Barratt Redrow plc (BTRW) Earnings Call Transcript & Summary

Good morning, everyone, and welcome back. I think we may have had 2 or 3 join us. So welcome, please, to those who've joined for the second part of today. Again, just for those actually in the room, please do put your phones to silent, if you could please, or switch them off. We've now got a couple of others together, where David, Steven, Mike and Matthew will give you an update on the new business, it's distinctive brands, its unique proposition and the plans for growth. We'll also update you on our synergy progress, our medium-term guidance and the new capital allocation framework that was published this morning. We'll also make sure there's plenty of time at the end for questions and for anything as well following on from the half year results where people didn't have the opportunity. Finally, and I hope you all had a chance to chat over in the atrium, we are going to go back over there afterwards. So please do come over to follow-up with questions for any of the people who we've got here today. It's a great opportunity to talk to the people with strength and depth who actually run the business here inside Barratt Redrow. With that, I will then now hand over to David. Thank you.

Thanks again, John. It's good to see you all again and those that have arrived. So I think I'll just start and say that for me personally and for Barratt Redrow, this is a -- it's a big and it's an important meeting for us. It's the first opportunity for us to really give a full update to our analysts and the investor community since we became Barratt Redrow. I'm really looking forward to it, and I know that the team are really looking forward to showcasing our new business, outlining what we believe is a unique proposition and also exploring the opportunities that it creates. So we're going to provide updates on several topics during the course of this morning. But we really want to focus on 5 key takeaways that we believe represent the strength of our unique proposition, and they put us in the best position to deliver both growth and value for all of our stakeholders. So firstly, the long-term market fundamentals are extremely strong. Demand continues to outstrip supply, and we have a government who are committed to getting houses built as part of their growth mission. We recognize that affordability is challenging, but we do see that market conditions are improving. Secondly, we continue to put the customer at the heart of everything that we do. It is in our DNA, and we have an unrivaled record of quality, service and sustainability. Our portfolio is one of well-known leading brands, which is providing a range of high-quality choices for customers at every stage of life. Thirdly, we've always worked hard to be the partner of choice for other organizations and also for our employees. Strong relationships help us to be flexible and adaptable to changing market conditions. It helps us to gain insights and stay ahead of regulation, and they allow us to attract and retain the best talent in the industry. Fourthly, we have the foundations in place for significant sustainable growth and improved profitability. We have a strong land pipeline, with the right mix and balance of both strategic and immediate land opportunities. This pipeline is further bolstered through our established joint ventures through Gladman, through the MADE Partnership, which is a uniquely positioned master developer that was established just last year. And lastly, this is all underpinned by a strong balance sheet, providing the financial stability that we need to deliver sustainable growth. Given these strengths, we are confident that we are best positioned in the sector to capitalize on the improving environment. So let's first look at the market fundamentals before the rest of the presentation addresses our other 4 key takeaways. So the underlying market fundamentals are very strong, and conditions are improving. There is clearly a high demand for housing in the U.K., following years of undersupply across all tenures. The labor government has been vocal about the housing crisis, and is taking strong action to reshape the planning system, to try and deliver the homes and the economic growth that the country needs. They have moved swiftly to change the national planning policy framework and to introduce the concept of grey belt. They have also taken strong public decisions to unblock stalled infrastructure and housing developments. We recognize that this will take time to feed through into supply numbers, but these are clearly very positive steps that will help to improve a system that has suffocated supply in recent years. For the customer, the market has been volatile and challenging, and affordability is clearly a barrier. But inflation has stabilized, and whilst the timing and the pace of future interest rate reductions can be debated, it's clear that there is an expectation that bank base rates are going to fall towards 3%. Small movements in the base rates can have a positive impact on confidence, as we saw when the Bank of England reduced base rates last year. As we've highlighted, Barratt Redrow is best placed to capitalize on these market fundamentals. We build high-quality, well-designed homes in really great locations for a wide variety of customers, with different price points and different tenures. We have multiple land acquisition channels and the divisional infrastructure exists, and we have a timber frame capacity that we can scale up for delivery. And we have a strong balance sheet, ready to make the most of attractive land and planning opportunities as they come forward. We have demonstrated over many years that we are reliable. We have a track record of operational delivery. We do what we say we will do. Now just to look briefly at our combined business. Barratt Redrow is clearly the combination of 2 leading companies coming together to form an exceptional U.K. homebuilder. We both have long and established track records, building hundreds of thousands of high-quality homes across the country. And we have industry-leading reputations established over many decades. This combination puts us in a strong position for significant growth, with a medium-term target to increase volumes to 22,000 homes a year. We have very talented, engaged and experienced people, exceptional build quality, excellent customer service and well-designed homes in places that our customers want to live. This is why we have been a 5-star housebuilder for so many years. You will have seen some of these statistics before, but it is worth outlining them again. They do not happen by accident. They are the result of the hard work, experience and expertise of all of our employees every day. As I've said, our industry-leading reputation has been decades in the making, and we take pride in the credentials that set us apart. On quality, Barratt, David Wilson and Redrow site managers won 111 NHBC Pride in the Job Quality Awards last year. More than any other competitor for 20 years in a row. These are the most respected industry awards for site managers, and they are a hallmark of quality. We have been a 5-star homebuilder, which means more than 90% of our customers would recommend us to family or friends, and we've held that for 15 consecutive years. No one comes close to this record. Finally, respected independent benchmarks such as NextGeneration and CDP, underlying our position as the U.K.'s leading national sustainable housebuilder. Matthew will talk about our brands in a moment, but whichever brand they are buying for, we strive to deliver a sector-leading experience for all of our customers at every point of our journey. We provide potential customers the widest choice of high-quality homes at the best locations to meet their needs and their aspirations. Potential customers can see that not only are we a 5-star homebuilder, but all of our brands are rated excellent on Trustpilot. Then when a customer does decide to buy with us, we offer a variety of schemes to suit their circumstances. These schemes include part exchange, discount schemes for key workers or armed forces personnel or innovative products such as Own New - Rate Reducer or Deposit Unlock. Our developments are built on industry-leading design and place-making principles, ensuring that we help to create happy, healthy and diverse communities. Bringing Redrow into our business also brings a new dimension to our proposition. Redrow has very strong place-making credentials, with premium homes for modern living. Their life range, for example, which includes a 3-bedroom designed home on a 4-bedroom footprint is particularly popular with downsizers. On that note, I would like to hand over to Matthew, who will talk to you about our leading and distinctive brands that will help us to achieve our ambitions.

Thank you, David, and good morning, everybody. The key driver behind the creation of Barratt Redrow was to bring together 3 leading brands to create the unique proposition for customers at every stage of life. This is also a unique offer within the sector, unlocking the widest possible customer base and providing significant benefits for the business too. Here, you can see an overview of our brands, each with distinctive audiences and a clear architectural style. Barratt provides well-designed homes at excellent value, perfect for first-time buyers and for young families. David Wilson Homes, with its larger properties and high-quality fixtures and fittings, suits growing families, mover uppers and those buying at higher price points. Redrow offers a premium product perfect for downsizes or customers looking to buy the executive home. To bring the brand to life, I'd like to show you a short film. In it, we asked our sales teams to share what the brands stand for, and for our customers to talk about what it's like to live in a Barratt, David Wilson, or a Redrow Home. [Presentation]

It is great to hear our customers talking about how much they love their new homes and the difference it makes to their everyday lives. We regularly gather customers' feedback to help improve our homes, our places and our service, and we track what customers think of us compared to our competition. On the slide here are the findings from a current infield research project, which has so far surveyed around 1,500 people in market consumers. This has been carried out by one of the U.K.'s leading market research companies. Participants were asked to rate our 3 brands, as well as that of our 3 closest peers across 13 key areas such as design, quality and service. Redrow and David Wilson beat all 3 other brands in 12 out of 13 categories, and Barratt, 11 out of 13 categories. Here, we have pulled out our 4 of these categories that we are particularly pleased to be recognized for, and in which we have satisfactorily significantly leads -- sorry, statistically significant leads. We are proud of these results and glad that potential customers consistently recognize and trust our brands and see the benefits of buying a Redrow, Barratt or David Wilson home. For the customer, having such a strong collection of leading brands means they can find the perfect home that will fit their specific needs. It means we're helping create diverse communities. For us, the ability to deploy our full range of brands on a development means we can access that wider customer base, so we can also drive higher sales rates and higher volumes. On larger pieces of land, where it makes sense to do so, we can dual or even triple brand sites. This means once we have invested in the upfront infrastructure, we can open 2 or 3 outlets to accelerate build and sales rates. This improves the viability of larger sites. It enhances asset [ churn ], accelerates cash generation and improve return on capital employed. Ultimately, this approach creates choices for customers, better places for communities to grow and strong returns for us and our shareholders. Historically, Barratt and David Wilson have dual branded their sites many times over many years. They are experienced at it, and have proven that it works. Adding Redrow to the brand portfolio will strengthen this offer further. To bring this to life, we prepared a short animation that illustrates the benefits of deploying multiple brands on the development. [Presentation]

I hope this section has demonstrated the strengths and benefits of our multiple, high-quality and distinctive brands. I'll hand back to David now to talk through the importance of our relationships.

Thanks very much, Matthew. So look, we've always prided ourselves on being the partner of choice. With like-minded organizations, we see that throughout the value chain, we have some really fantastic partners. So the benefits of strong relationships are very clear. Firstly, it allows us to diverse -- to access a very diverse pipeline of land. We buy more residential land in the U.K. than any other business, and our excellent land and planning teams are constantly out, identifying and bringing forward land in high-quality locations. In addition, Gladman, the MADE Partnership and existing joint ventures open up multiple land acquisition channels. So this gives us optionality, and it also gives us flexibility. Next, we have our supply chain, a critical partner in delivering homes and services to the standard that we and our customers expect. We have relationships with suppliers that go back many decades, and we're pleased that Redrow's 40-year history with Ibstock is joining that list. We've grown together with our supply chain, navigating many market cycles and the unprecedented challenge of the COVID pandemic. We appreciate that establishing strong, genuine relationships requires many years of trusted working together and a long-term focus, and we believe that we do things differently. For instance, we're the only housebuilder to have held a supplier conference over the last 15 years, bringing together our key supply chain partners to share our targets and our plans so that we can all be as aligned as possible in terms of delivery. Strong relationships with our supply chain is clearly mutually beneficial. For example, in the Z House, we worked with over 40 suppliers, giving them an opportunity to innovate and test products. And for us, the opportunity to understand how we can build the homes of the future. Moving on to our people, being an employer of choice allows us to attract and retain the very best talent in what is a competitive market. We provide learning and development opportunities across all of our operations as well as bespoke programs to encourage and nurture diverse talent. This is good for our people. It's good for our customers, and it's good for our business. As the largest homebuilder in the U.K., we take our responsibility seriously, and we are investing in the next generation. Across the group, we have over 500 apprentices, trainees and graduates covering the trades and a range of disciplines. This develops the future talent that we need as a business and the future talent that our supply chain needs. Before the creation of Barratt Redrow, both businesses ran very successful engagement surveys, with high scores around 80%. It has been pleasing to combine 2 companies that value their employees so highly. This commitment sets us apart, and it is reflected in the employee ratings on Glassdoor, which places us well above the industry average. Finally, it is worth highlighting here our strategic partnership on Lloyds Living, the private sector rented offer from Lloyds Banking Group, and also our long-standing relationships with many affordable housing providers. It is also worth underlining that we are able to bring our offer to customers in parts of the U.K. where they are currently underserved. For example, Redrow does not have a presence in the Northeast of England or in Scotland. Before we hear from some of our partners, I'd like to explore a few more of these partnerships and their benefits in more detail. The MADE partnership is a uniquely positioned master developer, created through a joint venture with Homes England and Lloyds Banking Group. MADE will create the best new places in towns where people aspire to live. This means thoughtful place making, plenty of public and green spaces alongside community infrastructure. It will use its distinct offer, expertise and funding to enable new towns and support local authorities with large scale development of thousands of homes. These are clearly long-term projects, but the partnership helps us to access land at these emerging communities. While early days, MADE is already working on its first development, the 2,000 home Godley Green Garden Village in Greater Manchester, and we look forward to more plans in the future. On suppliers and innovation, we have an established partnership with the University of Salford. Here, we built and tested the Z House, a unique zero-carbon concept home that went well beyond the future home standard. As I mentioned, working with 40 supply chain partners, we tested new building techniques, low-carbon technologies and track the customer experience of living in a sustainable home. We took some of the findings from the Z House into our next project, Energy House 2.0, also at the University of Salford. This house sits in a climate-controlled chamber, large enough to contain 2 detached houses to test the homes of the future for changes in temperature in relation to both high and low temperatures. I know that many people in the room today are amongst the more than 4,000 visitors that have been to Energy House, to see the homes and experience the weather. We are applying lessons from these projects to new developments, building energy-efficient new homes that work for our customers. This also means that we are well prepared for when the future home standard is published later this year. As I mentioned, we have a strong relationship with a whole range of suppliers, all of which are very important to us. But one relationship that I'd like to highlight is the one with Ibstock, with whom our relationship has only been strengthened by joining forces with Redrow. Redrow's partnership with Ibstock spans over 40 years. Over the years, they have helped Redrow to create the arts and crafts architecture that Redrow is known for. These homes traditionally have tiled sills. But these can clearly be tricky to fit and lack robustness. Working in partnership, Ibstock and Redrow have created bricks that look like tiled sills, but overcome these issues. Before Steven takes you through the current land and planning position, I'd like to hand over to some of our partners, who, in the short film, will share why they choose to work with Barratt Redrow. [Presentation]

Thank you, David. We're very proud of our strong relationships, many of which span back over 30 years. They are a long time in the making, and give our suppliers reassurance that they are working with a strong, reliable business. And they give us a commercial advantage, sometimes through pricing, innovation or through certainty of delivery when resource is scarce. In this next section, I'll cover off our current land bank and pipeline, the planning environment, our strategic land position and our continued land and planning strategy. I'll then conclude by looking at how we're ready to capitalize on our land bank and support growth. Our current land bank is in a very strong position at nearly 100,000 plots. Our land pipeline is equally strong, with our strategic land bank of almost 150,000 plots. And additionally, we have Gladman, our land promotion business. We acquired Gladman in 2022, stating at the time, we plan for it to deliver 500 incremental completions for the group each year from FY '25. And we're well on course to deliver this, with, on average, almost 700 plots a year acquired from Gladman since 2022. Planning is an area that has had a huge amount of attention in the last few years. You may remember the National Planning Policy Framework, or NPPF, was introduced in 2013 under the coalition government. And as you can see from this graph, the effect was immediate, with permissions rising roughly 80% over 4 years in a market supported by Help to Buy. However, in 2021, amendments were made to the planning policy, which caused permissions to fall back. As David outlined earlier, the government has reshaped the NPPF to support their commitment to build 1.5 million new homes over the course of the parliament. Additionally, opening up sections of the green belt and increasing local housing targets will give us even more options when sourcing land. We do need to be mindful that these changes will translate into increased housing delivery immediately. However, if maintained, we expect the long-term impact of the changes to be very positive. This positive planning backdrop presents the best opportunity for decades, for the conversion of strategic plan. Barratt has a significant strategic land bank, which has been made stronger by the acquisition of Redrow. The combined strength of Barratt and Redrow strategic land means that we expect our strategic land pull-through to more than double in FY '25 and '26 when compared to FY '23 and '24. One of the other benefits of strategic land is the greater flexibility around drawdown once planning is in place and with a discount to market price agreed when exercised. And as an added bonus, strategic land generally provides an improved margin of instant land, typically around 3%. Having said this, we must keep in mind that the planning applications still will take time to work their way through the system, which remains under resourced. Our land bank target remains at 3.5 years owned. Our current gross margin hurdle rate is 23%. Thanks to our enhanced scale and synergies, we'll be able to increase this hurdle rate to 24% once cost synergies are unlocked, without compromising on our competitiveness. Our return on capital employed hurdle rate will remain at 25%. As Barratt Redrow, we have a unique opportunity in land buying, as David has spoken about. Plenty of our land is still acquired through the traditional route, with our divisional land and planning teams constantly bringing forward high-quality land opportunities. And as Barratt Redrow, we've increased our land buying advantage with larger sites, from which they have generally fewer bids, and these have become much more viable for us. This, in addition to the Gladman and MADE Partnership land acquisition routes, gives us a great advantage. We believe our current and future land bank has unique ingredients that will allow it to help perform the sector and deliver our volume aspirations. First, our current land bank. As the cost synergies from the acquisition unlock, they will improve the margin embedded within the current land bank, particularly the procurement synergies. And as we heard from Matthew, revenue synergies will aid in increasing the return on capital employed, allowing these sites to perform better than anticipated on purchase. Moving now to our future land bank. Our diversified land pipeline gives us an important advantage in sourcing the most attractive land deals, ensuring the best returns possible in locations our customers want to live. Through the relationships we have forged and our wide brand portfolio, we have the flexibility to ensure that brand and tenure mix on each site is best suited to the customer base expected. And this allows us to unlock the maximum potential return for the site. As mentioned, the increased hurdle rate, once cost synergies are unlocked, will benefit our future land bank. And we believe these factors allow our land portfolio to stand out from the rest. Our strong land position, alongside our expanded divisional network, gives us the foundation we need to grow. And we've been preparing and investing for growth over the last few years, for example, through our acquisition of Oregon Timber Frame in 2019. Since then, we've expanded the original factory in Selkirk and opened a second factory in Derby in 2023. We built almost 30% of our homes in FY '24 with timber frame. Most of our Barratt house types as well as the smaller end of the David Wilson range are designed for and are now able to be built in timber frame. Building in timber frame reduces our reliance on bricks and brick layers. It reduces the time taken from foundation to completion by up to 40%, while maintaining quality, thanks to factory conditions. Timber frame, however, is just one example of how we're trying to future-proof our business. We have an innovation team constantly looking at ways in which to improve our products and improve our build process. This forward-thinking mentality is key to pushing our business into the next chapter, and growing to 22,000 homes a year. And with that, I'll hand over to Mike to discuss our growth plans.

Thanks, Steven. So in this next section, I'm going to take you through our growth plans for the medium term, by which we mean, really the next 3 or 4 years. And while we're excited and ambitious to grow our business, we, of course, remain committed to running a strong and resilient business in the medium term. To maintain the financial strength of the group, our growth plans are underpinned by 3 financial priorities. Our first priority is delivering the synergies that we promised, including both the cost synergies and the revenue synergies from incremental site openings. And in a moment, we'll look at the progress we've made so far on those synergies. Our second priority is sustainable growth. Our growth has to be supported by a strong balance sheet, and it must be at a rate we can sustain without impacting either build quality or customer service. And our third priority is margin improvement. In recent years, our operating margin has been significantly reduced through a sharp fall in volume, high cost inflation and the increased need for these customer incentives. And so we're focused on returning margins to a higher level through a combination of disciplined land buying, delivering our promised synergies and increasing volumes to drive improved fixed cost recovery. So turning now to cost synergies. Our procurement synergy program is progressing well, and we've had a lot of engagement in a positive way with our supply chain, and we feel confident in the synergy figure of GBP 34 million in this area. Secondly, since October, we've closed 6 divisional offices across both businesses. And this week, we've announced consultations on the closure of a further 3 divisional offices, which takes us to the total of 9 that we announced back in February 2024. Together, this divisional restructuring is now expected to deliver GBP 36 million of synergies on an annualized run rate basis. Thirdly, some central and support functions have already been realized by combining PLC costs such as insurance and borrowing facility fees as well as board rationalization, amounting to a run rate saving of around GBP 8 million, with a further GBP 22 million identified. So a good progress to date on synergy identification and realization means that today, we're increasing our targeted synergies from the deal from the GBP 90 million originally expected, to GBP 100 million. And as well as the ongoing work on cost synergies, we've also made good initial progress on revenue synergies. As you can see from the map on the slide, the sites to deliver the 45 incremental outlets have already been identified, and our teams are now working hard to move forward with planning applications to bring these sites through into production. In line with our initial expectations, we expect to open the first of these new outlets in the first half of FY '27, so that's in around 18 months' time, with the first completions coming in the second half of FY '27. And as a reminder, we expect these 45 incremental outlets to deliver between 900 and 1,000 units per annum going forward. The sites we've identified, as David said, also help us to achieve our objective of opening Redrow outlets in parts of the country where it's not currently represented, such as Scotland. So we built a business capable of delivering 22,000 homes per annum from our 32 division national footprint. We're committed to working towards this in a controlled, sustainable manner, with a sensible organic growth rate factored in each year and with the benefit of the 900 to 1,000 units from revenue synergies. To be clear, in our plans, we're not factoring in any material improvements in market conditions or any demand-side stimulus being introduced. From our current position of around 400 active selling outlets, we expect our average number of outlets to grow to between 475 and 525 outlets in the medium term. And we're confident that the scale of outlet opening is achievable. It's similar to the levels that we delivered after the global financial crisis, and it will be further supported by the current positive planning backdrop. We're not proposing to pursue growth at any cost. We'll maintain our disciplined control of the business, and we'll only pursue opportunities that help us to meet our financial targets. And as we've said before, we believe that growth rates of up to 10% per annum for the business allows us to grow at a strong pace, but without compromising on quality or service. As you know, in recent years, our gross margin has been heavily impacted by the macroeconomic backdrop. We've seen build cost inflation of around 35% since 2020. Volumes have been significantly lower than normal, and we've offered sales incentives of 6% to 7% to drive our volumes. The combined effect of these factors has reduced the gross margin embedded in the land bank to 18.3%, as you saw earlier, although we have seen some recent improvement in that position. As we grow volumes, we'll replenish this land acquired -- with land acquired on better terms, and we're confident that our gross margin will see sequential recovery as we move through the next few years. However, the recovery of margins won't happen overnight. It will come through the disciplined application of our acquisition hurdles, increasing completion volumes and delivering the procurement cost synergies. And so our medium-term target for gross margin is to increase to over 20% in the medium term. Over a longer time frame, obviously, we expect gross margins to revert to our acquisition hurdle of 23% or 24% once the procurement synergies have been realized. And we're also focused on improving our return on capital. So we've just talked about gross margin improvement, which will in turn feed through to improved operating margins. But we're also focused on increasing asset turn. The combination with Redrow will help us to use our land bank more efficiently, thanks to the flexibility we have to deploy our 3 high-quality brands across the country. And we also have more opportunities to deploy PRS onto our sites, which helps us to improve build speed. We can see PRS volumes growing to 10% to 15% of the group's total over time. Now having said this, I have to stress, we've always delivered a mix of private, affordable and PRS units on our development, so we're not signaling any material shift in this today. Return on capital will also benefit from a return to using normal levels of land creditors within the portfolio, and we'd expect this to increase to between 20% and 25% of the value of the land bank in the medium term. And the combination of all of those factors will help us increase return on capital to above 20% in the medium term. So we talked a lot about growth plans and our expected improvement in financial metrics. So this slide recaps on the key pieces of guidance. So outlet growth from our FY '25 average of 400 outlets to between 475 and 525, which includes the 45 revenue synergy outlooks. This, in turn, drives our medium-term volume target of 22,000 homes per annum and our increased volumes aid our efforts to increase operating margin, alongside resetting the land bank gross margin and unlocking cost synergies of GBP 100 million per annum. Land creditors will increase from around 12% today to 20% to 25%. And finally, return on capital will increase to above 20%. As you've seen this morning, we're also making changes to our capital allocation framework. So I'd like to spend a few minutes talking through our approach. We've set out 3 clear and complementary capital allocation priorities. First, and most importantly, as we mentioned earlier, we're committed to maintaining a strong balance sheet throughout the cycle. This gives us the solid platform from which we can invest in the growth of the business. We'll deploy capital to profitable growth first, leveraging the land opportunities that Steven has just outlined. And then we'll look for other opportunities, perhaps in the supply chain or through further innovation, so we could be investing in land, new facilities or new initiatives. And having looked at these opportunities, we'll then return excess capital to shareholders, including our commitment today of at least GBP 100 million per annum in share buybacks and GBP 50 million coming in the second half of this financial year. We believe this is the best long-term framework to ensure the business remains strong, grows at a sustainable rate and delivers value for our shareholders. So how do we think about maintaining balance sheet strength? The bars on the right-hand side of this slide illustrate how our balance sheet structure has evolved, both pre-pandemic, during the COVID period, post COVID period and today. Out of necessity, we became more conservative, holding higher levels of cash to mitigate market uncertainty through the period from 2020 to 2024. We now expect to hold less cash on the balance sheet, but we do still expect to be cash positive on average through the year. We're obviously mindful of short-term land payments and building safety commitments, but with a committed facility of GBP 700 million out until 2029 and modest average net cash, we're satisfied that our balance sheet remains strong. We do expect some net indebtedness, including land creditors, but we will not be borrowing to fund the next phase of our growth. And we have a strong track record of investing in growth. As you've heard today, in the last few years, we've acquired 3 businesses: Oregon, Gladman and now, Redrow, which are key to our strategy and the ongoing success of the group. Each of these acquisitions is performing well, and has added to the group's market-leading position. We've invested in our own capabilities, such as the GBP 40 million investment in the new timber frame factory in Derby that Steven recognized earlier, and that capitalizes on the skill set we acquired with Oregon. But fundamentally, we need to keep investing in new land. It's our key raw material, and we expect to spend between GBP 1 billion and GBP 1.3 billion per annum on land over the medium term, as well as the work in progress we need to drive the growth in sales outlets. So as we look forward with confidence to growing the business over the medium term, we've also revised our approach today to shareholder returns. Firstly, we remain committed to paying a regular ordinary dividend. At present, our dividend is based on cover of 1.75x adjusted earnings, and that's before the impact of any of the purchase price allocation adjustments. And as promised, this will remain in place for FY '25. And then from FY '26, that cover moved to 2x adjusted earnings on the same basis. And we do expect our annual cash dividend to grow each year in the medium term, even after adjusting cover levels. We've also announced today the commencement of that ongoing share buyback program. This will be a minimum of GBP 100 million per annum, and we'll review the level regularly based on our expected cash generation. And as I said earlier, we'll begin the buyback shortly, and we plan to commit GBP 50 million in the second half. So overall, we believe this mix of shareholder returns will help us to maintain our disciplined approach to capital allocation. So thank you very much, everybody, for your time this morning. Hopefully, you're as excited as we are and the management team is to deliver on these plans. And now David, Steven and Matthew will rejoin me on the stage for Q&A to wrap up. Thank you.

Great. I guess we'll start at the front again -- sorry. I will go to the back here after this one. Gregor?

Two simple one, one a little bit more complicated. So the first one on sort of your midterm time frame, if you could just give us an idea what you mean by that? In 3, 4 years, is that kind of ballpark? Second question is you now sort of signaling you're prepared to go to a net geared, you're prepared to put a percentage on that number. And in terms of the -- I haven't quite worked it backwards yet. But in terms of the capital employed today, kind of back solving to what you're saying to get to a 20%, are you saying you're going to release capital? Or is it sort of a stable capital employed position compared to where we are today? And I guess the sort of follow-on from that is, I guess it does imply kind of a few years out that the cash builds quite materially. Are you basically with the gearing target suggesting you would then accelerate shareholder returns materially?

Gregor, thank you. So if -- maybe I just have a couple of opening comments and I'll pass on to Mike to pick out the pieces. But just -- I mean, so midterm 3 to 4 years, that's what we're talking about first thing. And the second thing is I know there's this debate about balance sheet strength. And I personally have been very, very focused on balance sheet strength. I joined the business when we had GBP 1.3 billion of net debt. But the reality is there's a fundamental difference between land creditors and bank debt. So I think Mike was quite clear that we're going to run a net cash position, and we are conscious of land creditors, but we don't see that we're running a net debt position. Mike, do you want to?

Yes. So I think -- I mean, the key thing is really a strong balance sheet, but still flexibility to invest in the opportunities that we see ahead of us. So I mean in terms of sort of net gearing percentage, we're not going to set a particular range for that at this stage. I think we'll see -- Steven talked about there a lot of strategic land opportunities coming through. We've got lots of opportunities to grow the business, and we're focused on opening outlets and so on. So we don't want to constrain the business. But I think what we are doing is signaling that over the next few years, we'll be returning to kind of normal levels of balance sheet structure that you would have seen pre-2020. And in terms of the capital employed position, I mean as the business grows, capital employed will grow. But the way we're thinking about that in the short term is that really, a big part of it will come from reducing the land bank length and bringing through strategic land work in progress. But we do expect to generate cash through the plan, you're right. And the reason that we set the share buyback is a sort of a minimum of 100 million. And so it gives us the flexibility as we move through the plan to think about how we want to deal with that excess cash and whether we're reinvesting in growth or some of the other opportunities that you've seen this morning or we would have the flexibility to increase the buyback at that stage. So I think we'll keep that under review closely as we deliver the growth over the next few years.

Great. Go to Ami at the back there, just conscious where we go.

Ami Galla from Citi. A few questions from me. The first one was on multi-branding and the gains that you touched upon on asset turn. I wonder if you could explore a little bit more in terms of the premium that Redrow has? Is there an opportunity to enhance the gross margin or the price premium on the multi-branded side? And as a result, the embedded gross margin that we see in the land bank today, is there an opportunity to really build on that if you are able to deliver a better gross margin on the Redrow plots in that multi-branded approach? The second question I had was on really processes and how you do things differently in the combined business versus historically, what processes such as planning or sales or admin, what process are -- will be more centralized now? And what are functions, which typically will always be decentralizing the combined business? And the last question was just on the WIP investment that you touched on the medium-term targets. At what point in the time scale do we kind of get to that normalized level of WIP? Is it quite aligned to the opening, i.e., it's FY '27, which will be the big WIP investment year? And from there onwards, we would expect a more normalized run rate there?

Wow, there's quite a lot unpick there. So Michael pick up in terms of normalized level of WIP, I mean. Look, I would say in terms of deploying Redrow and having 3 brands rather than 2 brands, I don't see that as primarily driving a gross margin improvement. I think that is much more about the efficiency of the land bank and the return on capital employed, providing a wider range of house types to the customers, increasing the rate of sale and so on. So I think that's a key thing. And the way I would look at it, which I've said previously is that, I would look at it in terms of the number of outlets against the number of plots in the land bank. That land bank efficiency ratio is fundamental to us and has always been very important to us. So if you have a site where you've got 400 plots and you just have one brand on that site, then clearly, your efficiency ratio is going to be low, whereas if you can have 3 outlets on that site or 2 outlets on that site, you're going to have a much better efficiency ratio. And I think that's something that Barratt has always prided itself on. And I think discussions we've had with Matthew, you can see that the Redrow land bank can be more efficient with more than one brand. So that's the kind of key point. In terms of centralized and decentralized, I think just at a general level, very interesting, that Redrow will do some things differently, we do things differently from each other. So I think what we want to do is to really look at what do we think is the best way to operate and that for any business is an ongoing process, how can we better deploy technology, what can we do more at a regional or a group level, at a divisional level and that inevitably will just be an ongoing evolution.

And then I think in terms of investments I mean, as you've seen from the first half cash flow lots of money going into work in progress and land as we get ready to open those outlets through the next 12 to 18 months. So I think that will continue through the second half of this year and into FY '26. If we then stabilize at 22,000 units, then you would expect that to, as you say, normalize at a level, but obviously, as we get to the end of the plan period, then we need to think about what the aspiration is in the future, which obviously we're not talking about today. But I think certainly, there will be more investment in land and WIP to come over the next 12 to 18 months. So we've set out what is actually quite an ambitious sales outlet opening program up to 475 to 525 from 400 today. So obviously, you need to put the WIP and the infrastructure into be able to open those outlets and then we'll see the cash flowing from that through the back half of '26 into '27.

Charlie Campbell?

It's Charlie Campbell at Stifel. Probably a few questions, but just one train of thought really. It's just around the sustainability of 22,000 units a year. Clearly, something that's never really been done before. And I guess the reason that people have struggled is that you just struggled to get on enough good markets really to sustain that. So first question is really about the sites. So you've given us a kind of a target of 500 sites that you want to be on. How many locations is that? When should we think about on average, dual branding and therefore, that's kind of 250 geographic locations? Or is it a bit more than that? Just to understand how many individual housing markets you're looking at?

Okay. If I sort of go on that. I mean, I think 2 parts to that. So one, I think in terms of how sustainable is it? I mean, you touched on it because it's broadly about how sustainable is the market. I mean, on a pro forma business -- a pro forma basis, the combined businesses delivered 24,000 units in 2022. So I think we understand that we have capability to deliver 24,000 that's demonstrated. But I think if you look at where we're coming from in terms of 17,000 units, then I think '22 is quite an ambitious growth target. If you look at the planning backdrop, I mean, I don't other than agree with Steven is that I've been here 15 years, Steven has been here a bit longer. But what we're seeing from government is not something that we've seen before. And I would emphasize as I touched on in my presentation, it's not just about residential planning. It's about all planning. So I think there is a real momentum that planning could change, and therefore, land will become more fully available. In terms of the outlets, I mean, I think Mike sort of talked through it. But what I would say is that, first of all, we've got really good visibility. So bear in mind, we're coming from 400 outlets presently. We've identified that and have committed to 45 outlets, which clearly, by definition, are shared sites coming from sales -- synergies and therefore, all we're doing is building from that 440, 450 sort of level of sites and saying that we're confident we can grow the business at 5% to 10% per annum. So inevitably, it will be a bit of everything. We'll end up with single branded, dual branded and triple branded sites. And we'll be very focused on that efficiency ratio in terms of making sure that we don't have large sites that are single branded or very large sites that are only dual branded.

So you talked about having kind of differentiated locations and being in the best locations. I just struggle with the idea that there are 400 good locations in the U.K. at any one time. I mean, that's sort of where I'm getting at, and that's where other people have struggled with, isn't it? But if we think about prime versus secondary versus tertiary, we're always told to stay out of tertiary location because you can't sell in the downturn. So you need to be in the primary and secondary. And just how many of those are there in the U.K. because I can't get to 525. So that's why I'm asking about how many locations you need to be dual headed on?

Yes. I mean, I think the point, Charlie, is we are very diversified across the country. So we've got businesses operating from Aberdeen right down to the South West and [indiscernible] and from Norwich across into South Wales. So we've got that national coverage that lets us access all of the locations across the U.K. I think we'll get to 525 -- the 475 to 525, I think there are plenty of good locations. And you come back to some of the market fundamentals that David talked about in his presentation. The market is structurally, there has been an undersupply for such a long time that the demand for housing across the country is strong, and I think that underpins the growth plan. And we've got the best land teams in the country through Gladman, through the strategic land teams across the country, and each division has an individual land team. So we've got people who will find the right locations for us to be in. And I think structurally, the market means that, that demand is there to underpin it. So I think we're all confident that we'll be able to deliver those outlet numbers. And I wouldn't get too hung up on is it single, double, triple, not least because I haven't got the number in front of me, but I think we'll use the brands in the right way for the sites that we acquire. And obviously, as we tend towards slightly larger sites, then there'll be more opportunities to do 3 brands. But the key point really is the flexibility to deploy the brands in the right way for the right location, I think.

The same theme, if I can. So 400 sites now, getting up to 500. So you need another 100 site managers, you need 25% more site managers. We've always been told that's a big constraint finding good site managers. Clearly, you've got lots of good ones already. But how do you find 25% more site managers in a difficult labor market?

Again, probably 2 parts to that, Charlie. I mean, first of all, there is no question that skills is a significant challenge. And equally, site management is an absolute key role within the industry. So first of all, we've seen a backdrop where overall industry site numbers have fallen. I consider that we are in a fairly unique position in terms of having line of sight of growth in our site numbers, but that's not a bad position to be in when the overall industry position is falling. And secondly, we've got really fantastic programs. I mean, I'm not going to go through them all, but I would call out particularly our ex-armed forces personnel program in terms of training of site management. We've got a huge number, both in Barratt and Redrow of a print -- of assistant site managers coming through in the business. So we do see skills as a constraint, but we don't see skills as a constraint in terms of the sort of steps that we've got in our site program.

Clyde Lewis of Peel Hunt. Apologies, 3 again, if I may. Just around the margin, you're sort of talking about the 15% operating margin but also the 24% GM for land. I'm assuming there's a time mismatch because I'm not expecting you to be running with 9% operating costs, but maybe you want to just confirm that. And then related to that would be, well, if the medium term is 3 to 4 years and you're looking at the 15% stroke, 20% GM, when do you get to that 24% GM? Is that 6, 7 years out? That was one. Joint ventures, are they likely to be a bigger feature of the business going forward around the partnerships, BRS, I suppose, and sort of, again, I suppose, what sort of scale are we looking at there? And the last one was the comment on the capital allocation to be the investment in the business? The last one there, the possible other initiatives, would you like to sort of expand a little bit on what you're thinking about there and maybe also the scale of capital that might be involved?

Okay. So if Mike puts up on margin and gross margin, I thought margin and gross margin was all 3 of the questions. So I was getting quite excited actually. So Mike will pick up on sort of margin and gross margin in the 15% and 24%. So joint venture, in terms of operational joint venture. So say, for example, with Lloyds Living, I mean, that's sort of an agreement, a partnership, but it's not an operational joint venture. But in terms of our operational joint ventures, I don't think we've ever had more than 15 operational joint ventures that would typically be 1 or 2 sites per joint venture, that has dropped down in recent years. But again, I don't -- we're not signaling that we're suddenly going to 50 operational joint ventures. But we do see that there are lots of partners out there that would like to joint venture. And I think we've just got to look at does it work for them, does it work for us, but we're not signaling any big change in terms of those joint ventures. I would say, in terms of capital allocation, our capital allocation outside house building will be entirely focused on supply chain. And I think the way to think about that is over a 3- to 5-year period, it would be very, very unlikely that we'd be deploying more than GBP 50 million on supply chain. Our second factory that Mike and Steven touched on, we have about GBP 40 million investment in the Derby factory. So it's kind of in that order if we were to open another factory.

And then on margins. So the gross margin guidance in that medium-term time frame is 20% against the 15%, so a 5% delta. It will take us a few more years to get to the higher levels beyond the medium-term guidance that we're sort of giving today. So it will be a few more years. But really, the way to think about that is, obviously, it comes through recycling the land bank. So you can see how long the land bank is 5 years at the moment, you'd be looking more on that sort of time scale. But we're not guiding to when that will be achieved at the moment.

Going back to Zaim Beekawa.

Zaim Beekawa, JPMorgan. Just to come back on the timber frame facility. Can you quantify in terms of how much additional capacity it is going to give you and the benefits from there? And then secondly, on the volume guidance of around 5% to 10%, what's baked into your assumptions to be at 5% versus the 10%? Is that something within your control? Or is it market driven?

Great. Steven will pick up in terms of Oregon and timber frame capacity. I think 5% to 10%, 2 parts to that. One is we've demonstrated historically we can deliver in that range. So the first thing is that we definitely see that growth beyond 10% is very challenging, hence, why we're trying to limit it. And we have historically limited it in that range. And then really, the -- we're not assuming any change in market conditions, as Mike touched on. So it's very much about how quickly can we deliver the new sites. So hence, why we're kind of putting in that sort of band.

In terms of Oregon, we acquired the business in 2019, and it was producing about 1,600 units here at that point in time at a capacity of about 2,500. That was from the Selkirk operation. We've developed a factory in Derby, next to Rolls-Royce and that's the GBP 41 million investment. That has a capacity of 4,000 units a year. And that runs on an open and closed panel basis. So we've got the opportunity to build open panel on one line as well as closed and open on another line. In terms of the regional factory, we've recently decided to extend that further. So that will take the capacity there to 5,000 units a year. So combined capacity is circa 9,000 units a year. And this year, we're hoping to achieve nearly 5,000 units out of both factories. So it's going well. We're currently producing 20 houses a day from the factory.

Cedar Ekblom from Morgan Stanley. I just wanted to ask, when we think about the medium-term volume recovery, it seems that there is 2/3 big topics we should be thinking about. So the one is land and permitting improving. The other is sort of normal market forces as it relates to mortgage affordability and costs, et cetera. And then the other one is around the fact that government wants affordable to be a much bigger part of the volume recovery this time. So can you talk to the third point when it comes to the capital pools that need to be available to support that affordable recovery, like housing association, et cetera? And if you can give us some sort of signposts that we should be thinking about in terms of policy or changes to get a better handle on whether that part of the recovery will actually be coming through because it seems that we have planning reform that's helpful and mortgages, the markets assuming that sort of plays ball, but we don't have a lot of visibility on what's going on the sort of housing association, shared ownership area. So maybe you can help us with what's going on there and sort of signposts over the next couple of quarters to get more confidence that the money will actually be there to support government's agenda on the affordable segment?

Yes, certainly. So I think in terms of the affordable segment, the key news flow will be the rental settlement. That is just -- that is what the HAs are waiting for. And therefore, government have indicated that they will give them a longer settlement period, perhaps up to 10 years. But then the level of settlement -- historically, in the last 10 years, the level of settlement has been below the rate of inflation. So clearly, if you're running an entity that's essentially a fixed cost entity, and you're getting settlements below the rate of inflation, that's obviously going to be problematic. So I think what the government says in March and the indications now is that they're going to see something both in March and June, so it may not be resolved until June, but that is the key news full point. I think when you look at it from our point of view is that if our overall affordable delivery is including Redrow maybe a little above 20%, that kind of level in terms of the natural rate of delivery. There will be very little change to that natural rate of delivery over the next 2 or 3 years. Firstly, because the government have been very clear that they're only looking for higher levels of affordable on certain types of land and that land will need to come through planning. And secondly, obviously, the underlying business that the vast majority of that delivery won't change. So it's only on our incremental sites as we grow. It won't be on the revenue synergy sites because the revenue synergy sites are by definition of an existing consent. So I think if you looked at U.K. affordable levels, it's difficult to see how they can change dramatically on a 2- or 3-year basis, unless the government creates stand-alone affordable delivery. And that has deemed to be problematic historically on a large scale. So the government have not really done a lot of stand-alone affordable delivery over the last 30 years.

And then just a follow-up on the rental settlement, what would you define as success on that? Would it be a certain percentage above inflation that you would be looking for tenure? Just a bit of color on how we should think about that structure.

I'm not really the person to ask that. So a definition of success for me would be that the HAs are happy. But the reality is that, first of all, I think the term is important. So having the longest or a longer-term settlement must be important if you're trying to forward plan the business. So I would think a minimum of a 5-year settlement would look fairly important firstly. And secondly, I think the HAs and the government indication has been -- it will be an inflation plus settlement, but we just need to wait and see. And it has been moved because it was originally intended that something would come with a budget and now it's going to come with the March statement and potentially some of it will come in June.

Will Jones at Redburn. First, just around the land bank efficiency. So moving the owned land bank length down. I think part of the balancing item will be that controlled goes up. I think you might have maybe 10,000 more plots controlled in a few years' time than now. What are the conditions that allow you to delay taking ownership for them to sit in that controlled category? Second around build costs, the synergies on build costs. Are they all materials? Or do you get some labor savings as well? And I think the GBP 34 million probably implies less than 1% of the combined. Is the scope for that maybe to be better as you go on? And then the last one is just around London, obviously, having integrated Redrow where London was a smaller part of the mix. how heavily does that feature, I suppose, in the strategy for the group over the next 3 to 5 years?

Okay. So if I if I start off in terms of London and Mike will pick up in relation to the synergies, and maybe I can touch on the land bank point as well. So in terms of London, London is very important to us. I mean, there's 9 million people living in Greater London. London delivered 28,000 homes last year. The government's revised target for London is 87,000 homes. It's a huge growth area in terms of housing and the government and the mayor have to unlock that. I mean, for us to be delivering 28,000 homes in London is clearly absurd. So I think that we see it as being a real opportunity. Today, we've focused on more about Redrow in the 3-brand strategy. But just in terms of London, we've had some really good success in London. So we've announced previously the partnership with TFL and are securing the West London partnership with TFL. So clearly, TFL or a big land owner. We feel that we're developing a really successful partnership with TFL. We have metropolitan on the video, [Melbourne], Chief Executive Metropolitan. So we've been at West Hendon for 12 years now developing that site. So we see lots of opportunity in the London marketplace, but we would recognize that affordability is the most challenging area in London presently. Just in terms of the land bank, I mean, the conditional contracts, I think, is I don't think it's an important part of the mix. I mean, naturally, our conditional contract position has dropped as we've had more strategic land available to the group. And our strategic land position, albeit except over 10 years, has evolved dramatically. So I think our original target was 3.5 years owned and 1 year conditional, but I wouldn't really focus too much on the conditional. And we want to get a planning consent on the conditional land as quickly as possible. There's no reason for us to delay that coming into the land bank. The only reason it would be delayed beyond the planning consent would be if there was questions of viability and that would obviously need to be discussed with the land owner. But in essence, every bit of land that we have any control over, we want to try to get planning on it as quickly as possible. Mike, do you want to pick up on synergies?

I think when you break down the build costs and look at the material component, it's more like sort of 3% than 1% in terms of the challenge that we're putting in there. I mean clearly, most of that synergy will come from materials. But from both a material supplier and a subcontractor perspective, what we can offer is much better visibility, bigger sites and the growth ambitions that we've got over time. So there will definitely be conversations on both sides. But in terms of our assumptions within that GBP 34 million, then yes, absolutely, the vast majority of that comes from materials.

Glynis Johnson, Jefferies. I got to go with 4. The first one, just not quite along the same line as Charlie, but still sticking in terms of the outlets. If I take the guidance for 2026 which doesn't have any of these additional 45 sites on those 45 extra outlets on, I get to the bottom end of your range in terms of your guidance years out, which just the bottom end of your range includes no additional sites that would come, except for those Redrow synergy sites. So I'm probably missing lots in the mix there, but what are the ins and outs? Why is the bottom end of the range effectively only including those additional Redrow sites? And second question just in terms of Gladman, very kindly told us 500 to 700 conversions that you were taking in per year. How many actually is Gladman doing per year? What proportion are you actually purchasing from Gladman and how much is going open market? Thirdly, just in terms of your wonderful video and the replan of sites, it looked like the Redrow part of it had far less density. We understand the asset turn it speeds up, but does the gross margin on the site come back within that? And then lastly, you have wonderful ladies out and the ladies doing the selling were fabulous. They talked a lot about Part Exchange, they talked massively about the key worker incentive, they talked about HALO. I wonder if you can just put in proportional in context because clearly, I know I understand about the Poppy Hill site, but not about the group. What proportion of your sales uses Part Exchange? What proportion use key worker? What proportion use HALO? Am I missing something else important? And then the costs, we know Part Exchange is costly relative to some others, but where does HALO sit? Where does key worker sit?

I'm not going to let you I'm not going to let you speak to anyone other than me. Okay. Right. Sorry, just go through that. So Steven, I think if you could pick up in relation to Gladman, that will be good. I think Matthew, it would be sensible, if you could pick up in terms of Redrow densities. I'll make one comment about that in a minute. And then I'll pick up in terms of the schemes. But in sites, I mean, the starting point when I would say, well, I'm pleased about that, i.e., the bottom end of our range is something that looks very achievable. I don't think we're looking to go out there with something that's super bullish in saying, look, this is massively aspirational because we can alter these targets at any point and the reality is that we are very, very confident in that midpoint at 500. So I think that we have good visibility because we've approved a huge amount of land over the last 12, 15 months. And we've got the revenue synergies. So we are very confident, and we really take the site numbers around. The other point just going back slightly to the point that Charlie was making is that when we were -- the combination was being looked at by the CMA, I mean, that resulted in the CMA looking at about 430 local markets, which I think was just England, but I don't think they looked to Scotland. So I think we're very, very confident that the markets are there and we have that potential to grow the site numbers. But I think we're trying to be balanced about it, 5% to 10% per annum, 45 of them are really had done deal. I mean, that's for us to deliver. And just a brief comment on Redrow and then we'll pass over to Steven and Matthew, but the brief comment on Redrow would be that when you look at the returns from Redrow compared to the returns from Barratt over a long period of time, whether it be on margin or return on capital employed, they're very similar. But Matthew can talk more about the plotting and the densities. And then just on the different schemes. I mean, I touched on it in the presentation. We prided ourselves in terms of being able to bring different schemes and different propositions to market. So what I would say is that the key workers scheme and the HALO scheme are not that significant. I mean, they're obviously very, very important to the customers but they're not that significant in terms of either the number of completions or the percentage cost of the schemes. Part Exchange as you say, is more significant. It's interesting that Redrow really historically have done very little Part Exchange, Barratt and David Wilson have always been very focused on Part Exchange. I see it's one of the strongest tools that we have because everyone knows that moving house is just difficult. And therefore, if you're dealing with somebody who's moving up, and they're going to get into a chain, and you can offer them Part Exchange to avoid the chain, we see that as being very popular. But in both Redrow, Barratt, David Wilson, most of our customers will use something that we would call Movemaker. Redrow will call it something different, but we would call Movemaker. So therefore, we never actually taken the stock. We just pay the agents expenses in terms of the sale of their property. It would only be where we actually taking the stock that we would have transaction costs. And we're generally running our Part Exchange business on a very small profit. So -- but it's a great way to attract customers. Steven, do you want to pick up on Gladman?

Yes, in terms of Gladman, in terms of land coming to the market in the open market, we also maintained it would be a similar proportion to what was being sold [indiscernible] as continued to be the case. I think I'm looking at Vicky now, she should probably give me another [indiscernible]. But in the first half, there was a couple of sites that were sold to Redrow, for example. So that's continued to flow through on a similar basis. But what the business case about for Gladman was about converting their existing promotion agreements into direct opportunities for Barratt, Redrow Group. And so that's converting promotion into either freehold strategic land or options or preemptions and Vicky and the team have been highly successful in doing that. So I think we've got something like about 16,000 plots sat in the Gladman portfolio that are available to Barratt, whether it be as option of preemption. So it has been a good business acquisition for us in terms of that.

I think the video is very, very indicative, so I wouldn't say that as a layout -- a layout the get shot in our business. I think, ultimately, you've just got to understand it's about coverage per square foot. And ultimately, Redrow, Barratt and David Wilson are very, very similar. And that's about private and social coverage per square foot. David Wilson a little bit more because they do a bit more, 2.5 and...

Aynsley Lammin from Investec. Two questions, please. Just bringing everything together, you've kind of set out today on the margin return on capital targets and efficiency around the balance sheet, et cetera. Should we think of Barratt still as a lower margin, faster asset term relative to the wider industry average? Or are you kind of saying it's going to be closer or further away from the average on those kind of medium-term targets on that basis, margins and asset turn? And then second question, I guess, with kind of eye on what the government policy is and what their ambitions are, you're going to do more PRS and that will be within the group. But did you consider having a kind of distinctive or would you be open to a more distinct partnership division in the group? Is that something that you would consider or do you just think too much on your plate and it's not your kind of business model?

Yes. I mean if I cover on the government policy and partnerships -- do you want to take the first one? Thanks, Mike. So I think I sort of touched on this because a lot of our partnerships would be through joint venture. And they will have to be through joint venture, but they have generally been through joint venture, whether it be with a local authority. So for example, with Swindon where we have a very large site in joint venture or whether it be West Hendon with Metropolitan with the housing association. So most of them we be through joint venture. I think I would expect it to tick up slightly if you were taking a CEO view on it, but I wouldn't expect any major change in relation to that partnership business. I think in terms of -- yes, sorry, that's it. If you can on margin, Mike?

Yes, sure. So I mean, I certainly wouldn't see us as being a sort of lower-margin business than the sector going forward. It will depend on some extent to the mix that we and others deliver at obviously. But obviously, asset turn is a big focus for us. So we do want to improve our asset turn. We think the 3 brands gives us the opportunity to do that. And implicit in what we're seeing today is essentially our asset turn is going from sort of 1x to about 1.3 based on the guidance we've given this morning. So definitely, over the next couple of years, you'll see that improve, and you'll see our margins improve. And where we sit relative to the others, I think there's a big range of different things out there, isn't there? But we're focused on getting our own margins back up to 20% over the next 3 or 4 years and then beyond that back up to 24% in the long run.

I just wanted to ask how the 22,000 target you've got over the medium term, it sounds like it's 4 or 5 years out based on the volume growth you're talking about, David. How does that configure with the government plans? Because it would leave you 10% below where you were in [indiscernible], government wants to probably build maybe 50% more. Do you think they've got to have to find different people to get us building at that rate? Do we need to have contractors in the market? It doesn't sound like you've got the ambition to take the business to the level to be consistent with that market share in that plan. That's number one, I've just got one more. That's just about range and pricing. I mean, is the current mix where you want it to be at the moment, GBP 375,000 or GBP 400,000 on price. I mean, how far do you think you'll go up the pricing category. Now you've got the 3 brands. Are you going to try and extend it a little bit into maybe 1 million plus, but just curious about what you're thinking there?

Yes. So I mean, I think in terms of our growth. So yes, I mean, we touched on it earlier. So combined, we were at 24,000 and combined now we're guiding to around 17,000. So I think we're very comfortable that moving from 17,000 to 22,000 is a big growth target for the business. And equally, we're very confident we can deliver that. In terms of how it sits in -- for the government with the wider targets, then yes, unquestionably, they are looking at different channels. So for example, government land release and what can happen in terms of the government land release program, that is a big area that's being looked at by government. Particularly, I know that there is a focus on MOD land and what can be delivered on MOD land. So when the government starts looking at some of this larger release, it may be possible that they'll look at alternate delivery mechanisms because you can see from historic numbers that for the industry to deliver GBP 350,000, GBP 400,000 per annum is a huge challenge without any more delivery mechanism. So I think from our point of view, we would see 22 as being a good growth target. We're not saying that's the limit of our ambition. But I think we've got to be sensible about how quickly we can get back to those kind of numbers. And I think the ranging it between 5% and 10% growth per annum looks sensible from our perspective. In terms of changes in mix, no, we don't anticipate any really big strategic change in the mix. We've touched on London, and we definitely have an ambition for the London business to grow. London historically was as high as 2,000 units and we've been as low as 700 units. So we definitely have ambition for London to grow. I think for Redrow as a brand, there is an opportunity for Redrow to grow because we can take Redrow into [Altana] locations where the best example would be Scotland, where Redrow used to be in Scotland. But I think that didn't really have the scale in Scotland to run a divisional office and so on. So I think Redrow can obtain more distribution than present and that is part of the revenue synergies. But beyond that, we don't see in terms of Barratt or David Wilson any major changes in terms of mix.

So [Tristan Steve] from China Construction Bank. Just on the Zed House, how has that investment seen? Has it been seen very positively, how many learnings have been sort of rolled out across the homes recently. How many sort of in the pipeline? Where does it put you -- those sort of learnings put you compared to your peers in terms of the technology and the developments you've made there? And sort of finally on that point, do sort of the learnings or the developments have to be seen as cost neutral from a customer point of view? Or are customers still more happy to pay a bit of a premium for the efficiencies and sort of the sustainability aspects that the Zed Houses has driven to try and find?

Yes. Okay. So if I -- let me just start on Zed Houses and Energy House and then I'll ask Steven to maybe comment a little bit more. I mean, clearly, you know I'm biased. But if you look at what it cost us for the Zed House and the Energy House, so several hundred thousand pounds, it's the best several hundred thousand pounds we will expect. I mean, the kind of spotlight that has been shown on the Zed House and the Energy House, and in fairness, [indiscernible] also built a house at the Energy House, and many of you know and will have seen it, the spotlight is shown on our business and is shown on the industry in terms of the pursuit of more energy-efficient homes, less carbon and so on has been quite extraordinary. And I think to have a more than 4,000 people from government, from the media, from the investment community to have visited has been quite extraordinary. And I think that the returns on it have been really, really fantastic. And as I touched on in the presentation, it sets us up so well in terms of the high-volume delivery of homes and I'd maybe like in the Zed House to -- I was going to say like in a Formula 1, where you're never going to actually put it on a normal road. In the same way, we're never going to build the Zed House. It's a showcase of what you can do with different technologies. Steven, do you want to talk more about that?

Yes. I mean, from our point of view, from my point of view, it has been a highly successful project. There's a lot of components in that property, which care are under consideration for future homes. For example, when the future home standards come in, whenever it is, maybe later this year or next year, it will require certain components to be used. It's been an ideal project to trial and test those projects. For example, SRC pumps, how do SRD pumps actually perform at minus 15, which you don't often get the chance to trial it in that external situations, but we've been able to trial how those components have the ventilation performed? Has there been any cold spots in the house in terms of installation? How is the installation really performed? So it's a real-life test that we generally can't perform in this country because we have the weather conditions or they are very extreme when we see those weather conditions. So we had a lot of learnings. There's certain things we've said we wouldn't use in our houses going forward, and that's been very valuable research for us. So it's been, as I said, a great project, a lot of learnings from it, which will inform our future standards.

In terms of the costs and the sort of consumer approach to it. So I think we can probably all look at it a bit through our own lens and I think people are reluctant to capitalize costs at more than maybe 4x or 5x. I think that's as a sort of general rule. People don't buy a house as a general rule, thinking I'm going to stay here forever. So the Redrow customers obviously accepted on the video. But I think that if you capitalize at 4x or 5x, 5 years ago, the energy savings on the water savings, people would see as being almost incidental. Whereas now, I think where energy savings are being quoted at GBP 1,000, GBP 1,000 plus, it's starting to become more meaningful. So I think there is a little bit more traction. And you see companies like Octopus putting forward 0 bills. Now there is clearly capital costs involved in 0 bills and somebody has to fund it, but the idea you could have 0 bills for 5 years or 10 years, I think it seemed to be more attractive. We also see that -- when you look at heat pumps, and clearly, the industry is committed under the Future Home standard to move to alternates from gas boilers, heat pumps being the most likely, air source heat pumps. That then takes you into a world where removing radiators, particularly from the ground floor looks sensible because radiators need to become bigger, and therefore, you're likely to go for underfloor heating as a solution. And I think for the customer, that's a very, very positive move, easier to arrange furniture, just a better kind of look and feel to the property. So I think you then start to get into the fact that although there is extra cost, the customer is prepared to pay the premium. So it's kind of becoming more of a win-win. And the other side, which isn't really in any way sorted just now is that all second-hand or existing homes have to be decarbonized. So when people start to realize that there are substantial decarbonization costs for their existing property as perhaps landlords are now facing into for 2028, then it's again another reason why new build would be more attractive.

We got time for one more question. Harry, first, if we could, please, and then we'll switch across. We might have to squeeze 2 more in, I think. Yes.

Harry Goad from Berenberg. Slightly niche question, but I think important, when we think about the sales rates you've talked about on the sort of dual, triple branded sites. How are the -- how do the individual sales outlets operate? So for example, you've got your 3 brands operating on site. And I appreciate their primary focus is to sell Redrow or David Wilson. But to what extent all will those sales executives then be remunerated to cross-sell, for example, Barratt unit or a Redrow unit, if they've got into David Wilson out there? And I think there's a more general question there about how do you strike that balance between -- we think about your social media campaigns, your online campaigns. If you've got the customer for the sort of PLC group, how do you balance that sort of brand, customer autonomy of the brand type challenge?

I mean, I think, first of all, I mean having a portfolio of brands isn't unusual in a retail business. So there's plenty of retailers that have a portfolio of brands. And I think you've just got to be very clear about what is the branded entity for each of your products, in our case, houses. I think there is a very, very clear differentiation between the brands. But clearly, there will be crossover between the brands. So our sales advisers with Barratt and David Wilson will see a lot of potential customers will visit all sites. I mean, why wouldn't you? You've gone out to look at David Wilson, why wouldn't you go and look at Barratt or vice versa. So we would expect where we've got triple branded sites or Barratts with Redrow, you'll get a very similar thing with people arriving and deciding that they'll visit both sites, maybe one on an appointment and one on spec, I think that's quite common. I think it's the same as on the high street where you have a number of jewelers in the same street. People will visit more than one shop. We're encouraging that cross-fertilization between the brands and the sales advisers will, if they feel somebody may be looking for something different type of house, then they will encourage people to visit David Wilson or a different price point, may be encouraging people to visit Barratt if it's at a lower price point. So I think that's a key part of the overall offering to the customer.

Allison Sun from Bank of America. Two questions. First one is very niche as well. So following up on the timber frame, my understanding is timber firm is quicker, more ESG friendly, but also at current stage, more expensive. So right now, are you able to pass this kind of cost to the end users or actually using net-net, it helps to reduce the cost? That's number one. Number 2 is the 22,000 volume in the midterm, just very broadly, do you think that will cost -- sorry, will you also have some labor shortage problem if we are hitting the 22,000 without significantly increased the cost base on the labor front?

Okay. I mean, I would say that on timber frame and I'll ask Steven just to sort of comment on the timber frame position. But part of that discussion on timber frame, I think, comes back to skills is that there is a different skill set and a different labor force in relation to timber frame from traditional brick and blot. So I think it's very, very important that we diversify the production because otherwise, we're just adding to the problem of there being not enough skills in terms of traditional methodologies. In terms of the 22,000, no, I mean, I don't perceive that there is a particular challenge around skills for the 22,000 because it is relatively recent that combined we were at 24,000. So if that was in calendar '22, then I think as we move forward, I don't anticipate that there's a big skills challenge. We -- I said earlier that we have 500 apprentices, trainees, graduates in the business, and that will obviously continue each year over the next 3 or 4 years. So I don't see that being a particular issue at those levels. That's quite different, obviously, from talking about the industry moving from 200,000 to 350,000, but I don't perceive that being a skills issue.

In terms of -- I think you mentioned speed on timber frame. We've typically seen for an average for 3 small 4-bedroom house, it takes us 18 weeks to build from DPC foundation. That is to completion typically against the house, which might be 27, 28 weeks. So there's a good saving on overheads perspective.Timber frame at one level does cost us a lot as you mentioned. But when you start taking into account other factors such as speed of erection, then it starts to offset and certainly turning the capital quicker. But there's also other savings in terms of -- it's future-proofed in terms of width of wall construction. So take into account higher thermal standards, walls are going to get wider in masonry, but timber frame will be -- can contain that extra installation within the fabric. But there's also lots of other benefits around cost certainty, carbon reduction, waste reduction. So there's a lot of moving parts around timber frame. And as I said, the Barratt range is designed specifically for timber frames, so it's easier to build into a frame than it is in masonry in many respects. So -- but there's some good savings and it's about diversifying skills and broadening our horizons.

So one more point. We don't normally give you another answer, but to our point, our business in Scotland is entirely timber frame and our business in Scotland was entirely brick and bolt if you went back to about 2008. So Scotland has seen a big, big transition. I mean, not just in our business but across the industry, primarily driven, as Steven touched on, because of the thermal standards. So Scotland has a different thermal standard than England, and wider cavities costs money. So the reality is that people who are just building traditionally are going to see those incremental costs as the future home standard tightens and there's no way around it. You have to create wider cavities or come up with alternate construction methods.

I have one final question from Emily. While we're passing the microphone, we've had one question online. Could I just ask, basically with the changes in stamp duty at the end of March, is there a view from the group in terms of the impact either on the current year or in FY '26 in terms of order book dynamics? So the impact of that stamp duty, is it having a notable effect? Or has that kind of run its course given the time frame from order to completions?

So I think the impact -- I mean, I'm cautious of the fact we're going to have to come back to the answer of this in April, May, June. So I'm conscious that we'll have to answer this for hindsight. But I think what we would see is that the impact on stamp duty, the holiday stopping at the end of March is quite muted for the new build sector for 2 reasons. One, because this was well trailed. Everyone knew the stamp duty holiday was going to come to an end unless the government did something. And the government was saying from the middle of the summer, we've got absolutely no money. So it was likely it was going to come to an end, firstly. And secondly, as a general rule, the industry operates and we operate with very little available stock. So you can't just turn up in December or January and say, I want a house and I want to move in by the end of March. So we don't see that the new build industry will be particularly affected. But the secondhand market always has stock. And you've seen some quite spikey price increases in the secondhand market over the last 2 or 3 months, particularly since the budget. So my sense is more of this is playing out in the secondhand market than in the new build market.

Emily would like to go ahead, and then we'll close -- David going to come back on for some closing remarks.

I just have one left. Also one, but it's multipart, sorry. Just on work in progress. I think what you're saying on a 1.3x assets turn, like as well as what you're saying on land and land creditors, I think you still need a meaningful improvement in your WIP turn sort of like most house build, it looks elevated versus where it's sort of been historically or will pursue relatively sort of slow turn. Is that easy to do if the land -- if the sales rate stays at sort of 0.6, is it easy to do that? Those revenue synergy sites that are coming on stream, are there sort of WIP efficiencies within there? Is it sort of shared infrastructure that meaningfully helps you? Or is there other stuff that you're doing like on timber frame that really should help with turnover the longer term?

Yes, sure. So I mean, the WIP turn will be helped by the multi-branding that we're seeing coming through. And also, we're in this investment phase at the moment where there's a lot of WIP going in across a high number of sites that we're expecting to open through the second half of this year and into FY '26. So as those sites come through into production, and as we get to the medium term, that growth rate potentially stabilizes, then you'd expect to see the benefit of that. I mean, we're very focused on it and Steven and Matthew and the business are having regular conversations about the level of WIP to make sure that is at the right level. So I think can we do it? Yes, we think we can as part of the mix as we open the outlooks, and we get to a stable volume level. And in terms of the revenue synergy sites, I mean that is one of the benefits, Emily, is we're building off a shared infrastructure essentially. So we'd be putting infrastructure into that site anyway. And indeed, as we move into the second half of this year into '26, you'll see that we're starting to put the infrastructure on those revenue synergy outlook as well. So we do benefit from that as the overall land bank efficiency that David was talking about, the outlet numbers to the amount of WIP that land and WIP that we're holding. So we expect to see all those benefits coming through in the guidance that we've given today.

Thank you very much. Thank you, everyone. Thank you, team. David, if you'd like to come and close out?

So first of all, thanks, everyone for attending. I know it's been a bit of a marathon, but it's very much appreciated everyone taking the time. So that's the first time. Second thing, and I just touched on it in addition to stamp duty, we are very, very conscious that we are accountable for everything that we've said this morning in terms of what we're going to deliver. And we pride ourselves in terms of our ability to be reliable and to deliver. So that's been a key consideration when we presented these plans. I mean, I know we focused on the sort of 5 takeaways. But I would really ask that you also reflect when you look at our sectors, and I know many of you look at other businesses, you will not find an other sector in the U.K. that has better fundamentals than housebuilding. The fundamentals are extraordinary because of the undersupply over a long period of time. We really believe and we absolutely stand behind our record on quality service and sustainability is second to none. And I think that's an absolutely key point of our proposition to the consumer. We have clear plans in terms of growth. So we know that growth is kind of topical, but the reality is we've got concrete plans for growth. We have identified sites. We have revenue synergies, and we're very confident we can deliver that growth without any assumption that the market is going to dramatically change. And being a partner of choice is very important. It's important to us, it's important in terms of our delivery, our ability to deliver through the supply chain to customers, fundamentally important. And lastly, I know you'd expect from me and I know you would expect from Mike, is that we're absolutely focused in terms of the financial strength of the business. I touched on earlier that I arrived when the business was in a very different place financially. And we do want to be conservative in terms of the financial structure. And hopefully, we set out very clearly how we're going to take that forward and how we're going to deliver improved returns for shareholders. So we're now going to go back to those that want to, it's not mandatory. But we are going to go. So we're going to go back through to the atrium. I think there's some drinks that I'm sure they're all known alcoholic and some food as well. And so there will be opportunity again to talk to people other than myself for everyone apart from Glynis. Thank you.