Our robust investment case

Our culture and values have been put to the test in this challenging year and our dedicated employees have risen to the challenge. We have acted decisively and responsibly in the interests of our stakeholders and the wider society, including going above and beyond to support the NHS and care homes. We closed our sites early to put in place COVID-secure ways of working and supported our colleagues and partners financially and through added support, communication and online training. We were rated by Glassdoor in the top 10 UK firms for work-life balance during COVID-19.

Not only is this the right thing to do, which is our core value, but protecting and supporting our customers, employees and subcontractors is in the long term interest of our business and the industry, reputationally and operationally. Acting responsibly has been key to keeping construction open.

Whilst it is important to adjust to near term market considerations, we make our decisions in the interests of the long term sustainability of the business. Ensuring our business is sustainable is in the interests of all our stakeholders and is at the heart of the Board’s decision making process.

This was demonstrated this year as we progressed our ESG goals including environmental targets and diversity, our rigorous approach to health and safety as well as our decision to invest in the future by increasing our investment in land.

We have captured opportunities to maintain our well-invested, quality landbank and strong balance sheet. We also made some difficult decisions to streamline our operational structure and refocus our London business on more affordable and sustainable pricing points.

We began the year with one of the strongest land positions in the sector, with high-quality land in our core areas. The equity raise allowed us to grow our land position whilst maintaining a strong balance sheet. We agreed terms on and authorised gross land spend of c.£1.3 billion by 31 December comprising 93 sites and c.22,600 plots.

We believe that our decision to take opportunities to progress land investment will provide us with strong momentum going into the medium term.

We have a strong short term landbank of c.77k, as at 31 December 2020. Our strategic land pipeline is an important input to the short term landbank and provides an enhanced supply of land with greater control over the planning permissions we receive. We have one of the largest strategic pipelines in the sector which stood at c.139k potential plots as at 31 December 2020.

We see potential for some medium term volume growth, assuming a supportive market. We continue to view timing as key to our investment decisions. In June 2020, we were able to take advantage of a disconnect in the land market with much reduced competition. We raised additional equity which enabled us to confidently and assertively re-enter the land market, adding plots that meet our strict criteria in terms of location, value and margin hurdle rates.

This additional investment has helped us to re-balance our landbank by adding a slightly higher proportion of smaller sites into the mix. In normal years, stepping up land buying at such a rate would not be possible without impacting the market and causing land prices to rise. The quality of the pipeline we have coming through means we feel we will emerge stronger from this crisis, with the best momentum in the sector heading into the medium term. The additional investments made in land in 2020 and in 2021 are expected to result in outlet openings from late 2022 and increased volume from 2023, generating additional value and investor returns.

In order to conserve cash and increase our flexibility, we took proactive measures to protect the balance sheet in the short term, including cancelling the 2019 final dividend and the planned special dividend payment.

It continues to be our aim to provide a reliable income stream to our shareholders, throughout the cycle, including during a ‘normal downturn’. With a strong balance sheet and performance, we propose to resume ordinary dividend payments in May 2021, starting with the 2020 final dividend payment of 4.14 pence per share equating to c.£151 million, subject to shareholder approval at the AGM.

As we look forward, our intention remains to return cash generated by the business in excess of that needed by the Group to fund land investment, all working capital, taxation and other cash requirements of the business, and once the ordinary dividend has been met.

We are not proposing to return excess capital in 2021. We will review the level of excess capital and potential return in respect of 2021 at the time of the 2021 full year results in February 2022, for payment in 2022.