Bellway p.l.c.

and welcome to Belway's half-year results. I'm joined by Shane, who most of you have met already. Simon is with us too, and accompanied by a few of our senior management team. If I could take you to the first slide. We've had a strong first half performance with completions up by 12% to almost 4,600 homes and that has driven a healthy increase in profit. The trading environment is much improved too and while Trading started slowly at the beginning of our financial year. There's been a notable pickup in both home buyer enthusiasm and reservations since the start of the calendar year. Demand feels more robust, less fragile, and supported by relative stability with mortgage rates, and that leaves us very well placed to deliver our full-year target of 8,500 homes. And to pick out a few highlights from our results, the order book has grown by around 20% to over 4,700 homes. Outlet numbers are up and averaged 248 in the period. And we have a strong land bank, totalling some 95,000 plots, of which over 30,000 have a detailed consent. Now, looking at the figures on the slide, I'm pleased with our land bank. I'm pleased with our outlet position. And when coupled with our operational strength and our track record on delivery, Bellway are well placed to execute our multi-year growth story. The real focus here, the real opportunity, is the box on Rocky. And at 9%, it's not good enough. There's clearly room for improvement. And Shane is going to offer his early thoughts and ideas on how we can deliver capital efficiencies through the group and drive a meaningful improvement on return on capital employed. I'll provide some more detail on Ops and Outlook later this morning. But first, our financial review. Shane.

Thank you, Jason, and good morning, everyone. As you know, this is my first set of results since taking on the role of CFO in December last year. I can see a few familiar faces in the room. Before I cover the financials, I'd like to just take a bit of time maybe to introduce myself and share some initial views on Bellway. During my career, I've worked in a variety of sectors, including most recently four years at listed homebuilder Cairn, where I was also CFO. So I do have strong experience in the industry already. In my first four months at Bellway, I've had the opportunity to spend a lot of time with our colleagues at head office, as well as getting out to visit several of our sites and divisional offices around the country. And it's clear to me that Bellway is a very well-run business. with a quality land bank and an excellent culture. The systems and controls in the business are very strong, and the teams across the group have a consistent focus on providing quality homes for our customers. I'm confident that we have an excellent platform to drive growth and increase returns for our shareholders, particularly with a sharper focus on capital efficiency, as Jason has said. And with that, I'll turn to the financials. As Jason said, we've delivered a strong financial performance in the first half, despite some market headwinds. Our healthy order book at the start of the year supported an 11.9% increase in volume output to 4,577 homes. The growth was driven by private output, which was up 17.5% to 3,617 homes. Social output was 5.3% lower at 960 homes, as the proportion of social completions reduced to a more normalised level of around 21%. The ASP was just over 310,000, and that was in line with expectations. Whilst underlying pricing remains firm, the slight increase in the ASP is more reflective of some geographic and mixed changes, as there's been little or no HPI over the last 12-month period. And this is partly reflected in the gross margin of 16.4%, which is a similar level to last year. The backdrop over that trading period really was one of flat HPI and modest spot bill cost inflation. There's also higher embedded cost inflation carried from our work in progress. And that remains a headwind to margin in the near term. That said, it's been worked through and the gross margin was 100 basis points higher than it was in the second half last year. And that reflects an improving trend. And I think more broadly what we'd say is should the interest rate and trading environment remain stable, combined with the high build cost inflation in recent years having a lessening impact on margin as we go forward, we'd like to think we're well positioned to drive improvements in our margin percentage, therefore, in future years. And this would be supported by a more favourable HBI-BCI dynamic, as seen in previous cycles, and combined with the benefit of newer higher margin land in the mix. As we previously guided, our overhead expense rose by 10% to $77 million. This follows two years of broadly flat overheads and is reflective of our strategy to offer competitive rewards packages to our staff and the ongoing investments in critical areas that support group expansion, including the initial set-up costs of our timber frame factory. Underlying PBT was 11.9% higher at $150 million, and the interim dividend has been increased to 21p per share. Turning then to the balance sheet, we have a strong, robust and well-capitalised balance sheet. We have a high-quality land bank and a strong WIP position to support our plans for multi-year growth. With a more stable market backdrop, our land investment now has started to normalise. This is from a low level during the first half, together with some of our strategic sites gaining planning permission. Our land balance has risen by 107 million to 2.5 billion. The increase in land activity is also reflected by the land creditor balance rising to 290 million. And this remains modest overall and represents only 11% of our overall land balance. Jason will cover more detail on that later. Turning then to work in progress. This balance, which includes site whip, show homes and part exchange properties, decreased in the first six months by 57 million to just over 2.2 billion. This decrease has been driven by the growth in volume output in the period and also reflects our infrastructure spend for ongoing opening of outlets. Whilst our WIP balance has started to reduce, there is much more work to be done here and I will cover that shortly. Regarding build safety, House builders and the Government have committed to work together to accelerate remediation with a joint plan signed in December. There has been limited movement in our provision in the period, which partly reflects our focus on accelerating assessments and no material changes therefore in the underlying provision. The provision at the period end was $502 million. And the second half, we expect bill safety spend to be around $30 million, with a significant increase then to start from next year to around $100 million. And that will also include reimbursements to the government bill safety fund. To finish on the balance sheet, as you can see from the bottom of the slide, our adjusted gearing including land creditors remains low at 8.5% and net asset value per share is 29.60. This is underpinned by a land and whip balance with a value well in excess of that. If current stable trading environment is maintained with the dividend underpin coupled with low levels of debt and the strong cash generation that will come as our elevated levels of WIP start to unwind, we believe that the value creation opportunities that will come from that will be significant for our shareholders. And related to that turning to cash flow, We've generated good operating cash flow and ended the period with low net debt of $8 million, which was in line with our expectations. The chart shows the decrease in site whip in the first half, which I referred to earlier when I was talking about the balance sheet, and that was $60 million, and the monetization of land through cost of sales was $266 million. After other working capital movements and tax, the operating cash generated before we make investments in land and distributions to shareholders was £350 million. Land spend in the period including settlement of land creditors was £302 million and the payment of the FY24 final dividend was £45 million. As we refresh our approach to capital efficiency, I am ensuring that our 20 operating divisions are adopting a common approach to assessing and optimising their own cash generation. This will enable the Board to make more informed decisions around capital allocation across our divisional network to provide greater returns for the group as a whole. It's a critical KPI, which a number of you in this room will be aware of, which you'll hear more from us on as we refine our capital allocation strategy for the next number of years. Operating cash flow is effectively the oxygen that allows us to create further investment opportunities for the business and ultimately greater value creation and returns for our shareholders. And turning to value creation for our shareholders, as I said in my introduction, Bellway is in a very strong position to deliver growth in output and returns in the years ahead. And these remain our strategic priorities. To deliver this growth with a supportive market, we have a well-invested land bank, outlet network and WIPP position. Within our divisions, we've got highly experienced teams with operational strength and their significant structural capacity to deliver organic growth. Our focus on growth will improve asset turn and increase cash generation. Delivering strong volume growth will enable us to work through the top tier of the land bank more quickly, which has lower embedded gross margin. These plots will be refreshed with higher margin plots, including those from our strategic sites. Whilst 20% plus gross margin will remain a requirement for land acquisition, we'll be taking a balanced approach to viability assessments and the key underpin when we're making those assessments will be on higher levels of capital employed from those investment decisions that we make. Maintaining a strong cost discipline across the group remains a key focus and we'll continue to invest in our commercial teams to further support margin improvement as volume output grows again. So therefore, we'll increase our ROCI. However, it's not just about increasing volume and driving margin. We also need to improve our underlying capital efficiency outside of that. So in terms of our capital allocation framework, our strong balance sheet and our well-invested land bank, they will remain the bedrock of the business and support our balanced approach to achieving growth, but also delivering greater returns to our shareholders. I'm now four months into the role and I believe we can deliver greater cash generation from our land and our WIP through a combination of growing volumes and by running a more efficient balance sheet. Overall, I'm confident we can enhance our returns and I look forward to providing a fuller update on capital allocation later in the year and the targets within that. Turning to guidance. For a summary of guidance, it's unchanged from that that we provided in October in our FY24 results. We are well forward sold for the year and we are targeting volumes of at least 8,500 homes, of which 1,900 will be social. The average selling price will be around $310,000 and the admin overhead will increase by about 10% for the reasons that I set out earlier to slightly below $160 million. The operating margin will approach 11% and dividend cover will be about 2.5 times underlying earnings. I'll now pass back to Jason who will cover the operating review and outlook. Thank you. Thank you, Shane.

Trading. In the first half, we achieved a private sales rate of 0.51, with January being the strongest month at 0.6. And that momentum has continued to build through the spring. Improved sentiment and affordability have both helped that recovery. Mortgage availability is good. Rates are stable, but a little too high. And you can see from the chart that a five-year LTV still costs around 4.5%. That said, overall, the market is in a much better place, and cancellation rates have steadied to around 14%. Current trading... In the first seven weeks since 1 February, we've achieved a private sales rate of 0.76. Bulk sales in the first seven weeks totaled 169 homes, or the equivalent of 0.1 per outlet. Clearly, there is good underlying demand for new homes, and that appetite has extended well beyond the stamp duty deadline. And from a geographical point of view, divisions in Manchester, Milton Keynes, East Midlands and Glasgow have all delivered strong numbers this year. Trading tends to be a little softer or more deal-led in the south-west and south-east of England. Headline pricing remains firm with incentives unchanged at between 4% to 5%. We are over 95% sold for the current year and hold an order book of 1.6 billion, or 5,600 homes, as at 16 March. The next slide shows our land bank totalling some 95,000 plots, 50% of which are owned or controlled and 50% are strategic plots. I am happy with the size and the shape of the land bank. It is more my intention to maintain the current level rather than grow or invest any further. And alongside that approach, we intend to target a higher number of completions from strategic land. We currently have 37 applications either running or about to be submitted, totaling almost 7,000 plots that will make a good contribution to FY27 and FY28. And that controlled investment in land and that maturing Stratland Bank are both designed to improve our capital efficiency across the group, which Shane has already outlined. In the period, we contracted on over 5,000 plots across 32 sites, and we have already secured detailed planning consent on sufficient plots to meet next year's target. And as a consequence, we have good visibility on SALS outlet openings. We plan to open 50 outlets during this year and a further 60 outlets in FY26. Average outlet numbers, never an exact science, but we do expect to hold around the 245-250 mark for both this year and next year. Turning to production, overall cost inflation remains modest at 1 or 2% and slightly weighted towards materials. There are good levels of availability for both labour and materials, which is understandable given the lower volumes across the industry. Our artisan standard house type range is now reaching capacity and will represent over 80% of housing volume in FY26. That reflects our standardised approach and our efforts to become ever more cost efficient. And as announced back in October, we are progressing to plan with Bellway Home Space, our new timber frame facility. And within this calendar year, we'll have a management team in place, the factory fit out will be underway, and the machinery and technology will begin to be installed. In the period, we have made good progress with Better with Bellway, and I'm keen to mention the performance and efforts of our operational teams in delivering great quality homes. We achieved a record 45 NHBC Pride in the Job Awards, including 10 Seals of Excellence and three regional awards. Our construction quality review score, a metric to determine build quality, is also a record high of over 92%. And finally, outlook. We are on track to deliver at least 8,500 homes this year. Our outlet numbers and the building of our order book underpin our confidence to deliver at least 20% volume growth across the two years to FY26. And speculating beyond FY26. With our land bank and a trading environment that could support an average sales rate of 0.6, we have the capability to deliver 10,000 homes for FY27. And finally, and most importantly, as Shane has set out, Our focus will be to drive capital efficiency across the group, improve cash generation and deliver greater returns for our shareholders. Thank you. We are now happy to take questions.