Barratt Redrow plc

Okay, I think we're going to make a start. So first of all, good morning all and thank you all for coming. I know that for some of you it's unscheduled. So we're really conscious that there's a lot to get through. We're sure that there's going to be plenty of questions. So we're going to spend most of the time on the transaction announced today and clearly less time than we would normally do on results for both companies. So first of all, just in terms of introductions, we have people dialed in online who are not on our video. So with me is Stephen Bowers, Barrett's Chief Operating Officer and Deputy Chief Executive. Mike Scott, the CFO of Barrett, to my left, Matthew Pratt, Group Chief Executive of Redroll, and Barbara Richmond, the Group Finance Director of Redroll. So, as you'll see from the announcement this morning, in addition to our half-year results, we are really delighted to be announcing the recommended combination of Barrett and Redroll. The new company will be called Barrett Red Roll PLC and today we're going to be talking you through the details in the background to this really exciting combination and how it's going to help both businesses build together, how we're going to create a really exceptional UK home builder in terms of quality, service and sustainability. So moving on in terms of the running order for this morning. As I said, the first part of the presentation will focus on the creation of Barrett Red Roll PLC. Then we're going to have a short section on Barrett half-year results, which Mike will guide us through. And then Barbara will talk us through the Red Roll half-year results. And then we're going to move on to a joint Q&A. which I'm very, very much looking forward to chairing. And we're going to be aiming to try and leave as much time as possible for Q&A. But just to flag, and John Messinger will be keeping us on time, is that we are looking to close no later than 10. So please do think about that in terms of placing questions. So I just wanted to start by saying that I really strongly believe that the combination we've announced today is going to create a truly exceptional UK home builder. I think you all know that when you look at both businesses, we're hugely focused in terms of quality, service and sustainability. And really crucially, this is against a backdrop of a very significant shortage of high quality homes in the UK. So the combination is going to allow us to accelerate the delivery of the type of homes that the country needs. Underpinning the future success of Barrett Red Roll is our combined portfolio of what are clearly very highly respected and differentiated brands. Barrett, David Wilson and Red Roll. This is going to enable us to drive output across our combined pipelines and what is clearly a complementary footprint. And I think Matthew's going to give us a few thoughts on it.

Thank you, David. I mean, clearly from this is an important moment for our two businesses. We're two well-regarded house builders within the UK. And like us, Barrett is committed to quality, service and sustainability. We are both innovators, and this is an opportunity to realise significant cost synergies. The combination will give us the opportunity to share best practice across everything we do. And finally, I think both businesses are already highly regarded in the market, and working together will only improve that.

Thanks very much, Matthew. And so on to the next page, we're setting out the headline terms of the transaction, which is recommended by both boards. So it's an all-share combination where each Redroll shareholder will receive 1.44 new Barrett shares for every Redroll share they own. The offer values the equity of Redroll at approximately 2.5 billion. Following completion, Red Row shareholders will hold 32.8% of the combined group, and Barrett shareholders will hold 67.2% of the combined group. We expect to achieve pre-tax cost synergies of at least £90 million on an annual run rate basis by the end of the third year following completion. And we're going to cover that in a little more detail later, Mike is saying. We expect the transaction to be accretive to both Barrett and Redrose adjusted earnings per share in the first year after completion, excluding the one-off costs of delivering the synergies. I just also note, and I know that he is here this morning, and I just note that the transaction has the full support of Steve Morgan, Redrose founder, and a very significant shareholder in the Redrose business. So we've said we both, Barrett and Redrell, believe that the combination is really compelling. It's going to help us to address the country's housing shortage. We are going to create a really exceptional home builder. Quality service and sustainability are clearly so important. But also it's important that we do accelerate delivery of high quality homes through the three brands. We've identified the opportunity to realise cost synergies and Mike's going to talk through that in the presentation. But we also believe that based on our strong track record of integrating other businesses and brands, that we can achieve this integration both rapidly and efficiently. Within a cyclical industry, this combination will maintain a robust balance sheet and will be better protected to operate through the cycle and it's going to be a strong platform for us to deliver improved shareholder returns over the medium term. And finally, we do believe that the combination of Barrett and Redroll will deliver significant benefits for other stakeholders. Firstly, our highly skilled and dedicated employees within both groups, our suppliers, our other partners, and most importantly, our customers, who are going to have access to a wider range of homes at more price points. And Stephen will talk us through more about how good a fit the combination is going to be.

Thank you, David, and good morning, everyone. At the heart of this combination are two culturally aligned organisations with a shared focus on quality, customers, and sustainability. I think that the awards and external recognition we've set out on this slide bear testament to these credentials. In terms of quality, Barrett site managers have been awarded more Pride in the Job awards than any other home builder for 19 years in a row. Red Row also received a significant number of Pride in the Job awards in 2023. And we are both rated as excellent on Trustpilot. And in terms of customer service, in 2023, Barrett was awarded a HPF 5-star rating by its customers for the 14th successive year, more than any other major home builder. Red Row also has an impressive record of achieving 5-star HPF customer satisfaction ratings for the last five years. And in terms of sustainability, Barrett is included in the CDPA list for leadership on sustainability. We were also awarded the 2023 Innovation Award for our e-Home 2 project, which reflects our pioneering efforts towards a low-carbon and climate-resilient future. Red Row holds a double A rating from MSCI for its commitment to ESG investment standards. We're proud of what we've created at Barrett, and we've also been impressed by the way Matthew, Barbara and their team run Red Row. This like-minded approach will ensure that Barrett Red Row continues to put the customers at the heart of everything we do. As you can see from this map, Barrett is a leading UK home builder with 29 operating divisions located across the UK. Since the business was founded in 1958, we've built more than 500,000 homes, creating great new places to live throughout the country and And in the financial year 2023, we delivered more than 17,000 new homes and had a land pipeline of almost 75,000 plus.

Thank you, Stephen, and thank you for your kind words. Across 50 years and over 120,000 homes, Red Row has earned a strong reputation for building premium homes and thriving communities. We currently operate through 12 regional divisions across England and Wales. We have a land pipeline of over 24,000 plots, and last year delivered over 5,400 completions across both private and affordable homes. Here you can see how complementary the combined geographic footprint of Barrett Red Row is. In addition to an attractive portfolio of sites in current development, our combined land pipeline brings together almost 100,000 future plots and the capacity to accelerate housing delivery. Together, we will be positioned to build in excess of 22,000 homes each year, reaching customers across a wider geographic footprint and with a complementary product range. The combined group will have a strong portfolio of three high-quality complementary brands. This is clear differentiation within this portfolio across price points and positioning in the market. Barrett's will continue to serve first-time buyers and families. David Wilson will continue to offer larger homes for moving uppers and families, and the Red Row brand will be established as the premium brand in our portfolio, targeting the upper end of the average selling price range. We will continue to develop attractive and innovative homes across all three brands focused on design excellence, build quality, home running cost efficiency and sustainability. This portfolio will be able to meet customers' needs across a wide range of house types and price points. We expect this to be a three-brand strategy that will allow us to accelerate the delivery of high-quality homes across suitable sites.

Thank you, Matthew. We have a proven track record of acquiring, integrating and nurturing attractive brands. Back in 2007, we acquired Wilson Burden, including David Wilson Homes. which was successfully integrated over a period of 18 months. We have continued to invest in and develop David Wilson since acquisition. We've been a good steward of the brand, improving the service and quality associated with it. We've also transformed it from being largely regional into a truly national brand. As a result, it has become a more important and valuable part of the group over time, going from approximately one quarter to one third of group completions. We've also successfully integrated Gladman, our promotional land business, and Oregon, our timber frame manufacturing business, into the group. We've achieved this whilst preserving the skill sets and know-how they've brought into Barrett, and both brands are benefiting from our investment in growth. Along with the Red Row team, we intend to do exactly the same with the integration of Red Row, Protecting, nurturing and investing in the brand and its strong customer proposition. We've seen through David Wilson that applying a multi-brand strategy delivers a positive impact on site performance. And this can be seen in this example, Grey Towers Village, a site up in the northeast in Nunthorpe near Middlesbrough. It was a David Wilson site when we acquired and operated very successfully from the financial year 2016 through to 2020, delivering excellent build quality, five-star customer service, as well as securing both Pride in the Job Awards and the UK Supreme Award in 2019. Reflecting the impact of the COVID pandemic, we made the decision to dual brand grey towers, adding Barrett Homes to the site and opening a Barrett sales outlet and show home suite to the site. And you can see on the right-hand side of this page what dual branding meant in terms of performance at the site. Completions increased 110% from the pre-COVID average. The reservation rate increased almost 100% to an average rate of 0.94 per week in FY22 and FY23. And since the introduction of the Barrett brand, the site has maintained its build quality and customer service success. This is reflected in both its five-star status and continued Pride in the Job award success, with Leanne Hardcastle becoming a Pride in the Job award winner in 2023. So you can see why we're so excited about what we can do with three distinct brands. We will accelerate the delivery of homes from the combined land pipeline by introducing the Red Row brand, to appropriate Barrett sites and vice versa. And with that, I'll hand over to Mike to now pick up the financials.

Thank you, Stephen. So you've heard about the strategic and operational benefits of the combination, but let me now touch on the material financial benefits that we see. So for now, we focused on cost synergies. We do also believe there will be scope for revenue synergies over time, but we're not in a position to quantify these at the moment. So we've estimated at least £90 million of pre-tax cost synergies, which is a big number, but it's a number that we're very confident in our ability to deliver. The savings are going to come from both Barrett and Redrose cost bases across the following areas, applying a best-in-class approach. So firstly, procurement-related savings, primarily from direct materials, are expected to contribute approximately 38% of the synergies. Secondly, optimisation of our divisional structure is expected to contribute 37%. And finally, consolidation of central and support functions delivering roughly 25% of the total. Now, broadly half of the annual run rate pre-tax cost synergies will be realised by the end of the first year following combination with around 90% delivered by the end of the second year following completion. Full run rate will be achieved by the end of the third year The associated one-off pre-tax costs to achieve the synergies we currently believe to be around £73 million. And we'll also maintain a robust balance sheet in the combined group. So this is an all-share deal, and critically that means there's no leverage being used. The combined group's balance sheet will be net cash positive, including land creditors, and it will provide both resilience through the cycle and allow the combined group to respond to changing market conditions. We'll maintain a highly selective approach to land acquisition and we'll maintain Barrett's existing dividend policy of cover of 1.75 times on the ordinary dividend based on adjusted earnings per share. And in line with our track record of returning surplus capital to shareholders, our policy remains that where appropriate and after investment in the business and ordinary dividends, excess cash will be returned to shareholders by means of a share buyback or a special dividend.

Thanks, Mike. And, you know, in addition to the benefits for both sets of shareholders, which I think are very clear, we also strongly believe that the combination will benefit the wider stakeholders of both RedRoll and Barrett. I think both businesses would say that our people, our teams are absolutely our greatest asset and our greatest advocates for our business. And we believe that employees will benefit within the wider group. So more development opportunities, more variety in terms of roles, as well as being part of what is an industry-leading reward programme. Suppliers are going to benefit from more visibility, more scale and more certainty of delivery, which should give them more confidence to invest in the skilled labour and the production facilities that are clearly critical for the future of the sector. And finally, customers and communities are will benefit from accelerated delivery of much-needed housing across a complementary housing range, more price points and a broader geographic footprint. Here's our combined leadership team. and board and this is clearly a strong board and a strong management team with the skills and experience needed to successfully deliver the integration and drive future growth for the combined group. Upon completion of the transaction Matthew, who is currently Group Chief Executive of RedRoll, will join the board and assume the role of CEO of RedRoll and Group Executive Director. Nikki DeLue and Geeta Nanda will also join the board of the combined group as non-executive directors. In addition, Barbara, currently Group Finance Director of RedRoll, will join the combined group to support the integration for a period of at least 12 months from the deal completion. And on that note, I'll pass on to Barbara to outline the plan for integration.

Thanks, David. So we've a clear plan on how we'll manage this integration, both efficiently and effectively. And both the Barrett team and the Red Row team have strong track records of successfully integrating businesses and driving synergies. We expect the integration to be substantially complete within 18 months of completion, as Mike said. Our approach will be to maintain the Red Row brand and add the heritage collection to the Barrett portfolio. We'll apply best-in-class philosophy to the consolidation of central and support functions. We'll review the divisional office structure and optimise geographical coverage across the group. And we'll consider a range of additional opportunities, as Mike said, for both revenue and cost synergies. And we'll do that by drawing upon the strong experience and the shared cultures of both teams, while carefully managing the delivery of those cost synergies and maintaining our focus at all times on operational excellence, build quality and, of course, customer service. Back to David.

Thank you. Thanks very much, Barbara. So to give you an idea on timing of this process, we've obviously formally announced the transaction today. We'll post and publish all the required shareholder documents by mid-April 2024. We expect the shareholder votes to happen in about mid-May 2024 and we expect completion in the second half of this calendar year. The deal is conditional on CMA approval and also, as I said, the approval of both sets of shareholders. So I hope that today's presentation has given you a good sense of what Barrett Red Rope is all about. But I'd just like to quickly recap on what our ambitions are and what we mean when we say we're going to be building together. So building together means a new business model for the long term. We're going to continue to build thriving communities with exceptional build quality and customer service. We're going to deliver sustainably with a framework for future homes, great places and better living. And we're going to deliver the homes this country needs by driving and accelerating completions. But we're going to do this with the same discipline you've seen from both businesses over the past few years. Continuing to drive building efficiency and increase sustainability through use of modern methods of construction. maintaining a highly selective and a disciplined approach to land buying. And I want to leave you with our operating framework ambitions as set out on the right-hand side of the page. A four-and-a-half-year land pipeline, a balance sheet in a net cash position, a dividend policy of 1.75 times cover, and an increase in our future minimum land buying hurdle rates at 24% gross margin to ensure that we capture and sustain synergies and we will continue to target to deliver a 25% pre-tax return on capital employed for our developments. So we recognise that this is just the beginning, don't we Matthew? And we hope that you share our excitement that we feel about creating what is going to be a really exceptional house builder on quality, service and sustainability. I'm now going to hand over to Mike. Mike is going to give us a quick update on our half year performance. And as I mentioned earlier, Mike will present and then Barbara will present and then we'll take questions on the overall package. Thank you.

Thanks, David. So, as David said, let me briefly cover half your performance. It will be brief, I promise. And then I'll pass to Barbara to do the same for Red Row. Our normal full results deck is up on the website for anyone who'd like to see that. So let me start with an overview. We're on track to deliver completions in line with our previous guidance, and I'll touch on current trading in a few minutes. Our total home completions in the half were 28.5% lower at 6,171. and that reflects the challenges that we face in a tough market throughout the half. This fed through to a reduction in adjusted operating profit to £155 million. Adjusted operating margin was 8.4% against a backdrop of our reduced volume and the operational gearing impact of that, lower average sales prices and the ongoing impact of bill cost inflation. Our results included adjusted items relating primarily to external wall systems, which totalled £61.9 million, and I'll come on and just touch on that in a bit more detail in a few minutes. With the reduction in profit before tax, adjusted EPS was £11.8, and based on our dividend cover of 1.75 times, we'll pay an interim dividend of £4.4. Our return on capital has reduced to 12.8%, and that's a consequence of the lower margins that I've touched on, and also a reduction in asset turn as sales performance slowed. But fundamentally, our balance sheet remains strong. We had net cash of £753 million, and that was after paying the final dividend of £228 million. So turning now to sales performance, our wholly owned net private reservation rate was 0.48 in the half, and that's up 9% year on year, and improved sequentially as we moved through the half against the comparative period with very low sales rates in Q4 FY23. The reservation rate improved as mortgage rates eased lower from August, and although the autumn selling season was slightly muted, demand held up right into the Christmas break. The contribution from multi-unit deals for PRS and affordable housing contributed 0.06 to the sales rate in the half, which was around 13% of private net reservations. And that was broadly in line with the 0.05 from the prior year. Our average outlet numbers were up slightly by 2% at 367 compared to last year, but looking to the full year, we continue to expect that average sales outlet numbers will be around 6% lower than FY23, which reflects both lower outlet opening numbers and also the sell-through of some sites closing. In the bottom table, we've again also detailed the absolute movements in our private order book in half-year 24 and 23, where you can see our private reservations have grown in absolute terms by just over 12%, and our private order book has now stabilised at around 3,600 homes. Now some detail around adjusted operating margin, and this chart details the key movements bringing the half relative to half-year 23. The most significant impact came from lower completion volumes, which was responsible for a 660 basis point reduction relative to the last half year. We continue to see build cost inflation of around 7% in the income statement in the first half, and we expect to see this reduce sharply in the second. And this, in combination with the underlying softening in selling prices, reduced margin by 540 basis points. The trajectory of build cost inflation is clearly lower, and on a spot basis we now think it's very low to slightly deflationary, so we'd expect to see that feed through into the income statement in future financial years. We saw a reversal of last year's impact from impaired developments in London by 80 basis points, and also more normalised charges for our completed developments than last year, which contributed a further 70 basis points to margin performance. Other changes in sales mix and a small impact from administrative expenses made up the final 50 basis point move year on year. Now to our adjusted items in the half. And you can see here we've incurred a total charge of £61.9 million. The charge represents an increase to the contingencies held within our provision and covers two elements. The first is the impact of rising costs coming through from the Building Safety Fund, over which we have little visibility and no control, and a small number of buildings for which specific additional works are being identified, contributing to additional costs. We've also disclosed this morning a new contingent liability, which is not within the provision, for a development with three buildings. They have a unique external curtain wall system which requires a detailed fire test to be undertaken to allow it to be assessed under PAS 9980. This work will take up to a year to undertake and the results are clearly highly uncertain and if necessary we'll provide a further update on that in due course. So moving on now to our usual guidance slide, I'm just going to highlight three quick points for FY24 where our position has changed. So given current trading performance, we've narrowed our guidance range and expect to deliver between 30,500 and 14,000 total home completions for the year. Secondly, our net interest charge is around £20 million, and that's unchanged, but we expect to see the cash and non-cash components of that increase. And lastly, a small reduction to the effective tax rate from 29% to 28%. And so now let me turn to an update on current trading through to the 28th of January. And as you can see, we've had a really positive start to the year, with a reservation rate of 0.6 and only a small contribution of 0.04 from multi-unit sales. Customer sentiment appears to be improving, supported by lower inflation, energy costs and mortgage interest rates, but this reflects only a couple of weeks trading in the new year, and therefore we're cautious about how sustainable it will be. Our sales outlets position is now reflecting the closeout of extended sites and is in line with our guidance that I mentioned a few minutes ago. And finally, we're 86% forward sold with respect to private completions for the year, and that's slightly ahead of the position at this point a year ago. And so with that, let me hand across to Barbara.

Thanks, Mike. So I'll briefly cover the Red Row results for the first half of 2024. Unusually brief for me. Starting with the financial overview, despite numerous macroeconomic headwinds, I think we've produced a resilient set of results for the first half. Our group revenue was £756 million, which resulted in a pre-tax profit of £84 million in the first half, against £198 million in the first half last year. Earnings per share were £18.7 pence, And in line with our dividend policy, we've declared an interim dividend of five pence per share. And we ended the first half with a net cash balance of £121 million, ahead of both our guidance and the position in December 2022. If we now move on to the income statement, as expected, homes revenue was down 24% due to lower volumes and flat overall selling prices. Other revenue returned to a more normal level of £4 million from the elevated 2023 figure, which was due to a number of large land sales. And that gives total revenue of £756 million, which is 27% lower than last year. Gross profit was £143 million, which is a gross margin of 18.9%, compared to 24.9% in half one 2023. This was due to the combined impact of higher incentive levels, higher build cost, and the higher proportion of affordable housing. In the second half, we expect the gross margin to be a little lower for two main reasons. Firstly, the gross margin on private homes will be slightly lower due to the impact of increased incentives. Secondly, the proportion of affordable housing will be higher and their geographical mix weighted to regions where prices are particularly low thus impacting the overall gross margin. As a result of these factors, we're expecting the full year gross margin to be between 17.5% and 18%. Operating expenses were £1 million lower year on year, despite the cost of the restructuring we undertook last summer, as the benefits of that restructuring came through in the second quarter. I expect second half operating expenses to be lower than those in the first half. So we generated an operating profit of 86 million pounds, which is an operating margin of 11.4%. With interest expense at 2 million, our profit before tax was 84 million pounds compared to 198 last year. Moving on now to the geographical analysis of revenue, you can see that the regional businesses experienced revenues between 28 and 33% lower due to market conditions. Collindale revenue was actually £61 million higher due to the affordable sale to Barnet Council, along with more private legal completions. And now let's look at revenue by category. Private revenue overall was down 30% due to the reduced volumes. Revenue from private apartments increased by £18 million. and their average selling price by 37%, again due to the Collindale completions I mentioned earlier. Affordable revenue was up 21% to £126 million, due to a small increase in volume, but a 19% increase in average selling price, again due to that geographical mix effect. Affordable revenue represented 16.8% of homes revenue in the first half, a substantial increase on last year when it was only 10.5%. In the second half, we expect affordable homes to comprise 17.8% of homes revenue, making it 17.3% for the full year, and that compares with only 12.4% in 2023. And now moving on to the cash flow. EBITDA was £89 million. Our net investment in land was only £8 million compared to £70 million in the same period last year due to the reduced land buying. Working progress increased by £56 million with the usual build-up for second half completions. However, the increase was less than the £97 million in the first half of last year due to the quieter market. Spend on fire safety amounted to £7 million in the period. The movement in other working capital was an absorption of £38 million due to the reduced trade creditors as a consequence of the lower WIP build-up. This resulted in an operating cash outflow of £20 million. The non-operating cash flow was the usual dividends and tax and so the net movement was a reduction of £114 million to £121 million which was, of course, ahead of our guidance. And we expect our cash balance at the end of the financial year to be over £260 million. Now moving on to the guidance for the full year and this hasn't changed from what we said in November at the time of the AGM when we stated that whilst the range of outcomes for revenue and PBT are the same as September due to the subdued autumn sales market we expect the results to be towards the lower end of the range so no change there. Our percentage of 2024 revenue that we've already achieved as at last weekend If we only include exchanged plots in the order book, it's 74%. But if we include reservations not yet exchanged, that figure is 88%. And the equivalent figures last year were 85% and 95%. So now let's move on to look at first half trading. Our private sales rate per outlet per week during the first half was 0.36, a little less than the prior year, reflecting that subdued housing market I mentioned earlier. Cancellations remained elevated at 26%, albeit they were below last year's level of 28%, and that was basically due to continuing chain issues. And now looking at current trading, I'm pleased to report the new calendar year has begun with a return of strong interest from our customers. We entered the second half with an order book of £800 million, 500 private, and our net reservation rate per outlet for the first five weeks was 0.52, above the 0.51 in the same period in FY2023. And whilst this is only the start of the important spring selling season, it's encouraging to see signs of a return to a more normal sales market. And with that, I'll hand back to David.

Thank you, Barbara. Thank you very much. I'm sure everyone would agree that from Mike and Barbara is a model as to how to present half your results to two companies in 11 minutes. So thank you. Thank you very much. Now, just before we move on to questions, just I need to remind you, I have a disclaimer to remind you that. We're now in a code offer period. I know you all know that. And so there's restrictions on what we can say and questions that we can answer. And those restrictions will cover both things under the code offer and any questions that we don't like the look of. Okay, so I'm going to chair the Q&A and we'll start. And if you could sort of identify yourself and give us your questions. And John is going to keep our track on overall time. You have to wait for the microphone as well, that's the other rule.

Good morning, congratulations, and good luck. You've got Harry Goad here from Berenberg. Two for me, please. One, I guess, for David and the Barrett team is, can you give us a little bit of history about how you have thought about merger acquisition opportunities going back over the last couple of years? And then supplementary to that is, if conditions in the land market had been different, If there was more attractive land valuations out there, how would you be thinking about that relative to this transaction? And then secondly, with regard to the operating multiple brands on sites, could we be thinking about sort of structurally higher sales rates in the future than what either of the businesses could have done in the past? Thank you.

Okay. Hi, good morning. Thank you. So I think if I just deal with both of those questions. So in terms of rates of sale, we would look at it on an outlet basis rather than a site basis. And therefore, if we currently have Barrett and David Wilson on one site, we would count it as two outlets. And therefore, having more outlets and more brands on site isn't going to create a structurally higher rate of sale per outlet, but it will create a higher rate of sale in aggregate per site. So Stephen touched on the example in the northeast where we've created a second outlet, we've pretty much doubled the rate of sale, but we would be counting it as two outlets. Nonetheless, we're delivering 100 units rather than delivering 50 units. So clearly, in absolute terms, it's a very significant change. And I mean, just to expand on that, We touched on it in the presentation, but we see really for Red Roll and Barrett and David Wilson really three sets of opportunities. So first of all, to be able to take existing outlets and say bring Barrett onto a Red Roll outlet or to bring Red Roll onto an existing outlet within the Barrett business. most likely sitting alongside the Barrett brand to give that clear product differentiation, or in some cases having all three brands on the same site. Secondly, we see the opportunity to expand Red Rose geography, and we see that as being a good opportunity, subject to appropriate markets and appropriate average selling prices. And then thirdly, in terms of future land acquisition, it allows us to look at larger sites than we might normally have looked at. So I think it helps us hugely. We don't see it in any way as being an acquisition that we're looking at because of the situation of the current land market. We see that. the combination of these two businesses is genuinely bringing two businesses together that are very aligned and very complementary. And clearly both businesses will, in the combined group, continue to operate within the land market. So hopefully that covers it.

Thanks. Ainsley Laman from Evastic. Just two for me. I guess based a bit around the historical context, no big M&A in the sector, there's always been the view that maybe diseconomies of sales start to kind of feed in around 20,000. Just interested to hear your view of that. You've mentioned the acceleration of delivery. Do you see the combined group being able to deliver 25,000, 30,000 homes in a normal market, or should we think more about getting to a level and giving more capital back? And then secondly, just on the CMA, kind of interested to hear what your expectations are there. Do you expect any issues that we should be thinking about?

So in terms of size of business... and I'll pass over to Matthew after I give my initial thoughts on size of business. But I don't in any way see that 22,000 homes is a cap. But equally, you know, we're not setting about just trying to chase volume. We believe that there is a genuine opportunity to bring brands together to the market, bring our strong housing brands to the market in a different way that can result in incremental volume. But it's clearly going to give more choice on a site-by-site basis. And again, I'd go back to Stephen's example. I mean, we could have given lots of examples of a similar branding strategy where I think you are really enhancing the mix that's going into the marketplace. We've said in the medium term that that we should be thinking about building up to 22,000 as a guide. So I think that's the thoughts. Matthew, do you want to?

I think ultimately, if you look at it from Red Row's point of view or the group's point of view, ultimately, you know, there were more Red Row homes built. And I think it's fair to say we're probably not in certain areas. Much today was discussed. We pulled out of Scotland. But ultimately, you know, there is opportunities in Scotland, but there's probably not an opportunity for us to have a full operational division there. But actually this acquisition or this merger gives us an opportunity to work together. The fact that, you know, you can still probably do 200 a year out of somewhere like Scotland, but certainly not in the North East. So there's clearly opportunities there. And you can see, you know, the Red Row brand is really pushing in terms of downsizing the market, which is a growing market. And I think we'll have opportunities to grow the business on the back of that as well. So you can see we're not stuck at an arbitrary figure of 20,000. You know, there's certainly more growth in there.

And just the second point in terms of the CMA. So we've said this morning that the proposed combination is subject to both shareholder approval and regulatory approval with regard to the CMA. I mean, we're very confident of the combination being approved by the CMA.

Amigala from Citi. My first question was on Oregon and how much does this enhanced scale can be utilized to increase your timber frame utilization, especially knowing that the Red Rope product type was quite niche and specific. Is that something that you can also kind of fit into the broader standardization framework that Barrett has? And the second one was on the sort of multi-brand approach. Barrett more recently had gone down the route of shared ownership you know having more shared ownership and prs to kind of accelerate this sort of site utilization now with a multi-brand approach do you really need that or would that still be an aspect that you would tap into knowing that you do need more affordable channels to certainly yeah thank you so if i'll just make a comment initially about timber frame and then i'll pass to steven on timber frame just to talk about our strategy in terms of timber frame

But I think in terms of what Barrett is doing in relation to partnerships, so for example we're acquiring sites from homes in England in what I think would be commonly described as a partnership model. or what we're doing in terms of private rental, where we signed at the beginning of 2022 an agreement with Citra, who are part of Lloyds Bank, to do more private rental homes. I mean, this doesn't in any way change our ambitions in those areas. And we see that both partnerships for us... big opportunity but mainly for the Barrett and the David Wilson businesses and therefore we will continue to pursue that. In terms of timber frame again our main focus would tend to be on the Barrett brand But if I pass to Stephen. Good morning.

As David says, the main priority for Oregon is to roll out the timber frame into the Barrett business. The Barrett product was specifically designed for timber frame. It's simpler, straightforward, higher levels of repeatability. So when we acquired Oregon in 2019, we'd already sort of designed a Barrett product with that in mind, that it would be more timber frame going forward. You know, The David Wilson and clearly the Red Row product have a lot more complications to their elevations and the plan is to come to use the road timber free out to Barrett, which is a substantial size of our business in terms of volumes. Okay, I hope that answers that question.

Thank you. Thank you.

Morning. Glynis Johnson, Jefferies. Three, if I may. A couple of parts, Barbara, a couple of parts. First one, to both parties. Why now? It would be lovely to hear why not 12 months ago. What is the urgency? Second of all, just in terms of the synergies, are they based on a certain level of delivery of homes? Is there a certain completions? And the third one actually is a couple of parts, Barbara. It's about the practicalities, really. How long would it actually take to put... red row homes on the planning of a barrett site barrett homes do they really fit on red row sites that have been bought for a red row product and then forgive me i don't know really what the difference has been david wilson and red row they have a very similar selling price very similar square footage one is for downsizers one is for upmovers are they actually any different in terms of what you get as a customer is there additional sales you can make by putting the two on the site

Okay, so if I'll start with the sort of why now, and then Mike will talk about synergies and so on. I'm sorry, Glynis, the third question was?

The difference between Red Row and David Wilson. The difference between Red Row and David Wilson. I can answer that. Yeah, no, that's fine.

Okay. So, I mean, I think why now, that's true of anything. combination I mean you've got to announce at a point in time so I think the key thing from our point of view is we see that as a medium or long term strategic move having the three brands under one portfolio is a really strong strategy and we've outlined it this morning part of it is synergies which Michael talked about in terms of cost synergies but part of it is being able to optimise revenues and to deliver more homes and we absolutely see that there's big opportunities in terms of being able to do that across the portfolio. In terms of the differentiation between the brands, between David Wilson and Red Rock, I think there is a very clear differentiation between the brands. I know Matthew is going to confirm that shortly, but I really do think there's a very clear differentiation. And I think brand differentiation in our portfolio of brands is fundamental. So we will be absolutely clear in terms of the delivery that we can achieve that differentiation. I touched on it in an earlier question I mean price point is a very very important part of the differentiation and therefore there's markets that you can see that David Wilson would find it more difficult to operate in and there's markets that Red Bull would find it more difficult to operate in so I think the deployment of the brands is the absolutely key part of that strategy but In standing in a David Wilson home or a Red Row home, I think there's a clear differentiation for the consumer.

Yeah, I mean, I think if you look at the product, that's the obvious thing. The difference in style is very unique. In fact, our heritage collection is 1930s arts and crafts. So, I mean, that's the first point. The one thing I would say about Red Row is the fact that, you know, I've talked a lot about the fact that the downsizing market is a growing market, and that continues to be, and it's quite interesting in Red Row in the sense of what level you get downsize the markets, because we can go to a million pounds and still get downsizes. In fact, the higher you go, the tender you do get more, because I think what you tend to think of a Red Row product is certainly, it's got the style of an old house in looks, but the modern interior. But I mean, the difference between them, but Dave, the one thing I will say about Red Row, we've got higher ASP, as David's already pointed out. I think it's fair to say that you've got now probably a bit more of a mixed policies coming in across planning authorities. I think it's fair to say that they want to see a bit of a broader range so we've probably in some instances had to go to put some more two beds in and three beds and actually this combination between the two businesses would be you know probably very well joined up that you know if Barrett's continued on doing what they're good in terms of first time buyers on the two bed and we could concentrate more on the larger size and split the site on that basis that would help us a lot. You know, but also, you know, the fact that the three-storey tends to be a bit more David Wilson on the three-storey side as well. But there is a distinct difference between Red Row and David Wilson, which I think most customers would recognise in it, the fact that they're in the same areas. But I think we've very much highlighted what the brands do and what the, you know, upward movers and the fact that a premium product... Mike, do you want to pick up on that?

Yeah, if I just touch on synergies quickly. So, I mean, we've been through a really detailed exercise, as you would imagine, over the past few weeks with the Red Row team and our team to look at where the synergies can come from. And you'll know the way that accountants report on that. So we're very confident that we can deliver the 90 million of synergies. It's based on the businesses as they are today. So, I mean, we've looked, we talked about three distinct buckets. The first being the alignment of the procurement process and the supply chains and so on. There's a good opportunity there when the businesses come together. And then the remainder of the synergies come from the physical combination of the business. So we've talked about optimising the geographical coverage of the divisional offices. So there will be some that fall out of the network as part of that. And then when we look at the head office and central functions, clearly there will be duplication of roles. You know, think about the PLC infrastructure and head office infrastructure. So, you know, there's a lot of work we still need to do to make that into, you know, a sort of detailed plan. But we are very confident that we can deliver the numbers. I think it's also important just to point out that, you know, we don't expect to see any, Reduction in site numbers, so construction and sales will be largely protected because we need to grow the business from the date of the combination.

Sorry, just the speed of being able to put a red row home into the planning on a Barrett site and vice versa.

I think there's plenty of opportunities. I mean, if you actually look at, I think we'd combine our land portfolios in terms of facts. I think some would probably, if they're large enough, would have a three brand. I think there's some way to do a two brand. And I think also there's actually areas where probably some of our land, our land made land itself to Barrett's and therefore they put theirs on there and some of the land that the Barrett and the Barrett Group own, we'd put ours on there. I think in terms of timing, you have to take it on board, I understand that. I don't think it's a particular issue, certainly not on the larger sites where you're just adding another brand on, where effectively you are adding, as we said earlier about outlets, it'll be a new outlet, it'll be a scheme that you're taking more plots off a piece of land, but you know, it's In terms of, you know, you're talking about six months in terms of planning. I mean, ultimately, normally when you've got the reserve matters, the battle with the planning authorities is over at that point and actually coming along and potentially putting something else is probably less of a position. It's more the principle in the first case.

Thanks. You've got the microphone.

Chris Millington from Deutsche Niemes. Can I ask firstly just about embedded land bank margins? You've both commented on them before. Do you think the land bank margin you're buying in Red Row is higher than what you can achieve in the open market? That's number one. Second one is just really about what the trigger to excess cash returns would be. You've mentioned it a couple of times in the meeting this morning. And the final one is just to explore current trading in early 2024. I presume you've seen a sequential improvement for both companies, but also can you just comment around incentive levels and whether or not you're changing those in light of the high sales rate?

Yeah, well, I think if Mike picks up, I mean, Mike covered current trading, so if Mike picks up in terms of excess cash and current trading, I mean, I think in terms of margin, I mean, our activity and red rose activity and I think most companies activity in the land market over the last 12-15 months has been quite muted. We see that there is land that is coming through to the market and has been coming through to the market during 2023 with planning concerns that is available to purchase and levels of interest are lower. I mean, clearly there's more volatility on cost, and there's been more volatility in terms of demand and selling prices. So we don't see there being any great shortage of land in the market, and we see opportunities to buy land. I think it's much more about, is this the right time? And certainly some indicators that things are are more stable and I maybe ask Stephen to kind of comment on that a little bit more. In terms of the underlying margins within the Red Bull business and the implications in terms of the transaction, we're very, very comfortable with that. We see that, as we've said, we see it's earnings enhancing for both businesses in the first year. We see our ability to continue to deliver strong margins from both of the underlying land banks is good.

I'll just touch on land, yeah. Yeah, in terms of land, Chris, we've got visibility of what's in the pipeline. I think the last sort of three, six months, there's been a number of sites that have come out into the market that haven't sold. You know, the agents have been embarrassed in some cases that they've only had two or three offers for those sites. So that's, you know, held back and they're planning a lot of cases. A lot of the sites will be coming out. in spring 24. So that's what, speaking to most of the agents, their plan is to try and get some land out before there's a change of government and perhaps different levels of taxation on land. There is a lot of large sites in the system. I think we've mentioned that in previous meetings, that the planning system function of the NPPF was to bring forward bolt-on communities, 150, 200 unit sites, but there is now a lot of Sustainable urban extensions coming through 500,000 unit sites. This arrangement will certainly help on those sort of sites where you've got large sites where you can sort of split in some cases three ways.

Do you think it meets your hurdle rate of 24% the acquisition?

Yeah, we do. When we look at the returns that are coming through in the short and medium term, we see the opportunity for very strong returns. Mike's obviously talked through in terms of cost synergies, and we've talked about the ability to drive more revenues, and we see that as being absolutely key.

I'll pick up on the other part, Chris. Just on the margin point, clearly that is dependent on delivery of the synergies, so that won't all be delivered on day one. That will flow through as the synergies are delivered over the first couple of years. On excess cash, I mean, I think the philosophy is very similar. Both companies, you know, have run conservative balance. We both have a very sort of similar outlook on, you know, the levels of conservatism that we apply. And I think that will carry through into the combined group. And in terms of the thought process we'll go through, clearly there's a growth agenda, so we want to invest in... part of the combined group, so there will be a call on cash for that. Both businesses have building safety provisions, so we know that there will be some outflows on that over the next three or four years, so we need to take that into account. And then beyond that, we would clearly look to return excess capital in the way that we've looked at it in the last few years. So I think the philosophy will be very consistent. And then coming on to first-half trading, so you're right, I think quarter on quarter we saw improvement, and since Christmas, as I said, the rate at 0.6 is strong, and I think it's a good indicator coming into the spring selling season that the customer is feeling in a better place. For Barrett, the incentive levels we're offering are still pretty similar to where they were before Christmas. the increased demand hasn't sort of flowed through into affirming a pricing at this point. If you look, we do the sort of like-for-like plots year on year. In the first half, we would have seen price deflation of about 6%, which really is reflecting the incentives and so on that we talked about as we went through last year. So we're still seeing the incentives at the 6% to 7% level, but clearly we'll keep that under review as we come into the spring selling season.

with how the market's picked up driven mainly by mortgage rates and the changing in mortgage rates but you know it's the same principle at the moment incentive rates remain the same I think it's fair to say we're not looking to adjust them yet we want to see this rate continue but ultimately if the rate continues that incentive rate will come down it's economics really Thank you.

Gregor Kukic from UBS. Maybe just sort of a broad point on the level of due diligence that's been going on in both directions, I guess. I think you sort of talked about best practice sharing and I guess sort of operational improvements. I guess I want to understand what have you learned, if anything, from each other in this process that sort of leads you to believe that ultimately there's some sort of benefit to be had from sharing best practice and so on. And maybe coming back to the excess capital definition, I think there's a slide suggesting that you sort of want to be – net land credit to neutral, right, or positive, right, so cash minus. And then I guess there's another, I think, roughly a billion of provisions if you add the two up, give or take. So should we really be thinking about the sum of the three before you start thinking about... capital returns over and above a dividend. And then maybe a final point on the margin. I mean, if you're kind of gunning for the gross as you are with the new overhead structure, are you suggesting the business should be making a 20% operating margin? Is that roughly what you're steering us towards? Thank you.

Okay, if I pick up maybe in terms of the level of due diligence, and I'm sure Matthew would like to talk about that as well, and then if we might pick up in terms of excess capital and provisions and also in terms of the operating margin percentages. I mean, I think in terms of the due diligence, the actual due diligence that we've done is just appropriate for a transaction. You know, we're buying a listed company. And because it's an all-share combination, then the reality is that Red Rule have undertaken due diligence in relation to barriers as well. I mean, from our point of view, I would say that everything we did on due diligence was just confirmatory in terms of what we expected. very well run business very conservative balance sheet I think we've been just very impressed and found it quite compelling as to how similar the businesses are and there's nothing in terms of our interaction with the team interaction with Matthew and Barbara and some of their team that tells us anything other than that so it's been really excellent from that point of view Matthew's loved it as well.

Oh, I've absolutely loved it, yeah, yeah. I think the reality is we didn't need the due diligence to tell us that we're culturally aligned. We always knew we were culturally aligned in terms of business. You can see that from the outside, you know, and so ultimately when you see this is a long-term tie-up, they'll benefit both businesses and you can see it from a mile away, you know. In many ways, we're already leading the industry between the two of us, sustainability, working with our employees, our trainees, how we treat our customers in terms of quality, in terms of the customer service they give. And ultimately, you will always know that when two businesses come together, One will do it a little bit better than the other or will do it differently than the other. And we'll work through that and basically pick off the best of it each. You know, we're looking forward to learning from these guys in certain areas. And I'm sure they're interested in learning how we do it. And, you know, we'll come up with the best thing. But ultimately, we'll continue as two businesses, as one business, leading the industry in everything that we do.

If I could pick up the other two bits. So, I mean, on excess cash, I think you're right in what you're saying. What I was saying to Chris a few minutes ago is that we'll look at it in terms of land provisions and then other uses for the cash. So that's a reasonable framework to use. And as I say, I don't think there will be any significant change in the way that we look at when we'd make excess distributions. On operating margins, we were not guiding to a combined operating margin. I think we've obviously said 24% growth, and you'd expect between 4% and 5% of SG&A costs down to operating. So you're going to be in that 19 to 20 range. So I think we'll come back. We're getting well ahead of ourselves at this stage, so we'll come back with guidance for the combined group when the time is right.

Thank you.

Thank you. Will Jones from Redburn Atlantic. Three, if I can, please. First, sorry to come back to land bank gross margins, but I think the Barrett release has a disclosed 18.5% for the land bank at December, down from just under 20 at June. Could you just run us through the assumptions on that, please, regarding any future cost movements and the level of volume against that? And just to be completely clear, there is no equivalent for the Red Row land bank at December. Is that right? You haven't done that historically, so I assume that's... No, we've not, no. Yeah. Okay.

No, that will, that will. No, great.

End of. The second one was just around outlets. I think in the most recent period in the release for Barrett, it's 330 down from 370-odd, which is more than a 10% fall. How do we see that against the 6% guidance for the year to June? And I know it moved around quite a bit last year, so perhaps it's just a comparative. And presumably, no, but would you give us any steer on what the combined group outlet position may be approximately year to June 25th? And then the last one was just around divisions. I know the whole industry has been reviewing its divisional structure anyway in light of the downturn. Do you think either business would have been closing offices irrespective of the transaction, just given the volume environment?

Thanks. I think if Mike picks up in terms of land bank and the margin in the land bank, Stephen can just talk about outlets, which clearly is going to be a by-product of what we've been doing as Barrett in terms of land acquisition. But the one thing I would say on outlets is we have held outlets relatively high. And hence we've held output relatively high. And one of the ways that we've been able to do that has been doing more dual branding, bringing more Barrett onto David Wilson, as Stephen outlined this morning, and also bringing more David Wilson onto Barrett. So really more dual branding has been a key part of that. In terms of divisions, I'll let Matthew answer in terms of the Red Row position. But our position has been very clear. We've said publicly that we want to maintain capacity. And the way we've addressed that, and I understand that different companies take different routes, but we said in October 2022 that we were going to apply a recruitment freeze. And we've applied that. You know, it's not been a hard freezing that if somebody's left, we haven't always said we won't replace them because sometimes we do need to replace them. But our headcount is down round about 10% by applying a recruitment freeze. but we've wanted to maintain the divisional network because we all know that the market will improve at some point, and therefore having that capacity is key. So that's been our consistent position on it. Matthew, do you want to just pick up on that?

Yeah, I mean, it's fairly relevant. Looking backwards, this is about business going forward and the future it can hold, but we have no plans to close any more divisions either. But we're talking about the future more than the past of what's happened. We're excited about the prospects of what this deal will bring us. Mike, do you want to pick up on the land bank?

On the land bank, yeah. I mean, we obviously reflect current trading conditions in the margin that we see in the land bank. So that's factoring in our view of current selling prices and current bill costs. And as we've said, clearly they've both been under pressure over the past few months. So that's just really reflecting the current position. In terms of volumes, clearly it's based on the volume guidance that we've given and the way it flows through. So it's really based on our view of the business as we're running it today. And as you say, there's been a reduction in the first half, but really that's just reflecting the cost and sales price pressures that we previously talked about.

In terms of Outlook, Will... In the first half, we averaged 3.67. We only opened 15, which is a function of the land bind and the planning process. I think at the end of December, we ended up at about 3.42. And regarding to the fact that the average outlets in the year will be 6% down from the starting position of 3.67. But throughout that period, we have been continuing to dual brand our sites, and we've got further sites in the pipeline to expand. and outlets to open from our existing portfolio. But, as I say, it's a function of the land and planning system and the market we've had. Some of the sites have been extended in life because of the slower sales rate, but the recent sales-level activity pickup will also impact the outlet numbers.

And the combined group too early, I imagine.

Yes, asked and answered.

Thank you. Clyde Lewis at Peel Hunt 3, if I may as well. Firstly, around the synergies and I suppose the sort of changes you're going to start making to the business. Are you going to do anything until the deal is actually completed or will you actually start to have conversations with... the suppliers, because obviously they can see the deal, the likelihood it's going to get done. Will you begin that process ahead of sort of formal completion? And I suppose also thinking about land deals that might come up again, the bigger sites that will obviously sort of tick the box in a bigger way. Will you actually sort of start that process a little bit ahead of time? That was the first question. The second question was really around Gladman. Does that... now become, I suppose, a bigger plus in terms of what they've got in their portfolio, given the bigger group in terms of the size. Are you going to be able to utilise their skill set and their land bank more than you were currently planning to do? And the third one was on... the state of the market and how it would change I suppose you know how easy the deal is to integrate is a stronger market easier for you to integrate and get going in terms of the synergies or is it actually does it make it tougher for you in terms of sort of how that process of getting to the 90 million comes through okay I think I'm just going to have a try at those myself Clyde okay so slightly rashly um

You know, in terms of the question about synergies and what we're going to do, etc., I mean, the answer is we're not going to do anything until we get shareholder approval and until we get regulatory approval. On the Barrett side, and I'm sure on the Redville side independently, we'll be doing a lot of thinking about it, and we've been doing a lot of thinking about it already. But actual things happening, no. The one point I would just pick up in terms of land, I mean, we've got a couple of sites that we're looking at that we're just sort of thinking, actually, they would be ideal for a three-brand strategy, but if we need to make those decisions pre, um, completion of the, of the combination, we'll, we'll decide whether we go ahead anyway, or we don't go ahead. And we'll almost certainly just go ahead anyway. So we're not, we're not going to wait and see. Um, I mean, Gladman, you know, we said at the time, and this is the thing about a public company, it all gets written down. And, you know, we did say what I really liked about Gladman and what I really like about this and what I really liked about Oregon is that they were really long-term strategic moves. I mean, Oregon, clearly, we are moving our production to timber fretting. Gladman was about being more invested in that type of business, Gladman being primarily a promotional business, but with a lot of land skills, and we feel that we've benefited hugely within the wider group in terms of the Gladman skills. So potentially, we know that Red Row have a lot of land skills, so I think that will all work well, but we still see... Gladman has been a real plus for the group, a standalone of the combination. In terms of the market, I think that's the classic thing of what do you wish for? Well, obviously we wish for a strong market. And if the outcome is that the market's strong and it means it's more difficult to do the integration, well, that will be a good thing. But I think we certainly feel that in current trading, we're seeing something that's a little bit more positive than we saw back in October. I don't think either business is getting guyed away. But bottom line, we'd much rather have a really strong market and a delayed integration. But we demonstrated previously, and Red Row themselves have demonstrated previously in terms of integrating a business, that we know what to do. So I think we can put the processes in place. We'll have a strong team to deal with it. And it's in everyone's interest to get the integration to be as fast as possible.

Can I just add a couple of things now? I think in terms of timing, when you talk about doing it at the top of the market or doing it probably certainly not at the top of the market now, I think it probably is the right time. We don't want to be doing it at the top of the market. It's hard to do this sort of stuff at the top of the market while you're trying to buy land and do everything with it. At this point, we can integrate a business. It would be nice to see that the market's coming. We're really pleased with good trading. but actually gets us in a great position, and then we'll have the cash ready for when we need to get out there and start buying sites and moving forward. But as I always said, this is a really long-term tie-up. This is about businesses coming together for a long time, and that's what we're excited about in terms of a business tie-up. But yeah, it's easier at this time of doing it than it is at the top end of the market, although we would like that to come very soon.

Okay, I'm not sure how we're doing time-wise, but... I can't see John. Oh, okay. John looks quite relaxed. He's fine.

Morning. It's just one question. Sorry. I just wanted to ask on the CMA side of things. You expressed quite a high level of confidence that you think this will be approved. I wonder if we need to think about the ongoing housing market study. I don't know if you've sounded anyone out at the CMA. Just Talk a little bit about why you have such high confidence that this is likely to sail through.

Yeah. I think that we understand what's required in terms of looking at the market and looking at the positioning of this combination. And obviously that's a consideration for both boards. It's not just a consideration for the Barrett board. So I think it demonstrates the fact that we're here this morning that we're very confident the transaction will get cleared. I mean, really beyond that, it's a CMA process, and clearly, as you would expect, we will cooperate fully with the CMA, and we'll seek to get the process completed as quickly as we can. But we have a very high level of confidence.

David, just on from the web, we just have one question. So if I could just ask that one, then we can go back for any final questions on the floor.

Is this a real question, John?

It is. It wasn't designed to give you a breather. No, it's actually the others have been answered in the room. It was just when you consider the combination looking ahead, will there be any change in the affordable content that you think the combined group would need to deliver? Or would that be a simple aggregation of what is done by Red Row and Barrett separately today?

I mean, in the principle of it, there would be no change. There's no reason for there to be a change in terms of affordable under Section 106. But I think the way the affordable is delivered... may alter, and Matthew touched on it in terms of if, for example, Barrett and Redroll were sharing a site, then the way we deliver the affordable may be different to the way that Redroll currently deliver the affordable. But that's something that we need to look at in time, and it will depend on a site-by-site basis. That concludes the web questions that haven't been answered. Okay, and It looks like we've concluded the questions in the room, I think. I'm just looking around. So I thank you very much. I mean, I know for some of you it was a completely unscheduled announcement and for some of you it was a slightly different announcement. But I do really appreciate your time. So thank you very much, everyone.