Henry Boot PLC

And just before I start the formal parts of the proceedings, just have a look at the image of that. That, believe it or not, is an industrial unit, and that's our development at Raynham. And it overlooks the Thames. You can see how it's a computer-generated image, but it will look like this. You can see how green it is. It almost looks like an R&D technology part, doesn't it? that was being built in the 1990s, and that is net zero carbon. So that's the sort of quality of development that we're developing, even on the industrial market. Nice to see a picture of what we do, isn't it? so morning everybody so we're going to do the normal running order with me covering our operational highlights i'll then give a brief overview of our strategic targets then darren's going to update on financials and land promotion and then i'll go through development construction and finish off with outlook So you can guess what I'm going to do. First of all, I'm going to talk you through our investment case. And I know you're all familiar with this, but... Again, I think that it's useful. We're focused on three long-term markets with positive structural long-term trends. And whilst our markets have slowed, I think that these results show that due to the quality of our sites, the quality of the schemes that we promote, and the premium homes that we build, that you can maintain encouraging levels of demand. It gives you resilience. More importantly, nothing that we've seen over the last 12 months shakes our belief in our three markets. We've continued our long record of managing our balance sheet effectively, and you can see from the bar graph that the NAV just continues to remorselessly grow. With 97,000 plots and a development pipeline of 1.26 billion all held at cost, we've also got ample opportunity as markets improve to hit our growth and return targets. And all this means we're confident enough to increase our dividend by 10%, which is 4.8 times covered. And our TSR in the long term remains attractive. Over half one, we made an operating profit of £25.7 million. And I'm going to go through it by subsidiary. On land promotion, the business sold 1,900 plots at an increased profit per plot of £11,400, driven by a very profitable sale, a freehold sale at Tunbridge. Darren's going to go through that in more detail in a minute. But just to say, for the right sites, there continues to be demand, and we currently have nine sites under offer. We're also growing our land portfolio. It's now at 97,000 plots. And as planning gets tighter, we believe these plots will be in demand. Turning to property and development, we completed on £70 million worth of development our share. 100% of that has been profitably pre-sold. and we've maintained a high level of committed developments, again our share at £186 million. Nearly half of that is in industrial. Our investment portfolio has grown to £112 million through retaining completed developments. It's again outperformed the CBRE index. Stanbridge iJunk Venture House Builder has achieved sales rates close to our target, including over July and August, at just under 0.5 houses per week per outlet and is on track to hit its target of 250 homes this year. And that's showing an increase in volume of 40% from last year. On construction, operating profit of 4.4 million is below budget, but that follows and is in line with a general slowdown in the industry. And all this means, once you've deducted £4.2 million of central operating costs, group operating profits, as I say, is £25.7 million. And before leaving this slide, we also sold Banner Cross 4 at a premium to Book, and we'll be moving to our new head office in November, and that's in Sheffield City Centre. And these resilient results mean we still deliver on our medium term objectives. Excuse me. Capital employed is nearly at £413 million and is on track to grow to our £500 million target. Rocky at 6.3% is expected to finish the year within our stated range. Hanham's five-year running average is now at 3,175 plots, so it's getting close to the 3,500 average. plots medium-term target. To achieve development completions of circa 200 million, you need to maintain a development programme. And in a slowing market, I think HBD has done well to maintain a committed programme of 186 million. And as markets improve, we'll be able to scale the business up by drawing down on its £1.26 billion pipeline. In terms of investment portfolio, we made £42 million of accretive sales over the last couple of years, and there will be opportunities to grow the portfolio back up to the £150 million target by retaining completed developments, but we're going to be patient in doing that. The demand for Stonebridge's premium homes endures. We expect to complete 250 homes in 2023 and we're planning for more in 2024. Therefore, we're on track to scale the business up to 600. We continue to make good progress against our responsible business strategy, including our NZC equality, diversity and inclusion targets. And what I will do at the full year is I'll give you a more detailed presentation on that. And in the interim, there are details in the appendices of your pack. But what I wanted to do today is just to show you a quick image. of our new head office. And the move from a large listed hall to a modern, efficient, open plan building with great ESG credentials, that's helping us in our ambition to be more progressive, more open, more diverse and a more environmentally responsible business. And with that, I'm going to hand you over to Darren.

Thanks, Tim, and good morning, everyone. I can now take you through our financial highlights. Despite challenging market conditions, revenue still grew 25% to £180 million in the period, reflecting the continued completion of strategic land transactions, delivery of our committed development programme, and growth of our house builder, Stonebridge Homes. On the back of this, gross profit remained resilient at £40.8 million, only marginally down on that of the prior year. With the prior year having had the benefit of a significant one-off joint venture residential land disposal, the group achieved an underlying profit before tax of 23.3 million. And whilst earnings per share has decreased 42% to 14 pence, we have increased the interim dividend by 10% to 2.93 pence, in line with our progressive dividend policy, and still almost five times covered. With operating profit down 34%, our return on capital employed for the six months of 6.3% sees us on track to achieve the lower end of our medium-term strategic target of 10% to 15% this year. In 2023, we've continued to focus on delivering existing opportunities in our key markets with selective investments in new opportunities and tactical disposals from our investment property portfolio occurring since the half year. Within the portfolio, including investment properties held in joint ventures, values remain stable following the downward valuation movement seen towards the end of 2022. The increase of £9 million in the period therefore being derived from the retention of an industrial asset from our development at Luton. Following the half year, we've since disposed of three properties for just over £11 million at an average 19% premium to their December book value. We've continued to invest in our growing house builders land bank and work in progress, adding some £11 million to inventory, and having invested £4 million to deliver in speculative developments, inventory has increased around £6 million overall, following disposals of £9 million from strategic land. Net debt increased to £70.8 million from these investments and also due to increased working capital requirements resulting from land sales on deferred payment terms to the major house builders. With gearing at 17.5%, we remain within our target range of 10-20%. We've got a secured borrowing facility of £105 million, and we will look to commence refinancing activities towards the end of this year, with a view to having a revised facility in place early next year, well ahead of the facility renewal date in January 2025. Early discussions with all of our banking partners, one of which we've banked with for over 100 years now, have all been very positive. Finally, our net asset value per share increased 3% to 303 pence, or 298 pence, excluding the pension surplus. In terms of cash generation and the movement in net debt, the cash flow sees us recycle retained profits and funds from operating activities into continued investment for the future. We started the year with net debt of £48.6 million, having then achieved an operating profit of £25.7 million. adjusting for non-cash items of £2.1 million and paying interest costs of £0.7 million, corporation tax of £0.9 million and dividends of £8 million, we ended with a cash inflow from operations of £14 million overall. Our interest costs have remained low, with our facility having a 1.4% margin over Sonia. Each 1% of interest gives rise to a charge of around £700,000 at current average debt levels. However, overall, our net interest cost benefits from funding returns on investments in joint ventures. We then made overall investments of £30.4 million across all areas of our business, including adding to our investment property portfolio, growing inventories relating to the land bank and work in progress within Stonebridge Homes and delivering our committed development programme. With working capital and other items increasing by £15.8 million, again reflecting land disposals on deferred payment terms, we ended the period with net debt of £70.8 million. If I can move on now to the operational review and start with land promotion. At 1,900 plots, low volumes in Hallam have been offset by a significant increase in gross profit per plot to £11,400, allowing them to maintain their level of operating profit at £17 million, aided by a significant freehold disposal of land at Tunbridge, mentioned by Tim, which I'll give you more of an insight into shortly. Whilst land values are reportedly softening, down almost 3% in the year, we continue to see good demand for smaller sites in prime locations. Having taken three such sites to market in recent months, we've seen demand from up to 16 interested parties, and despite the larger players now appearing some way down the list, values remain very sensible. We've continued to add to the portfolio, securing sites with the potential to deliver over 3,000 plots and ending with over 97,000 potential plots within the portfolio. Whilst current period sales have reduced plots in the portfolio with planning permission, having 8,335 plots still in stock equates to almost two and a half years' worth of sales, and over 2,000 of those plots are currently under offer on nine sites, as Tim mentioned. With our portfolio all held at cost, no valuation gain on securing the planning permission on those plots is recognised until the land is sold. We anticipate demand for these plots will continue to increase as we see minimal relaxation in the planning system. Evidenced by recent announcements to tackle nutrient neutrality through the levelling up bill, which would have been good news, again the politics seems to have got in the way. We also have over 12,000 plots currently working through the planning system. Having achieved determination on 804 plots, this is already almost twice that achieved in the prior year, but remains lower than expected, also demonstrating the continued difficulties in the planning system. Looking at this slide, we can see the geographic spread of our portfolio, which continues to be one of the largest strategic land portfolios in the country amongst the listed house builders. 78% of the portfolio is in the Midlands and south of the country, where values tend to be higher in general, and 25% of the portfolio is in the Golden Growth Triangle of London, Oxford and Cambridge. We continue to see demand for quality sites in these prime locations, albeit, as expected, smaller 100 to 200 unit sites are in the highest demand in the current climate. The chart of plots sold shows we are now getting closer to achieving our medium-term target of selling 3,500 plots per annum, with the five-year average now at 3,175, despite the low volume achieved in the year-to-date. The average gross profit per plot has increased in the period on the back of the freehold disposal at Tunbridge and demonstrates how this metric continues to vary with tenure, volume sales, land price inflation and location of sales within the UK. Finally, just looking here, we can see the benefits of having an element of freehold land within the portfolio. In 2021 at our site in Tunbridge, we managed to acquire the freehold of the site, which we'd held under option since 2004. Having secured planning in 2022, we've sold the site in two phases to Carla Homes, first phase being this year, the second phase to conclude early next year. On conclusion of that final sale next year, the site will have returned an impressive internal rate of return of 27% per annum, as well as delivering new ecological habitat areas and wider community benefits, including cycleways and a contribution to public transport infrastructure. And now I'll hand you back to Tim, who will continue with property investment and development.

Thanks, Darren. So property and development, which comprises HBD and Stonebridge, you can see it made an operating profit of 8.5 million. HBD completed on 70 million our share of developments, and that's all been successfully pre-sold. We maintained a high level of committed development at 186 million. 98% of the development costs are fixed. Included in our £1.26 billion pipeline is £50 million for the first phase of our mixed-use campus, Golden Valley, which is next door to GCHQ at Cheltenham. We expect to sign a funding agreement for this first phase with the council over the next half and then we expect to also put a planning application in and we hope to be on site in the summer of 2024 on the first phase. The investment portfolio has outperformed with a capital return of 0.8 of 1% as a result of growing rental values in industrial and also the investment markets stabilising. Our total property return over the six months of 3.3% was better than the index at 2.5%. The portfolio is made up primarily of high-quality retained developments, but with some investments which have clear development potential held on shorter leases. So despite that mix, we benefit from a healthy weighted average lease length of 10.6 years. Past half one, as Darren said and I mentioned, we sold three smaller assets plus Banner Crosshall for £11 million at an average premium of 19% to the December 2022 valuation. Now, looking at the committed programme in more detail, first of all, you can see that we've committed to three industrial schemes totalling 700,000 square feet, the majority of which has been pre-sold. The only speculative scheme is at Rainham, and I'm going to go through that on the next slide. On industrial generally, whilst occupier take-up has slowed from the record levels seen during the pandemic, demand does remain resilient due to structural drivers. Rental growth, for example, over half one at the index level has been 3.6%. So consequently, we do expect to commit to more industrial development over the second half. Next, we've got urban, residential and commercial. Post half one, we completed on TDT. And that is the fourth phase of our successful chocolate works development at York. And then you've got settle and island. And I'm going to update you again on those on the next slide. Total estimated profit on all of the schemes is £24 million, equivalent to an average profit on cost of 15%, of which only £4 million has been taken, and that's being taken on Walsall Spark, and it's being taken as we carry out the local authority-funded remediation works. And once those works are completed next year, we expect to exercise our option to buy that site, which is right in the heart of the UK's national motorway network. Now, I said I'd just talk to you a bit more detail on some of the schemes. And this also, I think, slide gives us an example of how we create value. And I think it also shows the quality of the development that we're promoting. So from left to right, I think I've got that right, Power Park Nottingham. I might not have got that right. First on Power Park Nottingham, we acquired the site, got planning and secured forward funding, completing it recently, and it crystallised a 22% profit on cost. On Raynham, that's a high-quality NZC scheme. It's the photograph that I started the presentation with, serving London, and it's made up of four units ranging in size from 40,000 to 170,000 square feet. It's in an 80-20 JV with bearings, so our share of GDV is £24 million. and we're currently following up 750,000 square feet of requirements. And typically we'd expect to do lettings on a scheme like this either side of PC, and PC is early next year. Our appraised rents are £15 per square foot. I think that that's great value for industrial within Greater London, and I'm encouraging the team to beat those rents. On settle, as originally planned, we'll be looking to sell around a quarter of the 102 apartments pre-Christmas, with the majority released when customers can inspect the completed building in April next year. This is a high-quality building with communal services situated in the trendy jewellery quarter in the centre of Birmingham. And our agents, Knight Frank, believe we will be able to sell those apartments in line with our £32 million GDV. And that's £475 per square foot. Potential profit, 15%. And then finally, Ireland. This is another prime NZC scheme in the centre of Manchester in a 50-50 JV, this time with the Greater Manchester Pension Fund. And our share is £33 million of GDV. It offers 91,000 square feet of Grade A office accommodation and it will complete in Q3 2020. And although we're already talking to occupiers, the real launch of the building was only in July of this year. And currently we're following up 400,000 square feet of requirements. And there is interest in buildings with good ESG credentials. So turning to Stonebridge, our premium house builder, it's achieved sales rates close to our target through half one and over the summer months. During half one, sales rates averaged 0.48 against a target of just over 0.5. And in July and August, it was actually running at 0.52. Sales price against budget in half one was plus 1.2%. Against a slowing market, we're pleased with this performance and I believe the demand is because of the premium quality of homes that we offer and the well-located sites that we're developing. Supply chain restraints and cost inflation at 8% is easing, although we do think that it will continue to eat into our margins. Up to the end of August, 97% of this year's target is effectively sold, so no surprise we believe we're going to hit our target of building 250 homes this year. Now, we're not insensitive to market conditions, but our plan based on the present level of demand is to increase volume again next year. We're therefore taking the opportunity to buy some more sites. And in this regard, the level of bidding in sites has become less aggressive. And vendors are definitely interested in dealing with people like Henry Boot with a great reputation. But we're finding sensible deals. We're not finding cheap deals. In terms of margins, our gross margins remain in the mid to high teens, although cost inflation, as I say, might eat into that as the year goes on. And in the medium term, as the slide shows, as we scale up the business, we expect our gross margins to be at 20%. The construction segment, like the rest of the industry, has been impacted by cost inflation and supply constraints, yet has remained profitable. Remember, this is just a small part of the group, accounting for just 2% of capital employed. As I reported last time, construction has experienced challenges on two of its large urban development sites in Sheffield. That's Kangaroo Works and Block H. Kangaroo Works completed in August and Block H should fully complete in the next month. So we will be able to draw a line under those challenging schemes. Our £47 million refurbishment, Cocoa Works, in York is on budget and on track for completion in early 2024. There is work around, but we remain selective on what work we will do, so we expect our turnover to be below our target for this year. Banner Plant is trading marginally below expectation, although it has had a pretty good summer, and Roadlink continues to perform well. And that gets me to Outlook. Now, there's no doubt that the rapid increase in short-term rates is reducing demand across all three of our markets. And there is more uncertainty around the timing of strategic land sales and, of course, the cost of funding all development schemes has risen. More positively, we're seeing cost pressures ease and science suggests this will continue at least for the rest of the year. Planning, I'm afraid to say, remains very difficult. Whilst we're not immune to these pressures and difficulties, I believe our focus on high-quality real estate affords us a degree of resilience. Hallam promotes high-quality, significant sites, the majority in the south of England, many of them around the Golden Growth Triangle. As planning gets tighter, these sites are going to be in demand. HBD delivers institutionally quality development with an increasing emphasis on strong ESG. The majority of our pipeline is industrial, where we believe demand will endure. And SBH builds premium homes in affluent locations. In a tough market, we're pleased that in effect 97% of this year's target has been sold. and we will increasingly turn our attention to carrying on the scaling up of the business in 2024. Our balance sheet offers the same quality and resilience, so this is going to allow us to continue to invest in land both for Hallam to promote and to scale up Stonebridge. It will also allow us to continue to commit to HBD's quality development programme. All of this means we have the confidence to increase the dividend by 10% and we also remain confident that we will hit our medium-term strategic growth objectives. Thank you. We're going to start off with any questions from the room, please. Kristen's first off.

Thank you. Christian York from Numis. Three questions from me, if that's okay. So first of all, just on land, I know that business has done a good job historically of underpinning future profitability through exchanges, etc., Obviously, you pointed to the plots and sites under offer, but just what more can be done as we progress through the rest of the year to underpin 2024 results in Hallam, given the tougher backdrop. The second one is just in property development and just the confidence around the shape. of the pipeline given the macro situation and just how quickly those sort of projects can be pulled down and I assume the key issue is funding for a lot of them but just yeah exactly right And then I suppose the final one, just on the medium-term targets, it's been a few years since you set them, just when you think £500 million of capital employed should be achievable and what you'd need to see to deliver a rocky at the top end of the range.

Thank you. Okay, all right. So I'll have a go on the last two, and you have a go on... what we've got in store for land. So I suppose the quick question to answer is the medium-term targets. And we set those out in 2021. I'm pleased with the progress, and there's nothing that we've seen that suggests that we won't hit those medium-term targets. And, Kristen, you've asked me this before, and I'm always a bit coy, aren't I, on the exact date, because it feels a bit too contrived, doesn't it, for me to give you a specific date. But when we set them out in 2021, we were doing a five-year business model. Now, you're not going to see anything printed saying we expect to hit these dates in March 2026, but that's broadly our ambition. It's the medium term, and I think of the medium term being around five years, and we are on target for doing that, which I think, if you think about the environment that we've seen since the beginning of 2021, is no mean feat. Now, in terms of the pipeline, and I think that you're also picking the funding of it, I think development is definitely going to be more challenging. And development is going to be more challenging because the funding markets are going to be more selective over what they fund and the cost of funding has gone up. And you all know that. Now, I think that we are at an advantage to many of our competitors. One, because of the quality of the schemes that we promote, and two, the fact that two-thirds of our development pipeline is in industrial, and you can still get funding for industrial development. So I think that we will be able to carry on our model of some developments being funded by institutions. I think that we will also draw down over the next year or so and do more industrial developments, and actually a lot of that will be funded by occupiers who are buying those schemes off us. And then you all know how resilient the Henry Boots balance sheet is. And as Darren's known one of the banks for over 100 years, which is truly remarkable. Because I could have sworn he was in his 40s. We'll be able to draw down on our facilities. So I think, Kristen, we will navigate our way through some of the difficulties of the funding market, but we've definitely got a good pipeline. And as you well know, but it's more for perhaps people who are listening in, it's all held at cost. Darren, on the land.

Yes, so then on the underpin of land, clearly we've not got the level of exchanges we've seen for 24 currently, as we perhaps had in previous years moving forward. But you have just heard me talk about the Tunbridge site, which phase two is currently set to land in next year, which is an incredibly profitable scheme at 27% ARR, really nice part of the world for that one. We've also just heard in recent days, not quite time to redraft the announcement, but we've just exchanged 100 plots on another scheme. We've got the nine sites that are under offer with 2,000 plots in total working through, and we believe we've just got another site under offer for another 500 plots. So there are a lot of moving parts, as always. The team are also working up several sites to take to market for for next year, including 1,000 plots at our Coventry development where we sold 250 plots this year, another fantastic scheme. So, you know, we're still very hopeful that by the time we get to the year end, we will have more exchanged going into next year. but also that we've got already a good underpin from a few sites to start next year with and plenty more in the tank to be pulling forward to come through for next year. I think it's a really credible result, actually, that Hallam have achieved in this first half year compared to, for example, what others are kind of saying in the market. It also goes to the three that we put in the market in the last year, last few months, where, you know, 16 bids on one site, for me, is absolutely phenomenal, especially given the market conditions we're currently in. So the appetite is still there for decent locations, prime sites.

Brilliant. Thank you. All right. Adrian? Adrian Kiersey, Pamier Gordon. I'll just leave it at one, if I may. We've got the banking facility sort of in negotiation. The pricing will be what the pricing will be. But in terms of the way that you're talking to the banks in terms of the structure, should we expect it to be a similar type of facility in terms of how it is put together?

I think so, Adrian. I mean, it's early days in terms of the conversations at the moment. We're not out in the market. We're just really teeing them up to start thinking about that. We're about to embark on the group strategy review, which will give us a guide into kind of medium term requirements for debt funding within the business. I think initial conversations are suggesting that five year money might be as cheap as or broadly similar at the moment to three-year money. So we might consider locking in for a bit longer than we have done in previous times, but that will be to some extent driven by the rate. And I think we will, again, look to not take the full facility up front. We'll have some kind of accordion arrangement to allow... for the projected growth in the group so that we're not paying for everything on day one. And I think one thing that we will have a little more focus on this time round and how it's structured is potentially to introduce an element of hedging into the group's facility. So historically, we've probably been in a position where we might have returned to cash minimal debt. I think going forward with the development pipeline, we've got the investments we're making in stonebridge homes we can perhaps have a bit of visibility on an underlying debt level that we can then put some hedging on the top of

Clive Lewis at Peel Hunt I think I've got three if I may two really around land one on the sort of balance of option versus freehold land coming through clearly Tunbridge is freehold land but beyond that is there going to be a sort of shift in mix one way or the other over the next sort of 12-18 months second one around land was I suppose the attitude of landowners at the moment to to sell where are they in their thought processes are they more or less active um obviously land prices you're indicating it sounds like they they're not moving very much at the moment certainly not downwards um so we'll see on that front and then the last one was probably really around sort of construction and sort of tender levels um you've indicated revenue is going to be down on previous expectations But I'm just trying to sort of work out whether that's just because you can't make the margins work or whether there is less work out there to do as well.

Okay, right. Well, we're going to really mix it up. I'm going to do the land promotion questions and you're going to do the construction. We completely cover the business, don't we? So, first of all, in terms of the shift in the portfolio mix, I think that it's going to stay. We've got about 10% freehold, and then the rest is obviously promotion and options. And, you know, you're analysts. You can model all of that. And, again, we've modelled it. And we like the mix because the freehold... And every so often, but actually if you look at the stats consistently, it gives us a boost to the profit, so we like that. But it's quite capital intensive. So we've got to manage our capital because we're a growing business and we've got competing opportunities to invest. So... That mix, we think, can give us a good return on capital employed and also it means that we're not going to be using up too much of the group's capital. And then in terms of the landowner's attitudes... I think the pricing has come down, and we quote Savills. Knight Frank have got a different figure. Knight Frank is a more volatile index, isn't it? So we consistently give you Savills. So their loan prices are nearly 4% down over six months. And I think that what's also happened is, although that might be at headline level, We, when we're buying, and the house builders, when they're buying off us, they're definitely pushing out the payment profile. So the net effect is that prices are falling. In terms of landowners, they remain a pretty stoic bunch, and they can see that demand for land has softened, but they can also see... that we are making a real meal of the planning system. So if they've got land with planning, they rightly believe that that is a precious commodity. So they will not just sell it at knock-down prices. So you're not getting a flood of land coming on the market. And because you're not getting a flood of land coming on the market because of landowners' views and planning difficulties, I think that that is the thing that means that you're not having the volatility in land price that you might have seen 20 years ago. And then construction.

Yes, so in terms of construction, tender levels, I think as a nation, the UK has seen a slight decline in the amount of activity that's been reported out there in the construction markets. However, I think it's fair to say we as a business have still seen a good level of opportunities coming forward. In recent times, 12, 18 months, we'd seen a big shift towards pre-construction service agreements as a method to tender, which effectively is there's a quick tender to pick a chosen partner, and then you spend a lot more time working up the detailed design cost plan process. de-risk to a great extent the project before starting and what we've seen over the last 12 months that has driven the impact to our revenues is that our clients are taking much longer to get through those PCSAs and actually to a start on site and that's been impeding us to a degree ordinarily once you're in a PCSA you've got to get to the right budget but there's much more likelihood of you doing the work so I think we've got about 84-85 million currently working through PCSAs that we will hope to be starting imminently and into next year. I think more recently what we're now seeing as well is almost a shift away from that PCSA model, and it does go in cycles. We've seen it before, we'll see it again, but we're moving back to a kind of single-stage tendering opportunity. Much more competitive, but much quicker to get to a position where you can actually start on site and deliver in the work. Okay, Sam?

Morning, Sam Cullen from Peer Hunt. I've got three also. I guess kind of related to your point around freehold land, can you talk a bit about the challenges you might face in continuing to grow Stonebridge in a softer market? the level of capital you'd want to invest to kind of grow the volumes with probably inherently lower sales rates than you might have seen 18 months ago. So kind of how much whipping the ground, et cetera. And then, Tim, can you give some numbers maybe, and it's probably an impossible example, but the spread of values between good and bad ESG buildings, you kind of mentioned it in your spiel that... there's high demand for for good rated buildings basically and then lastly darren just if you could just remind i didn't get all the numbers in terms of the moving parts with the sensitivity to to rate moves in terms of the the interest costs you're paying and then getting back also on some of your leases thanks sam and sam just just just so i'm answering the the right question just just go through the stone bridge you want to know how the freehold land you can say in It's profitable, but it's more capital-intensive because you have to hold on to it longer. But you want to grow Stonebridge, but sales rates in the market have fallen from 0.6 to 0.4, 0.5. Therefore, to grow the business as rapidly as you wanted in the past, you need more land and whip, basically.

Yeah, good question. So with Stonebridge, perversely, well, no, actually, logically, we tend not to buy freehold. So the freehold is in the Hallam part of the business, and we will buy a piece of land at a reduced value. It's not agricultural value, and then we might hold it for 10, 12 years. Tunbridge was not a good example of that, was it? Because we bought that in 2021.

21, 22, yeah, but we've had an option for a long time.

So there we either played a blind or we got a bit lucky, a bit of both. Stonebridge on the whole we are doing conditional deals on getting planning we work towards getting planning and then we will buy the site once we've got planning and we're almost ready to go on site and again to help our capital work harder they will be typically phased purchases And that's how we manage it. And by its nature, Sam, because we are... So at the moment, the land bank will give us probably two and a half years of sales. We have to feed that business with more immediate sites, but they will still be conditional on planning. And then in terms of ESG... Well, it's difficult to be categoric. So some of the agents have talked about getting a 10% premium on rental values, but there's not a lot of data. So if you look at Manchester, Manchester will probably be two true NZC buildings that are in the market at the moment. I don't know how many there are in London now, but there might be half a dozen. And then as you go away from the Londons, the Birmingham's and the Manchester of the world, there will not be many. Instinctively, I think that there will be that sort of premium on the rents. I think that what is just as interesting is that the funds have definitely got targets to buy ESG funds. quality buildings. And because of the low level of stock that's being developed, they are finding it hard to buy. So I think that if they meet those targets, then they'll have to be bidding competitively to get the product. So I think that there will be a double premium. You'll get a premium on the rent It might be around 10%. That's what the agents think at the moment. And then there'll be a premium on the yield. And then I think that, moreover, I think that the ESG-rated buildings will be more liquid. They'll be in more demand. And to give you an idea, on Ireland, the construction costs were 10% more because you obviously try to diminish the footprint of the building and you diminish the operating emissions from the building. So if you... And that's just the costs, it doesn't flow through to the land. So if you can even get a 10% premium on the rents and the yield stays the same... you are more than covering your costs of developing the building.

Okay, and then just finally on kind of interest costs and the sensitivity there. So 1% increase in base rate at our current average debt levels would cost us about £700,000. Given where Sonia's currently at, we've got a 1.4% margin on that. Call the all-in rate about 7%. It means that we've probably got an annual interest cost of around £5 million at this point in time. But around 50% of our debt is then used to fund joint ventures where we have funding arrangements in place. So we get about 50% of our interest cost back and covered through that arrangement. All right.

Yeah, Alistair? Alistair Stewart from Progressive. Two sort of interrelated questions. You mentioned the up to 16 bidders on a site. Roughly what size was the site? And you said that... the volume house builders were towards the bottom. Can you just give a sort of indication of... You know, how many volume builders are near the bottom? Are the rest housing associations mid-sized, regional, private builders, et cetera? And also the deferred terms you mentioned, you know, are they kind of deferred in, say, two or three big chunks over the life of the site? Or is it really, you know, drip, paying on the drip, literally, you know, plot by plot? Oh, and also, related to that, is there a quid pro quo from your part that you can get an extra few quid out of on that land sale?

So in terms of that particular one, the site was just below 100 units, so it's still a fair-sized site, but down the bottom end of what we're seeing the appetite is for at the moment. In terms of the volume house builders, they were all on the list. I think one was in the top five, one was in the mid area, and the rest were all in the bottom five. in terms of the bids that were coming forward from them. I don't recall there being any social housing providers on the list. So they were all mid-size regional house builders that were bidding in the competition. And then on the deferred payment terms, I'd say historically, yes, you get a little bit of a premium built in up front for the deferred payment terms, and I think they will still be doing that in terms of how they're putting their bids together from a competitive perspective. But given where interest rates are, I certainly think that's, you know, coming at a bit more of a discount to us, particularly as they then push the time out. And, you know, you've seen the movement in working capital that we're having to then potentially arguably fund because of the way that they're behaving.

And in terms of the actual deferral... It's more like three chunks.

It's not on kind of like, you know, groups of plots and...

And again, it's down to the size of the schemes. It might be two chunks on a smaller site of 100 units.

Good. Okay. So have we got any questions on the phone or the web?

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No, just good to see you all. Thank you very much.