Mj Gleeson Stock

Good morning, everybody. Welcome to MJ Gleeson's annual results presentation for the year to June 2026. I've hotfooted it here from my Radio 4 breakfast show. I hope you're all listening. It was very exciting because Mark actually got me to go to the studio. So I sat there with Nick and Justin and my headphones, it is all very exciting.

But then even more excitingly, following on from me, Johnny Marr walks in. So there's me and Johnny, recognizing 2 aging rock stars. And but the best bit was the text from my great old friend, Andrew Duxbury, who said what a classic BBC link to go from the housing market to The Smiths because heaven knows you're all bloody miserable now.

It is certainly not the most propitious of economic backdrops against which to be presenting our results. But on the other hand, I'm actually really pleased and really excited with good changes and the improvements that we've made in Gleeson Homes this year. We can only affect what we can affect, but there's -- I will talk to you about that this morning.

There's a bit to get through. So please bear with me, but I think it's worth sharing -- with the market and with the changes we've made, it's worth sharing that with you. So I'll try and take it at some pace, but bear with me.

So I characterize the outturn as a robust performance against a challenging backdrop, and that was underpinned by good performance from Gleeson Homes selling 10% more homes than the previous year. Pleased that, that figure was augmented by -- the net reservation rate was poor at 0.51. Nobody is writing home about that. But that figure was augmented by our first partnerships completions. And of course, that's a journey we began about 2, 2.5 years ago. So great work by the team to actually get those first scores chalked on the board, and we will be looking to build on that.

We also -- we did have some bulk sales as well, about 300 units. That was at an average discount of just under 16%, which is actually not bad. Nobody likes being forced into bulk sales. But I think the relatively low numbers that we're looking to put in that market and also the work that Scott and the team put in to get after that early so that we're doing our business through the year in smaller quantities rather than getting caught in the period-end carnage and some of the egregious discounts that we read about.

Site openings, a bit disappointing, still constrained by slow planning. I will talk about that. And -- but as I said, we have completed that operational restructure, and I'll give you some detail on that. Gleeson Land, here was really -- the number was really defined by that continuing the slippage of the single large sale that we've talked to you about.

I'll update you on that this morning. There were 2 other smaller sales, which we'd hope to complete in June, and they really ran into the developer caution that we're all well aware of that you're reading about in all the majors statements. But happily, both of those sales are expected to proceed in the current year, one to the same buyer and one to a different buyer. But all is not lost in that market.

We are -- we have, as you know, a strong business, we have a great portfolio. And when we're taking our high-quality sites to market, we are still seeing good interest. So very happy that we strengthened our pipeline even further with some 13 new promotion agreements and submitting 18 planning applications [indiscernible] there, which was -- so that's, as I say, strengthening the pipeline, which we're very pleased with. And pleased that we also maintained our strong balance sheet with negligible net debt at the period end and continuing low land creditors.

It really was a year of intense business improvements activity in Gleeson Homes. It's been hard work. And I do want to recognize upfront the response and the support we've had from the team. They've shown real resilience. They've embraced that change. And happily, in the people survey that we completed just in the last few weeks, our engagement score, which was already strong last year, actually improved over the year and improved against the benchmark. So that's a real tribute to the team, a real -- and a strong thank you from me to the team and to the leaders that have led them through that. So very pleased with that.

But we've absolutely restructured Gleeson Homes. We've massively strengthened our leadership team. We've changed process. We've significantly reformed our land buying process. We've rationalized the portfolio, and I'll give you some detail on all of that.

Very pleased that we successfully completed the transition to the new -- or to our new for us, NHBC/HBF customer scoring system. You shouldn't underestimate the achievement that was for the team, particularly against the rest of the change we are bringing through. It is a very different -- the quality of the product is still good, but it's a very different way of collecting the data and a lot of different things for the team to concentrate on.

So we were -- I think in -- so in calendar '25, which is our first year under that system, we achieved what I would class as a satisfactory 4-Star outcome. And that is quite an achievement with that transition. Obviously, what we want to be, what we need to be is 5 Star. We're not settling for anything less.

In the current year, which is calendar FY '26, we are currently trading at 5 Star. But of course, there are a lot of surveys to pass under the bridge before that's closed out. We grasped the nettle on legacy site adoptions. I'll give you a little bit of detail on that.

And now looking forward, having with Transform complete, we are looking at how -- we know that we can continue to improve, and we're proactively looking at our market engagement, product, brand, et cetera, and I'll talk to you a little bit about that. We're also looking to build on the success -- our success in partnerships, which is particularly timely given the government's recent recommitment to that mode of delivery.

So how are we seeing that market in Gleeson Homes? Subdued, it definitely is. It definitely is. I've picked out 3 reasons here. I mean, Rightmove tell us continually and have been telling us for many months now that the total available properties for sale in the U.K. and England remains very high, an 11- or 12-year high, and that is clearly absorbing a lot of the demand. Mortgage rates are increasing and likely to go higher and the cost of living challenge is rearing their head again. We're already seeing it in fuel and energy and widely expected that we're going to get some sort of spike in food inflation. And that's a particular worry for Gleeson customers at the lower end of the income band, as you've heard me say before.

The bulk market is active, but pricing, as I've alluded to, is very keen. And partnership opportunities, we are seeing them. It's a competitive marketplace, but we were really pleased to see the -- announced the recent announcement of the strategic partner funding, and we have -- the phone has started to ring off the back of that. So excited for what we can achieve there. Selling price inflation, I mean, it is anemic. We got a bit last year. Currently, Stefan has done a bit of an exercise. So it's a low sample size, but we currently think we're running at about 1% annualized, which is very poor.

Obviously, the bigger story is around incentives. Happily, incentives still averaged just below 5% last year. So we are keeping that fairly tight. In fact, Scott and I find ourselves in the place of kicking and saying push the incentives a bit harder. It's a balance. But as I say, we achieved what we achieved at sub-5% incentives. Build cost inflation continues to go forward. We saw about 4.5% over the year. It's currently running, we think, at about 3% to 4%. We are -- because the market is weak, we're able to resist the more aggressive requests for 7%, 8%, 9% increases. But there's a residual level, let's say, we think about 3% to 4%, below which we won't be able to resist. And so sadly, difficult for us to rebuild margins into that environment.

Current trading, it's on the slide, really poor. August was very weak. So 0.44 in the 9 weeks to last weekend. We've seen a bit of a tentative pickup. You'd expect that since -- once people come back from their holidays. It's -- so the last couple of weeks have been better than that 0.44. We do need it to be better again. And who knows how well that holds as we run into increasing mortgage interest rates and now the looming budget.

But -- so at that point, I'm going to hand you over to Stefan to run through the numbers, and then I'll come back and talk about the good things we've been up to in Homes and Land. Stefan?

Okay. Thank you, Graham. And as Graham said, the year to June '26, it was a robust performance by the group. We grew revenue by 12.1% to GBP 410 million, but we did deliver lower group operating profit, and that was due to -- principally due to 2 things: the significant site delays in Gleeson Land with one particularly large site sale and margin compression in Gleeson Homes.

I'll take you through the divisional performance on the next few slides, just to highlight a couple of group items here. Group overheads, reduced by GBP 0.5 million. That was due to tight cost controls, lower remuneration and the unwind of a legacy construction provision.

And interest costs increased by GBP 1.7 million to GBP 5.2 million, and that was due to higher average borrowings, so higher interest costs in those borrowings and also higher discounting charges under IFRS 9 for long-term payables. As a result, group adjusted PBT reduced to GBP 10.8 million and adjusted earnings per share were 14.1p.

So turning to the divisional results. Gleeson Homes volumes increased by almost 10% to 1,968 homes. And that was driven by the 320 homes that we sold to partners, our first full year of partnership delivery. That represented about 16% of total volume. And we increased the number of homes that we sold to multi-unit buyers. That was 301 homes, about 15% of full year volume. Selling prices were up 3.8%, and that was driven by a 3.0% increase in underlying selling prices, a stronger house type and regional mix with a higher average number of beds and that was partly offset by the impact of the lower prices that you get from selling to multi-unit buyers.

Now incentives remained high. They're about 4.8% of open market selling prices. And including 2 land sales during the year, Gleeson Homes totaling GBP 4.4 million, Gleeson Homes revenue was up almost 15% to GBP 400 million. Now gross profit increased by 3.3% to GBP 74.5 million, but the benefit of -- the margin benefit from higher volume and higher selling prices was significantly mitigated by those lower gross margins.

On other income, you'll notice there we introduced our own part exchange program in the second half of the year, and that's been very successful. We were breakeven and that helped deliver 58 additional sales during the year. Now we continue to improve overhead efficiency. And whilst costs increased by GBP 4.5 million, which was a 9% increase compared -- that compares to a 15% increase in turnover. Those cost increases that was driven by pay increases, the impact -- the full year impact of higher national insurance rates, increased IT spend and higher recruitment costs. As a percentage of revenue, that fell to -- overhead costs fell by 80 basis points to 13.6%.

Operating margins were 140 basis points lower at 5.0%. And really, that was driven by 3 things: significant build cost inflation, which is running at 4.5%, exceeded underlying selling price increases on reservations during the year, which were 2.2%, and the increase in multi-unit sales, which chipped away at margin. Now we were able to mitigate about 1/3 of those -- that impact through overhead efficiencies.

Now just touching on the exceptional items. We recognized GBP 13.6 million worth of exceptional items in the year. And those are listed out in the appendices just to set them out briefly here. GBP 2 million comes from the cash costs from the restructuring activities during the year, in particular, restructuring of Greater Manchester and Merseyside region and the East Yorkshire region.

GBP 4.5 million noncash impairment from the impairment of 12 conditionally purchased sites and one owned site that we haven't developed, we won't develop. We will be selling, but we expect to sell at a loss to the purchase cost. And then GBP 7.1 million, which is a provision we booked for the legacy site adoption costs that we expect to incur over the next 3 to 4 years, and that's on 81 legacy sites. And those legacy sites date back, some of them 10 years.

So looking at the forward order book. So despite a weaker market, we maintained our forward order book. In fact, it was up 3 plots. Open market orders were flat, exactly the same as last year at 402 forward orders. The 8 additional partnership agreements we signed during the year increased our forward order book at the end of the year, and that offset a reduced multi-unit forward order book.

Now turning to Gleeson Land. The division recorded 5 site sales during the year. As we said, 3 sales were delayed to this year, one of those particularly material. The business generated -- those 5 site sales generated GBP 4.8 million of gross profit, and we booked additional provisions against the portfolio of GBP 1.4 million, meaning that we reported GBP 3.4 million of gross profit for the year. Overheads were in line with last year's overheads of GBP 4.1 million. As a result, we are -- that division reported a loss for the year of GBP 700,000.

Now looking at the balance sheet. Inventories increased by GBP 35.4 million year-on-year. That was largely driven by 3 items. So build WIP in Gleeson Homes was GBP 18.8 million higher due to build cost inflation and some significant infrastructure investment on some large sites. We have GBP 7.1 million of part exchange assets on the balance sheet within the limit that we internally have set ourselves. That's 46 properties that we own, and that contributed to completions, particularly in June of the year. And we're quite confident that those like in the first half, that those will continue to be sold at profits that mean that our part exchange activity remains breakeven.

And Gleeson Land inventories increased by GBP 8.3 million. And that reflects the cost of securing those 13 additional promotion agreements during the year. Significant spend on planning applications, we had a very strong year in submitting planning applications, but also the lower charge to cost of sales for the site sales that didn't happen during the year, the ones that were delayed.

Land creditors remained low at GBP 15.5 million, and other liabilities increased by GBP 36.7 million. And there are a number of reasons for that, GBP 7.1 million legacy site, [ adoptions ] provision being one of them. We did have higher accruals of about GBP 11 million. Trade payables were GBP 17 million higher, reflecting the timing of payments and in particular, a very busy June build activity. Now with net assets of approximately GBP 300 million and net borrowings of only GBP 2.6 million and low land creditors, we continue to focus on the strength of our balance sheet.

Forgive me, I think I skipped a slide a little prematurely there. Just on cash flow, the group generated GBP 16.9 million of operating cash flow. That was entirely driven in Gleeson Homes, GBP 22 million of operating cash flow in Gleeson Homes, offsetting a small outflow in Gleeson Land, essentially driven by the delay to those land sales and the cash flows on group overhead costs. Cash interest increased by GBP 1.1 million. That reflects the higher borrowings and the higher interest cost. CapEx was GBP 2.3 million higher. That reflects quite low spend in the last -- in the previous 2 years, but also a step-up in investments in show homes, sales arenas, compounds and equipment on site.

Now to the dividend. We are proposing a final dividend of 1p per share. That is reduced on last year's final dividend. That brings to 5p, the total dividend for the year, which the Board believes is prudent in this less certain market environment and is consistent with that determination to maintain a strong balance sheet and is also more in line with our dividend cover policy, which is that earnings will cover dividends by between 3x and 5x. A 5p total dividend for the year will be covered 2.8x, so close.

Thank you very much, and I shall hand you back to Graham.

Thanks, Stefan. Okay. Operations and strategy, looking first at Gleeson Homes then. And a couple of minutes on Project Transform. It's -- we have done a huge amount of work on this. We significantly strengthened the leadership in the team. As you know, Scott joined us as Divisional Chair on the 1st of July last year. Scott is now responsible for running the whole of the Gleeson Homes business. As you're aware, we've restructured into 4 principal operating regions. We have 3 new regional managing directors supporting Scott. So two of those are experienced external hires, one is an internal promotion.

And we've made multiple experienced recruitments at regional and divisional director level. It really is a strengthened team. And this is really about moving away from that overly centralized, overly dependent structure that was -- we had in the group before that really isn't effective for a volume home builder.

So what we've done then is to empower our regions so that those guys are very much owners of their budgets, owners of their profit and loss account. They have the ability to make decisions, to be entrepreneurial in their local environment.

Quite clearly, remaining very short reporting line to Scott, who's very close with all of them, and they're working to very clear targets, KPIs and reporting -- regular reporting, et cetera. We've also reinvigorated but clarified the role of our group central functions, which are absolutely vital. So we've slightly reduced the center, but as I say, reinvigorated it. And the role of those guys, they're sort of functional leaders and their role is providing expertise and setting the standards by which our regions operate, and that's how we maintain control. That's how we maintain quality. So significantly improving the integration between center and the regions.

We've completely reformed our land buying. So we've moved land buying away from a centrally controlled operation and embedded that in the regions. And the critical thing there is that the regional management teams, you're getting full buy-in to every bid at bid stage before, as I say, it was too centrally directed. We've also refocused -- importantly, refocused our land buyers onto areas of -- more chimney pot areas as we call them, more densely populated areas, suburban areas reversing that trend, that drift that we -- the group has seen, I think, over the past 5 or 6 years into buying, frankly, too many rural and coastal -- too many rural and coastal locations. So we've definitely sharpened that focus.

We've also strengthened the process around our land buying. So we said that we've been much more specific on our requirements on the appraisal, on layouts, on planning the actual development itself and on planning our completion and exit. And that's all about really sharpening the technical control of the land bidding and buying process.

And that's aimed at mitigating that kind of dissipating -- disappointing situation whereby you commit to the site at one margin. By the time you bring it to commencement budget, the margins dropped and then it drops again through development. And that's just not something that we can -- that's not a way for the business to prosper. So I'm very pleased with what we've achieved in land buying.

We've also taken -- as you're aware, we've rationalized the regions, as I mentioned, into 4 principal regions. We've taken the opportunity to rationalize the land portfolio as well. So we're walking away from about 13 sites in the Northwest and on the East Coast of Yorkshire that just no longer fit with our criteria or our hurdle rates. So a huge amount of work. And that really is a very short summary of what we've done.

I'm convinced that the business is in much better shape than it was when I stood here 12 months ago. And I'm convinced -- I'm excited for how we can take that forward. And it really -- that is really expediting that process that I've talked to you about before of changing Gleeson from an overly large small business into a well-controlled and efficient volume house builder. Legacy sites. So I talked to you briefly about this before, but this is basically an issue that, frankly, should have been dealt with before. We're looking at something like 80 sites completed variously over the last 10 years, some 1 or 2 even older than that in parts of the country we don't even work in.

These are sites where we haven't secured the adoption. Why? Because in most cases, they require some sort of rectification. I'll give you -- the most common example is actually where we've installed gravel drives actually in line with our planning permission and meeting with regulations, but the highways engineers don't like them. Why? Because the gravel spills on to the road. That means the road gets more damaged, has to be maintained more, cost them more.

So the highways engineer looks at you and says, I can't adopt that. It's not a standard. We could have the fight. We've been advised. It's not worth it. We need to get on and get these roads into a state where they can be adopted. It's interesting, actually, just last week, the HBF has brought out latest sort of protest on behalf of the industry, which is around the transparency and objectivity and the time taken to get roads adopted. And that's very timely.

But we haven't -- I can't whinge about it. We've got to get on and deal with it. I'm not going to make the -- we can't kick the gravel down the road joke. And so that's going to -- it's going to take us 3 or 4 years. We've hired the best guy in the business really, an adoptions engineer to lead a small team. It will take us 3 or 4 years to deal with that.

During the year, we were operating from an average of 67 build sites and 56 sales outlets. As we've said, that both of those will be slightly lower this year. Our prospective site numbers are frustratingly lower than I would like, and that's for 3 reasons: one, the continuing challenge of slow planning. So -- and it's the same story. The government, I think, is absolutely doing the right things at national policy level, but that is still -- that is not feeding through -- for various reasons, that is not feeding through to pace and reliability of decisions at local level. So planning very much still an issue.

In addition, we've rationalized the portfolio. As I say, we have taken the proactive decision to walk away from a number of sites that no longer fit our criteria. And the third thing is that, I suppose, like others and I think very sensibly, we're managing our balance sheet. This is a market where it pays us to be cautious. We absolutely want to protect the integrity of the balance sheet. So we're upping our risk aversion, if you like, in the appraisals we're bringing through. That's not to say we've stopped buying land. I've just talked to you about what we've done with that process, and we are still very much in the market, but we're being more cautious in the approach we're taking.

And so combining those 3 reasons, our site opening profile is going to be slower than I would like, certainly this year and almost certainly into FY '28. So it is a difficult market, but we're absolutely convinced that there are things that we can do better. And it's vital that both in a weak market now and into any upturn, we're the best that we can be. So with the -- we've got the people and process fixed. I was talking to you, I spoke about that just now. And I kind of see that as fixing the factory. What we're getting after now is the way we engage with the market, so our product and our customer experience.

We're going to -- we absolutely want to build on the success of our partnership strategy, and I'll talk about that in a moment. I've talked about refocusing our land buying to make sure we're getting the right sites. And now we're looking proactively and at pace at our product, at our customer experience and at our brand and brand perception. This is -- we're trying to be absolutely rigorous, absolutely objective and make this data back.

So we've got hand-picked teams from around the organization looking at each of those, each of those teams led by a member of the ELT. We're actually using an AI data scrape of every piece of customer feedback that we've had because the -- if you aggregate that, we'll pick up the themes and we'll pick up some good ideas, I'm absolutely convinced. And we're also commissioning focus groups from our website users, both those who've gone on and bought a Gleeson Home and those who haven't, so that we're getting the best information that we can to combine with our own expertise. Scott and the team, we -- as I say, that strengthening has brought in a lot of experience as well from elsewhere.

And so on product, we just -- we want to make absolutely sure that we're delivering the product that our customers want, our open market customers. We've also taken the decision to design a specific partnerships range. And so that -- I think that we're working on that right now, that should be available to us in the second half. And that's avoiding that compromise because partners do have certain slightly different requirements for the units, and they're looking for a long-term rental product.

And it's always a compromise if you're trying to use the same units for the open market. So no, we'll have a separate range effectively, making it easier for partners to select Gleeson to work with. On the customer experience, we're looking at that from -- right through from marketing through the customer journey through sale and are also looking at the way that we're providing after-sales service. And we know that we can improve in all of those areas. So quite exciting to see those ideas coming through.

And on brand, we know what it is. You know what it is that we do. We build a high-quality product that's affordable to customers at lower end of the income spectrum. But we get -- we listen, we get feedback. We bump into people in the market. We don't think people are very clear on that, particularly that point that we are -- we build a high-quality product. And so it's really important that all of our stakeholders understand what it is Gleeson does today. And that includes the market.

So land agents, for instance, recruiters, prospective partners. It includes our own people. That's absolute -- absolutely vital. And of course, critically, it includes our customers. It's vital that we're listening to what the market is telling us and that we're led by the customers we serve. So yes, it is a difficult market, but there are absolutely things we know we can do to improve our performance, and we're working hard at that.

Just to touch on partnerships. I'd say really pleasing to see those first units -- our first completions coming through. For me, the pleasing thing, we've established our credibility in the partnership space now. And just pausing on that, that's not a gimme, that's not a no-brainer. If you put yourself in the shoe -- it's not just a question of turning up at the conference and pulling up your stand and saying, come and sign here for deals.

If you put yourselves in the shoes of the investor, he's got quite a bit of due diligence to do on a new firm offering themselves as a development partner. Who are these guys? Do -- what's the quality of their product? How will it stand up as a long-term rental product? Can they actually build at the pace and to the quality that I need? Will they do what they say? Do I trust them?

All of that is -- you have to build that. We accept that. And so I'm really pleased that with those first completions and the feedback that we're receiving from our partners, I think we've established our credibility. And certainly, that seems to be how it's playing for us. The market appetite is certainly continuing. It was great to hear Matthew Pennycook at the conference in Liverpool last week, absolutely endorsing that this mode of delivery is and will continue to be important for the U.K. homebuilding market. As I say, very much encouraged by the announcements under the SAHP last week.

So what we need to do now, what we're focused on, if you like, is to evolve to the next generation of partnership deals. So coming back to that establishing your credibility, they might get to the point where they'll take their units from you, but will they trust you with the cash upfront? Well, you need to prove a little bit more before they'll do that. So the first deals that we did, effectively, yes, you're sacrificing a bit of margin, but the benefit and the only benefit we were getting was the diversifying our market risk. So it was a forward sale.

You're certain that those 40 units are going to go to that partner, tick. But they're paying them for you when you -- paying for them when you deliver them. We've now evolved that model. So within that 320 units was our first 60-odd under the golden brick model. Now that's better because that's when you're getting -- starting to get paid during the construction period. So that -- you're then getting the benefit not just of the forward sale, but now starting to improve your return because you're getting paid sooner.

The next evolution where we'll really mature is when we increase the proportion of forward funding. So we start to work with partner cash at the implementation of infrastructure. You can immediately see that, that starts to really sing from a return perspective. And of course, the absolute maturity is when they'll join you at the land acquisition point. So pleased to see -- those are the kinds of conversations we're now having and a real opportunity for us. And you can tell, I think we're very excited about the progress that we've made in that area.

So turning to Gleeson Land then. I'll start with the market headwinds. No secrets here, but probably 2 elements that I would bring out. So planning is a constant story, isn't it? It's always something slightly different. So following the specific that I'm referring to here, following the local elections, obviously, the biggest shift was away from labor control.

So a number of authorities where labor -- where it either moved away from labor completely or it's moved to no overall control. What that does is creates a fracture between national policy and the local implementation of that policy. The no longer -- the committee less willing to embrace because you've now reopened that sort of democratic competition of I can win votes by resisting national planning policy. So not moving the local plan through at pace or and trying to resist the NPPF direction on their numbers or, for instance, resisting Grey Belt, et cetera, et cetera, et cetera.

So the effect of that is that where we had previously hoped that we might get a committee decision, now there's a good chance that it will be filibustered, we won't get the local decision. What do we have to -- it doesn't mean we can't get it because in the end, 9 times out of 10 national policy will prevail, but it means you've got to go to appeal, it takes longer and it's more expensive. So that's the planning drag that I'm referring to.

The developer caution, I've mentioned it already, you're all well aware of that. All of the majors are referring to it. And that is restricting appetite for some bids. I don't want to give you the impression that the market is dead. It's absolutely not. As you know, we have a high-quality portfolio. And when we put those sites out to the market, we're still getting good interest, and we are seeing bids.

The pricing has definitely moderated a bit. The technical due diligence process is being elongated, always will in a buyer's market. We're seeing a lot of bids conditional on registered provider partner participation, and that's all to do with the hiatus in the Section 106 market and obviously, people asking for deferred payment terms. So what's the impact on leasing land?

Well, I've said not if, but when, and that really is that we are still seeing the demand. But predicting the actual timing of completions is difficult. Just to touch on FY '26 was obviously -- the biggest single impact was the deferral of the large deal, which I've talked about in just 1 minute on that. So we are -- you shouldn't see this as -- well, it's a big standoff and the local authorities just don't want this. That's not the situation we're in.

We are working very closely with the prospective buyer of the site and actually, alongside the local authority and their advisers, but it's a massively complex technical resolution that we need. The number of sort of open items gets ever smaller. I think I've said to you before, it's a bit like when your phone updates and that bar goes across and you think blimey, it must be finished now. But it's a bit like that with this technical consent.

We fully expect, I'm looking at Guy that we will get that technical consent this calendar year, and that should trigger the -- well, that does trigger the terms in the option. Remember, we sold an option to the buyer of the site in June '25. They've got about 6 to 8 weeks post that technical resolution to exercise that option.

So I'm hopeful that we will say, get that technical resolution before the year-end. I've certainly learned more about roads, signs, drains and what have you than I ever imagined I would need to learn about. So as I've said, both planning and transactions are taking longer. And what that does, it makes -- the effect for us sitting here scratching our heads is it makes the timing -- calling the timing of completions even more difficult than normal in that business. It's just the way it is.

So as I stand here this morning, we've got over 9 months of the year still to go. We've been -- we do this regularly. We've been through every site. No reason to say to you, we're not going to make our numbers in Gleeson Land. And so we're standing by the numbers that you have, but it has to come with that heavy note of caution.

Given that, as I said, there is very much still a market. And having said what I've said about planning, the national planning policy framework remains favorable. They have done the right things. And so we are working very hard to take advantage of that. Steam coming out of the planning team, and they've got -- they did really well. That's a record number of applications. It's a small team. That was a hell of a lot of work to get those 18 applications in. We've got 24 sites currently awaiting a decision. And as I say, all towards strengthening that portfolio. And to the same point, we were delighted to exchange some 15 new promotion agreements in the year, two of those are conditional.

And so -- and just to stress, that absolutely does not come from relaxing our standards. In fact, in this market, we're probably pushing up our risk aversion as you would expect. But this comes from the effectiveness of the local team, the local structure that Guy has put in place that really has upped our game and also backed by our fantastic market-leading data research and analysis team, which really does strengthen the bid and also strengthens our ability to get the planning permission as well in front of the local authority.

So not relaxing our standards. We're still only bidding kind of -- we're rejecting 95% of the sites that we see -- that we're shown, they go straight to the bin. But because of the quality of the team and the data research, we are winning about 1/3 of the bids that we actually make. So really pleased to see that portfolio strengthening. So in terms of characterizing, we are absolutely confident for the medium-term future of the Gleeson Land business, just have to put caution on there and what you're expecting in each 6-month period as we always do.

So summary and outlook. We delivered a robust performance in the year. Project Transform has overhauled Gleeson Homes into a much improved business. We've got a dual focus now on managing the business as efficiently as we can in anticipation of that continuing subdued market. But we're pursuing a number of strategic initiatives to enhance our own performance and so far as we can mitigate that margin attrition.

Gleeson Land continues to face a more cautious land market. So the timing of land sales lacks the visibility we'd hoped for, but the quality of the portfolio continues to attract strong interest. And the Board, therefore, expects to deliver an overall result in FY '27 in line with current market expectations. I'll read you the quote because I think it's fair.

Following a year of intense activity, implementing fundamental business change, we now have a homes business that's operationally much stronger and a land business well placed to meet the needs of developers for high-quality consented sites. With a focused and disciplined approach we're now taking, we're confident for the future prospects of the group.

Thank you for bearing with me on that, and we'll now be pleased to take your questions.

We have had a number of questions pre-submitted and submitted live. [Operator Instructions] Our first question is, you delivered nearly 10% more homes this year. How much further can volumes grow from here?

Yes. Thank you for that. So I mean we've talked in the past about a medium-term target of 3,000 homes. We strongly believe in the open market potential of this business. So there's really no cap. The cap on the where we can take the volumes is really to do with our ability to grow the business in a controlled manner, and that is absolutely our focus.

And perhaps the only shift that you would hear in my tone from -- in answering that question today as opposed to perhaps a year ago, is that with the continuing drag on the market, which is really a global macro and customer confidence issue, we are, along with most in our sector, paying particular attention to the integrity of the balance sheet right now. It's strong today, and we want to keep it strong. And with uncertainty of take-up or pace of take-up in the market. We're obviously elevating our risk aversion in terms of the pace at which we're investing in sites.

So no, in my view, no kind of challenge to the medium- and longer-term demand for homes in our part of the market. But we're probably slowly -- looking at slowing that pace of growth until we can be a little bit more confident of the outlook and confident that we can relax the purse strings and start going back into site acquisitions at pace. We haven't stopped, but we're being more cautious.

Next, we have Gleeson's key differentiator has always been affordability. In the current mortgage environment, how affordable is the typical Gleeson home compared with renting the equivalent property?

Well, I'll let Stefan give you the detailed stats, but what I would say is that I think whilst we're focusing on mortgage rates increasing and you're absolutely right to raise that and the -- if you like, the headlines and the conversation on the train is about rates rising.

But over in the rental market, things are getting pretty tough as well because a lot of rent -- ex rental stock is being landlords are walking away. It's all got too difficult and the Renters Rights Act is kind of the last straw to a catalog of additional costs and relief -- tax reliefs taken away from the rental market. So the rental stock is shrinking and the cost of renting is going up as well.

So -- but Stefan, do you want to just touch on the maths?

Yes, absolutely. I mean the cost of renting a typical 3-bed house in our regions is about GBP 280 per week. And as Graham said, that cost -- rental costs are -- rental increases are accelerating. The cost of a typical 3-bed Gleeson Home on a 90% mortgage is currently about GBP 240.

So it's GBP 40 a week cheaper to buy a 3-bed Gleeson Home than it is to rent the equivalent. And that's a smaller gap than it was a year or so ago, but it is still a real saving on top of the savings that you get in maintenance costs and energy bills. I would also add that as a proportion of take-home pay, the amount that a first-time buyer spends of their take-home pay on mortgage payments is -- in our region is about 25%, and that's unchanged on the average over the last 40 years. It has been when there were really -- when it was a really strong market with high interest rates -- with very high interest rates. That has risen to about 37%, but it's averaged 25% over the last 40 years, and that's exactly where we are at the moment. So on the math of buying a home, it is as affordable now as it has been on average for the last 40 years.

Next, we have build cost inflation is running ahead of selling price increases. How much scope do you realistically have to rebuild margins if affordability prevents you from pushing prices materially higher?

Yes. I mean, welcome to our daily challenge. So the -- I suppose what I would say is we are still seeing very modest price inflation, very modest, but currently, it's running, we think at about an annualized 1%. The point is it's not deflating, which I think you're seeing in some areas in the South and Southeast. So we've got something to work with. The North is not absolutely flat. And don't forget that build cost inflation, it's not a straight one for one because price inflation is on the whole of the revenue and build cost inflation is only on the build costs. And it only in the year impacts those elements of the build costs that we haven't forward secured, if you like.

So we don't -- so that -- I mean, I think your rule of thumb, Stefan, is about 1% of revenue inflation covers 2% to 2.5% of build cost inflation, that sort of ratio, but obviously, it fluctuates. So -- but back to your question, you're absolutely right, with build cost inflation running hotter than sales price inflation, you're not going to see margins rebuild anytime while that's the case. And we are facing into that now. I think what I was trying to get over is that it should be -- at the moment, it's feeling like a reasonably steady relationship, i.e., the one is canceling out the other as of today. But yes, you're not going to see the margin growing whilst we're in the -- the situation that we're in.

And I would add, in the short term, we -- so the -- if you look at the analyst forecast for gross margin, they are expecting gross margins to be similar this year to FY '26, the year we're reporting. FY '26, we had some additional margin impacts. We don't expect those again. I would also say that the mix of sites is going to be slightly different.

So we have perhaps a bit more confidence on the margin this year. But as Graham said, the mixture of underlying house price increases that we can achieve and build cost inflation will drive either improvement in margin or a flat or let's hope not, but a little bit further margin deterioration.

Our next question is, at what level of volumes does Gleeson Homes become significantly more profitable?

Good question. I suppose that -- so if you step back, if you go back a couple of years, I think when I joined, the business had -- the overhead was too high. The business had too many regions for the number of units it was selling 9 regions, selling, I think, just some 2,000 units. That's too many.

With that -- so what the absolute imperative to get the business efficient is to -- was to well, reduce the regions, but get each of those regions up to an efficient optimal operating level. And we're not there yet. So you've heard -- if you've been following the story, you all have heard me refer to growing into the overhead because it's not -- once you've opened those regions, it's not a simple matter of closing them until you've got the right number of regions for the number of outlets you have because, of course, then the regions won't be in the right place.

And the worst thing you can do is leave sites too far away from the office that's looking after them because guess which -- if you've got a site that's 40 minutes from the office and a site that's 2.5 hours from the office, guess which one doesn't get visited very often and then guess which one goes wrong. So you need to maintain the coverage at the most efficient level you can, but whilst trying to grow into that overhead. So we still have too many -- too much overhead for the regions we're producing.

And so where I'm going with that answer is that if I can get -- we currently have 4 regions and kind of 2 satellites that's as tight as we've been able to get it. An efficient region should be doing kind of 500, 550 units, that's a good number and 600, if they have a particularly busy year. So at our current output, we should be covering that kind of 2,000 units, we should be covering that with 4 regions.

Now in a growing business, you'll always grow a bit ahead. So that should take us up to kind of 5 regions. So where we should be today with the business that we have, we should be doing kind of 2,500, 2,600, something like that. So as we push on towards 3,000, you'd expect us to open out again. But -- so an efficient level for our current business would be about 2,500 units. We're currently just under 2,000. So I hope that kind of -- I think that answers the question you're asking.

Thank you, Graham. Our next question is the recent reservation rates has fallen from 0.44 to 0.55. Is this mainly a weak August? Or are you seeing a more fundamental deterioration in first-time buyer confidence?

My view, obviously, I can only give you a view, I would be very surprised if 0.44 is what we're staring at into the future. That looked and felt very much like just an even sleepier version of a normal sleepy August. And indeed, I know it was because I know what the last few weeks have done.

So nothing -- there is nothing that says to me that we've got a sort of fundamental collapse of confidence of first time or any other buyers. What we have is a lot of caution. You have a lot of negatives out in the market. In the presentation, I called out mortgage rises and increases in the cost of living, which undoubtedly disproportionately troubled leasing customers because they're at the lower end of the income range. But we're not seeing an absolute collapse in demand at all.

We saw a weak sales rate through August. It's picking up. We've got to make sure that we are getting our fair share of the demand that's out there. But there is definitely still a market. It's just a market that's lacking conviction and confidence.

Next, we have you rationalized the homes land pipeline from 164 sites to 123. Does that mean you're prioritizing return on capital over chasing volume growth?

Good question, good spot. Yes. And as I said in the -- there are 3 reasons behind that reduction. One -- so one is slow planning. So we're not pulling the sites in -- at the -- not getting the sites open at the rate that we would have hoped. But the second key reason is we did -- we have looked very hard at that pipeline during the year.

So we've been proactive as part of Transform in actually reducing -- deleting some sites that were previously in the pipeline that no longer meet our criteria. The principal reason for that would be if you -- there were 13 of them, as we've set out in the presentation as a direct result of closing the East Yorkshire region and combining the 2 Northwest regions and that's really around the anticipated rate of sale on those sites.

So that was 13 sites. There were another 12 elsewhere in the portfolio that are not included in the exceptional item, just dealt with as part of normal costs, where, again, new management has looked at them and said, we don't think these meet the hurdle. Now that might sound alarming, 25 sites. We haven't bought those 25 sites. So this isn't tens of millions of pounds, these are sites where we had gained control through a conditional contract. So what you're writing off is some fees and legal fees to get the contract, et cetera, et cetera.

In some cases, it might be as much as a couple of hundred thousand pounds. In some cases, it will be GBP 20,000. But it sticks out like a sore thumb in the pipeline numbers if you take 25 prospective sites out. So that's an improvement in the quality of the pipeline. And yes, it hurts the headline number, but we're happier that we've got a robust pipeline that we're working with.

And then the third reason, absolutely, as you allude to, is just being cautious with our capital at the moment. As I mentioned just now, we are in that phase of the market, whereby we are deliberately being cautious, deliberately protecting our own balance sheet. And there will come a moment and the great art -- the great gift is to spot when you kind of reach that point that, say, land is about as low as it's going to go, and you can open the sluice gates because the market is going to start coming back and coming back at pace. That's a difficult call, but better to be wrong on the -- better to be slightly late to the party than be overpaying for land when it's still on the way, it's still potentially on the way down.

Our next question is, 3 land transactions slipped from FY '26. What gives you the confidence these are delays rather than evidence that major housebuilders have structurally reduced their appetite for buying land?

Yes. Look, so that's a Gleeson Land question. Obviously, there were, as you say, 3 sites. The one that we had tracked and basically kept the market informed of because it's a large site and then 2 others. The large site is actually already under option to a developer, and that developer is working with us to achieve the technical consent that we need that will enable them to exercise their option and buy the site.

So that isn't really -- that's not to do with developer caution that we're seeing amongst the majors and indeed others. That's just -- we have to work through and get that technical agreement. I won't bore you with all those details now. We expect to achieve the technical agreement in this calendar year. So the other 2 were precisely, as you say, with developers revisiting, they all slammed the brakes on. They absolutely did as they've been telling the market.

So on those 2 specifics, why am I confident that will happen this year, well, because the transactions are already being negotiated, one with the same developer purchaser, one with a different purchasers. So I'm fairly confident that those 2 will happen this year. And you shouldn't read that or what the developers are saying, as suddenly nobody is buying any land. That absolutely is not the case. What they're doing is being more cautious. They want to be, Barratt have said it, others have said it. They want to commit to a lower number of sites during the year.

So you can imagine that they are probably up their hurdle rates a little bit. That means they'll offer us slightly less. They're looking for deferred terms. And they're being more cautious. A lot of this is around -- so we're running what we call saturation maps. So if you -- let's pick Chichester, if we've got a -- we only tend to have high-quality sites. So we've got a high-quality site near Chichester. In any normal market. 3 or 4 of the majors will be there regardless of the fact that they might have a site 10 minutes away and another site 30 minutes away. They'll say, no, that -- we'll put that in our pipeline. It looks a great site, we'll have it.

In this market, they themselves will be saying, well, actually, I've got a site I'm selling from now and when that one finishes, I've got another one opening 5 miles away. So I think I'll step back. I won't bid for that Gleeson Land site because -- so that's -- so we are obviously looking at the saturation maps to say, okay, well, who are the bidders. It just means -- the effect for Gleeson Land is not nobody's buying, but instead of 4 of them punching each other to get to the best bid, there might be 2 of them, or there might one major and a couple of the mid-tiers.

So we're still seeing interest but not quite at that intense level. And so it's more of a buyer's market. but it's absolutely a market. We'll make the sales. They take longer, it's a little bit off the price, and they probably want deferred terms in paying for it.

Next, we have, at a roughly 200,000 SAP, where does Gleeson's structural cost advantage actually come from today? Can you break it conceptually into cheaper land, smaller homes, specification, build efficiency and lower absolute margin?

Goodness me. I mean the -- I don't know whether you want to -- if you've got the math, but the fundamental answer is that it's all about the location. So the reason that we can -- we sell at a lower average selling price is principally because we buy in secondary locations. We're not out there competing for the high-value better-located sites.

And the logic is that if you need a 3-bedroom home because families had a second child or whatever the reason, then you need a 3-bedroom home, you might like the location that's near the shops and near the railway station. But actually, you can't afford that.

So you will go to the secondary location a bit further away because you need that space, and that's where upsteps Gleeson to offer you the product, and that's why we're generally at a lower average selling price. That's our model. And we see -- we continue to see fantastic potential in that model. I don't know if you want to put any more detail on the other 17 categories.

Yes. Actually, let me try and summarize it as this. The determination of margin is a number of factors. But essentially, when a house builder looks at bidding for a site, it will anticipate what it thinks it can sell the home or/and then anticipate what all the costs are, it will then assume a target margin. And then what's left is how much they can pay for the land. And that's the maths of the housebuilding market.

Now we sell in areas where house prices are lower, typically 1/3 lower than our competitors. So that means the amount that we pay for the land is significantly lower. And let me just give you 3 or 4 numbers that demonstrate that. So on a GBP 200,000 average selling price, which is let's say, a typical selling price for a 3-bed home. If you anticipate that a target margin is maybe GBP 40,000 gross margin. It costs us about GBP 70,000 to build the house. It's the foundation, the superstructure, kitchens and bathrooms in.

That leaves us GBP 90,000 for all of the other costs of building, and I can tell you there are substantial other costs, not least the contributions that are required to be made to local authorities and the government, which equates at the moment to another GBP 70,000. That leaves us about GBP 20,000 for the land. That's roughly what we're paying for the land.

Other developers selling in higher-priced areas are probably spending closer to GBP 50,000, GBP 60,000 per plot for the land. Hopefully, that helps understand -- help you to understand.

Our next question is, if interest rates in the housing market don't materially improve for the next 3 years, can Gleeson still grow earnings meaningfully? Or does the investment case ultimately require a housing market recovery?

I would say I don't have a crystal ball on where the market goes. Quite clearly, if the market stays as subdued as it is, our ability to grow will be constrained. There's a number of things that we are doing, which I talked about in the presentation, which when we have done them will improve our performance even in a static market, I'm absolutely clear of that.

We can improve on our selling. We're actually -- probably we think we're spending a bit too much on sales and marketing, actually, so there's a saving there. There are lots of smaller -- each benefit is not massive. But if we focus on all of the areas where we can improve then we will improve our margin and our rate of sale even in this market.

To make a dramatic growth in our earnings, of course, we need some sort of recovery in the market. But we're not all about just sitting around and waiting for a recovery. Also, as Stefan alluded earlier to still some -- we've called out the big legacy items, there are other areas where we're still kind of cleaning up our act that's held back the margin certainly in the last couple of years and gives us confidence that as we conclude those and stop creating new ones, we'll start to see some margin rebuilding in any event.

So I'm absolutely not saying we're x growth even in the current market. But to see a significant pickup, obviously, we need to see sales rates at a more normal level for the U.K. market. And let's forget that's -- let's not forget, I just want to -- a normal level is good for us. We don't need to be seeing 0.8 and 0.9 sales per site per week. And if we could get somewhere close to 0.6, that would be very good for us.

We are now moving on to our final question. If you have any further questions, please email the team who respond to any questions that weren't covered today.

So last question is what 2 to 3 operational KPIs do you use internally to judge whether Transform is working? And could you disclose those -- sorry, could you disclose those so shareholders can track progress?

That's a great question, actually. I mean -- so we are -- we look for improvements basically in the normal KPIs for the business. So I will be looking at rate of sale. I will be looking -- I mean, the critical one, obviously, is commercial control. So I'm looking for -- as I think I mentioned in the presentation, I'm looking for sites to be properly appraised on the day we acquired them so that we have done a sufficiently rigorous technical appraisal of that land so that the margin I am offered, when we commit to the site, is pretty close to the same margin as when we then budget the entry for the site.

And indeed, we deliver that margin over the life of the site. That's Nirvana. And that's what I will personally be watching, but that will play out over the next 3 to 4 years. But in the meantime, it's absolutely all -- it is all of our normal operating KPIs should be tighter and should be improving.

As to -- back -- I realize that's not really answering your question, is there something we could put in for shareholders to monitor. I think I'm going to have to take that way and have a think about it. We'll certainly update you. But yes, for me, it's a general improvement in all of our normal operating KPIs.

That's all the questions that we have time for today. So I'll hand back over to Graham and Stefan for any closing remarks.

Just to say thanks very much for joining this morning. Thanks, good questions. Thanks for your interest and support in Gleeson. And I suppose, enjoy a sunny Friday. Have a great weekend. Many thanks.

Cheers.

Thank you to the managed team for joining us today. That concludes the MJ Gleeson investor presentation. Please comment to complete a short survey following this event. The recording of this presentation will be made available on Engage Investor. I hope you enjoyed today's webinar.

Welcome to MJ Gleeson's Annual Results Presentation for the year to June 2026. I've hotfooted it here from my Radio 4 Breakfast Show. I hope you're all listening. It was very exciting because Mark actually got me to go to the studio. So I sat there with Nick and Justin and my headphone is all very exciting.

But even more excitingly, following on from me, Johnny Marr walks in. So there's me and Johnny, recognizing 2 aging rock stars. And but the best bit was the text from my great old friend, Andrew Duxbury, who said what a classic BBC link to go from the housing market to The Smiths because heaven knows you're how bloody miserable now.

It is certainly not the most propitious of economic backdrops against which to be presenting our results. But on the other hand, I'm actually really pleased and really excited with the changes and the improvements that we've made in Gleeson Homes this year. We can only affect what we can affect, but I will talk to you about that this morning.

There's a bit to get through. So please bear with me, but I think it's worth sharing with the market and with the changes we've made, it's worth sharing that with you. So I'll try and take it at some pace, but bear with me.

So I characterize the outturn as a robust performance against a challenging backdrop, and that was underpinned by good performance from Gleeson Homes selling 10% more homes than the previous year. Pleased that, that figure was augmented by -- the net reservation rate was poor at 0.51. Nobody is writing home about that. But that figure was augmented by our first partnerships completions. And of course, that's a journey we began about 2, 2.5 years ago. So great work by the team to actually get those first scores chalked on the board, and we will be looking to build on that.

We also -- we did have some bulk sales as well, about 300 units. That was at an average discount of just under 16%, which is actually not bad. Nobody likes being forced into bulk sales. But I think the relatively low numbers that we're looking to put in that market and also the work that Scott and the team put in to get after that early so that we're doing our business through the year in smaller quantities rather than getting caught in the period-end carnage and some of the egregious discounts that we read about.

Site openings, a bit disappointing, still constrained by slow planning. I will talk about that. And -- but as I said, we have completed that operational restructure, and I'll give you some detail on that.

Gleeson Land, here was really -- the number was really defined by that continuing the slippage of the single large sale that we've talked to you about. I'll update you on that this morning. There were 2 other smaller sales, which we'd hope to complete in June, and they really ran into the developer caution that we're all well aware of that you're reading about in all the majors statements. But happily, both of those sales are expected to proceed in the current year, one to the same buyer and one to a different buyer. But all is not lost in that market.

We are -- we have, as you know, a strong business, we have a great portfolio. And when we're taking our high-quality sites to market, we are still seeing good interest. So very happy that we strengthened our pipeline even further with some 13 new promotion agreements and submitting 18 planning applications realized there, which was -- so that's, as I say, strengthening the pipeline, which we're very pleased with.

And pleased that we also maintained our strong balance sheet with negligible net debt at the period end and continuing low land creditors.

It really was a year of intense business improvements activity in Gleeson Homes. It's been hard work. And I do want to recognize upfront the response and the support we've had from the team. They've shown real resilience. They've embraced that change. And happily, in the people survey that we completed just in the last few weeks, our engagement score, which was already strong last year, actually improved over the year and improved against the benchmark. So that's a real tribute to the team, a real -- and a strong thank you from me to the team and to the leaders that have led them through that. So very pleased with that.

But we've absolutely restructured Gleeson Homes. We've massively strengthened our leadership team. We've changed process. We've significantly reformed our land buying process. We've rationalized the portfolio, and I'll give you some detail on all of that.

Very pleased that we successfully completed the transition to the new -- or to our new for us, NHBC, HBF customer scoring system. You shouldn't underestimate the achievement that was for the team, particularly against the rest of the change we are bringing through. It is a very different -- the quality of the product is still good, but it's a very different way of collecting the data and a lot of different things for the team to concentrate on.

So we were -- I think in -- so in calendar '25, which is our first year under that system, we achieved what I would class as a satisfactory 4-star outcome. And that is quite an achievement with that transition. Obviously, what we want to be, what we need to be is 5 star. We're not settling for anything less. In the current year, which is calendar FY '26, we are currently trading at 5 star. But of course, there are a lot of surveys to pass under the bridge before that's closed out.

We grasped the nettle on legacy site adoptions. I'll give you a little bit of detail on that. And now looking forward, having with transform complete, we are looking at how -- we know that we can continue to improve, and we're proactively looking at our market engagement, product, brand, et cetera, and I'll talk to you a little bit about that. We're also looking to build on the success -- of our success in partnerships, which is particularly timely given the government's recent recommitment to that mode of delivery.

So how are we seeing that market in Gleeson Homes? Subdued, it definitely is. I've picked out 3 reasons here. I mean, Rightmove tell us continually and have been telling us for many months now that the total available properties for sale in the U.K. and England remains very high, an 11- or 12-year high, and that is clearly absorbing a lot of the demand.

Mortgage rates are increasing and likely to go higher and the cost of living challenge is rearing ahead again. We're already seeing it in fuel and energy and widely expected that we're going to get some sort of spike in food inflation. And that's a particular worry for Gleeson customers at the lower end of the income band, as you've heard me say before.

The bulk market is active, but pricing, as I've alluded to, is very keen. And partnership opportunities, we are seeing them. It's a competitive marketplace, but we were really pleased to see the -- announced the recent announcement of the strategic partner funding, and we have -- the phone has started to ring off the back of that. So excited for what we can achieve there.

Selling price inflation, I mean, it is anemic. We got a bit last year. Currently, Stefan has done a bit of an exercise. So it's a low sample size, but we currently think we're running at about 1% annualized, which is very poor. Obviously, the bigger story is around incentives. Happily, incentives still averaged just below 5% last year. So we are keeping that fairly tight. In fact, Scott and I find ourselves in the place of kicking and saying push the incentives a bit harder. It's a balance. But as I say, we achieved what we achieved at sub-5% incentives.

Build cost inflation continues to go forward. We saw about 4.5% over the year. It's currently running, we think, at about 3% to 4%. We are -- because the market is weak, we're able to resist the more aggressive requests for 7%, 8%, 9% increases. But as a residual level, let's say, we think about 3% to 4% below which we won't be able to resist. And so sadly, difficult for us to rebuild margins into that environment.

Current trading, it's on the slide, really poor. August was very weak. So 0.44 in the 9 weeks to last weekend. We've seen a bit of a tentative pickup. You'd expect that since -- once people come back from their holidays. It's -- so the last couple of weeks have been better than that 0.44. We do need it to be better again. And who knows how well that holds as we run into increasing mortgage interest rates and now the looming budget. But -- so at that point, I'm going to hand you over to Stefan to run through the numbers, and then I'll come back and talk about the good things we've been up to in homes and land. Stefan?

Okay. Thank you, Graham. And as Graham said, the year to June '26, it was a robust performance by the group.

We grew revenue by 12.1% to GBP 410 million, but we did deliver lower group operating profit, and that was due to -- principally due to 2 things: the significant site delays in Gleeson Land with one particularly large site sale and margin compression in Gleeson Homes. I'll take you through the divisional performance on the next few slides, just to highlight a couple of group items here.

Group overheads, reduced by GBP 0.5 million. That was due to tight cost controls, lower remuneration and the unwind of a legacy construction provision.

And interest costs increased by GBP 1.7 million to GBP 5.2 million, and that was due to higher average borrowings, so higher interest costs in those borrowings and also higher discounting charges under IFRS 9 for long-term payables. As a result, group adjusted PBT reduced to GBP 10.8 million and adjusted earnings per share were 14.1p.

So turning to the divisional results. Gleeson Homes volumes increased by almost 10% to 1,968 homes. And that was driven by the 320 homes that we sold to partners, our first full year of partnership delivery. That represented about 16% of total volume. And we increased the number of homes that we sold to multi-unit buyers. That was 301 homes, about 15% of full year volume.

Selling prices were up 3.8%, and that was driven by a 3.0% increase in underlying selling prices, a stronger house type and regional mix with a higher average number of beds and that was partly offset by the impact of the lower prices that you get from selling to multiunit buyers.

Now incentives remained high. They're about 4.8% of open market selling prices. And including 2 land sales during the year, Gleeson Homes totaling GBP 4.4 million, Gleeson Homes revenue was up almost 15% to GBP 400 million.

Our gross profit increased by 3.3% to GBP 74.5 million, but the benefit of -- the margin benefit from higher volume and higher selling prices was significantly mitigated by those lower gross margins.

On other income, you'll notice there we introduced our own Part Exchange program in the second half of the year, and that's been very successful. We were breakeven and that helped deliver 58 additional sales during the year.

Now we continue to improve overhead efficiency. And whilst costs increased by GBP 4.5 million, which was a 9% increase compared -- that compares to a 15% increase in turnover. Those cost increases that was driven by pay increases, the impact -- the full year impact of higher national insurance rates, increased IT spend and higher recruitment costs. As a percentage of revenue, that fell to -- overhead costs fell by 80 basis points to 13.6%.

Operating margins were 140 basis points lower at 5.0%. And really, that was driven by 3 things: significant build cost inflation, which is running at 4.5%, exceeded underlying selling price increases on reservations during the year, which were 2.2%, and the increase in multiunit sales, which chipped away at margin. Now we were able to mitigate about 1/3 of those -- that impact through overhead efficiencies.

Now just touching on the exceptional items. We recognized GBP 13.6 million worth of exceptional items in the year. And those are listed out in the appendices, but just to set them out briefly here. GBP 2 million comes from the cash costs from the restructuring activities during the year, in particular, restructuring of Greater Manchester and Merseyside region and the East Yorkshire region. GBP 4.5 million noncash impairment from the impairment of 12 conditionally purchased sites and 1 owned site that we haven't developed, we won't develop. We will be selling, but we expect to sell at a loss to the purchase cost.

And then GBP 7.1 million, which is a provision we booked for the legacy site adoption costs that we expect to incur over the next 3 to 4 years, and that's on 81 legacy sites. And those legacy sites date back some of them 10 years.

So looking at the forward order book. So despite a weaker market, we maintained our forward order book. In fact, it was up 3 plots. Open market orders were flat, exactly the same as last year at 402 forward orders. The 8 additional partnership agreements we signed during the year increased our forward order book at the end of the year, and that offset a reduced multiunit forward order book.

Now turning to Gleeson Land. The division recorded 5 site sales during the year. As we said, 3 sales were delayed to this year, one of those particularly material. The business generated -- those 5 site sales generated GBP 4.8 million of gross profit, and we booked additional provisions against the portfolio of GBP 1.4 million, meaning that we reported GBP 3.4 million of gross profit for the year.

Overheads were in line with last year's overheads of GBP 4.1 million. As a result, we are -- that division reported a loss for the year of GBP 700,000.

Now looking at the balance sheet. Inventories increased by GBP 35.4 million year-on-year. That was largely driven by 3 items. So build WIP in Gleeson Homes was GBP 18.8 million higher due to build cost inflation and some significant infrastructure investment on some large sites. We have GBP 7.1 million of part exchange assets on the balance sheet within the limit that we internally have set ourselves. That's 46 properties that we own, and that contributed to completions, particularly in June of the year. And we're quite confident that those like in the first half, that those will continue to be sold at profits that mean that our part exchange activity remains breakeven.

And Gleeson Land inventories increased by GBP 8.3 million. And that reflects the cost of securing those 13 additional promotion agreements during the year. Significant spend on planning applications, we had a very strong year in submitting planning applications, but also the lower charge to cost of sales for the site sales that didn't happen during the year, the ones that were delayed.

Land creditors remained low at GBP 15.5 million, and other liabilities increased by GBP 36.7 million. And there are a number of reasons for that, GBP 7.1 million legacy site options provision being one of them. We did have higher accruals of about GBP 11 million. Trade payables were GBP 17 million higher, reflecting the timing of payments and in particular, a very busy June build activity.

Now with net assets of approximately GBP 300 million and net borrowings of only GBP 2.6 million and low land creditors, we continue to focus on the strength of our balance sheet.

Forgive me, I think I skipped a slide a little prematurely there. Just on cash flow, the group generated GBP 16.9 million of operating cash flow. That was entirely driven in Gleeson Homes, GBP 22 million of operating cash flow in Gleeson Homes, offsetting a small outflow in Gleeson Land, essentially driven by the delay to those land sales and the cash flows on group overhead costs.

Cash interest increased by GBP 1.1 million. That reflects the higher borrowings and the higher interest cost. CapEx was GBP 2.3 million higher. That reflects quite low spend in the last -- in the previous 2 years, but also a step-up in investments in show homes, sales arenas, compounds and equipment on site.

Now to the dividend. We are proposing a final dividend of 1p per share. That is reduced on last year's final dividend. That brings to 5p, the total dividend for the year, which the Board believes is prudent in this less certain market environment and is consistent with that determination to maintain a strong balance sheet and is also more in line with our dividend cover policy, which is that earnings will cover dividends by between 3x and 5x. A 5p total dividend for the year will be covered 2.8x close.

Thank you very much, and I shall hand you back to Graham.

Thanks, Stefan. Okay. Operations and strategy, looking first at Gleeson Homes then. And a couple of minutes on Project Transform. It's -- we have done a huge amount of work on this. We significantly strengthened the leadership in the team.

As you know, Scott joined us as Divisional Chair on the 1st of July last year. Scott is now responsible for running the whole of the Gleeson Homes business. As you're aware, we've restructured into 4 principal operating regions. We have 3 new regional managing directors supporting Scott. So 2 of those are experienced external hires, one is an internal promotion. And we've made multiple experienced recruitments at regional and divisional director level. It really is a strengthened team. And this is really about moving away from that overly centralized, overly dependent structure that was -- we had in the group before that really isn't effective for a volume home builder.

So what we've done then is to empower our regions so that those guys are very much owners of their budgets, owners of their profit and loss account. They have the ability to make decisions, to be entrepreneurial in their local environment. Quite clearly, remaining very short reporting line to Scott, who's very close with all of them, and they're working to very clear targets, KPIs and reporting -- regular reporting, et cetera.

We've also reinvigorated but clarified the role of our group central functions, which are absolutely vital. So we've slightly reduced the center, but as I say, reinvigorated it. And the role of those guys, they're sort of functional leaders and their role is providing expertise and setting the standards by which our regions operate, and that's how we maintain control. That's how we maintain quality. So significantly improving the integration between center and the regions.

We completely reformed our land buying. So we've moved land buying away from a centrally controlled operation and embedded that in the regions. And the critical thing there is that the regional management teams, you're getting full buy-in to every bid at bid stage before, as I say, it was too centrally directed. We've also refocused -- importantly, refocused our land buyers onto areas of more [ chimney pot ] areas as we call them, more densely populated areas, suburban areas reversing that trend, that drift that we -- the group has seen, I think, over the past 5 or 6 years into buying, frankly, too many rural and coastal -- too many rural and coastal locations. So we've definitely sharpened that focus.

We've also strengthened the process around our land buying. So we said that we've been much more specific on our requirements on the appraisal, on layouts, on planning the actual development itself and on planning our completion and exit. And that's all about really sharpening the technical control of the land bidding and buying process. And that's aimed at mitigating that kind of dissipating -- disappointing situation whereby you commit to the site at one margin. By the time you bring it to commencement budget, the margins dropped and then it drops again through development. And that's just not something that we can -- that's not a way for the business to prosper. So I'm very pleased with what we've achieved in land buying.

We've also taken -- as you're aware, we've rationalized the regions, as I mentioned, into 4 principal regions. We've taken the opportunity to rationalize the land portfolio as well. So we're walking away from about 13 sites in the Northwest and on the East Coast of Yorkshire that just no longer fit with our criteria or our hurdle rates. So a huge amount of work. And that really is a very short summary of what we've done.

I'm convinced that the business is in much better shape than it was when I stood here 12 months ago. And I'm convinced -- I'm excited for how we can take that forward. And it really -- that is really expediting that process that I've talked to you about before of changing Gleeson from an overly large small business into a well-controlled and efficient volume house builder.

Legacy sites. So I talked to you briefly about this before, but this is basically an issue that, frankly, should have been dealt with before. We're looking at something like 80 sites completed variously over the last 10 years, some 1 or 2 even older than that in parts of the country we don't even work in. These are sites where we haven't secured the adoption.

Why? Because in most cases, they require some sort of rectification. I'll give you -- the most common example is actually where we've installed gravel drives actually in line with our planning permission and meeting with regulations, but the high-rise engineers don't like them. Why? Because the gravel spills on to the road. That means the road gets more damaged, has to be maintained more, cost them more. So the high-rise engineer looks at you and says, I can't adopt that. It's not a standard. We could have the fight. We've been advised. It's not worth it. We need to get on and get these roads into a state where they can be adopted.

It's interesting, actually, just last week, the HBF has brought out our latest sort of protest on behalf of the industry, which is around the transparency and objectivity and the time taken to get roads adopted. That was very timely. But we haven't -- I can't whinge about it. We've got to get on and deal with it. I'm not going to make the -- we can't kick the gravel down the road joke. And so that's going to -- it's going to take us 3 or 4 years. We've hired the best guy in the business really, an adoptions engineer to lead a small team. It will take us 3 or 4 years to deal with that.

During the year, we were operating from an average of 67 build sites and 56 sales outlets. As we've said, that both of those will be slightly lower this year. Our prospective site numbers are frustratingly lower than I would like, and that's for 3 reasons: One, the continuing challenge of slow planning. So -- and it's the same story. The government, I think, is absolutely doing the right things at national policy level, but that is still -- that is not feeding through for various reasons, that is not feeding through to pace and reliability of decisions at local level. So planning very much still an issue.

In addition, we've rationalized the portfolio. As I say, we have taken the proactive decision to walk away from a number of sites that no longer fit our criteria. And the third thing is that, I suppose, like others and I think very sensibly, we're managing our balance sheet. This is a market where it pays us to be cautious. We absolutely want to protect the integrity of the balance sheet. So we're upping our risk aversion, if you like, in the appraisals we're bringing through. That's not to say we've stopped buying land. I've just talked to you about what we've done with that process, and we are still very much in the market, but we're being more cautious in the approach we're taking.

And so combining those 3 reasons, our site opening profile is going to be slower than I would like, certainly this year and almost certainly into FY '28. So it is a difficult market, but we're absolutely convinced that there are things that we can do better. And it's vital that both in a weak market now and into any upturn, we're the best that we can be. So with the -- we've got the people and process fixed. I was talking to you, I spoke about that just now. And I kind of see that as fixing the factory.

What we're getting after now is the way we engage with the market, so our product and our customer experience. We're going to -- we absolutely want to build on the success of our partnership strategy, and I'll talk about that in a moment. I've talked about refocusing our land buying to make sure we're getting the right sites. And now we're looking proactively and at pace at our product, at our customer experience and that our brand and brand perception. This is -- we're trying to be absolutely rigorous, absolutely objective and make this data back.

So we've got hand-picked teams from around the organization looking at each of those, each of those teams led by a member of the ELT. We're actually using an AI data site of every piece of customer feedback that we've had because the -- if you aggregate that, we'll pick up the themes and we'll pick up some good ideas, I'm absolutely convinced. And we're also commissioning focus groups from our website users, both those who've gone on and bought a Gleeson Home and those who haven't, so that we're getting the best information that we can to combine with our own expertise. Scott and the team, we -- as I say, that strengthening has brought in a lot of experience as well from elsewhere.

And so -- on product, we just -- we want to make absolutely sure that we're delivering the product that our customers want our open market customers. We've also taken the decision to design a specific partnerships range. And so that -- I think that we're working on that right now, that should be available to us in the second half. And that's avoiding that compromise because partners do have certain slightly different requirements for the units, and they're looking for a long-term rental product. And it's always a compromise if you're trying to use the same units for the open market. So no, we'll have a separate range effectively making it easier for partners to select Gleeson to work with.

On the customer experience, we're looking at that from -- right through from marketing through the customer journey through sale and are also looking at the way that we're providing after-sales service. And we know that we can improve in all of those areas. So quite exciting to see those ideas coming through.

And on brand, we know what it is. You know what it is that we do. We build a high-quality product that's affordable to customers at lower end of the income spectrum. But we get -- we listen, we get feedback. We bump into deep in the market. We don't think people are very clear on that, particularly that point that we are -- we build a high-quality product. And so it's really important that all of our stakeholders understand what it is we, Gleeson does today. And that includes the market.

So land agents, for instance, recruiters, prospective partners. It includes our own people. That's absolute absolutely vital. And of course, critically, it includes our customers. It's vital that we're listening to what the market is telling us and that we're led by the customers we serve. So yes, it is a difficult market, but there are absolutely things we know we can do to improve our performance, and we're working hard at that.

Just to touch on partnerships. I'd say really pleasing to see those first units at first completions coming through. For me, the pleasing thing, we've established our credibility in the partnership space now. And just pausing on that, that's not a [ gimmick ], that's not a no-brainer. If you put yourself in the shoe -- it's not just a question of turning up at the conference and pulling up your stand and saying, come and sign here for deals.

If you put yourselves in the shoes of the investor, he's got quite a bit of due diligence to do on a new firm offering themselves as a development partner. Who are these guys? Do -- what's the quality of their product? How will it stand up as a long-term rental product? Can they actually build at the pace and to the quality that I need? Will they do what they say? Do I trust them? All of that is -- you have to build that. We accept that. And so I'm really pleased that with those first completions and the feedback that we're receiving from our partners, I think we've established our credibility. And certainly, that seems to be how it's playing for us.

The market appetite is certainly continuing. It was great to hear Matthew Pennycook at the conference in Liverpool last week, absolutely endorsing that this mode of delivery is and will continue to be important for the U.K. homebuilding market. As I say, very much encouraged by the announcements under the SAHP last week.

So what we need to do now, what we're focused on, if you like, is to evolve to the next generation of partnership deals. So coming back to that establishing your credibility, they might get to the point where they'll take their units from you, but will they trust you with the cash upfront? Well, you need to prove a little bit more before they'll do that. So the first deals that we did, effectively, yes, you're sacrificing a bit of margin, but the benefit and the only benefit we were getting was the diversifying our market risk.

So it was a forward sale. You're certain that those 40 units are going to go to that partner, tick. But they're paying them for you -- when you're paying for them when you deliver them. We've now evolved that model. So within that 320 units was our first 60-odd under the golden brick model. Now that's better because that's when you're getting -- starting to get paid during the construction period. So that -- you're then getting the benefit not just of the forward sale, but now starting to improve your return because you're getting paid sooner.

The next evolution where we'll really mature is when we increase the proportion of forward funding. So we start to work with partner cash at the implementation of infrastructure. You can immediately see that, that starts to really sing from a return perspective. And of course, the absolute maturity is when they'll join you at the land acquisition point. So pleased to see -- those are the kinds of conversations we're now having and a real opportunity for us. And you can tell, I think we're excited about the progress that we've made in that area.

So turning to Gleeson Land then. I'll start with the market headwinds. No secrets here, but probably 2 elements that I would bring out. So planning is a constant story isn't it. It's always something slightly different. So following the specific that I'm referring to here -- following the local elections, obviously, the biggest shift was away from labor control. So a number of authorities where labor -- where it either moved away from labor completely or it's moved to no overall control.

What that does is creates a fracture between national policy and the local implementation of that policy. The no longer -- the committee less willing to embrace because you've now reopened that sort of democratic competition of I can win votes by resisting national planning policy. So not moving the local plan through at pace or and trying to resist the NPPF direction on their numbers or, for instance, resisting Grey Belt, et cetera, et cetera, et cetera.

So the effect of that is that where we had previously hoped that we might get a committee decision, now there's a good chance that it will be filibuster, we won't get the local decision. What do we have to -- it doesn't mean we can't get it because in the end, 9 times out of 10 national policy will prevail, but it means you've got to go to appeal, it takes longer and it's more expensive. So that's the planning drag that I'm referring to.

The developer caution, I've mentioned it already, you're all well aware of that. All of the majors are referring to it. And that is restricting appetite for some bids. I don't want to give you the impression that the market is dead. It's absolutely not. As you know, we have a high-quality portfolio. And when we put those sites out to the market, we're still getting good interest, and we are seeing bids. The pricing has definitely moderated a bit. The technical due diligence process is being elongated, always will in a buyer's market. We're seeing a lot of bids conditional on registered provider partner participation, and that's all to do with the hiatus in the Section 106 market and obviously, people asking for deferred payment terms.

So what's the impact on leasing land? Well, I've said not if, but when, and that really is that we are still seeing the demand. But predicting the actual timing of completions is difficult.

Just to touch on FY '26 was obviously -- the biggest single impact was the deferral of the large deal, which I've talked about in just 1 minute on that. So we are -- you shouldn't see this as -- well, it's a big standoff and the local authorities just don't want this. That's not the situation we're in. We are working very closely with the prospective buyer of the site and actually, alongside the local authority and their advisers, but it's a massively complex technical resolution that we need. The number of sort of open items gets ever smaller.

I think I've said to you before, it's a bit like when your phone updates and that bar goes across, you can plan, it must be finished now. But it's a bit like that with this technical consent. We fully expect, I'm looking at Guy that we will get that technical consent this calendar year, and that should trigger the -- well, that does trigger the terms in the option. Remember, we sold an option to the buyer of the site in June '25. They've got about 6 to 8 weeks post that technical resolution to exercise that option. So I'm hopeful that we will say, get that technical resolution before the year-end. I've certainly learned more about roads, signs, drains and what have you than I ever imagined I would need to learn about.

So as I've said, both planning and transactions are taking longer. And what that does, it makes -- the effect for us sitting here scratching our heads is it makes the timing -- calling the timing of completions even more difficult than normal in that business. It's just the way it is. So as I stand here this morning, we've got over 9 months of the year still to go. We've been -- we do this regularly. We've been through every site. No reason to say to you, we're not going to make our numbers in Gleeson Land. And so we're standing by the numbers that you have, but it has to come with that heavy note of caution.

Given that, as I said, there is very much still a market. And having said what I've said about planning, the national planning policy framework remains favorable. They have done the right things. And so we are working very hard to take advantage of that. Steam coming out of the planning team, and they've got -- they did really well. That's a record number of applications. It's a small team. That was a hell of a lot of work to get those 18 applications in. We've got 24 sites currently awaiting a decision. And as I say, all towards strengthening that portfolio.

And to the same point, we were delighted to exchange some 15 new promotion agreements in the year. 2 of those are conditional. And so -- and just to stress, that absolutely does not come from relaxing our standards. In fact, in this market, we're probably pushing up our risk aversion as you would expect. But this comes from the effectiveness of the local team, the local structure that Guy is put in place that really has upped our game and also backed by our fantastic market-leading data research and analysis team, which really does strengthen the bid and also strengthens our ability to get the planning permission as well in front of the local authority.

So not relaxing our standards. We're still only bidding kind of -- we're rejecting 95% of the sites that we see that we're shown, they go straight to the bin. But because of the quality of the team and the data research, we are winning about 1/3 of the bids that we actually make. So really pleased to see that portfolio strengthening.

So in terms of characterizing we are absolutely confident for the medium-term future of the Gleeson Land business, just have to put caution on there and what you're expecting in each 6-month period as we always do.

So summary and outlook. We delivered a robust performance in the year. Project Transform has overhauled Gleeson Homes into a much improved business. We've got a dual focus now on managing the business as efficiently as we can in anticipation of that continuing subdued market. But we're pursuing a number of strategic initiatives to enhance our own performance and so far as we can mitigate that margin attrition.

Gleeson Land continues to face a more cautious land market. So the timing of land sales lacks the visibility we'd hoped for, but the quality of the portfolio continues to attract strong interest. And the Board, therefore, expects to deliver an overall result in FY '27 in line with current market expectations.

I'll read you the quote because I think it's fair. Following a year of intense activity, implementing fundamental business change, we now have a homes business that's operationally much stronger and a land business well placed to meet the needs of developers for high-quality consented sites. With a focused and disciplined approach we're now taking, we're confident for the future prospects of the group.

Thank you for bearing with me on that, and we'll now be pleased to take your questions.

Yes, Greg from Singer Capital Markets. A few for me, please.

Firstly, on the land rationalization, obviously, you've moved away from 13 sites in the Northwestern Yorkshire. But you also do a wider land review in the other divisions? Or if not, is that likely to be extended this year?

No. So we will -- in any year, we'll always -- we keep an eye on every site every month. So I think the total was about 25 -- about 25. So 13 specifically in those 2 regions. We probably have -- to your question, we probably have walked away from more this year, a few more this year than we normally would, and that's as a consequence of the shifting into the interregional control and Scott having had an opportunity to give it a good cone.

And then on land, could you just talk about concentration within the numbers for this year? Obviously, you had one large land transaction delayed last year. Are there any larger deals in the numbers for the rest of the year?

There is one. It's not as large, but it's bigger than the average. So yes, I mean, it's -- Guy's gravy is always a bit lumpy, but...

And then lastly, just on partnerships. Obviously, you've made good progress last year on that strategy. Can you talk about access to funding from affordable housing providers and how that's improved? And then linked to that, with the dedicated products that you're bringing to market, is the intention to utilize that product in dedicated partnership sites? Or will it be utilized alongside your open market offering?

Great questions. So the access to funding, that's the $64,000 I can't -- and the answer is, so they took ages to announce the funding of $39 billion. Then they sat on that announcement, then they put out the statement sometime in the summer saying we just need people to push there. We can't spend it too soon, all defense and what have you.

And then last week, 3 weeks ago, they came out with the announcement of the strategic partner funding. I can't say to you and somebody asked me this earlier this morning. So I can't say that I've got a check that's come out of the $39 billion. I can't, but it was only 3 weeks ago. So what I can say is that we are receiving much enhanced and live interest from a good number of prospective partners since the -- both before the announcement and certainly since the announcement.

But it's too soon because you simply couldn't agree a deal and get the cash flowing. It's too soon to say, are they actually going to get the folding stuff in their pocket and start handing it over to us. I hope so. I think it would be very odd, very disingenuous to have that big announcement, but then still hold the funding back. But I can't confirm that visibility will come over the next few months.

And on the partnerships range, so we're looking -- so the range of homes is -- it means that we can offer them -- offer to partners homes that absolutely work for them. We don't have to modify have the spec that they need. The slightly different aspect to your question is, will that be for dedicated partnership sites? In the main, no. We're not looking to do it. We wouldn't rule that out. And as I've said to you before, every deal is quite specific.

So you might do that in a particular area. If you've got a cluster of sites, it might -- and the partners I like all of that site, you might do that. We're not setting out to be partnership contractors, but it's all within the context of a relationship, if you see what I mean.

Sam Cullen. 2 for me as well, please. On your point about the evolution of the partnerships, business and moving towards more of a forward-funded model in time. What's the gestation period of that? Is that a 2-, 3-year story? Is that a 5-year story?

We're talking about it now, Sam. But I'd be a fool to say to you right, I'm going to be announcing the first one by Christmas, but I might be. And that depends. So there are a couple where on existing sites, we've got people talking to us. Obviously, these conversations proceed over a number of months and then they accelerate and they slow down. So we have some deals in prospect.

I'm not going to say to you -- I mean, I'll be realistic -- I'll be honest with you. In July, I said to Scott, are you going to have anything I can announce in September? And he said, maybe. But we haven't. Will we by Christmas? Maybe. But there are deals being negotiated and kind of goes to Greg's last question as well. But would I be disappointed if I wasn't sitting here next year with a couple to tell you about? I'd be really disappointed.

The second one, given your decision to protect the balance sheet and slow down net new openings, do you think the other kind of partner in this relationship is listening to what you're doing in terms of the government? Are they taking heed of what you are telling them?

I'd really like to think so. The -- I don't know whether you're pulling me onto the punch of a Help to Buy question there. I think that -- so there's an onus on us to make the business the best that we can be, and we are absolutely on with that. The more specific request I would have of government would be, stop adding your [ threepences ] and [ sixpences ] into the viability challenge. And by that, I am referring to Building Safety Levy and I am referring to the full implementation of Future Homes. Both of those, it is still in their gift to alleviate that pressure because you're just adding to viability pressures in an already viability challenged market.

So that would be a specific request. Whether or not they choose to put in place some form of buyer support is really a decision for them. What we're focused on is what we can do because we think we can improve our sales rate with the work that we're doing. I'm not going to manage to move a natural rate of 0.5 to 0.8 by polishing up my product. I can certainly do better than I am.

Alastair?

Alastair Stewart, Progressive. A couple of questions. One on Homes and one on Land. On Homes, you mentioned less activity in the coastal and country rural settings and more of a focus on urban. What's the thinking behind that? I presume in coastal and country, you've probably got higher selling prices, but lower densities of potential buyers and those buyers are probably more discretionary, whereas it might be different for urban. So that's question one.

And on the land business, you mentioned technical due diligence stretching out. Is that a delaying tactic? Or is it preempting reductions in pricing from the buyers?

Okay. So taking the first one then. I don't want you to see this as Gleeson Homes turning away from what it does. But if you step back and look at the portfolio that effectively Scott inherited, we had -- so there is absolutely a place for less densely populated areas. We have a good business in Cumbria. But what had happened for various reasons I wouldn't bore you with -- there had been a drift. So we had too higher concentration of those sites, which tend to sell slower for all the reasons that you've set out.

And, yes, and also, they're just less densely populated. So just the pace, the churn in those markets is slower. And we needed to rebalance to get back to some more chimney pot areas to have a good balance of faster selling sites. Can I not being picky. We're not going urban. It is definitely suburban. And I make that point because Gleeson doesn't do city center and we won't. But definitely, there are plenty of suburban areas where we need to rebuild our pipeline, and it's to get that right balance in the portfolio.

On the technical due diligence, well, all I would say is you would expect there to be an absolute level of technical due diligence, which every developer would do on every site they ever buy. But the reality is it's a marketplace. And in a strong land market, you have to be damn quick and move. Otherwise, the guy has trampled over you and bought the site already. In a weaker market, you can afford to take your time, so you can afford to say to Guy, look, here's my bid, but I need 6 weeks to look through all of this lot. And then in that 6 weeks, is he going to find something that's going to buy them another 3 months? Well, yes, he will. And that's the difference between the buyers and the seller's market.

And specifically in sites that have been stretched because of the due diligence, have prices been going down? Are you standing your ground?

No price -- as I said, prices have come off a bit, but they've come off a bit because people are forecasting a more difficult sales market. So -- but it's not -- they're not halving in value. They're just -- they are taking the froth out of their own inflation -- selling price inflation expectations, and they're looking at the same cost inflation that Gleeson Homes is. So you're not getting people -- you're not getting -- seeing the hope value in their selling -- onward selling price expectations, which all feeds back to a lower land value. But it's not capitulated. I don't want you to think of that. Think of what we say, guy, 5% to 10% sort of off the bids that we would be getting. But these are still good sites. So if you come in with a 20% discount, someone's going to beat you.

Charlie?

Charlie Campbell at Stifel. Two questions, both pretty quick, I think. So your comments on sites FY '27 into FY '28, you said it sort of continues into FY '28. So does that mean they get to fall again '28 against '27 or they stay at that lower '27 level in 2028, if you can answer the question?

Stefan, do you want to take that? I will caveat that we're still in the window. FY '28 is not yet set in stone. So be gentle with us on making forecast for '28, just to understand the wording really.

Yes. Yes. Perhaps I could have been clear. It was intended to that we expected to open the same number of sites as we closed roughly. And therefore, we would anticipate the average number of sites we're selling on in FY '28 is the same as FY '27. But as Graham said, that feels a long way away at the moment. But that's what we're intending to communicate.

And again, I mean, with the same caveat, I guess, thinking about the percentage of bulk and partnership units of 27, 28. I think you're guiding us to the same sort of number. I mean partnerships is eventually 20, 16 now maybe drifts up a bit. Is that the right way of thinking about that?

So on partnerships, I would very much hope so. On bulk, I very much hope not, but I expect to.

Did that make sense?

Yes.

Bulk maybe he wants to do it. But yes, we are planning that there will be a level of bulk this year. And yes, similar. But partnerships, we're looking to push that harder.

Sorry, one other question. In terms of mortgage rates, I mean, it looks as if mortgage rates probably have gone up again in the last month. What's the sort of sensitivity you're hearing from customers around mortgage rates at the moment? Just trying to figure that out.

Yes. Well, so I'm glad you asked that question because it prompts me to remind everyone about the lack of a problem on affordability in the housing market in the Northern Midlands even at higher mortgage rates. So the proportion of the first-time buyers take-home pay that is spent on mortgage payments. It's the same now today at these current mortgage rates, if you were to borrow today as it has averaged over the last 40 years. There was no bubble in prices. There's no unaffordability problem. There's a confidence issue and there's some challenges on deposits.

Back to the question. So those slightly high mortgage rates at the moment, I mean, they add -- so in the appendices, you'll see I always have a slide on what are the weekly mortgage payments compared to weekly rents, demonstrating that it is cheaper to buy than rent. The impact actually is not that significant. It's about GBP 3 a week in terms of additional mortgage costs to the costs in here. In terms of what we're seeing in cancellations and the reasons for cancellations, it's a mixture. We're not really seeing mortgage costs or rate rises as an issue. Not yet. That may well come, but we're not really seeing that at the moment.

All of that, I absolutely agree with an endorse -- what you've heard me say before, my issue is less with the pounds per week that the mortgage -- it's absolutely right. It's a conversation in the pub that hurts us. And right now, that conversation is about mortgage rates have gone up and they're going up and it's about food price inflation coming. So I think at the moment, the mood out there in market land is weakening because of the conversation, even if what Stefan says is true. But yes, it's not what we're hearing, Scott, across the -- in the sales offices, isn't it? We've got no one sort of pulling out because of mortgage increases.

[Technical Difficulty]

I don't think there are any more questions in the room. Tilly, do we have any questions online? No. Sam, I thought you were going to ask a question then. That have been row. Very good. Thank you very much for bearing with us. A lot of content there. Thanks for your time. Great to see you all. And yes, I hope we managed to deliver on all of this. Thank you.

Hello, everybody, and welcome to MJ Gleeson's Half Year Results Presentation for the 6 months to December '25. I'm delighted to be joined by colleagues this morning, of course, by Stefan, but also with us are Guy Gusterson, the MD of Gleeson Land; Scott Stothard, Divisional Chair for Gleeson Homes; and also Simon Topliss, Gleeson Homes Chief Operating Officer.

We'll follow the normal format. I'll give you a quick overview. Stefan will talk you through the numbers. And then I'll come back and talk a little bit more about strategy and outlook, and then we'll be happy to take your questions.

So, autumn really was, as everybody knows, the autumn selling season turned into a bit of a damp bonfire night. And against that backdrop of dire budget headlines, we were quite pleased with what I'd characterize as a robust performance in a subdued market. 848 homes was up about 6% on the prior year and our net res rate was actually up 9%. Still sub-0.5, which is very frustrating to me, as you might imagine. But against that backdrop, I guess, we would take 0.48.

Really pleased to see our partnerships, fledgling partnerships business starting to generate its first revenue and profits. And we are making progress on site openings, although, as ever, constrained by a difficult planning environment.

A big stride forward on Project Transform. I'll talk about that this morning, but we have moved to the second phase of that restructure to complete the fundamental operating restructure. And as I say, I'll talk about that in a moment. And of course, it's all about -- and Transform is all about, rebuilding margin, and I'll talk about some of the risks and opportunities in that regard.

Turning to Gleeson Land. And we really are seeing increased momentum in that business, and it's great to see that that's as a direct consequence of the strategy that Guy's put in place. We're pleased with 3, I suppose, fairly modest transactions, but 3 transactions in the first half.

And I will just call out one landmark transaction in Gleeson Land, which is the sale of the first site that has been acquired since Guy joined the business, a lovely site in Chipping Norton, in Oxfordshire. That is frankly remarkable in a strat land business to have a turnaround of less than 3 years, I think, Guy, from promo to sale. I'm not saying that, we're going to hold them to that for every other site that they've acquired, but it is really a hell of an achievement.

We signed 4 new promotion agreements in the period. We have a number more in the pipeline. And then a quite astonishing 15 planning applications submitted by Gleeson Land in the 6 months. Really pleasing, then, to see the portfolio growing, both in quantity, but also in quality.

So then turning to the big question of the moment. So how's the second half started? Well, I think the phrase is cautiously encouraged. We're seeing an open market sales rate at 0.55. I'd like it to be more, if I'm honest. This time last year, we were seeing 0.79. As you're aware, as we all found out, we suspected, in fact, I remember saying it, we suspected that that had something to do with the stamp duty changes, and indeed, that proved to be the case. But nonetheless, we're not seeing the same strength of uptick that we were this time last year. However, it is an improvement. We need that to continue to strengthen and to be sustained. Heaven forbid that it falls off just like it did last year.

Price increases, well, holding tentatively. We put through an increase of 2.5% on the first of January. That's held to an average of about 1.7%, which is modestly encouraging. Nonetheless, we are still giving away 4.5% on incentives. I think there's a little bit of an opportunity there, and I'll talk about that.

The backdrop is good, mortgage availability is strong and interest rates coming down, as we know. Importantly, we are continuing to forecast further multi-unit sales. And that market as well, slightly tentative, and I'll talk about that. We are still seeing good interest in future partnerships transactions. And again, I think every reason to be pleased that we took Gleeson into that part of the market a couple of years ago and we're starting to see the benefits of that.

So to outlook, and that's, I guess, what the market is focused on this morning. So our open market sales rate, as I said, has improved. It's 0.55. We'd like it to be stronger than that. So we need it to continue improving and we need it to be sustained. Clearly, if the open market rate is weak, then we will run to the, if you like, the safety valve of the bulk market, and we have done quite well in that market. I think it's fair to say that that market is feeling a little softer than it was.

And so you've got the double whammy there. If the open market sales rate proves to be weaker, then you're going to -- you're looking to more bulk. And if that market is weaker, then you've got an exponential hit to margin there. And the RPs are not yet back in that market in any numbers. We are talking to those guys, but then not expecting funding under the continuous market engagement program until April, and the strategic funding is even later in the year.

And those margin risks clearly persist. As I said, buyers continue to need incentives. Selling price increases still not quite keeping pace with residual build cost inflation and the regulatory headwinds continue to persist. There is still that presumption at government that whatever they throw at us, don't worry, guys, the land will absorb it, and viability, an increasing issue across the country.

And so it's for those reasons, frankly, I consider it would be rash for me to stand here and say, don't worry, guys, we are going to stand by and we're going to deliver the guidance that we have. And for that reason, we're saying, well, we can deliver the guidance that we have, but an awful lot depends on what happens over the next few weeks." And we will undertake to come back and tell you about the next few weeks in April.

At that point, I will pause and I'll let Stefan tell you about the last 6 months.

Thank you, Graham. So the first half really was a tough market and our performance I would characterize as really robust. We grew revenue in both divisions and at a group level delivered 9.6% higher revenue. Group operating profit was 17.6% lower, and I will take you through the divisional results on the following slides.

Interest costs were GBP 700,000 higher at GBP 2.2 million and that reflects higher borrowings during the first half compared to the first half last year. And excluding the additional GBP 300,000 of exceptional costs, the group therefore delivered GBP 2 million of profit before tax.

Now to Gleeson Homes. They grew their revenue 5.9%, and that was through a combination of higher selling prices and higher volumes. The division delivered its first completions to its partners, 37 plots completed. It also delivered significantly higher bulk than last year.

So the first half of last year, we delivered 95 private bulk. This year, it was 190. So those average selling prices, they were, on a reported basis, up 2.5%. Underlying selling prices, that's on a like-for-like basis, were up 1.7%. And a richer bed and site mix contributed to the other increase in reported selling prices.

Now gross profit was higher, driven by that higher volume. Gross profit was 4% higher at GBP 33.4 million. You'll notice that gross margin as a percentage of turnover was lower, 19.8%. That reflects the additional bulk sales that we completed during the first half, extended prelims as sites -- slower selling sites continued to extend, so the fixed costs on those increased. Continued use of incentives. While we did grow gross, gross selling prices, we continued to need to offer incentives, which averaged about 4.5%. And the build cost inflation marginally exceeded that underlying selling price increase.

Now on overheads. Overhead costs were GBP 3.4 million higher compared to the prior half year, and let me break that down. Pay inflation averaged about 3.2%. We had the impact of national insurance, of course, which went up in April 2025. We invested more in IT systems, and in particular, in cybersecurity. And compared to the prior half year, there was a different level of accruals for bonuses and share-based payments. So the higher volume drove higher gross profit, GBP 1.3 million higher, but that was more than offset by the relatively higher overhead costs. So Gleeson Homes reported a lower operating profit of GBP 7 million.

Now the forward order book actually grew quite strongly. It was from quite a low base, but we grew the forward order book by 64% and to 978 plots. So the biggest growth in partnerships. So we had a very successful 12 months, particularly the last 6 months, at growing our partnership forward orders, from 105 to 382 forward orders. Bulk, which is mostly private bulk, those went up by 36. And very, very pleasingly, we saw our open market forward orders increase compared to December last year by 20% to 416.

Now Gleeson Land. So Gleeson Land had a really busy first half on site completions. They completed 3 site sales. There were no sales in the first half last year. That generated GBP 2 million of gross profit. We increased provisions on WIP by GBP 700,000, which meant we actually reported a gross profit of GBP 1.3 million.

Overheads were a little bit higher, but with that higher gross profit, it means the loss that we book in the first half reduced to GBP 600,000. And remember, Gleeson Land is, within the year, quite a lumpy business and we typically see a very low performance in the first half and a very strong second half.

Now turning to the balance sheet. Inventories increased by GBP 46 million to GBP 416.7 million. Gleeson Homes grew its inventory by GBP 31 million. And if I point to the land WIP, that increased through the purchase of over 2,300 plots on 17 sites during the last 12 months at an average cost for those purchases of GBP 17,800.

And in Gleeson Land, whose inventory increased by GBP 15 million over the last 12 months, as Graham said, they had a really busy period. They submitted 15 planning applications. And we had all of the associated costs with the quite busy activity ahead of and at the point of submitting a planning application.

I would highlight and remind you that the Gleeson Land WIP includes a significant amount of WIP on an owned site that we've conditionally sold, that we expect to complete the sale of by the end of the financial year and that would correspondingly reduce the WIP quite significantly by the end of this year.

Other liabilities, includes much higher trade creditors, but that's compared to what was quite a low level of trade creditors 12 months ago, and is broadly in line with where we were at the start of the year, at June 2025. Land creditors were higher and they were over 10% of land asset value, and that reflects a few larger sites that we've bought over the last 12 months, particularly in the last 6 months and on deferred terms, so we had higher land creditors.

Turning to cash flow. Operating cash outflow, typical in the first half, is an outflow. That was GBP 11.7 million, lower than the first half of last year. And that was due to Gleeson Land swinging from a net cash outflow, which it was in the first half of last year, to quite a strong operating cash inflow this year.

Higher average borrowings, as I mentioned earlier, increased our interest cost, and therefore, our cash interest payments were GBP 500,000 higher at GBP 1.6 million. And our CapEx was higher, again, against a relatively low first half. We opened more show homes and sales arenas in this first half than last year. As a result, in the 6 months, we had a cash outflow of GBP 6.6 million, and that resulted in slightly higher opening net debt of GBP 22.5 million.

So on dividends, the board is declaring an interim dividend of 4p. That's unchanged from the interim dividend last half year. That dividend will be paid on the 7th of April to shareholders on the register at the close of business on the 6th of March.

Thank you, and I'll hand you back to Graham.

Thanks, Stefan. So turning to first to Gleeson Homes. I don't know how many times I've stood here and talked to you about a cautious market environment. We have a cautious market environment. The buyers are clearly there. We know that, so this isn't post GFC. If you look -- in fact, if you look at the ONS residential transactions for last year, they're at a normal level. There is not -- we're not at a sort of diabolical subdued level in the wider market.

Now there are all sorts of other dynamics in there. We know there's an overhang in the secondhand market, et cetera, et cetera, et cetera. And if you're looking at a transaction to sell a home, it's quite difficult. But the buyers, therefore, are there. And we have a more benign or an increasingly benign backdrop, in my view. So you have the affordability graphs are improving. We've had several years of wage growth outpacing house price inflation. We've got the base rate gradually trending down. And we've got a very strong mortgage market environment. As you can see, more well-priced, high LTV products available than you can shake a stick at.

But what we're lacking is confidence. And it's really -- that means it's really -- it does make each sale hard work. It means that our pricing, our incentives, our appearance of our stock, et cetera, has to be absolutely spot on. We basically have to do the hard work and convince our customers of the benefits of buying a beautiful Gleeson home.

Project Transform then. Impossible to overstate the importance of this to Gleeson Homes for the future. I'm really pleased with the way that the changes that we announced in July have settled down. Scott, sparing his blushes, has made a great start, and equally, Simon doing really well in his role. So I'm much more confident in the leadership of the homes business.

And the relish, if you like, with which the leadership has set about those changes and the way the organization has received those changes, has given us -- has emboldened us to move perhaps more quickly than we were going to, to the second phase of that restructure, which we announced in January, and that completes the operating restructure for Gleeson Homes.

And just briefly, what have we done? So we've moved to a single division, as you're aware, with 6 regions. You know that we combined 2 of those regions, Greater Manchester, Merseyside and Cumbria, into a single leadership team back in the summer. We've taken the decision to actually push that a bit further.

We're not closing either region, but we are taking Greater Manchester, Merseyside, down to effectively a skeleton team, comprising customer care to look after the homes, but also importantly, land, whilst we rebuild the pipeline in that region and get to a kind of critical mass, which will then justify a full development team and a full region in that important, important area, for us.

Structure-wise, what have we done? The changes we've made affects land, customer care, marketing and finance. That land change, really very important, and it's a move away from the old Gleeson model. And it's a big move for the organization because land was bought centrally, reported centrally and then handed over to the regions.

It was a big change we knew we needed to make. We've now made that change. It's settling well. So our land directors report to their regional managing directors and work with their regional teams, and that's a critical step.

If you think about that moment of when the -- if you have a central land team and they hand over the site to the regional team, then magically, you lose 2% or 3% of margin. And in a growing, strong market, that may get washed under the carpet and lost here and there. But in reality, what you need is one team owning that site from selection to bid right through to delivery, and that will just work better for us, so a really important move.

Customer care, moving to a much more recognized model whereby the site team will hand over the unit defect-free after 8 weeks. It benefits our customers. It's a much cleaner, clearer system for them. But more importantly, it actually benefits our site teams because they can concentrate on building quality homes, which is what they need to do. And that will help with pace of build, which has been an issue for Gleeson.

We're routing our marketing business partners to report into their region, not into center. We've still got a great team at center. We're not changing what they do, but we're just taking out some of the friction so that the regions can be precise and agile in what they need from marketing, and we'll get that response much more effectively. And we're also taking the step of bringing our finance business partners into region to report to their regional managing director.

So you now have a complete regional team, which is led by a strong regional managing director and it's reasonable now to say to those guys, "Okay, I need you to take the ownership, responsibility and accountability for your business." It really does feel like a better controlled, more grown-up business.

Turning to those regional teams. We have made a number of changes at regional managing director level and indeed in the functional directors. We do have -- it is simple, straightforward to say that we have much stronger regional leadership in the business now.

We have taken the opportunity to tighten the belt on overheads a little further in as part of that process. And that will run to about, no more than about 25 heads, but important that we keep that as lean as we can. We know that our overhead larger than it should be for the number of units that we produce and we have to leverage that and grow into that overhead, and that's actually an opportunity for us going forward.

That will generate exceptional costs in this second half. The cash cost, the people costs, not exceeding GBP 1.5 million. And there will be some costs in writing off some old land assets, mostly pre-development costs of up to GBP 3 million, and that's in Greater Manchester, of course. The cost savings we expect to be about GBP 1 million on an annualized basis.

But stepping back, as I say, really importantly for me, the organization is completely transformed, is pretty much unrecognizable from the Gleeson Homes that we would have had even this time last year. I think we've got the right structure and process in place, and I'm sure we've got the right people in place, and I'm excited for what that can deliver going forward.

Important then, when I talk about the challenges in margin, my biggest confidence around restoring our margin is Project Transform. I need those regional teams to be able to take ownership and perform both in terms of the appraisal when -- right from bid appraisal through to build and commercial control, and that's what we need to see. That's what I'm confident we will see.

But just breaking down those margin challenges, they'll be familiar to you, but I've already touched on build cost inflation continues. Even though it's low-single-digits, I think we're about 2.7% in that first half. But labor costs really do increase. And so although it's not at a ridiculous level, it's very difficult when house price inflation is so constrained. Also, the curse of extended prelims when you're selling slower than you planned, and those regulatory headwinds and additional tax costs add - continue to add to the burden.

There's an item there, improving subcontractor base. I won't take too long on that this morning, but that's an elective cost, if you like. Why are we doing that? Why are you doing that, Graham? We need -- in order to be able to build at the pace that we require, we need to improve our subcontractor base. The key one is our groundworkers. It was the old Gleeson badge of honor that we only use labor-only groundworkers. That can probably work for you at building a few hundred units, but actually, it rapidly becomes a false economy when you're trying to build at volume.

What you get with supply and fixed groundworkers is a greater pace, a better quality and greater reliability. That's not a comment on all labor-only groundworkers everywhere. It's as you try to use more and more to grow at pace, you're going -- you're not going to get the quality and pace that you need.

Now that switch will add on roughly 2.5% to the cost of those groundworks on your appraisal, and that hits our margin. So why are you doing it, Graham? Well, I'm doing it because it's the right thing for the business, for me, for today, also for the medium and the longer term. And I firmly believe it will actually save us money as we grow and as we get the reliability and quality in the delivery.

Bulk sales continue. Stefan's touched on it. They will always, of course, continue to put downward pressure on your margin. But there are mitigations and we're not just lying there and taking it. And that's all about, and I've talked to you about this before, the potential in sales.

So I mentioned the January price increases, that's encouraging. Really important that we're right on that. And as we -- particularly as we bring these newer sites on, we make sure we're not underpricing them in the market. And there is, as we start to get any sort of recovery, huge potential in incentives and extras.

And as you can see, incentives currently running at 4.5%. Back in 2022, they were less than 1%. And of course, incentives steal from extras because you're giving it away instead of selling it. In 2022, we were doing nearly 2% of extras, which is quite strong on Gleeson Homes, given that we sell at the affordable end. We're currently doing 1%, if we're lucky.

The improving sales rate is absolutely key. It's key to both of those and it also is key to that -- constraining those extended prelims. I can't underestimate the small, sustained improvements in effective demand can have an exponential effect on margin.

So of course, sales and marketing, therefore, you won't be surprised, is a huge focus for us, and we're not sitting around waiting for the market to come to us. You're aware, I think I've talked about this every time I've stood in front of you. It was clear to me that Gleeson needed to improve, to up its game on sales.

I'm pleased that we now generally sell at or around the same rate as the HBF. We were -- we used to be materially below the HBF rate. I still believe we can do better, but I don't want to -- I believe that our product and our -- where we are in the country, we should actually be above that average, and we're really trying to get after that. But I'll just draw out 3 quick points on here that we're specifically focusing on at the moment.

So that point around bringing marketing into the regions, I think that will improve our edge. Incentives is an interesting one. I think we've got lazy. Scott and I have discussed this. As what happens with PPI, with carpets and curtains, as units come up to be complete and they're going into stock, people say, well, actually, to sell that, I'm going to put some PPI in there.

Now what they should then do is remember they've got that PPI and that should reduce what we call the dealer margin, the 5% that they're able to give away. I think we've got lazy about that recovery. Scott's done some quite granular work on that. So there's an -- I think there's an opportunity there for us to tighten up today, and we're right on that.

And the third area where I'm very excited about, actually, is part exchange. I will credit Scott with pushing for this and Simon for delivering this in a record 3 weeks in the run-up to Christmas to have it ready for the 1st of January. We've always had part ex. We had -- it was an outsourced product, so the offers were derisory and nobody used it. We brought it in-house, taken out the middleman, so we can make much more realistic offers to our customers. It's working really well already. And fear not, we've all seen how that can go wrong.

So for sure, Scott and I have known exactly how this needs to work. We're being very disciplined around the type of units we can take on, the proportion it can represent to the selling price and the prices we will offer. We're also restricting the balance sheet commitment any one region can have at any one time. So we're under control, but it's working well for us.

Turning to site openings and getting hold of sites. Planning, in a short sentence, remains the biggest single impediment to Gleeson's ability to grow our business into the opportunity that we know we have. We did purchase 9 sites in the first half. I'm reasonably happy with that, but the opportunity is larger.

The planning environment remains tough. You can see from the chart. I don't need to give you the detail on that. But just look at that stat in the last bullet, some 43 sites awaiting planning. I do think that Transform will help us here. When your land is being promoted by the regional team, I think that gives you an edge in terms of your timetable and your focus. So it will be better, but that might buy us a month in 24, 25, 26 months.

We are not going to solve the planning. However good we are, we're not going to solve planning on our own. We've had a good start to the year. We've had 5 consents since the beginning of January. And one of those, the largest ever for Gleeson Homes, which was 600 units in Spilsby, in Lincolnshire.

So pace of site openings obviously very closely related. Reasonably happy with 9 sites opened in the first half, 1 more than last year. We're aiming to open a second -- 8 sites in the second half. But the key is that we get to that steady rhythm of an average 10 net new sites annually, and that's what we're targeting for FY '27. Importantly, on sales, we opened 7 outlets in the first half, but absolutely critical that we hit that 12 new outlets in the second half. That's really key to getting the sales that we need in H2.

Gleeson Partnerships. As I say, I'm upbeat and really pleased with the progress that they're making in what's been a difficult market really since we set up that partnerships team. So well done to them. The housing associations, definitely back in negotiation. We're seeing really, really good interest. They need their-- they actually need their pocket money to be delivered.

PRS investors are still definitely remaining active. We signed 3 new agreements in the first half and we're discussing. So we currently now have 8 sites under development and we have discussions progressing on a further 11. So we continue to target that 20% of our business in partnerships.

Turning to Gleeson Land. As I said, really pleasing that the momentum is building. And it's a clear and direct result of the strategy that Guy set around that presence on the ground in 3 regions; the Southern region, the Western region and Northern Home Counties. And that helps with -- it really does help us with building our relationships, our networks in those regions and convincing vendors that we understand their market.

Market remains, I would say, strong for our prime sites, we're getting -- we get a good list of bids and bidders, but I wouldn't say it's an ebullient market. We won't have kind of 4 of the majors wrestling with each other at the top of the list.

It's a bit more gentlemanly than that at the moment, which means that transactions are undoubtedly taking longer to get over the line. It's a market when your buyer can afford to take that bit longer over his or her due diligence. And interestingly, we're seeing quite a few bids conditional on getting the RP deal sorted in the background, and that's a direct consequence of what I was just saying about the RP market.

We're still investing in our market-leading research and data analytics capabilities. Really impressive what those guys get up to. And that helps us both in site finding, in winning the bids, sitting in front of the vendors, and indeed, sitting in front of planners to get the consent over the line.

Still very disciplined about our criteria and our hurdle rates. We're turning away -- we're currently I think turning away about 95%, Guy, of the sites that we're offered. But pleased with a win rate. When we actually commit to, we decide to bid. We're winning about 1/3 of the bids that we make. And that's -- that means that the portfolio is growing steadily and strongly, both in quantity and in quality, and importantly, continuing to maintain that 100% customer satisfaction score.

So a really busy period in Gleeson Land. As I said, we sold 3 sites. I would remind you, we continue to grind through with the technical approval on the large options site. I'm still hoping that we'll get that done by June, but the pace of negotiations would try the patience of a saint, I have to say. Nonetheless, we'll keep you updated on that progress.

We signed 4 new promos in the first half. We're targeting a further 10 in the second half. That record 15 planning applications, that would be a record for Gleeson Land in any 12-month period, never mind a 6-month period. And I can't let them yet go off for a lie down because they're still working feverishly. So yes, as I say, good progress in Gleeson Land and really feverish activity.

So turning to the summary. As I said, a robust performance in a subdued market in Gleeson Homes. Cautiously encouraged by the signs of recovering demand, but importantly, it's just too early to tell if that will continue to improve and be sustained. And we do need to see that stronger market both to get the sales rate up and to support a margin recovery.

So our current market expectations remain achievable. But the reality is that the market we're facing into, for the reasons I've described, risks a lower outturn, and it would be foolish of me to stand here and say, I can absolutely stand by that. I know what's going to happen over the next 8 weeks, so stand on me, we'll deliver those results.

So as one of your number elegantly put it this morning, we are keeping our powder dry. We will undertake to come back in April with a bit more knowledge and tell you and give you better guidance. But importantly, probably for me, much more importantly, we are well positioned now in both businesses for the future and to deliver our strategy.

Project Transform is delivering a better Gleeson Homes business. We have the right structure and we have the right people. And in Gleeson Land, as I've described, the right strategy and absolutely seeing the momentum and primed for growth and outperformance. So we are confident that the group's in a very strong position to deliver on our exciting objectives.

At that point, that brings the presentation to a close.

We have a number of questions pre-submitted and submitted live. First one, how should investors compare Gleeson to other listed house builders?

I think I would focus on 3 or 4 areas, really. I mean, so we are unique. Nobody else focuses on the private, affordable part of the market. You know that we -- on any site that we take on, we make it a point of principle that a couple earning the national living wage must be able to buy a material proportion of the homes on that site. That is exactly what Gleeson does. We're very proud that that's the case.

Nobody else focuses on that section of the market. It works for us. Therefore, that's a great sustainable purpose. It's also a great commercial proposition because that's a very big market for us. Also, because we pay less for the land than on a per plot basis than if you're buying for the more upmarket market sites, it means that we can work our capital harder, so we can actually grow faster.

And I think the other area I would point to is the opportunity in this business. We have, as you would have picked up from our presentation, probably the most important point in that presentation is the work that we've done under Project Transform. The organization is, as I said, unrecognizable from where we were 18 months ago. We have a better structure, better process. We look and feel like a small volume house builder, and we've got the people that we need. We've greatly strengthened our leadership across the piece, and I'm really excited for where that can go.

How are you preparing for future energy efficiency and environmental standards?

It's a very interesting question right now because we await -- we continue to await the publication of the Future Homes Standard. We think we know what that will say, so that's the government's requirements for addressing energy efficiency. They should have been published, well, we were promised before Christmas. We're now promised before the end of this month, in fact.

And there is detail in there that we need to see before we can finally firm up our plans, and that's the detail of what will be required as well as the detail for transition and implementation. So we're well on with our planning. We are as prepared as we can be without actually seeing the detail. We're working that through. We're well on with working it through the designs of our homes. But as to the precise preparation, well, we have to wait and see that detail.

You highlight a 38% improvement in open market reservation rates in the first 5 weeks of early February. How much of that uplift is volume versus increased incentives?

So the res rate is all about customers putting reservations on our homes. Our incentives actually are steady. We're very cautious about the level of incentive we offer. We're at about 4.5%, and that's been consistent over a good number of months now.

We also pushed our headline prices from the 1st of January. We put through about 2.5% increase. That stuck or landed at about 1.7% on average. We are bearing quite hard down on the incentives that we offer. In the presentation, I referred to perhaps a bit of laziness around giving away both house improvements and still giving away 5%.

And we're turning up on the teams on that, getting a bit of discipline back into there. But we are not -- we're absolutely not buying that sales rate. That's a market improvement. And we work in other ways to try to encourage the sales rate -- an improved sales rate, if that makes sense. We're absolutely not going to chase the market with excessive sales price reductions or incentives.

Reservation rates are up, but sales sites open are down. Is planning or regulation holding you back?

Yes. Look, you will have heard in the presentation, planning remains the biggest single impediment to the growth opportunity in this business. So I'm disappointed. We've done well. I think we opened 9 build sites in the first half. We got a further, I think it's about 8 in the second half. But we're looking to, we're targeting to be opening a net 10 sites openings net of closures annually. We hope to achieve that in FY '27 and beyond, but that's the sort of progress we need to grow this business at the rate we know it's capable of growing.

Planning has improved at the strategic level. The government's done very, very good, sensible things at the strategic level, but it's very difficult for them and for anybody to address the resource constraint in local authorities, and the sheer weight of complexity and regulation that govern what a planning consent consists of. And that's a problem that will take more than one, probably more than one government duration to solve.

Net debt increased slightly. Is that a worry if the housing market gets worse?

Do you want to take that, Stefan?

Yes. Let me take that. So, no, we saw net debt at the end of December go up by about GBP 4.4 million to GBP 22.5 million. We would expect net debt to reduce by the end of the year. And we do carefully manage our capital structure, so we will manage it in a way that is consistent with the risks in the business.

And the levers on cash in this business are really quite strong. If you want to generate cash, you can slow down your land purchasing, slow down your WIP investment on site. So we're quite comfortable as a house builder that we have a very sensible capital structure.

And I would remind you, there were 3 elements of leverage on a house builder's balance sheet. There's typically the cash or the net debt. There are the land creditors. And for those house builders that have significant building safety liabilities, and ours are quite minor, there are the liabilities on the balance sheet. You look at those altogether, I'm very comfortable with our leverage position.

Would you rather sell fewer homes at better margins or push volumes and accept thinner profits?

Interesting. An interesting proposition. We are about volume, but we actually -- but we're not going to -- it touches on the point earlier. We're not going to chase that volume by slitting our throats on pricing and incentives.

So I think that -- well, I think that probably gives you the answer. We need to ensure that we're achieving a sensible sales rate. And that's about how we appraise a site at the outset, make sure we're happy with the location and make sure that we're pricing -- we can build that site at a price that the market can take. And if we get that right, we would not need to chase volume with -- by ridiculous pricing discounts or incentives.

So the answer is, if we get it right, that doesn't become a problem for us unless the market simply grinds to a halt. But we're not in that place now. There is a market there. There are buyers there. I'm happy that we've currently got the right level of pricing and incentives. And we just need to work hard, make sure our homes are well presented, make sure our teams are chasing every lead and that we're offering a great customer experience.

We're also really pleased that we've introduced our part exchange offering, which is generating a lot of interest. And so I think we're pulling all the right levers, but we're absolutely not going to chase sort of outperformance on volume by giving away profits.

Following on from that previous question, what makes you confident buyers will turn up this year?

Well, great, great question. Let me just give you the backdrop why I think there are actually no barriers to quite a healthy market. The house price affordability graphs are better than they've been for a number of years. House price inflation has been less than wage growth for several years now.

The base rate is trending down. Mortgage market is strong. There are multiple high street offers for high LTV, well-priced mortgages. Consumer balance sheets, personal balance sheets, I understand from the economists who track these things, those are strong. The savings rate's been high.

So there's actually no, if you like, macroeconomic reason why we shouldn't be in an increasingly strong housing market. What we need is confidence to grow. A confidence is a fragile flower, if you like. So what we need is no more invasions, no more geopolitical crises, no more gas crises, high energy prices, cost of living crisis. If we get some calm and stability in the wider environment, then that confidence will naturally grow.

So -- and the evidence so far is that customers are coming back. That rate of sale is improving, not at the rate I would like it. Clearly, I don't have a crystal ball any more than anybody on the call does. So I can't guarantee that the sales rate is going to continue to get stronger or indeed that it's not going to turn down as it did last year. There were specific reasons for that. But right now, I think the fundamentals are in place for a half-decent market.

What would you say to a long-term shareholder like me who's frustrated at the moment?

Good question. I'm also a shareholder and I'm also frustrated. I mean, if that question -- so look, there are 2 elements to that. One is the wider market. For goodness' sake, it has been a long trudge. I get that for anybody. Since -- pretty much since Truss quitting, house building and all its knock-on, if you're in construction products, it's been a hard slog. So there's a wider market. When do we get some upturn from here?

And also, I take the point that you're saying we've had some bad news out of Gleeson on more than one occasion, and when's that going to stop, Graham? That's a very fair question. I turn you back to Project Transform. I think it's fair to say there was a lot to be done in Gleeson when I joined. All was not well.

We changed a lot on day 1 and we've changed a huge amount. We've changed pretty much everything in Gleeson Homes since -- and the latest change was the changes we announced in January. So my biggest confidence in our ability to grow and improve from here is Project Transform. Clearly, the proof of that particular pudding will be in the eating as ever.

Would you consider buying back shares if the price stays low?

My simple answer, and I'll welcome Stefan's view as well. My answer would be no, because I believe profoundly in the growth opportunity that we have in Gleeson, both in our Homes business, most importantly in our Homes business, and in our Land business, albeit Land doesn't consume particularly a great deal of working capital. So my answer would be no share buybacks are not on my agenda. Stefan?

So I mean, the Board does consider this from time to time, as you might imagine, when it considers their capital allocation policy. Where the Board is at the moment, where both Graham and I are, is that, look, we've got -- we're in the right part of the market. It's not a particularly strong market, but we've got a really strong pipeline and we've got a really interesting period of growth ahead of us, and that could be not just a medium-term, but a long-term period of growth. To deliver that, we need to make sure that we manage our capital.

So hence, we have a capital allocation policy that -- a dividend cover policy that will see dividends covered between 3x and 5x. That's -- by earnings, that's quite a high cover level, that's quite a low dividend yield. And at the moment, we think that we want to maintain that and preserve our capital to invest in the future growth in the business.

Beyond the GBP 1.1 million savings announced, are there further cost efficiencies identified?

So for now, we are happy with the -- we had a very good scour of our overhead in the lead-up to the January announcement. But like any well-run business, we will always keep our eye on opportunities to save costs. But I don't have any further plans this afternoon to be cutting costs further.

We're now moving on to our final question. If you have any further questions, please email the team and we'll respond to with any questions that weren't covered this morning. If you could change one thing in U.K. housing policy tomorrow, what would it be?

Great question. Well, I'll give Stefan a go as well, but I think mine probably came loud and clear in the presentation and that's the P word, planning. Having said that, I recognize the challenges. I answered to the earlier question. I think the government is doing a lot that is right at the strategic allocation level, the National Planning Policy Framework and some of the things in the Planning and Infrastructure Act. But if we could reduce the burden of complexity and regulation that have to come with a planning permission and increase the capability and capacity in local authorities, that would absolutely be my top wish by some distance. But what would yours be, Stefan?

Mine would be planning, but let me give you one more. So we are in a market where there is a structural imbalance in supply and demand of high-quality affordable housing. We're on the right side of that.

What is holding the market back is an absence of confidence. So if there's one thing I could do, I'd just -- if government policymakers could stop the noise and stop the fighting and allow that confidence to return, because it is there, you just continue to make people nervous and postpone and delay those really important decisions to buy a high-quality home that's good for their health, their wealth and their well-being.

We currently have no further questions, so I'll hand back to the management team for any closing remarks.

For me, thanks very much for listening. I hope that's been helpful and insightful. If there are any further questions, I believe there's a facility to email. We'd be happy to try and help. But thanks for your time and good questions.

Thank you. Thank you to the management team for joining us today. That concludes the MJ Gleeson investor presentation. Please take a moment to complete a short survey following the event. The recording of this presentation will be available on Engage Investor. I hope you have enjoyed the webinar today.

So hello, everybody, and welcome to MJ Gleeson's Half Year Results Presentation for the 6 months to December '25. I'm delighted to be joined by colleagues this morning, of course, by Stefan, but also with us are Guy Gusterson, the MD of Gleeson Land, Scott Stothard, Divisional Chair for Gleeson Homes and also Simon Topliss, Gleeson Homes Chief Operating Officer.

We'll follow the normal format. I'll give you a quick overview. Stefan will talk you through the numbers. And then I'll come back and talk a little bit more about strategy and outlook, and then we'll be happy to take your questions.

So autumn really was -- as everybody knows, the autumn selling season turned into a bit of a damp bonfire night. And against that, backdrop of dire budget headlines, we were quite pleased with what I'd characterize as a robust performance in a subdued market. 848 homes, was up about 6% on the prior year, and our net res rate was actually up 9%, still sub 0.5, which is very frustrating to me, as you might imagine. But against that backdrop, I guess we would take 0.48.

Really pleased to see our partnerships, fledgling partnerships business starting to generate its first revenue and profits. And we are making progress on site openings, although as ever, constrained by a difficult planning environment. A big stride forward on Project Transform. I'll talk about that this morning, but we have moved to the second phase of that restructure to complete the fundamental operating restructure.

And as I say, I'll talk about that in a moment. And of course, it's all about -- and transform is all about rebuilding margin, and I'll talk about some of the risks and opportunities in that regard.

Turning to Gleeson Land, and we really are seeing increased momentum in that business. And it's great to see that, that's as a direct consequence of the strategy that Guy has put in place. We're pleased with 3, I suppose, fairly modest transactions, but 3 transactions in the first half. And I will just call out 1 landmark transaction in Gleeson Land, which is the sale of the first site that has been acquired since Guy joined the business, a lovely site in Chipping Norton in Oxfordshire. That is, frankly, remarkable, in a strat land business to have a turnaround of less than 3 years, I think, Guy's, from promo to sale. I'm not saying that we're going to hold them to that for every other site that they've acquired, but it is really a hell of an achievement.

We signed 4 new promotion agreements in the period. We have a number -- a number in the pipeline and a quite astonishing 15 planning applications submitted by Gleeson Land in the 6 months. Really pleasing then to see the portfolio growing both in quantity, but also in quality. So then turning to the big question at the moment.

So how has the second half started? Well, I think the phrase is cautiously encouraged. We're seeing an open market sales rate at 0.5. I'd like it to be more, if I'm honest. This time last year, we were seeing 0.79. As you're aware, as we all found out, we suspected, in fact, I remember saying it, we suspected that, that had something to do with the stamp duty changes. And indeed, that proved to be the case. But nonetheless, we're not seeing the same strength of uptick that we were this time last year. However, it is an improvement. We need that to continue to strengthen and to be sustained, heaven forbid that it falls off just like it did last year.

Price increases, well, holding tentatively. We put through an increase of 2.5% on the 1st of January. That's held to an average of about 1.7%, which is modestly encouraging. Nonetheless, we are still giving away 4.5% on incentives. I think there's a little bit of an opportunity there, and I'll talk about that.

The backdrop is good. Mortgage availability is strong and interest rates coming down as we know. And importantly, we are continuing to forecast further multiunit sales, and that market as well, slightly tentative, and I'll talk about that. We are still seeing good interest in future partnerships transactions. And again, I think every reason to be pleased that we took Gleeson into that part of the market a couple of years ago, and we're starting to see the benefit of that.

So to outlook, and that's, I guess, what the market is focused on this morning. So our open market sales rate, as I said, has improved. It's 0.55. We'd like it to be stronger than that. So we need it to continue improving, and we need it to be sustained. Clearly, if the open market rate is weak, then we will run to the -- if you like, the safety valve of the bulk market, and we have done quite well in that market. I think it's fair to say that, that market is feeling a little softer than it was. And so you've got the double whammy there of if the open market sales rate proves to be weaker, then you're going to -- you're looking to more bulk. And if that market is weaker, then you've got an exponential hit to margin there.

And the RPs are not yet back in that market in any numbers. We are talking to those guys, but not expecting funding under the continuous market engagement program until April, and the strategic funding is even later in the year. And those margin risks clearly persist. As I said, buyers continue to need incentives, selling price increases, still not quite keeping pace with residual build cost inflation, and we are -- the regulatory headwinds continue to persist. There is still that presumption at government that whatever they throw at us, don't worry, guys, that the land will absorb it and viability, an increasing issue across the country.

And so it's for those reasons. Frankly, I consider it will be rash for me to stand here and say, don't worry, guys, we are going to stand by and we're going to deliver the guidance that we have. And for that reason, we're saying, well, we can deliver the guidance that we have but an awful lot depends on what happens over the next few weeks, and we will undertake to come back and tell you about the next few weeks in April.

At that point, I will pause and I'll let Stefan tell you about the last 6 months.

Thank you, Graham. So the first half really was a tough market and our performance, I would characterize as really robust. We grew revenue in both divisions, and at a group level, delivered 9.6% higher revenue. Group operating profit was 17.6% lower, and I will take you through the divisional results on the following slides.

Interest costs were GBP 700,000 higher at GBP 2.2 million, and that reflects higher borrowings during the first half compared to the first half last year. And excluding the additional GBP 300,000 of exceptional costs, the group therefore, delivered GBP 2 million of profit before tax.

Now to Gleeson Homes, they grew their revenue 5.9%, and that was through a combination of higher selling prices and higher volumes. The division delivered its first completions to its partners, 37 plots completed. It also delivered significantly higher bulk than last year. So the first half last year, we delivered 95% private bulk. This year, it was 190. So those average selling prices, they were on a reported basis, up 2.5%. Underlying selling prices on a like-for-like basis were up 1.7%. And a richer bed and site mix contributed to the other increase in reported selling prices.

Now gross profit was higher, driven by that higher volume. Gross profit was 4% higher at GBP 33.4 million. You'll notice that gross margin as a percentage of turnover was lower, 19.8%. That reflects the additional bulk sales that we completed during the first half, extended prelims as sites -- slower selling sites continue to extend, the fixed cost on those increased, continued use of incentives, while we did grow gross selling prices. We continue to need to offer incentives, which averaged about 4.5%. And the build cost inflation margin exceeded that underlying selling price increase.

Now on overheads. Overhead costs were GBP 3.4 million higher compared to the prior half year. And let me break that down. Pay inflation, averaged about 3.2%. We had the impact of national insurance, of course, which went up in April 2025. We invested more in IT systems, in particular, in cybersecurity. And compared to the prior half year, there was a different level of accruals for bonuses and share-based payments. So the higher volume drove higher gross profit, GBP 1.3 million higher, but that was more than offset by the relatively higher overhead costs. So Gleeson Homes, forgive me, reported a lower operating profit of GBP 7 million.

Now the forward order book actually grew quite strongly. It was from quite a low base, but we grew the forward order book by 64% and to 978 plots. So the biggest growth in partnerships. So we had a very successful 12 months, particularly the last 6 months, growing our partnership forward orders from 105 to 382 forward orders. Bulk, which is mostly private bulk, those went up by 36%. And very, very pleasingly, we saw our open market forward orders increase compared to December last year by 20% to GBP 416 million.

Now at Gleeson Land. So Gleeson had a really busy first half on site completions. They completed 3 site sales. There were no sales in the first half last year. That generated GBP 2 million of gross profit. We increased provisions on WIP by GBP 700,000, which meant we actually reported a gross profit of GBP 1.3 million. Overheads were a little bit higher, but with that higher gross profit, it means the loss that we booked in the first half reduced to GBP 600,000. And remember, Gleeson Land is within the year, quite a lumpy business, and we typically see a very low performance in the first half and a very strong second half.

Now turning to the balance sheet. Inventories increased by GBP 46 million to GBP 416.7 million. Gleeson Homes grew its inventory by GBP 31 million. And if I point to the land WIP, that increased through the purchase of over 2,300 plots on 17 sites during the last 12 months at an average cost for those purchases of GBP 17,800. And in Gleeson Land, whose inventory increased by GBP 15 million over the last 12 months. As Graham said, they had a really busy period. They submitted 15 planning applications, and we had the -- all of the associated costs with the quite busy activity ahead of and at the point of submitting a planning application.

I would highlight and remind you that the Gleeson Land WIP includes a significant amount of WIP on an own site that we've conditionally sold that we expect to complete the sale of by the end of the financial year, and that would correspondingly reduce the WIP quite significantly by the end of this year. Other liabilities includes much higher trade creditors, but that's compared to what was quite a low level of trade creditors 12 months ago and is broadly in line with where we were at the start of the year at June 2025. Land creditors were higher, and over 10% of land asset value, and that reflects a few larger sites that we bought over the last 12 months, particularly in the last 6 months, and on deferred terms. So we had higher land creditors.

So turning to cash flow. So operating cash outflow, typical in the first half is an outflow. That was GBP 11.7 million lower than the first half of last year. And that was due to Gleeson Land swinging from a net cash outflow, which it was in the first half of last year to quite a strong operating cash inflow this year. Higher average borrowings, as I mentioned earlier, increased our interest cost, and therefore, our cash interest payments were GBP 0.5 million higher at GBP 1.6 million. And our CapEx was higher, again, against a relatively low first half. We opened more show homes and sales arenas in this first half and last year. As a result, in the 6 months, we had a cash outflow of GBP 6.6 million, and that resulted in slightly higher opening net debt of GBP 22.5 million.

So on dividends, the Board is declaring an interim dividend of 4p. That's unchanged from the interim dividend last half year. That dividend will be paid on the 7th of April to shareholders on the register at the close of business on the 6th of March.

Thank you, and I'll hand you back to Graham.

Thanks, Stefan. So turning to first, the Gleeson Homes. I don't know how many times I've stood here and talked to you about a cautious market environment. We have a cautious market environment. The buyers are clearly there. We know that. So this isn't post-GFC. If you look -- in fact, if you look at the ONS residential transactions for last year, they're at a normal level. There is not -- we're not at a sort of diabolical subdued level in the wider market. Now there are all sorts of other dynamics in there. We know there's an overhang in the secondhand market, et cetera, et cetera, et cetera. And if you're looking at a transaction to sell a home, it's quite difficult. But the buyers, therefore, are there.

And we have a more benign or an increasingly benign backdrop in my view. So you have -- the affordability graphs are improving. We've had several years of wage growth outpacing house price inflation. We've got the base rate gradually trending down. And we've got a very strong mortgage market environment, as you can see, more high -- well-priced, high LTV products available than you can shake a stick at.

But what we're lacking is confidence. And it's really -- that means it's really -- it does make each sale hard work. It means that our pricing, our incentives appearance of our stock, et cetera, has to be absolutely spot on. And we basically have to do the hard work and convince our customers of the benefits of buying a beautiful Gleeson Home.

Project Transform then, impossible to overstate the importance of this to Gleeson Homes for the future. I'm really pleased with the way that the changes that we announced in July have settled down. Scott sparing his blushes, has made a great start and equally, Simon doing really well in his role. So I'm much more confident in the leadership of the Homes business. And the relish, if you like, with which the leadership is set about those changes and the way the organization has received those changes has given -- has emboldened us to move perhaps more quickly than we were going to, to the second phase of that restructure, which we announced in January, and that completes the operating restructure for Gleeson Homes.

And just briefly what have we done? So we've moved to a single division, as you're aware, with 6 regions. You know that we combined 2 of those regions, Greater Manchester Merseyside and Cumbria into a single leadership team back in the summer. We've taken the decision to actually push that a bit further. We're not closing either region, but we are taking Greater Manchester Merseyside down to effectively a skeleton team comprising customer care to look after the homes, but also importantly, land whilst we rebuild the pipeline in that region and get to a kind of critical mass, which will then justify a full development team and a full region in that important area for us.

So structure-wise, what have we done? The changes we've made affect land, customer care, marketing and finance. That land change, really very important. And it's a move away from the old Gleeson model, and it's a big move for the organization because land was bought centrally, reported centrally and then handed over to the regions. It was a big change. We knew we needed to make. We've now made that change. It's settling well. So our land directors report to their regional managing directors and work with their regional teams. And that's a critical step. If you think about that moment of when -- if you have a central land team and they hand over the site to the regional team, then magically, you lose 2% or 3% of margin.

And in a growing strong market that may get washed under the carpet and lost here and there. But in reality, what you need is 1 team owning that site from selection to bid right through to delivery, and that will just work better for us. So a really important move. Customer care moving to a much more recognized model, whereby the site team will hand over the units defect-free after 8 weeks. It benefits our customers. It's a much cleaner, clearer system for them. But more importantly, it actually benefits our site teams because they can concentrate on building quality homes, which is what they need to do, and that will help with pace of build, which has been an issue for Gleeson.

We're routing our marketing business partners to report into their region, not into center. We still -- we've got a great team at center. We're not changing what they do, but we're just taking out some of the friction so that the regions can be precise and agile in what they need for marketing, and we'll get that response much more effectively. And we're also taking the step of bringing our finance business partners into region to report to their regional managing directors. So you now have a complete regional team, which is led by a strong Regional Managing Director, and it's reasonable now to say to those guys, okay, I need you to take the ownership responsibility and accountability for your business. It really does feel like a better controlled, more grown-up business.

Turning to those regional teams. We have made a number of changes at Regional Managing Director level and indeed in the functional directors. We do have -- it is straightforward to say that we had much stronger regional leadership in the business now. We have taken the opportunity to tighten the belt on overheads a little further as part of that process, and that will run to about no more than about 25 heads, but important that we keep that as lean as we can. We know that our overhead larger than it should be for the number of units that we produce, and we have to leverage that and grow into that overhead. And that's actually an opportunity for us going forward.

There will generate exceptional costs in this second half. The cash cost, the people costs not exceeding GBP 1.5 million, and there will be some costs in writing off some old land assets. mostly predevelopment costs of up to GBP 3 million in -- and that's in Greater Manchester, of course. The cost savings, we expect to be about GBP 1 million on an annualized basis.

But stepping back, as I say, really importantly for me, the organization is completely transformed. It is pretty much unrecognizable from the Gleeson Homes that we would have had even this time last year. I think we've got the right structure and process in place, and I'm sure we've got the right people in place, and I'm excited for what that can deliver going forward. And important then when I talk about the challenges in margin, my biggest confidence around restoring our margin is Project Transform.

I need those regional teams to be able to take ownership and perform both in terms of the -- right from bid appraisal through to build and commercial control, and that's what we need to see. That's what I'm confident we will see. But just breaking down those margin challenges, they'll be familiar to you but I've already touched on build cost inflation continues, even though it's low single digits, I think we look -- I think we were about 2.7% in that first half, but labor costs do increase. And so although it's not at a ridiculous level, it's very difficult when house price inflation is so constrained. Also the slow -- the curse of extended prelims when you're selling slower than you planned, and those regulatory headwinds and additional tax costs add to the -- continue to add to the burden.

There's an item there, improving subcontractor base. I won't spend -- I won't take too long on that this morning, but that's an elective cost, if you like. Why are we doing it? Why are you doing that, Graham? We need -- in order to be able to build at the pace that we require, we need to improve our subcontractor base. The key 1 is our ground workers. It was the old Gleeson badge of honor that we only use labor-only ground workers. That can probably work for you at building a few hundred units, but actually, it rapidly becomes a false economy when you're trying to build at volume. What you get with supply and fixed ground workers is a greater pace, a better quality and greater reliability. That's not a comment on all labor-only ground workers everywhere. It's as you try to use more and more to grow at pace, you're not going to get the quality and pace that you need.

Now that switch will add roughly 2.5% to the cost of those ground works on your appraisal, and that hits our margin. So what are you doing it, Graham? Well, I'm doing it because it's the right thing for the business for today, also for the medium and the longer term. And I firmly believe it will actually save us money as we grow and as we get the reliability and quality in the delivery.

Bulk sales continue. Stefan has touched on it. They will always, of course, continue to put downward pressure on your margin. But there are mitigations, and we're not just lying there and taking it. And that's all about, and I've talked to you about this before, the potential in sales. So I mentioned the January price increases. That's encouraging. Really important that we're right on that. And as we -- particularly as we bring these newer sites on, we make sure we're not underpricing them in the market. And there is, as we start to get any sort of recovery, huge potential in incentives and extras. And as you can see, incentives currently running at 4.5%. Back in 2022, they were less than 1%. And of course, incentives steel from extras because you're giving it away instead of selling it. In 2022, we were doing nearly 2% of extras, which is quite strong on a Gleeson Home given that we sell at the affordable end, we're currently doing 1% if we're lucky.

The improving sales rate is absolutely key. It's key to both of those, and it also is key to that constraining those extended prelims. I can't underestimate the small sustained improvements in effective demand can have an exponential effect on margin. So of course, sales and marketing. Therefore, you won't be surprised is a huge focus for us, and we're not sitting around waiting for the market to come to us. You're aware, I think, I've talked about this every time I've stood in front of you. It was clear to me that Gleeson needed to improve to up its game on sales. I'm pleased that we now generally sell at or around the same rate as the HBF. We were -- we used to be materially below the HBF rate. I'm still -- I still believe we can do better but I don't want to -- I believe that our product and our -- where we are in the country, we should actually be above that average, and we're really trying to get after that.

But I'll just draw out 3 quick points on here that we're specifically focusing on at the moment. So that point around bringing marketing into the regions, I think that will improve our edge. Incentives is an interesting one. I think we've got lazy. Scott and I have discussed this -- as what happens with PPI with carpets and curtains as units come up to be complete and they're going into stock, people say actually to sell that. I'm going to put some PPI in there. Now what they should then do is remember, they've got that PPI and that should reduce what we call the dealer margin, the 5% that they're able to give away. I think we've got lazy about that recovery. Scott's done some quite granular work on that. So there's -- I think there's an opportunity there for us to tighten up today, and we're right on that.

And the third area we're very excited about actually is part exchange. I will credit Scott was pushing for this and Simon for delivering this in a record 3 weeks in the run-up to Christmas to have it ready for the 1st of January. We've always had part X. We had -- it was an outsourced product. So the offers were derisory and nobody used it. We brought it in-house, taken out the middleman, so we can make much more realistic offers to our customers. It's working really well already. And fear not, we've all seen how that can go wrong.

So for sure, Scott and I have -- know exactly how this needs to work. We're being very disciplined around the type of units we can take on, the proportion it can represent of the selling price and the prices we will offer. We're also restricting the balance sheet commitment any one region can have at any one time. So we're under control but it's working well for us.

Turning to site openings and getting hold of sites. Planning in a short sentence remains the biggest single impediment to Gleeson's ability to grow our business into the opportunity that we know we have. We did purchase 9 sites in the first half. I'm reasonably happy with that, but the opportunity is larger.

The planning environment remains tough. You can see from the chart, I don't need to give you the detail on that. But just look at that stat in the last bullet, some 43 sites awaiting planning. I do think that transform will help us here. When your land is being promoted by the regional team, I think that gives you an edge in terms of your timetable and your focus. So it will be better, but that might buy as a month in 24, 25, 26 months. We are not going to solve the planning, however good we are. We're not going to solve planning on our own. We've had a good start to the year. We've had 5 consents since the beginning of January and one of those, the largest ever for Gleeson Homes, which was 600 units in Spilsby in Lincolnshire.

So pace of site openings, we're obviously very closely related. Reasonably happy with 9 sites opened in the first half, one more than last year. And we're aiming to open a second -- 8 sites in the second half. But the key is that we get to that steady rhythm of an average 10 net new sites annually, and that's what we're targeting for FY '27. Importantly, on sales, we opened 7 outlets in the first half but absolutely critical that we hit that 12 new outlets in the second half. That's really key to getting our sales -- getting the sales that we need in H2.

Gleeson Partnerships, as I say, I'm upbeat and really pleased with the progress that they're making in what's been a difficult market really since we set up that partnerships team. So well done to them. The housing association is definitely back in negotiation. We're seeing really, really good interest. They actually need their pocket money to be delivered. PRS investors are still definitely remaining active. We signed 3 new agreements in the first half, and we're discussing -- so we currently now have 8 sites under development, and we have discussions progressing on a further 11. So we continue to target that 20% of our business in partnerships.

Turning to Gleeson Land. As I said, really pleasing that the momentum is building, and it's a clear direct result of the strategy that Guy set around that presence on the ground in 3 regions, the Southern region, the Western region and Northern home counties, and that helps with -- it really does help us with building our relationships, our networks in those regions and convincing vendors that we understand their markets.

Market remains, I would say, strong for our prime sites. We still -- we're getting -- we get a good list of bids and bidders, but I wouldn't say it's an ebullient market. We won't have kind of 4 of the majors wrestling with each other at the top of the list. It's a bit more gentlemanly than that at the moment, which means that transactions are undoubtedly taking longer to get over the line. It's a market when your buyer can afford to take that a bit longer over his or her due diligence. And interestingly, we're seeing quite a few bids conditional on getting the RP deal sorted in the background, and that's a direct consequence of what I was just saying about the RP market.

We're still investing in our market-leading research and data analytics capabilities, really impressive what those guys get up to. And that helps us both in site finding in winning the bids sitting in front of the vendors and indeed sitting in front of planners to get the consent over the line. Still very disciplined about our criteria and our hurdle rates. We're turning away -- we're currently, I think, turning away about 95%, Guy, of the sites that were offered. But pleased with our win rate when we actually commit to -- we decide to bid, we're winning about 1/3 of the bids that we make. And that means that the portfolio is growing steadily and strongly both in quantity and in quality and importantly, continuing to maintain that 100% customer satisfaction score.

So a really busy period in Gleeson Land. As I said, we sold three sites. I would remind you, we continue to grind through with the technical approval on the large options site. I'm still hoping that we'll get that done by June, but the pace of negotiations would try the patience of the saint, I have to say. Nonetheless, we'll keep you updated on that progress.

We signed 4 new promos in the first half. We're targeting a further 10 in the second half. That record 15 planning applications, that would be a record for Gleeson Land in any 12-month period, never mind a 6-month period. And I can't let them yet go off for a lie down because they're still working feverishly. So yes, as I say, good progress in Gleeson Land and really feverish activity.

So turning to the summary, as I said, a robust performance in a subdued market in Gleeson Homes. Cautiously encouraged by the signs of recovering demand. But importantly, it's just too early to tell if that will continue to improve and be sustained. And we do need to see that stronger market, both to get the sales rate up and to support a margin recovery. So our current market expectations remain achievable but the reality is that the market we're facing into for the reasons I've described, risks a lower outturn and it would be foolish of me to stand here and say, I can absolutely stand by that. I know what's going to happen over the next 8 weeks. So stand on me, we'll deliver those results.

So as one of your number elegantly put it this morning, we are keeping our powder dry. We will undertake to come back in April with a bit more knowledge and tell you and give you better guidance. But importantly, probably for me, much more importantly, we are well positioned now in both businesses for the future and to deliver our strategy. Project Transform is delivering a better Gleeson Homes business. We have the right structure, and we have the right people. And in Gleeson Land, as I've described, the right strategy and absolutely seeing the momentum and primed for growth and outperformance. So we are confident that the group is in a very strong position to deliver on our exciting objectives.

At that point, I will -- that brings the presentation to a close. And I'll be pleased to take any questions. Mr. Kearsey very swift with.

That's very frustrating. Thank you, Scott. But let's take your questions. And I do apologize to anyone online if there's been a problem with the slides, forgive me. Adrian, sorry.

Adrian Kearsey, Panmure Liberum. Changing the strategy going much more regional. In terms of land and land costs, I noticed within your land, the plot cost has gone from 14 to 17. As you change to a more regional approach, do you think that's going to change as the buyers think more about sort of the detail of delivery?

So you're talking about land within Gleeson Homes. Yes. So yes, we have -- I mean, in essence, we have looked at our land buying strategy, and that's actually a key part of putting the land -- the responsibility for land into the regions, frankly, where it belongs. And so we have bought 1 or 2 slightly shorter-term sites in, i.e., closer to achieving their planning, either with some sort of consent. That's actually really -- a really important balance within the business. I think it's fair to say there was too much effectively strategic land that we had.

So great future for the business, but we need to iron out some of that lumpiness. So we need land that we can get on and develop. And of course, where there's greater certainty around the planning, your average plot cost is going to be higher. We maintain the same hurdles because, of course, a lot of the hard work is done and a lot of the risk is taken out. But that means that when you look at the straight what you're paying per plot, well, that number is going to be higher.

Now you shouldn't confuse that, that Gleeson Homes is moving away from being the provider of affordable homes. We're not suddenly diving in and competing with Redrow for really fancy land next to the railway station. We are still targeting an affordable product, but we're levering the mix of our land portfolio to improve the short-term land.

Next question, Aynsley.

Aynsley Lammin from Investec. Just 2 for me. First of all, on the kind of market expectations you still see as being achievable. Is that both in terms of completions? Are you talking about just PBT? I mean, presumably, you could do some bulk sales if you -- the open market is not as good as you'd like it to be in the spring selling season. Just some guidance a bit more around that.

And then secondly, on the -- just a clarification on Slide 23, the average number of sites. This is probably me being stupid, but the kind of where you've got build sites not actively selling and then the sales outlets, should we read that, that the '26, '27 number, where it goes from 67 to 71, that's the average sites you expect to be selling from during that year? Or actually, is it going from 57 to 55? And at that point, you'd have kind of 16 under build but not selling? Just trying to work that out a bit.

I'm going to -- I'll take the first one. I'm going to pass the second because these are Stefan's coloring pencils, not mine. But just on your first question around market expectations. So I mean, a number of factors in play, Aynsley. So yes, completions, of course. And don't forget that the expectations that we set that were in the market were unchanged from June or July, I think, was when we last changed that forecast. We -- as I said before, we had no autumn selling season, so we go into the second half with more to do. And so as I said back in January, we're very dependent on a strong spring selling season. We may yet get a strong spring selling season.

We were idly debating this morning, what would we be saying if we were now seeing 0.79 sales rate rather than a 0.55 sales rate. It is -- that confidence is so fragile. It would just be silly of me to try to predict what that sales rate is going to be. So completions absolutely is a critical element of that. The -- and then the bulk, obviously, we're quite -- we've been quite good at that. We've had some -- we found some good investors. And of course, our numbers are not that high, so we're not looking to shift thousands in bulk. And we had at the discounts we were attaining in the first half, probably not allowed to say this, but we've seen some -- we've seen bulk deals with discounts as low as sort of 6% to 7% and probably a range in the first half.

I'm going to say, 6% to 15% on our bulk. That market -- it is softening. And I've noticed 1 or 2 others have said the same thing. So it does depend on us finding the -- both finding the buyers and then agreeing a deal that we're content to take. But I mean, there are some gouging numbers out there. We're fortunate that we're looking to do whatever the number comes out at. But if you're looking to do 200, you're not having to accept the sort of pricing that some are if you're looking to do 1,000. But it is a challenging market.

So -- and both of those go to your middle point around margin and profits, i.e., what will we be -- what open market will we be landing? What bulk will we need and therefore, what will be the impact on that margin? So all of those variables in play. Does that answer the question, Aynsley?

Yes.

Thank you, Stefan, do you want to?

Yes, let me -- so we were -- our average sales sites for the first half were 58. We think they're going to be about 56 average in the second half. So we'll be selling on average for the year about 57 sites. That's broadly where we had expected to be, maybe a little bit point something of a site on average lower. With the slower opening of build sites, which is driven by what has become a tougher planning environment in North and the Midlands. The pace of sales site openings has changed a little bit. So we do think we're going to open more sales sites next year than we will close sites. So we'll end the year with more sites.

At the moment, we're estimating that we'll actually end up with 8 more sales sites at the end of next year than the end of this year. But the timing of site opening closing means that next year is likely to be a couple of sites on average -- we'll be selling on a couple of sites average lower than this year. So the 57 this year will look more like 55 last year. That's a lower number than we were expecting.

And let me give you a stat that 1 of my colleagues pulled together, came from some Glenigan and ONS data. If we look at the residential planning permissions that were granted during 2025. In the North of England and the Midlands, 27% down on 2024. 27% fewer residential planning consent granted in the North England and the Midlands. In the South, it's only 10%, still down 10%. I mean, a shocking statistic. So planning has -- and now we've got 43 sites in the planning system, and they are all working their way through and then closer to the end than they were 6 months ago. So we have perhaps greater visibility on when the timing of those sites opening.

So we're quite reasonably confident on these site opening numbers, which is why I'm giving you a probably firmer steer than I have done in the past. So expect to be selling on slightly fewer sites next year, which means we're going to be doing probably more bulk unless we see a strong recovery in open market demand. But then the following year, actually, the timing of this means that following year, the number of average sales sites will be significantly higher.

Alastair?

One question following on from that comment, 27% down in the North. That was planning permissions, was it?

Planning consent granted by local authorities on residential sites.

But 10% in the South, just about every trade mag, news story out suggests it's harder to get planning permission in the South than the North. Can you try and square that? Any view?

I can't actually.

Alastair, it's a stat. I mean, Stefan's got the stat wrong, I'm sorry, but that's what the data seems to be telling us, but I'm not going to speculate why.

I mean there's no doubt that planning has not improved in the North and Midlands. And it's taking longer to get planning through and Section 106 are taking longer. And those numbers have been reported by various -- by Savills, by HBF, planning is tougher. I was trying to make a point between how much tougher it's been in the North and the Midlands than the South region. And actually, in Gleeson Land, I don't think they feel as if planning has gotten as worse as bad as it has in Gleeson Homes, which is a southern business compared to the Northern Midlands business.

Well known. Can you provide a bit more of a qualitative view of what's happening with the PRS investors and the RPs. The RPs have definitely been wanting to do it but have been funds constrained and the PRS investors seems to see the economic outlook, cost of debt has been an issue. But can you just have a very quick round up on where -- what direction of travel are we in just right now.

So positive, Alastair, is it would be very quick. I do stress, it's -- we are a fledgling partnership business. We've worked very hard on building our reputation, building our relationships. I'm delighted with the feedback we're getting from our customers. No secrets, Lloyds Living, Home Group, Castles & Coasts. So that is going well. But -- so we don't need thousands of PRS and registered provider purchases to move the dial. And so we're very happy with the interest that we're seeing. And as I said, I think we've got 11 new deals under negotiation now. Whether they will happen, but it's a good level for us.

But basically, are they ready to jump...

Yes, yes. Caroline?

Caroline de La Soujeole from Singer. Just coming back to planning, which clearly is an issue right now. The planning bill infrastructure bill got Royal Assent in December. Do you feel that can make a difference? And if so, how quickly you can it unblock what you're seeing?

I mean sorry, I could moan for hours, Caroline. Look, the planning, just like the NPPF reform that we saw was very positive. I think the thrust of the new NPPF consultation is positive, but it's not going to massively move the needle. And the Planning and Infrastructure Act has some good -- some great ideas actually around simplification of the process, albeit -- and I'm not a specialist in the way laws are drafted but I understand that, that has created the primary legislation for delegated authorities. It hasn't actually put the delegated authorities in place. A more cynical person than me might say maybe they're waiting till after the local elections before they do that.

So creating the conditions and generally improved, but it's not going to move the dial on the complexity and the regulations and the lack of resource that hold up planning consents and Section 106 agreements in local authorities. And that's what really constrains Gleeson Homes' ability to get the permissions we need to open the sites to grow the business. Very good.

Clyde?

Clyde Lewis, Peel Hunt. Just building it up. Slide 37, it's tough to wear in the appendix, but the cheaper to buy than rent one. I mean this has been, I suppose, this way around for a while. Is it that deposit issue that is the bigger stumbling block? Or do you think there's something else stopping those renters from converting into buyers?

It's a great question. I'm going to let Stefan answer or give his view as well because he studied this data a lot. But I'll give you my -- I mean, my sense is that the deposit for Gleeson Home is not the biggest stumbling block out there right now. For me, it is about confidence more than affordability or deposit. But Stefan, what's your...

It's a great question because I do think it's quite odd that we've got an increasingly affordable housing market where -- and please pour over the appendices. And if you'd like more, I can send you more. All of the -- well, all of the metrics, all of the factors suggest we should be in a very, very strong market. So it is significantly cheaper to rent -- to buy than rent.

For first-time buyers, particularly in the North and the Midland, the proportion of their take-home pay that is spent on mortgage payments is the same as it's been for the last 30 years. The savings rates are the highest since pre-COVID. So everything points to a really strong market. I don't think it's deposits. I think there's a fundamental intangible that's missing at the moment. That's confidence. And it's the confidence to make that decision, that buy decision. Now it's interesting, if you look at our KPIs, we've seen a really strong increase in web traffic.

So up significantly on the last 3 months, up significantly the last 3 months of last year. I think the demand is building. The confidence just isn't there. So there may be some elements of deposits, certainly for those looking at more expensive homes than the high-quality, highly affordable Gleeson Homes. I think it comes down to the C word, confidence.

Is it politics or the weather?

We could be all day, John, on what it actually is. Somebody said to me the other day, let's just hope England win the World Cup. Who knows? Who knows? But I -- in seriousness, when you read the January -- the traditional January articles on how is the year going to go, I'm not in the camp where a lot of the economists went, which was worries me, we're baked in for another really bad year.

Echo what Stefan has just said, the fundamentals are there. Personal balance sheets -- not necessarily mine, but most personal balance sheets are in a decent shape. Savings rate is high. Allegedly consumer confidence is generally picking up. So I think the conditions are there. And as we know from previous cycles, it can -- once it starts to pick up, it can pick up quite quickly. I'm not forecasting that, but I'm not writing it off. We've got some questions online.

The first one is, could you move the slides, Graham.

So we have one from Max Hayes from Cavendish. He asks, what are your full year working capital expectations following the land division inflow in the first half?

Should I?

Yes, please.

So we've got elevated working capital in Gleeson and that's driven by 2 things. One of them, I think, will -- it will remain elevated. And that's that we've invested significantly in WIP on sites that are progressing quite well through to a planning submission. So planning submission activity drives expenditure. So I think we'll see it more elevated than in previous years. And of course, we are growing the portfolio. So -- and to sign up a promotion agreement, you do pay a -- I'm going to say, relatively modest sign-on fee with your landowner plus all legals. So I think there will be an elevated level compared to previous years.

But there's an additional element, which is about GBP 8 million. That's the value of a site that we purchased that has been back-to-back conditionally sold that we would expect to be sold this year, and therefore, the balance at June '26 will be reduced by that amount.

Thank you very much. We have no more questions from the webcast. I'd like to hand back for some closing remarks.

Charlie?

Charlie Campbell at Stifel. Just as I think about the gross margin in homes in the second half. I'm guessing you kept 1.7% of the house price increase. So that probably just about covers build costs. You've then got presumably more volumes in the second half going through the fixed site overheads. So should we think of the kind of the gross margin in the first half being a kind of low point and it moves on from there? Or am I missing something?

I'd certainly like to think so. I think I wouldn't want to say to you, expect a really strong recovery in gross margin percentages in the second half. I think the 0.55 open market sales rate is weaker than we were expecting. It's certainly a lot weaker than we saw last year. That weakness feeds through into the inability to get strong gross price increases to reduce incentives. And whilst there is still build cost inflation, and there are lots of things that are driving build cost inflation, then we are likely to see, I think, until we see a strong recovery in open market demand, we're likely to see margins not recover strongly.

So I think some of the forecasts I've seen this morning essentially anticipate a 0.2%, 0.4% recovery in H2 margins to get to about a 20% full year gross margin. Thereafter, I would be quite surprised if we didn't see some margin recovery coming from there in future years if that's proven.

Very good. Well, on the basis that there are no more questions, thank you for those questions. Always a good discussion. Thank you for coming. I know it's a busy morning for all of you. I gather some -- there was another company, well, I don't know. Really good to see you. Many thanks and bring things to a close.