Peter Redfern - Group Chief Executive and Director Ryan Mangold - Group Finance Director and Director

Gregor Kuglitsch - UBS Investment Bank Jon Bell - Barclays Emily Biddulph - JPMorgan Cazenove Aynsley Lammin - Canaccord Genuity William Jones - Redburn Partners Charlie Campbell - Liberum Capital Andrew Murphy - Bank of America Merrill Lynch

Good morning. Can everybody have your eye at the back?

Fairly normal presentation I think today, sort of good run through on the first half market operations, a little bit of a strategy update in one or two key areas, but nothing fundamental I don't think, so sort of hopefully decent amount of time for questions. First of all 2017 first half overview, yes, as we have done for the last few presentations just highlighting our top three financial measures, all in a strong place.

Obviously, that sort of special dividend that we announced for this time next year is key, but very much in line with the plans that we've setout. And probably the number I'm most pleased with is that first half return on net operating assets and as we'll touch on the asset turn improvement that's come in line with that.

Just briefly touching on the cash conversion at the bottom of the page, obviously over 100%, very strong performance. We've only been reporting on that really because we didn't want anybody to say you're not reporting on it anymore it must be bad.

So we thought because it was a measure that people will naturally calculate themselves we keep with that. This is probably the last time that we will do it.

And we see this sort of underlying level maybe 70%, 75% that we've been kind of running out on average over the last three years is probably being well maintained for the next two or three years maybe a bit higher, but the first half particularly strong on cash and on asset efficiency. Pulling out a couple of the operating highlights, as I said probably the financial number I'm most pleased with is that operating asset turn.

We've had a debate on a couple of things, sales rates is one of the operating asset turn is a measure about where we think the new normal will be in a very different world with lower land values and a better capital structure. And 1.45 is the top end of the expectation that Ryan and I have had over the last sort of two or three years.

So pleased to see is at that level. I wouldn’t tell necessarily be quite as high at the full-year, but it's not going to fundamentally change.

So I think we've made a real step forward there. And I think it's largely because in an underlying way we've been buying bigger sites that involves more investments in work in progress and some more investment in land.

But really we're now at a point where that proportion of bigger sites is delivering and delivering consistently. You can see it in the high sales rates and the fact that we're able to deliver sort of production close to those high sales rates.

So the efficiency of the business is now sort of come into line. And as we see slower growth going forward that more efficient underlying sort of slower growth phase actually will help us maintain that kind of level of asset efficiency.

The other number that we had a lot of focus on both at prelims and even with our AGM statement is that sales rate, running roughly 12% ahead of last year and last year wasn't a bad sort of year in sales rate terms particularly strong. And as you can see in the first half, we followed that up with growth in production as well and we have touch in a sort of later slides on the first half, second half balance that sort of all change, but clearly a strong sales rate.

And as I have said before and you’ll see from some of the color in terms of things like brochure requests and website inquiries, and the like, it's backed up by a very sustainable level of customer interest, customer demand and it's not because we've been pushing it hard. It's happened very naturally and so really I think it's a testament to the quality of the underlying sites.

But also the level of interest from customers that we have seen continuously through the first half of the year even with the uncertainties of general elections et cetera. So more broadly our market performance that sales rate is the key number.

There is nothing I think in the first half starts that stands out as unusual and concerning. I think I don't want a major on this because I think it would be disingenuous.

I said too many times over the last six or seven years that we're not overly focused on outlets. But I think the fact that with that high sales rate our outlet numbers have crept up over the last six months, sort of really is driven by as getting to a steady state on those larger longer sites.

We're not closing anything like as many and that's where we wanted to be. So we weren't living hand to mouth, and so having outlets sort of sustainable solid level.

So even when we're selling faster, we're not just burning through smaller short-term sites, which has been the historic experience is important. I think for us and hopefully view gives us hands of a business that is running well under control that yes, sort of the first half delivery is very strong.

But it's very strong in the areas where we are focusing on it being strong and it's very well managed rather than as striving for every last completion in June, all the commensurate issues that that can cause you. Splitting out as we have done over the last couple presentations, the Central London market performance and you've seen and I will touch on our sense of that Central London market later.

But certainly a very stable first half of the year prices probably fell slightly less than we expected and flying to six months ago. Sales rates have remain stable, cancellation rates sort of which [Pete] immediately asked the sort of Brexit vote last year have stabilized sales prices have continued to grow as our mix is shifted and those were with sites that were already in our order book sort of six months ago.

So we're clearly no great surprise it was. But as we look forward I think we have a great degree of confidence in the environment in Central London, not so much about where things will go over the next two or three years, but about the next five to 10 years and whether strategically it's about [place where it is to be].

Just touching briefly on our UK land pipeline very stable, we haven't been growing it strongly in the first six months of the year, probably a bit of a phasing difference, but chances are we'll have slightly more additions in the second half. So you'll see sort of a little bit of landbank growth in the second half and you’ll see that little thing cash clearly the very strong performance in cash is partly to do with land.

But also you see quite a big switch and if you compare the sort of owned and controlled split in the first half of this year with exactly 12 months ago, you'll see a swing towards control plots, a very much part of an overall plan, not being too dependent on land creditors, which we've talked to you about of the last just a few years and actually controlling land and bring it through, but without always being fully committed to all of the cash payments. So that actually we have some flex in that landbank investment.

But continue to be very strongly supported by the strategic land environment. Ryan will give you a sense on the financial returns, we've secured on your investments are certainly nothing that the concerns as it continues to be very strong.

Now moving on for one or two software issues around the underlying business and our overall drive towards continuous business improvement and touching on customer service first of all. The top half of the slide just picks out the measure that we had most of our competitors also publish.

I think we publish a broader range of statistics, but would you recommend score, which is the one that drives a four or five star rating. The red line is the 2016 stats.

And if you went back a year early, you'd see our low point was about 84% in 2015. So we saw in the second half of 2016 is that new processes really kicked in a fairly steady growth and then very encouraging is you go into 2017, I think an even clearer trend emerges.

We're not overly sort of concerned or focused on the five star rating as a means to an end in itself. It's more a sort of test of where we are and whether our processes are working right.

But certainly very pleased that the processes we've put in place are showing a really significant underlying improvement. And our emphasis has been on getting under the skin of getting things right, first time both production wise, but also communication of completion timetables, how we kind of interact with customers by before and after completion.

So we see lots of other benefits from that over the next two or three years, rather than just one single customer service rating. But it's the thing that you can benchmark against sort of others in the industry as close to as possible.

So I think it's good for us to continue to give you a sense of where that's trending. Then dealing and go back to leasehold, which obviously we talked about with the prelims and again in a lot more detail at the AGM.

We've made the provision that we flagged at the AGM that we expected to of £130 million. We still view that as very much the right size.

We based it on the number of leases that we knew rather that that number has not changed. So we still feel that we're in the right place on that.

And in terms of cost, we have one deal, which we are very, very close to completing and which would come in, in line or below that provision level. But more importantly and I know there has been some concern that comp freeholders just hold out and charge you whatever they want because you have a reputational issue.

You have to remember that we have always retained the option to revert to a cash payment to customer. Is not what we want because we don't think it's the best option for customers could lease them with a complex process to manage, but they then have a legal rights to either buyback in the case of houses, the lease from the freeholder at a price that will be set by court in the end or in the case of apartments to extend and reduce based to technical level.

So there isn't a situation where we kind of have an own cap negotiation, we always have another angle. But our preference remains to do data variation deals because we think it manages the process for more effectively for customers.

So we remain pretty comfortable with the size of that provision. And really with a view that we're doing the right thing for our customers and sort of we're ahead of that sort of what it would otherwise be a very difficult environment I think.

Just touching last row before I hand over to Ryan, so I always tended to pull out one softer issue talked to you about, three years ago, it was customer service. And I think since then you've seen why we felt it was particularly important.

And we talked a bit over the last two or three years about all the work that we've done with our employee base and yes sort of the single statistic you tend to see as staff turnover, which for us is remained roughly 13% stably for the last sort of four or five years, in very difficult conditions in terms of retaining people. Comparison in previous cycles and I think many capacitors have been rollout 20%, 22%, so we feel – we could really see the outputs.

But we completed in the first half of 2017 by annual employee survey and I just thought to flag a couple statistics. The first thing, which is not an output score, but just the response rate.

We pushed our response rate up from 55% to 72%. And the big shift there was 55% fell low because of the first time, but included all of our weekly paid staff many of whom are subcontractors in Yorkshire in the middle of this and sort of in the survey, but failed to really get them to engage.

And we worked really hard over the last two years to get that engagement sort of working well and we really see that coming through. So all of the other scores include lots of contract I assume.

Historically, we would have seen to eight, not ten to engage in the survey, but also to give lower scores. And you can see some of the scores, on engagement and overall score 97% and health and safety, which we view incredibly seriously, but it fundamentally important to us that our people believe we're doing it for the right reasons, 98% score and across four or five health and safety score over in the sort of 97% to 99% range.

But we’ve also highlighted a couple of areas probably the only two areas that jumped out of the survey where we see a real room for further improvements around collaboration particularly between departments, which in a business like ours, but lots of regional business is always a challenge and technology to resources. So we will continue to focus on improving those areas, but as I say all of that work, all of the work that we've done on development and on paper retention, we feel is really paying off.

It gives us a competitive advantage and I think sort of we have become the place that people want to work in the industry.

Thanks Pete and good morning, ladies and gentlemen. It's my pleasure to be talking through our very strong results that we've delivered in the first half of this year.

I was sort remind to just represent one slide today because I think all of the key financial metrics that we're really looking for are reflected on this slide other than the one metric, which is the dividend that Pete mentioned earlier. Just as a reminder, the Group results include our Spanish business.

And our Spanish business has done a reasonably good first half and relatively speaking with generally speaking completions weighted to the second half. Spain delivered £2.8 million with a profit in the period and with the strong order book of around about 400 homes currently and demand remaining robust on the ground.

We think the business is positioned well to continue to make progress this year as it did last year. We've maintained our investment in our Spanish business and the Spain business now has a landbank of just over 2,800 plots comparison to 2,300 plots in the prior year.

And there's more details on the Spanish business in the appendix to the presentation as we have always done. From a Group point of view, revenue growth of 18%, up year-on-year driven by both pricing movement as well as volume increase.

This has resulted in a gross profit of £444 million, which is up 22% year-on-year and a gross profit margin of 25.7% is up 0.7 percentage point’s year-on-year. Further overhead recovery improvements in the period resulted in an operating margin of 20.2% which is 1 percentage point higher than 2016.

The key drivers of the operational performance in the period, I will cover later in the presentation. Overall, interest costs are marginally up year-on-year.

This is as a result of lower financing costs following the redemption of the corporate learn of £100 million in the second half of last year. This is offset by slightly higher land creditor, and volumes and other financing charges, but expect this trend to continue downwards in the second half of the year.

This results in an underlying profit before tax of £335 million, which is up 25.7% on the previous year. The strong and return net operating assets progressed made during the 2016 and particularly the second half has continued into 2017 benefiting from both the higher profitability in the period of a slightly lower balance sheet that continues to benefit from improving quality of the landbank.

Tangible net asset value per share at 94p is up 6% year-on-year reflecting the continued investment in the business. If you look at the UK performance summary, legal completions in total are up by 9% year-on-year and the strong demand and high quality sites is driving the volume growth as well as market support through the mortgage availability.

The quality of the locations continues to benefit average selling price increases as well as our ability to capture some of the market growth with private selling prices at £287,000, up 7.9% year-on-year. We have several new joint ventures coming on line through our major developments business which does have quite a bit of success recently in the land market and we expect this to continue to grow particularly from 2020 onwards with our Board in Hampshire coming on stream and three large London joint ventures all contributing to volumes.

Gross margins up 0.7 percentage points. You recall the prior year was impacted by some £10 million material costs that we booked on two specific schemes.

However, 2017 has impacted by the costs of our investment in our customer journey as Pete noted early in the presentation. But the team is now largely in place and so we're not expecting to see necessarily that same impact in the second half of the year.

Gross profit per completion at just over £65,000 is up 10% year-on-year. And if you're looking at from a margin point of view, it's ever so slightly higher land cost recovery is offset by lower recovery in build costs and of selling expenses.

This results in a 100 basis points operating margin progress with further recovery overhead as we deliver more topline growth of a slightly growing overhead base. This is an indicative margin movement for the UK business and we kind of presented this consistently over a number of years.

And what it's trying to reflect is to what extent the market drives in terms of inflation both in house price growth as well as build cost growth and how our business is performed against that. The net impact of market sales and markedly build cost inflation, we think added 0.4% to topline growth.

The landbank evolution on sites acquired around the 2013 mark which is now being trading out from that have really benefited from the more significantly positive housing market from 2014 and 2015 trading out and being replaced by newly acquired sites. As a result, the net market impact is a negative 1.4 percentage points on total margin.

This is then compensated for the new sites coming on stream with a slightly higher hurdle rates that we've actually nudged over the past four to five years, which we think that's contributed 0.8 percentage points to the margin which sort of offsets a little bit of that market dynamic that flushes through the landbank. Land sales in the period as higher gross margins added 0.4 percentage points and a bit overhead recovery, overheads up approximately 6% year-on-year with revenues up 18%, add 0.6% to the margin.

As I noted before, the negative impact of the £10 million booked in the first half of last year is not repeated, but this is offset by some of the costs on the customer journey that I noted before and the higher joint venture profits contribute 0.3% to margins. For exceptional items and tax, as Pete noted, we booked the £130 million exceptional item on the leasehold provision.

This is a full and conservative estimate of what we believe the costs are and which as Pete noted, we certainly – legally bound to incur that we think is the right thing to be doing by our customers. We expect the cash outflows against this provision to be over a number of years.

With regards to taxation, our underlying effective tax rate for the period is 19.1%, which is just a fraction below the statutory rate. But on a go forward basis, we'd expect the statutory rate broadly to the P&L.

Looking at the balance sheet that I make of capital release from land continues, despite the overall scale of the landbank taking broadly the same for that – furthermore there's been a reduction in land creditors in the period. However, I expect in the second half of this year that land creditor balance will probably grow to be more in line with the trend we saw in 2016.

There's been a slight overall investment increase in work in progress year-on-year and this is reflecting both sort of higher infrastructure costs on the larger sites, as well as the art of growth that Pete noted before and a bit of build cost inflation, which obviously goes into that line. The change in the provisions is principally as a result of the £130 million we've taken for leasehold and the total net asset growth before the £375 million worth of dividends paid were accrued in the period since December is up 8.7% reflecting the strong profitability, some of the pensions deficit movements, which will I cover a bit later as well as the offset by the leasehold provision.

We turn quickly to the landbank, the total revenues in the landbank at £1 billion year-on-year to £43 billion on a very similar number of plots. The landbank cost plus relative to expected revenues is down by a percentage point year-on-year, reflecting the quality of investments and inherent margins.

The actual margins delivered out of our landbank in the first half of this year relative to our investment assumptions on sites acquired since 2009 were 0.9 percentage points above the investment assumption and this has been over a period and as you'll see in the later charts, we are an investment assumptions of continued in that forwards in terms of hurdle rates. The greater portion of plots with planning - control bucket rather than our own bucket, which is a technical shift that we made in the prior year in terms of how we manage and control our land.

Hence as a consequence, we think that will be great of capital commitment part in the future, in the second half of the year, as well as recognizing some of this on – in land creditors. The quality of the landbank is a significant underpinning for our future profitability and sustainability of the returns from the business.

As I mentioned before, these collection of dots on the chart is just showing how the contribution margins, which is off the selling expenses as well as our expected return on capital employed from investments and have performed over the last and several years and as you can see in the first half of this year, this continues to trend upwards. This focus on quality of acquisitions rather than just simply volume growth provides us with this ability to continually match up return requirements.

And this is clearly also very much underpinned by our accessibility to land through our strategic landbank, which gives us a lot more choice in the sites we wanted to acquire and pursue. If you turn to managing our working capital balance, which is our inventory level, the investment in the business continues to grow.

Our outlook numbers are slightly higher year-on-year, as well as greater levels of infrastructure investment with the larger strategic sites. The profit and loss recovery, which is the two dotted lines and versus the cash spend are getting closer and closer as those large sites become more stable in our total portfolio of outlets.

The effect of our customer journey, which is adding more time to the build program to show that the quality is right that process started in anger in the first half of last year and by the time we’ve got two. This half year June, I think is fully reflected in the numbers and in broadly steady state.

And we expect in the future completions to be around about 4.5% ahead this year in terms of total volume growth and almost all of the plots for 2017 completions are will on – in production to learn more time for us to focus and build quality. For the pensions, the level of the pension deficit is materially lower since December.

That's primarily driven by asset performance and in line with the investment strategy that we worked on with the trustees and this has also helped significantly by the hedging program that the scheme runs. The actuarial assumptions driving liability also has a marginal benefit in the period and we have started the engagement with the trustees on the triangle valuation as of December 2016 and expect to conclude this early in 2018.

Looking to managing cash through the cycle, going back to 2012. The land cost of plot for coverage to the P&L has largely remained static over the period.

With the current cost of plot on the balance sheet, I expect that this trend to continue for a number of year’s ahead. Deployment of cash into the investment in the balance sheet has reduced marginally in the last 12 months.

Some of this reflects the IHS following the referendum result and some 12 months ago and how we earned land and control land following the referendum. And it also reflects the stability of the land costs in terms of replacement on to the balance sheet.

The higher proportion of controlled land does mean that slightly higher future cash outflows relative first half are expected to go through the cash flow statement. As noted before the Group cash – so the Group is cash tax paying and we spent approximately £132 million in cash tax over the last 12 months and expect future cash tax payments to largely reflect the P&L charge on a go forward basis.

Net cash is up £313 million year-on-year despite this tax payments as well as returning £392 million to shareholders over the 12-month period reflecting a very strong operational cash generation as well as our balance sheet discipline. With a balance sheet broadly, what we believe is that optimal scale with the landbank roughly at about sort of 75,000 to 76,000 plots.

A higher proportion of the quality of earnings generated, I think will be converted into cash, which will then be available for return to shareholders and hence the increase in dividend for next year. And I expect that this trend of strong cash generation supported by the higher quality landbank to continue for the foreseeable future.

In the dividends, we've declared an interim dividend for this year to be paid in November of £75 million or 2.3p per share. This combined with £301 million special dividend paid in July and the 2016 final dividend paid in May means that we will return £450 million to shareholders in 2017.

We have today also declared the special dividend for 2018 to be paid in July of £340 million, which is roughly 10.4p per share, which will be subject to shareholder approval at next year's AGM. This combined with our ordinary dividend policy of 5% of net assets means that we expect the total dividend payment for 2018 to be £500 million or 15.3p, which will be after survey 11% year-on-year.

And this to clear dividend for 2018 of yesterday’s share prices of roughly a yield of 8%. So in summary, I think the business has made good progress against the medium term target set out in May of last year.

The declaration of the special dividend for 2018 means that we have delivered on the £1.3 billion target that we set ourselves for cash returns to shareholders. The net asset growth year-on-year before dividends return to shareholders of 22.3% reflects strong total equity returns generated by the business.

And the quality of the business and its people combined with the quality of the balance sheet and capital discipline means that the Group remains well placed to continue to generate strong returns for the foreseeable future. And I'll hand back to Pete to discuss current trading strategy.

Thanks Ryan. Now as I touched on earlier though it's headed current trading and strategy there's not an enormous amount of new stuff on strategy.

So if you go away from here thinking our strategy has changed fundamentally then I got it badly wrong. But we'll touch on a few elements not update you, but I think probably some point during 2018 will be the right time to kind of give a full of sort of strategic planning update.

But first of all current trading sort of since the half year up-to-date nothing has really changed. We've continued to see a good trading environment.

We've continued to see statistics on sales rates, sales prices, cancellation rates, which are slightly better than last year. You remember last year immediately after the referendum, but even then the statistics really didn't show any change, so good against a solid sort of trading comparison.

And as you'll see in a second this sort of the substance under the surface both regionally and in the way in which customers engage with us really hasn't changed and gives us a real sense of sort of stability in the market. I think it is worth touching on and it's not a new trend, but the fact the second-hand market remains and our use of word stagnant, which is possibly a little sort of overly negative, but certainly remain subdued in terms of trading volumes sort of should be a concern to us in terms of the medium term and what that says about the market, but certainly we're not seeing any knock-on impact of that for our business and we've kind of got used to trading in that environment over the last two or three years.

I sort of show you these graphs, you've seen them before, we don't always put them up because they're always relevant, they're always included in the appendix, but you can see from the 2017 line not just the fact that it's run on all the measures that we used to track kind of customer confidence and interest that it's not just one best in the last two or three years. But also most interesting in the last sort of six weeks or so has actually shown a step up on a relative basis from previous years, which we wouldn't have expected.

And all just gives you a sense as to why we feel sort of pretty relaxed about where short-term trading sits and where our customer confidence sits. We don't see any sort of sign from customers that some of the nervousness that you see sort of reported in the press.

That sort of surprises us, but it feels like it's true pretty much across the board. Just touching on a couple things on mortgage lending.

I'm not going to talk about that the numbers sort of except to say they still continue to be structurally very low. But I think would just pickup on the third of those bullet points.

There's a lot of talk about exactly when interest rate movements will happen. We remain of the view that sort of small movements and even the signaling of small movements isn't a huge concern to us.

It's more the sense of scale about what those movements will be. That robustness in the market and particularly how low the base level of interest rate movements – of interest rates is means that sort of 25 and 50 basis points movements in the level that customers actually pay is not our concern, it's about when that changes more structurally and more fundamentally that we ought to be more aware of not feeling that's going to happen sort of in the particularly short-term, but that's where the focus is rather than exactly what the timing of the base rate movement would be.

Moving on to politics in the economic environment more generally, clearly it's been an unusual period with an unusual general election and the ongoing Brexit concerns. As we've touched on and as you can see from those graphs on the slide before last, we can't see that impacting on our customers confidence and their engagement with this, but that does surprise us.

I think the key factors of employment levels which remain high, the mortgage market which remains very available for our customers and mortgage lenders who very much want to be lending and lending on new build homes or helpers. We can’t talk about the fact that [helped way] is a significant components of that and has definitely helped new build relative to second hand over the course of the last few years, but we're not picking up any short-term political signals of that changing at the moment.

I would say our political dialogue has been more muted over the last few weeks then we're used to, but that's I think because politicians have been very much focused on other issues such as Grenfell Tower, the Brexit negotiations that results to general election et cetera, so conversation is about how to buy just seem to sort of disappeared into the long grass for now. And just touching on labor availability.

We still haven't seen any noticeable impact at site level and such of changes to people's expectations for overseas labor. We remain focused on taking some control of that ourselves and have active pilots running in four of our businesses and just looking at extending those around direct labor on site as we touched on in sort of the last presentation.

Moving on to Central London, and I don't – really don't want you to overplay this too much. As we've touched on our trading in the first half in Central London has been stable and probably slightly better than we expected.

The sorts of price reductions that we expected sort of at the beginning of the year were new order of 6% or 7% average across Prime Central London. What we've actually seen is a bit lower than that more like 4.5 maybe 5 sort of tops, and also it seems to embed and trading seems to have sort of then normalized as a new level.

That sort of just a short-term kind of trading environment. I think what's more important for us is our longer term plans for Central London and we've not completed our work on this.

But our Central London business has a relatively short landbank, so if we chose to reconsider run out sites for the next two years, generate good returns, a significant amount of cash and effectively exit that business. I think what’s switch for us a little bit over the last couple months because we were open minded about that is we think that's very unlikely to be our plan and so we are happy to continue to invest in that business and start to see land opportunities which are significantly better than we used to see in that Central London business.

That doesn't mean which is why I don't want you to overplay, the level of cash invested will be particularly material or change any of the targets that we've given nor we changed our overall view about where that Central London business goes. But I think we've just kind of reached [indiscernible] actually we do want to be here and so it's about timing and about whether the opportunities that come up work and deliver what we sort of need to.

But we have as I say in a land environment where for the first time and a long time actually the deals on offer are better than they are in the rest of the business and don't depend on future price inflation in that Central London environment. So we still think it will be an uncertain environment for the next couple of years.

But it's more a sense of our longer term plans remain sort of with a Central London business as part of the overall business. I should say that if pretty much whatever we do from here 2019 will be a pretty lean year for that business because we haven't invested in new size for the last 18 months.

So it will generate cash in that year, but the profit flow from that business won't be as significant. But if you look at an overall Group level, I doubt you'll really notice that in the overall, but the results are not flagging a significant shift.

But I think our longer term view remains it's a business that we want to invest in. I'm just picking on dividends and I'm not going to repeat what Ryan said.

I'm not going to read out the words on the slide. There is really just one thing, the second bullet point that I want to comment on, and that's just to reinforce.

I know this is not new news, but it remains our expectation that in 2019 and beyond that we will continue to pay material special dividends and we see the level that we've just announced a 2018 as being a good signal of where our thought process will start for that debate. But we expect to give a fuller update on how to calculate those dividends?

How communicate them, because we recognize that our announced sort of policy on special dividend is going to finishes in 2018. So we will give you a fuller update in the first half of next year either at the prelim day or at Analyst Day so since it probably April, May time.

And just flagging sort of strategic priority again nothing particularly has changed, but very much medium to long-term focus strategy, balanced growth. We remain of the view that there's a natural level for the business, remain of the view that we shouldn't be chasing land to generate sort of long-term sort of growth to cyclical risk start to grow, but we still think there's track for us to run and you can see in the first half an hour for the flags for the full-year, we expect growth this year and growth next year.

Continuing to continuously improve our asset of landbank and our land trusted no big changes, but every site we buy we want to be slightly better in financial terms, in customer quality terms and desirability of product than the site that we've just finished. And then really focused on maximizing and taking a step change in some areas of operational performance, particular customer service was already touched our interaction with our employees, our investment in future programs around direct labor, around sort of how we build really start to run the business with a longer-term mindset, which is historically been hard in a very cyclical industry.

And then just overall summary and outlook, a very strong first half of 2017, very strong underlying financial performance sort of the dividend announcement today kind of completes that three-year. So the dividend planned to get to £1.3 billion.

The environment we see is stable today. We're not unaware of the risk, but our base case remains sort of low price inflation markets.

Yes, the market not giving us any free wins, but also quite stable as well if you take it over the course of a year, some build pressures, but remaining a manageable level and a land market, which is still very attractive, but keeping that discipline, which you can see through – coming through every number that we report remains key. And there are risks out there we're not unaware of them, but the structure of the business, the structure of the balance sheet, the focus on a sustainable growth rather than pushing sort of every single element, every single December, sort of I think we might get put in a strong place to manage those risks.

And we really do continue to see value and get some of the underlying premises of the business around how we deliver to our customers? How we interact with our people?

We really do see that can create a long-term advantage for the business. In a sector, which hasn't focused as much almost elements as it should have in the past, and our value case remains that discipline growth, high cash returns, but balance between the two and investing in good London.

Questions please.

Gregor Kuglitsch from UBS, I’ve got good three questions. Can you elaborate on your point in London that seems to be something that has changed?

I think you were linked with a relatively large site from Royal Mail, but I guess you don't want to comment on specifics. But if you can give us a sense what's changing payment terms, which make you perhaps more optimistic of being able to conclude land deals in London that would be helpful?

The second question is on asset turns you run 1.5 first half, I mean is this thinking that you are sustainable run rate a bit lower 1.4, something like that, because obviously you have some timing on cash on land payments I believe in the first half? And then if you could elaborate a little bit what you think sustainable growth is for this year to 4%, 5% I think in terms of volumes.

Is that what you're guiding for also over the medium term appreciated subject to market conditions, but assuming market conditions prevail as they are right now? Thank you.

Do you want to take the middle one and I’ll take the first and the last. Do you want to do the middle one first, Ryan?

Yes. I think – Greg, well I think the balance sheet scale that we've currently got and how we are approaching that investment into the balance sheet a combination of land creditors as well as continued work in progress focus.

And I suspect to that asset turnover about 1.45 is probably the new norm for us. It is probably the new norm for us.

Now clearly what can change in that regard is that if we did have a period of very more significant total cost inflation, which is not what we're not expecting in volume growth to being much greater than our current guidance, which we're also not expecting as well as the land market that shift. But all our indicators from a land market seems to continue to be fairly benign and we can replace at levels that are attractive to us and clearly also supported by the strategic landbank, which is a bigger and bigger contribution to what we have acquiring, so 1.45 I think is probably about the new norm.

I mean sort of made slightly more cautious noises, but it's not because I fundamentally disagree with Ryan on what he just said, it's just that when you've just delivered a number that slightly surprised. You want to deliver it twice before you say that's a new norm, so it's not the structure.

I think that's wrong, but it's somewhere there or there about sort of will be my take, but it slightly surprised us this period. On sustainable growth, I mean we talked sort of [however] six months ago or a year ago that probably annualized sustainable growth over the next two, three years in this 3% to 4% range and we're kind of guiding it to 4% or 5% this time.

And clearly what we do this year impacts on next year. And if it's 5% this year then I'd say it's more likely to be at the 3% end of the range next year.

But I still think that averaging over time or 3% or 4% is about right. This year is a bit stronger because the landbank is there, the market has been stronger, but what we're not trying to do is fundamentally then change our build operations, we can step it up a bit, but it's become very, very important to us to maintain the consistency for delivery on site and so that kind of acts then as a constraint, it's not going to burn much out of the bond.

And then on London, I think to say it's not that there's been some fundamental change. Our London business, our Central London business has it always been sort of based on short-term size by always I mean over the last five or six years as we've sort of developed that business effectively from scratch, but off the learning of a lot of historic experience in previous cycles.

And actually we've been cautious and because we came into that business not right at the beginning of this cycle, we've always recognized that the opportunity to go in and buy bigger sites whether on sort of joint venture type deal structures or on a sort of land partnership type structure or buying them out right sort of online credit returns was likely to be muted. Because what we were committed to not doing was going and trying to buy big sites with 10-year profiles at a point when the market both land and housing was at its peak.

We've seen that in the past year sort of and a very significant way in the U.S. when we were kind of – as we’re coming out of that market, so we've been committed to that.

And so we haven't been searching for those deals, but we are open minded that if current conditions give us the opportunity to buy long-term value-added size to underpin that business at strong financial returns in an environment we're confident and then we would take it. If it doesn't it doesn't, but it's – that we're happy to look at that when you refer to one sort of not a secret that's a site that we've been looking at, but it's not the only one.

But actually if none of those large sites happen then we’ll buy small size. So it's not that way to delay it’s a possibility, but we're open to.

Yes. Good morning.

This is [indiscernible]. I got a couple of a question.

First one is just around kind of the dialog with government. This consultation being opened on kind of the leasehold in the ground rent.

In terms of what you going to building in few hurdles when you repricing site particularly in London? Do you build in an expectation that you get revenues from – for your older version interests and also the ongoing consultation or expecting them to be [kept as they are] and therefore you've got to reset your hurdle rate?

And the second one is just trying to help to buy obviously limited, as you said over the last couple of months, but do you think there's a chance that the government might look at that maybe going back to kind of the days of FirstBuy where the shared equity was kind of split between the house builder and the government, and if so would you have an appetite to do that with a balance sheet where it is?

Okay, I mean just touching on the consultation first of all, I mean I think two main elements; one, sort of the strength of the government view that houses – assuming houses as a post apartment shouldn't be sellable, as you'll remember we announced in January that we're moving down that route anyway. So yes, we feel we're ahead of that curve.

And the other one – and both of these elements are largely forward looking, but the other one in terms of the level of ground rent on leasehold apartments which sort of the consultations running clear, but certainly there is a downward pressure on that. When we buy land, we don't build any sort of value for future leases.

We're kind of aware of it, but we don't put in the numbers, so whenever [indiscernible] today that talks about margins that doesn't at that stage sort of involve leasehold. Once we're into a short-term sort of puts us in a planning cycle, if we are on the site and it's been sold and we do tend to sort of build in, but in terms of the underlying landbank hurdle rates it has actually no impact for us.

I actually don't know what others instruct to do, but we've never built a value for it as a separate piece. So we don't see sort of – our concern is about leasehold is about historic customers and getting it right nor about being a sort of meaningful profit stream or value stream for the business.

It never really has been, it's about getting the history right, it's been – remains our focus. And on how to buy, as I say, it's not impossible.

I think it's very unlikely that government would do anything sort of short-term before their own sort of 2021 deadline, but I don't think it's a total impossible that they would sort of announce some sort of taper down at that point. I guess it could in theory be a taper earlier than that, so that’s I would guess fairly possible at some point in the next 12 months.

There's been no dialogue about sort of FirstBuy type scheme or any view there kind of HomeBuy Direct type policies. I think we have had and we'll continue to have conversations about as we've always assumed at some point that it would go.

And so if even if that’s four, five years out and sort of we start to think now about how we would set that open making sure that we've got all the things that we could do whether we go down the route of using our balance sheet, it depends on the trading circumstances. And we'd want to be geared up, so we could if we needed to if that was the best option.

It obviously wouldn't be our preferred option if there were other choices. I think our main focus is on making sure that the products that we have, how we sell it or how we focus on it is more desirable than everybody else's sort of which may sound pretty obvious, but actually I think sometimes gets missed in this.

A lot of our high sales rates are driven because we're in the right places with the right product.

Yes, Jon Bell from Barclays. A couple for me if I can, just on the leaseholds, are you able to share with us how many freeholders you’re dealing within and how many properties it relates to?

And then secondly on Central London, I think you’ve referred to deals there looking now more attractive than they are in the rest of the business. I'm assuming that you're referring to gross margin, but could you elaborate on that please?

What kind of things are you seeing?

Happy to acquire number of freeholders, it gives you a sense. There are really three material ones and then a long tail, so if you're looking at it numerically, it's negotiations, but there's a long tail and obviously for each individual customer they got long – so that long tail in some ways matters just as much, but it does obviously make prices more complicated.

Still not going to give you a number of leases. And yes, the reason remains the same.

You know the absolute amount, if we put a number of leases out into the press then everybody can calculate amount per lease and that does weakens the hand with those same freeholders and that's just not a smart way for us to do it. So we've always been very upfront about how we approach these things.

We think we've done it in a reasonable way [indiscernible]. On Central London, it would be wrong to get the sense that our conversation about Central London is about one side.

Greg you sort of said, we don't tend to comment on one side and you're right and it's not because we sort of particularly secretive about that particular site. But actually no site really impacts significantly enough from the business for it to fundamentally change our approach and our strategy.

And we wouldn't be having the conversation that we're having on Central London if it was just about one side. We are seeing other deals that have very different structures that where we're really not paying for the land upfront at all that we're not used to see in land environment and that opens up some choices that we haven't had around larger sites.

So the general comment is not just about gross margin, sort of although it applies to gross margin that generally the deals that we're seeing are higher margins than sort of an ordinary land purchase in the business, but there are also pretty healthy returns on capital which is harder as you will understand to achieve in Central London with higher land costs and higher price points even in a sort of most acute market. So it's both, although, margin stands up well.

Okay, thank you.

Good morning, guys. Emily Biddulph from JPMorgan, I have two questions please.

Just the first one on operating cost inflation. You’re obviously talking about putting cost into improve the customer experience, but presumably some of the cost inflation the first half was about the volume growth and some of it was about that.

I just wondered if you could give us a sense of what OpEx is a percentage of sales might be for the full-year or what the cost of this customer experience is overall year-on-year? And then secondly just on build costs.

Are there any sort of moving parts that changing in there? I just wonder if you give us a space or any sort of change on visibility there.

Thanks.

Yes, on the cost inflations presumably in terms of the bottom as to overhead or connect. Because the customer journey, costs are going to two places.

One of them into overhead in terms of infrastructure to put in centrally and that's from systems in terms of having engaging with the customers all the way through to quality inspection, operatives that we've got that are now examining every single home before we hand them over to customers. That the average starting for business units probably increase by about seven ways.

Just in that regard, year-on-year and then there's the actual cost on sites from physical delivery of the homes to better quality, in a better standard, which has a preliminary cost that goes with this, which is also slightly up year-on-year. And I can't give you the benefit split between those two, but I suspect that they're probably about equally weighted overall as a broad sense.

In terms of why they're both cost inflation and Pete noted before in terms of labor availability in the sector, we haven't seen any of that sort of reduce. It seems to be broadly keeping pace.

We do however, expect labor costs to be a fraction higher than inflation, but on the flipside overall for the basket of commodities that we acquire through central resourcing pools, which covers about 15% of cost spend overall that cost increase year-on-year is below inflation. So net-net, we think a 3% to 4% is the reason regard on a go forward basis on build cost.

I think it's interesting amount we’re surprising what we have seen over the 12 months has remained driven by localized conditions, whether that be localized in the sense of one nationally procured material or localized in the sense of what Bricklayers are doing in the Northwest, but it's been driven by that rather than by macroeconomic agenda exchange rates or anything else. So actually we seen not really a see change in where the cost inflation is coming from and what makes it is in this prior guidance.

We have ended up being exactly the same today as it was a year-ago.

So as Pete noted before, we're going to continue to invest where we can in direct labor and to [indiscernible] a bit more stock-based staff on to the books just as a way of sort of feeding that pipeline of employment for the future.

Thanks and Aynsley Lammin from Canaccord. Just to place, firstly, on I wondered if you could give us the numbers, the percentage of sales mates using how it's a buy both in London and outside, and how you see that trend in?

Have you got the kind of allocation and capacities to continue there? And then secondly, just on London, coming back there again, wondered what your thoughts on PRS.

Is that something you can using a bit more in London to kind of manage risk et cetera? Thanks.

Do you want to pick about – I think it’s in the presentation.

Yes, the status in the announcement of 45% of the sales are under Help to Buy of which 42% of the total of that is to first time buys. So clearly it is a solution that is working well for the government to be able to getting customers on to the property ladder and as well as the domestic sponsorship that comes from that in terms of economic activity.

So it's a fairly useful tool. I don't have specifically the split in London, but even if I did I think it would be relatively meaningless given the pricing point variety that we've got an operating inside the M25 and it could be very, very much scheme specific and it could have one scheme that is targeted clearly at that price point below 600,000 and other schemes were sitting in the Central London business that none of the sales really would be help to buy the GMV, because of the price point we selling it.

And on build rent, I mean I’ll make a distinction between tactical site level and build rent and what I think if as meaningful strategic decision to go into what build rent model. And we are and this is not a new thing doing some of the form.

So we have sites that we are looking at. We have the out on the books that has a built rent component and we are often in that case because those are desired by the landowner or the planning of or it is part of the overall deal structure and sometimes because this is the return on capital and the certainty of delivering from prime time for structure sites in London.

I would very much like to believe that in over the course of next few years, we can do something more strategic on build rent, which is not kind of how we built it and really got rich market, but it's a conscious decision that it's a rich market for a component of the business. It still remains not totally straight forward.

And while the market has been strong, it's been a bit too easy, almost go down there right, but I still think strategically it will be a healthy component to improving the business, but we're not doing anything active on that at the moment except trying to work out how we would make it work and make it a real viable long-term and sort of part of our business rather than how it works on this site and helps make the numbers work and that's buy site they wanted to buy actually for it to be something more structural than that. I’ll pass it back Will is to couple of rows behind.

William Jones at Redburn. Few if I could please.

First, just back on the ground rents, could you just give us an indication of the degree of kind of customer income and going and taking up your offer since you announced it whether you're still happy to leave it as them coming to you rather than you being kind of proactively going to them? Then a couple on land, I think you gave that margin split, margins better again in the first half of this year in terms of the land buying additions.

Is that just a strategic open market mix or are you getting better margins on either one of those two segments? And I think back at the full-year on landbank length, you had talked about the fact you were thinking about where the right level was and maybe scope to bring it in by a quarter or a half a year compared to what you said previously, where is the thinking on that particular given the comments around major land developments growing?

And then the last one is just around the special dividend, I think in the past when you’ve talked about especially told us to think about next year's announcement as a base and potentially it could be one of those higher thereafter. I appreciate 2019 is couple of years away, but would that still be that kind of thinking there – potentially think about the base could go higher as it comes to fruition?

Okay. I think all of those well, but I was slightly [indiscernible] you're moving at speed.

So if miss one and sort of comeback. I think margins on land acquisition is the second reason.

So the customer pickup, I think it's been pretty much in line – on the ground rents pretty much in line with all the expected, so we’ve had a material number of customers come forward and signup to this game. It's nothing like the whole universe at the moment and it's not you know it's sort of been patchy geographically.

And yes we are comfortable that we're approaching that that the right way, it's been well publicized. And clearly if people get an increase in the ground rent then the – we're not – I might feel differently, if we’d said we're going to run this scheme you're going to apply in the next three months, but we haven't put a deadline on it.

And it's driven by view that what we're focused on and what we believe we have a moral duty to focus on is the suggestion that these houses are rather unsalable or unmortgageable sort of – and actually if that is an issue for people then it's flagged and therefore they can sort of come forward in this game as well publicized. So it's not that we think that broken, so it's causing people issues they can come forward.

But as I side, I would feel slightly differently if we put sort of some deadline on it then that doesn't feel quite morally right. So we will see what happens.

Flagging at a point when we haven't got deals done with many of the freeholders also doesn't feel like it's particularly helpful. And what we've found is the relatively small number of initial customers that we had some real sort of Angstrom understandably over the course of the back end of 2016 early 2017 remain those that are most concerned.

People who have only become aware of the issue after we started the scheme have generally signed up to the scheme or fairly relaxed about it because as soon as they became aware of it they can see there is a solution and that it's not quite as frightening as it might be if you started it from scratch. And I think that shows that it's the kind of healthy way to approach it.

So it's not a perfect system it never would be or could be by reducing the balance [is wrong]. On margins on land, I mean it's a bit like my answer to, yes, when you've delivered a level that's higher than you expected to you're always a bit nervous.

And I do think sort of our landbank was slightly more muted in the first half just the timing of deals that came through. And I think you just take a bigger kind of population over the whole year.

I'll be surprised if the slide for 2017 as a whole has got quite the same numbers in it that Ryan put it to the half year, it's not I think it will be below 2016 that probably be above, but probably not quite so much just as it will be more statistical. But fundamentally we're still finding sort of deals that are in that range.

We had a sort of an internal debate discussion April and May because people were struggling to find that level as to should be softening that. We decided we'd sort of hold firm and actually kind of back of the half [indiscernible] we are looking at an awful lot at the moment.

That's a very strong returns which says sticking to that discipline is right, but it those underline what we've been saying for the last few years. If we want it sort of grow the landbank significantly and buy twice as much as what we're using, we would have to compromise on those principles, so there is a clear trade-off between the aggressiveness of the growth and those financial returns, and so it's continually trying to find that sweet spot.

And in that sort of the views haven't changed on landbank length, sort of – and looked dramatically for most of time and slightly – and shrunk slightly in the first half just because of where the volumes going and the fact the landbank has been stable. And that's as I said earlier on is a natural result of this operating on a bigger proportion of the larger sites we've generally been acquiring through both strategic in the short-term landbank and that that dynamic will probably continue a bit having fix a new number and if we do kind of give a fuller strategic update sometime next year we'll probably talk a bit more about things that, but nothing is fundamentally changed on that.

I do still able tighten from what we said sort of three or four years ago. Major developments again will probably give you a good update next year we've got year sort of three or four sites that are right on the cost and so we continue to see as a good value added part of business, but it takes time to get ahead esteem feels like it's kind of right at that point now.

So again next year we could time for an update. And last of all special dividends I think I answered this.

So maybe I misunderstood the question, but we see the level we’ve announced 2018 being the right base level for 2019, we would never say never have that it won't necessarily be higher, but it will just depend on market conditions and uncertainty. So that's just our star point.

This is Charlie Campbell from Liberum. Two for me, just first on mortgage availability, I’m just wondering if you've seen any changes in mortgage availability or the percentage success rate of applicants?

And secondly on house cost inflation just wondering if that was any each change in the level of inflation you've experienced sort of through the first half. So we process easier to come sort of combine the – beginning of the half rather than the end was up in fairly uniform through that?

Yes, I think no changes in the mortgage availability that we've seen at all no changes in success rates that that I've picked up and you kind of see that in those broad statistics and in the sales rights as well. So nothing that is particularly changed.

And I think I’m going to go back to I know the mortgage approvals overall a down, but that's so dominated by the second-hand market sort of reduction in a way it helps us now I don't like that in many ways, but it's certainly in short to medium-term that's helpful rather than a problem for us. Even though I don't necessarily feel it's healthy longer-term.

On own house price inflation, it's not been big enough to say a discernable difference first quarter second quarter it's kind of 2% from kind of October, November last year it's in that sort of range. We don't always see the first quarter as being where we would put three most price movements, but I would still say you see positive price movements in the second quarter and probably a small of it not really anything out of what obviously is a normal seasonal trend.

Looks like that's all or kind of go one more, there might is the last question.

Thank you. Good morning, it's Andy Murphy from Bank of America.

Just a quick question really around the margin and really following-up on the previous question, I think you said in the statement that you thought the 20% margin target over the three year of probably one of the harder metrics that you put in place, but to say with your land buying on that chart you mentioned a couple of minutes ago. Like you're probably sort of again point we saw over a hump and therefore margins on a run rate basis are light to be hedging up rather than margins plateau.

Would that be the correct interpretation from what you're trying to the message you are giving?

Yes, I think both are trading. So we do think and I don't think this is new and news that if the three targets the 22% operating margin averaged over three years is the toughest sort of to get there really we need to be 22% this year and it's not where we guiding people and it's not where we expect to be it would sort of couple of extra things would have to go our way to get there.

So we do think it's tough. That means the average kind of fairly it's probably more likely to be 21.7% and 22%.

So it's not a long way off. But that's most likely.

But at the same time, you're right the land acquisition is correct in the background, but most of those sites deliver into the 2019, 2020 and beyond. So I don't think necessarily our margins plateau with 21.5%, I think 22% so sort of and beyond is probably achievable could because the partner of landbank has been better than we expected it would be.

I just don't think it takes is a bit longer to get that than we would have hoped. The biggest difference and really the only major difference between our expectations sort of just over a year-ago and now is around Central London.

That headwind on prices in Central London is probably something like 0.75% for us and that's probably sort of slightly more than the gap will end up between – well I think we'll get to on that 22% target. But as I said when we announced it – we get to 21.0%, something I’ll have to thrown myself off a bridge.

End of Q&A

Thanks very much. Thank you for all the questions.

I look forward to seeing you again beginning of next year.