Barratt Redrow plc (BTRW) Earnings Call Transcript & Summary

Good morning, everyone. I think we're ready to start. So first of all, as usual, I'm joined by Mike Roberts, our Chief Operating Officer. And Mike is going to cover our operational performance. Also John Messenger, our Investor Relations Director, and John will update you with regard to our financial performance. And then I'll update you in terms of the market, current trading and synergies and just set out how I feel that we're well positioned for the future. Many of you will be aware that Dean Banks, our incoming Chief Executive, has joined us this morning and also Rebecca Napier, our CFO, and Rebecca started with us at the beginning of August. So welcome to Dean and Rebecca. So I think, first of all, I'd just like to take you through some of our key messages. The market conditions have clearly been challenging. I think we've all seen that play out, particularly since the end of February. Barratt Redrow has delivered a very solid performance over the year, both operationally and financially. I think that performance reflects the strength of our brands, but it also reflects our strategy and the sheer hard work and determination of our teams and our supply chain. The customer is understandably subdued, so we've made tactical decisions to drive sales and proactively manage our cost base so the overall performance has been in line with expectations. The early signs from our retro dual and triple branded sites are encouraging reinforcing our conviction regarding the multi-branded approach. And our balance sheet remains robust, facilitating an enhanced capital return, which I will talk about shortly. Our focus is now on disciplined execution to deliver the potential we have created through the combination with Redrow and navigate the market as it evolves in FY '27. Here are some of the operational highlights from the year. First, the integration of Redrow is now complete. We are already seeing the benefits of that reflected in our performance with a good progress on cost synergies and the future benefits from revenue synergy outlets. We have maintained a strong land bank position with 5.2 years of supply. This is a key advantage. This has enabled us to tactically reduce land investment given the increased market uncertainty, but without impacting our near-term growth plans. And we completed 17,667 homes, which was towards the top end of our September '25 guidance range. I would also like to, as ever highlight some of our externally accredited awards in the period. Our unique record with 17 years as a 5-star housebuilder and 122 NHBC Pride in the Job Awards, which is a testament to the dedication of our teams across the business as well as the quality of the training that we provide them and the customer-first culture we maintain across the group. The quality is also reflected in our Trustpilot scores given by our customers which award all 3 of our brands, the highest rating of Excellent. John is going to cover our financial performance in more detail, but just to pull out a few highlights. The adjusted PBT was lower than last year at GBP 572.8 million, due to higher net interest costs and lower joint venture profits. So return on capital employed was lower than last year at 9.2%. All of the GBP 100 million cost synergy target was confirmed in the second half with a GBP 73 million benefit in the profit loss in FY '26. And finally, we finished the year with a solid net surplus position of GBP 61.4 million which is net cash adjusted for line creditors. This compares to a net indebtedness position of GBP 37 million last year. Before I hand over to John, I'd like to talk you through our capital allocation framework. We have 3 clear priorities: maintaining a strong balance sheet investing in our business and delivering sustainable returns to shareholders. The Board regularly reviews the balance between these to ensure that we are well placed to deliver our strategy. So when we look at our balance sheet, we consider not just the year-end position, but the seasonal nature of our business, where average net cash is typically much lower than the year-end. We target minimal year-end net indebtedness, which takes account of net cash and line creditors. And we are mindful of our building safety obligations which represents a further significant liability for the business. We also recognize that continuing to invest in the business is critical. That's why leveraging our multi-brand opportunities, which enables us to grow outlet numbers but requires less incremental capital investment is an important focus for us. and we continue to be very selective on land opportunities. Our updated shareholder return program is also set out here, and I'll now take you through the background to that. When it comes to shareholder returns, we have a strong track record of evolving our position, reflecting the macro environment and the views of our shareholders. Over the last 10 years, we have returned nearly GBP 3.5 billion to shareholders, with GBP 1 billion return through share buyback or special dividends. As we set out in July with our shares trading at a significant discount to tangible net asset value, we saw an opportunity to increase shareholder returns with a larger buyback. As a result, except for a GBP 0.01 nominal dividend, our ordinary distribution, which is equivalent to 50% of adjusted net earnings will now be delivered by way of a share buyback starting with the FY '26 final distribution. This will be supplemented by an additional buyback of at least GBP 100 million. For FY '27, the total capital return will be GBP 400 million, with GBP 386 million delivered through a share buyback. I'm going to pause there and hand over to Mike, who's going to take you through the operational performance.

Thanks, David, and good morning, everyone. Today, as David said, I'll be taking through our operational performance for the year. Starting here with the private reservation mix on Slide 9. As you can see, 88% of our private reservations were generated by individual homebuyers with 12% coming from PRS and other multiunit sales. Our first-time buyer share of reservations remained stable at 30% and home movers including those choosing to use our part exchange service accounted to 48% of reservations, marginally lower than 5% in FY '25. As you remember from the half year, we've seen a significant increase in the customers using Part Exchange at 21% of all nonaffordable reservations in FY '26, up 14% in the prior year. This part reflected a slower market ahead of the November budget when Part Exchange provided customers greater certainty at a time when buyers had real concerns over conveyancing chains. And we've also introduced our part exchange capabilities into Redrow in the year. Part Exchange has been a highly effective sales tool and what we've used for 55 years. Importantly, it's an alternative, not an additional incentive and our part exchange stock is very well managed. Of the GBP 228 million value of part exchange properties held on the balance sheet at the year-end or but GBP 22 million have now been sold on. PRS and other multi sales were at a similar level to last year. This follows a strengthening the sector of the market in the second half. And finally, the percentage of customers relying on a mortgage remained unchanged at 75%. Turning to completions. We delivered 17,667 homes, an increase of 5% on the performance in FY '25. Private completions were flat but affordable completions were up 27%, reflecting the timing of delivery. And overall, they accounted for 22% of the total wholly owned completions. We expect affordable volumes will return to our more normal levels of around 20% of completions in FY '27. PRS completions were 20% ahead, reflecting the order book strength entering into the year and joint venture completions were 566, 5.2% ahead of last year. We anticipate this will increase slightly to around 600 units in the current year. And in terms of pricing, the wholly owned average selling price was up 2.2% to 351,700. More detail on that is provided in the appendix, but this increase was driven by a combination of product and geographic mix with a slightly larger average unit size and a greater contribution from regions with higher average selling prices. Based on our matching plots analysis, the majority of our regions saw only minimal underlying price increases or less than about 1%. Prices in our London division were notably down, consistent with the broader commentary on the London market. And our Southern division also experienced some deflation. But overall, we estimate the underlying selling pricing deflation was just under 1% for the year. Turning to sales performance on Slide 11. The underlying private reservation rate was slightly ahead of the aggregated position in FY '25 at 0.56 reservations per outlet per week. This good performance was supported by a targeted use of sales incentives to maintain sales momentum in what was a very uncertain macro environment. John will provide more details on this shortly. And customers also benefited from an improvement in mortgage product availability. We are seeing greater competition by mortgage vendors and an increase in higher loan-to-value mortgages, which have helped in what remains an affordability challenge market. PRS and other multiunit sales had an improved second half, and our strong relationships with PRS providers, such as Lloyd's Living supported our good reservation rate overall. Across the year, we operated from an average of 405 sales outlets, very much in line with our plans and our guidance. And the private forward order book at the end of June was lower than last year at 4,570, has provided a solid start to FY '27. David will cover our view on future sales evolution later in the presentation. Based on our revised average sales outlook guidance at 405 and the encouraging trading performance we've seen in the first 10 weeks of the year, we are confident with the guidance for total completions of between 17,500 and 17,900 in the current year. I wanted to give you a bit more flavor on how our home brands are distributed and our newest multi-brand developments are performing. Here you can see that the multi-branded outlets account for 44% of the total at the end of the financial year. We're seeing more and more opportunities to create dual-branded combinations, and we now have 3 triple branded developments. The trading performance from these has been really encouraging. Over the first 10 weeks of the year, the blended sales rate across our triple branded developments has been in line with the underlying rate for the whole group. Each development is selling more than 1.5 homes per week compared to around 0.5 prior to the triple branding. This performance reinforces our conviction in the strength of the multi-brand approach, which enables us to optimize land opportunities. Each development is unique and maximizing value is driven by pricing in the location, the careful plotting of our homes by brand and house type to deliver value and choice for each customer, whilst maximizing our returns, both around margin and return on capital. Of course, it's early days and this is just a small sample. We've previously talked about potential for reservation rates to moderate slightly with the addition of further brand outlets, but it has not been an experience to date. I wanted to say a few words on build cost inflation. This is a challenge for the whole industry, and we've not been immune. As you'd expect, we continue to see inflationary pressure on the more energy and oil-dependent products such as plastics. But even here, we've been able to negotiate some improvement where suppliers have held their price on the back of volume. Where required, we're intending to agree surcharges with suppliers, which will flex as energy costs move. Other materials worthy of note, our timber, which is seeing above average inflation across both engineered and unengineered elements and blocks and plasterboard, both of which are slightly above the overall average. Importantly, our size and scale are real benefits here as are the strong relationships we've built up with suppliers over many years. We've guided to 3% to 4% inflation for the year. And as you can see on the slide, this is weighted towards materials, which is the greater component of our costs. We do expect labor to be lower compared to given the spare capacity in the industry in a more subdued market as well as subcontractors desire to lock in future workload. But we can only give guidance on what we are seeing today. Clearly, the macroeconomic backdrop is highly unpredictable. So we'll continue to evolve our expectations. And finally, as you're aware, we're really proud of our industry-leading credentials around design, build quality and customer service. These continue to underpin our brands and contribute to our sales resilience in a more challenging market. As David said, we've achieved a 5-star rating for customer service in HBF survey for the 17th consecutive year and our site managers secured an industry-leading total of 122 Pride in the Job awards this year. So on that note, I'll pass it over to John for an update on the financials. Thank you.

Thank you, Mike, and good morning, everyone. Today, I'll take you through our FY '26 performance and update to on our land bank and on building safety. Here is the overview of our FY '26 performance. we've set out the 3 profit measures, adjusted PBT before PPA impact, the adjusted PBT after and then finally, the statutory reported pretax profit after adjusted items. Consistent with the approach adopted at the half year, both adjusted measures are now stated prior to the impact of the noncash interest charges on legacy property provisions. We also showed both the aggregated comparable, which includes Redrow in the 7.5 weeks prior to the acquisition on the 21st of August back in 2024, and the reported comparables. I'll focus on our performance relative to the aggregated performance in FY '25. I'll now take you through the P&L on the next slide. Here on Slide 17, we detailed profitability and margin performance in more detail. There are several points to highlight. Firstly, the increase in home completions coupled with an increase in our average selling price, increased revenues to more than GBP 6 billion. However, the adjusted gross margin was lower at 15.3% giving an adjusted -- adjusted gross profit of GBP 926.6 million. There were 3 drivers behind the movement. First, we benefited from the growth in completion volumes and higher average selling prices, although we did experience softer underlying pricing, as Mike mentioned. Second, the targeted use of incentives, with financial incentives impacting the top line and nonfinancial incentives such as customer upgrades impacting cost of sales, but both having a negative impact on the gross margin. Third, we experienced underlying build cost inflation across the year of 2%, net of procurement synergies. Note this was closer to 3% in the second half, and this effectively offset the usual benefit of second half completion volume gearing. Adjusted operating profit was slightly ahead at GBP 598.1 million. Revenue growth, the benefit of integration cost synergies and business as usual cost discipline, moderated the year-on-year margin impact to 60 basis points, giving an operating margin of 9.9%. Adjusted finance charges of GBP 31.5 million compared to finance income last year at GBP 4.9 million. This change encompassed lower cash balances the utilization of our RCF for part of the year and higher interest rates applied to new land creditors relative to the rates on those that were being settled in the year. Including JV income, PBT before the impact of PPA adjustments was the GBP 572.8 million, David mentioned at the start. In summary, we saw good momentum on home completions and the cost synergy benefits of the Redrow integration,, as well as our own cost reduction actions coming through to the bottom line. Looking now at the movements in our adjusted operating margin. aggregated on a pre-PPA basis, this was 10.5% in FY '25. In FY '26, we then saw a benefit of 20 basis points due to the gearing of effective higher volume. Then the combination of softer pricing, underlying build cost inflation and targeted use of additional nonfinancial incentives created a negative net impact of 200 basis points. Acquisition-related cost synergies added 90 basis points, and our business as usual, cost reduction actions, including our recruitment freeze as well as reduced performance-related pay and one-offs, delivered a further 60 basis point benefit. The resulting operating margin before PPA impacts was 9.9% and 9.1% after PPA. The movement in our administrative expenses from GBP 398.5 million last year to the GBP 329.8 million is set out on this slide. You can see the various drivers but I would highlight, firstly, the positive impact of acquisition-related cost synergies at GBP 37 million there. Below target employee performance pay, reduced expenses by GBP 15.3 million and business as usual cost savings mentioned earlier, contributed another GBP 14.3 million. We then had GBP 17.3 million of one-off positive items. GBP 10.1 million related to the remeasurement of cost accruals and GBP 7.2 million, reflecting a year-on-year decline in internal project activity where internal project teams redeployed on completing the Redrow integration and these internal resources have been deployed back into the operations in FY '27. In the current year, we expect administrative expenses will move to approximately GBP 360 million, taking account of the absence of the one-off items, underlying cost inflation, residual synergy savings and assuming a return to on target levels of performance pay. Now to look at our Land bank. A slower pace of land acquisition has seen the duration of our owned and controlled land bank moved down to 5.2 years at the year-end. This remains a strong position and is very consistent with our plans to optimize our capital employed, as David will cover later and will remain above our medium-term target of 4.5 years and our detailed consented plot to sales outlet ratio set at 135 at the end of the year. And we are looking to ensure our land bank is efficient with sales outlets, sized to drive sales over a typical 3- to 4-year period. Finally, with 118 strategic land applications covering more than 31,000 plots submitted to local planning authorities, we expect to see significant conversions and drawdowns from our strategic land bank portfolio into our current land bank over the coming years. Now to look at our Land bank gross margin and how that's moved over the 6 months since December. There are 3 moving parts to flag in terms of the movement. First, we've seen a positive 50 basis point impact, reflecting the plot mix traded out through completions in the second half of the year at a 14.5% gross margin after PPA impacts. Second, we had a negative impact of 220 basis points from the flow-through of softer pricing, build cost inflation, and incremental sales incentives. And thirdly, a 10 basis point improvement from the most amount of land plots acquired in the half at a 23% gross margin. These plots were just over 2,800. In combination, the embedded gross margin ended the year at 160 basis points lower at 17.3% and relative to the 18.9% reported at the end of December. Improving the embedded gross margin is a clear priority. With little movement on pricing, we have to focus on self-help, which David will come back to later. Turning to Building Safety, where we've seen little change to the net provision position, but there are some moving parts to flag. Here tabled at the movements on the 2 portfolios, where we recorded a net adjusted item charge of GBP 96.8 million there. In our building safety provision, we've taken a charge of GBP 105 million. covering cost inflation and scope revisions at 2 active developments. In our reinforced concrete frame provision, we saw a net release of GBP 8.2 million. This included, firstly, the release of a provision on several developments where further investigation concluded remediation works were not required and an additional provision on 1 building where additional remediation works were identified. Completing the picture is the unwind of imputed cash interest -- noncash interest of GBP 4.5 million. and the provision utilization of GBP 153.8 million. We ended FY '26 and with a total provision of GBP 1.05 billion, and we expect to spend approximately GBP 300 million in FY '27 and GBP 450 million in FY '28 on our direct remediation-related works as well as payments to the Building Safety Fund. Now to cash flow. Here, we set out the cash flow bridge and a few points to highlight. First, cash outflows included payments around tax an interest of GBP 84 million, outflows on trade receivables and payables totaling GBP 90 million and the building safety expenditure, which we've seen already. Second, we saw the reversal of all of our first half construction WIP outflow. So a disciplined performance and an underlying improvement up and above the typical sales cycle and construction seasonality that you expect from Barrett Redrow. Thirdly, our reduced investment in land unlocked GBP 328 million of cash. Fourth, we increased our investment in JVs at a net GBP 102 million. This encompassed our building investment in the made partnership and our new JV with places for people at Gilston in East Hertfordshire. Finally, after a dividend payment of GBP 242 million and share buybacks of GBP 101 million, including taxes, the net movement in cash was broadly flat. We currently anticipate that FY '27 year-end cash will be between GBP 400 million and GBP 500 million, subject, of course, 20 changes in land activity and guidance on that as the year develops. Here is our usual balance sheet breakout. Just a couple of points on this one. You can see our gross land investment reduced by GBP 464 million. And then with land creditors, GBP 98 million lower, our net land investment position reduced by GBP 366 million and stood at GBP 3.93 billion. Land creditors funded 15.3% of our Land bank. This is below our target range of 20% to 25%, and we expect this to remain the case over the coming year as we limit our investment in land. Longer term, it remains a clear intention to manage our land bank more efficiently including land cost deferral using land creditors. But this will depend on the scale of land buying and the deferral terms available in the land market as we move forward. Finally, I am really pleased that we have been able to announce that we have amended and extended our revolving credit facility with our existing providers. We have increased the RCF from GBP 700 million to GBP 900 million and if you remember, Redrow's old facility of GBP 350 million was canceled at acquisition. We've also now extended this facility to July 2031, and with 2 potential extensions, subject to lender approval, which would take the facility through to July 2033. So to summarize, our financial performance in the year has been resilient, and that's despite the macro uncertainties faced. Our balance sheet remains strong, and the cost synergies from the Redrow acquisition are making a positive impact on performance. Turning to guidance. You will see -- find a detailed slide in the appendices, but I thought it's helpful to have the key points here. And then finally, on the key movements around cash, up and above the seasonal cash flow movements in our housebuilding operations, we do expect to spend approximately GBP 300 million on legacy property remediation and GBP 340 million settling line creditors, and to finish the year with between GBP 400 million and GBP 500 million of net cash, subject to the land market and opportunities. Happy to take questions later, but I'll now hand back to David. Thank you.

Thanks, John, and thanks to Mike as well. So I'd like to start this section with an overview of the housing market. I think everyone recognizes that the fundamentals that underpin our market are strong. There is a desperate need for housing across all tenures on a nationwide basis. This should be driving an active and efficient industry, creating value for all shareholders. However, this year, the macro backdrop has clearly been very challenging with consumers cautious and interest rates at best expected to remain stable. Home bars, particularly first-time bars, face severe affordability challenges. And the industry remains constrained by an under-resourced and unresponsive planning system combined with excessive red tape, regulation and taxation. We do welcome the steps that the government has taken to improve the planning policy environment as a whole. In time, we believe that these reforms will enable the industry to operate more efficiently with shorter overall land banks and an ability to accelerate growth. But the pace of delivery so far on the ground has been frustratingly slow. On the demand side, we're doing what we can to support our customers. Mike and John have both touched on how we deliberately stepped up our incentive levels in the face of increased hurdles for people who are taking out mortgages. We continue to tailor incentives, particularly for first-time buyers and also for key workers. While we believe that more decisive action from government is required to deliver a strong and sustained recovery in the market, this is not how we are planning or operating the business. In the current environment, proactively managing our business is critical. This means delivering cost efficiencies. On the slide, I've set out 3 key areas of focus: the first is overheads. And here, as you know, we've made good progress. Our administrative expenses for the year came in lower than our original guidance, and it represents a GBP 90 million saving compared to the stand-alone business businesses back in FY '24. We have also just completed a significant project to streamline our house types. The number of house types over the last few years has proliferated as new policies at both a national and regional level have required multiple variations of our core ranges, taking the total number of house types just for the Barratt and David Wilson brands to more than 500. This streamlining project will reduce Barratt and David Wilson to under 100 house types, all of which are future home standard compliant and deliver significant economies in terms of procurement and build time, without materially reducing house price choice for customers. As Mike has already set out, we're also benefiting from our size and scale to generate efficiencies throughout our supply chain. Build cost inflation is a challenge for the whole industry but scale is a clear advantage in purchasing, and our streamlined house type range will deliver benefits for our subcontractors through greater standardization and repeatability and ultimately should benefit our build costs. In respect of today's challenges, these actions will drive plotting and build efficiency, ensuring our build operations are best placed to perform over the long term. Turning to capital employed. As you know, we have been disciplined in terms of our land investment with just over 3,000 plots approved for purposes in FY '26. This is net of nearly 5,000 plots, which we canceled. We are guiding towards higher levels of approvals in the current year at between 6,000 and 8,000 plots but only if we see sufficiently attractive opportunities. We have assembled a strong land bank, which gives us the flexibility to manage our investments in more challenging time. At the same time, we're continuing to evaluate our existing land bank for opportunities to rightsize our holdings, driving an improvement in capital employed. We've already made some targeted land sales in FY '26, which will continue in FY '27, with potentially some additional land swaps. And finally, we are leveraging opportunities we have across the portfolio to drive multi-branding. This enables us to open new outlets without investing so much capital, which John has already touched on. As we've set out on previous occasions, by working through developments quicker, we can improve our return on capital employed. To give a brief update on our synergy sales outlets. Our target, as you know, is to open 45 incremental sales outlets following the Redrow acquisition. 12 of these were launched in FY '26, a further 18 on June FY '27 and the balance of 15 will become active in FY '28. Identifying opportunities for dual or triple branding is now business as usual for us. And we can look at how large developments can be optimized around both margin and speed of development to improve ROCE. Wrapping this into the broader position in outlets. On this slide, you will see that we have held steady in FY '26. We now anticipate that average outlets will be stable at approximately 405 again in FY '27. When we last updated in July, we would expect an average outlets for FY '27 to be around 415. Our divisional teams are still working hard to get these outlets open. But the pace of planning approvals has slowed. Looking forward, these sales outlets will be open in FY '28, and we will benefit from a strong strategic land position with 118 planning applications pending. So the next 2 years, are primarily about using the land we already have, either under our ownership or under our control. To complete the picture on synergies, all GBP 100 million cost synergies were confirmed in the second half and the cumulative profit and loss impact through to the end of FY '26 was GBP 73 million, of which GBP 53 million was delivered through administrative expense savings. We would expect most of the outstanding synergies to be delivered in FY '27 taking the annual profit loss contribution to approximately GBP 95 million. In summary, the Redrow acquisition has more than delivered on the cost synergies identified at the time of the acquisition. The focus going forward will be on driving our business as usual discipline on costs to ensure that as the cycle evolves, our cost base is optimized around the market in which we operate. Looking at trading since the start of FY '27, our net private reservation rate is strong given the market backdrop and has benefited from PRS and other multiunit sales. The underlying private reservation rate was notably resilient. Year-to-date completions were behind last year, but FY '26 did benefit from some completions delayed from FY '25 that we outlined at the time. And encouragingly, our forward sales position is up 6%, giving us confidence in our guidance volume for FY '27. But obviously, the market will remain sensitive to macro uncertainties, as we've talked about. So pulling this all together, we operate in a market with strong fundamentals. Housing is clearly cyclical, but we remain confident that Barratt Redrow is well placed to navigate the current market and capitalize on underlying demand. Fundamentals to this are our 3 high-quality and differentiated brands, providing the widest customer reach and allowing us to develop land more effectively and efficiently. Our customer focus has been established by our numerous third-party credentials over the long term. We are the reliable partner of choice across the private and public sector, allowing us to lead and innovate. And finally, we remain financially strong with a robust balance sheet, plenty of liquidity, and that is a key strength in this market, and it will underpin our current shareholder return program. So to wrap up, as Barratt Redrow, we are stronger, more efficient and an agile business that is well placed for the future. Just to pause at that point, I think as some of you know, I am retiring as Chief Executive of Barratt Redrow next week. Yes, I was a bit uncertain about actually saying anything about it at all, but I just thought I would say a few words. I mean, look, it's been a huge privilege for me to be CFO for Barratt Redrow for 6 years and then Chief Executive for Barrett Redrow for 11 years. It is an absolutely fabulous business. And we've always sought to lead the future of the homebuilding industry. We build fantastic homes. We have amazing people who are really committed, hard-working and tremendously talented. I think you just need to go out and visit our sites to really get that feel. We also have amazing support from our subcontractors and from our supply chain. So I have really wonderful memories of my career in homebuilding. It has been eventful. And in my time I've had 7 Prime Ministers of which I've only met 5, but a couple of them weren't there very long. And we've had Brexit, and I understand everyone's had these things. It's not unique to me. So we've heard Brexit, COVID, with the war in Ukraine, the conflict in the Middle East. And of course, Scotland qualified for the World Cup. Thank you. And yes, we did a placing and rights issue within about 3 months when we starting and we've made 3 acquisitions, Oregon, Gladman and Redrow. But I'm hugely proud of everything that the team has achieved over the 17 years. So over 17 years as a 5-star housebuilder. Somebody asked me yesterday that was connected to the fact that I've been here 17 years, but just to be clear, that's not connected to the fact that it would be near 17 years. 22 years with more NHBC Pride in the Job awards. I think sometimes we're modest about our achievements as a business. CDPA-rated on carbon ranked globally in terms of our CDP ranking. And as you know, something very close to my heart, we've donated more than GBP 25 million to charity in the last 6 years. We have said -- I know it's hard to believe, given the current backdrop, but we have set a few annual records for both profit and cash returns. And I think we've always understood our place in the community and our place in society. This is my 25th year as a plc Director and today's presentation, just coincidentally, it wasn't planned this way, it's my 50th either half year or full year presentation. When I said that to the team yesterday, and they said, well, why are you not better at it. I thought it was harsh. A very long time ago when I started as a plc director somebody said to me, which is probably one of the best bits of advice I've ever had is don't spin things to the analysts and the investors because you're going to come across them again time and again in your career. So I've always sought to be transparent, straightforward, consistent. And I think we company at Barratt Redrow always strive to be very clear in terms of our guidance. I count many of you in this room, and I'm sure dialed in as friends. Even the ones that have published sell notes or have sold shares, and we've had some really great times together. But things move on. So I'm going to spend more time with Janet, my wife, which she is very worried about, and also my children and my 4 grandsons and those of you that play off know that I'm going to play a lot more golf. I would just like to wish the very best to the Board of Barratt Redrow to Dean, our incoming CEO and Rebecca, our CFO; and to all of the team. So we're now going to move to questions. And I'm going to chair and John is going to compare. Thank you.

Will Jones from Rothschild & Co Redburn. Congratulations, David and best of luck. Three questions if I could, please. First is, I guess, around trading in the year-to-date. It looks a fairly resilient ex bulk sales rate, but maybe you could give us some color on how months have trended, and particularly with that first couple of weeks of September under your belt? Second was around margin. Clearly, no firm guidance for the year ahead as normal. But if there's any of the moving parts, perhaps you could comment on, we've got the build cost for you. Is there anything on mix to be aware of and presumably the balance for us all to think around is just where we land on price? And the last one was just around policy. Yesterday, we had the port out on the Help to Buy scheme as was, which concluded fairly favorably. Just wondered what your opinion was on that and whether you think it changes any of the potential for demand side support from the new leadership.

Okay. Thanks, Will. So I'll pick up in terms of current trading and a pickup in terms of policy, and then John will talk through in terms of margin guidance. And I think we'll pick up inflation probably at a later question in terms of topic. So just in terms of trading, I think we've always been pretty strict about not starting to disaggregate the current trading period because 10 weeks, it's a relatively short period. But what I would say is we are very pleased in that period. And the 1 thing I would say is that we haven't seen any weakening as we progress through that 10-week period. So I think from that point of view, that is a positive is the first point. The second point is, I think the regional variations are quite similar. And therefore, where affordability is most challenged, so particularly in London and the Southeast, the market is difficult and that remains to be the case. But we're very comfortable that when we look at the way that we're trading in terms of private and the way that we've supplemented that with multiunit sales, then we're comfortable with our full year guidance position. And I think we have good visibility on that. In terms of policy, I mean, I think 2 sides to it. But I know that we've adjusted our outlet numbers today, and we've adjusted them previously. So that seems slightly contradictory to be positive about the government position on the supply side. But I think if you step back and look at the changes in terms of planning and infrastructure bill and the national planning policy changes, the framework changes that have been made, they are creating a fundamentally different environment from a planning perspective, whether you're looking for planning on residential commercial, retail, whatever. It's a fundamentally different environment. So I think our frustration has been more about the speed of change because the act didn't go live until December '25, and the second deterioration of the planning policy framework was not until 2 weeks ago, 3 weeks ago. But that is going to bring benefits. The only thing that government really do need to address is resourcing at a local authority level. So 320 local authorities, you can get your planning ticket, but then you've got to get the 106 agreed and you've got to get your pre-commencement conditions cleared, and there's a finite resource at a local authority level. On the demand side, we've covered it a little bit in the presentation and the announcement, but we strongly believe that the government should put demand side to support in place. We were very pleased to see the publication of the government report in relation to Help to Buy, which I think was hugely supportive of the Help to Buy program, despite criticism from various quarters that it allowed nearly 400,000 people to buy a home. 300,000 first-time buyers buy a home. Total benefit to the economy, we've estimated at GBP 25 billion. I benefited -- I know I'm older than all of you in the room, but I benefited from a government support program when I bought my first house to Myers program. The Myers program was a massive support program across both new build and secondhand. But if the government want growth, they need us to be building more homes. So I'm sure the government are looking at on the basis that they have a stated growth agenda. And also, I think a growth agenda that isn't just going to be about a particular part of the country, that the whole country can benefit from more house building. John, do you want to talk a bit more?

Yes. Thanks, David. I guess 2 or 3 things. One, on the selling price, a couple of things to flag. First is, we obviously had some benefits of mix that we've highlighted in this year. There's a little bit of that still to flow through. So a couple of percent is around mix and geography in terms of the ASP, and that's a positive on the selling price. Second thing to bear in mind on pricing is the affordable where we're expecting that to move back down towards 20%. So that has an effect in terms of the overall ASP that you'll see. Those are the 2 things I'd flag on the selling price movement. And obviously, we flagged previously that the underlying pricing in the order book is of the order of 1.4% lower back in July, and that hasn't really changed. Turning then to think about the margin movements over the year ahead. I'm going to [indiscernible] too close. Basically, the big item would clearly be build cost inflation, so around the gross margin. And that's for, I guess, everyone in the room to take a view. Obviously, we've guided to the 3% to 4% but think you build cost in total being 60% of revenue should help people think about how that will kind of break through. And obviously, we've guided on the admin expenses when you think about what that does down at the operating level. I think those are the key components there just to bear through, I think that covers it.

Aynsley Lammin from Investec. Just 2 questions from me. Just on the guidance, obviously, very minimal change. It looks like it's more related to site numbers. What's the underlying assumption for underlying sales rates for this year? Is it flat at 0.55. And just given what we're seeing with swap rates and confidence going into the autumn kind of where is your confidence around that guidance, I guess, or the risk to it? And then second question relates to just on swap rates. How sensitive do you think the underlying sales rate would ease to interest rate moves? Is it more confidence if we were to get mortgage rates 25 bps higher, is that a big impact? And are you seeing any interest rate hike -- mortgage rate hikes at the moment?

John will pick up in terms of sales rate and outlook on that. I mean I think in terms of the interest rate, I think the issue we've seen over a long period of time. If you look over 2, 3 decades, I don't think that the issue is about the interest rate parse, I think the issue in consumer confidence is about the certainty of what is going to happen. And so we came from a position in February where I think a base rate cut at the end of March was 80% likely to happen. And because of the conflict in the Middle East, it didn't happen. And I think that dense consumer confidence hugely. Now there are interest rate increases priced in, and that's clearly pricing into the 2-year or 5-year effects. And as I said, I think we've been very encouraged about the reservation levels over the last 10 weeks. So it's more about does it play out in the way that people expect it to play out. I think that is what we'll solidify confidence or will impact confidence. So we would also prefer that there was no rate increases. But from where we are today, that looks tough, and that's not the way the market is pricing in. And we have definitely seen movements. If you look over the last 6 months, there's been substantial movements in terms of the 2-year and the 5-year mortgage rates.

And just picking up on the reservation rate for the balance of the year, Aynsley. If we look, obviously, the 0.53 underlying for the 10 weeks. If we look at where we will be the remainder, we need a sales rate of about 63% to 0.64 to meet the midpoint of our guidance range. Clearly, that is an all-in sales rate, including multi-unit sales as well as the underlying and we would expect the seasonal kind of movement in the year to occur with the stronger spring selling season.

Ami Galla from UBS. Three questions from me. One was on current trading, given what swap rates currently said, are you seeing any behavioral shifts from institutional investors on the multiyear unit sales and the mortgage lenders in terms of how they are looking at potential buyers and assessing the affordability metrics. The second question was on WIP. If you could give us some directional color on how we should think about WIP investment in '27 and '28, especially given the sort of outlet guide that you're giving? And the last one was just on availability and pricing. How are you seeing that end of the market shift?

Okay. Thanks, Ami. So John will pick up on WIP, and Mike will pick up in terms of land availability and what we're seeing in pricing. So I think in terms of multiunit sales, we need to go back really to the budget in '25. And bear in mind that in the run-off of the budget in million there was a huge amount of speculation about what was going to happen, ranging from rent controls to stamp duty to mention tax and so on. And it was all a bit of a mess to be honest. And I think what that meant was that the institutional investors backed away from the market, particularly London, but I think generally, their appetites often than where they were doing deals in the second half of '25 they were tending to be deals that were at quite substantial discounts. So what we've seen in '26 is, I think, a renewed interest from institutional investors in the market mainly looking at single family, but I would say there's a higher level of interest in London than we've seen probably over the last 2 or 3 years. So we work with a number of partners. We've been very public about the fact that we work with Lloyd's Living. And they have a big appetite to grow their portfolio, and we see them as being a great partner, and we obviously have a lot of partners as well. We said last year that we want to do about 5% to 10% and I think that still is our aspiration. We don't really want to be above 10%. We prefer not to be below 5% in terms of completions. In terms of mortgage lenders, I would say that generally, the mortgage lending environment is continually improving. So the regulator has allowed more lending to take place I think the banks and the lending banks are keen to lend, but the affordability, particularly for first-time buyers is the main challenge. So people who are able to afford. And therefore, for first-time buyers, our lead offer is deposit match. So if you have a deposit of 5%, we will match that deposit -- and I think that is quite a powerful offer because in a lot of cases, it's allowing first-time buyers to access a 90% loan to value and therefore, better affordability than accessing a 95% loan to value. John?

And on work in progress, obviously, with the adjusted guidance, when you think about the profile we're expecting a pretty tight control of it this year because there isn't really step up now towards the back end of the year, clearly, we are looking for our that growth. So there will be investment going in to get those sites ready to be up and running. But I think the whole effort inside the group is to really keep a tight lid and control on WIP. So I don't see any significant step up. And clearly, there's a big focus internally on driving efficiency and moving out with lower if we possibly can.

So and, obviously, our sort of -- our intake profile of land is changing in that we're looking more at our strategic portfolio and trying to make use of that through the planning opportunities that we've got. So as David noted, we've got 118 strategic applications notes that are going through. And that will give us better visibility of land going forward. What it does give us a bit of flexibility in terms of where we where we look to buy instant land in the market in a more competitive environment. That land is still coming to the market. We see prices pretty flat in terms of land coming through. I think there's less peers. There's more opportunity or more bidders on smaller sites as you'd expect. But I think where we've got larger sites, our 3 brand sort of USP gives us that opportunity to really tackle those and be competitive and economic on those beds.

Rebecca Parker from Goldman. I just wanted to ask a question on build cost inflation. What conversations are you having with suppliers given the more recent spike in energy costs and what are you assuming in your build cost inflation guidance? And then secondly, on the planning challenges that you've cited in terms of that outlet guidance. Could you provide more color on those and confidence of growing your outlets into '28 and '29,?

Thanks, Rebecca. So I'll pick up on planning and outlets and Michael cover in terms of build cost inflation and what we're seeing generally. So I think in terms of outlets, I think the key point is that we have really good visibility. So across our 32 divisions. We got visibility. is becoming a less common thing given the planning backdrop we either get planning or we'll get planning on appeal. So I think what it has more to do with is can we get a planning committee convened? Can we get the 106 signed? And can we then get our pre-commencement conditions agreed? And that is more about, I would say, admin rather than points of planning principle. So in looking at the portfolio, we feel we are going to see some slippage as we move through FY '27. And hence, we've adjusted the guidance slightly on that basis. But it's not about -- we don't have the outlets. We've got to go out and secure the outlets, we absolutely have the outlets.

Yes. So on Bill cost, probably it's worth recognizing for the current year, we're already 20% through the year. So we're getting a clearer picture on it on a monthly basis. As we said in the presentation, we have really strong ongoing partnerships, and we engage with the supply chain on a regular basis. Our deals aren't done the first of January for every material. So they're done through the year. So there's regular touch points where we see and we're talking to the supply chain about how that's working and how they see the picture evolving. I think the current assessment takes account of the size of the business. We talk a lot about buying power that we've got and the relationship. So it takes all that into account. I think really positive. We have a really strong group procurement team. We have set individual sector managers that are regularly talking to the various supply partners. And we're getting regular updates, as I say, from them from a holistic basis about what inflation is looking like. So we're really confident on the guidance that we've given. I think it's worth noting -- I was with the supplier last night and we're talking about sort of innovation and how we can manage potential inflation measures around installed cost rather than just PO supply costs. So we're working together as a team as a broader team to try and manage those processes. And we've also got, as we always have got sort of cost initiatives and whatever you through the business that will try and offset any inflation pressure. So overall, we get in regular updates. We're 20% through the year, and we're really confident with the forecast that we've got in the [indiscernible] .

Zaim Beekawa, JPMorgan. The first, maybe to John, I think on Slide 21, you presented the land bank gross margin. Just curious to think -- to get your thoughts as to the sub 10%, when do you think could fall off? And maybe just to come back on build cost inflation. I think in the presentation, you referenced the fuel surcharges. Any indication as to what the contribution is at? And if we were to paint a scenario where maybe those were to come offline, where do you think that 3% to 4% build cost deflation falls to [indiscernible]

Okay. So John, if you pick up in terms of the land bank might you pick up on a charges?

Yes. So just looking at the land bank, when you look at the part sub-10 -- are you here thinking about impairments or are you just looking at this from the profile? Because obviously, that is coming through -- it's partly geographic. It's partly about the time when the land was acquired. So those are the kind of the 2 big drivers as well as obviously the way the market has moved since. But from the point of view of those plots coming through, we're expecting those to come through pretty much the more mature plots are coming quicker in the process. So they will work through the next 2.5 to 3 years. But from the point of view of the 10% gross margin, obviously, there's a mix in there. I don't -- I probably wouldn't go any further in terms of giving more detail, but we expect those to pretty much burn through in the next 3 years because they tend to be the auto plants. Does that help?

Okay. On the surcharge, I guess it's worth noting again that it's only one of the areas that we -- it's only one of tactics that we're employed in terms of trying to manage our overall inflation pressures. We put it in -- we put that into place really so that we can be agile around moving prices back down when prices normalize a little bit more. I think what we're seeing, it's difficult to do the 3% to 4%. We've taken that view, and that's all rolled into the 3% to 4% that we've guided on. We are seeing our supply chain, both labor and material actually sort of take and absorb some of the price increases that are out there really to secure workload for the future. And that comes back to our sort of volume and ability to engage and guarantee volume going forward for them. So it's -- there's a number of items that we're looking at in terms of blending that. So it's difficult to ascertain the surcharge, but we forecast that sort of all that's baked into the as best we can, knowing what we know today.