Taylor Wimpey plc

Hi, good morning everyone. I think we're just going to take the heating down a little bit because it's a little bit warm here this morning. So it looks good to see you all today. Just to get a start, take the heating down a little bit because it's a little bit warm here this morning. So it looks good to see you all today. Just to get us started, so as usual I'll take you through some of the highlights from the half and Chris will take you through the detailed financials and then I'll come back on how we're set up and the outlook. So firstly, underlying performance is good and delivering in the first half what we said we would. And turning to the current housing market conditions, the fundamentals underpinning demand remain good. However, the market has softened more recently and is a little bit more uncertain than we hoped for coming into the year. I'll come back and talk about that a bit later. But you'll have seen that we are reconfirming our guidance for the year of 10,400 to 10,800 completions. And of course, you'll also have noted the announcement this morning of an increase in the cladding and fire safety provision. Chris is going to cover this in more detail shortly with a full explanation of what's driven the increase, but so just up front from me. The topic of cladding remains very important to us and we're 100% committed to getting this right, to doing the right thing for our customers and leaseholders and, of course, progressing the remediation works swiftly without compromising safety or quality. And then finally, you'll have seen from our release this morning that we're going to be hosting an investor and analyst event on the 1st of October. I think, as you know, our strategy at Chair of the Wimpy is to focus on through the cycle operational delivery. And as we look to the next stage of the cycle, I think now is the right time to take you through how we've set up the business for growth beyond 2025. So I hope you'll all join us for that. Okay, so turning now to our usual highlight slide, a sales rate of 0.79 per week, which is 0.73 excluding bulk, I think was a good performance against a market that was robust up to spring, but not as strong during the second quarter. As you can see, we grew group half-won completions, including JVs, by 11%. However, operating margin was impacted by an unexpected cost at a completed London development undergoing remedial works, where we stepped in to take over work of a principal contractor who has withdrawn from site due to financial difficulties. My thanks go to our teams and subcontractors across the group for all of their hard work in achieving today's result. And we'll come back later in the presentation on how we're positioned for the future, but our strong land bank and continuing drive for high standards and customer service and quality give me significant confidence in the future. We've characterised our overall trading performance in the first half as resilient, reflecting a good first quarter, but as I said, becoming softer during the second quarter. You can see this reflected in the sales rate, which has not seen any benefit from the recent rate cuts. As a result, and as you would expect, we are leaning into self-help measures, we're leveraging our database, we're driving the basics, and of course, we're leveraging our very and highly engaged sales teams. We continue, however, to see the benefit of offering a quality product in the right locations and a resilient customer base. With affordability still challenging for many, especially the first-time buyer, we see some fragility in chains. But I'll talk more about that and what we're seeing from the market after you hear from Chris. So finally, we're on track with outlet openings, and we've opened 23% more in the first half than in the same period last year, and more outlets to open in the second half than in the first half. We've already started on site for around 50% of the outlets due to open in the second half. So I'll pass over to Chris.

Thanks, Jenny. Good morning, everyone. So we delivered a good underlying performance in the first half of 2025. A 12% increase in group completions helped drive a 9% uplift in revenue, which reached £1.65 billion. Pardon me. Both our gross and operating profit were affected by an unexpected £20 million charge, and this stems from a historic London development where defective workmanship was uncovered. The principal contractor had been undertaking remediation works, but was since withdrawn due to financial difficulties. As a result, we've provided for the cost of completing those works. Excluding that charge, our underlying half-won operating profit was £181 million, representing a margin of 10.9%, slightly ahead of the guidance we gave at the full year. Including the charge, the reported operating margin stands at 9.7%, as you can see on the slide. Tangible net asset value per share has reduced by 5.6% year-on-year, driven principally by the increase in our cladding provision, which I'll explain in more detail shortly. Despite the softening of the market backdrop in the UK since our last update, we delivered a well-balanced and resilient performance in the first half, reflecting our disciplined approach and consistent execution. Our UK sales rate averaged 0.79, that's a 5% improvement on last year's 0.75 and helped drive a 9% increase in UK completions. We delivered full improvement on last year's 0.75 and helped drive a 9% increase in UK completions. we delivered 4,894 homes excluding joint ventures, which represents 46% of the midpoint of our full year volume guidance range. The blended average selling price came in below our half-won guidance of £330,000 and this was mainly due to the mixed impact of a high value London apartment scheme moving into the second half and a higher proportion of affordable homes in half one at 21.6% of completions, which is slightly above our full year expectation of around 20%. We anticipate a lower proportion of affordable homes in the second half, which should bring the full year mix back in line. As a result, we continue to expect a full year blended average selling price approaching £340,000. As I mentioned on the last slide, both gross and operating profit were impacted by the unexpected £20 million charge, and you'll see more detail on that on the next slide. Overall, it was a resilient first half, which is testament to the consistent approach of delivering high-quality homes with discipline and focus. So this slide sets out the key drivers behind the movement in our UK operating margin for the first half of 2025 compared to the same period last year. As we outlined at the full year results, lower pricing in the opening order book and modest bill cost inflation created a small drag on margin around 70 basis points combined. Land bank evolution also had a small impact as we continued to trade out of older high margin sites bought in the years after the Brexit referendum. We flagged at the full year that the margin reported in half one 2024 included a positive contribution from land sales which were margin accretive. As anticipated that benefit hasn't repeated this year resulting in a 90 basis point headwind to margin. The most material item is the 20 million charge related to the historic London development where that principal contractor has withdrawn from remediation works. This was not anticipated in our original guidance and has reduced half one UK operating margin by 130 basis points. We are pursuing the contractor for breach of contract. In total, these factors account for a 300 basis point year-on-year reduction in operating margin. Excluding the unexpected charge, the movement is fully in line with the guidance that we set out in February. Looking ahead to the second half, we expect stronger volumes to support improved operating leverage which will help drive margin improvement. While bill cost inflation remains modest, it will continue to exert some downward pressure on margin. Overall, assuming pricing remains stable, we're well positioned to deliver a stronger operating margin performance in half two through continued disciplined execution. Turning to cladding and fire safety. As part of our ongoing work to meet the government's remediation action plan deadlines, we've continued to carry out intrusive investigations and update fire risk assessments across our legacy buildings. These assessments have evolved over time, particularly as chartered fire engineers have adopted increasingly cautious interpretations of the relevant standards, especially PAS 9980, which provides recommendations and guidance to fire engineers when carrying out fire risk assessments. While our initial building assessments were carried out thoroughly based on all accessible information available at the time, many of the issues we are now identifying, particularly cavity barrier defects, are located behind external finishes such as brickwork and render. And these areas aren't visible without physically opening up the structure which requires intrusive investigations. As a result of these assessments, we've increased our cladding provision by £222 million in the first half. Of this, £145 million relates to confirmed or estimated cavity barrier defects, including £94 million for buildings still awaiting external fire engineer assessments. A further £39 million reflects more conservative interpretations of the PAS9980 standard, particularly in relation to timber and HVL cladding types. The remaining 38 million covers site-specific cost increases, professional fees, contingency, and an uplift in building safety fund-related properties. Given the long-term nature of these works, with cash outflows now expected to extend to 2030, we've applied discounting and included an allowance for build cost inflation. Clearly today's update, reflecting the new information we have, represents a significant increase to our cladding provision. Our priority remains doing the right thing for our customers and leaseholders, completing these works as quickly and efficiently as possible without compromising on quality or safety. our cost assumptions now include a best estimate allowance for cavity barrier defects on buildings that have not yet been intrusively assessed, helping to reduce the risk of further material changes. From a cash flow perspective, we still expect to spend around £100 million on cladding rematerial changes. From a cash flow perspective, we still expect to spend around £100 million on cladding remediation in 2025 as previously planned. The increase in provision mainly relates to works that will take place in future years. However, as the provision is tax deductible, we anticipate lower tax payments in 2025 and this reduction is expected to more than offset the increase in remediation spend in 2026. So overall, we don't anticipate a material change to cash flows in the period to the end of 2026. That said, we remain fully committed to resolving these issues responsibly and efficiently. We continue to maintain a strong and disciplined balance sheet with net assets of £4.2 billion at the end of June. land holdings are slightly higher than june last year with own short-term plots increasing from 59 000 to 62 000 supporting future delivery the value of land net of land creditors is broadly flat as expected work in progress is up year on year landing within the range i guided to of 2.1 to 2.2 billion And this reflects the second half weighting of completions and continued infrastructure investment in new outlets, positioning us well for delivery into half two and into 2026. The increase in provisions reflects both the increase in the cladding provision and an 18 million provision related to the previously reported commitment to conclude the CNA investigation. Both items are classified as exceptional. Turning to cash flow, the movement in the period reflects our commitment to position the group for growth through investment in opening outlets and our differentiated dividend policy which provides a much valued stable income to shareholders. We closed the half with a strong net cash position of £327 million which is within the range that we guided to in February On an adjusted basis after deducting land creditors, gearing remains very low at 5%, underlying the strength of our financial position. In addition, we've extended our 600 million revolving credit facility by a further year, now maturing in July 2030, alongside our 100 million euro loan notes, further strengthening our long-term liquidity profile. As planned, net investment in land remains minimal, reflecting our focus to drive improved capital efficiency by growing into our strong land bank. Meanwhile, the increase in WIP reflects investment to support delivery in the second half and beyond. Tax paid in half one did not fully reflect the increased cladding provision so tax payments in the second half will be lower as a result and for modelling purposes the pre-exceptional group effective tax rate for the full year is expected to be around 28%. Cladding related cash outflows were lower than anticipated at £20 million due to the timing of payments to the Building Safety Fund However, we continue to expect total cladding-related cash spend for the year to be around £100 million. And finally, we returned £165 million to shareholders through the 2020 full final ordinary dividend, demonstrating our continued commitment to disciplined capital allocation. So this slide will be familiar. Our capital allocation priorities are unchanged. We continue to guide how we manage the business with discipline and focus. First, we maintain a strong balance sheet that's non-negotiable and underpins everything we do. Second, we invest in land and WIP to support future growth. As mentioned earlier, we've increased investment in WIP to support outlet expansion and completions in the second half and beyond. Third, we continue to pay a sustainable ordinary dividend, returning 7.5% of net assets annually through the cycle. Today, we're announcing an interim dividend for 2025 in line with that policy, 4.67 pence per share payable in November. And finally, where we have excess cash, we will return it to shareholders. We've done that consistently and we'll continue to do so at the right point in the cycle. Now, I think this is the right time to pause and reflect. We've had a number of questions recently about the sustainability of our ordinary dividend policy, and that's entirely fair. When you return two-thirds of your market cap to shareholders over seven years, people naturally ask, can it continue? The answer lies in how we've planned and managed the business, not just in the last year, but over the long term. Our shareholder returns policy was introduced in 2018 and has remained unchanged since then. It's a core part of our strategy, intentionally differentiated from others in the sector and designed to deliver change since then. It's a core part of our strategy for reliable returns through the cycle. Since its introduction, we've returned 2.7 billion to shareholders, 1.9 billion in ordinary dividends and 840 million through specials and buybacks. That includes 1.2 billion in ordinary dividends alone since the start of 2022 as we've navigated the current downturn. And we've done that while maintaining a strong balance sheet with low adjusted gearing and a land bank with over seven years of short-term supply. 82% of which at the end of June was already owned. That hasn't happened by chance. It's the result of deliberate, disciplined investment decisions. We already own and have planning for all of the homes that will legally complete in 2026 and we're actively building on the sites that will deliver more than 80% of those completions. The land we're approving today is for delivery in 2028 and beyond because we already own and control everything we need for 2027. That gives us flexibility. Depending on the quality of the opportunities available, we can adopt a replacement approach to land acquisition, maintaining capital efficiency while retaining full confidence in our ability to grow. And we know that our land bank can support that growth because the scale of our short-term land bank at 76,000 plots is at a level that has previously supported significantly higher volumes of completions. So as we stand and sit here today, reflecting on both our progress and our path ahead, we remain confident that our dividend policy strikes the right balance. delivering an attractive and sustainable return to shareholders while supporting the group's continued growth. It is a policy that aligned with our long-term strategy to create value, ensuring we reward shareholders today while investing responsibly for tomorrow. Finally, turning to guidance. Our UK volume guidance remains at 10,400 to 10,800 completions. Company compiled consensus currently sits just below the midpoint of the range at 10,588, which we think is fair given the softening in the market in Q2 and uncertain outlook for the second half. As a result of the unexpected 20 million charge outlined earlier, we are revising our full year group operating profit guidance from 444 million to approximately 424 million, and this reflects the one-off nature of the charge and does not alter our view of the underlying strength of the business. Expectations for net finance charges have increased to around 25 million in the year, largely due to discounting of the cladding provision The share of profit from joint ventures remains consistent with our previous guidance. We expect year-end net cash to be around £350 million depending on land spend timing, broadly in line with consensus. In summary, we've delivered a first half performance that is in line with expectations on an underlying basis. The increase in cladding and fire safety provision is clearly disappointing but our focus remains firmly on doing the right thing for our customers and leaseholders and progressing remediation works as efficiently and safely as possible. We're well set up for the second half and beyond and our ordinary dividend policy remains fully supported by the strength of the balance sheet, our land position and our disciplined approach to capital allocation. And I'll now hand you back to Jenny.

Thanks for that, Chris. So while performance has been good in the first half, the current market is not as strong as the spring. But if we think of the fundamentals, many do remain supportive. Unemployment remains low and we continue to see real wage growth. For those with a loan to value of 75% or better, it remains cheaper to service a mortgage than to rent. The desire for home ownership remains high and underlying demand remains good. And there also continues to be good news in the availability of mortgages. Lenders continue to be competitive in the market and mortgage rates are marginally lower than where we entered the year. So trending in the right direction. But all that said, there are challenges for our customers. Affordability remains a key headwind at today's rates, especially for first-time buyers. And of course, interest rates have remained higher than many predicted at the start of the year. And finally, on this slide, it is noticeable that since the spring, we are seeing a greater supply of second-hand stock coming to the market, the most for a decade. So whole market competition is a factor. coming to the market, the most for a decade. So, in the next slide. Pricing remains relatively stable and down valuations remain low. Cancellations are a bit higher, reflecting, I think, the fragility of chains, which in turn can be traced back to the affordability challenge first-time buyer. As previously flagged, Section 106 delivery has been more challenging, though we're in a good place for this year. The recently announced funding of £39 billion over 10 years via the Social and Affordable Housing Programme, the rent settlement and the consultation on the route to rent conversions are all very welcome. However, these will not immediately flow to increase Section 106 funding in the short term. This will remain a sector wide issue until we have clarity and visibility of the flow through of that funding to increase appetite and commitment from housing associations for Section 106 affordable homes. So we're very focused on driving performance in this market. When I spoke to you in February, I flagged that we had adjusted our approach to digital marketing to drive up the quality of our leads. This work has continued throughout the period with a focus on the quality of leads and improving conversions. Feedback from our team suggests that this change in market sentiment came post-Easter 2020. Cancellations are something of a mixed bag, but anecdotally our teams would call out customer caution overall and by those whose affordability is really being tested in today's environment. The permanent mortgage guarantee scheme and the recent announcements and changes in the FCA and PRA rules are incrementally supportive, but for an affordable mortgage at today's rates, deposit building is needed. With no government assistance for the first time buyer for the first time in 60 years, this is one of the biggest hurdles for those aiming to get on the property ladder today. So we just launched a new nationwide summer marketing campaign, which is landing well and generating some strong levels of inquiries. The campaign emphasizes the differentiation in our offering, how we're able to support customers in getting on the ladder and the benefits of new build. The campaign is aimed at driving people towards our sites to engage with our sales teams on the ground and our offer is aimed at gaining that all-important customer commitment. And not surprisingly then, incentives remain a key part of the offer. Chains are longer, and as you heard me say earlier, can be fragile. So we have packages available to assist the next stepper. So, for example, Easy Mover, when our experienced sales teams assist the customer in selling their home, or Part Exchange, which our customers can use, our teams can use in a disciplined way as a tool to help our customers. So as you already know, the MPPF represents a very positive step in planning opportunity and housing delivery for the sector and is an absolute must in addressing the housing crisis. However, we look to the implementation phase now in order to drive delivery. It's still relatively early and much still needs to be done, but we have seen signs of encouragement, which I'll run through shortly. Part of the implementation impetus is expected to come from the Planning and Infrastructure Bill, which we expect to streamline decision-making and support the more timely delivery of planning consents. And as you can see from the slide, the bill is currently progressing through the legislative process. So moving in the right direction. There's a lot of other regulation also making its way into operation. We have the building safety levy which is expected to come into effect from the 1st of October 2026 with guidance on its operation issued just earlier in July. As you would expect, we are actively preparing for its implementation in relation to both new and existing land assets and will mitigate its impacts wherever possible. We also await the update of the future home standards expected in the autumn, which, as you know, we have been preparing for for some time. So directionally, we are pleased with the changes underway for planning and supply side support to ensure that we have land and consents from which to deliver those much needed homes. But the demand constrained by affordability in many areas progresses perhaps slower than we had hoped. So given this backdrop, it remains critical that we control the things we can to drive value for our stakeholders. And as ever, it starts with land. We continue to have a strong land bank strategic pipeline and balance sheet. And as Chris pointed out, this means that we are in a good place to grow volumes when market conditions allow and do not need any new net land investment to do so. You will have seen from our release this morning that we'll be hosting an investor and analyst event on the 1st of October, where we will talk to you in much greater detail on how the business is positioned to navigate the next stage of the cycle. But in advance of that, let me update you on some of the actions already underway. So for the last two years, we've been focusing on getting the business ready to deliver growth and in doing so, increase efficiency. To leverage the improving planning environment, our focus for some time has been on deliver growth and in doing so, increase efficiency. To admitting high quality planning applications, including assertive and enterprising applications drawn from our strategic pipeline. We currently have around 29,000 plots and planning for first principal determination. That's up from 26,500 in December. A continuation of the strategy we commenced in 2023. We have more planning applications in preparation targeted for submission during the second half and into 2026. So whilst in the first half of the year conversions from the strategic pipeline continue to reflect a sluggish planning system, we remain positive of the actions we have taken and we would expect the pace to increase towards the end of 2025 and into 2026. So with that planning activity driven from our strategic pipeline as context, we will continue to be active, though selective and opportunistic in reviewing land opportunities as we remain mindful of securing and ensuring that the group has an efficient land bank. And this is reflected in the relatively modest 3,000 new plots approved in the period. Importantly, we now own all of the land for 2026 completions, over 90% of which has detailed planning. And we continue to expect to open more outlets this year than in 2024, with new outlet openings waited towards the end of the year. So still lots to do, but we remain optimistic. Decisions are still sporadic and the time delays continue to be frustrating. But this slide includes just a couple of examples by way of illustration. These are some of our earliest assertive applications and are at the smaller end of the site size, which is what I would expect to see at this stage of the planning cycle. In Hamilton Selby, we submitted an outline application for 110 homes in December 2023. At the time, the council could identify a five-year housing land supply, but the local plan was not forecast to be adopted until December 2025. However, in July, 2024, when it became clear that the MPPF would require a significant increase in housing requirement, the council agreed to work proactively to bring forward sites to maintain land supply. The council became more engaged in quarter one, 2025, which turned constructive in quarter two when the application was brought to committee and the scheme unanimously approved subject to section 106. In Buntingford, we made an assertive planning application for 200 homes and that was submitted in February 2024. In this instance, the local plan was over five years old and we predicted that the council did not have a five-year housing land supply. Our strategy aligned to that deficit kicking in during the determination period. The scheme was initially taken to committee prior to the MPPF being confirmed in October 2024, at which time members were opposed. However, the application was returned to committee for determination in January 2025 when it was approved by a significant majority vote. So I think these applications just serve to illustrate both the benefit of our early application actions, thereby ensuring that we're in a good place to achieve early planning outcomes from the introduction of the MPPF, and also how some councils are responding to the challenge of increased housing targets. So as I say, still sporadic, but with a focus by government on the implementation phase, we hope to see more decisions like these emerging in the near term. So to conclude, we are continuing to focus on operational excellence to protect and drive value and position the business for growth. We've been preparing for growth for some time, and we've been front-footed with assertive and enterprising planning applications to enable us to get ahead. This, together with our strong land bank, means that we have great visibility for next year and beyond. And the foundations to deliver growth have already been laid to with Taylor Whidbey Logistics, our timber frame factory, Taylor Whidbey Manufacturing, and the work that we've done in improving service, quality and skills. Today's market is not straightforward, but we have reiterated guidance on an underlying basis. And as you expect, we continue to drive sales and are focused on building our order book to position us best for 2026. And subject to the market, we are well placed for growth given our strong balance sheet and excellent land bank. And finally, as I mentioned earlier, on the 1st of October, given our conviction in the strong long-term fundamentals of the market, we will host an investor and analyst event and take you on a deeper dive into how we've set the business up for growth beyond 2025. I look forward to seeing you all there. So now I'm happy to move to questions.

Good morning. Alison from Bank of America. Just one question from my side. So can you comment a little bit on the dynamics of affordability in North and South? Are we seeing affordability turning better or staying the same, especially for the South, affordability in North and South? Are we seeing affordability in part of London?

Okay. Yes, thank you. We are continuing to see a stronger sort of level of affordability and demand in our northern operational areas. So very much as we've described, I think, you know, probably from the last quarter of last year, a bit easier from an affordability point of view. The south, yeah, a little bit more impacted on the affordability and chains tend to be longer in the southern operating area as well.

Amigala from City. A few questions from me. The first one was in the cladding provision. Can you give us some curve on the cash spent between 2026 to 2030 of how should we expect that provision to be paid down? The second question was on Section 106. Is there any active discussions with the government as to how can we really unlock the current funding point that we sit with? Or do we really have to wait for the housing associations to get that to an extent or wait for more clarity on that respect? And the last one was just on the incentives. You know, you did touch upon how incentives are still part of the market. Can you give us some color as to where they currently sit? And is our read right that Currently, we are in a seasonally quiet period, and hence we shouldn't read too much into the sort of current trading trends that you recently commented.

Okay. I'll take the Section 106 of the Census, and Chris, if you could do the cloudy. Section 106. I think that the 39 billion is an exceptional commitment from government, but there are quite a range of issues, as we've talked about before, within housing associations that they need to resolve. I'd say it'll just take some time for that to process through. Some of the larger housing associations we're hearing are restructuring their balance sheets and intending to get more active in the autumn. We're not really seeing that just at this point in time. Your government are actively involved in discussions as are Homes England, their agency. We would like to see a little bit more pace and urgency put into those discussions. So I think that we will see this start to evolve through the autumn. That's what we would expect. On incentives, you know, we're still in the range of 5% to 6% from an incentive perspective. It was probably a little bit lower in that first quarter and then sort of eased back up again. And, you know, I think particularly around elements of deposit support for first-time buyers, that's a real differentiator that we have to offer to the second-hand market. So really ensuring that our teams are building their incentives still to suit each individual customer. I think you are right. It's a discreet period. The last four weeks, there's a lot going on. So it's a very small period to take a read. We'll be looking at customer sentiment, particularly first-time buyer and affordability as we move into the autumn. We have launched our marketing campaign to support the build into the autumn selling season. So I'm really confident that we've got the timing and the strength of that message right. So yeah, I would caution about reading too much into it and I'd lean again into the underlying fundamentals are good and we're reiterating our guidance today. So Chris.

Yes, Ami, if you look at slide 11, then you'd see that the remaining provision is 435 million. As I said, for 2025, 100 million for the full year. We had 20 million in the first half, so you need to take 80 million off that to get to the end of this year. Next year will be a bit more than 100 million. And then for the years from 2027, through to the first half of 2030, you can just taper it down gradually.

Thank you. Marcus Cole, UBS. I've got two questions. The first is just on the land bank composition. So in the appendix, it looks like there's 27,000 plots in the short-term land bank without detailed planning permission. I just wondered how you think about this moving forward? And the second one is just more on commentary from some of your peers in terms of more modest sales outlook growth over the next 12 months. How should we be thinking about this for Taylor Wimpy?

Okay. So on the sort of 27,000, there's a range of sort of efforts that make up that community. There are some that will be on their way to getting detailed planning permission. And, you know, that's important. Clearly for next year, as Chris and I both mentioned, we've got 90% of our plots have detailed planning permission for next year. So we're in a very, very strong position. And then for some of the sites that are multi-phased, we wouldn't necessarily race to get a detailed planning commission, particularly at a time when, you know, there's sort of markets are potentially changing in order to ensure that we're best placed then to design the mix of those schemes to fit the market. So I'd say, you know, two communities in there. On the sort of wider sort of read across or sort of more modest sort of site opening, I'd really sort of like to sort of lean into that. You know, we're quite confident. We did a huge amount of work as a business, particularly in 2024 around land and also WIPP. I'm really confident in the outlets that we've got left to open at the end of this year. And as we say, 50% of those were already on and building. So we're not reliant on some of the MPPS benefits that we're talking about today. We are in a great position for 2026 with good, excellent visibility. And we're actually in a really good place for 2027 that we sort of own and control all the land for 2027. When I talked to you guys sort of this time last year, I think I did caution you not to sort of plug in too much of MPPF benefit. you know, into this year. And so it's sort of playing out. We had always hoped markets for better, you know, for faster and for it to be more dominant. But, you know, it's playing out broadly as we expected. The first half decisions, you can see they were clearly in submission before the NPPF came through. We are seeing some benefit as to the way councils are determining the I would expect to see a bit more of those early applications coming for determination in the second half. Now, I would hope that they will be approved, but otherwise we'll move on to the next stage, appeal and the likewise, and more again in 2026. So that takes you to really supporting volumes 27, 28, rather than in 25 or 26.

Just two questions for me. First of all, on the dividend, I'm thinking a bit ahead to your October event, I guess. Should we read from that slide that you put up, the last bullet point, kind of saying it's affordable, aligned with a strategy, that we shouldn't expect any change to the dividend policy in the upcoming event in October? You're happy, kind of committed to that. And then second question, just on bill cost inflation, I think you said low single-digit percentages A bit more colour, any change in trends, whether material, labour side, any insight there would be quite interesting.

So, yeah, I mean, on the dividend, no, I'm not expecting any change by October. And, you know, going back to that capital allocation slide, what would sort of... put that dividend under pressure, well, the two priorities that sit before it. So the non-negotiable priority of maintaining a strong balance sheet, we've got a very strong balance sheet and we've got a very strong land position. And the second priority of investing in the business for growth. And we've said really clearly that our current land bank is more than capable of delivering growth from today. in the right obviously market conditions. In terms of bill cost inflation, yes, there's no change in terms of low single digit for 2025. Nearly all of that pressure in the first half really came from materials with suppliers seeking to sort of pass on input cost increases. I think moving into half two, the pressure is shifting a little bit more to labour with, I think, particular pressure from ground workers. They tend to be the first. Yes, but nothing more particular to add to that.

Okay, fine.

To be the first. Yes, but nothing more...

Thanks, Will Jones from Rothschild & Co, Redburn. Three please, first just coming back to building safety and potentially recoveries, have you achieved anything on the recovery front today and just more generally how far evolved are you as a business on pursuing those? The second is just around land mix within margin, I think it was a 50 bit drag in the first half, if I recall Chris in April you We talked about potentially there being more of a help to that in the second. Is that still the case? And how should we think about that potentially building into 26? And I suppose it links more widely to your land buying. And if you are able to be more selective given the land bank length, are you able to just get a little bit more value in the land market based on your approvals? And then the last is just around shared equity. I think there's a couple of the larger companies that have either launched or are about to launch their own scheme. Are you giving that any thought?

Okay do you want to go?

Yeah so in terms of recoveries you know we are obviously assessing and where appropriate bringing claims against those responsible for poor design, workmanship or material failures so yes no recoveries obviously are included in those provision values And in terms of land mix, you write 50 bits negative in half one. And yes, I would expect there to be a sort of a reversal of that, if you like, in half two. So I suppose a net benefit from where we are in half one to half two as we just sort of start to get on a few more of those outlets that we've been opening at a faster rate over the last 12 months. Yeah, I'll take the land.

It's still variable. You know, I think that, you know, as we look into the second half, there's a sense that pipeline opportunity in the market is just easing a little bit, but there's still quite a bit of demand. sort of competition in sort of local hotspots. So we are sort of focusing on where and where we want to invest and what we want to invest in. And we've been focusing more towards the smaller end of sites. On a shared equity basis, we scan the market. We engage in discussions. There's a number of potential platforms that are being presented to the market at the moment. They don't tend, by our assessment, to be particularly good value for the customer. They come with quite you know, a meaningful sort of amount of cost both for the customer and then obviously potentially for Toyota Wimpy. We'll continue to, you know, scan the market, listen to those who are bringing forward sort of platforms, but at this point, it's not something that we're heavily committed to.

Morning. A couple of questions please. First, bearing in mind you said there was a slowing down in Q2, is it possible to split the underlying sales rate of 0.73 for the first half into Q1 and Q2? And the second question is, could you give more colour on your comments and Shane's, you said they were getting longer, have you got weekly or number of weeks comparisons and is it predominantly second steppers, first time buyers going up? Are you further up the chain, second or third steppers, second going up to third steppers?

Okay, I think you'll have the progressive sales.

Yeah, so that's on slide six. If you look at it, it's actually 0.79 in Q1, 0.79 in Q2 to get to 0.79 for the half. But it also shows the, it also has the excluding bulk numbers on there for you as well.

And in terms of colours sort of on chains, look, we don't always have perfect visibility. So, you know, it's really anecdotal in what we're hearing from, you know, sort of our operational business. Because of maybe more challenging affordability in the south, then we are seeing, you know, longer chains and, you know, there's more reliance on, transactions from some of our customers. I mean, in terms of chains, our customer is likely to be the second, third stepper, and therefore our visibility to the bottom of the chain can be a bit opaque and lack transparency. But generally, the issue is traced back to a first-time buyer at the start of the chain. And really that just goes to underscore the importance of first-time buyers to the whole of the housing market ecosystem, whether it's in the second-hand market or in the new homes market.

Thanks for taking my questions. The first will be on the FCA changes for the mortgages. How helpful do you think these can be or unhelpful are my questions. The first will be on the FCA changes for the mortgages. How helpful do you think these can be or unhelpful? And then secondly, I think on slide 10 you've got a 60 bps impact labelled other on the operating margin. How can we think about that in H2 and maybe some indications on what those are? Thank you.

Okay, I'll leave Chris to deal with the 60 bucks. The FCA, the PRA, the permanent mortgage guarantee, they're all incrementally helpful. And then really it depends on individual circumstances. So the FCA, change to stress testing and bringing down effectively the exit rate stress test I think is helpful and the banks have moved quite quickly to embrace the FCA changes and we can see that trickling down through the market. The PRA changes, obviously it's a consultation but there's the ability for the lenders to opt in as an interim or transition period. That opportunity to lend higher loan to income multiples than the current sort of 15% again is helpful. And we can see that, you know, theoretically or on an assessment that will help the customer. But really, you know, all of that is helpful. But really, then it does come back to how the individual customer is feeling and their own view of affordability. And, you know, that is something that we're continuing to watch. So 60 bits.

Yeah so I mean that's typically the whole host of different things but one thing that we've done quite effectively that we targeted for this first half is recovery of rebates and so yeah half on half we've had some success there and other just general cost discipline measures that you would expect us to undertake.

Two questions from me. Can you just return to the dividend for a start on that? I mean, when you're modeling the business going forward and you're sticking with this dividend policy where, if you like, the net assets are stickier than the earnings at the moment, are you heading for cash trap as we start to get into a recovery phase? You put $150 million into working capital, which is about 124 WIP and about 26 land in the first half, and we've seen the cash go down. The question really is when you're modelling the future, what point do you get to a cash trap where you can't really take advantage of any recovery in the marketplace because you haven't got the cash to do it, all other things being equal. So what's going to give in that process, which I think follows on from Ainslie's question. I can ask a second question with regard to building safety. If I look at slide 35 in the appendix, You've increased the provision by 222 million, but you still have 56 properties out of a total of 329 that have been in the remediation basket, if you like, and you're awaiting the report on that. So when you've increased it by 222, have you been looking at the worst case Have you been assuming a level of recoveries? What's going on there? Because with 56 still awaiting a report and a net 20 having gone into that basket in this first half period, it doesn't look promising that this is going to go down at a rate that we were acceptable to the short. But you'd be content with the shareholders should be content with. So can you just sort of help us through what your thought process is about that number and then alongside the number of properties?

So on the dividends, fundamentally we are a cash generative business and the key thing that I was trying to get across was that the size of our land bank as it is historically has supported far, far greater volumes than we're delivering today. So if you apply that to a model going forward, you can see that we can grow into that land bank without any net investment in land. Yes, you would need incremental investment in WIP, but if you run the numbers, there's more than enough headroom, especially in the context of the facilities that we have, to be able to cope with that. In terms of the increase to the cloud, yes, there's a slide 35 that goes through, I think in a fair amount of detail, the movement in the buildings. You can see that we've had movements from receipt of reports where they were previously identified by Chartered Fire Engineers as not needing works under EWS1 they now have been identified as needing work so that's I think is the 37 movement that you referenced and the 56 I mean this is where we we've got experience over the course of certainly the last half where we've been moving at pace to hit the remediation action plan deadlines, we've had a lot of PAS9980 surveys come in and what we are seeing is making us readjust our risk appetite in terms of that provision. So looking at buildings and saying, all right, readjust our risk appetite in terms of that provision. So looking at buildings and saying, all right, if we've had a clean report from a chartered fire engineer in the past under say EWS1 do we think now with our knowledge of PAS 9980 and these reports that we've had more recently do we think that's going to be the case and that is what is driving the 56. In terms of the actual you know the drivers you know our cost estimates for known works are proven to be very accurate So the increase is not due to underestimating previously identified issues. It's also not driven by new buildings. We've only identified two new buildings in the period with associated costs of less than £1 million. So these were known buildings to us. The main driver of the increase is the identification of more cavity barrier defects behind non-combustible bricks and render. We've also seen this evolution in chartered fire engineer assessments, particularly for timber and high pressure laminate, where updated assessments obviously now recommend works where they didn't in the past. And while we've always included allowances for likely works that were, you know, based on visual inspections of buildings that are waiting to be assessed, we've now added a best estimate of 94 million for cavity barrier defects in buildings that have not yet been intrusively assessed. And that should help reduce the risk of further material sort of changes.

Just very quickly on the provisions as well. I think I'm just trying to understand at what point is the risk kind of fully removed for you? You know, are there buildings where maybe you would have previously classed them as fully remediated prior to the assessment and now following the assessment actually they do need works and then so at what point does that risk actually go away or are you in a situation where you're constantly battling, I guess, a moving goalpost? And then I guess also, you know, the longer it takes to fully remediate the portfolio, are you at risk then of, you know, standards continuing to become increasingly harsh and so then, you know, risk of further provisions going forward as maybe assessments continue to, yeah, get harsher?

Yeah okay so have we had properties that were remediated and then are now not remediated because really what I've been talking about today is ones that didn't need any remediation and you know now do. I think from memory that we do perhaps have one of two of those but it's typically where we've obviously we've designed with charter fire engineers and all the applicable experts and removed combustible cladding from buildings and those works have been absolutely fine and we've maybe come to do a PAS9980 a couple of years after that because we've been doing this for quite a while now and obviously we targeted the most high risk buildings at the start of the process So the ones I'm thinking of were, all right, well, you need to take that timber decking off the balcony that wasn't required when we were doing the works. These are not cases where we've stripped a building of cladding, we've put new cladding back and now we're being told to take that cladding off. We have no instances of that. We might have sort of small elements of work that are for those remediated buildings. And yes, standards, in terms of standards, I believe our obligations are pretty well defined and attached to PAS 9980 in the agreements that we've got with government. But yes, I guess there's always some degree of risk in standards moving, but generally, I think that's the point.

They're well established, yes. Thank you. Chris?

Thank you. Good morning. Chris Wellington from Deutsche Neumis. The first one's really just about the confidence and visibility you've got over your land bank. And I do appreciate it's a very big land bank, but we do all know that it's outlet numbers which are going to drive your completion. So with that visibility and confidence, are you very confident we'll see growth in 26 and 27 over the average number for 25? That's the first one. The second one is just about how many outlets have you got dual flags on. I know you've not got the multiple brands, but I imagine there are outlets where you're selling from more than one location on those. And the final one for me is just about adjusted gearing. I think it's one of your kind of capital allocation policies to show low adjusted gearing. Perhaps you can talk through... the sort of bookends of where you would like to be there. And perhaps you can also weave in, Chris, that point about WIC investment for net output growth as well. Is the 10 million you've got on average at the moment a sensible figure for long outlets, or would it be a little bit more than that? Thank you.

Okay. Well, sort of the easy one first.

Long outlets, or would it be a little bit more than that? Thank you.

Okay. Well, sort of the easy one first. Dual flags, not very many at all. So it's a very, you know, very small part of our business. And I'm standing here trying to think of some, Chris, and I can't. I would say less. So, yeah, not sort of a big factor for us. Earlier, I said I'd lean in. I am really confident we have excellent visibility. I'm very comfortable with where we are for the outlets yet to open in 2025. We've got excellent visibility into 2026. You've had both Chris and I talk about how we're standing in terms of detailed planning permission for sort of volumes into 2026. So, you know, and I would, you know, again, reflect on the work that we did in 2024. You'll have seen that in terms of approvals in land, the efforts that we have made through planning, as well as then investment in WIP. And then just a gearing question.

Yeah, so, you know, I get asked the question reasonably regularly and, you know, have resisted giving a number just because we don't want to constrain the business unnecessarily by having to perform to a specific number. We are in a strong financial position with net cash and very low adjusted gearing and if you were to look back over the last decade let's say you would see that there have been periods where we've operated prudently with significantly higher adjusted gearing and I'm not suggesting that they are a target for us but we are some way from that at the moment.

Thanks. Clive Lewis at Bill Hunt. I think I've got three, if I may. Spain, very strong performance in the first half. How good is that currently feeling? And I suppose how much have your expectations increased within, I suppose, the last few months for the full year outcome in 2025? The second one was on pricing. How many of your regions are sort of, I suppose, thinking about prices going up in terms of list prices. And I suppose mix that in with incentives. I mean, we're at that point in incentives where they tend not to go much higher than 5 or 6%. So I'm just wondering whether list prices are moving forward anywhere at all in the country at the moment. And the second one was really on the regional structure and sort of optimum size. And maybe this is an issue for the first of October, but I'm jumping in early and sort of wondering how your thoughts about what the optimum size of each region should be in terms of volumes. And, you know, given historically it's hard to do much more than 10 or 12% growth for the business as a whole. Probably applies to regions as well because they just can't get enough people. But How long do you think it will be before you get to that sort of optimum scale for each of those regions?

Okay. Well, I think that is actually a good indication of some of the questions you might like answered in October. So I think that regional structure, optimum size, we'll talk about when we get together in October. Just going backwards on your questions, pricing. You know, where we think there is the capacity on a site-by-site basis, on a plot-by-plot basis client, you know, the businesses will be pushing price. Where there's the opportunity to take it, it is variable. But, you know, we really do sort of get down to that level of detail in terms of pushing price and incentives. It's the same, you know, it's what we think the customer needs in order to sort of commit to purchase. So if there's an opportunity for us to ease back on incentives in any particular plot or any particular site, then we will take the opportunity to do that. I mean, on Spain, you know, it is a strong performance. I think that we're really pleased. The nature of the developments that we do in Spain, you know, sort of predominantly sort of apartments and sort of villas, their completions tend to come, you know, in sort of in groupings. So strong performance in the first half, we're not expecting to see that into the second half. And then it doesn't matter what country you're in, planning or their equivalent tends to tends to impact, so good performance. We're delighted with Spanish performance this year, but that's a reflection of just the cadence of their developments as they've come to completion this year. The market remains good in Spain. Last year was particularly strong, but it's still a good market.

Okay.

Hi, morning. Sam Cullen from Pilheim as well. Just coming back, I guess, towards the dividend again. I'm assuming you think the shares are undervalued at the current level. Coming back, I guess, towards the dividend again. I'm assuming you think the shares are undervalued at the current level. When would you think that you prefer to return capital via a buyback rather than a dividend?

Okay, Christian, I'll take that.

Yeah, I mean, we have an ordinary dividend policy, and again, I feel like I might be repeating myself, so apologies, but that is very consistent, it's clear, it's differentiated, and it's consistently welcomed by our shareholders. So, you know, our capital allocation policy yet also allows for return of excess cash at the appropriate points in the cycle. We've got a track record of doing that. We will continue to do it and we'll make a decision on sort of specials versus buybacks at those sort of points in time. But obviously, paying a dividend does give shareholders control and those who don't need income have the choice to reinvest.

Okay, I think looks like we're done in terms of questions. So fairly full Q&A this morning. Thank you for bearing with us and just a little bit warmer than usual. So thank you. Clearly the provision is disappointing, but we're pleased with our first half performance and the underlying sort of business performance. And look, I think that we've still got lots of value to unlock. And on that note, I really look forward to seeing you on the 1st of October and we'll try and regulate the heat just a little bit better. Thank you.