Bellway Stock

Thank you. Good morning, and welcome to Bellway's full year results. As usual, I'm joined by Shane and Simon with a number of our senior management team also with us today. If I could take you to first slide. Bellway delivered a strong full year performance, and I was particularly pleased with cash generation, and that's despite a softer selling period for much of the year. Volumes increased by almost 11% to 9,700 homes. Operating profit increased by 5.6% to GBP 321 million. Operating margin of 10.1% was 80 basis points lower than FY '25. Operating cash increased by 36% to almost GBP 870 million.

As you are aware, trading across the past 6 months has been affected by the prolonged conflict in the Middle East and the subsequent increase in mortgage rates. And the impact of those elevated borrowing costs continues to be more pronounced in the south of England, whereas other parts of the U.K. are proving to be more resilient.

Outlook is still uncertain, but it is reasonable to assume that higher mortgage rates and the lower order book will lead to a lower output this year, and we are targeting volumes of between 9,000 and 9,400 homes. That said, it is still my intention to drive volumes to drive operating cash and continue with our dual approach to capital allocation. We are both investing in the right land for growth and extending our buyback with a further GBP 150 million this year. And that takes total dividends and buybacks to GBP 450 million across FY '26 and '27.

Given the market backdrop, we are taking action to be more efficient and to position ourselves for growth. And you can see from the slide, Bellway has a strong platform to deliver higher returns in the future, underpinned by a strong balance sheet, continued investment in land, operational efficiencies that I will refer to later, and government support for first-time buyers. The average age of a first-time buyer is now 34 years old. Your first home is clearly the right thing to do for young people. And set up right, it can also deliver growth. And Bellway are well placed to capture growing demand for first-time buyers.

And based upon our past experience with Help to Buy, the new scheme has the potential to boost volumes by around 10%. And with the market recovery, provide a path back to at least 10,000 homes a year and a return on equity of 15%. I'll provide an update on operations later, but first, our financial results from Shane.

Thank you, Jason, and good morning, everyone. As Jason said, we delivered a robust performance in FY '26 despite the challenging market backdrop. That was supported by our opening order book and a strong contribution from bulk completions. Total volumes increased by 10.8% to 9,695 homes. We delivered double-digit growth in both private and social housing output with social homes accounting for around 21% of completions, in line with the prior year. Bulk completions more than doubled to 615 homes and that represented around 6% of our output, with a strong pipeline of bulk opportunities, and we expect bulk completions to increase to over 10% of our output in FY '27.

The average selling price increased by 2.5% to just over GBP 324,000 and that entirely reflected geographic and product mix with no underlying house price inflation. Strong growth in volumes and revenue drove a 9% increase in underlying gross profit to GBP 498 million. The underlying gross margin was 70 basis points lower at 15.7%, and I'll provide more detail on that shortly.

Administrative expenses increased to GBP 173 million, and that was in line with our previous guidance. The increase reflects annual pay awards, targeted investment in important areas of the business, which included our timber frame factory and strengthened IT, commercial and finance functions. This investment provides the infrastructure and expertise required to support our long-term growth ambitions.

Against a prolonged challenging market backdrop, we are obviously reviewing the group's overhead cost base to ensure that our resources remain aligned with our strategic priorities and are deployed as efficiently as possible. This includes normal areas of opportunity, use of technology and AI to simplify processes, whilst retaining the expertise and capacity needed to respond as market conditions improve, and Jason will cover that review in more detail later.

Admin expenses will increase in FY '27, although it's important to add that, that will be materially lower than in FY '26, and primarily reflects annual pay awards. We'll provide more specific guidance on that once our overhead review is completed. As market conditions and volumes recover, we expect to generate operating leverage from investments already made and the management actions now underway as we progress back towards, as Jason said, delivering more than 10,000 homes a year.

Turning to underlying operating profit. This increased by 5.6% to GBP 321 million. It implies the reduction in gross margin and higher overhead cost base resulted in an 80 basis point reduction in underlying operating margin to 10.1%. Underlying profit before tax increased by 5.7% to GBP 306 million. I'm pleased to report that the proposed total dividend has increased by 7% to 75.0p per share. The figures on the slides are presented on an underlying basis and adjusting items primarily relate to build safety and they're set out in the income statement in Appendix 1.

Turning now to our gross margin. We thought it was helpful to show an underlying gross margin bridge, which shows the 3 principal drivers of the movement in underlying gross margin, which reduced by 70 basis points to 15.7%.

Firstly, as previously guided, the evolution of the land bank provided a 100 basis point benefit as newer higher-margin land contributed to completions. Secondly, net pricing and targeted sales incentives reduced margin by 50 basis points. Importantly, these measures supported sales and volume delivery in what's been a challenging market. And finally, build cost inflation, net of procurement savings and operational efficiencies reduced margin by 110 basis points, with mix accounting for the remaining 10 basis point reduction. Overall, the 100 basis point benefit from land bank evolution was more than offset by pricing incentives and build cost inflation.

Whilst these pressures will continue into FY '27, the next slide, which we think is critical in the context of the strategy that we outlined previously, shows why the margin embedded in the land bank supports recovery in future years. And as you can see from the slide, the embedded gross margin in the land bank with detailed planning permission is currently around 17%. And of these, plus 70% of those have margin above 15% and including 53% above 18%, which is obviously well above the current gross margin trajectory that we have on our forward order book.

We do expect gross margin to reduce further in FY '27, and that reflects current market conditions. The continued flow-through of build cost inflation, including costs already embedded in WIP and a higher proportion of bulk completions.

Whilst bulk completions typically carry a lower margin, they support volume delivery, asset turn and critically cash generation and thus value creation for our shareholders. From FY '28, we expect margin to begin recovering as higher-margin land contributes a greater share of completions, although, of course, that pace will depend on market conditions, particularly around where interest rates are for our customers at that point. Continued discipline in land acquisition and our strategic land pipeline provide further opportunities to improve land mix and support longer-term volume growth.

Turning to operating cash generation. And I guess we're conscious of the fact that operating has been difficult, 1 thing myself, Jason, Simon are keen to emphasize is that we are consistent in terms of the strategy we outlined, and we prove by doing, and I think this operating cash generation slide shows that we generated very strong adjusted operating cash flow in FY '26. And the bridge demonstrates the benefit of our focus on capital efficiency and how that cash has been allocated, whilst maintaining a healthy year-end net cash position and also a very strong balance sheet in terms of land and the level of WIP that we have invested.

Turning to the key movements. In line with our strategy, there was a GBP 72 million reduction in total WIP. Land utilized through cost of sales was GBP 564 million, which exceeded land investment in the year. Together with the movement in land creditors, this resulted in a GBP 152 million reduction in land held on the balance sheet. After the working capital movements of tax, adjusted operating cash flow increased by 36% to GBP 869 million. This cash generation provides the capacity to both invest in future growth and deliver enhanced returns to shareholders.

During the year, we invested GBP 496 million in land, including the settlement of land creditors and returned GBP 224 million to our shareholders through dividends and share buybacks. Due to the share buybacks, this was significantly up on the GBP 70 million returned in the prior year to shareholders. After GBP 33 million of build safety expenditure, we ended the year with net cash of GBP 158 million after those returns and the investments that we made in land in that period.

And we have a very robust and well-capitalized balance sheet, and this is underpinned by our investment in land and WIP. Both remain important areas of focus as we seek to improve capital efficiency and generate further cash in the years ahead.

And turning now to the key balance sheet movements. As highlighted earlier, the land balance reduced by GBP 152 million to GBP 2.35 billion. During the year, we entered into new land contracts on fair terms, totaling around GBP 177 million and made land creditor payments of around GBP 252 million. As a result, land creditors reduced to GBP 265 million at year-end, and that's equivalent to around 11% of the overall land balance.

As we said before, over the medium term, we intend to increase the use of deferred payments towards 15% to 20% of land value. And that's broadly in line with historical levels. And that obviously forms part of our ongoing move to a more capital-efficient operating model, whilst maintaining discipline over the terms and overall cost of land acquisition, and Jason will discuss that land bank in more detail later.

Total WIP reduced to GBP 2.26 billion, with the main movements coming from site WIP. Breaking down those movements, site WIP reduced by GBP 103 million to just over GBP 2 billion. And that demonstrates our continued progress in aligning build activity more closely with sales and improving capital efficiency and drove a decent uptick in our WIP during the course of the year.

Part exchange properties increased by GBP 32 million, and that reflected the greater use of this incentive in a slower housing market and the balance of that at the year-end was GBP 58 million. And finally, show homes were broadly unchanged at GBP 143 million.

Turning to build safety. The overall provision remained broadly stable at GBP 520 million. We have now started our completed works on 59% of the relevant buildings, and we're increasing our focus on recoveries from the supply chain. And we have a significant number of claims that we're pursuing. We expect cash expenditure of at least GBP 100 million in FY '27 with further detail on build legacy safety provided in Appendix 8.

To finish, adjusted gearing, including land creditors reduced by 530 basis points to 3% and the accretive effect of the share buyback supported a 4.2% increase in net asset value per share to just over GBP 31 per share. Underlying return on capital and pretax return on equity both increased by 50 basis points to 9.2% and 8.7%, respectively.

Turning to capital allocation and in line with my previous comment around consistency of our strategy and delivery, I just want to remind people what we outlined in terms of our capital allocation strategy. It starts with our balance sheet. That provides the foundation for a flexible approach, balancing disciplined investment for growth with attractive shareholder returns. We will maintain financial strength, continue to invest selectively in land and strategic initiatives and drive greater capital efficiency, particularly through improved WIP turn. And the resulting cash generation will support our ordinary dividend and multiyear share buyback program.

The next slide demonstrates the strong progress we have made in executing this framework. The 36% increase in adjusted operating cash flow to GBP 869 million, that's equivalent to 2.7x underlying operating profit. This is well ahead of our target to maintain conversion of at least 2x over the 3 years to FY '28, which we laid out last October when we spoke to you and that reflects the higher volume and improved land and WIP turn.

Driving greater WIP efficiency remains a key priority across all 20 operating divisions. And whilst we've made good progress in FY '26, we see further opportunity to reduce average WIP and improve asset turn by FY '28, whilst retaining the capacity to invest in land and support there for future growth. The stronger cash generation also provides the platform to deliver enhanced shareholder returns. In addition to maintaining ordinary dividend cover of 2.5x underlying earnings, we've commenced a further GBP 150 million share buyback for FY '27.

And together, dividends and share buybacks are expected to total, as Jason said, around GBP 450 million across FY '26 and '27, and I think that demonstrates very clearly our commitment to long-term creation of shareholder value.

To conclude my section, I'll summarize our guidance for FY '27. Clearly, we recognize the continuing risks to inflation, interest rates and customer confidence from the geopolitical and current macroeconomic uncertainty. Against this backdrop, we remain focused on volume delivery, driving efficiency, and cash generation, whilst retaining the capacity to respond as market conditions improve. For FY '27, we expect volume output of between 9,000 and 9,400 homes with a higher contribution from bulk completions and social housing representing around 20% of our total volume.

An overall average selling price of around GBP 325,000, and that's broadly in line with FY '26, but margins will be lower. Build safety expenditure of at least GBP 100 million and land spend of around GBP 500 million, and that's consistent with our replacement-led strategy, and that will all be underpinned by cash dividends and share buybacks of around GBP 225 million.

I think it's important to reemphasize looking through the near-term headwinds with our management actions and the return of supported market conditions, we see a clear pathway back towards an underlying operating margin and return on equity of 15%. That's very much our longer-term strategy. We're very committed to it, and it will be underpinned by stronger cash generation, which hopefully you'll see this morning in terms of what we've articulated and driving shareholder returns over time.

I'll now hand back to Jason, who will cover the operational review and outlook.

Thank you, Shane. I will start with trading. In FY '26, we achieved a private sales rate of 0.55, including a good contribution from bulk sales of around 10%. And you will recall that we enjoyed a strong first 3 months to the calendar year post budget and pre-Middle East where the sales rate climbed to almost 0.7 per outlet. And you can see from the slide how the sales rate has fallen as mortgage rates increased in April and across the summer period.

And to put that into context, Mortgage rates for an 80% LTV were below 4% at the start of the year and are now above 5%. Repayments on a GBP 250,000 mortgage have gone up by almost GBP 2,000 per year. Looking at this financial year, those affordability pressures continue to weigh upon customer demand. In the first 9 weeks, since the 1st of August, we have achieved a private sales rate of 0.5%, with September showing a modest improvement from August sales and bulk sales made a contribution of around 10%. A point to note is the geographical performance with Scotland, Northeast and Northwest, all enjoying sales rates of up to 0.6, whereas some divisions in the South have been lower than 0.4. And these regional differences are reflected in headline house prices with the north generally holding firm, but downward pressure on some sites in the South of England.

Overall, incentives average around 5% and part exchange has increased to 10% in FY '26 and may increase further to support volume this year. A similar story with bulk sales. We have a strong pipeline of opportunities. Last year, we delivered, around 600 homes from bulk. And this year, I would expect that figure to double to around 1,200 homes, supporting both volume and cash generation. And finally, order book. As at the 2nd of October, our order book is around 5,000 homes and GBP 1.4 billion.

Moving on to land bank. A total of 95,000 plots and evenly split between owned and controlled and strategic, similar size to last year, reflecting our land replacement policy. And importantly, those newer plots are at higher margins. Overall, an owned and controlled land bank of around 4.5 to 5 years, that's enough to support growth without tying up excess capital.

That said, I am targeting around 30,000 plots in the DPP land bank to give me at least 3 years of output as we aim to get back to 10,000 homes per year. And I plan to top up those consented plots through higher-margin land from both the open market and our strategic land bank. We are still active in the land market. Last year, we contracted on 8,600 plots with 80% of those in the better-selling areas of the Midlands, the North and Scotland.

Our investment is forecast to be around GBP 500 million this year, but we have the firepower to invest more if conditions improve. And we have strong land buying controls in place. Every acquisition is approved by either Simon or myself and the regional chairs. And that approach ensures our capital is invested in land that drives better returns. Moving on to planning. The planning environment has improved slightly, but progress is slow. limited local authority resources and too many consultes. And that's highlighted in strategic land, not coming through the system as quickly as we would like. That's not an impact on cash, but it is a near-term drag on outlet openings.

Despite this, strategic land offers significant opportunity in the years ahead with over half of our plots attracting a positive planning status and around 80 planning applications running in the system. Ultimately, it will benefit margin and outlet growth. To put that into context, we expect around 15% of our completions to generate from strategic from both this year and next year, and that will likely grow to around 10% -- sorry, 20% in FY '29.

Average outlet numbers will be around 230 this year, down from 238 last year. And from FY '28, we are well positioned to grow outlets again given our land investment and that strategic pull-through.

Turning now to costs. Overall, build cost inflation is running at around 3% and largely driven by energy surcharges with building materials accounting for most of that increase. As I mentioned in my introduction, operational efficiencies, cost savings and overheads are our key priorities. And I will highlight how and where we are taking action. Firstly, operational efficiencies, and our program is well advanced. Timber frame factory is complete. output is expanding quickly. House type redesign is complete. The new Bellway collection is fully optimized for timber frame, and we can improve build times by up to 6 weeks per house.

Brand refresh is complete, more cost effective, easier for the customer, digital first in approach. It's modern, it looks great and provides the platform for extra revenue opportunities. The final piece of work on the new platform is to deliver a step change in our additions and upgrades program by offering customers more choice, and that will be up and running in the second half of this year.

Cost savings, a few examples. Since energy costs spiked in April, we have taken a robust approach to subcontractor requests for cost increases. Any application for additional costs as a result of the Middle East is controlled by head office to ensure we take a consistent approach to any surcharge. Since April, we have had requests for energy-related costs of over GBP 22 million. We have authorized just GBP 3 million. Most contractors value the relationship with Bellway, the good payment terms and the promise of future work above any short-term gain or benefit. And this centralized approach has saved Bellway around GBP 20 million or 1% of BCI.

Another example of cost saving is the introduction of our 3-tier specification following the launch of our new house type range. Our new base specification is still a great offer and expected to save GBP 5 million in costs in FY '27, a saving of almost GBP 1,300 on a 4-bed home, yet the customer still has the opportunity to upgrade through our additions platform. Overhead costs. As Shane has mentioned, our operational cost base is under review. 20 U.K. trading divisions gives us the right balance between a nationwide footprint and the platform for growth. I don't want to cut into that muscle. That's Bellway's strength, but a broad review of overheads is underway.

The next 2 slides look at our positioning within the market. The first slide highlights our broad product range, accessible price point and all based upon larger 2-story or 2-story housing. The second slide highlights Bellway's balanced national land bank and how it supports medium-term margin recovery. And you can also see we have the second lowest ASP in the sector with a good exposure to the first-time buyer market. And if you go back to 2022, the last year of Help to Buy, 42% of completions came from first-time buyers, and that drove higher volumes.

Finally, outlook. We are targeting completions of between 9,000 and 9,400 homes. And Shane has mentioned there will be margin pressure in FY '27. But the challenges in FY '27 give way to opportunity in '28 and beyond. Your first home could drive volumes back to 10,000 homes and as early as FY '28. Capital efficiency has markedly improved. We have a strong balance sheet with net cash and a strong track record on delivery. I hope you can see that we are taking action to make the business more resilient, more structurally efficient, and we have the capability to respond to stronger demand. Thank you. Happy to take questions.

Aynsley Lammin from Investec. Just 2 for me, please. Just on the recent trading, I wonder if you could comment if you've actually seen any cancellations from first-time buyers as they await the new scheme to come in? Or is it mainly just the kind of higher interest rates? And then the second question on the kind of your first home scheme, have you had any discussions with government? What's your kind of fear that could go wrong with that in terms of the detail at the end of budget? Are you confident that they understand what's necessary around price gaps, the funding scale, et cetera?

Thanks, Aynsley. I'll take both, if I may. From the first-time buyer, it's early, Aynsley. There's a little bit of cancellation in the south of England, but not that we can see in the north, which you'd probably expect, but nothing significant. In terms of the your first home. I don't see problems. I see opportunity. My view on it is that your first home, Aynsley, is going to underpin volumes, but it won't supercharge profits. And the reason I think that is because I'm quite relaxed about the income caps, the regional caps, but there are more guardrails in place than the old system. And I think the funding for the first round of your first home will be -- let's see how it develops before it's funded beyond that. So I think it will support volumes. I think it's the right thing to do for young people, but I think it will be fairly measured. And sorry, you did ask me, are we engaging with the government? We do directly, I do, and HBF do it on behalf of the sector.

Zaim Beekawa, JPMorgan. Two questions from me. The first is just on stamp duty. I think that was a comment in the prelims, but it seems like there's no comment on that in today's statement. Is that something that you feel like is off the cards now? And then also to come back to your first home, obviously, there will be a developers' contribution, but what's your appetite to provide further incentives, cash or noncash beyond that?

In terms of SDLT, I'm a big ad supporting young people, but I think you need an SDLT cut to improve affordability in the whole market. I think it's probably be optimistic or naive of me to ask government for both at the same time. So we'll see how the market unfolds in '27. But I won't be shy in going back if we need to encourage the market because it's affordability pressures. In terms of your question on your first home, I think it's a good one. I've made the point quite clearly, and I'm relaxed about income caps, regional caps.

The bits I don't know are developer fees, yes, and the amount of money in the pot to fund the first round of your first home. I've made it quite clear that there is going to be strong appetite for your first home, both from developers and from first-time buyers. So if the scheme rules don't work, that's a political problem, not appetite problem. I think they get that message, but we won't know the answer until October, the budget day. Do you mind asking some questions?

No, I think they're much better than me.

I think I've got one for you. Lewis Roxburgh, Goodbody. Just one on cash flow. Do you have any targets that you're thinking about in terms of a specific conversion rate or level or looking at it another way, a target land bank or WIP or asset turn just to help us from that perspective.

Secondly, just what you're seeing in terms of land prices, particularly in the North, where we've seen obviously stronger pricing there. And lastly, sorry, again, your first home scheme. How quickly do you think the uptake will take to sort of reach that 10% of your expectations just based on the volume guide? I think that's probably more gradual, but just some color there.

I'll do -- yes.

Cash flow targets. Yes, Lewis, it's very -- I guess you probably picked it up from the presentation. We're trying to be as consistent as we can. So the capital allocation strategy that we outlined was very much low levels of gearing on the balance sheet. That doesn't change. And the opportunity that we identified was WIP turn was at about 1.3 when we started the cycle, get that above 2 in this market. That's going to take a few years to do that. And in a tougher market, obviously, it's harder to do that. And we'd be very comfortable with that as a measure. So I think the comfort that people can take is a lot of the WIP -- a lot of the operating cash flow opportunity is coming from WIP.

So we made an important strategic decision, and this is aligned to the supply chain challenges that we have, like we and the sector saw a unit output go from 11,000 in our case down to 7,000 overnight. We made a very, I think, wise strategic decision then that we weren't going to reduce our WIP exponentially, like you would have been reducing your WIP spend to probably GBP 1.5 billion or GBP 1.4 billion from GBP 2 billion a year. The disruption that would have on your sites and everything else would be significant.

So when we turn and we talk around -- talk to our supply chain partners now around BCI and working with us, they believe us when we talk about our pipeline because that's Bellway and that what we've done. And it's worked out well for us because we're now monetizing that WIP. We're going after that opportunity. And I think you can see that like we got a 20 basis point improvement in WIP turn in the year, went from about 1.3% up to over 1.5. And that will -- again, we're on a good track to get that up to 2. And we're doing that, and we're buying back our shares at a discount. So that's a good timing piece for us in a world where trading is very difficult.

So low levels of leverage, a very strong land bank. So we are net replacement on land. And you can see from our balance sheet, we've got 3% gearing, including land creditors at the moment. So if Simon and Jason turn around and say that they want to buy more land, we absolutely have the firepower to do that. But the 3 of us are very much committed to net replacement on land broadly, and that gives the guys plenty of firepower, I think, to go after the opportunities that are there.

I think on your land question, I think it's a good question. I think the answer may surprise some. But the land market in the north is quite competitive. I was only talking to Clyde earlier because his note -- his recent note was quite accurate. But land prices are holding up quite strongly in the North of England for 2 reasons. One, because -- the planning environment is slow. And the second reason is there's an appetite from developers for outlets in better selling areas. Most are well funded. So there's more cash being focused in those better selling areas of the north where it's a bit softer down the south.

William Jones from Rothschild, Redburn. First one is just around margins. Helpful bridge for the year finished. When we look forward, I think you've guided to 3% to 4% build cost inflation. Can we assume land mix will be similar again at 100 bps? And pricing-wise, if we stay the same sequentially, where are we at the moment in terms of what might be the price effect on margin for the year ahead? Second one was just maybe on that land point. I know you've slightly tweaked the way you consider new land to IRR as opposed to just necessarily gross margin and ROCE, but perhaps you can just update us on what you're asking new land acquisitions to clear? And then the last one, just around your first home. Are you hearing anything on the price caps and how they might be struck? Clearly, we exited Help to Buy with price caps. Do you think they'll be similar or more restrictive against those? Or maybe we just don't know yet.

You do margins, I'll do...

So on the margin bridge, I do want to answer the question as best I can. We're not guiding on margins this morning because it's just so difficult in this market as you'll understand. But I think the one thing that 3 of us are very comfortable talking about is that land margin uptick. And I think it's important that we give that assurance in a world where margin is under pressure. And it's all well and good for us to talk about an aspiration to get to a 15% return on capital employed. But to do that, you need margin progression. So we're very comfortable that, that margin upside exists in terms of the land mix and we'll continue to do so for the next number of years.

There's decent margin progression in our DPP land bank all the way to the 20% plus that you have on Strat land. So clearly, as your penetration rate goes up on Strat and you trade your way through the forward order book, you will get that margin progression. BCI is roughly, our build cost is roughly half your ASP. So if you divide that by 2, you're probably getting to about 1.5%. So the big unknown that we have at the moment is how hard are we going to need to trade incentives in this market.

Bulk doesn't have a dilutive impact on margin as you would think. It's probably around 50 basis points in overall terms, but the cash generation that you get from that is significant. So the unknown for us is just the extent to which we'll need to drive incentives and base pricing over the next 12 months.

But margin will be going downward this year. But I would caveat that by saying you will get margin progression in future years. And when we give guidance around what our land bank looks like, we're doing that mark-to-market at the moment in terms of what current levels of BCI and HPI look like in overall terms.

In terms of our land hurdle rates, our hurdle rate is typically 20% on both ROCE and on margin. And particularly in the North, we might look at certain deals where the margin is lower than that if there's a strong ROCE in that and where it's competitive because it makes sense to do that in those situations. But in general, they're the hurdle rates that we have. And I think, Simon, they work generally for us in terms of what we're trying to.

What we're finding in the North is whilst value Jason mentioned a little bit lower if it's a quality site. The strength of our balance sheet allows us to agree with deferred terms on the back of that approach.

I think the land market reflects slower sales rate. Shane was ahead of his time with capital efficiency because the land market today, whilst prices haven't softened, payment terms have. They understand that we're selling slower than we was a few years ago. That's good. Can I just touch on price caps, Will? The reason I'm more relaxed on price caps than I am on developer fees and the PAS is because in my one-to-one discussions with the minister, I pointed out quite clearly that the Scottish Help to Buy product that was launched in June has only sold 1 home in 4 months because of the scheme rules and the price caps.

I've pointed out, Will, that the Welsh government are writing to me saying, Jason, would you like to increase the price cap to 375 because we recognize 300 is not working. They understand the detail. And I think that, that will be accommodated in the regional caps or the local authority caps that they're thinking about. It won't all be perfect, nothing ever will. But I don't think you're going to go back to the price caps of Help to Buy. Some of those we can't even build a house for those figures, let alone sell a home. So I think they get it. I think they get it.

It's Harry Goad at Berenberg. I've got 2, please. So just extending the point about gross margin contribution from land, how many years does it take before we get to sort of fully reinvested land bank, if that makes sense? And over that period, is it fair to assume everything else being equal, about 100 basis points of contribution per annum?

And then the second question is just the point around capital efficiency. Is there -- just as a reminder, is there an implicit assumption there that what you feel in terms of long-term required landholdings will be less in the future than it was in the past because of regulatory change?

Just the first part of your question there, just I get a bit about margin progression, just so I understand exactly what you're asking, just the first part.

Effectively, how many years does it take before you have a fully reinvested?

20% gross.

To date. Well, look, I think in terms of -- there is a kind of a gross margin improvement coming through of 1% per annum. We're always careful in terms of how we articulate at the moment because the industry itself is flagging headwinds at the moment, and it's a double, whammy in terms of BCI and HPI. So that 1% progression is real. My own view for what it's worth because we can all crystal ball gaze, is that we've been long on cost challenges over the last number of years. You've seen the HBF report yourself, I'm sure, which talks about a 75% increase -- 75,000 increase in build costs over the last 4 to 5 years. And there's been pretty much no HBI. So that's all baked in our margin now. And the question obviously is at what point do you get a little uptick in your HBI to provide at the very least that the neutralizing impacts of that 1% comes through.

But then 1% margin progression is only 3000 -- about 3,000 to 4,000 per home in terms of a beat on HBI versus BCI. So it's not a whole lot. It's just in this market, it hasn't really existed for the last number of years. So I would say there's probably an inherent 1% uplift that you'll get off where margin lands this year. And then it's just a case of how that whole HBI, BCI dynamic lands. But you'd have to be somewhat optimistic in so far so we're all sitting here, and there's been a series of questions around a first home scheme with a 2.5% underpin in terms of what the deposit required is by first-time buyers.

I think if I was in this room 6 months ago and I said that, that was a potential, I don't think anyone would have believed it. So you'd have to -- and I think if you even look at press coverage, like the dynamic is changing in terms of the industry. I think we're doing a better job explaining some of the cost of capital challenges that we have in terms of viability. And I think there's a lot more focus now coming around what macro support can be provided for housebuilders who are actually as well invested as we are in terms of providing much needed homes.

The second question, Harry?

Second one was around your point of capital efficiency. Is there an implied assumption there that you just will in the future [indiscernible] relative to [indiscernible]

Yes. I'm a bit cautious on that. We've been improving the planning system, Harry, since I left school 40 years ago. So I think you're probably always going to need a 4.5- to 5-year land bank to compensate for that environment. You can get closer to 4%, I guess, in a better market when it's turning, but I'd be cautious with that at the moment.

Rebecca Parker from Goldman Sachs. Just wondering if you could provide some color on how bulk appetite is tracking, you're planning to double your bulk sales into next year and the types of discounts you're having to offer there? And are there certain regions where you're targeting doing these deals maybe in weaker performing regions? And secondly, you're seeing outlets drop into this year. How is the planning environment and confidence that you can drive growth into FY '28 on outlets?

Do you want to [indiscernible]

Bulk? Yes. Yes. Look, bulk has been a significant area of opportunity for us. Look, we haven't reinvented the wheel here or anything. It's just historically, the private demand backdrop has been stronger, but we take very much a group approach now to both deals because what the counter parties tell us is they want to deal with Bellway. They don't necessarily want to deal with the divisions on their own. So we take a more holistic strategy in terms of how we go after bulk. But the hopper of bulk opportunities is significant. And I think that's important, again, when we sit in front of people like yourselves. this isn't the way we can mitigate kind of margin reduction is making sure there's a lot of appetite out there for bulk. And there is.

And there's 2 reasons for that. One, the funding allocation that's been given to -- around affordable housing. So we're seeing more interest levels there, but also the fact that the rental underpin is still very strong for those customers who actually can't buy a home. So the economics tend to work in this market because bulk buyers will tend to take an even longer-term view than we do in terms of where interest rates are going to be ultimately in the long term. So I would say we've got very strong visibility around our ability to double that. If we wanted, we could probably do more, and it's just a case of whether we would actually want to do that or not. And we look at everything on an NPV basis. So typically, the reduction can be around 10%, but you'll claw some of that back through obviously, your site preliminaries and your sales and marketing cost.

And then obviously, as Jason said already, if you can get a funded deal in particular, it can be very much NPV accretive. So that's how we look at bulk. I think we've created a good platform in terms of where there's plenty of healthy competitive tension around people who want that product. And it's a flexible strategy for us because obviously, you've got first home coming out. And if the market improves, we never overcommit in terms of doing something that's a long way out because we do that for BCI purposes as well as anything else. We don't want to have a big BCI exposure around something that's going to have many years to build where you might have locked in prices. So there's a good symmetry there in terms of if the market demand backdrop picks up overall. So feeling pretty good about that opportunity in overall terms.

Can I just pick up your point on planning and outlets. It always strikes me as strange when housebuilders come out and suggest they're growing outlet numbers when no one is buying any land and the planning system is slow. Our outlets are just coming off slightly. It's difficult for me to say there's going to be significant growth in the short term. I'd probably be more interested in better quality outlets, right product in the right area, driving good sales rates as opposed to getting consumed by outlets. So I don't want to see them fall back too much, but it's difficult to see why they're going to grow in the short term.

Clyde Lewis at Peel Hunt. Two, if I may. Jason, you touched on the 20 regional offices at the same time, we talk about overheads, reviewing costs there. 450 to 470 units times the 20 regional offices gets you to that 9 to 9.4. Where are you thinking is the optimum size for a regional business these days, certainly given the bulk sales, given AI tools and other dynamics that have obviously helped the business? The second one was on the future home standard.

And I suppose where are you in terms of that ramp-up in terms of costs for building the new standards? How many years left have you got before you're at the full run rate? And also, I suppose, on the impact of timber frame, how much of a drag will that be around gross margin given it's still typically more expensive than traditional build?

Yes. I'm not -- I'd be guessing to talk about how AI is going to impact on my regional businesses. I look at 20 U.K. offices and think that feels about right as a nationwide footprint at the moment. And I measure it against 600 homes per division. And there isn't a sweet spot. You can't say, look, we can do 600 in every office. If I've got a mature senior management team with good geography, I'm running 700, 800 out of that office. If I'm out in Norge, the natural absorption rate is probably 300 or 400. So it's a balance. But as an average, I take 600. So I think my existing infrastructure gives me the ability to grow into those shoes as opposed to opening up more offices in the medium term.

Future home standards, we're fully embedded in the system, costs fully provided. It's been a long journey getting here to implement it all, but I have no concerns on that. I do worry that people are going to unwind it after all the effort that's gone into putting it in place. And your final point is a good point on -- we put a lot of investment into closed panel timber frame systems, which trust me, Clyde, is the future of housebuilding. 5 years' time, closed panel, sealed units, wall construction, it's the answer. But it is a little bit more expensive. Our investment now, we expect to get up to maybe 1,000 units this year. That's 1 shift. I can run that operation into 3 shifts. And you know how I approach things. I'd prefer to get that shift right before I start getting into the next one. So we'll breathe success into that factory. So it's a slight drag at the moment, but that's a good investment for the future.

I'm going before you there, Chris. Actually, just -- that they probably have a couple of bits. Firstly, Shane, you target a pretax return on equity rather than return on capital employed. One would assume that's the top end of guidance in terms of your balance sheet leverage and land creditors. Is there anything else in there that you would -- that differentiates that pretax return on equity from a return on capital employed? And then secondly, just in terms of that 10,000 units that you're sort of aiming for 2028, is that included in that what looks like about 20% of plots that need to be bought for 2028? Or would you need to step up going into the land market?

And kind of the follow-on from that, when you tell that to government, given where your completions have been previously, and they say, hold on, Jason, you used to do much more than that, and the ambition used to be substantially higher than that. What are the backlogs? Do you feel there's something more that might come down the line in terms of planning because land availability as well as confidence in terms of being able to sell, but land availability is clearly going to be very key.

ROE...

ROE. The only reason we talk about ROE is a number of our regional chairs are here, and they'll all remind me, they're all measured on return on capital employed, but we think it's right that we measure ourselves on return on equity. It's myself, Jason and Simon's job to make sure we run an efficient balance sheet. I don't think you'll ever see a situation where return on equity, Glynis will be running materially ahead of return on capital employed. When we did the math on that, we came out our capital allocation strategy, we said we weren't going to be over-leveraged. So around a 5% gearing rate in overall terms, and it's nothing more complicated than that.

Whatever operational efficiencies we're driving in the businesses, we want to make sure that, that gets driven down into return on equity because I think the industry has probably been guilty in the past of we've had margin degradation and then we're all sitting on big cash balances, and that's a dilution to return on equity. So you will not see that there. So that's the promise that we're making is that return on equity will never run lower materially than return on capital employed.

Glynis, 10,000 homes in '28 is deliverable of owned and controlled rather than new land coming into the market. So new land would feed into '29 to deliver those numbers. So I'm reasonably confident that we can deliver that if the market is there. And why not help your first home deliver extra volume by '28. If the scheme is up and running in, let's go for it. Customers need it, government needs it, more social homes, we need it. So we're certainly prepared for it. How do you drive more volumes? And will the government be interested? I'm not sure. It's a little bit more guesswork.

I personally think you need a better selling environment with lower mortgage rates to drive more volume. I think trying to squeeze it out the planning system or your existing land bank is probably too hopeful. You need better selling environment, lower interest rates, and you'll see the market free up a bit quicker. We're really forcing that volume at the moment, are we, let's be honest. We're throwing everything at the private market. We're doing bulk investor deals. We're encouraging housing associations. We're forcing it at the moment.

You're the last one.

Chris Millington at Deutsche. Look, the first one I wanted to ask about is how robust do you think the intake margins on land are? We often hear from people say it's coming in at 20%, 25%, and then we rarely see the out. I know there's headwinds there. But can you just give us some confidence as to kind of what you're assuming on sales rates, what you're assuming on build cost contingency? Just give us a little bit more color. I'll go one at a time.

Okay. I'll start with that. So I reckon our intake margins have moderated a little bit, Chris. You're quite right, probably 21%, 22%, depending upon planning and geography, those sorts of things. But I do think they're fairly robust in the North of England because we can see -- we can see the sales rate, we can see the prices. If you were to invest too much in the south of England, you've still got a bit of price erosion with build cost inflation. So then your margins become a little bit flaky. That's why most of our investment is in the north of England. I can't be more specific than that, but it feels fairly robust at the moment in terms of where we're investing.

And do you have more contingency on build cost perhaps what you used to given...

Yes, certainly. We've got additional costs in there going forward because we're mindful that prices could be flattish and there's still that nudge of energy inflation. But until we can see a clearer picture, I don't think we'll overinvest in land, Chris. We're just going to keep the hopper where it is and stay efficient.

An extra layer of comfort on that is, obviously, when we update on where our margins are sitting across the tiers, we look at that bottom up around where sales rates are and everything else. And clearly, if we're in a trough, you'll take a view around whether -- what a halfway point is. But then equally, I think when Simon and Jason are buying land, they will put the business through the ringer then to say what have we learned maybe from land we bought before and how should we be buying now in terms of is that actually going to give you the sales rate based on what we know is actually out there in the market. So it changes your buyer behavior. And obviously, we update our margins then to reflect what we're seeing overall in the market balanced.

Affordable housing market. Can you just give us a comment about Section 106 and additionality, just kind of how pricing and demand is faring?

Yes. I guess I mentioned that because we've -- the past couple of years, there's been a struggle to get local authorities to invest. I think that's settled down now. So we're a little bit more relaxed on when we invest in land, Chris. We was getting to the point where if you had 40% of affordable on a site in Oxford that was a greenfield site, we didn't know the value of 40% of the land. We couldn't buy the land unless you had contracted with some of that upfront. That settled down that side of the market. The new funding round and the pressure from government into the RSL world has stabilized. So pretty relaxed there.

Sorry, last one. Would you go any further with vertical integration post the timber factory?

I mean that's a debate I have with our Chair. I'm particularly interested to see year 2 of our timber frame facility and whether we'd expand that approach into the south of England. But you've got to be mindful of Clyde's comments on pressure on margins. So it needs to be fed into the system rather than jump in with 2 feet. So we're all eyes on it, but need to see how it unravels.

Ami Galla from UBS. A few questions from me. The first one was on your first home and its impact on the sector. When you think about the land sites and the site layouts that you have in place, do we need replanning? When we kind of think longer term of how this could shift the tenure mix in the sector, how do you think about that? The second question, still early days, but on build cost inflation, what is your early read on how the supply chain is thinking into next year? And do we kind of think that as the sort of surcharges unwind, there could be quite a quick sort of normalization to the build cost in the sector? And the last one is on the strategic sites that are locked in planning, i.e., pending planning. What do you think is sort of delaying the decision there? Is it just timing and resourcing? Or are there some technical elements where, say, councils are not willing to sort of come to a more definite terms et cetera?

I'll answer your -- I'll do all 3, Ami. I'm not brave enough to go and replan some of our sites. We've got quite a broad product range already. And we are affordable family homes in the main. And we think a good part of our land bank is attractive to first-time buyers. So certainly, we'll take on board your comments on new land that we buy, but I'm not going to change what I've got. I think we're quite well placed as it is. You're quite right. I love talking about my centralized approach to energy surcharges, and we have generally saved nearly GBP 20 million. But if those diesel prices continue past the spring next year, we'll have to rethink that approach because we have to share some of the costs with our subcontractors and the suppliers. We can't burden them with it all. It's a balanced approach. So I will come under pressure if that conflict is still going next spring. And your final question was on planning.

Strategic -- the plots that are applied for planning, which are pending to an extent on the strategic land.

Sorry, the 20.

So essentially, in terms of planning delays and potentially...

The problem I think it's volume, there's limited resources in local authorities to deal with planning applications. And there's lots of developers and private companies with strong strategic land banks that are flooding the systems of bid applications. That causes a log jam. That's point number one.

The number of people that we consult to get planning, particularly on something large, is remarkable. And if you ask 10 people, Ami, a question, you might get 6 of them to agree and 4 won't. And it just creates time delays through the system. But I'm not complaining that the government, they're making an effort to improve things through the NPPF.

There are still some local authorities that want to die in a ditch over a planning application, but most are dealing with it. So I don't see it changing. That's -- I'm going back to Harry's point about would you shrink the land, not really. I'm just not confident enough about the planning environment. So it might get better. It might improve a bit more, but I don't see anything dramatic.

Well done. thank you very much for your time.

Thank you. Good morning, and welcome to Bellway's half year results. As usual, I'm joined by Shane and Simon. We've lots of our senior management team also with us today. If I could take you to the first slide. We delivered a good first half performance despite a softer selling period through much of 2025. Half year volume increased to 4,700 homes. That delivered an operating margin of 10.5%. We have an order book of 4,400 homes and a strong land bank largely unchanged at 94,000 plots.

Now since the start of the calendar year, trading conditions have markedly improved with a notable pickup in both homebuyer interest and reservations. However, the ongoing conflict in the Middle East clearly has the potential to dampen customer demand and clearly increases the risk of higher inflation. That said, to date, we have not seen any material impact upon sales rates. And for FY '26, given our half year results and our order book, we remain on target to deliver operating profit in the region of GBP 320 million to GBP 330 million.

The full year is likely to deliver a higher volume than previous guidance with an operating margin similar to the half year. And while margin headwinds may well continue delivering higher volumes will certainly drive cash generation, and that very much supports our program to be more capital efficient.

I will provide the usual detail on ops and outlook later, but first, for our results and update on capital allocation with Shane.

Thank you, Jason, and good morning, everyone. As Jason said, we've delivered a robust performance in the first half despite ongoing challenges in our industry, supported by the order book at the start of the year and despite subdued trading throughout the autumn, volume output increased by 2.7% to 4,702 homes. There was growth in both private and social output and the proportion of social completions was in line with prior year at around 21%.

The ASP was up by 3.7% to just over GBP 322,000 and in line with expectations. The increase in the ASP was driven by geographic and mix changes with headline pricing remaining broadly stable.

Turning to gross margin. There was a 20 basis point reduction to 16.2%. This slight reduction reflects the benefit of higher-margin land in the mix, which was offset by incremental incentive usage, the absence of any HPI and low single-digit build cost inflation. These factors are also reflected in our order book and combined with the expected contribution of bulk sales in the second half, we currently expect gross margin in FY '26 to be similar to that achieved in the first half.

These margin dynamics, together with embedded cost inflation carried in our work in progress are likely to remain a headwind to margin, at least in the near term. And there are clear risks of potentially higher build cost inflation stemming from the ongoing conflict in the Middle East. We'll be in a better position to comment on the potential impact of FY '27 when we report in our June trading update.

Looking further ahead, we are working through our WIP balance and growing proportion of our output will benefit from newer high-margin land. With a stable market supported by a more favorable HPI BCI dynamic as seen in previous cycles, we are well positioned to drive ongoing improvements in our margin in future years. In line with our strategy to invest across the group to deliver greater efficiencies and long-term growth, the admin overhead increased to GBP 86 million, and the full year number is expected to be between GBP 170 million and GBP 175 million.

Our investments include our new timber frame factory, combined with strategic investments across IT and strength in commercial and finance teams, which means we now have the right structure in place to effectively deliver on all of our strategic priorities. We expect that, that level of increase will not repeat in future years, whilst obtaining operating leverage from it as we drive towards 10,000 units if market conditions improve into the medium term will obviously be a key focus also.

The effect of the increased overhead investment, together with the movement in gross margin led to a 50 basis point reduction in the underlying operating margin to 10.5%. Underlying PBT was slightly higher at GBP 151 million, and I'm pleased to report that the interim dividend has been increased by almost 10% to 23p per share.

This slide has covered the group's underlying performance. Adjusting items shown in more detail in the income statement in Appendix 1. These include GBP 300,000 to admin expenses relating to the previously announced CMA investigation. The other adjusting items relate to build safety, which I will cover later in the presentation.

Turning to our balance sheet. It is robust and well capitalized with a strong land bank and WIP position at its core foundation. These are key focus areas for our capital efficiency drive and critical to our plans for increasing cash generation. I will cover this in more detail shortly as part of our capital allocation strategy.

First, to highlight the key balance sheet movements, reflecting our largely land replacement only land strategy, the land balance of GBP 2.5 billion has reduced slightly by around GBP 38 million since the year-end. During the first half, we entered into new land contracts on deferred terms totaling around GBP 130 million, and settled line creditor payments of around GBP 180 million. This led to period-end land creditors of GBP 290 million, representing 12% of our land balance.

As previously guided, and as part of our strategy to run the business with a more efficient capital structure, there will likely be an increase in the use of land creditors over the medium term. The range is expected to be between 15% and 20% of land value, which is similar to historic norms. Jason will cover our land bank in more detail later.

The work in progress balance, which includes site WIP, show homes and part-exchange properties reduced by GBP 39 million to GBP 2.3 billion. Breaking that movement down into 3 component parts. Firstly, the value of show homes remained flat, reflecting our broadly stable outlet position. The value of part-exchange properties rose by just over GBP 20 million. Part-exchange is an important selling incentive for customers. And whilst its usage increased, it has remained disciplined and represents a relatively modest 6% of our completions.

Finally, site WIP reduced by GBP 61 million to just over GBP 2.1 billion. And this highlights some good early progress with our capital efficiency drive, which we spoke about to you in detail last October.

To finish on the balance sheet, as you will see from the bottom of the slide, our adjusted, our adjusted gearing, including land creditors, remains low at 10.3% and our net asset value per share has now risen to just over GBP 30. We've continued to make good progress on build safety, and I'm pleased to report that the overall provision remains broadly stable. With regards to movements in the provision, in addition to the GBP 6.5 million adjusting finance expense, which was in line with previous guidance, there was a very modest net increase of GBP 4.2 million in the build safety provision through cost of sales, which relates to the refinement of overall cost estimates.

We have now completed the terminations on all of our legacy buildings in England and Wales in accordance with the joint plan. Our provision is based on robust assumptions and prudent cost estimates for both internal and external works on the 457 buildings in scope for remediation. We have started our completed work on 172 buildings with the majority of spend expected by FY '30. We've spent GBP 212 million on legacy build safety since the start of the program, including GBP 21 million in the first half of FY '26. The strengthened team at our dedicated Build Safety division is focused on completing works as promptly and as efficiently as possible.

For FY '26, we continue to budget for total spend of over GBP 150 million, although I must caveat that this level of spend remains dependent on receiving requests for payment from the government for works carried out on our behalf for the build safety fund totaling around GBP 90 million. I think it's important to point out today that for prudence, our shareholder returns capital allocation modeling assumes significant disbursements around build safety over the next 3 years. The provision at the 31st of January '26 was GBP 507 million, and I'm confident that we are well provided for the remediation works required across the legacy portfolio.

In terms of recoveries, we've recognized GBP 81 million to date. We do, of course, continue to actively pursue further supply chain recoveries. But as these are not virtually certain at the balance sheet date, no additional reimbursements have been recognized.

Turning next, just to remind you of our priorities for capital allocation, which we covered in detail last October. In short, it is a flexible framework with our strong balance sheet and well-invested land bank as the foundations of the business, which support our balanced approach to continue to invest for growth and delivering enhanced returns for shareholders from increased cash conversion and generation. As part of our strategy, we are sharply focused on driving greater efficiencies and our WIP balance presents a significant opportunity for much greater cash generation, which I will cover next.

We generated good operating cash flow in the first half. The cash flow bridge chart shows the movement from a small net cash position to ending the period with modest net debt at GBP 72 million, in line with our plans to run a more efficient balance sheet and increase returns to shareholders. To run through our key movements, you can see the decrease in total WIP that I referenced earlier amounted to GBP 39 million.

In relation to land, the monetization of land through cost of sales was GBP 283 million. This was slightly lower than the cash spent on land and together with the movement in land creditors, this led to a GBP 38 million decrease in land on the balance sheet in the period. After other working capital movements and tax, the operating cash generated before investment in land, build safety spend and distributions to shareholders was GBP 314 million. As a result, the conversion of operating profit to adjusted operating cash flow was 2x.

As I highlighted in October, we are aiming to maintain the conversion level at a minimum of 2x over the 3 years to FY '28. As I've said previously, adjusted cash flow is the fuel for future investment opportunities in the business and ultimately, greater value creation and returns for our shareholders. In this regard, we invested GBP 302 million in land, including settlement of land creditors and dividend payments and share buybacks totaled GBP 105 million. We also spent GBP 21 million on build safety, which I referenced earlier. After taking account of all of these disbursements, we closed the half year with net debt at a modest GBP 72 million.

I will now cover our cash generation targets for the second half, which I think is important in the context of what we're discussing this morning and the tougher trading backdrop that may emerge, together with our longer-term ambitions in the context of driving shareholder value against this potential backdrop.

As I've said many times, driving WIP efficiency is a key area of focus across all of our 20 operating divisions and a significant opportunity for the group to deliver cash generation. We've increased our volume guidance for the year by between 100 and 300 units on our original volume guidance of 9,200 units. And the combination of this increased monetization with tighter controls around WIP spend will see us increasing our operating cash flow conversion targets significantly year-over-year.

As the chart shows, operating profit will grow by between GBP 20 million and GBP 30 million year-on-year in FY '26. But we expect operating cash flow will increase substantially more than that by between GBP 100 million and GBP 150 million year-on-year. This leaves the company in a strong position to drive future value for shareholders by continuing to drive volume appropriately against this tougher trading backdrop. This will provide greater opportunity to invest in more high-margin land and potentially returning more excess capital to shareholders.

Overall, we are targeting adjusted operating cash flow of between GBP 750 million and GBP 800 million for the full year. Looking beyond FY '26, we have a greater proportion of units at an advanced stage of build than a couple of years ago, which should support a faster monetization of our WIP balance. This drive for improvements in WIP turn and to lower our WIP balance will enhance asset turn and support cash generation. This will help fund our build safety disbursements, further land investment and returns for shareholders.

We'll maintain our underlying dividend cover of 2.5x, and this will be supplemented by returns of excess capital. In this regard, we are making good progress on our GBP 150 million share buyback launched in October with around GBP 64 million completed so far, and we have a clear intention of returning excess capital in future years.

To finish my section, a summary of guidance for FY '26. We, of course, recognize the risks to inflation and customer demand from the ongoing situation in the Middle East. Notwithstanding this and supported by a robust first half and our current order book, we are well placed to deliver FY '26 underlying operating profit in the range of GBP 320 million to GBP 330 million.

So for guidance, we are targeting volume of between 9,300 and 9,500 homes, the final outcome of which is dependent on completions from our bulk sales pipeline. The average selling price will be around GBP 325,000 with the increase over FY '25 driven by mix. It's important to point out when we give that guidance, we are not in any way giving that guidance in the context of any potential negative impacts that it might have on FY '27. It's all based on the strong work that we've been doing, monetizing our WIP and broadening the pipeline of opportunities that we see both in private sales and potential bulk sales.

The admin overhead will be between GBP 170 million and GBP 175 million. We currently expect the operating margin to be similar to the first half level at around 10.5%. The finance expense will be around GBP 20 million, and adjusted operating cash flow is expected to be strongly ahead of prior year at between GBP 750 million and GBP 800 million. Finally, land spend is expected to be in the region of GBP 500 million to GBP 600 million, reflecting our largely replacement-only land strategy. Despite the headwinds facing our industry, I'm confident that our self-help and drive for capital efficiency will mitigate the impact on our strategy to increase cash generation and value for shareholder returns.

I'll now pass back to Jason, who will cover the operational review and outlook.

Thank you, Shane. But now for trading. In the first half, we achieved a private sales rate of 0.47 with January being our strongest month at 0.6, and that momentum has continued to build into the start of the spring selling season. With regard to the mortgage market, improved affordability and changes to lending criteria have both contributed to those better trading conditions. That said, recent increases in mortgage rates due to the events in the Middle East clearly has the potential to impact upon future demand. And that brings me on to current trading. In the first 6 weeks since the 1st of February, we have achieved a private sales rate of 0.66 and bulk sales made an additional but modest contribution of 57 homes.

And from a geographical and mix point of view, the picture hasn't really changed much with Scotland, the North of England and the Midlands all remaining stronger than the South. But those regional differences are quite pronounced with Midlands and upwards all delivering a strong sales rate of around 0.75, significantly higher than the 0.5 being achieved in the South. Headline pricing remains firm, although incentives are full at 5%. And we find that prices for houses are more robust or more resilient than those for flats.

And as I referenced in my introduction, the last 2 weeks of our current trading period have coincided with the conflict in the Middle East. Both of those weeks have delivered a consistent sales rate of 0.65 or the equivalent of 155 private homes per week. We continue to progress bulk sales to support both this year and next. We are over 85% sold for FY '26, hold an order book of over GBP 1.5 billion or 5,300 homes as at the 13th of March.

The next slide shows our land bank totaling some 94,000 plots, half of which are owned and controlled and half are strategic. Now I'm happy with the size and the shape of the land bank. It supports our short-term growth ambitions. We are still buying land but with caution. In the period, we contracted on 4,700 plots across 15 sites including 1 site in Scotland for 1,900 homes that was converted from our strat pipeline. And strategic land continues to play an important role in our growth ambitions. Within this financial year, we will have 80 strat planning applications or around 17,000 plots in the system. And to put that into context, that has increased threefold in just 2 years. And that is a significant change in our business. And these strat plots will support both margin recovery and outlet numbers from FY '28 onwards.

Overall, we have detailed planning consent on over 95% of our plots to meet our volume for FY '27. And as a consequence, we've got good visibility on outlets. We're on target to open 55 outlets this year and a further 55 to 60 next year. And we expect average outlet numbers to hold at around 240 for both this year and the next with growth up to 250 in FY '28. With regard to planning, I would describe planning reform as positive rather than perfect. Overall, and outside of London, the planning environment is generally supportive.

Moving on to costs. Overall, cost inflation remains modest at around 1% or 2% and we currently have no issues with regard to availability, either labor or materials. That said, we are very mindful of the heightened inflationary risk caused by the events in the Middle East. And as a consequence, our focus on being more cost efficient seems ever more relevant today. And I'll give you a few examples of our approach to saving costs to support margin.

Firstly, we intend to phase out the Ashberry brand as it is proving too expensive to fund a separate brand to sell just 9% or 10% of our volume. We plan to adopt a single brand approach that will play on our 80-year history. It will be clearer to the customer, a digital-first approach, less expensive and without any overall impact upon outlet numbers.

Secondly, we will shortly launch our new house type range, the Bellway Collection, which has been designed to be timber-frame friendly. And by that, I mean, optimize panel widths and ceiling heights to improve both speed and efficiency and also reduce waste in the process. And with our new house type range, our single brand approach, we have the perfect platform to personalize homes and offer extras and additions on a much greater scale to drive incremental revenue and profit growth.

And thirdly, we successfully opened our timber frame facility, Bellway Home Space back in January. And we have already started delivering timber kits to our divisions. Our investment in technology that supports Category 2 closed panel systems is hugely important as I firmly believe that Cat 2 is a key part of the future of housebuilding.

And one final point before outlook, build quality and customer service. I'm pleased to report that we are rated as a 5-star housebuilder for the 10th consecutive year. But more important is our position with HBF's new scoring system, which has been designed to be more challenging. Housebuilders are now measured by their customers at both 8-week and 9-month intervals and based upon both quality and service. Bellway have achieved an overall score of 4.38, the highest of any national listed housebuilder, a phenomenal effort by our ops teams and a direct result of their hard work.

And finally, outlook. We're on track to deliver a volume of 9,300 to 9,500 homes. As you've heard from Shane, regardless of the wider backdrop, we have a sharp focus on improving cash generation, and we expect to deliver a significant increase in operating cash flow this year. And should we find ourselves in a prolonged turbulent period. Our business is in good shape. We have a flexible capital allocation framework and a strong and experienced management team and are well able to navigate our way through any challenges. Thank you. Now happy to take questions.

Allison from Bank of America. Two questions from my side. So first, if the -- let's assume the market activity will be muted given all the impact. Are you guys ready to give out more incentives or not? I think are we expecting maybe incentives will go beyond 5% for the rest of this year?

And the second question is what type -- what kind of inflation assumption you put in your fire safety remediation work?

Sorry, I didn't get the second question.

The inflation assumption you have for the fire safety remediation work.

So I'll take the first and you take the second. With regard to incentives, it was our intention at the start of the year to tighten up that incentive level to support margin growth into '27. Today, that looks a little bit too optimistic. But no, I don't have any plans to increase incentives. They're at a level that we're happy with, and we're delivering a sales rate that we're quite comfortable with. Can I hand over to you?

Yes, 3% on the inflation, [ build ] safety.

Aynsley Lammin from Investec. Just two for me, please. Just trying to understand the change in guidance a bit more, more volume and obviously less margin. Is that driven by kind of changing view of the market, what you expect going forward? Or is it just more opportunities to do some bulk sales and you can release some of that WIP? Any color around that would be quite interesting. First question.

And then just on the second question, I guess, a bit more color again last couple of weeks, have you seen any change in cancellation rates, the vibe on the ground in terms of the sales rates? Is it kind of beginning to feed through in confidence what we're seeing in the mortgage market?

Thanks, Aynsley. Shall I'll start with the last question and I'll hand back to you. No, sales rates, Aynsley, have held up and likely to hold up through March. And when I think about it in a little detail, it's probably not too much of a surprise. If you're planning to buy a home now, you probably made a decision a month or 2 ago, and you've already got the benefit of a mortgage offer, which probably looks quite good value Aynsley at the moment. So no -- we've seen no immediate impact.

And I think our buyers and customers in the market have got a little bit of crisis fatigue. We've been through Brexit and pandemics and Ukraine and Middle East. So there's a bit more resilience amongst our buyers. But I would expect that sales rates to soften into April, not now because you'll see the impact of the margin increase. And I don't think it will be material. I just think it will dampen a little bit. And all that's caveated to what's going on in the Middle East. But you'll probably see a softening into April, but not significant.

Yes. In terms of the guidance, it's probably along the lines and what we flagged when we came out in early February. It's very much probably reflective of what we were seeing in the first half of the year. It's probably easy enough to forget that now because I like the crisis fatigue. That's what it feels at the minute. But the run-up to the budget was a difficult time for everyone. And what we did in the run-up to the budget was we traded appropriately in relation to the value creation thesis that we set out last October, which is that we will drive pricing as appropriately as we need to. But sales rates in the run-up to Christmas were less than 0.5% across the sector.

So what you're seeing is the margin uptick that we're seeing coming through is really just reflective of the fact that with good visibility with good forward order book coming into the year, sales rates have picked up. And whilst the kind of 50 basis point margin reduction seems quite significant, those margin reductions become exaggerated, unfortunately, in a market like this where there is very little HPI for the reasons that Jason has outlined and you have kind of BCI running even at 1% or 2%, that is going to hit you to the tune of about 50 basis points on your margin. So that's all you're talking about. It's probably GBP 2,000 per unit in overall terms. It's a pretty small number.

The market has picked up quite significantly in the early part of this year across all of our divisions. And if that sales rate was to maintain, I think it's important to make that point, notwithstanding the caveat we put around the emergent situation, that sales rate was to hold at kind of 0.65. We will be looking at a kind of -- we never gave formal guidance into next year, but we did talk about the fact that we were going to get to 10,000 units. So if you storyboard that from the original guidance that we gave, 9,200, 96,000, maybe 10,000, we would have assumed off the current sales rates that we would still be forward sold to the tune of probably 35% of getting to a 9,000, so a flattish volume next year, notwithstanding the emergent situation.

So that volume uptick that we're seeing is not at the expense of the overlying market growth opportunity that's still there. And it's very easy to kind of talk yourself into a doom loop because of what might happen at the moment. But the broad reality is as you look out beyond maybe whether it's the end of this year or beyond next year, the demand-supply imbalance still holds. Jason talked about the strat land margin coming through. There will be good, strong underlying margin progression coming through our business. And we've got good volume opportunity, and we've got 20 outlets. So really, what you're seeing at the moment is just us trading appropriate through what has been a challenging environment and emerging from that with little debt and the ability to return capital to shareholders.

Zaim Beekawa, JPMorgan. The first is just to come back on the incentives. Can you give some indication on the cash, noncash portion? And then secondly, in light of the mortgage volatility you sort of alluded to and potential impact, what's your view on your own shared equity scheme like some of your peers? And then third, if I could go on the bulk sales, sort of any indication on the discount on those bulk sales compared to maybe a year ago or 6 months ago?

Should I start with?

Yes.

Sorry, on incentives, it's mostly cash and some additions. I did want to set out a chart to show you the regional differences across -- because you can understand there's probably more in the South than there is in the North at the moment. But nothing surprising in what you see regarding incentives.

And in terms of -- shall I do shared equity products. We don't think they're a big part of the market. I get a little bit frustrated because they can confuse customers when you've got a whole series of schemes across the industry. And I've always preferred a housing association on something government backed that people can trust and look into. So we look at it and watch with interest to see if that market moves, but I've got no ambition to bring out a bespoke shared equity product at the moment. Sales are good enough.

What I'd say in relation to bulk is -- I'm not trying to dock the answer. What we do is we tend to take an NPV approach to bulk pricing, and that's kind of using a 10% hurdle rate because whilst you may need to reduce your baseline pricing, you will find savings in other areas, not least your sales costs will be lower and also your running cost as a site can be lower as well, and you may have forward funding opportunities.

So looking at it through all those lenses, when we baseline that against private pricing and sales rates and if it has -- and using a hurdle rate of 10%, if that's NPV accretive, then we'll go after that deal. What I'd say in broader macro terms in terms of buyer appetite, it's a lot stronger now than it was 12 months ago, insofar as a lot of the indicative pricing that probably was coming back 12 months ago was reflective of where interest rates were, and you could be looking at maybe 20% discounts on pricing, which is not something that we'd be interested in.

But certainly -- and it's not reflected in the numbers at the moment, but it's certainly reflected in our pipeline of opportunities. The gentleman sitting in front of you there is actually living and breathing it at the moment, the 2 actually. We've got a significant pipeline of bulk opportunities, and we'd be confident that we'll see some of that coming through between now and year-end.

Can I just add to that? So there's lots of questions here about incentives. But from a bulk point of view, we did about 600 homes last year. This year, we'll probably do something similar. It's not a major part of our business. And incentives across the board, we've got a strong order book. Our sales rates are good. We were very well organized as we come out into January in the new year. So we've maximized what opportunity is there in the market. And I've got no intention to start discounting properties and being desperate. We can make good decisions. We're in a good place. So I think we're fine at the moment.

Will Jones from Rothschild & Co Redburn. Three as well, please. First, around build costs, if that's okay. Just what you've heard from manufacturers since Iran kicked off, visibility you've got generally and whether you have any framing of how you might look at your build cost basket in an energy context, any sensitivities around that?

Second, on the balance sheet and the returns, helpful guidance on the operating cash flow for the full year. Do you have any view at the moment as to how that might shake out, net cash net debt, please? And when you think about the ongoing buyback, hopefully, beyond the current year, how would you think about the sensitivity of that to -- broadly speaking, to a lower profit environment if it came through?

Or do you think that actually continuing to optimize the assets would mean that, that buyback can carry on? And then the last one just around Ashberry, just a reflection there. What, I guess, proved different to your expectation to make it too expensive? And any implications do you think on sales rates as that winds down?

Okay. I'll pick up build cost in Ashberry and I'll hand back to Shane, Will, if that's okay. On build costs, most of our supplier agreements are fixed from the start of '26 and generally last for around 12 months. If it gets really bad, Will, that counts for nothing. We know that we've been through the pandemic. All we've seen to date is lots of suppliers asking for increased delivery charges, haulage costs, fuel surcharges, those sorts of things, which is all manageable.

What has got our interest is where you've got high energy-dependent materials such as bricks, blocks, concrete chips and those sorts of things. So that's where we'll keep an eye on to see if there's any movement there. And like everyone, Will, we look every morning for a quick resolution to the problems in the Middle East to hope they don't transpire, but time will tell. So at the moment, mostly delivery and haulage costs is what's coming our way.

And on Ashberry, we did a thorough review of our brands. And I don't want to suggest for a moment that a one-brand approach is better than a multi-brand approach, but it certainly is for Bellway because Ashberry, after our research, our customers were confused with the product. And some people in this room used to get confused when you ask me about what is Ashberry and what does it do?

And I found that Ashberry was confusing our customers because it was asking for or selling the same product on the same site, and it was more expensive. So we decided to refresh that Bellway brand. We're going to offer 3 tiers of specification going up to Bellway premium. It's going to be very digital focused, both in our sales offices and on the Internet. And we think we'll make savings and be less confusing to our customers and deliver the dual outlets where we can. And you must remember, Will, we don't have lots of large sites. We've got handfuls of them where we can offer a dual outlet without making any sort of serious impact on outlet numbers.

So in terms of net debt, I mean, I anticipate at the moment, like it's probably worth just saying stripping out the build safety component, if I just assume that's constant, even though I expect that might come in slightly lower, even allowing for that, I think our net debt figure is probably going to be in the region of GBP 100 million, GBP 120 million type range between now and year-end. And that would probably see the buyback running at probably close to maybe GBP 100 million, GBP 120 million by year-end as well. So you have a decent clip of that coming through within that. So we're in good shape from a cash perspective.

The only thing, as I say, Will, I could bring that down would be if the build safety spend is lower. But I think it's important to talk about it in the context of it being at normal run rate. So I think that gives us a lot of confidence in terms of the fact that the capital allocation strategy is working against the backdrop of kind of 2 tough economic events running in the background and lower margins, we're still throwing off cash, and that is the underlying strategy going forward. We'll have plenty of cash to buy land. We'll buy land probably -- I won't quite say on a net replacement basis. We may make some incremental investment if we do it, though, it's because it's a compelling opportunity.

So we'll be very much focused on the returns to shareholders, I think, in the context of the cash that we'll continue to generate. And the fact that we've identified between 100 and 300 units this year, that's effectively ring-fenced upside from an operating cash perspective, even if it's not necessarily coming through on profitability. But as we all know, the share price is trading at a fundamental discount at the moment to what its net asset value is. And we look at our strat land opportunity. We look at the land margin upside that's coming through. And so it's very compelling for us to continue to look at buyback opportunities in that context.

I'm Rebecca Parker from Goldman Sachs. Just 2 questions. In terms of your outlet opening program, just wondering if you could talk to a bit around why you're expecting, I guess, outlets to be flat into '27. And I think the guidance for '28 has slipped by about 10 outlets there. And then secondly, on that increased proportion of higher margin land coming through, when do you expect that contribution to have more of a material impact? Is that more into 2028? Or can we start to see that come through in '27?

Rebecca, I'll start on outlet numbers. The growth -- let's start with '28, we'll go back to '27. So the growth is a product of our strat land coming through the system. Those 17,000 plots. So if that comes good, we'll get a natural increase in outlet numbers. Outlets are flat this year and next, probably because we had a big jump back in '23, '24, where we opened 80 outlets in 1 financial year. And we've just been buying replacement land. So it's difficult to see how we can grow outlets without that strike coming through. So we've held them flat.

And then as long as we get a decent run through the strat planning system, then we're likely to see a little bit of growth again.

In terms of margin progression, again, it's probably easier to talk about that in the context of how we were planning this before. And we have to take note of what we're hearing at the moment in terms of all the stagflation risks that are there in terms of potential BCI risk and interest rates going up. But we know that, that can also change quickly. So therefore, I think to answer your question most effectively, it's probably worth just talking about what the underlying margin upside that we were seeing coming through on the land bank.

So in simple terms, gross margin this year is going to be around 16.3%. We had in our head that, that could be probably getting up to 18%, maybe even 18.5% over the next 2.5 years as you get to FY '28. So you would have been looking at margin progression of probably 17% and then 18%. And I think the big question, Rebecca, that we're all asking is what impact is that 17% now coming under as a result of what's happening globally.

I think the comfort that you can take today is that hedging, it seems to be order the day at the moment. Everyone is talking about hedging in the context of BCI and stuff like that. I think our land margin uptick that you're seeing coming through is an effective hedge for what's potentially coming down the track in terms of higher interest rates and potentially higher costs. So that's the most effective way I can answer that question at the moment for you.

Can I -- sorry, Rebecca, can I just add to that because we've taken a more sober view of the outlook. We take the view that even if the war stops in the morning, there's still going to be a ripple of cost inflation in the system. That's already in existence. It's unlikely that the trading environment is going to change from a deal led market. So there's no house price inflation in the market. So we've just taken a more cautious realistic view of what's happening in the world. And then we see margin progression probably feeding through back end of '27 into '28. That's a sensible view to take today.

Alastair Stewart from Progressive. A couple of questions, please. First, in terms of the trading over the last 2 or 3 weeks, I think we're on week 4 now from what I hear. But in terms of that, you've been clear in terms of the weekly sales rates been holding up. But in terms of anecdote from sites, if there is any reticence anywhere among your potential buyers, is there a trend? Is it more traders up are more comfortable than the first-time buyers? And is there a regional disparity in terms of comfort about the situation? That's the first question.

In terms of the second, it's more of a sector-wide question. You're chasing the supply chain for recoveries. Everybody says that. But in terms of the bigger picture, are you and other housebuilders chasing -- do you see more upside in terms of recoveries from, say, big materials groups who have strong balance sheets, but also very strong lawyers? Or is it from the supply chain that probably have very little legal status, but no balance sheet to depend on really?

I'm just going to start recoveries with Simon, who can talk -- turn around without a microphone it would be fine.

Hear me now? That's better. So it's aimed at not just the supply base and their insurance, of course, it is also aimed at the larger suppliers and manufacturers. So we're very actively considering our options there. And there's quite a bit going in that space. I can't say any more at this moment in time, but we are very determined to secure as much recoveries as we can from as wide a pool as possible.

But just if you had to take one side of the divide, the big guys, the small guys, who do you think you've got most chance to get?

Well, it's a real mixed bag because even the small guys as it were, we're looking at them from their insurance position. So it's big guys behind them. So it's a real wide pool that we're looking at. But just to reassure, there's lots going on in that area.

And I'll come back to your trading point, Alastair. And I'm not sure I was surprised, but there's certainly resilience amongst our buyers because they have got crisis fatigue. It seems to be -- it's just too often, but I'm not naive enough to think it won't come and get them in the end, but everyone is very sensitive to the news at the moment. So I certainly think that March will continue with -- until we get to the end of March, there will be some decent sales rates we'll deliver.

And there's new spring buyers coming to the market, there may be a little more caution where people take the view, well, I might just wait for this war to end because mortgage offers are going to -- mortgage rates are going to come down. So there will be more caution in the market. I don't think significant, but I think it will just take the gloss off the very good sales rates that people in this room have been delivering so far this year.

Chris Millington, Deutsche. First one, just following on what you just said there, Jason. If we're going to see a slowdown in April, do you think you would have seen anything in inquiries, visitor levels? Is anything happening to that extent at the moment? Well, let's go one at a time.

Yes. We've just noticed visitor rates slowed down this week, which leads me to think that's not inquiries. It's what passing traffic. So serious buyers are still there, Chris. So just starting to moderate. And when you say sales start to slow down, I don't think we're going to move back to 2025. I just think the gloss will come off ourselves. We've been working quite hard to deliver that sales rate. But it seems to me it's a little bit inevitable unless something changes in the news, Chris, in the short term. That's my view.

Next one is about buying land. I mean as you say, you're on replacement, but you're still expending a lot of money. How do you deal with kind of the price cost inputs when you're going through trying to work out whether or not you should be committing to this stuff in times like this?

I think that's a very good point. And last October, I spoke to you about we're going to adopt a replacement-only policy, Chris, for land because that was going to help Shane's capital efficiency program. I'm not sure we'll ever do that this year. That's the level of caution. And you're quite right, until I can understand what that ripple of cost inflation that is almost inevitable going to come into the market, it's probably best to buy as little as possible or just the good deals that you've got on the table. That's probably my approach.

Sorry, I've got 2 more, but one is pretty quick. Affordable. Any sign that market is starting to wake up at all? Or is it still pretty?

Yes, murmuring. And certainly, the new grant round that comes into play now and next month has got the housing associations more active. I mean we'd like to materially move that market and start delivering more affordable homes and get building, Chris. But it's moving better. It was stuck. It's now got some life in it.

And sorry, my last one. Just about this land bank evolution. You've hopefully given that slide about pre-'24 plots, post '24 plots. Perhaps you can give us a little bit of help with the margins in each category or just talk around kind of what benefit that would have given you.

Well what I was going to do in -- I might get Simon to do a presentation to you on strat land in October, so we can show in a bit more detail. But sometimes on strat land, there's lots of hope. So I'd like to see those 17,000 plots come through the system. So that crystallizes the land value and the margins, Chris. So certainly, it's margin accretive. I'm not sure we can spell out today what that all means. Can you add anything on that, Shane?

Simon, do you want to?

I'll add one quick one there. Back to the margin point that Jason was talking about. Strat land obviously has the benefit to us because you get a discount to market value in the option terms we agree. But the other benefit is that we're not agreeing land value until we've got planning permission, a detailed planning permission. So half of our land bank there hasn't got a land value yet ascertained, which clearly benefits from what we're talking about with the risk in Middle East and build cost inflation, et cetera. We'll agree a price relevance at the time. So it would be better margin protection as well as a consequence of that.

Charlie Campbell at Stifel. Just one actually, just on the WIP and obviously, well plans in place to reduce that. And as you said, you've made good progress. Does that get more difficult in a slower sales environment where buyers are more choosy, more careful and maybe want to see more finished stock on the ground. Just wonder how you juggle the WIP reduction in a more difficult market.

Can I start? May be you can look at the headlines. Yes. We put the properties on the market, Charlie, that are more advanced. So that's what's for sale. So we're not particularly selling anything other than stock. So we engineer what we sell on those sites. And I wouldn't describe today's market as bad. A selling rate in 2/3 of the U.K. at 0.75. It's not bad at all. It's in the South of England and the Southwest of England, where we're probably a little bit more sensitive to the investment in WIP and sales rate. Are you okay to talk about the headline numbers, please, Shane?

Yes. Well, I mean, I think you've probably answered the bulk of the question insofar as, look, clearly, there's a volume correlation in terms of how many units you're selling. That's the tightest control you can have around WIP. But we have put a lot of hygiene -- additional hygiene controls in place around WIP spend in itself as well. So clearly, if we're in a situation where unit output wasn't where we anticipate it's going to be next year, that would actually have an impact on with monetization.

But we are well set up to manage our WIP spend proactively in relation to that. And we can see that in terms of KPIs that we have in place around a number of foundations, number of unreserved production. All of those percentages are substantially lower than where they were a couple of years ago. So if we maintain those at that level and run our business that way, you will see a commensurate reduction in WIP spend vis-a-vis what you're monetizing. But clearly, the opportunity to get to 10,000 units and doing that without overspending on WIP is where the significant cash monetization opportunity is.

A few from me, if possible. So Kate Middleton, Panmure Liberum. The first one is just on timber frames and vertical integration. So just wondering how many of the business units are currently utilizing timber frames and whether the rollout is phased or more discretionary and perhaps how that will link in with the new house types that you're bringing in?

The second is on cancellation rates and if you've seen any movement on those since the beginning of this year? And just finally, I know you've alluded to no real house price inflation, but just wondering whether on a regional perspective, you're seeing any underlying variation in ASPs at all?

Okay. I'll do those. On timber frame, we've started on our journey, and we've got 7 divisions out of 21 feeding into our facility. And we'll -- until we get up to speed and more proficient at it, we'll keep it with just those 7 surrounding the factory. The next step for us was to scale it up within the factory, work 2 or 3 shifts in a day and possibly in the future, build another factory somewhere else in the U.K. That's our thoughts.

In terms of cancellations, we've not seen anything yet. Who knows what's going to happen in the month of April? I certainly don't. And sorry, your third question was on.

Whether you're seeing any regional underlying movements in ASPs?

No, we haven't. You always get a good site that's selling really well that you might be a bit braver on. I think the market is sensitive. It's deal led. Our next step won't be to push house prices. It will be to reduce incentives, which is sort of the same thing, but you're keeping your headline the same. So it will be in those better selling areas in Scotland and the North of England, we've discussed as a team, should we reduce incentives down to 2%, for instance. I'm not quite brave enough to do that just yet, but maybe across the spring, early summer. Is that okay?

All done? Thank you very much, indeed. Thank you.

Thank you.

Good morning, and welcome to Bellway's full year results.

I'm joined by Shane. Simon is with us, too, here in the front row.

If I could take you to the first slide, just to set the scene. We had a good performance last year. Volume was up by over 14% to 8,749 homes. Operating margin increased to 10.9%, and that drove a strong increase in operating profit to GBP 303 million. And you can see that we are well positioned with land and outlets for FY '26.

Now along with our usual financial and operational detail today, Shane will also set out our new capital allocation framework, which is central to our approach to drive assets harder in a more challenging environment.

But firstly, I think it's important to provide some context with regard to recent trading. Trading, since the start of April, has been slower and never really recovered from the levels that we enjoyed in Q1 of this calendar year. Sales rates over the past 6 months have tended to hover between 0.5 and 0.6 per outlet. That said, the order book is still in good shape. We're well placed to have both a decent half year and achieve our full year guided volume of 9,200 homes.

And to complement that growth, there is further opportunity for the business. We have a sharper focus on return on capital employed and being more capital efficient. And regardless of that trading backdrop, given our well-invested land bank and WIP position, Bellway have the ability to increase cash generation and returns to our shareholders. And our confidence is reflected in our announcement today to commence a share buyback starting with an initial GBP 150 million.

In summary, I would describe our business as being very robust and well placed. But we must be mindful of the softer market conditions. And if the government are serious about growth and delivering more homes in this parliament, then that ambition needs to be reflected in the November budget.

Now I will provide more detail on ops and outlook later. But first, our financial results and capital allocation framework with Shane.

Thank you, Jason, and good morning, everyone. I'll start with the finance review.

As Jason said, we've delivered a good financial performance in FY '25 despite ongoing challenges for our industry. The combination of our healthy order book at the start of the year and the improvement in reservation rates supported a 14.3% increase in volume output to 8,749 homes. That growth was driven predominantly by private output, which was up by 20.3% to 6,924 homes. Social output was 3.7% lower at 1,825 homes as the proportion of social completions reduced to a more normalized level at around 21%. The ASP was up by 2.8% to 316,000, and that was in line with expectations. The increase in ASP was driven by geographic and mix changes with underlying pricing remaining broadly firm.

Turning then to gross margin. There was some modest progress here with a 40 basis point increase to 16.4%. Whilst we had the benefit of some higher margin land in the mix, this was partly offset by the absence of any HPI and ongoing low single-digit spot cost inflation. We also have higher embedded cost inflation in our WIP, which remains a headwind to margin in the nearer term. And this is reflected in our order book, and we currently expect gross margin progress in FY '26 to be similar to that achieved in FY '25.

Looking further ahead with our planned volume output growth, we're working through our WIP balance and a growing proportion of output will benefit from newer higher-margin land. With a stable market supported by a more favorable HPI BCI dynamic as seen in previous cycles, we are well positioned to drive ongoing improvements in our margin in future years. The increase in volume output and revenue drove an improvement in overhead recovery of roughly 50 basis points. This, together with the higher gross margin, led to the improvement in underlying operating margin to 10.9%, which was in line with expectations. Underlying PBT was 27.9% higher at GBP 289 million, which drove the strong increase in the proposed full year dividend to 70p per share.

This slide has covered the group's underlying performance. Adjusting items are shown in more detail in the income statement in Appendix 1. These include an adjusting item of GBP 15.4 million through admin expenses relating to the previously announced CMA investigation, comprising both our voluntary contribution and legal expenses. The other adjusting items relate to build safety, which I'll cover later in the presentation.

Turning then to our balance sheet. We have a very well robust capitalized balance sheet. And at its foundation, we have a high-quality land bank and a very strong WIP position to support our plans for multiyear growth and increasing cash generation, which I will cover shortly as part of our capital allocation framework. To highlight the key balance sheet movements, firstly, the increase in fixed assets primarily relates to our investment in our new timber factory facility -- timber frame facility. Given that relatively stable market backdrop, our land investment has started to normalize from the lower levels in the previous 2 years.

During FY '25, our overall land balance has risen by roughly 3% to GBP 2.5 billion. This increase in land activity is also reflected by the land creditor balance rising to GBP 338 million, although this remains modest overall and represents only 13% of our overall land balance. Jason will cover that in more detail later when he talks about the land bank.

The work-in-progress balance, which includes site WIP, show homes and part-exchange properties, rose by GBP 52 million, roughly 2% to just over GBP 2.3 billion. This slight increase was primarily due to spend on our ongoing strong outlet opening program. And to finish on the balance sheet, as you'll see from the bottom of the slide, on our adjusted gearing, and I think this is particularly relevant when we talk about capital allocation later and how we utilize that. Our gearing remains low at 8.3%, including land creditors. And quickly, our NAV per share has risen to GBP 29.89.

Turning then to cash flow, and you'll hear a lot of this throughout this presentation this morning. We generated good operating cash flow, and we ended the year with net cash of GBP 42 million. The chart shows a small increase in site WIP I referenced earlier, amounting to GBP 41 million. In relation to land, the monetization of land through cost of sales was GBP 521 million. Whilst this was higher than the cash spend on land as part of our drive -- to drive a more efficient capital structure, our increased use of land creditors towards a more normal level, as shown on the previous slide, helped to fund the GBP 70 million increase in the land balance in the year.

After other working capital movements and tax, the operating cash generated before investment in land, build safety spend and distributions to shareholders was GBP 639 million. This represents a 50% increase in operating cash flow on FY '24. Again, I think that's a theme that we will come back to when we talk to capital allocation, strong year-on-year growth, primarily driven by better discipline around WIP investment. When in FY '24, there was a net cash outflow over the same period of GBP 260 million. As a result, the conversion of operating profit to operating cash flow has risen from about 1.8x to 2.1x, and I'll provide more detail on our ambitions in this area later.

Adjusted operating cash flow is the fuel for future investment opportunities for the business and ultimately greater value creation and returns for shareholders. In this regard, we invested GBP 472 million in land, including settlement of land creditors and dividend payments totaling GBP 70 million. We also spent GBP 45 million on build safety, which I'll cover now. Overall, we've made good progress on build safety during the year.

With regards to movements in the provision, in addition to the GBP 14 million adjusting finance expense, which was in line with previous guidance, there was a net increase of GBP 37.4 million in the build safety provision.

I'll now cover the components of and the drivers behind the GBP 37.4 million, starting with the SRT. In December '24, following a period of industry-wide delays in obtaining building access licenses, housebuilders and the government committed to working together through a joint plan to accelerate assessments and remediation. We have now completed 100% of assessments in accordance with the joint plan for all of our legacy buildings in England and in Wales. Following this accelerated and extensive survey program, a higher proportion of legacy buildings was found to require works, both externally and internally than was previously assumed. And this has led to a net increase in the SRT and associated review provision of GBP 50.7 million through cost of sales.

With regard to structural defects, there was a net credit through cost of sales of GBP 13.3 million. This was largely due to remediation strategy being finalized for reinforced concrete frame issued identified at a high-rise apartment scheme in Greenwich London in FY '23. This strategy is less invasive than remediation design applied in the previous year and has led to a reduction in the cost estimate for the Greenwich scheme of GBP 19.3 million. This has been partly offset by a GBP 6 million charge relating to a mid-rise building, which was identified during the year with a similar issue to the Greenwich building. We've since carried out further reviews across all of our buildings over 11 meters in height constructed by or on behalf of Bellway, where the same third party responsible for the design and the frame of these 2 developments have been involved. And to date, no other similar design issues with reinforced concrete frames have been identified.

The provision at the 31st of July '25 is GBP 516 million, and I'm confident that we are well provided for the remediation works required across the legacy portfolio. Following a year of delivery against our requirements of the joint plan, with a particular focus on completing build surveys and procuring works, we will now be accelerating the pace of remediation. The strengthened team at our dedicated build safety division is focused on completing works as promptly and efficiently as possible. We have spent GBP 191 million on legacy build safety since the start of the program, including GBP 45 million in FY '25. For FY '26, we expect there will be a significant increase in spend to over GBP 100 million, although I must caveat that this level of spend will be dependent on receiving requests for payment from the government for works carried out on our behalf by their build safety fund.

To finish off this section now, I'd like to just cover a summary of guidance for FY '26. We are targeting volumes of around 9,200 homes, of which 20% will be social. The average selling price will be around GBP 320,000 with an increase of FY '25 driven by mix predominantly. The admin overhead will increase to around GBP 170 million, and that's driven by underlying wage increases and the full year impact of employer NIC. Together, I think it's important to say with important investments that we see for the efficiency and growth program that we have over the next number of years, that includes areas like IT, timber frame facilities becoming fully operational. We currently expect the operating margin to be similar to the FY '25 level at around 11%.

I'd now like to turn to the capital allocation framework. This is my second update that I've given to the city. And I think myself and Jason are very keen that we talk in detail today around our capital allocation framework and what that actually means for the business financially, value creation and strategically for the business. I think it's fair to say we've refreshed our approach to capital efficiency, and it's very much embedded across the group. There's a number of senior leaders here today from Bellway who are very much part of this journey. So I'd encourage you to talk to them as well as just the finance people in relation to this. This is very much a living, breathing thing across the business. And this section of the presentation covers our refined capital allocation framework and the strategy that we have to drive better value for our shareholders.

So first of all, I'd like to set out the clear priorities for capital allocation. We have a strong balance sheet, and we have a well-invested land bank, and that will remain the bedrock of the business. And it supports our balanced approach for investing for growth. And it's very important that we don't lose sight that Bellway has a really strong track record of growth, and that's very much the bedrock of this capital allocation framework as well as well as delivering enhanced returns to our shareholders. We're going to run the business with an efficient capital structure with low gearing, and we're going to continue to invest for growth. Whilst our financial strength provides flexibility and headroom to grow our land bank, I think it's fair to say with the current market backdrop, we expect our near-term land strategy to be largely replacement only.

We're also sharply focused on driving better efficiencies and our WIP balance presents a significant opportunity for much greater cash generation. If the trading environment remains stable, we can deliver growth in volume and profit. And that will drive strong cash generation, particularly as our elevated levels of WIP start to unwind. Combined with the ordinary dividend underpin, we believe that the value creation opportunities are significant for our shareholders. And I think this is evidenced today, as Jason said, with the launch of our GBP 150 million share buyback program, we're going to run that over the next 12 months. And I think it's important to emphasize we've got the capacity for this to be a multiyear program.

This slide summarized our clear priorities for capital allocation, and I'll provide more details on the pillar of the framework in the following slides.

Turning to our efficient capital structure. We're going to continue to run the business through the cycle with a strong balance sheet, but there are definitely opportunities to deliver greater efficiencies within the business. We're very well capitalized with total debt facilities of GBP 530 million. That comprises of GBP 400 million of bank facilities and GBP 130 million of fully drawn USPP notes. Over the next few years, we expect to run the business with modest average net debt and low year-end financial gearing of up to 5%. As we referenced earlier, land investment has started to normalize, and there will be a modest increase in the use of land creditors in the medium term. The range is expected to be between 15% and 20% of land value, and that's similar to our historic norms.

When taking land creditors into account, our adjusted gearing is expected to rise modestly into the mid-teens. And the chart illustrates that we successfully run the business with a similar efficient capital structure and level of adjusted gearing in previous cycles that we've been involved. I'm confident that this strong and efficient capital structure will enable the group to continue to invest in attractive land opportunities to drive the growth and improvement in returns. It will also ensure that efficiencies generated within the operational divisions as measured to return on capital employed will generate an ROE percentage at similar levels, which I think that's something that's really critical. We're driving to ensure that our return on equity and return on capital employed percentages are as close as they can be. And this will help to ensure that the balance sheet structure doesn't dilute the returns capacity for shareholders from operational efficiencies that are generated within the business.

Looking to improvements then in the WIP turn. This is the key area of focus across all 20 of our operating divisions, and it's a significant opportunity for the group. The chart shows our WIP turn fell by around 50% to 1.2x between FY '22 and FY '24. This was primarily driven by a sharp fall in volume output. Bellway stayed well invested in our WIP platform and our supply chain throughout the downturn. I think that's going to stand us -- that strategic decision is going to stand us in really good terms now as we look to harvest that investment that we made in the downturn as hopefully market conditions improve into the longer term. We've made some early progress in FY '25. The WIP turn has increased slightly, but this is an area where our discipline will improve further.

We're well positioned to deliver growth in volume over the next 3 years. And if you think about 10,000 homes in FY '28, that would see our revenue increasing by 20% from FY '25 levels, but it will also enable us to monetize our WIP. So that will allow us to target significant net cash inflow on WIP, so you can juxtapose that 20% increase in revenue, and that should allow you to reduce your WIP balance by around 10% over that same time frame. So that 10% reduction in WIP growing your revenue will allow us to get a significant cash release over that time frame. And that would see our WIP turn growing to about 1.8x by FY '28. And I think that's a ratio that we and I think a lot of people in this room will be comfortable with over that time frame, and that's going to be a key driver in increasing asset turn and cash generation to enhance our returns over that time frame.

Turning then to capital efficiency and cash generation. As part of our plans to deliver higher volume output and asset turn, we have an increased focus on bulk sales. They represent roughly 10% of our private reservations in FY '25, and they will remain a part of our strategy going forward. We will remain selective with our divisions working with our commercial finance teams, and it will be all around running scenarios and assess if a potential bulk sale is NPV positive compared to standard open market sales. So probably more of an NPV asset turn lens as opposed to just looking at the -- maybe what the margin differential between both options are. And we think that gives more options for our business leaders then who are running the divisions as they trade their way through the cycles, the ups and downs within the cycle.

Regarding land investment, as we highlighted earlier, we expect the number of plots will be broadly in line with plots utilized in the year, and that will be a largely replacement-only strategy. So delivering volume growth enhanced by bulk sales will enable us to work through the top tier of the land bank more quickly, which is lower embedded gross margin. These plots will be refreshed with higher-margin plots, and that will include from our strategic sites. Whilst 20% gross margin will remain a requirement for land acquisition, we'll be taking a more balanced approach to liability and the key underpin really will be more around higher levels of capital employed from those investment decisions.

And we'll be looking for the return on capital employed on those to be 20% plus underpinned by 20% plus gross margin. I think if you live by that in terms of land acquisition, that will create a lot of value for us and our shareholders over the coming years. The compounding effect of those initiatives and the drive to monetize our WIP, that should deliver a material increase to the group's operating cash flow conversion, and that's illustrated in the chart.

If you take FY '23 to '25, Bellway generated an aggregate underlying profit of around GBP 1.1 billion. Our adjusted operating cash flow before land, build safety spend and shareholder returns for that period was just over GBP 1.7 billion. So that represented a conversion between operating profit and operating cash flow of around 1.6x. There was an improvement in each year through the period with that 1.3x rising to 2.1x in FY '25, and we're expecting to maintain the conversion at greater than 2x over the next 3 years. And as an illustration, based on a similar level of aggregate underlying operating profit of around GBP 1.1 billion between FY '26 and '28 of getting to that 10,000 unit number, if we were to improve our cash flow conversion to 2.4x, this would generate an additional GBP 1 million of cash compared to the previous 3 years. That will help cover the ramp-up in build stage disbursements that we have over the next number of years, further land investments and crucially providing returns capacity for our shareholders.

So we think that's a very balanced scorecard as we think about capital allocation and fulfilling all the obligations that we have over the next number of years. And I've used that as an example. And whilst it's ambitious, we think it's definitely achievable. I've been at Bellway now for almost a year, and there's a clear focus across the group on delivering on all of these priorities. If the market remains stable, I'm confident that we can deliver greater cash generation and therefore, returns for our shareholders.

And I'll turn now to value creation for our shareholders. We're in a strong position to deliver growth in volume output and a significant increase in pretax ROE in the years ahead. These remain our strategic priorities to deliver growth with a supportive market with a well-invested land bank outlet network and with position. Within our divisions, we've experienced teams with operational strength and their significant structural capacity to deliver organic growth. Combined with an efficient capital structure and our drive for greater cash flow conversion, I'm confident that we have an excellent platform to increase returns for shareholders.

We will maintain our underlying dividend cover at 2.5x, and this will be supplemented by returns of excess capital. We started this today with an additional GBP 150 million share buyback and with a clear intention of returning further excess capital in future years as it arises. Returning excess capital is a key component of our strategy to increase returns. I think it's really important to say that our management incentives across the business are fully aligned with increasing cash generation and ROE and also profits and volume output that run commensurately with that. A new LTIP proposed for shareholder approval at this year's AGM includes a challenging FY '28 underlying pre-ROE stretch target of 14%. And whilst this would require exceptional delivery and more supportive market conditions than we are currently experiencing, it clearly demonstrates the extent of our ambitions collectively in Bellway.

I'll now pass back to Jason, who will cover the operating review and outlook. Thank you.

Thank you, Shane. Before I start, I think it's worth recognizing the amount of hard work involved in pivoting the business to being more capital efficient, and much credit goes to Shane, but also to our senior management teams across the U.K., who have embraced the new approach with so much energy and enthusiasm. A deserved well done to all.

Now I'll start with last year's trading. We achieved a private sales rate of 0.52 per outlet, with bulk sales contributing to a further 600 homes. Overall, the sales rate was 0.57, with cancellation rates steady at around 13%. Mortgage rates were relatively stable in the period. Affordability is still constrained for first-time buyers or for those without the benefit of a decent deposit, and those purchases are still exposed to rates of around 5%.

Overall, I would describe customer demand as sensitive, sensitive to mortgage rates and sensitive to the commentary around further tax increases. And that's clearly reflective in current trading. In the first 10 weeks since the 1st of August, we achieved a private sales rate of 0.51 per outlet, with bulk sales only making a very modest contribution in that period. Pricing has remained firm overall, the Southeast and Southwest areas are still slower, where we tend to deal harder and maximize the use of incentives.

Our order book at the 5th of October consists of 5,300 homes with a value of GBP 1.5 billion. And we are currently forward sold by around 65% for FY '26. In general, the market appears to be in the same pattern as last year, where the autumn selling season is largely flat, owing to the timing and noise around the budget. That said, you will recall that we enjoyed a busy start to the calendar year as homebuyers had waited for the outcome of the budget before making a commitment. And we will likely or hopefully see that pattern reemerge with a busy start into 2026.

The next slide is about multiyear volume growth and the conditions required to create a path back to 10,000 homes by FY '28. We have assumed a stable market and the following realistic assumptions. A private carryforward order book of around 40%, modest outlet growth to around 260 outlets by FY '28, an increased focus on bulk sales and the private sales rate moving towards 0.6 per outlet. With those conditions or similar, we can deliver 10,000 homes by FY '28.

Now if I could take you to the next slide, land bank. We have a total of some 95,000 plots nicely split between owned or controlled and strategic plots. Taking a look at gross margin within the land bank. The current margin for DPP plots is 18% to 19%, and we expect progression through '27 and '28 as the new higher-margin land come through from both pipeline and strategic.

In the period, we contracted or acquired just over 8,000 plots. So my short-term ambition, as Shane has said, is simply to maintain the land bank and continue with just replacement land. Today, a land bank length of around 4.5 years feels about right, particularly with an improving planning environment. And based on DPP and pipeline plots with a volume of 10,000 homes per year, that allows me to grow into the land bank rather than invest further. Looking forward, our focus will be on strategic land with the aim to harvest more consented plots from that strat tier of the land bank, delivering better margins for '27 and '28.

Turning now to outlets. We opened 56 new outlets during FY '25 and plan to open a similar number during this financial year. Overall, I would expect average outlet numbers to be between 240 and 245 for this year, with modest growth to around 250 for next year.

Regarding planning. Government progress remains positive. We do still experience some delays as local authorities take time to adopt local plans. And as you can imagine, some local authorities are more supportive and keen to deliver new homes, whereas others are less enthusiastic. Although I tend not to worry too much about outlets and planning as we are very fortunate to have good visibility on both and already have 85% of our plots with DPP for FY '27, we are in good shape.

Regarding production and costs, not much change over the past 12 months. Build cost inflation is still running around 1% or 2%. And it's still -- while still at very modest levels, it's still a margin headwind for housebuilders. And earlier in the year, you may remember, I mentioned Bellway Home Space, our new timber frame facility in Mansfield. We are progressing to plan and due to open in FY '26. Simon can offer a little more detail in Q&A and required, but our plans are very much part of our approach to drive WIP turn and return on capital employed.

And finally, outlook. With the strength of our order book, we are well placed to meet our guided volume of 9,200 homes and will hopefully benefit from a busier market at the start of the year to build that order book for FY '27. Structurally, we are able to deliver more volume in the years ahead. We have the land, the planning, the people and the outlets, but we just need a supportive economy in which to do so. The key message from today is our focus on cash generation and our confidence to increase returns to our shareholders, which Shane has already set out.

Thank you. We're now happy to take questions.

Ami Galla from Citi. A few questions from me. The first one was on the stretch of pretax ROE targets in your LTIP. Can you give us some sort of building blocks of framework of the sort of scenario where we can see that reasonably coming through by FY '28, i.e., what are the elements that we need to watch out to understand the moving parts there?

The second one on the Bellway Home Space facility. I think in the release, you've mentioned, it is one of the drivers of build efficiency for the business over time. At what point into the ramp-up phase can we see that get -- giving us more meaningful gains on the build side as we think about your journey there?

And the last one, just on the land market. You've kind of given us a reasonably strong framework of how you think about capital allocation. But in terms of the near-term sort of sentiment in the housing market, do you see any sort of near-term opportunities on the land? And how are land vendors really looking at this market today?

Ami, I'm going to give you a selection here. I'm going to get Shane to answer question one, Simon to do two, and then I'll close on three. So you get the full board.

Do you want to do the ROE first? Yes. So I think if we're sitting up here talking about capital allocation, cash efficiency, and I see a lot of my colleagues sitting here beside me, which makes me very comfortable as we talk about this. It's really important that you've got an incentive scheme in place that, that mirrors it. So we've done a lot of work on both our short-term and our long-term incentive schemes. And it's not a case that the old incentive schemes didn't do their job. They did, but they were very much probably focused around the P&L. And I think that works well in a rising market, but we all know that the market is a bit tougher now.

So the underpins within our STIP are around operating profit and operating cash flow. And then the LTIP is around return on equity, not return on capital employed, so return on equity, which means we have to return capital to shareholders as well. But we have to do that in a manner that allows us to grow as a business. So there's an EPS underpin within that as well. The 14% target is very much a stretch target. We've guided to 10,000 units today over 3 years. I think that's a number that we're pretty comfortable giving in the context of current market conditions. That's not going to deliver a 14% ROE. That probably delivers probably close to 12%.

I think the thing that we're really keen, if there's one big message that I want to deliver today, I think what we're keen to emphasize is our strategy. It's nothing new or anything. But I think what we pride ourselves in Bellway is that we're very clear, we're very detailed orientated around what we want to do, and we're all about staging, posting where we think we can get to as a business. The sector has suffered a lot in terms of profitability loss and return on equity loss over the last number of years. So the 10,000 units that will still deliver a lot of value for shareholders compared to where we are today in terms of cash returns and indeed the growth and profit that you would see coming off that.

But to get to 14%, you probably need to get unit output probably closer to 11,000 units. But both of those scenarios would see a lot of potential capital being returned to shareholders. We've obviously announced a GBP 150 million share buyback today. But clearly, if you get to 10,000 units and you're growing your revenues by 20% plus, there will be a cash monetization in that if you're being very disciplined around how you're doing land buying. I think it's fair to say in the context of the LTIP as well, the stretch component for management is very much between that 12% and 14%. So we're all very heavily incentivized to do obviously better than the 10,000 of the 12% plus, but that's not where we're guiding the market today because that's not where we see conditions.

Good morning, everyone. So on Home Space and perhaps more timber frame, Ami, we have no doubt it's going to drive capital efficiencies in the medium term. That's very much the strategy by opening the new timber frame factory, which is forecast for early calendar year '26. We're currently at 10% timber frame production across the group. That's predominantly through our Scottish divisions and some other divisions, and we're going to ramp that up to around 30% of output by 2030, but we're going to do it in a very prudent, careful manner. It's a new facility for us. So we want to make sure we get it right. So over the next 2 to 3 years, we'll introduce Home Space products into the group initially through 7 of our operating divisions. But we've also got a partnership with Donaldson Timber Solutions, who are currently helping us across the rest of the group. And between DTS and Bellway Home Space, we'll ramp it up towards a 30% point by FY '30.

I'll be brief on land, Ami. Just at the moment, we've got a very full land bank, and I described how we can grow into it. So I'm not in a position that I'm keen to overinvest. I'm a little bit like our purchases at the moment, adopt a wait-and-see approach to see what happens towards the end of the year. We're still buying land, but we're selective. So in those bigger divisions in better selling areas, we're still investing. I guess that dynamic will change. If the market does pick up, then our land appetite will probably increase. But just at the moment, we'll -- we haven't stopped. We've just paused.

It's Will Jones from Rothschild & Co. Redburn. Three, if I can, please. The first, if you could just update us on your thinking around bulk sales. There was a mention of it on an NPV basis in the presentation, but I think it was 0.03 of the sales rate last year and 0.1 or so the prior year. Where is normal? And I suppose if we continue with somewhat subdued conditions for, say, the next 6 months to hit that flat sales rate for the year, would you be willing to up the bulk sales content? Or would you let the sales rate slip slightly?

The second was just coming back to the balance sheet content. You gave some helpful guidance on the WIP balance potentially coming down 10%. How would you think about the land value balance? I think plots broadly steady. Does the value go up a bit as you replace a bit higher than you sell out at? And then last, just a technical one on the finance bill, whether you had any commentary on how we should think about that on a 3-year view as you return more cash?

I'll do bulk. You do the other 2. Well, as usual, your figures are more detailed than mine on bulk sales. We did about 8% to be this year in terms of bulk sales. But as Shane alluded to, we've got a bigger appetite and could do a little bit more this year. I don't think it's going to change the dial, but we'll probably do 10% plus. But sometimes it's dependent upon what's happening in the market, how busy it is. But if you talk to our RCs that are with us today, our regional chairs, there's certainly an appetite and some deals on the table that we're looking at. But if you said sort of 10% plus, I think that's about where we need to be, Will.

Can I hand you for balance sheet and finance?

Yes. On the land side, I mean, we've got roughly GBP 2.5 billion in land. That might tick up very slightly over the next 3 years, probably commensurate with our unit output, but it won't be a material movement. Probably the bigger piece there is that we're probably willing to take on more land creditors, and we're happy to let that go as high as 20%. So net-net, Will, that probably means the overall net land balance between land creditors and land won't increase that much. Probably the increase would be offset largely by land creditors.

I'm sorry, I missed your third question. Would you mind repeating that, please?

Finance cost [indiscernible]

Yes. I don't think that will be a material movement either because we have GBP 130 million of PP money. And when we set ourselves the kind of broad target of how do we actually make sure that return on equity and return on capital employed are broadly similar. Funny enough, when the PP money is kind of drawn fully at year-end, that kind of gives you close to the answer. So I would say our net debt is probably at year-end will probably only be kind of GBP 100 million to GBP 150 million, maybe slightly higher than that. So the finance costs themselves will not move significantly, I don't think, in relation to that.

Allison from Bank of America. Just one question on the share buyback. So I was wondering if in the next few years, if you see a better investment opportunities, for example, will you thinking maybe scale back GBP 150 million? Or is this is like the minimum you want to return per year in the future?

Yes. Yes. I mean, I think -- I'm glad you asked that question because we're very keen to emphasize that the lens we look at through everything is long-term shareholder return. But long term can't mean that people are waiting forever. So if you were to ask me to anticipate, I would say, I think we will be -- as long as that cash is generated, I think we will be returning it to shareholders. But we look at everything now through an IRR NPV/ROE lens.

So if there was an investment opportunity that we could undertake that made sense for us, we wouldn't be found wanting there. And -- but we wouldn't just turn around and say we've decided to make that investment to shareholders, which I think in the sector, we're guilty of doing sometimes, say, we're going to invest that money. I think what we'd be saying is we're investing that money because we actually see the IRR of that investment being greater than actually buying back the share at a certain price and the payback period of it will be X or Y. I think that's the level of precision you have to get down to when you've seen the hit that the sector has taken over the last number of years. So we are going to take our responsibilities around that very seriously, but we are absolutely going to invest in growth where that opportunity exists.

Aynsley Lammin, from Investec. I think I've got 3 as well, please. Just first of all, any kind of extra color on pricing and incentives as we've gone through the autumn selling season?

Second question, just on the kind of point you've just making, I guess. If you look at -- if the government does actually improve planning brilliantly and the sales rates do bounce back, is it right to assume that there is flexibility around that share buyback that you would open more outlets? I guess 260 outlets by FY '28 doesn't look that ambitious in terms of what the government wants and how much flexibility is there?

And the third question, Jason, just you mentioned this kind of hope the government recognizes a supportive economies needed. I mean just what's your wish list for November budget? Thoughts ahead of that would be interesting.

Okay. I might start with 3 of those and just get a bit of help. But pricing, Aynsley, is not flat all across the U.K. Not everything is like the Southwest and Southeast. There are some pockets of buoyant markets. So we explore those as best we can. At the moment, the Southeast and Southwest, it's full fat incentive in those locations at the moment. We deal hard. So we try to balance the books across the U.K. The new year may be different. We look at it quite regularly.

And in terms of outlets, I wanted to get across today that our ambition is based on realistic assumptions, and I've adopted the same approach with outlets. And if you assume that we're just going to buy replacement land, for me to offer you ambitious outlet growth doesn't seem right. I think I can deliver realistically modest outlet growth with an improving planning system. And you're quite right. It could get better. But I think what we've offered is deliverable. We need a slight tick up in sales rates. I think if you look at them in the round, the world doesn't end just with outlets from my point of view.

And with government support, I look at things, they've done a reasonable job on planning. Let's give some credit. Bellway are in super healthy shape. We've got no debt. We've got the land, the people, the planning and the outlets. All I need is a supportive economy. And sentiment is most of it, Aynsley. We need to lift. Sentiment is low in the market, and we've made 2 requests to government, and that's not just me alone, that's the majors.

Firstly, can we undo the stamp duty costs that were imposed on first-time buyers in April? And can we have a long-term deposit support scheme for first-time buyers? Not every young person has the benefit of the bank of mom and dad or fat family financial help to support them. So we think that that's fair to give them some lift. And if we can have that support, which isn't big numbers at the bottom of the housing ladder, we think that will improve the sector and get the market moving.

Clyde Lewis at Peel Hunt. Land creditors and large sites normally go hand in hand. But obviously, large sites don't necessarily help that ROE drive. So I'm just sort of looking for a little bit of help as to whether you are going to be more or less happy buying the larger sites, which will allow you to probably drive that land creditor position a little bit more. That was the first question.

Second question around London. I mean it's become a fairly small part of the group at the moment, again, given part of the market going on. But where does London sit within your sort of strategic thinking now again, given that ROE backdrop?

Third one was on the announcement yesterday from Barratt Redrow and Persimmon around the loan scheme. Are you tempted to get involved in that reside offering as well? But again, where does that sit from a margin point of view more than a capital point of view? I'd be interested on that.

And I suppose the last one I had was around demand for PRS and bulk deals. And are you only thinking about vanilla-type deals that you've done in the past? Or are you thinking actually we can maybe change the structure a little bit and look to pull capital from them earlier as part of the deals that you might do?

I'll do the first 2, you do the second 2. On large sites, you're quite right. That's where the use of land creditors. We're not buying, Clyde, lots of large sites at the moment. There's 2 guys sitting directly behind you that we'd probably invest in, 2 strong MDs from big businesses in East Midlands and Manchester, and we'd probably invest in those locations, maybe Milton Keynes, too. So strategically, where we think there's long-term demand. But other parts of the U.K., we're probably small to medium-sized sites at the moment.

In terms of London, listen, I love London, but the percentage of our business now in London, Clyde, is 2% to 3%. We come out a few years back, as you probably know, we was as high as 20% of our volume in London. And I didn't exit London because I predicted where we're going to be today, certainly not. It was just that the commercial terms were too hard for us to do business. And Bellway was sort of priced out of London. But you do need a function in London market to deliver meaningful improvement in housing supply, and it's not there yet. The viability concerns in London are significant and the housing numbers in London are dire. We will continue building in London, but on the fringes on the outside.

On the Help to Buy, that is some conversation that we've been part of as well. We're keeping a watch and brief on. I think it's helpful. I think it's going to be a niche product. I think the participants would say that themselves, but I think certainly a welcome addition. We would have similar type measures, obviously, in terms of deposit support and all that for our homebuyers. So we'll absolutely keep an eye on that and see just how it stacks up. I think fundamentally, what's required there is some kind of state support for first-time buyers. I think everyone in the room would acknowledge that. I mean there's a GBP 500 or GBP 600 differentiator in terms of what your monthly mortgage repayment will be depending on whether you're fortunate enough to have a 25% deposit or a 5% deposit.

And I think the thing that gives me heart has been relatively new still to this sector, just having worked in another jurisdiction is every division I visit, rental levels are consistently higher than what debt service costs are. So that tells us that the long-term fundamentals are strong. So we will absolutely keep an eye on that initiative and see if it's something that needs more extensive participation from us.

On your other point around PRS, I think it's a really interesting question. And yes, is the quick answer to all of that. We will look at all of those things in terms of forward fund transactions, all of those things, if it makes sense for us in terms of asset turn and having greater return capability for shareholders. I think it gives the people running the divisions more tools in their kit as well in a market where the HPI has been pretty much nonexistent. You have to look at every capital efficiency that you can. So we look at forward purchases, we look at forward funds, all of those things. And we've no hard target or how high and low that number will be. It all just depends on whether it stacks up compared to the private sales rate and the private ASPs that you can get.

It's Charlie Campbell at Stifel. A couple of questions, one operational, one financial. Mortgage availability, we're aware that banks are allowed to change stress tests and also have slightly higher availability of higher loan to income. Has that made any changes on the ground sort of currently? And will that in future?

And then secondly, the financial question is just on the dividend. I wonder sort of how you judge the balance between dividends and buybacks and whether there's a thought to maybe sort of cutting the dividend or widening the cover to do more buybacks. I just wonder how the debate came out on the answers we got today.

I'll start with mortgages. Charlie, I think what the banks have done has been really helpful. It's not going to move the dial. It's just a help. It's a movement in the right direction. Mortgage rates for 2- and 5-year money haven't really changed. They're around, I guess, 4.25%, something like that. But being able to loan more is a help for first-time buyers. It doesn't solve the deposit problem, but it's certainly a move in the right direction. So we welcome that.

Can I hand...

Yes. I mean, I think, again, an interesting question. I think where we've landed, I think, is a good balanced outcome. I think if we were sitting here saying that the cash generation wasn't going to be significant over the next number of years, I think we would have to have a hard look at our dividend policy in relation to that and maybe flip into a buyback. But I think you're going to see probably a 2:1 split between buyback and dividends roughly assuming that, that excess capital gets generated. And I think that feels right as a balance because I think having a dividend yield underpin is a good discipline for the business as well, just in terms of the growth ambitions that we have and just shareholders knowing that they'll get a cash return from the business every year as well.

Chris Millington at Deutsche. Can I just ask about strategic land and how it kind of configures in your outlet opening plans, your margin plans. Perhaps you can also comment on the relative margins versus the DPP land bank so we can understand what benefit it can bring in the future.

Next one, just curious about recoveries on the reinforced concrete frame. We had the Barratt court case there, which seem to open up avenues for recoveries. I know you can't recognize them, but would you hope to get some? And then also, is there likely to be anything different in H1, H2 split you can see them getting to the back end of the question queue. We have a question like that at the end.

If I do -- I'll do land. And can I ask you to do recoveries, Simon, just to keep Simon involved.

If our DPP land bank has a gross margin of 18% to 19%, we think the strategic land is 23% plus. If we are currently delivering 10% of our volume through the strat tier of the land bank, we think, Simon, that we can double that to 20%. It's an ambition, and we might miss it a little bit, but 20% by FY '28. So they're the sort of numbers where we are on strat. So it also gives us flexibility in the market. It's not just margin accretive, Chris. It just gives us a few options. So we quite like that, and you know we've invested in that for probably 5, 6 years now. So it's starting to bear fruit.

Is it worth you just commenting, Simon, on recoveries?

Just picking up on -- just on the strat piece as well, just interesting, but very helpful, Chris. We're aiming to have around 80 planning applications running this financial year on the strategic land portfolio to give you an idea of what we're throwing at this to get our conversion through into the DPP ultimately. So there's a lot of work going on there to try and drive the outlook piece.

On recoveries, yes, as you can imagine, we've got a very active program generally across our recoveries piece. It's only recently, of course, we've been able to quantify our liabilities properly with all the assessments being done. So on the SRT side of things, we're now gearing up to go after [ service ] and suppliers, and we've already recovered around GBP 80 million thus far on that.

And so far as the structural defect is concerned, we've got good prospects of success against those who are involved in the 2 schemes that Shane has alluded to, and we are heavily involved in litigation on those as well. So I'd expect to see some sort of recovery, decent recovery in the fullness of time. But it's complicated, and it will take years rather than months to get there, but I'm determined to do so.

Can I just quickly loop back to the strategic land? Let's say, you're up at 260 outlets by '28. Is that assuming you get that full conversion of 10% to 20% is strategic or...

It's a [indiscernible], Chris, and outlets. I just couldn't be more specific enough. There's too many moving parts in it, but we think it's doable. We wouldn't give you the number if we didn't think we could achieve it. Yes.

I think your other one was H1, H2 split.

Is there anything funny this year?

No, not really. I mean we were pretty well for it. So it's all coming into this financial year. So it will be -- it won't be massive, 50-50, give or take, I'd say. Yes.

Not 70-30.

All good. Thank you very much for your time. Thank you.