U.S. markets closed

Edited Transcript of BWY.L earnings conference call or presentation 25-Mar-20 9:30am GMT

Half Year 2020 Bellway PLC Earnings Call

Newcastle Upon Tyne Mar 27, 2020 (Thomson StreetEvents) -- Edited Transcript of Bellway PLC earnings conference call or presentation Wednesday, March 25, 2020 at 9:30:00am GMT

TEXT version of Transcript

================================================================================

Corporate Participants

================================================================================

* Jason Honeyman

Bellway p.l.c. - CEO & Executive Director

* Keith D. Adey

Bellway p.l.c. - Group Finance Director & Executive Director

================================================================================

Conference Call Participants

================================================================================

* Ami Galla

Citigroup Inc, Research Division - Senior Associate

* Aynsley Lammin

Canaccord Genuity Corp., Research Division - Analyst

* Brijesh Kumar Siya

HSBC, Research Division - Analyst

* Clyde Lewis

Peel Hunt LLP, Research Division - Analyst

* William Jones

Redburn (Europe) Limited, Research Division - Partner of Construction & Building Materials Research

================================================================================

Presentation

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

Hello, and welcome to today's call for Bellway p.l.c.'s half year results for the 6 months to 31st of January 2020. (Operator Instructions)

For now, I would like to hand the call over to Chief Executive Officer of Bellway p.l.c., Jason Honeyman. Please go ahead, sir.

--------------------------------------------------------------------------------

Jason Honeyman, Bellway p.l.c. - CEO & Executive Director [2]

--------------------------------------------------------------------------------

Good morning, and welcome to Bellway's half year results. The presentation will take a slightly different form today owing to COVID-19. Keith will still present the balance sheet and a financial summary, and I will provide an update on operational matters, but there will be a shortened Q&A at the end to allow us to attend to pressing matters within the business.

Firstly, our strategy for dealing with COVID-19. The level of uncertainty is clearly unprecedented. The only relevant comparison that we have in recent times is the financial collapse of 2008. And certainly, there are similarities in how we manage the business today to those used in the last recession. And whilst I have no more idea than anyone else as to how long this pandemic will last,

It is certainly my intention to prepare the business for the worst scenario, and I expect a prolonged period of disruption by also have an eye on the future, any strong business should also be preparing for the aftermath, providing the opportunity to invest and grow again when more normal times return, just as we did back in 2008.

Now firstly, conservation of cash. In the past 2 weeks, our approach has been to target WIP spend and labor resource on sold homes or part-complete units.

Land spend has been suspended, and it is worth noting that we only have a short tow on land creditors of circa GBP 275 million. Our plans for divisional expansion have also been suspended, and we have postponed the interim dividend. A key priority is the safety and support for our staff.

Our group office and divisional offices were all closed on Tuesday, the 24th of March. Our sales offices are also closed, but can be contacted by telephone. Our building sites have started to close in a safe and orderly fashion, and this process will be complete by noon on Friday, the 27th of March.

Across the group, we have around 250 people in self isolation, albeit this number changes daily. And I have to say the response from our teams all across the U.K. has been quite extraordinary. And we are supporting the staff in every way we can, whether that is through flexible working or supporting families with full pay who have child care responsibilities.

Now I also want to talk about current trading in my introduction as it will give you some idea as to how the market is unfolding.

Sales in the first 6 weeks, since the 1st of February, were up by 7%. In week 7, which was week ended, the 15th of March, reservations were largely in line with our expectations, but we had noticed the start of the decline in visitor numbers. Week 8, however, which was last week, visitor numbers were down by 50% to 60%, the cancellation rate had more than doubled to 30%, and net reservations were down by around 40%. I would expect that decline to accelerate in the weeks ahead, and we are very much managing the business and cash around that scenario.

Now I want to hand over to Keith, who will take you through our balance sheet and finances. Keith?

--------------------------------------------------------------------------------

Keith D. Adey, Bellway p.l.c. - Group Finance Director & Executive Director [3]

--------------------------------------------------------------------------------

Thank you, Jason. As you would expect, I will keep today's presentation brief, focusing initially on the balance sheet before giving you an overview of the half year results.

The balance sheet is strong, clear and transparent with net assets of over GBP 3 billion. As at 31st of January, we had net cash of GBP 5 million, and ungeared position. Land creditors, that is amount outstanding on unconditional land contracts, were relatively low at GBP 275 million. Taking land creditors and cash together, adjusted gearing was just 9%. We are operating comfortably within our bank covenants with adjusted gearing, net asset value and interest cover all substantially within their committed limits.

The threat to liquidity throughout the whole economy is one that we take very seriously, and I would therefore like to explain our position. We have committed bank facilities of GBP 545 million and good long-term relationships with 3 supportive U.K. banks.

As I speak today, and in collaboration with our banks, these facilities are fully drawn, thereby providing certainty of funding over the coming weeks.

Our pipeline of forward sales is strong with an order book of GBP 1.5 billion at the 8th of March. 62% of the plots in this order book are contracted.

We are mindful that completions could be severely delayed over the coming months due to possible restrictions in an on-site activity that could feasibly be a lockdown scenario where we are unable to collect cash receipts, but historic obligations still fall due.

We are, therefore, controlling all WIP and land expenditure for the foreseeable future, as Jason has already outlined. Beyond land and WIP spend, our monthly running costs are low at around GBP 15 million per month. In summary, cash is our priority. And for the foreseeable future, we will manage the business with that mindset.

In that regard, the board will adopt a cautious and responsible attitude towards dividend payments, naturally approaching the coming months with a reduced risk appetite. Accordingly, in order to preserve liquidity, the decision to pay an interim dividend has been postponed until later in the calendar year. This does not change the group's ability to continue paying dividends over the medium-term beyond this period of unprecedented and heightened uncertainty. It is instead a prudent approach and tended to preserve cash over the coming months and to ensure the long-term health of the business.

This is not a decision we have taken lightly, but ultimately, we feel it is not appropriate to return cash to shareholders in the present circumstances. The current uncertainty does not change our fundamental view of the business, which still envisages a long-term opportunity for growth.

Moving now on to the results. Housing revenue rose by 3.6% to over GBP 1.5 billion, with this mainly driven by the 6.3% increase in volume. This was offset slightly by a modest reduction in the average selling price, which fell to just under GBP 287,000.

Other revenue remained broadly flat at GBP 17 million and mainly comprises the usual receipt from the disposal of freehold interests on apartment schemes, which was GBP 13 million in the period. As the legislative outlook evolves, this is unlikely to form a recurring source of income in the years ahead.

Gross profit was GBP 357 million, with the 6% reduction from last year due to ongoing margin normalization as previously flagged.

Operating profit was GBP 297 million, and the operating margin was 19.3%. PBT was GBP 292 million, with earnings per share reducing by 6.3% to 194.4p.

The growth in volume was mainly driven by additional social completions, reflecting build progress on site. A total of 275 homes were sold using our Ashberry brand, accounting for 5% of completions. These sales were taken from 16 sites on which there is also an active presence of our core Bellway brand. Using dual outlets in this manner on a small number of larger developments, has proven to be a successful method of increasing output and improving return on capital employed.

Help to Buy was an important selling incentive, accounting for 33% of completions in the period, although in Scotland, where the price cap is only GBP 200,000, the usage was low at only 10%. Despite this relatively small uptake, the market in Scotland was strong with our 2 divisions north of the border being amongst the best performer in the group. As an aside, if completions from Nine Elms are excluded from both periods, the underlying average selling price rose by 2% to GBP 285,000. This simply reflects modest changes in product and geographical mix. It is not indicative of underlying house price inflation.

Geographically, we have a widespread and balanced exposure across the country. There is roughly a 50-50 split of completions between the north and the south. We retain our presence in London, which represented 6% of completions, a continued reduction given that better opportunities can often be found elsewhere in the country. That said, demand continued to be strong in the more affordable outer zones where Bellway focuses its activities.

We completed 20 apartments at our Nine Elms site, which is now almost fully traded out at an average selling price of GBP 761,000. This is a sizable reduction from the 125 completions last half year when the average selling price was GBP 829,000.

Our strongest performance has been achieved by those divisions offering affordably-priced homes irrespective of geography. Accordingly, divisions such as Manchester and the Northwest, our 2 Scotland divisions, and Essex and Northern Home counties are not geographically close but have all performed well.

Now looking at the operating profit bridge.

As you can see, Nine Elms made a significant contribution to profit last year, with a gross margin in excess of 35%. The rest of the bars in the chart show the underlying movement in the period, that is with Nine Elms excluded from the analysis. Additional volume as ever made the biggest contribution, around GBP 29 million to operating profit.

The underlying movement in the average selling price added GBP 6 million to operating profit. As previously flagged, the trader margin continued to normalize as the historical benefit of house price inflation unwinds and build cost pressures remain across the wider industry. Jason will remind you of the progress in relation to our cost-saving initiatives in a short while.

Overall, operating profit was GBP 297 million, and the operating margin was 19.3%. The total amount invested in land has risen to GBP 2.1 billion and now comprises 44,000 owned and controlled plots.

Additions to the top-tier of the land bank, i.e. those which benefit from an implementable detailed planning permission, had a plot cost of almost GBP 56,000 and an average selling price of around GBP 275,000, slightly lower than the average selling price achieved in the period.

The intention of this land buying approach is to ensure that future sales outlets offer our customers an affordable product with less reliance on Help to Buy.

In terms of strategic land, we have 26,000 plots and continue to fund growth in this area of the business.

In total, the owned and controlled land bank, together with our investment in strategic land, provides Bellway with access to some 70,000 plots, a solid platform from which to move forward.

We have made further investment in work in progress, which will help ensure that we maintain a good quality product. The amount invested in part-exchange properties is closely monitored, but has risen to GBP 53 million, with this incentive being used in 8% of completions. Whilst this is an increase year-on-year, the balance is only marginally up on the GBP 50 million reported at July 2019.

The group is financed by retained earnings, bank debt and land creditors. We are significantly cash generative, producing GBP 54 million from operations after making increased investment into land, net of land creditors and construction based WIP.

Taxation payments were GBP 120 million, more than double last year, following a one-off change in legislation accelerating the timing of quarterly payments. Overall, after paying the tax bill, dividend, interest and other minor items, we ended the period with net cash of GBP 5 million, an ungeared position.

As you know, our business model requires upfront investment in both land and WIP. We therefore consume cash unit growth phases, but generate cash in a steady state or if the business is required to contract. This model, coupled with a lowly geared balance sheet, should ensure continued long term resilience.

Our approach to investment requires an ongoing focus on return on capital employed. This has remained high at 19.9%, with the reduction mainly reflecting the normalization of the operating margin. When including land creditors, a long-term source of debt as part of the capital base, return on capital employed was 18.2%. This is a strong overall level of return, which reflects the quality of the group's land investments.

Notwithstand a lowly geared balance sheet, post-tax return on equity remained high at 16.1%.

In summary, we have a lowly geared balance sheet, which provides a flexibility with resilience and strength. We will manage the business in order to preserve cash in this incredible period of uncertainty.

We've enjoyed a good overall performance in the first half of the financial year, and the business is in good health. And beyond the current international crisis, the long-term industry fundamentals remain strong.

Jason, over to you.

--------------------------------------------------------------------------------

Jason Honeyman, Bellway p.l.c. - CEO & Executive Director [4]

--------------------------------------------------------------------------------

Thank you, Keith. Starting with land. We've had a successful first half with over 7,000 plots contracted and also some success with contracting larger sites. To give you some examples, Great Dunmow in Essex, 464 homes with an ASP of 364,000; and Cardington in Bedford, 592 homes with an ASP of 303,000. Both of these sites are purposely focused at the lower end or at mid-market family homes and importantly, afford us the opportunity to dual outlet with our Ashberry Homes brand. The land market remained competitive, although we were still able to acquire land at an average intake margin of 23%.

Going forward, and certainly in the short term, land contracts are paused as we seek to conserve cash and maintain a robust balance sheet.

Turning now to costs. Inflation is still a feature of the industry, amounting to around 3% per year, but it's too soon to comment on what impact COVID-19 may have on our costs going forward. But we are making good progress on our cost-saving initiatives.

The key component to this is our Artisan standard house type range, which is gathering real momentum. This year, we will deliver around 300 Artisan completions, but with some significant numbers going forward. Over 13,000 homes are at various stages of the planning process. 2,200 Artisan homes are forecast for FY '21 and 3,800 are forecast for FY '22. And ultimately, we believe the Artisan collection will cover around 80% of our overall volume and generate savings of over GBP 2,000 per plot.

And whilst talking about costs, it's also worth noting the impact of new building regulations. Increase to standards of Part L of the regulations is the first step in delivering the government's new Future Home Standard. These standards are designed to improve energy efficiency and also to encourage lower carbon heating solutions.

Inevitably, there will be a cost associated of raising standards, somewhere between GBP 3,000 and GBP 4,000, depending upon which option the government adopt.

Now I also want to talk about people. We've always had a strong culture of developing people through our business. I am particularly pleased that we appointed a further 38 graduates in January of this year, around 50% of those were women and 50% men. I'm also pleased that we are on track to achieve our target of introducing 50 women into our construction departments following the successful launch of this program on the 1st of January.

I'm very much an advocate of giving young people an opportunity. Our recruitment program is not exclusive to university graduates. I want young people from all backgrounds to be given a chance. And our new Bellway Academy is under construction and should be complete by the autumn of this year. The Academy will enable us to develop bespoke training modules for site managers, apprentices and young people.

Turning now to customer service. I'm very pleased to report that we expect to achieve our 5-star customer rating for the fourth consecutive year. And we also are proud to have achieved 42 Pride in the Job awards from the NHBC, but it doesn't just stop with a few awards. We have embarked upon a new customer-first approach, something I mentioned back in October. And whilst this is a year-long project that needs to be rolled out across our 22 divisions, the purpose is quite simple. I want to improve in every area, raising the standard higher, particularly with our after-sale service. And despite the challenging environment that we now find ourselves in, it is very important that we keep that quality thread running through the business.

Now if I could take a brief look at trading. HPI has been generally flat in the first half. There were some green shoots as we started the calendar year, but I expect those to be quickly reversed owing to the onset of COVID-19. During the period, private reservations were up by 11%. Overall, reservations were up by 6% and average outlets increased to 274, an increase of 5%.

And now for current trading and order book. Our order book is marginally ahead, and that also reflects strong growth in the first half. And as I mentioned in my introduction, sales in the first 6 weeks since the 1st of February, were up by 7%, but that picture is changing quickly.

And finally, outlook. Needless to say, the outlook is unclear, and it would be foolish of me to offer any guidance in that respect. What is important is the quality and strength of our balance sheet.

And our focus across the next 4 months will be to maintain a robust and resilient balance sheet to ensure the group can manage a lengthy period of disruption, but I also have an eye on the future to ensure that we can respond when the time is right. Thank you. I will now hand you over to a moderator who will help facilitate the Q&A section.

================================================================================

Questions and Answers

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

(Operator Instructions) We take our first question today from Will Jones from Redburn.

--------------------------------------------------------------------------------

William Jones, Redburn (Europe) Limited, Research Division - Partner of Construction & Building Materials Research [2]

--------------------------------------------------------------------------------

A few for me, please. First, I don't think it was in the release or the presentation, but would you be willing to give us a kind of insight into the balance sheet position today as opposed to at the end of January, please?

Second one was just, when we look at the -- I think about GBP 700 million of short-term trade creditors on the balance sheet at the half year. Could you just help us slice and dice that package, if you like, between land, trade, accruals? Just how we should think about that and how that might unwind on a kind of monthly basis as opposed to just the very helpful overhead guidance you gave earlier?

And then I guess the other one is whether -- clearly very early days and let's wait and see, but I just wondered whether you had any intention to access any of the kind of government support schemes that have been put in place or will be put in place around wage support, which clearly might offer some of the alleviation of the overhead build as things unfold?

--------------------------------------------------------------------------------

Keith D. Adey, Bellway p.l.c. - Group Finance Director & Executive Director [3]

--------------------------------------------------------------------------------

Okay. Will, I'll take those. So in terms of the creditor position on the balance sheet, I suppose if you look at the current liabilities, there are around GBP 0.5 billion there, with an additional GBP 200 million or so of land credit as we're to do within a 12-month period, which takes you to GBP 700 million. Now if you're to look at that GBP 0.5 billion, around half of that relates to what I would call normal trade creditor. So your site-based cost subcontractor suppliers, which is usually slightly elevated at the half year just because you have a surge in activity and they run up to January. And as we look today, that GBP 250 million figure is probably GBP 100 million or so or less. The balance of that GBP 500 million tends to relate to liabilities which don't necessarily relate to a cash outgoing. So for example, we've got something like GBP 120 million or so advanced payments from housing associations and respective pre-funded work in progress, and we have some, what we call, cost to complete provisions on sites in relation to longer-term obligations, which we will make good at some point, but the tail on those come, in many cases, to be several years. So it's GBP 250 million of, I suppose, real short-term obligations at the position of January.

To talk about the balance sheet today, I think it's best if I try to explain where we are in terms of cash, is maybe the easiest way to look at it. So as we opened up this morning, we had a net bank debt position of GBP 90 million. And just to remind you, that's in the context of having GBP 545 million of committed bank facilities. If you look at what payments we've got to go out over the coming months, while if you envisage a very, what I would call, was a downside scenario of having site lockdown until the end of the financial year, and assuming that scenario, you can't collect any cash at all from completions. Our committed payments on land are something like GBP 130 million to GBP 160 million over that period. And as I said, the direct cost build is probably sub-GBP 150 million and probably close at GBP 130 million. So not huge commitments there in the short term. And as I said in the speech, our monthly running costs are round about GBP 50 million per month. So you can see, hopefully, in the disaster scenario where you're unable to collect a penny of cash, we should still remain comfortably within headroom over the next 4 months or so in that particular instance.

Then in terms of government schemes, look, we look at everything on a daily basis and things will evolve. At the moment, as I said, we've got committed facilities. We don't feel we need access to those. We'll clearly look at the rules in terms of [workers] who might be otherwise engaged over the next few months or so to see whether that will apply to Bellway or not. At the moment, it's just a watch and brief on a daily basis, and we haven't made any positive steps towards drawing any of those facilities down.

--------------------------------------------------------------------------------

Operator [4]

--------------------------------------------------------------------------------

We now move on to question from Clyde Lewis from Peel Hunt.

--------------------------------------------------------------------------------

Clyde Lewis, Peel Hunt LLP, Research Division - Analyst [5]

--------------------------------------------------------------------------------

A couple if I may sort of following a little bit on the back of sort of Will's questions. But can you maybe sort of talk us through some of the HA mechanics in terms of sort of when you get cash payments from them and just sort of understanding if, again, you will get any sort of figures from them before the end of the financial year?

Also, if you can just let us know what sort of level of finished units you're likely to have either now or sort of again in the next week or 2?

And the third one was on sort of, I suppose, other payments you might have to make to the government in terms of the tax, other corporation tax, PAYE, presumably, you stop those, but just wanted to sort of check on that.

--------------------------------------------------------------------------------

Keith D. Adey, Bellway p.l.c. - Group Finance Director & Executive Director [6]

--------------------------------------------------------------------------------

Okay. Well, look, in terms of HA payments, I mean, clearly, we -- they -- we have an assumption in our normal cash flows. In that disaster scenario that I just outlined before, we've made no assumption on collecting HA money. So typically, those amounts will be paid when you meet certain build stages in a contract. Now we've already taken action and -- to our divisions, spoken to all housing associations where we've got amounts due within the next couple of months. At the moment, we're not aware of any issues, but obviously, collecting that cash is dependent on meet and build completion stages. So we're fully expecting some of that -- those cash receipts to go back. But we'll -- obviously, that's already factored into that scenario I mentioned.

Now in terms of tax, our next tax payment on account is due in April. Look, there are 2 elements to that. Firstly, is self-assessment. I've got no tangible idea in terms of what earnings will be in this financial year. So I'll say, they are likely to be less than what we previously thought. So your first lever is to pull, is to have a lower expectation in your profit forecast for the year. And then the second lever is, if we still think an amount is due, is to go down discussions in terms of deferred impairments. Now that's not something that we necessarily need to do. But if we get into a position where we really are in a prolonged lockdown, then we would be communicating with HMRC about deferral, but we're not at that stage at yet, Clyde.

--------------------------------------------------------------------------------

Jason Honeyman, Bellway p.l.c. - CEO & Executive Director [7]

--------------------------------------------------------------------------------

So if I just take the one on units. We've got units available for completion in both March and April for the early weeks that are already built and complete. So it would be highly unlikely that we collected no revenue against those units, but it is possible that some of those purchases or customers are either unable to complete at this point in time or need more time. So we're managing those on sort of a case-by-case basis, but I would expect us to be able to collect cash in the short term. But part-complete units towards the end of April and early May, we cannot complete them.

--------------------------------------------------------------------------------

Clyde Lewis, Peel Hunt LLP, Research Division - Analyst [8]

--------------------------------------------------------------------------------

Okay. I mean have you got an online ability to complete things, obviously without customers interacting on a personal basis with your staff at all or not?

--------------------------------------------------------------------------------

Jason Honeyman, Bellway p.l.c. - CEO & Executive Director [9]

--------------------------------------------------------------------------------

Yes, we're all set up for homeworking now. But there's always a problem, Clyde, we think we can do it, and then the -- Scotland closed land registry down on yesterday, so we couldn't do that. So we're sort of tackling the problems day by day, but there's a real will and energy in the business to overcome the problems as we face them day by day. And I thought your question on affordable housing was a good one because often, when we're in difficult markets, sometimes you do the opposite and start accelerating affordable -- or the delivery of affordable housing through the program. So that's something we're looking at at the moment as well.

--------------------------------------------------------------------------------

Clyde Lewis, Peel Hunt LLP, Research Division - Analyst [10]

--------------------------------------------------------------------------------

Yes. I mean I've read somewhere that the government is advising sort of public sector bodies, and I'm sure HA has sort of come under that to not stop any payments. So I'm just sort of wondering whether -- yes, obviously, your build programs are probably not going to be able to keep up. I'm just wondering whether you might still sort of continue to get the cash as if they were being built on a normal year basis.

--------------------------------------------------------------------------------

Jason Honeyman, Bellway p.l.c. - CEO & Executive Director [11]

--------------------------------------------------------------------------------

Yes, I think you're right, Clyde. But the -- not every housing association has got a strong balance sheet. So we're aware that we could start those works quickly as -- if and when or as and when we get back to work. But we're just a bit mindful of which register provider we're dealing with just to look at, do they have the means supply and the ability to take handover of the units.

--------------------------------------------------------------------------------

Operator [12]

--------------------------------------------------------------------------------

We take our next question from Aynsley Lammin from Canacord.

--------------------------------------------------------------------------------

Aynsley Lammin, Canaccord Genuity Corp., Research Division - Analyst [13]

--------------------------------------------------------------------------------

Just a couple for me, actually. Just firstly, on the dividend, interested to hear why you just postponed that as opposed to cancel it like lots of others. And I just wondered in the kind of terms of the facilities with the banks, are there kind of terms within or conditions that you have to suspend or postpone dividends if the covenants are tested every quarter if you weren't going to get revenue, for example, for 2 months and if any breach, then they waive some of the covenants. How much kind of pressure are the banks putting on you to have to cancel or postpone dividends?

And then just second, on the land vendors and land creditors, just wondered how much kind of scope there is to negotiate terms with them? Are they being quite amenable given the quite exceptional situation?

--------------------------------------------------------------------------------

Keith D. Adey, Bellway p.l.c. - Group Finance Director & Executive Director [14]

--------------------------------------------------------------------------------

Okay. Look, the position on the dividend, it's a fast-moving world at the moment. The priority is absolutely to preserve cash and the long-term resilience of the business. Whether we will pay an interim dividend in the quantum, all I can say, Aynsley, is it will evolve over the coming weeks and months, and it depends on the length and severity of any downturn which arises. So I suppose it's just a watch and brief we can't commit to anything either way. If we can, and if the market is strong, then obviously, we'd like to return some cash, but it wouldn't be responsible to do that at this point in time.

And in terms of the banks position, there isn't a restriction on paying an external dividend from Bellway. That's not what's driving our decision. Our covenants are tested every 6 months. And unless you get to a position where you're in default of your covenants, then we can pay any sensible dividend which we see as being appropriate. And we're nowhere close to been in default of any of our covenants. So we're in a robust position in terms of banks, and we continue to have their support.

--------------------------------------------------------------------------------

Jason Honeyman, Bellway p.l.c. - CEO & Executive Director [15]

--------------------------------------------------------------------------------

I'll do land, Aynsley. Certainly, everyone that we've spoken to today, and I think the mood of the nation is really one of being flexible, supportive cooperative, so, so far so good with land creditors or land owners. But being a realist, we're only in day 2 of lockdown, and maybe that language will change when we're in week 6. So we really do take it day by day. But so far, I think everyone's been as cooperative and as flexible as possible that we're dealing with.

--------------------------------------------------------------------------------

Operator [16]

--------------------------------------------------------------------------------

We now move on to Ami Galla from Citi.

--------------------------------------------------------------------------------

Ami Galla, Citigroup Inc, Research Division - Senior Associate [17]

--------------------------------------------------------------------------------

Just a few questions from me as well. I was wondering on joint ventures, is there any investment commitments that you see in the business in addition to the sort of numbers that you've already given?

And broadly, in terms of the sort of customer interactions that you've had over the last 2 weeks, can you give us some color as to -- in terms of the cancellations that you've seen and the step-up in that, is that more a concern about this level of house prices? Or is this more a concern of their capacity to get mortgages in place?

--------------------------------------------------------------------------------

Keith D. Adey, Bellway p.l.c. - Group Finance Director & Executive Director [18]

--------------------------------------------------------------------------------

I'll take the first one on joint ventures. We have 1 -- well, we have 2 or 3 joint ventures, but only 1 of any substance, and there isn't any commitment to continue investment in work in progress should we decide that. It's not appropriate to do so. So there isn't any tail of liabilities there that we're committed to.

--------------------------------------------------------------------------------

Jason Honeyman, Bellway p.l.c. - CEO & Executive Director [19]

--------------------------------------------------------------------------------

On sales, Ami, we've only got 1 week really to report on the drop in sales. So it's a very -- it's very difficult to make judgments. But we had 74 cancellations last week, and normally we'd run around 25 to 30. The extra cancellations were in part to many things, but all associated with COVID-19, and it was -- changed their mind as a result, nervous that house prices may change or nervous about their job position. I can't give you any more detail on that until I get 2, 3, 4 weeks of detail.

--------------------------------------------------------------------------------

Operator [20]

--------------------------------------------------------------------------------

We take a question from Brijesh Siya from HSBC.

--------------------------------------------------------------------------------

Brijesh Kumar Siya, HSBC, Research Division - Analyst [21]

--------------------------------------------------------------------------------

I have two questions. First one is on -- coming back to your last answer. Can you give a flavor or do you think there will be a natural impact on pricing because of the demand weakness, especially in the next 3 months? Do you have any -- if you can elaborate it more what you think about it.

And second one is on the site closure. Can you tell us what kind of costs would you be incurring to close those sites? And how quickly you can bring back those sites and offices in operation after these things get over and you come back to full capacity?

--------------------------------------------------------------------------------

Jason Honeyman, Bellway p.l.c. - CEO & Executive Director [22]

--------------------------------------------------------------------------------

Okay. In terms of pricing, Brijesh, the -- it's too early to tell when I've only got 1 week of statistics. The house builders are generally underpinned by 2 key issues. One is called interest rates, which we expect to remain low in the foreseeable future. And then secondly is employment levels. So if through the market employment levels remain relatively robust, I would expect prices to hold. But if you start to see a hike in employment levels, then that tends to put pressure on house prices going forward.

In terms of your question for sites closed, it's quite easy for me to close down sites, normally it takes 2 or 3 days on the bigger complicated ones because we've got heavy plant and machinery. But you're right to think about opening up sites again, it does take longer. The key issue we've got in starting sites again is not particularly getting the labor back to site, it's the supply chain. And the supply chain will take a while to be able to open up again because you've got merchants that have closed, you've got delivery problems, you've also got what I call the loo roll effects with some materials where some people have stockpiled materials on sites because of the potential delays to deliveries. So it's opening up that supply chain, will be how quickly developers are able to start back on-site in earnest.

--------------------------------------------------------------------------------

Operator [23]

--------------------------------------------------------------------------------

Thank you. That concludes today's this call. Ladies and gentlemen, thank you for your participation today. You may now disconnect.