet open to sell maybe five units at the end of next year. We're just not going to do that. We're being very careful how we manage it, as you'd expect us to be. Cash? I'll have another go at cash. Hi, Chris. Again, there's nothing untoward to point to. Some payment charts. Helpful. In terms of land, we say in the statement here, we spent GBP 590, we've got another 115 to go. That's just over GBP 700 million of cash out the door this year. Last year, that number was GBP 460. We're GBP 240 million-ish higher year-on-year. That's the fundamental difference. And you saw the growth in the land asset at the half year was sort of GBP 300 million. That's materially above land recoveries through the P&L. There's a net cash commitment to land. There is also a little bit of work in progress. We mentioned in the statement 1,000 equivalent units higher. That will unwind into next year. You might have GBP 70 million-GBP 100 million of cash tied up in that temporarily as we go through the year-end. Obviously, completions might be slightly lower than we anticipated four months ago. That will unwind in the first half of next year. Thank you. Our next question comes from the line of Chris Millington from Numis. Chris, please go ahead. Thank you. Morning, everyone. Can I just ask a quick question on the sales rate, first of all? Obviously it's been disturbed quite heavily by the cancellation rate, but perhaps you could help us with what the gross sales rate's been over the last six weeks, and maybe just give us a comparison as well, because I don't think there was a comparison even for the net one. That's the first one, please. Second one is really about what you're seeing on build cost inflation and do you see any possibility to mitigate administration costs given the land, you're looking at a lower volume backdrop. The final one is just on land, given it's been touched on a little bit. Really, I suppose my question is, are you confident over the last 18, 24 months that the land you bought will produce margins kind of consistent with what you used to produce? Now, I understand the market may kind of reduce that, but are you confident the land bought over the last two years has been a strong margin like you state? Morning, Chris. Do you mind if I do those in reverse order? Of course. In terms of land, yes, we are confident. Look, as I indicated earlier, we have pared back on buying land anyway, but we've been very disciplined about maintaining our hurdle rate in the business. I think the other thing that is relevant is land coming through maybe purchased, deals were done maybe six, 12 months ago at the moment. We've seen 12, 13% PD inflation between now and then. You've got an improvement in HPI on the property compared to when we did the deal. Thank you. We also bought those at great hurdle rates. Look, we are very confident at the land we have purchased. I think it will inevitably take a dip, which is linking to your second question, as we see if and when we see prices fall. It's a cycle, isn't it? Land stays around the business as we develop it out, and we bought some great sites that will be with the business for many years. I'm confident that if margin does take a bit of a squeeze in the next couple of years, we can manage that, and they will return to the margins that we'd hope for in time. Yes, we are confident. Where we have got land and we want to improve the margin on the existing sites, then we're optimizing, either through looking at the mix, and deciding about how and when we're releasing and what we're releasing at. In terms of build cost inflation, I think the picture's mixed at the moment. Obviously, those materials that are affected by energy costs will continue to see increasing costs over the next few weeks and months. Bricks, cement, that sort of thing. We are seeing, though other commodities falling in price. Timber is falling in price and we're re-tendering. It's interesting, we're seeing our ground workers are seeing the slowdown and they're coming to us for the first time since I've been in the business, certainly, and saying, "Oh, can we fix the price?" No Guess what? No. I think you're right to point to it, but it is a mixed picture out there. I think the energy cost issue will sort of set this out a bit differently. It's going to take some time to work that through, and we'll see some pain as a result of that. We will see some margin impact of that. If the next question is when do you expect that you're going to start seeing the impact of this slowdown on labor and materials? Not before the year-end. We'll start seeing it probably early summer in particular. We'll react accordingly. In terms of gross sales rates, I've got for the 12 weeks from 1st of July to the 25th of September, we were selling at 216 a week gross, six weeks, 26 September to Sunday, 183 a week. As I said, throughout that period, cancellations have been running at about 50. Got you. What's the comps for those numbers, please, Dean? What? Comparative. The comparative. I'd have to get back to you on those. We'll come back to you if that's all right, Chris. I'd have to get back to you on those. No problem. Thanks for the answers. The next question comes from the line of Will Jones from Redburn. Will, please go ahead. Thank you. A few for me if I could please, if it's possible, maybe just to explore this last six-week period in a little bit more depth. Just firstly, kicking off whether it's changed, I guess, week to week or has it been fairly stable against the numbers you provide for that kind of six-week period? Also against that, I suppose things like leads and inquiries, are they down by a similar number relative to sales, or is there a conversion issue here because of confidence? Alongside all that, do you have any sense of the mortgage rate at which customers who have reserved in the last six weeks, what rate they've been dealing at, as it were? Then, I guess, just big picture into next year. Clearly lot still to evolve there, but how are you thinking about the interplay, I guess, of sales rates and pricing? Is there a minimum sales rate you think the business needs to achieve, and you will respond on price to achieve that? Just early strategic thoughts on the interplay, I suppose. Thank you. It has bounced around week to week. Having said that, there's been reasonably consistent. I suppose linking back to the previous question, actually rates have halved compared to the start of the year, haven't they? We were running at a net of PD of one per outlet per week, and we're now running at about half per outlet per week. Compared to the first half, they've halved. They are bouncing around that about half number per outlet per week. Leads and inquiries are interesting. I would say the North of England has suffered the most in terms of, we've seen the biggest drop in inquiry interest in the North of England. Sales are an interesting picture. While sales are down, the central region is probably still the strongest in the group. Southeast is down, but inquiries are only marginally down in the Southeast compared to this time last year. There is a slightly different picture across the U.K. In terms of mortgage rates, well, people have been dealing at above six and a half%, haven't they? Yeah, 8, 6. The highest it got to about 6.99%. Yeah. Recently they've dropped a little bit. Yesterday we're talking about 6.19%. That's the kind of range of which, and since beginning, well, middle September to that 6 weeks we're at. Sorry. Apologies. Just to push slightly on. That is your insight on customers' mortgage rates in the last 6 weeks rather than the stuff we see advertised across the market because just wondering whether they're carrying forward mortgage offers from before the mini budget, potentially, but you're saying actually are they the mortgage rates at which they are reserving? Yeah. They're the mortgage rates which people are being qualified on and going forward at. Okay. Thank you. Well, look, as we say, we don't chase volume. We're gonna be firm on pricing but obviously sensible about it as well. We'll react to market conditions as we feel our way forward is the best guidance I can give at the moment. We operate in real time. We review sales and build every single day, almost. We are alive and nimble to what we need to do in the market. Thank you. The next question comes from the line of Arnaud Lehmann from Bank of America. Arnaud, please go ahead. Thank you very much. Good morning, gentlemen. I have three questions, please. Firstly, could you say a word on your relative position in the market? You have typically lower ASP than your other volume competitors. On the one hand, it should help with affordability for your customers, but at the same time you have, I guess, more first-time buyers. How do you feel you are operating in the market relative to peers with your lower ASP? Is that a positive or more of a challenge with the first-time buyers? That's the first question. My second question is on the land. You made a few points already, maybe just to follow up. You're saying you're reviewing existing land agreements where you can. Are you canceling land deals, or are you trying to renegotiate the price where you can, or maybe a combination of both? Lastly, just on the cladding provision, could you give us a timeframe? How many years are you going to spend this provision? Thank you very much. Morning, Arnaud Lehmann. Look, in terms of affordability of the product, the vision is that we want to capitalize on that. We're building quality homes, which are as good as our peers now, at more affordable prices. We want to capture some of the benefit of that as we go into this period of volatility. I'm not saying we're an Aldi or a Lidl. Our market's not like that. In terms of, I'm very struck by listening to their MDs when they talk about a downturn as an opportunity. Help to Buy bigger, wasn't it? With that removed, I feel Persimmon's in a good place to capitalize on affordability issues as we work through this downturn, and that's what the business has got to go after. In terms of land deals, each land deal has got us back up. Each land deal, we're all over hungrily to maximize the opportunity. Each and every land deal continues to be reviewed all of the time, and it kind of doesn't really matter. We just highlight it because obviously there's an added focus to it at the moment. We're doing this all the time in terms of looking at the deal, have we got the right deal? If we haven't, we walk away from it. We constantly look to improve it. In terms of cladding provision, it is challenging to give a finite timeline on this. I'm very pleased with the progress that we've made. I certainly would hope that 3 to 4 years' time is when we will have it all done, if not sooner. We're very conscious that you have leaseholders living in these buildings. Their safety is of paramount importance to us. We're doing absolutely everything we can to safeguard their security. Including, in every single building, we have carried out fire risk assessments, and we're implementing the advice of those fire risk assessments to keep people safe. It's, as you can imagine, very challenging to get contractors to do this work. There simply aren't enough of them out there. That is a part of the equation here in terms of giving a certain timeline for when all this work will be done. That's our estimate, but it's very hard to say. There's a lot of uncertainties. Of course. Thank you very much. Our next question comes from the line of Aynsley Lammin from Investec. Please go ahead. Hi. Thanks. Good morning, everybody. Just two questions from me, if I could. Firstly, coming back to the dividend, obviously quite a big shift in capitalization policy. Am I right in thinking it's going to be a kind of earnings cover, dividends cover target type policy going forward? Obviously there's a balance sheet and cash flow element, but if it's based on earnings cover, given where earnings might end up over the next year or two, that obviously significantly reduces the visibility over the dividend you would pay. Would you pay a bit more attention to the cash on the balance sheet and cash generation and not strictly follow a kind of two times dividend cover policy, for example? A bit more color around that. Secondly, just on the price kind of fall, you're seeing 2%. Is there a wide range within that average 2% fall? Any kind of patterns or big differences between regions or product mix, for example? Be interested to hear. Thanks. I'll take the first on the divvy. We were deliberate in what we said, obviously, around the dividend being well-covered from earnings. Also balancing the required investment in the business with the payouts to shareholders. We recognize very much that profits are a good long-term guide to the cash availability to pay dividends in a period to period. That will be different. This year will be lower cash flow actually than earnings. Next year, probably higher, just for the reasons that I touched on earlier. We will seek to smooth that out somewhat. The policy deliberately gives us a bit of flexibility around that. That's factored in. As we get further through next year, clearly as we declare the 2022 dividend and beyond, we'll be able to give you a little bit more visibility as to how we expect it. It's written at the moment to give us that extra flexibility. On the sales price. It was actually a conscious effort. You think about up to July, we were giving away an average of about 2% of top-line price as an incentive. That's all we had to do to secure our year-end position. We actually did a national campaign that was advertised giving an average of GBP 10,000 away. We naturally reduced the net, actually, in terms of our trading to get to year-end position. The 2%, has it risen slightly? The actual net price has come down slightly because we have been having to deal and keep our cancellation rate. There's nothing kind of top-line has moved at all at this moment in time. Just one follow-up on that. Is that how you see prices for the whole industry in the market, or is that more Persimmon specific, that you've had that national campaign to secure some of the completions for the full year target? I see that it's the whole sector. Everybody's dealing at this moment, and we're competing against a smaller market share, a smaller share overall. We're all dealing to try and get a forward order book. Okay. Thank you very much. Next client comes from Clyde Lewis from Peel Hunt. Clyde, please go ahead. Good morning. Two questions, if I may. One on Part Ex. I think you referred to using Part Ex as a bigger incentive going forward. I'm just wondering what sort of scale of investment you might see being redeployed into Part Ex assets. The second one was on, I think, Jason, you referred to sort of undue stress on the balance sheet. You didn't want to put undue stress on it. Could you sort of help us define that a little bit? Obviously sitting there with a very large cash pile, even if it's down year-over-year, would be a long, long way from undue stress on the balance sheet. Just be useful to maybe understand some of the metrics around what you would see as undue stress on it. Paul, do you want to Part Ex? Part Ex, unbelievably this year we've done very little. Our average is normally around about 10%-15% Part Ex, and we've been in the single figures. We have a facility built into our year-end provision. We're probably holding about GBP 30 million worth of Part Ex at year-end, which is up from probably about half as much again as what it was last year. On the balance sheet, obviously when we're setting out a new statement, it needs to be weatherproof for all types of different trading environments. It's not looking directly at the position today, and you're absolutely right, the balance sheet today and the guidance that we've given you puts us into a comfortable position. I think about net cash as simply the cash less the creditors. I don't want that to go negative. We'll continue to see that as a key metric. I think in the past we've talked about GBP 700 million of cash. With GBP 500 million of creditors plus or minus, doesn't feel wrong. I think that's a comfortable position as we go into the year-end. We're in a good place now. I wouldn't want to be driving that down into a net gear position. Okay. Perfect. Thank you. Our next question comes from the line of Andy Murphy from Edison Research. Andy, please go ahead. Good morning, everybody. Two questions, if I may. Just wondered if you could talk a little bit about the build rates and how you're reacting to the lower demand and the cancellations. Are you deliberately holding back on the build rate? You were saying it was up 20% year-over-year, but how do you feel about it now looking into next year? Secondly, it's more of a broader question for the rest of the team. Just really thinking about the last recession, just wondering, thinking about that, what lessons the team can take from that and apply to this current situation. Well, if I take build rates and then Martyn, Paul, you talk about the last recession. Okay. Completions for year-end. We've kept absolute focus on that and driving that forward. We've still got a lot to do to hit the number, and those are valuable sales and completions that I want to get over the line, into the books, and into the cash pile. Obviously, next year we're going to be monitoring WIP very closely, and we're going to be managing build to what we've sold, so we don't have a massive cash out in work in progress. We're just going to be very controlled in how we're releasing build stages and controlling WIP. With regard to lessons learned from the last recession, a lot of it is about cash control, really. We need, as has already been said, to control the WIP. We need to be careful what infrastructure we put in. Our build releases, we need to make sure that we do not release too far down the field. We control what stage we stop the houses at. Land payments, I've already mentioned. Just ensure that we're signing up the right deals in the right locations. Ensure we're getting the right phasing on payments, so we're not exposed all in one year. Sales, I think we just need to be alive to what's actually happening in the market. We've got very well-trained sales advisors. We've got a strong sales structure. The feedback from them is vital, so we know what's going on in the market. As Paul said earlier, if there's a limited or reduced pool of customers out there, we need to be sure that we are able to meet their expectations and sell them the right property that suits them. Costs. Once again, if you do wish to ask a question, please press star followed by one on your telephone and wait for your name to be announced. That is star one if you wish to ask the question. Your next question comes from the line of John Fraser-Andrews of HSBC. Your line is open. Thank you. Can you hear me? Good morning, James. Yes. Hooray. We've got life. Excellent. Perhaps I could just explore the land situation with a couple of questions, then one on cost. The first one on land. The spend's up year-on-year with the GBP 175 million in the period. Is that all pre-mini budget, or is it commitments that you've made before that and you can't renegotiate those? That's the first question on land. The second question on land is that have prices reacted yet, land prices, or are we still in the phony war period of participants getting their minds around what's happening? That's question two. The third one is on cost cutting. Have you already implemented or have plans for reducing your costs on the admin line, I suppose is easiest, but anywhere else would also be useful to know. Thank you. Morning, John. Sorry for the chaos. Land, we are very content with the GBP 175 million at the prices at which we've bought that. Very content. In terms of the market, though, I think you're right to point to the fact that we're in, as I think you called it, the phony war stage. I think we're at the sharp end of this, aren't we, in terms of seeing what's happening in terms of demand. Landowners and agents are going to take some time to react and respond to that. That's fine. Look, we've got a strong land bank. We're in a good position. So we can afford to wait and see how the market reacts, and we will respond accordingly. In terms of cost cutting, we run a lean ship anyway, as our margin shows. There is not going to be a vast scope to knock out a whole lot of fat in a downturn, although obviously any CEO is required to hunt for cost savings in a downturn, and I have spent a lifetime doing that and this will be no different. Understood, Dean. Thank you for those. Your next question comes from the line of Ami Galla from Citi. Your line is open. Hi again. Can you hear me? Yes. Remarkable, I know, but yes. Yeah. Good morning. Just two questions from me. First one, just on the labor rate, have you seen any changes to subcontractor rates in response to the demand slowdown that we've seen in recent weeks? The second one on the timber frame factory, can you give us some timing in terms of the cash commitment on that spend? Is there scope to defer or delay those plans going forward? I missed that last bit. Is there Timber frame. Yeah. Is there scope to what? Defer it or delay it. Delay the actual spend on that project. In terms of subcontractor rates, well, first is availability. We're actually seeing people who are available and people who are now hungry for work. I think we're not at a stage, Paul, of seeing prices fall yet, but certainly they're stabilizing, aren't they? The first kind of green shoots, if you like, in terms of cost drops is that the groundworker tenders are starting to fall from where they were. Any works that we are tendering currently for next year are definitely down by four or five percent than they were in the spring of this year. Obviously our groundworkers are looking at their forward order book and getting a bit concerned. That's the first green shoots for us. Other than that, you said right, at the moment, it's year-end, everybody's concentrating on year-end or half year-end for the competitors, so we're not seeing that downturn yet. Yeah. I think we'll only begin to see this May, June, April, May, June next year. I think groundworkers will see it first in January, February time when they're hungry for work, and that will build. In terms of timber frame, it's about GBP 45 million over the course of the next three years, isn't it? Yeah. It's not a big number. Look, we want to get this factory built. It's there for improving our efficiency. There's a big payback from this factory when we actually get it built and get it live into the business. At this stage, we're not planning to delay that. Thank you Once again, if you wish to ask a question, please press star followed by one on your telephone and wait for your name to be announced. The next question comes from the line of Glynis Johnson from Jefferies. Your line is open. Morning. Sorry, taking advantage of the fact the other side have dropped off the line just to ask a couple more. One in terms of land creditors. Did I hear you say GBP 500 million for land creditors? Just want to confirm if that was the case. Just in terms of buyers mix, you said normally 10%-15% is Part Exchange. I wonder if you could just remind us what your buyer mix is. First-time buyers, those buyers that are using Part Exchange, whatever else is left in the mix. Lastly, just in terms of the GBP 175 million of land spend yet to do, how much of that is coming for strategic land and how much of that is land that you're picking up on the open market? On the mix, first-time buyers are 41%, I think, in the period, wasn't it? Something like that. In terms of land we're buying, strategic land's about 40% of the overall mix at the moment. Part of that will be, I'm sure, reflected in the spend over the year overall. Land creditors, Jason? Yeah, I did say GBP 500. I don't know precisely where it'll land, depending what we pay off, what we assess or what we take on. I think it'll begin with a five. That's sort of rough guidance. It might be slightly above that figure. We're just under GBP 500 at the half year. We might be just over it come the full year. Okay. Thank you. Any other questions? Once again, if you wish to ask a question, please press star followed by one on your telephone and wait for your name to be announced. There are no further questions at this time, I'd like to hand back to our presenters for closing comments. Okay. Thank you very much. Sorry for the interruption in the call. I hope it hasn't disrupted your morning too much. Look, I know, guys, you want to know what the EPS and DPS is going to be next year, so do we. I think we've given you a very fair, very full, clear transparency in terms of what we're seeing at the moment. I would remind you that Persimmon starts this in a very strong position with an excellent land bank and a very experienced management team that has lived through these cycles before. I am confident that we will manage this appropriately, and come out on the other side racing away in a strong place. I'd rather be sat in my position as CEO of Persimmon with our land bank and with our margins, and with our cash position than in my competitor's position. I'm looking forward to the opportunities that we will no doubt be seeing over the course of the next weeks and months. Thank you very much. The next update is in January. 12th of January. Thank you. Thank you. Cheers. That does conclude our conference for today. Thank you for participating. You may now all disconnect.