Henry Boot Stock

I'm Ed Hutchinson, and I am delighted to be sat here, fairly new in post as the Chief Executive Officer of Henry Boot.

Now for those of you that don't know me, I've been with the group about 20 years, just over 20 years. I became a Director of HBD in 2012 and went on to be the MD in 2018. Most lately, I've been the interim MD of Stonebridge Homes from the end of last year through to about middle of this year.

Now notwithstanding my longevity with the business, my remit from the Board is to come in and make a difference. That's exactly what I intend to do. So Henry Boot has a rich and a full history. This year is our 140th year anniversary. I can count on just 2 hands how many people have had the privilege of being sat where I'm sat. My immediate focus is to lead us through these challenging market conditions and then to define a vision and a strategy for the business that capitalizes on the clear strengths that we possess.

So my initial impressions since being in role, they've only reinforced my confidence in the group's long-term prospects. Henry Boot is a well-established business with a strong track record of delivery. Spearheaded by our market-leading land promotion business, Hallam Land, we have got a high-quality portfolio of more than 200 sites across the country that would be extremely difficult to replicate. HBD has a proven ability to deliver high-quality developments supported by strong partnerships across both the public and the private sector. We've commenced an improvement plan for Stonebridge Homes, but we know we need to go further. And we recognize that we cannot rely on a market recovery to improve our performance.

Having spent a considerable amount of time getting around the business and speaking to our teams over the past couple of months, I am in no doubt we have a highly capable people with the skills, experience, passion and relationships needed to deliver our schemes and create value. So a business review is already underway and a refreshed strategy together with the associated medium-term objectives, which will flow from it will be presented in early 2027.

In the meantime, I'm going to take you through our near-term priorities in a bit of detail on this slide. But the key aim here is to bring about a laser focus around how we can turn the dial of the business over the next 6 to 12 months. Being clear on what our near-term priorities are, which is as much about what we are pausing or stopping as it is what we are doing, will help bring about a more unified pace across the business and move us through into more stable conditions next year. So our near-term priorities are: number one, unlock and crystallize value. We'll do this by accelerating planning commissions and converting consent into sales in Hallam Land, leasing and selling completed developments in HBD and converting the Stonebridge Homes order book into completions, driving profitability and returns.

Number two, we're going to reduce our borrowings. We'll apply stronger cost and capital discipline, prioritize only the best opportunities and use partnerships to grow our development program without providing all the capital ourselves, thus strengthening the balance sheet and providing capacity for distributions and reinvestment. And finally, we will improve our operational efficiency. We will simplify how we operate, speed up decision-making and share expertise and resources across the group, creating a higher quality business for long-term value creation.

Okay. I'm going to just hand over to Darren now, and he's going to talk through the financial review.

Thank you, Ed, and good morning, everyone. I think given the challenging market backdrop we see ourselves with, it is nonetheless disappointing to report that our financial performance is below our expectations. Group revenue decreased by 19% to just below GBP 81 million, reflecting lower transactional activity across all of our markets.

At the operating profit level, we made a GBP 3.9 million loss, driven by weaker trading performance and a reduction in the value of our wholly owned investment property portfolio.

Gearing increased to 33%, and I'll take you through the movement in net debt shortly, but we do expect gearing to reduce towards the end of the year as we complete a number of planned disposals during the second half. Given the increase in gearing and our second half weighting, we've taken the decision to not pay an interim dividend, and we will consider the dividend again once our full year results are known.

Looking at revenue and operating profit on an individual business level. The chart on the left of this slide sets out a year-on-year revenue bridge showing the component parts of the movement in revenue. You can see from the chart that both revenue from Land Promotion and Property Investment have declined. Homebuilding revenue increased, reflecting a higher number of private versus affordable completions and the sale of land at Carlton.

The end of the Road Link contract was the principal driver of the reduction in Construction revenues. The chart on the right then shows a similar bridge for operating profit. It's clear this bridge that the main driver of the reduction in operating profit is land promotion with smaller movements across property development and homebuilding.

This lower profitability was partially offset by central cost savings delivered through our Future Ways Of Working program and the decision to not award our people bonuses in respect of the 2026 year.

Turning now to cash flow and net debt. The chart on this slide sets out the key components of the movement in net debt in the period. Starting on the left, the cash outflow from operations totaled nearly GBP 14 million as operating returns were not sufficient to cover interest, tax and dividend payments. Investment property generated a net cash inflow of GBP 8 million, largely reflecting the profitable disposal of a retail asset in Warminster. Inventories generated a further net inflow of GBP 4 million, while we continue to invest selectively across the business to bring forward future sales opportunities, particularly within Hallam Land, this was more than offset by a reduction of almost GBP 9 million in land and work in progress at Stonebridge Homes.

As previously mentioned, we purchased a further 12.5% of Stonebridge for GBP 5 million. We also continued to grow our Origin joint venture. The growth was largely funded by profits from land disposals into the JV, resulting in a modest net investment of GBP 3 million.

Other working capital represented a net outflow of GBP 14 million, and this was primarily driven by land sales to housebuilders on deferred payment terms. As a result, we ended the period with net debt of GBP 133 million.

Turning to the balance sheet. Underlying asset value per share, which excludes the pension surplus, decreased by 4% to just under GBP 3 per share, reflecting the 4p per share impact of acquiring a further interest in Stonebridge together with payment of the 2025 dividend and the retained losses at the half year.

Post period end, we agreed terms to increase our existing bank facility to GBP 165 million until the 31st of December. This provides additional financial flexibility as we progress targeted sales through the remainder of the year. Our lending group remains supportive and discussions are continuing regarding amendments to the full year covenant requirements should they be required.

I think it's fair to say our balance sheet remains asset-backed. Our inventories are all tangible assets, be they through property development, strategic land or land and work in progress for delivering new homes. And Ed's got a slide later in the deck that he'll take you through, giving you a bit more color and detail to that. Just looking at the sales progress, we've completed, exchanged or reserved 71% of budgeted sales with a market consensus profit before tax at GBP 9.7 million. To be clear, this is not turnover, but achieved property sales, which offers us visibility for our full year performance.

Completed sales of GBP 61 million to date rises to GBP 114 million, including exchanged disposals and completions post period end. If we then include reserved sales, we get to GBP 144 million and the 71% of our expected full year forecast. A further GBP 59 million of sales are then required to reach our target of GBP 203 million, with the majority split between Hallam Land, who have over 1,700 plots under offer and HBD who also have several sales under offer. However, we are mindful that we are operating in a more challenging environment than last year, where at this point, we have secured GBP 176 million of sales, equivalent to 80% of the previous year's forecast versus the 71% this year. And we remained mindful that Hallam Land and HBD have a number of transactions to complete to achieve this.

I'll now hand you back to Ed.

Thank you, Darren. Okay. So we'll go through a quick run-through on the operational review, starting with Stonebridge. I want to be straightforward about the outlook. With a slower sales rate, build cost inflation of around 4% and site and legacy extension costs, we expect Stonebridge to report an operating loss in 2026. We completed 72 units in the first half with completions this year being second half weighted. The private average selling price was up at GBP 431,000 with incentives stable, so pricing has held through half 1. The main pressure felt by the business has been on volume. Our net private reservation rate was 0.38, reflecting higher mortgage rates through the second quarter. The owned land bank now stands at nearly 1,450 plots, and we're applying a clearer land strategy going forward and a more disciplined approach to future acquisitions. The forward order book currently stands at GBP 30 million.

So we've been clear that performance here has to improve, and this slide updates you on our restart plan to get there. First, we've reset the leadership team with a new Managing Director, Warren Thompson, joining us later this year. The aim is to continue to professionalize the business and bring it properly into the group, so it operates the same standards and benefits from the same oversight as the rest of our operations.

Second, we are investing in our people and our systems supported by our group function teams. That investment is targeted squarely at sales capability and customer experience, the 2 areas where improvement converts most directly into performance. Third is about operational efficiency, better data quality and closer alignment across procurement, build programs and sales means improved oversight, tighter control of costs and decisions taken from a single reliable picture of the business. And fourth, a clearer and more disciplined land strategy. In practice, that means matching site scale much more carefully to our premium homes product. I'm going to flip back to Darren now, and then I will close by summing up HBD's performance before I wrap up the presentation.

Thanks, Ed. So I'm going to go over Hallam Land, who sold 556 plots in the period. This was affected by major housebuilders shifting their land strategies, which has slowed our sales activity.

Our 5-year average plot sales are now running at over 2,700 plots per annum. Gross profit per plot was almost GBP 11,000 in the first half of the year, and this does remain in line with our 5-year average at around GBP 10,000 per plot. The 2 transactions in the period were 416 plots at Biggleswade, sold to Persimmon and 140 plots at Thorpe Willoughby sold to Vistry, resulting in an average ungeared IRR of 30.5% per annum. So we continue to see really good returns on the sales that Hallam are achieving.

We have over 2,000 plots exchanged or under offer, and we expect those to complete in the second half along with a number of other sales we are pursuing. We have invested GBP 11 million in the pipeline and to date, have submitted nearly 3,400 plots into planning so far this year. We also remain on track to submit a total of 10,000 during the full year.

We continue to manage one of the largest strategic land portfolios in the country with now nearly 108,000 plots. Following the government's revision to the NPPF we saw in 2025, we have seen positive changes to the planning system, which have significantly increased our ability to secure outline consents. And this is shown clearly by the chart in the top right on this slide.

During the period, we secured planning for over 600 plots, taking the total number of plots with planning to almost 9,100. Again, as the chart in the top right shows and consistent with recent years, we expect to secure planning on a materially higher number of plots in the second half. We have a further 21,000 plots awaiting determination. And in this supportive planning environment, we expect our stock of consented plots to increase, further building the store of value within our portfolio.

As we move forward, our focus is on continuing to secure planning permissions and increasing sales whilst continuing to grow the portfolio at a modest level.

With the balance of freehold and promotion agreements, we can manage capital investment appropriately between risk and reward, taking advantage of the right time in the cycle when acquiring freehold land, which is much more capital-intensive.

Just on this slide, I just want to spend a minute on the Biggleswade transaction as it provides a good illustration of how our land promotion model works in practice. Hallam Land entered into a planning promotion agreement on this 105-acre site back in 2017. 43 acres were allocated in Central Bedfordshire Council's local plan when it was adopted in July 2021. From there, it was a complex planning process, but outline consent was secured on appeal in November 2025.

With this consent in place, we were able to sell 416 plots to Persimmon, the transaction generating an ungeared internal rate of return of 16.3% per annum. Just looking at the value in the portfolio with our portfolio all held at cost, there is no gain on securing planning recognized until the land is sold. This continues to reflect a significant uplift in value not recognized within our balance sheet, which we have tried to quantify here. We've included a table in the appendix showing the results if we vary these assumptions.

But based on the recently achieved average gross profit per plot of GBP 10,000, the 9,000 plots we have with planning have the potential to deliver a gross profit of GBP 91 million over the short term.

In addition to this, we have almost 21,000 plots awaiting determination. That significantly derisks almost 30% of our total land bank and has the potential to deliver a further GBP 214 million of gross profit over the short to medium term. Including sites with an allocation in a local plan, we have GBP 433 million of gross profit progressing in the planning system. The full portfolio over time has the potential to deliver over GBP 1 billion of gross profit. And as previously, we are presenting an illustrative net present value for this of GBP 230 million or 170p per share, equivalent to an uplift in NAV of 57%.

On that, I shall hand you back to Ed.

Thanks, Darren. Okay. So turning to HBD, our property investment development arm. Our committed development program has grown to GBP 161 million with HBD share of that standing at GBP 113 million. Almost 80% of that is already pre-let or under offer. Golden Valley Phase 1 is the biggest addition, adding GBP 95 million GDV, all of which is fully funded, and I'll provide a bit more detail on Golden Valley on the next slide.

Origin, which is currently developing 3 I&L schemes at GBP 56 million, is on program and budget. And if you include the other 3 initial schemes we developed last year, is now 66% leased or under offer with rents ahead of business plan. We will remain selective in building up our committed program. But as I'll explain again shortly, we have significant near-term optionality from our GBP 1.4 billion development pipeline. And finally, just to confirm, the investment portfolio delivered a total return of 2.5%, which was in line with the CBRE index.

So just picking out Golden Valley. This is an excellent example of us progressing a long-held opportunity and turning it into value. Phase 1 of the GBP 1 billion Cheltenham mixed-use scheme is forward funded and work has now commenced on site. It includes IDEA and ROUTER together with supporting infrastructure. IDEA is 68% pre-let or under offer with strong interest in the remaining space. Phase 2 will follow, and that comprises 2 buildings known as INPUT and OUTPUT, and they will provide a further 188,000 square foot alongside consent for up to 443 homes where residential partner marketing is underway. The profile and learnings gained through Golden Valley means that HBD are well placed to do more in the innovation sector. And together with our secured development opportunity at Duxford, it provides a springboard for HBD to secure further opportunities of a similar nature.

So just extracting out some of the schemes we have secured in our future pipeline, just pick out there. So we've got Wakefield Hub, where we have consent for a further 600,000 square foot across 4 units with our partner, Yorkcourt, and we're targeting a start on site in the near future.

FREEPORT 36, we have planning secured for 5.5 million square foot industrial and manufacturing park in partnership with St John's College, Cambridge. We already have strong occupier interest, and we're aiming for a start on site later this year. And as just trailed, AvTech Duxford, we have -- planning has been submitted here in partnership with Imperial War Museum for a 430,000 square foot campus near Cambridge. The use of the scheme will be focused on low and zero carbon aircraft technology.

So in terms of outlook, Darren trailed this slide a little earlier. We believe this makes for a very strong investment case and highlights the diverse and significant embedded value across the business. We have nearly GBP 540 million of investment property and inventory value. Land promotion totals circa GBP 160 million, including GBP 93 million of planning promotion agreements and just short of GBP 60 million of freehold land. In Property Investment and Development, which is the largest segment at around GBP 227 million, we had GBP 84 million investments, GBP 33 million in Origin and GBP 112 million in developments. And finally, homebuilding accounts for GBP 148 million, of which GBP 86 million is invested in land.

In summary, we expect a better second half performance, supported by land sales that have slipped from half 1 into half 2. It's about timing rather than lost value. Market conditions remain challenging with the trend of transaction volumes likely to stay subdued for the rest of the year. But we shall adopt a laser-sharp focus on progressing our near-term priorities, unlock and crystallize value, reduce borrowings, operational efficiency. We will not prioritize short-term performance at the expense of future returns or sell good assets in a way that risks future performance. The longer-term fundamentals for Henry Boot remain attractive. We have a strong pipeline and a discipline to convert it as conditions improve. Thank you very much for your time.

It's Tom Musson at Berenberg. Can you just give us a bit more color for the demand for land at the moment? How many serious bids is a typical site getting? And how has that evolved recently? And I guess, how are offers holding up in terms of price and payment terms?

So yes, demand for land is subdued. If we look at performance so far in 2026 compared to '24 and '25, it's definitely dropped off. Now having said that, there are lots of factors at play. There are some opportunities in Hallam Land's portfolio where we know we still have very, very strong interest. Some parts of the country, that interest has dropped off a little bit.

So what we are absolutely concentrating on is to, as Darren talked through, we need to keep making hay while the sun shines in terms of this window that's open to us in terms of planning, as many applications as we can into the system. We've just been running as fast as we can now probably for 2 years on that to make sure that we are locking in that store of value in the future.

And then just a second question on the dividend. I appreciate the reasons for deferring the decision are very clear. Should we take from this that the existing policy of staying progressive is effectively over. And so that's sort of under review with everything else? Or is there a way we can understand today what decides the future payout?

I'll pick that one up. I think clearly, at the moment, given the challenging markets we are in, it's just very difficult and challenging to see how performance is going to be into the future and medium term. Clearly, if we can see that we are starting to generate those sales and recover the cash and bring down the debt, then we will be much more comfortable about making the decision to turn the dividend back on. When we do so, I think we'll need to see, in particular, what our full year performance looks like to determine whether we're going to restore the full year expectation as we had it or whether reset the dividend to a new different appropriate level. I think once we get there, however, our desire would be to get back to a position where we can have a progressive dividend.

Adrian Kearsey, Panmure Liberum. Probably one for Ed. You've been with the business a while, you delivered some fantastic projects over the time. Could you perhaps when you look back or perhaps you don't look -- perhaps it's Golden Valley, preempting the answer, but which projects within HBD do you actually feel -- actually, that's the model that we want to follow and really grab a hold of and deliver over and over again?

The project I pick out is TECA, Aberdeen. We were selected -- HBD was selected as Aberdeen City Council's development partner through a competitive process in 2014. And we had lots of challenges to get from being selected to getting to a point where we could go unconditional in agreement and commence works on site. So people possibly know the scheme was -- it was an arena exhibition center, hotels right at the airport in Aberdeen, circa GBP 350 million GDV. I think it was a really good example of what Henry Boot, I believe, does very well, working with multiple stakeholders, listening to what stakeholders' needs are and working out solutions to meet those needs.

Good example, again, of a public-private partnership. We have a rich history of public-private partnerships. And possibly with the advent of devolution, this could be an area that we look to pick up more within HBD particularly, but we will work through that as part of our review of strategy, and we'll be able to talk to you about that in the spring.

Just to add to that, I think Aberdeen was a very special project for us and a real flagship. And HBD have had a number of those. We've had the York Chocolate Works. And now, as you mentioned, we're entering into Golden Valley with Cheltenham Local Authority.

For me, there's also a subsector of that, which is very important to HBD, which is the bread and butter. And it's sites like the one that Ed started on when he joined us those 22 years ago, which was Markham Vale. And Markham Vale has been delivering for us consistently for 22 years, which is just phenomenal. It's not going to change the world. It's not like those big flagship schemes of scale. But every year almost, we manage to take something from that. And I think we need a few of those to go with the big schemes as well.

Clyde Lewis at Peel Hunt. I think I've got 3, if I may, I'll do one at a time. Ed, you talked about in your last bullet there in your introduction about creating a simpler group. And you also talk more closely about aligning the activities. I suppose where I say Hallam and Housebuilding, there's obviously a degree of alignment, fairly clear there, albeit up to date, I'm not sure too much of Hallam's land has gone into Stonebridge, but that's another debate. But how do you create that simpler group without cleaving property or HBD one side and housing the other side. Is there another route?

I think it starts with -- look, we have to set what the vision and strategy for the business is, and we will do that over the next few months. A big part of us being able to deliver the strategy is looking at our own internal resource, our own skills. And if I look at across the business, we've got a fairly large team of highly skilled people, and those skills can cross over into the different businesses.

So it's simply -- and look, as an example, Hallam Land could secure a consent and as part of their contract in selling to housebuilder A, they have to deliver some infrastructure works. Hallam Land don't, within their team have any skills and expertise for overseeing procurement and delivery of infrastructure work. HBD do. Similarly, HBD are looking at or have been looking in the past at trying to gain positions on strategic employment land. Yet the specialists for doing that are sat in Hallam Land.

So as we move through this next period, we're going to be doing a bit of a skills audit and looking at, we need to make sure the people with the right skills are put to work in the right areas for the benefit of Henry Boot.

Don't get excited about it. It's early days, but we've literally just signed an agreement where Hallam Land and HBD are collaborating to look at a scheme that has the potential of being a data center.

Second one was on Stonebridge profitability. I suppose I'm looking for a sort of a route map for how the business will get back to making not just a decent margin, but a decent ROE. I mean you look at the land investment and to get to a 10% post-tax return on that, there's obviously a steep hill to climb for the business. You've indicated new MD's coming in. So there's a process there and a change in the land you're buying. Is that going to be enough? Do you think you're currently efficient enough in terms of, I suppose, the build process in terms of sort of costs as well as then obviously the selling that you've highlighted in terms of boosting that?

So I'll start by saying I believe we can make improvements in every area of that business. And I say that having spent 6, 7 months there myself early part of this year. But let's start with the land. We took a decision a few years ago, we wanted to scale up Stonebridge Homes. And we believe the market would be our friend to help us achieve that. Unfortunately, and I'm not going to just talk about what's gone, but unfortunately, the market didn't play how we wanted it to play. So we have some legacy issues to deal with, and that's what we are dealing with. But moving forward, I think we have a clearer understanding now of what Stonebridge is all about, what the USP is, and that is higher-end homes mentioned earlier in the presentation, the average sales price in the first half of this year, GBP 431,000. And most of those homes are in the North East of England.

We need to make sure that our land strategy meets with that product. We're building on sites where we believe there is a sufficient depth of customer for that product. And it might be -- we've not got there yet, but it might be that the sweet spot for Stonebridge Homes is sites that are, say, 50 to 80 units rather than sites that are 200-plus units. And that way, we can, I think, be more -- we can probably get more bang for our buck in terms of outlay of cash for land. We can have a higher number of sales outlets. Right now, we have 7 live sales outlets. And if you look at how much money we have out in land, we could probably do with that number being a bit higher. So the outlay of cash we have in land, we have to increase the number of sales outlets, which will increase volume, and we need to make sure we're building in the parts of the country where people are going to buy our product.

Last one is on probably Hallam, so probably more coming towards Darren. You're not the only ones obviously going hell for leather in terms of getting planning applications and everybody is doing it because there has been a certain amount of encouragement from the government to do so. Clearly, there's various bottlenecks as we're so used to seeing. If the taps are properly open, is there not a danger that the market is flooded with more land for sale than there has been for the last I don't know, maybe 10, maybe 15, maybe even 20 years. And actually, then it becomes very much a buyer's market rather than the seller's market that we've seen and that GBP 10,500, GBP 11,000 that you were making is actually sort of eaten into.

There's always that possibility, but I'd start by saying if you look at the kind of average IRR we've just been quoted, it's very healthy. And we still make good money even if our average gross profit per plot is down a bit on that. So there's plenty to go at. I question whether everybody is going hell for leather right now from some of the stats I've seen, particularly in this environment, some of the major housebuilders as well being pretty protective. And quite often strategic land is one of the first places they make cuts. If you're trying to take cost out.

So I'm not entirely sure that everybody is running as fast as we are trying to run in this environment given our experience. And we've been there before. So coming into kind of 8, 9 years ago, we had a healthy stock on the balance sheet, having taken advantage of a half decent planning environment. And we will be amongst everybody else and land is always going to be a scarce supply, and we never really saw it impacted to a great degree in that way.

Alastair Stewart from Progressive Equity Research. Two or 3 questions on Stonebridge. Interesting to hear you Ed saying that you're considering smaller sites. And well, I will start off by asking the ASP went up 10%. Was that like-for-like? Or was there a change -- change mix?

Probably what skewed the quite sharp increase on ASP is we have sold -- by the time we get to the end of this year, hopefully, we'll have sold 36 homes at our site in Morpeth, and the average sales price there on that site alone is over GBP 500,000. So that has skewed the numbers again, because we haven't got as many sales outlets as we would like. You have one site that performs that way, it just skew the numbers a little bit.

That ASP is also blended between private and social. And quite a lot of our social for this year, I want to say, started coming through now, but it is post period end.

Correct.

And would you consider, on one hand, reducing the ASPs going forward? You mentioned the term depth of customer. With expensive homes, frankly, in the North East, you've not got the same depth of customer, yet sites with 200-plus units, you're trying to emulate a volume housebuilder that has lower average selling prices or probably a broad range. Which direction will the dynamic go?

So again, we'll -- I'll be able to give you a better answer in the spring on this. But I believe our average sales price will probably come down, not because we are trying to reduce the quality of our product, but I think we will be looking at sites where we will be introducing more of a blend of house types. So we will have 2 beds up to 5 beds, whereas I think historically, we've majored on 4 or 5 beds, which obviously pushes the average sales price up. And I think we need that because it gives us more optionality. So that's the first point. The second point, -- do we want to be competing with the big PLCs on 200-plus plot sites? Probably not. Now do I think there's a place for maybe having through -- at any point in time, having one big site that we could be building on for 5, 6 years? Yes, I do. But we've got to be very, very thoughtful about that mix of land.

Can you do some land swaps, for instance, with chunks of your 200?

We could indeed. And we have actually completed on sales of 2 parcels of land on sites we're still building on to 2 of the PLCs already this year.

And finally, just of interest, your Golden Valley site development, they seem to have techy type names. Are they mainly for people or for companies in the cybersecurity space? Are you building from the Cheltenham factor?

Yes. Cybersecurity innovation is absolutely at the heart and center of that scheme, yes. We can't name a name at the moment, but that's how I would respond to your question, yes. And as I mentioned, we are 68% already pre-let.

I've got just a couple of questions that have come in. Is there any update on progress at Island in Manchester?

So we continue to market the space at Island. We are 2/3 let. We're hopeful that we have constant inquiries. We believe we're at the top of the list if there are any inquiries out there for prime space in Manchester. People possibly already know we did set new headline rent for Manchester when we did the letting at the end of last year at GBP 48 a foot. So no material news to talk of, but we're constantly fielding inquiries.

Thanks. And then there's one for you, Darren. Could you please expand on some numbers for legacy issues and how you're valuing these compared to the industry?

Yes. Look, I think that, in particular, relates to Stonebridge, where we are facing, as Ed's outlined, a number of challenges that includes inflation, prolongation of site delivery and to some extent, legacy costs. Clearly, we are reviewing all of those as we go and we become aware of them, and we're making appropriate provision in the accounts for those. We also have introduced this year an additional contingency to cover those that we may not yet know about in the accounts. And that probably amounts for around 1/3 of the forecast full year loss that Stonebridge are going to undertake going to be looking to deliver.

Great. There's no more questions online. So I'll just hand back to Ed for closing remarks.

Yes. Well, look, thanks again, everyone, for your time. I'll sort of finish by repeating something I've already said, look, new into this role, longevity with the business, but absolutely, I aim to make a difference, and that is the remit from the Board. And so we're looking forward to getting stuck into refreshing our strategy, and then I certainly look forward to being able to talk to you all about that in the spring.

Yes. So morning, everybody. We're going to have the normal running order. I'll start off with an introduction and then an overview of performance. Then Darren is going to go through financial and land promotion, then I'll come back and do development and Stonebridge and finish off with outlook.

So our focus on high-quality land, prime developments and premium homes has helped us to achieve total land and property sales of over GBP 350 million or our share GBP 193 million. Demand from housebuilders has been particularly strong for our prime residential land, even though the housing market has been slow. I'm pleased to say we've seen a significantly better planning environment since changes were made to the NPPF and our early investment in Hallam back in 2024 has already started to pay off, allowing us to nearly triple the amount of planning applications made last year to 11,000 plots. Planning has also been secured for Golden Valley and our industrial-focused JV Origin is performing well with the initial schemes completing on time and budget, and we're committing more. So we're managing to grow our development program.

We completed on both the first tranche of the Stonebridge acquisition, becoming the majority owner and on the sale of Henry Boot Construction. We continue, therefore, to simplify the group structure and increase our focus on our core activities. Clearly, Stonebridge hasn't performed very well. However, we've taken action and believe fundamentally, it's a business that will contribute to the growth -- the group's growth and return in the future.

Throughout this period, our balance sheet remained rock solid. Our NAV is just over GBP 3 per share. And as you all know, it's very conservatively assessed because all our land and developments are held at cost.

So going through the operational performance. I'm pleased to say that last year, as a whole, we delivered a performance in line with market expectations against at times a challenging backdrop. There have been some great achievements in the year and some areas where we know, I know we need to have a plan, we've got a plan, but also we need to do better. Hallam did exceptionally well, selling a record of nearly 4,000 plots, exceeding its budget by 13%. We also replenished our consented sites ready for sale by achieving planning on nearly 4,200 plots. And as I said, we submitted applications for 11,000 plots and our aim is to achieve a similar amount this year.

Our land portfolio has increased to 106,000 plots and our consented stock now stands at just over 9,000. As I said last time, we continue to grow more or put more emphasis on securing planning consents and increasing plot sales because we think that the portfolio is big enough, it's got scale and it's got balance.

Turning to development. In the current environment, we've been very disciplined and selective over new projects, so we've completed on GBP 33 million of development. Origin is performing well with over 700,000 square feet of industrial, either recently completed or committed. Lettings are being achieved ahead of business plan. The investment portfolio generated a great total return of just over 11%. And again, that's well ahead of the index.

Looking at home building. Stonebridge completed on 185 homes, materially below our expectations, which isn't good enough. While selling prices were in line with budget, we experienced soft trading conditions with delays in securing detailed planning permissions impacting the opening of new sites. We also saw some cost overruns. However, we see great potential in this business and to support this, we've added nearly 1,000 plots to the land bank. We've also started to reset towards the end of 2025 and expect to return to a small profit this year. And where does that mean we all got to? It means once you add in construction and deduct central operating costs, group operating profit was GBP 33 million.

I just want to spend a minute on the medium-term targets. Although progress has been made against some of those objectives, persistent economic and political uncertainty has made it difficult to achieve them in the original time frame. Also, as Darren is going to explain, there's been a reclassification of the group's main borrowing facility, meaning the capital employed measurement has increased. This, together with simplifying the group structure, plus the improved outlook for Hallam means we're going to look to refresh these targets during 2026. In particular, we need to look at the capital employed and return targets. On returns, I would add that as the vast majority of our sites are held in promotion and development agreements, options or discounted freehold, all of which is held at cost. I remain confident that when normal levels of volume return to our markets, we can generate attractive gross margins.

Also, we will look to increase the land promotion plot sales targets that we expect to achieve in the medium term. Looking at HBD, with the start of Phase 1 of Golden Valley late this summer and other industrial projects, we anticipate committed developments rising to around GBP 150 million our share. Much of that profit will flow into next year and beyond. The investment portfolio, as I've already alluded to, is one of Henry Boot's successes. We continue to be patient in growing it with the emphasis on performance, not size, but it's still expected to grow from the GBP 120 million as we complete on Origin developments.

If you look at Stonebridge, if you exclude 2025, over 10 years, output has increased by an average of 24% per annum. We still believe it is a growth business. We're still clear that operating in 3 regions and in a stable market, we can get to 600 homes per annum. As we change the group, we also need to change the way we work. In anticipation of the sale of HBC, the integration of Stonebridge and our ambition to create a more agile and robust organization, we started our future ways of working program in March of last year. The program is designed to drive efficiency, improve collaboration and the sharing of expertise and resources across all of our 3 core businesses.

This includes reshaping teams within the group to result in a leaner central function where we've reduced heads by 23%, and we've also reformed our Executive Committee. We've also implemented for the first time the first phase of Dynamics 365, bringing all our data together to be used more effectively for decision-making. The program has already delivered a reduction in central overheads of 20% in 2025 with further savings anticipated in 2026.

So Darren, over to you.

Thank you, Tim, and good morning, everyone. So this year, we are presenting our financial results, including discontinued operations. Hopefully, this will give a clearer picture of performance over the period. Discontinued operations are Henry Boot Construction, which we sold on the final day of last year. We performed well in a challenging environment, although revenue reduced by 6% to GBP 307 million as a result of lower new home sales, which were partially offset by higher strategic land disposals. The reduction in admin expenses was offset by lower gains on property sales and revaluations, resulting in operating profit being marginally lower at GBP 33 million with underlying profit of GBP 28 million, and that excludes valuation movements on completed investment properties.

Our return on capital employed was 7.5% before the revised classification of the group's main borrowing facility that Tim mentioned. That is reconciled on a slide in the appendix for anybody looking for the detail on that. As Tim has already also mentioned, we have significant opportunities across our portfolio. And through the cycle, we continue to believe we can deliver attractive returns. Earnings per share increased by 1% to 17.6p, and we have increased the dividend by 2% with our decision to hold the final dividend at last year's level, consistent with our policy to invest selectively while acknowledging the importance of delivering an income return to our shareholders.

Looking to the balance sheet. Investment property, including our share of joint ventures has increased to GBP 119 million, and that's after more than GBP 15 million of profitable sales during the period. We've seen further strong rental growth for our industrial assets and made good progress growing our Origin joint venture. Inventories increased by GBP 35 million as we added to our consented land bank within Stonebridge Homes. We anticipate our investment will be more limited this year as we look to recycle capital from both work in progress and via selective land sales to optimize site size and increase outlet numbers over the medium term.

Following investment in land and developments and the sale of Henry Boot Construction, net debt increased to GBP 108 million with 20% gearing slightly above our target range of 10% to 20%. We expect gearing to move back towards the top end of our target range this year as we look to complete several disposals across the group, although again, this will be largely H2 weighted.

In January '25, we completed the acquisition of 12.5% of Stonebridge Homes, taking our ownership to 62.5%. As a result of this and the distribution of dividends, our underlying net asset value per share, excluding the pension surplus was flat at 312p.

Looking at the cash flow, the cash flow bridge here shows how cash from operations, investment property sales and debt funding have allowed us to continue to invest in homebuilding and property development within our Origin joint venture. Cash inflows from operations totaled GBP 9 million as returns in the period comfortably covered payments for interest, tax and dividends. Along with this, profitable sales of investment property generated GBP 15 million, and this cash generation has been recycled into GBP 37 million of investment in inventories to grow land and work in progress in Stonebridge.

Investment in our development program and funding of planning costs within Hallam to bring forward sites for sale has been broadly self-funded from disposals, recycling capital back into inventory, which is broadly flat over the year for those businesses. As previously mentioned, we purchased a further 12.5% of Stonebridge. That was for a fixed sum of GBP 10 million with future fixed payments and importantly, final performance-related adjustments expected to conclude in 2031, following us taking full control at the end of 2029.

Whilst we continue to grow our Origin joint venture, this is actually largely funded from returns on land disposals into the joint venture itself with net cash generated of GBP 1 million. Other working capital increased by GBP 22 million following land sales to housebuilders on deferred payment terms and the sale of Henry Boot Construction. As such, we ended the period with net debt of GBP 108 million.

So if I can move on now into the operational review and starting with land promotion. Hallam sold a record 3,957 plots in the period, and this demonstrates strong demand for our prime deliverable sites from housebuilders. At an average gross profit per plot of GBP 11,400, we achieved an operating profit of GBP 32.9 million, an absolutely amazing result, 34% up on the previous year. This result was achieved from sites sold, which took an average of 13 years to deliver, but which achieved an average ungeared IRR of 27%, again, an absolutely fantastic result.

Over the term, our land promotion business has delivered significant returns with the return on capital employed averaging 17% over the last 10 years and above the group's target range. Whilst we have been -- whilst there have been annual variations, even during the initial COVID period, the business achieved double-digit returns. The scale of the portfolio allows us to mitigate site-specific risks. And whilst we are clearly correlated to demand in the housing market, this can be mitigated to some extent through forward sales. As we move forward, our focus is on continuing to secure planning permissions and increasing sales, whilst continuing to grow the portfolio at a modest level.

Following the government's revision to the NPPF, we have seen positive changes to the planning system, which have significantly increased our ability to secure outline consents. The planning environment has been positive for securing outline consents. And during 2025, we achieved planning for nearly 4,200 plots, a 39% increase on the previous year. This is also a significant increase when compared to the 3-year average of around 600 plots to the end of 2023, given we saw the positive impact of planning changes start to come through in late 2024.

We've been successful in utilizing the appeal system to unlock more sites, and we've won appeals on nearly 3,000 plots across 7 sites in 2025. This included 1,000 plots in Ashford in Kent in December, which is currently under offer. And then we made good progress on our target of submitting 10,000 plots into planning last year with just over 11,000 plots submitted, and we expect to submit a similar level this year. Plots we're planning increased to over 9,000 and with a further 19,000 plots awaiting determination, in this supportive environment, we expect our stock of plots with planning to increase over time.

We continue to manage one of the largest strategic land portfolios in the country with over 105,000 plots, of which 76% is in the Midlands and South, where values tend to be higher. With the balance of freehold and promotion agreements, we're able to manage capital investment appropriately between risk and reward, taking advantage of the right time in the cycle when acquiring freehold land, which is more capital intensive. Our use of planning promotion agreements provides a capital-light investment structure and gives us our USP against housebuilders by marketing the sites to drive best value for our landowners. Our 5-year average plot sales are running at almost 3,100 plots per annum, and we anticipate plot sales of over 4,000 this year, which will increase our rolling average closer to our medium-term target of the 3,500 plots.

Sales in the period delivered an average of GBP 11,000 gross profit per plot, driven by a particularly profitable freehold sale in Ambrosden, bringing the 5-year average back up to GBP 10,000 per plot, a level that we believe remains achievable over the medium term. Whilst we anticipate volume of plots in 2026 will increase, the anticipated sales mix with a higher percentage of promotion agreements and a lower share of freeholds is likely to result in profit per plot being lower than our typical rate of GBP 10,000 per plot with a corresponding impact on operating profit.

With our portfolio all held at cost with no gain on securing planning recognized until the land is sold, this continues to reflect a significant uplift in value not recognized in our balance sheet. As shown in the table at the top, based on the recently achieved gross profit per plot of GBP 10,000, the 9,000 plots that we have with planning have the potential to deliver gross profit of GBP 90 million over the short term. In addition to this, we have almost 20,000 plots awaiting determination. This significantly derisks 27% of our total land bank and has the potential to deliver a further GBP 196 million of gross profit.

The full portfolio over time has the potential to deliver over GBP 1 billion of gross profit. And as we did for the first time at the interim results in September, we're presenting an illustrative net present value for the total portfolio, which can be seen in the table down at the bottom. These figures are based on a range of gross profit per plot, but using average hold periods and making adjustments for overheads and tax. The matrix also includes a range of discount rates. If we use GBP 10,000 per plot, this shows a potential discounted profit after tax to come of GBP 181 million to GBP 256 million, which is equivalent to an overall NAV uplift of between 43% and 61%. Whilst there are, of course, risks to unlock this value, the business has a strong track record of mitigating these and with a portfolio of over 200 sites is not reliant on a few large schemes to deliver returns.

And on that, I shall hand you back to Tim.

Thank you, Darren. So I'm going to turn to property investment and development. We completed on GBP 119 million of development, our share GBP 33 million, with 32% of the schemes having been pre-let or presold. Understandably, we've been selective in starting developments with the majority of our completions coming from Origin, which I'm going to provide more details on the next slide. Our committed schemes now total GBP 66 million, our share, GBP 18 million. Our share of the estimated total profit is GBP 4 million or 28% profit on cost, of which only 30% has been taken to date. In the case of Origin schemes, this doesn't include the profit achieved in transferring the land to the joint venture nor the potential to earn promote fees. We'll remain selective in building up our committed program. But as I'll explain, we've got significant near-term opportunity from our GBP 1.4 billion pipeline.

Now in terms of Origin, the initial JV was seeded with 3 sites with a combined total of GBP 100 million GDV or nearly 450,000 square feet of industrial. All the schemes recently completed on time and budget. In line with the ambition to scale up Origin, at the end of 2025, we added a further 3 schemes totaling around 260,000 square feet with a GDV of GBP 56 million. So that total is GBP 156 million. Our share is GBP 39 million. Out of the total of 700,000 square feet, I'm pleased to say 134,000 square feet is let or under offer and lettings, as I've said already, are ahead of business plan.

Now I've talked about the strong pipeline, and that puts us in a good position to respond quickly to market conditions. And I'll talk you through these 3 schemes, starting off with Golden Valley. We're working with our partner, the Cheltenham Borough Council, we expect to obtain detailed consent shortly on Phase 1. We've agreed terms with the anchor tenant and other occupiers in the cybersecurity field, and the scheme is fully funded by the public sector. We're aiming to start on site late summer.

Then last year, we secured planning to develop FREEPORT 36, a 5.5 million square feet industrial and manufacturing park with buildings ranging from 40,000 to 1 million square feet in size. This is in partnership with the landowner, St. John's College, Cambridge. We've already got occupier interest. And again, we're aiming to start on site later this year.

And then finally, as we pivot our urban development to more specialized cyber and tech subsector, in conjunction with the Imperial War Museum, we've submitted planning to develop AvTech, Duxford, a 430,000 square feet campus close to Cambridge dedicated to developing low and zero carbon aircraft technology. As I said, the investment portfolio is being one of our successes. Our total return was 11.1% in 2025, again, ahead of the index at 7.1%. The line graph, as I usually show, shows that our total return compared with the index since the start of 2020 is 7.8% versus the index at 3.8%. So we're outperforming the index by over 100%.

During the period, we secured GBP 17.7 million worth of sales at an average 12% premium to book. The largest scale sale was Skelmersdale, where we secured planning for a new 245,000 square feet industrial. The property was sold for GBP 9.5 million, achieving an IRR of 25% per annum. Post period, we completed the sale of a supermarket that we previously developed in Warminster for GBP 8.6 million at a 7% premium to valuation.

Looking at Stonebridge. Stonebridge completed on 185 homes in 2025 at an average private selling price of GBP 403,000. The majority of the operating loss was due to completions being materially below our expectations of 240 to 250 homes. Completions were lower due to several reasons. As you know, the housing market was subdued last year, and our net private reservation rate was also affected by trading from outlets where towards the -- where we were towards the end of our sales program.

So in essence, we weren't offering the full range of homes on those sites. Delays in securing detailed planning also reduced the opening of new sales outlets. We operated from an average of 9 outlets compared to the budget of 12. In addition, around 30 completions moved into 2026 as build schedules were delayed by utility connections and changes in planning conditions. The remainder was caused by cost overruns related to unusual ground conditions and additional costs associated with extended site durations. Again, those extended site durations are caused by slower sales rates. In response, we've increased contingency within schemes to better reflect project delivery time.

Since becoming the majority owner, we've identified key priorities to improve and professionalize the business. This includes making major changes to the senior management team, in particular. We've replaced the Managing Director with the interim appointment of Ed Hutchinson, our MD of HBD. Ed has got extensive experience in building and construction processes as well as land acquisition and planning. He's already making an impact on the business. We've also replaced the FD with an experienced senior member of Henry Boot's finance team.

Supported by our group functions, we're investing in our Stonebridge people and systems to strengthen our capability and customer experience. We're also focusing on enhancing operational efficiency to create stronger links between teams. And then using Hallam Land, we've reviewed the land portfolio to better align scale and location with our premium home strategy. Whilst it's still early in the year, we've seen an improvement in trading with the sales rate for the 11 weeks to the 15th of March at 0.43. That's up 25% year-on-year. This week, which has just ended, and that wasn't in the sales figures, guess what, one of the best weeks we've ever had, and that would increase the sales rate year-to-date to 0.5. Our guidance for 2026 is completions of between 200 and 220 homes.

So finishing off with outlook. As we consider our markets at the start of this year, we've been encouraged by the continued demand for our high-quality land, early signs of letting activity in HBD and sales rates improving at Stonebridge. However, we'll need to see how the prolonged -- how prolonged the conflict is in Iran to gauge the extent, if any, on the effect of the outlook for 2026. Regardless, we continue to make good strategic progress by focusing on quality projects within land, promotion, development and homebuilding. Hallam remains a core driver of value where we are growing its store of worth. We expect to have another good year, although we anticipate a sales mix with a higher percentage of promotion agreements and less freeholds. So our profit per plot is likely to be lower.

HBD is preparing to commit to more of its near-term developments with industrial remaining a key focus through Origin alongside nationally significant schemes like Golden Valley. We anticipate Stonebridge Homes will begin to recover during 2026, as I've said, making a small profit. With a clear reset plan, we believe we'll get back on track to achieve our medium-term growth targets. As in previous years, we expect our performance to be half 2 weighted. However, there are significant opportunities across our portfolio, plus the benefits of a rock-solid balance sheet, leaving us well positioned to not only deliver against market expectations for 2026, but also to get back on track to hitting our growth and return targets in the medium term.

So we've got some questions, and I think we'll wait for the mic. And I feel as though Tom just be edging to the draw.

It's Tom Musson at Berenberg. Maybe if I ask one first on Hallam land sales in 2026. It sounds like from what you're saying, you might have some visibility on gross profitability levels just given the mix of land types that you're talking about. Are you able to perhaps quantify how far below that GBP 10,000 profit per plot average you might expect to transact on this year?

Well, we've got -- first of all, we've got pretty good visibility. So we've got 15 sites that we anticipate that we will sell this year. And the majority of those sites have either exchanged or under offer and then a minority of them are either in the market or about to go to the market. And if you think about it, that makes sense, isn't it, because selling big bits of land takes some time. So we're getting our ducks in a row.

So we do know the mix of the likely profit per plot so long as, of course, we achieve the prices that we are anticipating. And I've got to say, so far, this year, we've had a good run, and you saw the demand that we had for our residential land last year, the housebuilders want to buy land. So yes, we've got a view on what the profit will be, and it's likely to be about 20% below the long-term average. Anything you want to add?

Yes. So the chart on Slide 13, where we showed the 5-year kind of profit per plot returns. If you go back to '21, '22, those were years when we were kind of heavily weighted to the promotion agreements, and they were kind of GBP 6,000 to GBP 8,000 gross profit per plot. I don't think we'll be down at the GBP 6,000. So to Tim's point, we're probably going to be at kind of around the GBP 8, 000 mark.

Very helpful. And maybe just one on the balance sheet. I appreciate you're targeting the top end of the 10% to 20% range by the year-end. Just wondering what the pro forma is on gearing today, just given that we've had the Warminster Waitrose sale, but also the additional tranche paid for Stonebridge in February. And maybe just then given capital commitments, should we expect that gearing moves still a bit higher at the half year before coming down again in the second half?

Yes. So it's very much going to be dependent on the transactions we get through between now and the half year. Clearly, we are a transaction-led business and some of those certainly in Hallam Land, land sales are quite significant in terms of cash. So where they land either side of the half year can make quite a bit of difference to where our gearing might be. As we've said, we're H2 weighted. So I'd certainly like to think we're targeting gearing back down towards that top end at the end of the year. And through the midpoint, I'd like to think we can keep it stable from where we started, but it will be very much dependent on where the Hallam Land disposals, in particular, fall either side of the half year.

Yes. And Tom, sometimes there's a mismatch isn't there between investing in the business. And you can see today that we've continued to invest in the business and then getting cash back as we sell. So we're just trying to manage that cash flow.

A couple of questions, if I may, on Stonebridge. Average number of sites in '25 was 9. You were targeting 12. Could you perhaps give an indication of where you'd like average number of sites to be, a good start to the year in terms of sales rate. Is that skewed to any particular sites? Or is it sort of a relatively even spread of sales rates across all of the sites? And then the last one, you talked about ground conditions hindering activity in '25. Was that weather related? Or was that geology?

Yes. Right. So I'll have a go at that. So in terms of sites, as I said, we traded from 9 on average last year against a budget of 12. We're looking to trade from 14 this year, but 3 of those will already be close to closing. So it depends on how you work out the average, but probably we're going to be over 11. So we are -- we will end up trading on average on more sites in 2026. And then obviously, what we're trying to do in '27 and '28 through building up the land bank, which we've done last year, but we were doing it the year before as well, trying to grow those outlets like all housebuilders are doing at the moment. And then in terms of the good start to the year, if you looked at the weekend, we had sales on every single site.

So you always have some sites that you think are better than others. That's the natural way of a portfolio. But in our budget, we are not relying on certain sites to knock out the stars to achieve it. It's been -- but bearing in mind what we went through last year and bearing in mind that Henry Boot now has the majority ownership, we're trying to be pretty balanced in the assessment of our budget. So we're not going to be relying on just 1 or 2 sites. And then you asked about the site conditions. They were peculiar to the sites. It wasn't about the weather.

Yes. It was 2 elements. One element was the geology and the other element was a change in building regulations that meant we had to do more work in the ground to meet those regulations.

Christen Hjorth from Deutsche Bank. Two from me, please. We'll maybe stick with Stonebridge to start. I mean I suppose Tim, looking back, you sort of pointed to the strong growth up until 2024 in Stonebridge and then the various things that went wrong in 2025. So what do you think is the catalyst? Was that just a lot of bad luck? Was it -- have there been some management changes? Has there been some strategy changes, seeing a reflection, why it was '25 when it happened? And what is sort of changing? Obviously, you touched on the management, but in terms of strategy going forward?

And the second one is, obviously, you guys are trading on a reasonably decent discount to book and the ROCE is lower than you'd want it to be. If I look at Hallam, fantastic ROCE. So obviously, it's very poor in some of the other parts of the business. And I was just wondering if there's anything you can do there, for example, reducing capital employed, selling assets, et cetera, just to return or to improve ROCE in some of those other parts of the business.

Okay. So I think with Stonebridge, it's often the way isn't it, that there are a range of things that affect performance. And I talked through those. I was open in the presentation. I think that, first of all, in hindsight, we set a pretty challenging budget. And in setting that budget, probably there was just a bit of the market is going back to normal. And it didn't. It was an awkward market for everybody. And actually, if you look at the stats, if you're selling premium homes, it was just a bit harder.

So the market definitely didn't help. And when I kind of like look at a mental bridge between the operating profit and the loss that we made, the majority of it was about completions and then the big part of that majority was about the market. And then also in terms of completions, I've talked about the fact that we had 30 plots that went over to the next year and some of the outlets we didn't trade from enough outlets. And that's a planning issue. We're good at planning, aren't we? And the planning sometimes in terms of getting detailed planning consent is very hard. So that's the big part.

Then if you look at it, again, in terms of performance, we had some cost overruns, which I've talked about. And then also because we've gone into the business and looked in detail at the delivery programs, we also want some extra contingency, and that then becomes a cost on you. So that's partly bad luck on some of the costs, partly as Darren has explained, changes in building regulations, you can't do anything about that. But then I think that also what we can do is we can be more thoughtful about how we plan and build out schemes. And also, I think we can be more thoughtful how we promote the sites and train and develop the sales team. And that then goes to was the business being run the way that we wanted to run the business going forward? No, it wasn't. So part of that is management. And as you know, we've materially changed the senior management team.

So the MD -- we're in the process of changing the MD. We've got a fantastic interim MD, Ed Hutchinson. Darren, we've changed the FD, and we've also decided that we don't need an overall operations director. So we will change the SMT. We'll reduce it from 11 people to 7 people. And that's not about cutting costs. That's actually about increasing efficiency so that the MD knows who they're managing, has got a reasonable team to manage and that they're collaborating.

So I think that we've recognized that it wasn't going to plan, started to really, really get to the bottom of it in the summer, started to act on it in the early autumn. And then we've got what we're calling a fresh start plan in the business because we want it to be positive. We don't want to be negative. We've got something called a fresh start plan where we're really, really clear about what the priorities are. And also, this is definitely a Henry Boot. Henry Boot, everybody is in it together. And everybody is aware of what we're trying to achieve and everybody is motivated and partly responsible for the success. And we're definitely bringing that into Stonebridge. And I think as a result, the team will be better.

I've spent quite a lot of time in Stonebridge as has Darren. And considering being an open day, and I'm responsible, so I'm not saying it's just them. But bearing in mind, they've not had a good year and bearing in mind there's been a lot of change, they're up for it. What I think is good is that we've gone around and we've agonized over the homes. I've actually gone and seen customers and I've asked them about the homes. And you know what, people like our houses. People like the layout. They like the locations, they like the size of it, they like the quality. So fundamentally, it's good. And what we've got to do is you've got to be slicker at building and selling and keep our customers happy, and we can do that. So I think you talked about what's happened, management change. And then what was your final question on Stonebridge?

It wasn't Stonebridge. It was more around the return on capital employed. Capital, I suppose, in general, whether you can release it.

Well, look, I'm going to let Darren talk in a bit of detail. And by the time I finish, you'll have been able to write a dissertation, won't you, in great detail. So I'll let Darren talk about it. But look, I mean, first of all, Christen, you've been following Henry Boot for quite a long time. The reason why we have more than one business is that we all know that businesses have good moments and not so good moments. So we like the diversity that the 3 businesses have. And they are not mathematically absolutely diversified, but they definitely have some differences. So if you look at Hallam, Hallam, that will be the best year they've ever had, right? And then with HBD, I think, HBD has done very well. So their return on capital employed will not be sparkling. It will be about 4%.

But they're a commercial development business and commercial development has been in a subdued market. The values haven't been falling, but the levels of activity even in the industrial market, which is the standout market, have not been high once you've taken out the big lettings to the Amazons of the world and the big investment deals where Blackstone have been buying up platforms. The day-to-day market, it's an okay market, but there's not a lot of activity. And as a developer, we rely on activity. We've got to do lettings and then we want to sell buildings and recycle capital. So I think that HBD in the circumstance have had a good year and the investment portfolio speaks for itself.

So this year, really, Stonebridge has made a significant difference, doesn't it? You can do the math. If Stonebridge had performed in line with its budget, our return on capital employed would have been very, very decent. And then, yes, we have to keep on thinking about how we can boost our return on capital employed. And I said it in the presentation, the one thing that gives me confidence is if you look at our portfolio, it's rich with opportunity.

So we've got our land portfolio, and you can tell we've got -- our CFO models that to within each of his life. And then we've got a development pipeline. And we know all those projects on that development pipeline and most of them, so the capital employed in the development pipeline is about GBP 60 million. So we've got GBP 1.4 billion of potential development for GBP 60 million. That is not bad. And we have appraisals on all of those, and they all make money. But what we've got to do is we've got to have a degree of active market so that we can develop and we can let and we can sell on.

So I think that the development business will restore its return on capital employed. And then again, with Stonebridge, Stonebridge, I think, still got to get a bit bigger before it starts helping us materially with the return on capital employed. But I think that we can achieve that. I haven't -- just because of a bad year, I'm not dismissing it, but just because of a bad year, I don't think that will knock us off what we can achieve in the medium term. So therefore, I get to the place where I look at the returns on capital employed that we have historically achieved. And I think there's no reason why we can't do that in the future. But we'll have to get through a period where there's uncertainty, there's some cost in the system and also there's some low levels of trading.

Now Darren can think of anything, but you will -- he will give a more financial answer to it for me.

I think Tim makes a valid point and the returns are a big part of our return on capital employed, clearly, and we need to get back to our markets being in a place where they're really delivering what we know they can deliver to drive that metric. I think you're absolutely right, though, in terms of self-help and what we can do to look at the balance sheet ourselves and where we're deploying capital, which I think is probably a mix.

So if you take Hallam at the moment, we've just said they've never had such a good run at obtaining outline planning permissions. We've increased submissions fourfold over the last 1.5 years of what we are putting into planning and the planning application is not a cheap exercise. They've done really well at recycling returns to maintain their capital employed broadly flat, but we definitely don't want to be pulling back on their activities at the moment whilst the environment for them is so good. So hopefully, we'll keep capital employed flat, but definitely don't want to see that actually coming down in any way.

I think on property development, the business knows the market that it's in. And as Tim has pointed out, it's definitely a very capital-light model for the pipeline of opportunities we've got. But at the same time, that doesn't mean they won't look at what is in the investment portfolio, what is in the opportunity pipeline to see whether or not they can return capital to the group. So Warminster, for example, great example of a sale that they've looked at in the investment portfolio, looked at when might be the best time to actually exit that asset in an environment we're in, absolutely great result to be able to sell that now.

I think Stonebridge then is the final one where given the results and returns of last year and given the reduction in volume, what they actually were incredibly good at last year is obtaining land. So we've invested a huge amount in that business in land. The capital employed is therefore now, I'd say, at the limit of where we want to go with that business at this current time. And as we move forward, the focus will be on getting the outlet numbers up. And if some of the larger sites that we've acquired over the last year, we're able to sell some of the future phases that don't impact short-term delivery. And either return funds into reduce capital employed or actually recycle those into other smaller sites where we can then look to start increasing outlet numbers. I think that's the one where it's a bit of a balancing game for us as we move forward.

So I am surprised, you've got energy left after that long-winded answer from management, but go on.

Really just to follow up on the last answer from Darren actually. In that context of not putting more capital into Stonebridge materially more going forward, what's the right length of land bank for that business? And assuming you still want to eventually reach 600 plots per annum?

Well, we definitely want to reach 600 homes per annum, but that ambition hasn't reduced.

So we're growing from a smaller level, aren't we? And we've been building the land bank up as we go. I think an ideal for us is probably going to be 4 or 5 years in the land bank that's coming forward. But where we're at now with the volumes that we've achieved and the way the land bank has grown, we've definitely pushed beyond that. So it's twofold isn't it, so if we can get the outlets, get the actual volumes back up, all of a sudden, the land bank perversely resets itself to where you want to be.

So Richard.

Conscious of time, just a few questions on here. So I'll just go through them in no particular order. Could you discuss the pension scheme and when the next valuation will take place and whether you expect to remain in surplus?

That's definitely coming my way. So we've just signed off on the last valuation, which is effectively at the end of the previous year. So we've got 2 years until we're into the next valuation process. The end of last year, we got a GBP 9 million surplus. That's come down given the economic environment, we're into GBP 3 million surplus at the moment. But 90% of the liabilities in that scheme are now hedged. And therefore, the actual impact on the scheme of those global movements is a lot less than it ever used to be.

Therefore, I would hope -- never say never, but I hope that we stay in surplus now on the valuation methodology. The valuations follow different standards. And what we are looking at is the long-term game of being able to exit the scheme. On an exit valuation, we do still have a deficit. We're probably at GBP 89 million, which means, for me, I'd like to think in the next 4 or 5 years, maybe, we'll be able to look to get out of that scheme.

Great. Okay. So next question. grateful if you could help us understand the decision to substantially increase the land bank at Stonebridge in 2025. When you could see the soft trading and delays in opening new outlets and now subsequent decision to dispose of land at Stonebridge? And secondly, does the management believe that the transaction structure to acquire the 50% of Stonebridge based on 1.6x tangible gross asset value and not linked to profitability was the right structure?

Yes. Okay. Yes. So I think that in terms of carrying on buying land in 2025, it was the right thing to do because we want to get into a position where we've got enough land so that we can get to 600 homes per annum. And also sometimes you have opportunities to buy land that fits into your regional network and you have to take them. And to be absolutely clear, and I believe Darren has in both the presentation and in answering questions about Stonebridge, we bought some land and some of those sites are large. And it's a pretty well-known tactic to look to either partner or to sell off some of the parcels of that land to other housebuilders. So we're not doing anything unusual there. In fact, it's the right thing to do.

Then in terms of the transaction, at a strategic level, absolutely the right thing for us to do. So I talked about the growth that we've seen in Stonebridge, and we firmly believe that we'll continue to see growth in Stonebridge. And that growth going forward, even off the 270 homes that we did in 2024 would be between 15% and 16% per annum. There are not many growth businesses that you can take control of. So at a strategic level, it fits well into us. And we haven't really talked about it today, but don't forget, we -- Road Link is running off, and we don't have HBC anymore. So we do have to look for parts of the business to grow in order to cover that cost.

And then in terms of the price, the absolute right thing in terms of the price was it was performance led. And if we look at what we thought we would pay through modeling when the deal was agreed in December 2024 and what we think that we will pay today, it is materially lower. So that performance does bite, yes.

And then I think the other thing that we did and we were trying to take control of something, and there's always a premium to take control of something. What we did was we were very, very thoughtful about the phasing. And we will have control of that business, but we will not pay the final phase of -- the final tranche of the payment until 2031. And that will help our return on capital employed. So am I disappointed that we didn't have a good year last year? Yes, I am. And that's right for me to say that, isn't it? Have we got a plan for growing and recovering Stonebridge? Yes, we have. Is it the right thing strategically for Henry Boot in the medium term? Yes, it is.

I'll just quickly go through these. Should interest rates climb during '26, what impact do you think this will have on completions at Hallam and Stonebridge Homes? And do you expect the trend of securing planning via appeal to continue as high as a high proportion of planning wins during '26?

Okay. Well, look, I'll do the planning one. You do the interest rate one. In terms of planning, we believe that the environment to get outline planning consent, not detailed consent, outline planning consent, and that is what Hallam does. We think that, that is as favorable as it's been in many generations. And then do we think that, that means that the route to get planning through appeal will continue to be successful. And I want to say we did 7 sites last year on appeal, yes. And you know Henry Boot, we generally work with authorities.

We do not often go to appeal. But the reason why we're going to appeal is that we're assessing it. We're being logical aren't we? We're assessing it and we're thinking, yes, we can win these appeals. And if necessary, we will go again and we will appeal. And one of the reasons why planning authorities have responded pretty quickly to the changes in the planning policy is because they know that if they don't, they'll have people like us taking them to appeal. And the chances are they will lose those appeals, yes. So a $64,000 question, interest rates.

So clearly, our markets are interlinked to interest rates, particularly around the mortgage products and the sale of homes in Stonebridge. I think if you look at commentators at the moment, whether interest rates are set to go up or come down is a bit of a mixed view at the moment and to some degree, anybody's guess with what goes on from here. I think the initial reaction that we've seen the market starting to increase mortgage product rates on the long-term forecast debt cost, particularly in response to what is happening in the Middle East has had no immediate impact from what we've seen.

In fact, as Tim has just said, we've had our best-selling weekend ever in Stonebridge Homes just gone. And it feels like where rates are currently at is manageable for most households. We'll have to see how the Middle East continues and unfolds. And if that is prolonged, then we could start seeing an impact clearly. I think from the Hallam side of things, however, most of the housebuilders are, I think, in a similar position to us, currently seeing good kind of upticks in activity levels. And I think what a lot of them are suffering from at the moment similar to what we've been speaking about is the number of outlets they can secure and get open, which I think is why we are continuing to see good levels of interest for Hallam land sites. And I think as we move forward, that will, therefore, be less impacted by any movement on interest rates unless there's a significant shift in the market.

And I know you've got an eye on time, Richard. But everything that I read says that monetary policy is still restrictive. So look, who knows with war in Iran, inflation could go up and the bank could adjust because of that. But still, it feels based on the slow growth of the economy, the fact that the interest rates are likely over a medium term to be restrictive, still feels as though interest rates in the medium term will -- might adjust for events, but they should still come down a bit. And look, who knows? But if that does happen, that will be very, very good for our markets.

Okay. Had quite a few questions today, didn't we? Thank you very much. Good to see you all.