Persimmon Plc (PSN.L) 2018-02-27 Earnings Call Transcript

Hello and welcome to Persimmon’s analyst conference call. Throughout the call participants will be in a listen-only-mode, and after that there will be a question-and-answer session. Just to remind you that conference call is being recorded. Today I'm pleased to present Jeff Fairburn, CEO and Mike Kiloran, CFD. Please go ahead with your meeting.

Good morning everyone and welcome to the Persimmon Third Quarter Trading update on the 8th of November. As you heard I’m going ahead this morning with by Mike Kiloran and in the usual way I’m just going to run through the key points and then we will move quickly on to Q&A. So everybody I think would probably have seen the statement. As you can see we have had good strong trading, we continue see good demand on the sites. We are focused on our core customers who is the first time buyers, first time movers and that market is resilient. Affordability is still good and clearly supported by a competitive mortgage market, particularly on Help-to-Buy products where very good fixed rate mortgages are available. On that front we are also encouraged to see a further £ 10 billion invested in Help-to-Buy, which enables that product to go through the 2021, which is very encouraging. You will see on our statement that our outlets are slightly down. That really is for two principal reasons, planning delays have meant that our sites have been delayed a little bit further into the autumn, but also we have got some outlets that we have been focused on getting ahead on construction and we are putting product down there for the benefit of giving customers firm dates for leaving completions going forward. So the outlets are down around about 10% based on the same period last year. Albeit we have got 45 new outlets still to open before the end of the year, which puts us in a good position as we go through these last few weeks. However, we have made good progress on construction, both on existing outlets and new outlets to open. So that’s encouraging for completions through the second half of this year. We have got a very good sales rates before with sales position is strong as we look through into next year. Currently 10% ahead of the seven points at last year fully sold out for this year and obviously selling through the final few weeks, strengthening our position as we go forward. As mentioned, planning remains challenging, but we are focused very much on value creation so we do see delays and some cost mainly due to the fact that we are keen to make sure that we get the right planning consent for our product mix to suite market plus where we see strong demand. In half two so far we have opened 61 outlets and as I mentioned still 45 to open, so a good strong position in that respect. Land is still presenting good opportunities for us and we are a keen buyer. We have shown good investment through the second half of this year so far, with over 5500 plots bought so far £147 million spends. And actually encouragingly 48% converted from strategic land. And I think the point there is that we have got a very strong position on strategic, we see good progress through the planning system and we anticipate that we will see good conversion from strategic land over the next couple of years, where we see opportunities for further investment. Consequently we see further improvement in anticipated cash held at the year-end in line with expectations. The team at this moment are very focused on producing a strong results for the end of the year and we are confident in our trading position in that regard. I think it's worth remembering that we have got a strong position both for this year with an increase in completions, we are continuing to grow the business. You can see that we have announced this morning that we will open a further operating company in the New Year, which takes the total companies up to 30, so we have got good confidence in the market. So both additional completions during 2017 and a very strong forward sales position as we move forward into the New Year. So, with that I will now move to question-and-answers. Happy to take your questions and Mike and myself will be pleased to answer them. Thank you.

Exactly, thanks lot.

Thank you.

Thanks Greg.

Next question comes from the line of Clyde Lewis from Peel Hunt. Please go ahead.

Thanks Clyde.

Thanks Kevin.

I would say that we could be 40% to 50% well requirement coming from our own production.

Yes. Thanks very much.

Thanks Mark.

Thank you. And as there appear to be no further questions. I return the conference to you.

Well, thanks everybody for joining us and for your questions. Just to reiterate we are very confident with the position that were in. We are very focused on completions for this year and we anticipate further growth. So given that situation and a strong outturn for this year we are looking to 2018 with good visibility on the business with the strong market and good forward sales and as I mentioned a number of times the confidence with construction progress that was we have made to keep moving the business forward, which is our desire to meet the demand that we are seeing out there. So I think it’s a great position for us to be in. We will be able to further updates following the year-end on Tuesday, 9, January. Thanks very much.

Thank you. This now concludes our conference call. Thank you all for attending. You may now disconnect your lines.

[Operator Instructions] And our first question comes from Aynsley Lammin from Canaccord. Please go ahead, your line is now open.

I'm going to assume that's me. It's Aynsley from Canaccord. Just wondered if you could elaborate on your comment that the labor market remains tight, and you also flagged up some material shortages or issues. Just wondered if you could comment a bit further on that in terms of which materials, any particular regions, and what is the kind of cost inflation slightly to end up perhaps for 2017, would you expect that to be worse as you go into 2018? And then, secondly, if you have got any comments on your expectations, any surprises, or what you might expect in the budget coming up in the end of November. Thanks.

Thanks Aynsley. I mean on the resourcing side of the business I think it's pretty much the same picture that we have been presenting over recent times, I think given the fact that the industry and Persimmon are continuing to move volumes forward very well. I think it's natural that we will continue to see some pressure on skills, particularly even though we have got some significant training programs that are bringing quite an increase in the number of people available in those key skills, bricklaying and joinery and so forth. So I think that approach is going to continue on the basis that we see strong underlying demand and we really need to remain focused on that training program, but also look at opportunities to further efficiencies on site, both through increased use of Space4 and maybe some other techniques that may alleviate the situation on resources. And also you know the subcontract network through all of the domestics subcontractors as working hard to increase their resources as well on all of the trades. So I think it’s a pretty much a similar picture that we are seeing over recent years, but I think we will just continue to see that pressure as we go forward. I think that we got benefits at Persimmon, we have done a lot of work to put ourselves in strong position in that regard given the group house types that we use, the efficiency and the productivity improvement for that is helping us and enabling us to retain labor that can more readily on our side then on our competitors. And I think materials again I think that’s going to remain tight, I think there is probably a lack of investment in UK production on certain aspects, we are seen shortages in bricks, roof tiles and other products. We are now pleased and the time is being very good for us that we have got our brick manufacturing plant now online and producing brick, so that should alleviate some of those pressures. But I think there are other things that we need to continue to keep an eye on and look for further opportunities as we go forward. Notwithstanding all of that cost inflation for us isn’t very big issue, but we anticipate this year's cost inflation on the line about 3% to 4% and I don’t see that changing significantly as we move forward, but I think we have got to keep a very careful eye on the supply network and take whatever action we need to do to maintain production.

Great and just on the budget any expectations there?

Yes, on the budget, I think for me the key aspects is really planning it continues to be planning, we have seen improvement, but we really need to see that continue to move forward and provide more efficiencies. It just takes too long to get it planning concern through the process and you can see the pressure that brings on the outlet network, it is a timing issue but never the less we would really want to be off more sites. I think, I mentioned earlier that we were please to see an 10 billion invested into Help-to-Buy, but I think we are still waiting for a bit more detail on that, so that we understand how that will be managed through the process and whether any further changes will take place on that product. But other than that I think we have got a pretty robust model and we just need to continue to see momentum.

Great. Thank you very much.

Thanks Aynsley.

Thank you. Our next question comes from the line of Will Jones from Redburn. Please go ahead.

Thanks, good morning guys. Three if I could please. First, trying to understand the order book position place, because I look at the site number obviously down 10 in the period and sales rate is are pretty flat. Just kind of reconcile how the order book appreciated in value terms, how that’s ended plus 10, I don’t know if there is any moving parts, help us with that Mike, and always helpful to get a split if possible in that order book position between private and social. Secondly, just around the landmark it has a couple of parts to it, just when you flag that point that about highest strategic land conversions in the next couple of years. Do you think that kind of circa 50% ratio you have seen in the second half to-date can be kind of maintained and linked to that when we look at the value and the volume component of your second half land buying, I know they are not totally comparable, because won't include planned credit payments, but it looks like about £27,000 a plot which happens to be where your own plot cost was at the half year stage in the land bank. I mean is that fair to think that that's a number that's broadly holding. Again I appreciate you can't be too exact. And then the last one which is around the outfit schedule, I think at half year results, the Chairman had talked about the fact you're looking at measures to potentially reduce the dilution in the share count when that scheme vests. Just wondered where you are in thinking with that and any update there, thank you.

Good morning Will. Just ticking off the first of those three questions, in respect to the order book and looking forward, obviously the position at the end of this year when we look forward to December, the retained orders in the order book will be dependent on how many legal completions we take this year together with the fresh reservation volumes that we take over the next six weeks or so, as being inputs into the order book and obviously legal completion, final legal completion numbers being outputs from the order book. So you know that will continue to develop, but you know as Jeff said earlier we are quite pleased that by value we are 10% ahead, looking forward to that sort of sales position beyond this year and the makeup within that we have got about 2,700 PD units in there which is around about 500 units ahead of where we were this time last year, whereas on the affordable units we have got about five and a half thousand in total. So affordable units that are roundabout 2,750 currently which is slightly down maybe 250, 300 units down on the same position last year. Albeit that's a bit of a function, it's tied to the later profile of the outlet openings, we tend to book the HA contracts into the forward order book as the sites come on stream and we are finalizing those deal with our Housing Association Partners. So you know we would fully expect that to move forward by the time we get to December. So you know we are in a very strong position in terms of our forward order position book, you know if we manage to take a few more units in terms of legal completions this year and obviously you can only take them once and that will serve to mitigate the closing position at December, so as always we are very focused on delivering the best outturn for the current period.

And I think sort of moving on the land question Will, yes I mean the strategic conversion rate does change depending on how those sites come forward. And it’s quite unpredictable really in terms of you know obviously what are the vagaries of the planning system and strategic land tends to be less predictable than existing consented lancer. So it's a little difficult to predict, however, what we do know is that we have got a lot of land in the process in the system which were pretty comfortable we will come out the other side so that gives us confidence for the future in terms of the amount of land that we can convert into consented land and new sales outlets. I think really the key thing there is what that enables us to do is our optionality on the short-term land market and nothing thing that will just really that will just really depend on the appetite that have got on the cash units are willing to put into that both given the returns that we are making from that asset base and you have say that it’s a very strong investment opportunity. So we will continue to make those decisions as we move forward and at times we have been very strong in the short-term land market with the times you can [indiscernible] the strategic land. I think the beauty of about Persimmon is that the given the strength of its land bank we have got optionality around how we deal with that and what we do going forward to make sure that we capture those excellent opportunities that present themselves and we still see those in the land market. We have spent quite a few years now reshaping the land bank and making sure that all of our companies are in a strong position in terms of land longevity to their individual land bank in those different regions and we want to continue to strengthen that giving the individual opportunities for long-term sites which we call anchor sites and the smaller size, the faster moving outlays that's a we also supplement to them as well. So there is lots of moving parts there, and as long as those good opportunities are presenting themselves, we will remain both in strategic conversion and the short-term land market and I think the price per plot I think just to give you a sort of a indication we are still seeing very similar types of opportunities that we have been capturing over the last two or three years. So it’s a generalization both - we are seeing still excellent value that we have done over recent times.

On the outset Will, yes I mean obviously the Chairman mentioned we are considering our options in terms of dealing with the net settlements opportunity if you will. The by net settlements effectively considering how best to meet the obligation that arises on individuals within the scheme when they exercise their right to acquire the shares, exercise their options, then obviously that crystallizes the tax bill and 2% national insurance contributions. So the two basic choices are do we issue the gross number of shares and sell those sufficient shares into the market to raise the cash to pay the individuals tax bill or does the company issue a net number of shares and use its cash resources to settle our tax obligation to HMRC. We are currently reviewing those options to make sure and should we choose to net settle which means the company uses some of its cash resources to settle the tax and that is safe secure if you will in terms of the corporation tax treatment et cetera. So we are just doing the details, we are looking at that, if we decide to go down that route then that you referred to well what is the eventual dilution position if we did choose to go down that route. Well our best estimates at this point looking through to full vesting of the scheme. So this isn’t just looking at the 40% in December that its moving on an saying well on full vesting, if we go down that route then our best estimate is dilution would be more or less halved than to about 3.5% which shouldn’t be any surprise, because obviously with higher rate tax and 2% mix that sums to around about 47%. So you know it results in around a halving of the potential dilution which obviously is quite an attractive outcome for the existing shareholders of the business. So as I said, no final decision on that, but we are actively considering it will.

Great, thank you. And just in terms of timeline I guess you will need decided to wait before year-end, given the timing of some vesting is that right?

Yes, I mean we need to finish our thinking over the next few weeks before we arrive at the end of December. yes.

Thank you Will.

Our next question comes from the line of Gregor Kuglitsch from UBS. Please go ahead. Your line is now open.

Hi. I have got a few questions. Can you give us a little bit of steer where we are on volume completions, I appreciate its kind of the still six weeks to go and I guess it will depend on construction, but obviously at the interim stage you were implying in terms of growth at least relatively sharp slowdown in the second half given your forward order position at the time. So I understand that the plus 5% volume growth that I think you were referring to at that point is still kind of what you're thinking or whether that to change. And then just coming back on the site points the sites are down 10 it sounds like part of that is voluntary that you are building earlier in order to perhaps deliver quicker between reservation and then actually legal completion. so I guess the question or the underlying question here is should we be concerned about down 10 as we think about the volume growth into next year or do you think that’s the wrong conclusion to draw from the sites evolution? And then finally just back on the [indiscernible] point just to be clear if you decide to net settle would you have charge this tax against your margin or how would you deal with that, because obviously as my understanding is that if you net settled it the tax expense that essentially would be sell about Persimmon rather than the individuals would become an expense, I don’t understand whether that is part of the problem or what's holding you back from going down this route because otherwise it seems to be a relatively cash efficient way to do it. Thank you.

Yes, Greg just picking up on that last point, I mean that is a pertinent issue, and that comes down to accounting treatment. I don't want to bore everybody to death on the call, but once you have asked for it, so I will give you bit of detail on that. I mean there is an amendment to IFRS 2 share based payment some international accounting standard, in the waiting room, so to speak. It's not yet been endorsed by the EU which prefers what you term the equity settled accounting route to dealing with the issue, which means the charge to P&L would reflect the valuation of the options that they have grown rather than effectively on a mark-to-market fair value basis. So, the perspective accounting standard would mean that you wouldn't take a P&L charge for cash settling the tax, albeit there is a divergence of use currently, some in the market that have gone down that route and some that have taken the P&L charge. So that is part of our the final wrinkles that need to be resolved in terms of making sure that as always at Persimmon we pursue and execute the correct treatment for these sorts of things. So, yes I mean the key thing that you mentioned there is obviously the company is using some cash resources as against issuing the gross number of shares and I think philosophically we would agree with you that is a good use of some of the liquidity, the business has at this point rather than correcting more dilution of ownership for existing shareholders at this point. Is that okay?

That makes sense thank you.

So just going back over to the other points, Greg, I mean in terms of volumes we are pleased with the progress we continue to make on volume actually, so it's always difficult to call this stages even exactly what the numbers are given the number of businesses we have got, but we would anticipate, we are aiming toward around about 16,000 completions for the year. And I think that shows good progression year-on-year growth, but that could vary slightly depending on what progress we make between now and the end of the year. And I think just thinking about the other position moving forward, yes, there is a bit of a timing issue on the outlook position and I think and it's not a concern to us and that we can see the strength in the number of sites that we have got coming forward, and what I mean by that is quite often, we started on these sites in any case, it's not that we haven't got the sites, but we have haven't released the sale, I think in this particular instance, we are a bit behind where we wanted to be but quite frankly given our ambitions on outlooks and so forth, we never quite get to where we anticipate. The planning process is quite unpredictable, but nevertheless we have made good construction progress and that’s one of the important things. So that gives us confidence as we move into next year, actually we got a very strong construction position which enables us to continue moving volumes forward. And I think you then think about the infrastructure that we have got, we continue to grow that over the last few years and we are indicating that we will continue to do so and starting next year a new business there [indiscernible] which enables us to continue that process of improving volumes, accessing more resource in different locations and the strength of the market place in different areas that gives us an improved position from a volume prospective. At the same time and into the loan bank to continue to feed that. So all of the adds up to a pretty confident position from our prospective, continue to move the business forward and at this present time, we have got good visibility that gives us that confidence that we can do that. So I think, all-in-all a good strong position from our prospective.

Okay. Thank you very much Jeff. Thank you.

Good morning Jeff, good morning Mike. Can I go back to this outlet issue? Because I think that's sort of one issue that you sort of flagged up that's, probably, certainly different to what I was expecting. And you just told Gregor that you're still very confident about sort of moving your volume forward. So are you expecting outlook to be up on average for 2018 as you currently stand, given what you have delayed yourself and what you have got going through the planning process and what your current sales rate? Does that sort of still stack up in terms of sort of what you're expecting to see for 2018?

I mean Clyde just on the outlet profile, Jeff already said we have we have got good visibility on outlet coming through and strengthening a little bit later relative to last year. We saw the pickup come through sort of late from September this time last year if you will. And you probably remember we discussed that as part of the half year and this statement last year at that time, where we run through the same half of last year ramp 390 active outlets. Unfortunately if you will been running around the 350 active sales outlet so far through all [indiscernible]. We hope to close around 370, 375 as the new outlets 45, new outlets come through and then we are running into the new spring season where again Jeff has already mentioned we got decent visibility on new sites coming through that will opt to that number. We don’t particular, we are not frightening about our absolute number of outlets and coming back to the reasons for that is good visibility on the pipeline, but secondly the position on our build as Jeff has already said the build position is a lot stronger relative to last year. The shape of that build is in better condition if you will, which will put us in a position where we have better availability on existing sites we believe to offer choice to customer and pick up a good level of new home sales off existing sites as we move through into the New Year. So as always it’s a combination of the pipeline on outlets coming through, but also your construction stakes on your existing sites where you can offer good availability product to complement the new site starts. And as you know, when we open up new sites you pick up a bit of pent up demand in locations as well, which again we anticipate will help as we move through into the New Year.

I think at this point in the cycle Clyde you know the real driver for us at the moment for continued volume growth is construction. The efficiency of construction, the ability to build more units and we focus very much on that. You know the underlying demand is there, we continue to present good opportunities for people to buy. But really I have always said we are not aiming to have a long forward sales position, what we are aiming to do is to complete those houses to a high quality standard for the customers at the earliest opportunity and that's you know the best value creation for the shareholder to generate the returns that we are doing. So I think you know if I were to sum it, for me would be the satisfaction of having a very good and improved construction position compared to the same point last year, which gives us great confidence as we move into next year.

Okay, that one was very clear. I mean, presumably that has a little of an implication for what - on the stock levels at the end of the year, is that fair?

Well it does, but I think we are being consistently same, we would be happy to see a bit more width on the ground, that's where the challenge has really been, our return is still quick at five times that we really want to and we are focused on putting more build on the ground giving choice to customers and powering ahead on infrastructure into further of the sites, so we made good progress on that.

Okay, that's great. A couple other quickies if I may. One on Help-to-Buy, have we seen any sort of particular changes in trends in terms of take-up at all or does that still remain pretty robust? And the other one was on sort of regional differences in autumn in terms of sort of sales activity and pricing, if you have seen any noticeable differences at all.

No, I mean pretty much a similar pattern on both of those items early Clyde so Help-to-Buy consistent usage in demand for that product, which is very encouraging and the regional pattern is pretty consistent really across the Board, so no real changes there.

Okay, great, thanks guys.

Thank you, our next question comes from the line of Andy Murphy of Bank of America Merrill Lynch, please go ahead your line is now open.

Good morning guys. Just one quick question from me. On the new division in Suffolk, can you just give us a little walk around how it's come about is it basically carving up a larger division and making a new one out of it, in other words, it's sort of not really incremental in terms of the output in the short-term, but I guess, longer term, that will be the case? And then looking out a bit further, you have also been quite successful in putting together a few new divisions over the last three years, whether there is any other options that you have around for additional divisions in next year or two?

Yes, thanks Andy. This particular new division really fills a gap between our current Anglia office at Norwich and our SX business, where we got very land holdings, significant strategic land which we have modest to pull through the system. Those business is those mature business are already pretty optimized, so to continuing incremental growth and in a consistent way which we can continue with. Then I think there is the opportunity for another business which is sustainable and yes I mean you could consider it sort of some incremental growth, but actually again if you look at the business that were put down in Nottingham that very quickly become a mature business and within the [indiscernible] two years fold size operative company. So it all really depends on strength in those locations where we feel we have got a sustainable improvement in market share going forward. And this was really the next logical one. So we are pleased to be able to be in a lot of situation. We have worked hard and what we will do is man that new office up with so my existing Persimmon staff to give us the consistency and also it's a good procurement opportunity in the area and were pleased with where we are and we are ready to go straight away in the New Year. I think in terms of anymore opportunities we are getting to those sort of upper end of this, but I do think that there could be some more that would present themselves and but really we are now in the stage where I think that will be dependent largely on further progress in the planning system. Those further opportunities are currently a constrained with local authorities and plans that are not yet implied, but need to be to enable new houses to be built in areas where there is a current under supply. And when that those happened and it will happen, we would in turn to increase our capabilities in those areas and there will be opportunities for further offices in those locations. And so I think I don’t I can't say what the time scale of that could be, because we are largely dependent on the maturity of the planning process, but certainly over the next three to five years I would expect that there will be some further opportunities for maybe two or three further offices going forward. But we will only do it where we can do it in the quality way and very sustainable.

Great. I have one follow-up on [indiscernible] Help-to-Buy. Can you just remind us on the private sales, what proportion of sales in the privates are being done under or with the help of Help-to-Buy? And secondly, can you give us a sense of whether the size of property or value of property is changing, in the other words, are people tending to migrate away from two bedrooms towards three bedrooms or even just further up the value chains in terms of buying the higher priced units under a two bedroom for example on the like-for-like basis?

Yes, I mean Help-to-Buy for us is being pretty consistent you know we did our product offering particularly towards that because that’s where the demand is on the lines in this marketplace. Our private sales consistently its around about 55% which we don't know how to buy, and I think the mix as well as remained pretty consistent. You can see with our average selling price that we have maintained that availability of small two and three-bedroom houses. But I think the good thing is that there are people entering the marketplace at all points and I think the more of that lower end of the market the market where people are trying to step on to the housing ladder, the more of that demand we can meet with our product at the price points to me is the right thing to do. And we are very much focused on that. So yes, we got first time buyers and in some instances buying three-bedroom house but we also get a lot buying the small or two-bedroom houses so it's a good range and mix of that. As you know, we are very much focused on creating value in the business and that is a fundamental product for us meet in the market place for the benefit of the business and the shareholder.

Alright. Great. Thanks for your time.

Thanks Andy.

Our next question comes from the line of Charlie Campbell from Liberum. Please go ahead. Your line is now open.

Good morning everyone. Left with couple of detailed questions and maybe one sort of bigger picture. One, just wondering if you could give us a picture with the private sales rate so you have given us the total sales right, which is one that was happened private sales rate. Also anything you can say around margin and maybe thinking about the difference in the gross margin and the order book year-on-year might be interesting just directionally. And then last I realize it's probably far too early, but any comments on the ground about rising base rates?

Yes, I think base rate is obviously - we have seen the obviously the recent increase in the language around likely moves over the next year or two, obviously the mortgage market continues to be quite a competitive place. There is no major change on lending rates at this point. I think as we have said already Charlie the rates that are on remain pretty compelling particularly for first time buyers under the Helps-to-Buy linked mortgages is still quite a compelling offer to enter the market. So we don't see that presents in a major headwind if you will, to customer sentiment specifically. And indeed if there is a requirement to address greater inflation because traditionally obviously where the two go hand in hand by raising rates from here. Then hopefully that implies that the economy is doing reasonably well. So with that sort of backdrop you would hope the employment levels and job prospects and perhaps a bit of a real wage growth would provide further fundamentals spot to the market. So, as always it sort of depends on the circumstances that prevail as the context for why rates are increasing I guess. Just moving onto the sales rises, as we have already indicated that looking forward to December, we are around about 500 units more private sales in the forward order book looking further out, that is a product obviously selling through what has been an 11 week period from when we last reported on the 22nd of August. Private sales rose through that period been about 3% to 4% lower if you will over that 11 week period, but as I say we believe that is really by design, we are okay with that, and it's in line with our expectations given the management of the outlet opening process that we have already touched on. Obviously the delay to opening of new outlets really is a result of as Jeff has already mentioned the drive to optimize planning consents, we see that as a big value driver in our business to achieve the optimal planning consent on opening up the new outlet. Unfortunately the [indiscernible] there is it can delay site stopped on occasion but we believe that's a price we are paying if you will, but when you look at the absolute sales right, we are still at around about 0.7 one of the sale of a private sale per site per week, which for the autumn period is still very strong. If you look back on the second half of last year, the full second half sales rate was about 0.67, and also I have already mentioned I think on an earlier question which Clyde posed, obviously when you do open up new sites you do pick up a bit of pent-up demand as well which kicks on the sales rate a little bit which obviously we expect to pick up as we move through the rest of this year into the New Year, into the new spring season, the site profile comes through. So, a little bit down on accounts, but I think it's in line with our expectations, we have got as I say a very strong forward order position on the private end of the book. And indeed we have got a lot of good visibility on our affordable volume, our expectations on that remains very solid, so all in all a pretty sound market that we can work with. I mean in terms of margin outlook, Jeff do you want to mention.

Yes, I mean we are pleased again with the progression there, so obviously it's still quite a step up in the first half of the year, year-on-year, we naturally anticipate that sort of slowing to some degree, but never the less we are still moving forward and we expect to close the year at a higher point for the full-year.

Thank you.

Okay Charlie.

Thanks Charlie.

Thank you. Our next question comes from the line of Kevin Cammack from Cenkos. Please go ahead.

Thanks, good morning to you both. I just got one actually relating to the 10 billion of extra Help-to-Buy money, have the treasury actually given you any information as to what specifically the application of that will be and I suppose what's behind my question is, I'm just sort of slightly intrigued to know, is it how is its been driven in your view by the current money looking tight on the annual applications so the house building is making and therefore its needed to support the existing level of sales going through Help-to-Buy or is your impression that its sort of chopping up the final years because it proves more successful than they thought or is it something else, just slightly intrigued to know, what actually been set you about the actual application of that money is such.

Good morning Kevin, we can, we have been told specifically but what we do now is that the money previously allocated was likely to run out before the end of the scheme 2021. And I think that certainly the London Help-to-Buy aspect as to taken a lot more cash of the Help-to-Buy scheme. So I think there was a concern the money wasn’t sufficient to take us through the full term. And actually what was shocking that happened was there was a tight control over the allocation of those fronts between all the developers and that was really managed on a month-by-month basis, which is quite constraint and a quite restrictive. So what we have seen is that situation is now being freed up which enables builders the ability to look bit further into the future in terms of sales right, sale opportunities at two people looking to be supportive by Help-to-Buy. So it helps momentum continue in the marketplace and I think that’s the real benefit to us. And I think given the scale of this which is more than double now the original amount allocated, to it would give everyone the confidence that it will last at least the full term. More than that we don’t know, we haven’t been informed and I think expect, in a more detail over the coming weeks amongst both never the less positive position for us.

Had you reached the stage of your sales where you are having to turn people away, because you haven't had the prefunding if you like. Had it reached that point or as you say is this really more about underpinning the backend of the time scale?

No, I mean we have not turned anybody away Kevin, I think the funding, the rate of funding that was currently on the table albeit the HCA have been managing that on an annual basis from April to March, and have been controlling it on an annual review basis. So they are only prepared to look so far ahead anyway in terms of their management processes until recently where they've announced this additional funding and I think the industry have made the HCA aware and indeed the HCA could see the numbers themselves coming from the industry saying that well look you know at the current funding rate in terms of the original funding allocated to support the scheme that was likely to run out perhaps in the middle of 2019, I think was the latest indication that we have seen. So I think you know in part, I think your observation is right in the government have chosen to ensure the scheme is properly funded through to the original indicated end date of 2021, but also it recognizes that it has been quite successful in allowing more first-time buyers to get into the market. It's helped the lenders lend at rates that have been particularly attractive. But as Jeff says you know a key thing for the industry to provide at a lot of confidence from an investment perspective. Cause as you know we were investing in land that will reach out for some time and then obviously a question that has the banks did a little bit because of the extra funding promise. But we will start to bubble up again as well, what is going to happen after 2021. We expect more detail in the budget on the 22nd, but I'm sure that that issue will be consulted on for some time over the coming months, in terms of how do we transition if we are going to transition to a market that has a different support mechanism, if it's to be used in the future.

Understood, thank you very much, it's just the only one from me.

Sure Kevin.

Thank you, our next question comes from Mark Howson from HSBC, please go ahead, your line is now open.

Good morning gentlemen, just briefly on the cost pressures that you mentioned in the statement, and presumably you're looking into '2018 while thinking of past rates for type of area. Does this presumably sort of raise questions in your mind as to whether perhaps you want to lay down another Space4 line or factory elsewhere in the country? Can you remind us where we are with the development of the bricks, your own bricks and you mentioned roof tiles. Is that something a product that you could also look to go into as well yourself?

Good morning, Mark. I think I mean certainly from the Space4 respective which will making the factory balance 6,000 house frames this year and in the existing facility we have probably got the capacity from every end of the two and but we are getting to the stage where we are starting to think that we should look at a greater capacity. And over the next sort of year or two I would expect that we maybe in that situation where we are investing further in that product. It works very well, it supports efficient production and it covers of any shortages in terms of resources brick laying resource. So it's a logical step to take but we want to make sure that we do that at the right time, in the right place. So that's potentially on the agenda the brick, we are now producing bricks so we are filling yard ready to start delivering to our new sites and we are pleased with the progress we have made on that. And as I say, I think that's the [Indiscernible]. There are starting to appear to be shortages of product again out there. So, we will gain a great benefit from that having that sustainable supply. I think roof tiles yes, I mean it's a constrained marketplace. I think when you look at the manufacturing process is not the similar to concrete brick that we are making, so it is a potential opportunity for us but we haven't take that decision yet, but we are keeping a close eye on what's happening, we will do it if we need to do it. But I think they were different ways of dealing with shortages and ensuring that we have got security supply going forward on various aspect. So it's a moving marketplace, but I think we are very focused on making sure we do the right thing to give us our longevity. So we will continue to do that.

So looking into next year, what sort of percentage of the product, roughly, will be using your own bricks, by way of example?