Crest Nicholson Holdings plc (CRST) Earnings Call Transcript & Summary

Good morning, everyone, and many thanks for coming down to Windsor and join us this morning. Bill and I are looking forward to our Capital Markets event today, sharing some more detail on the strategic priorities we touched upon at the results and introducing some other members of the leadership team that are going to help execute some very exciting plans, all focused on delivering long-term sustainable shareholder value. If I can take this slide on forward-looking statements as read. Good. Thank you. Okay. A quick run through the content of today's presentation and our plans for the event more generally. As I said, Bill and I will start by talking through where Crest is today, what we see the future opportunities and the changes and improvements we need to make in the business to capitalize on those opportunities. Ultimately, we want you to leave today with a clear understanding of what our ambitions are for Crest and how that will flow through into delivering value for shareholders. After that, we'll look forward to introducing some colleagues, our recently promoted Group Managing Director, Mark Foyle, who will talk briefly on what to expect on our site visit to Windsor Gate today; our Group's Sales and Marketing Director, Vicky Cullen, who will provide a little more color on the sales and marketing initiatives that I'll share with you; and Charlie Joseph, who is the Managing Director of our Southwest division and soon move into the same position in our Southern division. She is going to talk about her experiences with the changes implemented to date and how her team are reacting to these changes. Then after a break, we'll depart on a short trip to Windsor Gate, so you can see firsthand on how some of these initiatives we talk about today are being introduced and implemented. Okay. We're going to go into some detail at times today, which I think is important for you to hear about. However, when we take a step back, there are five points that really underpin everything and why we think the Crest investment case is a compelling one. We know that there is demand for housing. And for my discussion with the Labor government and as you saw in the very recent Planning and Infrastructure Bill, I think that they want to make some positive changes to help our industry build the houses which the country needs. It won't be easy, and the target is a challenging one, but we will play our part in that. Having spent considerable time reviewing the market opportunity since joining as CEO, it is clear to me that the best way forward is to properly focus on the mid-premium segment in the housing market. The dynamics of that segment are very attractive and robust. We obviously need to improve some of the ways in which we operate to meet the expectations of the customers in this segment, but we have already seen some really encouraging signs following the actions taken and now in place. And ultimately, this is about delivering sustainable returns for our shareholders. We believe this is best achieved through a strategy that focuses on value growth alongside disciplined volume growth but aligned to a sharp focus on our return on capital. And you'll hear more about how we intend to deliver that over the coming slides. Thinking about Crest Nicholson itself, there are strong foundations to build upon. We have an excellent short-term and long-term strategic land bank, a strong balance sheet and well-regarded brand. In order to deliver a successful strategy, though, we also need a strong and capable leadership team, all aligned to the same strategy. That leadership team is now in place. We also have many excellent people who have started to really embrace the changes that Crest needs to make. But there's a lot to build upon. I think the evolution of the housing market over the last decade provides some useful context for the strategic pillars set out today. Clearly, the period from 2013 to 2020 was a good time for the industry. We had low interest rates and government support in the form of Help to Buy, underpinning demand and prices and actually relatively modest build cost inflation to navigate. The world then changed dramatically from 2020 through to today. As you will all recall, there was real macro instability and headwinds facing both the overall U.K. economy and then our industry within that. At the macro level, we had COVID, the cost-of-living crisis, inflation and interest rates increasing. And then thinking about our industry alongside that backdrop, we saw Help to Buy removed a material new cost to our business, including, of course, fire remediation. I know this period was a real challenge for the industry and indeed for any management team to navigate. But looking here in 2025, there is still some macro instability in part from geopolitical uncertainty, and we do have a higher regulatory cost base to operate than we did in the past. Equally, though, there is no doubt that as a country, we need more homes. There is no doubt also that the government is committed to supporting that industry. I'm really encouraged by the Prime Minister's language around beating the blockers. Against that backdrop, we can see a clear and differential approach, an opportunity for Crest and how we might start to mark our own progress against the national housebuilding targets, which we have set out. The government has obviously set out a very ambitious target of delivering 1.5 million new homes in this parliament, which put simply, equates to 300,000 homes each year. Set against the record of house and delivery over the last decade or so, it certainly seems ambitious. But the longer we put off the problems fire remediation housing delivery, the more extremely problem will become. On the right of the slide, you can see some of the public commitments on the topic. And what I will say from the private discussions I've had with ministers is that public rhetoric is very consistent with what they are saying behind the scenes. Understanding and resolving the blockers within the planning system is a key challenge for the Labor government. But again, we are seeing some helpful actions by the government. But clearly, there's still more to be done. Obviously, any simplification or acceleration within the system is good for Crest to enable us to build the right number of homes in the right parts of the country and with our transformation plans embedded in the business, importantly, at the right margin and rate of returns. We wanted to touch upon the previous Crest strategy, which was set out in 2019 and which was described as multichannel. It is important context because it sets out what Bill and I inherited and what we need to change. In short, the focus in that multichannel strategy was not -- was for more and larger sites, really quite aggressively driving down build costs through design, material and specification adjustments, and then selling across different market segments with different customer types, all with different needs and expectations. Whilst it is always easy to comment with the benefit of hindsight, it is clear from our results that this strategy just hasn't worked as planned, but for many reasons. There are both external and internal factors that have contributed to our performance over the years, some within our control and some not. I've listed out on the slide here some particular issues as a result of these external and internal factors. For a house builder of the scale and size of Crest, the scale of macro instability over the recent past has meant that the business has really suffered from the pressures associated with the rising cost of capital, coupled with the decline in margin on PRS housing. We were competing in a highly commoditized market against house builders and contractors with considerably better economies of scale than Crest. And in addition to that, of course, the balance sheet of the business was further impacted by the fire remediation costs, an area we've since provided more clarity on at the recent prelims. Alongside that, though, there were some decisions which we have reversed. It was clear that the build quality and the sales specifications that Crest is working towards just didn't reflect the Crest brand or what customers would expect when buying a Crest home. Our customers believe that we're a mid-premium brand. But we weren't acting or operating like a mid-premium brand. We need and are changing that quickly. As we spent time thinking the best way to take Crest forward, it was quickly apparent that developments in the PRS market have created significant operational and financial challenges for a house builder with the scale and operations of Crest. The chart on the left here has some key data points to illustrate this. You can see with the solid brown line how open-market house prices have changed since 2019. Obviously, though, with the PRS contract, you set a fixed price with a guaranteed but discounted income, which is the dotted blue line. However, the builder takes the build cost inflation risk, which you can see with the solid green line at the bottom. With unprecedented build cost inflation through '21, '22 and '23, margins have been squeezed significantly. Furthermore, PRS investors have become ever more sophisticated in their procurement. For a house builder with Crest scale, it's very challenging to manage those PRS contracts efficiently and as a result, drive any margin from those homes. As we look to the future, we've set out here an illustration on how our margins can be impacted. The doughnut on the left is where Crest is today with the multichannel strategy. Something like 60% of our volume, though sold on the open market, is margin accretive, with approximately 40% of the volumes sold at a discount to the affordable and PRS channels. The central and right-hand doughnuts show how this could develop going forward. You can see that we expect the affordable volume share to grow based on government policy. In the central doughnuts, with increased affordable but with an expected reduction in value to open market pricing due to tenure changes and just maintaining the level of PRS with higher discounts, we will be facing a lower proportion of open market sales and margin compression. On the right-hand side, we can maintain the share of private developments. And whilst volume growth has moderated, we can maintain and expand the gross margin. What we intend to do is limit the new PRS contracts, go through the runoff of the current PRS, which will take a couple of years; and then focus on private development at higher margin, which will lead to better financial performance and better returns for our shareholders. There's one final retrospective slide that we want to run through before we talk about the future and what we're going to do to take the business forward. This analysis that we've undertaken has enabled us to really understand where the margin leakage issues have been. It's important to note that this bridge reflects the actual experience of the last few years from pre-commencement through to handing over the keys to the customer and into warranty rather than affecting any of the future land, which is yet to be drawn down. The first rebar goes back to what we've said previously about the mix of house types that we've been building. Historically, the approach was to try and build as many units as quickly as possible and in doing so, having more affordable housing, where the revenue can be recognized quickly but at a lower price point. You can then see the impact by the discounting on open-market volume that was used to sell more houses. Our old commission approach was volume-led rather than having an approach aligned with sustainable financial interests about margin and return on capital. With a product which wasn't as good as it should have been,and that didn't reflect mid premium branding in a difficult market and with sales people motivated by volume, we just get discounts to hit targets. This was then further exacerbated by bulk release of houses, where they weren't being sold on the private market and so were sold through PRS in quite big numbers. Again, the objective was volume over margin. And finally, the biggest contributor to the margin leakage was build cost. This is in two components, but we've shown the combined impact because it's quite subjective in some cases as to what is build cost inflation in the market and what is self-inflicted from poor processes, building schemes that are no longer part of our strategy such as Farnham and suboptimal procurement. However, what this chart does show is both why Crest margins aren't where they should be and that some of this was self-inflicted and is, therefore, addressable. Later on, we'll give you a view on levers so we can pull to move the gross margin back to where it should be.

In order to deliver a new strategy for delivery of the mid-premium home, it is important that we look internally to what strengths we have. Prior to my time here, I always felt that the Crest Nicholson brand was historically aspirational. And since joining, supported by external research, I firmly believe that we do have a very strong brand. Our land bankers have a significant size and well located in areas that we can capitalize on our brand strength. It is true that this large land bank is too large for the size of the company in certain areas. But importantly, this offers a number of opportunities for us also. I mentioned earlier that we have an experienced leadership team in place now that reflects the needs of the business in order to deliver the ambition that we are setting out today. Importantly, our people are engaged and motivated to change the fortunes of Crest Nicholson. They are taking pride in what they've been asked to deliver. We have been clear in all of our communications across the business, focusing at all times on the key strategic pillars as we seek to build a culture of excellence. This, combined with a clear and focused plan to deliver this strategy, will in turn deliver sustainable returns, all of which we hope to be able to show you in the coming slides. I know many of you have followed the housing industry for a long time and cover some of our peers or maybe shareholders in other house builders. I did think it was worth quickly setting out how I view the various segments of the market, though, because it helps inform why we are going to dedicate ourselves to the mid-premium segment. There is always some overlap, of course, with house builders, perhaps, going a couple of the segments. But broadly, there are companies that focus on affordable and PRS than large players who dominate the more price-focused entry-level segment. At the premium end, there are notably a few scale developers then with some very small developers. And then there is the mid-premium segment. We think this is an attractive segment for a number of reasons and one which doesn't have the same competitive density as some of the other segments. There are a number of reasons why we think this is an attractive demographic for us to focus on and why we are particularly really well placed to do that. We've talked about our brand a few times now, and I'll come on to where our land bank is faced shortly. Overall, you would characterize the demographic as having above-average income and are generally, but not entirely, second- or third-time buyers along with downsizes. This means that the loan-to-value ratio is lower within having more equity. It is an attractive customer base. And so we're going to have a strategy, which ensures we have the product that these customers want to buy. That is about site design, house-type design, build quality, build specification and critically the overall customer experience. With the locations and shape of our land bank and by reducing our focus on the PRS market and by keeping our affordable home percentages in line with the regulatory requirements, we calculate that this is the best way to deliver good, sustainable returns for our shareholders and build great homes for our customers. When analyzing all the data and information to help formulate the right strategy for Crest and seeing that a mid-premium approach is clearly the right one, one of the pieces of analysis was looking at housing transactions in areas we develop. This page shows that there are over 200,000 transactions, both new and secondhand, with prices over GBP 300,000 in our 5 divisions. Compared to the overall market, Crest sales were less than 1% of all these housing transactions. This creates an opportunity for Crest to build on its brand, utilize its land and create an opportunity for market share over the medium term, representing circa 10% of the new-build transactions in this segment. Of course, identifying the market share opportunity is one thing. You also need to know that you're able to meet it by taking a more evidence-based approach to strategy formulation. I'm a big believer in market research, and we have done more internal customer survey since I started to understand what is expected. The conclusions from this research validate what we suspected. We spoke to a good number of customers, and the buyers here set out what they care about. The scores are out of 7. You can see that critically the location is vital. We are in a good place on that as I'll come on to. The other two key priorities are the build specification and build quality. And you see today how we are going to go about making that reflective of our mid-premium brand. And the design of the house itself, as we have redesigned our housing types accordingly. Underpinning all of that are a number of other criteria. And for me personally, I think they're all largely captured under the theme of customer service or customer journey. And again, we're going to talk to you through some of the initiatives a bit later today. I talked a little bit previously about why the mid-premium segment is attractive to us in terms of the buyer profile. I think it is also worth looking at the comparative performance of this segment versus the broader housing market. This page shows how the performance of other segments has compared to Crest performance for this multichannel strategy. By index and all data back to 2018, you can see that coming out of COVID and going through all the turbulence of the mini budget and then with the increasing interest rate environment, the number of completions by the top 3 mid-premium house builders notably outperformed the broader market. Those buyers have greater assets and find it easier to get mortgages. They're more likely to have cash and lower loan-to-value ratios. There are also less likely to be first-time buyers. This means that the demand was very resilient despite the broader macro turbulence. I think there were two dynamics that are disappointing Crest performance. Some of it was obviously external, as I explained earlier. But I also think this proves that when you're subscale and focused on just volume, then you were going to find things very difficult. Crest do not want to find ourselves in that position again. So what does the mid-premium segment look like with regard to the competitive landscape? I touched upon earlier the scope for market share growth. And I think this reiterates that point very clearly. Within this segment itself, we can be one of the largest scaled independent players. We have an established brand already aligned to mid-premium. Our site locations are favorable. And with improving build quality and product offerings, we believe we can take about 10% market share. So space to grow. We've spent some time talking about the merits of focusing on the mid-premium segment. Why it is attractive through the cycle? Why they are good customers to target? And what those customers prioritize before buying a home? We flagged that location was absolutely critical. But of course, to be a mid-premium house builder, you need the right land in the right places. This chart shows where our short-term land bank is located and how much higher the average incomes in those locations are versus the regional average income. So for example, you can see that in Yorkshire, Midlands, our short-term land bank is located where the average income is 17% higher than the average income for that region. Likewise, with our Eastern land bank, it is 13% and so on and so forth. In short, we have the right land bank with regard to location for our mid-premium strategy. We know that the potential buyers are there with the ability to buy our homes. Over the next couple of slides, I'll take you through some more color on the land bank, which is a major asset for Crest, albeit we need to make some changes regarding our strategy for it. We have two bars on this chart. Overall, there are approximately 14,000 plots in the short-term land bank. The bar on the left shows you the margins. We have 40% of the units with an embedded margin over 25%. Just under 1/3 of our plots are at margins under 20%. And within that, approximately 500 plots are at margins of under 10%, which will substantially be sold between now and FY '27. On the right, you can see the size of the different sites. When we spoke to you at the prelims, we touched upon the importance of having sites which are in the right location and are of the right size for a house builder of the scale of Crest. Large sites tend to have a tendency to absorb a lot of working capital with a high land payment and generally require more infrastructure work and Section 106 commitments. If you're building around 2,000 homes a year and maybe 50 to 60 a year on a site, then we do not need to have our cash tied up on dormant parts of a larger development. This bar shows you that we have about 25% of our units on sites over 500. This is a really important opportunity for us because we can sell either the whole or part of these sites to free up cash to invest in smaller land for outlet growth and to meet our remediation obligations. This slide gives you some more insights into the location of our land as well as 14,000 short-term plots. The strategic land bank has approximately 18,000 plots for an aggregate of 32,000 plots. The darker the shading on the map, the higher the average household income is in that region, with the darkest color showing areas where the household income is greater than GBP 55,000. We then overlaid the locations of the land bank. Here, the green dots show the locations of the short-term plots and the orange dots represent the locations of the strategic land. As you can see, almost all of the strategic land and the bulk of the short-term land is in regions well suited to a mid-premium strategy with very few outliers. We're targeting each division to deliver between 400 and 500 homes a year. This strikes the balance between having enough volume to support the central cost of the division, but also means that we can keep control of standards and quality, which is critical for a mid-premium player. Moving then to how the land is split between the different divisions, here, we've laid out the number of plots in the short-term land bank by division. At a group level, the average forward cover is 7 years, and you can see the position for each of the divisions. [ Chilton ] is a little lighter than we would ideally like, but being in the middle of our regions could be augmented with land from other regions. Conversely, the other divisions are well supplied, and this provides confidence that any land we do sell will not lead to new problems of creating subscale divisions. So in summary on this section, we believe that the mid-premium segment is attractive for Crest Nicholson because it is large scale in Crest regions. It's an attractive customer base of discerning and affluent families. It has demonstrated it's more resilient to the macro cycle and is a fragmented market with few large-scale players.

So Bill and I have set -- sorry, today set out where the opportunity in the U.K. housing market to deliver good returns for our shareholders and what strategies Crest need to deliver that. This section is going to build upon some of the comments we've already made about how we're going to get there. Simply and clearly, though, there are 4 strategic pillars, which we'll report back on going forward: Building exceptional quality homes efficiently, delivering outstanding customer service, both of which need to be underpinned by operational and commercial excellence, and making sure we optimize the land portfolio. And we will show the potential to do that by now going into a bit more detail on each of those pillars. Our ambition is to deliver strong value growth alongside disciplined volume growth. So it is very clear that we need to improve our design and specifications to reflect our mid-premium brand. We know from our legacy 4-star rating that it hasn't always been good enough. It's important, though, that we approach this with discipline and rigor because we need to maximize the value we get from this process and these changes. We carried out some customer research when I started, which was useful but we are supplementing that data with more extensive research to really understand the granularity of the key preferences and needs of our potential buyers. Alongside that, with regard to the design side of things, it is important that we need to ensure that our new house type designs are optimized for our target customer, but also that they plot efficiently on new sites to ensure we maximize the value and margin potential. Our room sizes need to work and reflect modern-day living. This will mean an evolution to our current range in the short term with the new house type range being introduced in the medium term. We have some initiatives around build and material quality, which will reduce future warranty claims and reduce future repair costs. Simple items such as bath panels that were not the required standards, external front door framework, staircase designs and client specifications. This obviously has two benefits. It aligns the overall customer experience to what they would expect for the medium -- so with a mid-premium house builder, and it reduces the cost to incur in fixing our mistakes. It also provides a home that the customer knows from day 1 will not need to be amended or added to for some years ahead. For example, the kitchens and bathrooms are well designed and specified. Features such as showers of above baths are fitted as standard and the external materials used will provide long-lasting curb appeal and protect future values. With regards to specifications, it's about raising the minimum base level at which we are fitting out the houses. The cost associated with the recent specification increases were controlled efficiently, centrally, but have created value. We will then shortly have a broader, more premium range of customer upgrade options, again, enhancing value. This will give our customers the options they would expect and our sales people a better quality product to sell. And certainly, they will have the confidence in what they are working with. Again, though, the point is that this will be done in a disciplined and a rigorous way to ensure we maximize the value from the process rather than things being done speculatively. Alongside all the work, which I talked about on the previous slides, we then have to make sure that the build quality on each site is at the right standard. There is no point doing all the design work and then falling short with build quality. We have five initiatives to deliver this: The first is enhancing the standardization of the build process and having better staff training. This will lead to less mistakes and a more efficient and smooth build process. We have then refocused and strengthened both the internal quality team and our external independent quality review processes. These both ensure that the build of each home is being properly checked at the important stages to ensure that the standards are being maintained. Any possible issues are caught quickly and lessons learned. Alongside these initiatives, we have carried out a similar reform of our quality and customer service team. I frequently talked about the critical importance of making the entire customer journey a positive experience, and we can now build on the levels of service provided to meet customer expectations. And finally, I've talked a lot at the results about how we reformed the fire remediation team, bringing the work into one centralized function with a dedicated lead. Previously, the Crest response to the fire remediation challenges were done at the divisional level, and this absorbed a lot of time and effort when I want those divisions focused on building great homes for our customers. They can now focus on doing just that. It is easy to talk in theory and in hypotheticals, but we are trying to get across the direction of travel that we are taking Crest. Here's a case study which shows what is possible to achieve. The site is in [ Solihull ], near Birmingham. In this instance, you can see that the customer review scores in 2023 were, frankly, not very good. And then with the appropriate actions and focus we have taken, you can see that the scores improved significantly in 2024. To be an HBF-recognized 5-star house builder, last year, we needed a 90% score or above on the question, would you recommend a friend? With this particular site, you can see we achieved a score of 100% in 2024 compared to 83% in 2023, highlighted by the gold bar on the table. The improvement was delivered by a number of different things. Obviously, you need the hard work and dedication of the team, and they have really engaged with everything that we were trying to do. You can also see with the bullets on the left, some of the practical examples of the actions I've talked through in the prior slide and that these real practical actions can make a big impact. Following up on the [ Solihull ] case study, I wanted to share some more of the early results we have seen from some of the actions we have taken so far. A lot of the change is going to be about making sure we have the right culture about [ installing ] a build-right-first-time culture that is so much more efficient than going back fixing problems. One of the initiatives which will be very useful is the structured external review process, which monitors reportable items and analyzes defects to ensure we do improve our standards. And we have the management information tools in place now to follow this properly on a real-time or daily basis. We've talked about having the appropriate materials previously and the benefit of having strengthened inspection processes and stricter quality control. Something which we need to be stronger and firm on is dealing with our subcontractors. I think we can be smarter at working out who we really want to partner with and then holding them to account to meet our quality standards. All of this contributes to achieving the 5-star status that we need as a mid-premium householder. However, in this context, I'm very pleased with our current 2024 HBF customer care metric for the year ending 2024 at 95%, comfortably above the 5-star threshold. The final confirmation of our year-end position is due to be formally announced next week by the HBF. On the right, you can see more evidence of our action plan can deliver tangible results. The NHBC come out and check for the properties. And if you aren't aware, a reportable item is when there is something not consistent with the required technical standards. You can see that already we have had a material impact on the number of reported items, with the group performance reducing from 0.36 down to 0.28, which compares well with our peers. We've added the Eastern division data because I know that some of you are aware of the historical issues we've had with that division. This has required more extensive reform and change, including a new management team. The uptick in performance with regard to reported items, though, has been excellent, down 42% to 0.19. Sustainability is going to play an important part of Crest future. We have some driving principles, which will then inform some of the actions, initiatives that we take. We have our net zero by 2045 target. We are committed to biodiversity. We are always thinking about how we can reduce waste, and we're always in touch with our stakeholders to ensure -- to understand best practice. For example, we work with the Supply Chain Sustainability School and Future Homes Hub to drive sustainability best practice. Thinking about what that all means at the site level, I thought it's worth running through the things that we have done on our site here in Windsor. Windsor is a zero carbon-ready development. There's no gas on sites and homes are fitted with air-source heat pumps. The emissions associated with the use of the homes are significantly lower than the current building regulations require. The homes are fitted with EV charging points and will be zero carbon once the electric grid has been decarbonized. All of these initiatives support our transition to the Future Homes Standard. Looking beyond the homes themselves, you'll see that when we get there, there are solar-powered street lights and [ bolars ] incorporated throughout the development, helping reduce emissions and electricity costs. You'll see these in the street scene and [ bolars ] next to the sustainable drainage system at the front of the site. With regard to biodiversity and supporting nature, the sites and houses have been designed to retain most boundary [ hadrows ] and tree lines. We have backed and bird bricks incorporate into the homes alongside bird boxes within the retained trees. The site is going to have a wild meadow and hedgehog highways. I've talked before about building homes and communities, and the overall environment where people live is important as the home itself. Within this development, we will incorporate 2 play areas, a trim trail and some pocket allotments, which people are going to use to grow fruits and vegetables. And finally, there's a sustainable drainage system to reduce flood risk and support biodiversity. As you'll see shortly, the development is really starting to take shape. I think it's important to remember that purchasing a house is probably the biggest financial transaction someone will ever make. And with our customers, we need to make the overall experience as smooth as possible for them. And we want customers to be excited when moving into their new homes. I talked about this a little on the results, and Vicky will talk through some of the actions we have taken and future initiatives we are planning to carry out prior to us going on to our development at Windsor. I also talked previously that we have PRS sales, obviously, affordable and then open market. I think this lack of focus make things difficult for the salespeople, who are targeted on volume and didn't have confidence in the product they were selling. That led to self-fulfilling downward spiral. We're changing the entire process. It's going to be led by Vicky and also Jason Roberts, who is our new Group Customer Operations Director. Jason spent much of his career at large PLC retailers, where he was responsible for customer care. And obviously, the volumes of customers he was dealing with was really significant. It's going to be really helpful to bring that objective and fresh perspective to the team. The slide does show you the journey that customer goes through and the actions that we have either started to take or are going to take so that it reflects our mid-premium brand and is something customers find positive. We know there's been a gap between our customer messaging and the mid-premium segment. As such, we are redesigning the website to make that a much more powerful tool for us, coupled with a targeted advertising scheme, all aligned to the brand values. When potential customers come on site, everything that they say and feel also needs to represent the mid-premium brand. Our sales offices are newly designed. Our [ show ] homes will meet minimum design standards, all again referencing back to the mid-premium brand. Alongside that, historically, we just didn't use technology and customer data nearly as much as we should do to help us follow up with people. We have brought in some systems and practices to change that. We are changing the disciplines and behaviors on pricing and negotiation. And critically, we need to make sure that the salespeople have the right quality of customer options to give them the confidence that they are selling a higher-quality product. We need to end this culture of just trying to sell the house whatever the prices to hit a volume number. And then, of course, once that is all agreed, we need to make the completion process a smooth and enjoyable one. People should look forward to moving into a new home, and we want them to tell their friends and family that they had a positive experience. This means having excellent post-completion care, with us checking in with the customer to make sure that everything is as they would expect it to be. The final stage will be a key focus for Jason. On the previous slide, you've seen a reference to the sale training and coaching that we've been running. We have done a huge amount of work in this area, and I've been encouraged by the response of the sales teams and the impact that it's already had on performance. That training and coaching has had a number of elements to it. And as part of that, we have changed the commission structure. I think it's really important that the commission paid to the salespeople is aligned with our business ambitions and financial priorities, profit and return on capital. Another part of that training has been clarity on what salespeople can do with regard to discounting and what sales behavior we expect. They're selling a mid-premium product, and they need to have pride in that and value it accordingly. And we will back them in that conviction, we've given them what they need and rewarding the right behaviors. The bar chart on the left shows a significant improvement in net achieved prices versus book value. However, just as importantly, the line chart on the right shows that this isn't at the cost of our sales rate, and it has also been increasing as the months have gone by. Now this is just a start. There's a lot more we need to make sure that the sales people have what they need to sell in the mid-premium product. But it shows what we can deliver in a very short period of time.

As you all know, Crest margins lag the sector and where Crest itself should be. Martyn has just taken you through some of the opportunities that we have to improve revenue. And over the next couple of slides, I'll give you an overview on what we can do on the cost base. So starting with commercial controls, we identified immediately a gap in commercial leadership. And a new commercial director, who had worked with Martyn previously, joined on the same day as Martyn. On procurement, we've made some initial steps to change the strategy. As an example, all of our brick procurements have been consolidated into one supplier. Whilst I'm sure, though, at a point in time with a great deal on consolidating the volume into that supplier, over time, this has given us less flexibility and made it harder to get a regular level of competitiveness into the procurement process. We've now changed that and have 3 suppliers going forward. On systems, the group changed its ERP to coins during 2022 and 2023. Whilst this is the standard ERP for U.K. house builders and the group rightly did not try to customize the product, it has not been made with sufficient allowance for configuration and report writing to ensure that the right level of granular management information is available. The teams are making good strides to improve this visibility. An enhanced program of new governments and improved MI is being rolled out and upgraded every 2 months, so that we can leverage regular incremental improvements rather than wait longer for a big-bang upgrade. This now provides us with more granular WIP reporting and highlights where build programs are getting out of sync with sales. Better governance requires central sign-off for Mark, our group MD; and Joe, the Commercial Director on commencing WIP on new phases. We're improving our payment controls. It hasn't always been apparent that we've received the goods or services procured when we make payments, and that is being rectified. Additionally, we've been paying up to 40% of our suppliers early and then a smaller but significant number of suppliers more than 10 days late. To maintain appropriate subcontractor relationships. We obviously need to have -- be a reliable customer for them and clearly getting the benefits of terms that we've negotiated. We're also looking at how we can appropriately leverage technology to increase sites efficiency. As an example, all of our site access and certification process is conducted manually and could be done online by subcontractors before they attend sites. Alongside commercial best practices, we should be more efficient as an operator. We've talked about how the Yorkshire business was established. We now have a small team on the ground, who are doing a great job growing the region. But they're now going to be fully supported in the back office by the Midlands team, which will improve efficiency and capability. We've spent some time looking at our operating model and can see some significant opportunities from standardizing the model for site management and site support, depending on the fluctuations in complexity and scale of the build program. One of the areas where we needed to be much better was the use of IT to make better decisions, and I'll give you an example here. Previously, we didn't have daily visibility on sales margins and sales rates. We didn't have the level of visibility I would expect on parts exchange costs, including interest charges. We're changing all of that with the better use of the system, and we've already done a lot of improvements here, which help us to run the business more efficiently and better every day. There is still a lot to do. None of this is individually difficult, but the volume of change required is going to be onerous on the business. Overall, we're working to bring down our overhead costs from 9% to 7% of revenue, which would be in line with the overhead ratio for a medium-sized house builder. The land bank, both short-term and strategic, is a big asset for Crest, but also a bigger opportunity. We have some excellent land, albeit it is also an area where I think we need to take some action. The land buying process was quite decentralized and focused on scale. As I touched upon on the results and earlier today, it meant that there were some sites which don't seem to fit into an overall coherent land strategy for a house builder the size of Crest. We now control this process much more closely from the center with new governance around what we are investing in. We're going to have greater and more consistent expectations around the type of land we're buying and where we're buying it. A lot of this goes back to being focused on one source of customer and making sure that the land we effectively manage across the 5 divisions. We're also looking to increase the number of outlets we have, prioritizing the development of smaller sites in sought-after locations to enhance return on investment we're making. Site selection is multidimensional. But our analysis here is focusing on scale and distance from the office of the existing short-term land bank. On scale, we've talked before about the challenges of the large sites. We've also undertaken an analysis of our margins based on distance from the nearest office. What we've identified is that when a site is over 80 to 90 minutes away from the office, then the levels of control really drop. The site gets less oversight and review the most closer to the office, more mistakes get made, and this has a meaningful impact on the margin. It's also more difficult to work with the right subcontractors as relationships haven't been established, and that works both ways. You can see here that the vast majority of our sites fit very well with the mid-premium strategy there are very few outliers purely from a location perspective. And in all likelihood, we will work our way through these sites. In the top right-hand corner, a small number of sites that would present as candidates for disposal. And towards the bottom left, there are a couple of sites where a partial disposal would make more sense. Overall, though, this is a pleasing analysis that demonstrates high levels of strategic alignment with an opportunity to free up capital to reinvest in smaller sites and meet our remediation obligations. Alongside our plans for the short-term land bank, I wanted to talk about the strategic land. Previously, we've talked about the sites which will produce sub-20% margin, which run through the numbers over the next couple of years. What's exciting is that as the low-margin sites flow-through, we can replace those sites with high-quality land from the strategic land bank. And so we will produce more and more houses at higher margins than we have talked about previously. In the strategic land bank, we have 42 sites and 18,000 plots. Positively, 50% of these sites have either a draft or allocated planning status. And overall, the average discount to open-market land portfolio is a healthy 19%. So in short, we have excellent strategic land to support our growth aspirations for the midterm, mid-premium strategy with about 50% either in draft or allocated status already. This land provides opportunities to sell parcels or phases to provide additional capital for future investments, which allows us to create more opportunities.

So pulling this part of the presentation together, what we have set out is a comprehensive transformation program that will deliver sustainable returns for our shareholders. We've made a good start in the areas, and we've given you some evidence of the improvements that this good start has generated. And you will see that we have absolute clarity on how we're going to take Crest forward, putting the customer at the heart of everything that we do, focused on doing one thing really well, which is the mid-premium segment; and then having strong processes and controls to operate efficiently and effectively. I've been really impressed by the response from our people in embracing the necessary changes that we're making, and my commitment to you is that we'll report back the progress against our strategic pillars at the half and year-end results. Now I'll hand over to Bill, who will talk you through the financial outputs from this transformation program.and how that will underpin the future returns we are aiming to deliver for our shareholders.

So first and foremost, our guidance for FY '25 is unchanged. We're then targeting modest volume improvement of mid-single-digit CAGR with a focus on maintaining the open market share at 60% to 2/3 of the overall output with fewer PRS transactions but replaced with an allowance for increased affordable units on new sites as government policy develops. There are a number of levers to support the improvement in gross margin, and I will explain those on the next slide. As noted earlier, the efficiency and productivity initiatives that will start to deliver this year and over the following 2 years, I expect us to reduce our overhead as a percentage of revenue to approximately 7%, which combined with improvements in gross margin, will allow us to improve EBIT margin into double digits. And we are targeting 13% or more by the end of the plan period. Improvements to profitability, combined with a more efficient balance sheet, is expected to result in an average 200 basis point improvement to return on capital employed over the plan period, with returns at or above 13% by FY '29. The key balance sheet initiatives are land and WIP related, and I will expand on these later. Here you can see the building blocks for the improvement in gross margin. We expect to be substantially traded out of the current low-margin sites during FY '27. On its own, this will improve gross margin by 220 basis points. In FY '24, we incurred a further 150 basis points of loss margin from operational missteps. I do not expect us or anyone else to eradicate errors completely. But our planning assumption is that we will drive greater diligence and adherence to process, and this will reduce the volume and value of margin deterioration. We expect to deliver improved margin from our sales initiatives, with improvements in sales price exceeding increased costs from value-enhancing specification upgrades. As we start on new sites, we expect a margin uplift from sites coming through the existing land bank, which will obviously become an increasing part of the portfolio. And finally, in time, we anticipate a further margin improvement from our planned operational efficiencies with reduced customer service costs as more of the portfolio is built right first time and we deliver benefits from new standard house designs and improved plotting. Across the plan period, we're targeting an uplift of gross margin from 14% in FY '24 to 20% by FY '29. And as you can see, we believe there are sufficient levers to underpin the improvement and potentially drives investments. Now moving to the balance sheet. The material opportunity to improve returns is in the inventory balance. At the end of FY '24, total inventory was GBP 1.137 billion. The largest component of this was land at GBP 670 million. With around 14,000 plots in the short-term land bank, this represents forward cover of around 7 years at our current volume. Our view is that for a house builder of our scale and with gradual improvement in the planning cycle, we should reduce the forward cover to between 4 and 5 years. As explained earlier, we have identified a small number of sites that are not entirely compatible with the new strategy, and we will look to dispose off these or partially swap them for land more suited to our needs over the next couple of years. We are not in a hurry and can be selective on how we manage the exit from this land. Secondly, we have GBP 334 million of work-in-progress that can be managed down through better site planning, more careful commencement of build phases and greater focus on raw material scheduling and holding of materials on site. Our inventory of completed buildings stood at GBP 103 million at year-end. This will reduce as we complete sales on the legacy apartment schemes and we implement better WIP scheduling. Finally, we have already reduced the parts exchange inventory from around GBP 35 million, and I would expect us to run a book of GBP 10 million to GBP 15 million when we reach a steady state. Overall, we're targeting an inventory reduction of around GBP 200 million, whilst growing our volume by 20% to 25%. The cash generated from this program will substantially cover our fire remediation obligations and ensure that we can maintain a land bank suitable for our medium-term requirements. Now turning to the balance sheet and capital allocation. As a reminder, the group's existing facilities are an RCF of GBP 250 million with maturity in October 2027 and an GBP 85 million private placement, which amortizes through to 2029. These facilities provide ample liquidity for the group's current needs. In the medium term, I would expect the group to maintain facilities of between GBP 250 million and GBP 300 million and are aiming to operate between GBP 50 million of debt and GBP 50 million of cash by FY '27. As such, the Board is expecting to maintain its existing dividend policy of 2.5x cover from adjusted earnings. As we progress through the plan period, the combination of enhanced earnings and greater focus on the balance sheet efficiency will provide optionality on capital allocation once the fire remediation plan has been delivered. I'll now hand you back to Martyn to summarize the investment case and conclude the presentation.

Thank you, Bill. Before we move to Q&A, I thought in conclusion, we will bring you back to one of the first slides, Crest, a compelling investment opportunity. I hope that our presentation today has delivered a number of key messages. The decisions and direction that the business has taken in the recent past have had some serious headwinds to navigate. But now is the time to set a clear strategy that focuses on the positive attributes that exist within Crest Nicholson. We have a strong brand with the right products. I'm confident that we can compete in the mid-premium market and offer our customers a first-class experience with a home they can be proud of. We have a clear plan to action, which will optimize our strong land bank. And as such, I am confident as the team will be able to deliver sustainable returns over the coming years. I'd like to thank you all for taking the time to visit us today. And I'll now hand over to questions.

Glynis Johnson, Jefferies. [ I think I'll ] launch with a few, but I'll try and keep them short. Operational leverage asset turn, what is the right level for Crest going forward? Second of all, mid-premium. We've heard from lots of the other house builders about the need for a range of different brands. So can you talk about how many housing types you think you need? What is going to be the price range potentially that you might see on those? How much of the customer base do you anticipate to be first-time buyers? Anything that gives us some sort of context of what that mid-premium means? Conversion rate currently for inquiries to reservations, and where do you think that can get to? Strat land, the average number of plots per site looks around [ 430 ], but is that the mean as well? Do you have to go through lots of land sales on that strat land as it converts kind of questions? And then the intake margin on new land or the intake return on capital employed, perhaps more importantly, on new land that you're buying in the open market.

Let me pick off some of the number ones then. So we're not going to give numbers around what we're going to intake on new land on -- that's commercially sensitive, I'm just not going to share that with anyone. In terms of the strat land scale, there's quite a broad -- quite a big breadth in there, Glynis. And I kind of think there's opportunity in that because where we've got sites which have got 1,000 plots, then they're going to be attractive to other people. So I'm all good with that. There are some 1,000, 1,500. There are some which are couple of hundred. So it varies quite significantly. But your 400 average is absolutely spot on. The -- I'm going to put Vicky on the spot here.

It's about 1 in 30.

Conversion rates...

Conversion rate is about 1 in 30, which is an area that we can focus on. We've already said that we're going to update our website. And we need to ensure that the people that are coming to site, we've actually got product that they want to buy rather than just a generic website. So there's a lot of work to do there, we recognize that. Yes, in the mid-premium range, there will still be first-time buyers. We just need to have a house type portfolio that covers 2 beds, 3 beds, 4 beds and 5 beds. We're not going to build any apartments. That stage in our history has gone, unless there's in a small-scale affordable. But we just need to get our research done and make sure that we redesign the house types that reflect what the customers need.

Then on operating leverage and assets turn, Glynis, I mean, look, what we've set out here today kind of is a -- if we do what we say we think we can do, then the EBIT is going to be 5x what it is now. So significant operating leverage and good improvement on assets turn. So I'm not going to give you numbers. I'm sure you've got the model for that.

Marcus Cole, UBS. I've got three questions. The first one is just on the 20% gross margin target. I think previously, you said 23% in the land banks. Just trying to work out the delta between the [ two ] of those 5 years out. In terms of PRS and the spec changes, what does that mean for ASP moving forward from the mix shift? And the last one is just on the shape of the balance sheet. Is there any considerations to cutting the dividend?

So I'll go on the first and the third. Yes. So -- but we could get to '23, Marcus, if everything goes our way, but very conscious that we've been in many -- we haven't, but others have been here many times before and made commitments that haven't been met. So we're pushing for as good as we can get. We can see a good line of sight to 20%. And if we can go further, then we will, obviously. In terms of the dividend, we've considered lots of different things as going through this journey, but keeping the dividend or expecting to keep the dividend where it is, we think is the right thing for now.

We talked about on one of the slides PRS. The PRS deals that were available 4 years ago perhaps were quite marginal discount to open market value and typically 5% to 8%. The market's changed. Those discounts now that market has become a lot more sophisticated and discounts of circa 20% are fairly typical. So in terms of our PRS costs, we've got to just run through our book that we've got at the moment. I don't intend to take any more on, unless there's a reasonable deal out there at a point in time that we need it. But -- so there's no additional cost coming through is from discounts in PRS, we're just not doing it. The spec changes that we've made actually with the overall build cost savings that we've made through better procurement have impacted us very negligibly, which also enabled us to put the prices up as well. So again, we're getting all of that value capture. And average sales prices take out the PRS, in time, that average sale price will go up. But to what degree, I haven't got that number. But it won't be as much -- sorry, it won't be as much at the moment because we're not taking the 20% discounts that have been offered at the moment. So the PRS things that we've got on the books are at 5%, 7%.

Aynsley Lammin from Investec. I think I've got three actually. Just in terms of the -- I think on Slide 21, the embedded margin in the land bank, it says at time of purchase, presumably, that was at the time of purchase the land. Just wondered if you could give an indication of what the kind of estimate of the embedded gross margin is based on current pricing and cost? And second question on the gross margin again, just the -- I think you said a 220 bps improvement just as the lower margin sites kind of fade out. So is that for the next 2 years? Essentially, the benefit in the gross margin is really those lower-margin sites on [indiscernible] just fading out. There's no help from the [ market ] in there. And then thirdly, on the balance sheet, I just wondered, what you'd expect the land creditor balance to be as you kind of reach a steady-state business.

Okay. So on the gross margin of land bank, I don't read too much into the words, Aynsley, of what's in there. We think what we've got is still at that 23% level. But we've made allowance for this to -- that we won't do everything perfectly. On the 220 basis points, yes, that is '25 and -- we'll get a good chunk of that in '25, kind of the rest of it in '26. There's a little bit in '27. But it's kind of -- it's in the noise, really. And then land creditors, I would expect -- we currently -- we ended the year, I think, with 130-odd something like that. I wouldn't expect it to be that high going -- when we get to steady state. We're probably going to be more like 70, I would think.

Chris Millington of Deutsche. I just wanted to ask around the site numbers against the profile of leasing capital from the balance sheet. You obviously struggled with the level of capital you've got. So just wondered, how that's commensurate with your volume targets? Next one, really -- I just quite -- I'd be interested here about how your free cash flow is going to manifest going forward in the fire safety there? And profit is kind of at the lower levels. And kind of what you see as spare free cash flow to kind of fund that investment? But I'd -- just to put that update on legacy sites, I think we were thinking about them being similar this year, last year in percentage terms. Can you just give us an update on that?

Yes. So first one, I think, was on site numbers. I mean the challenge we've got is in the mix, in that we've got some really big sites, which is one outlet. And part of what we want to do here is either dispose of that site and use part of that capital to deal with fire remediation and part of it to buy smaller short-term sites. We can do that either as a complete separate transactions or look to trade with someone who's going to buy the big site. We're not looking at massive site growth over the next 5 years. It's kind of going to be incrementally a couple of year type thing, is what we're thinking. But obviously, as sites roll out, you've got to replace them with new ones. So that still puts you in 8 to 10 new sites a year probably. Sorry, Chris, I didn't get all the questions -- look, I mean, over this time period, we've got the right level of funding to pay for the fire, get new lands, so when we get to FY '29, we still got a land bank that is good for the 5 years after that. If there's anything left after that, I'll be delighted.

But perhaps just a quick supplemental. [Average debt ], do you think you'll be using much [ average debt ] the year-end? Numbers are fairly prudent to position you through the year.

I mean at the moment, we kind of have GBP 100 million swing over the year, but it's one of the things that we're all looking to reduce. We've talked a lot when we've been out to see you all about -- we do most of our transactions on the 30th of April and 31st of October. There's no commercial or seasonal reason we do that. It's how the business has trained itself. And we're doing a lot of different things. So one of the aspects of the sales commission scheme is that the team get more commission for selling earlier in the year and taking delivery out of those 2 end months and delivering [ earlier ]. [ Don't ] get it for pushing it back, but they get it for delivering it early. So we're just kind of starting to drive those behaviors through the business, and it will take a bit of time. So I'd like to see that reduce, but we're not allowing for that. Nothing new to report. Cranking through the surveys, no new surprises.

Charlie Campbell, Stifel. Sort of one broad question, I suppose and a couple of things to help in and try to work stuff out. But you kind of gave us a number of plots in the strategic land bank, sort of a number of sites in the strategic land bank. Could you do the same for the consented? I can probably count the dots on Page 37, but...

I haven't got that number with me.

But also looking at that Slide 37, you said that 90% of your sites are well aligned. But clearly, the bigger ones are the ones that are not. So I mean, does that look as if maybe 80% of the land bank by kind of value and volume is right and 20% out, is that...

We don't need to sell -- with the dots down here. They're obviously very close to the offices, so they're good sites. We don't need to sell the whole site off. To bring it into the segment, we sell parcels of that site of to bring it here. So bring the cash in and use it for buying new land or paying fire remediation. And similarly, we've just got options.

Because looking at your sort of target for inventory reduction, it looks reasonably conservative to me and it looks as if you could do more than that. So within those 5 years between at the end point of the start point, are you sort of implicitly assuming there's some land cost inflation there?

So we're assuming that in 5 years' time, we're at 25% bigger business. So we need more land to keep us going for the 5 years after that.

Yes. Okay. So that's the difference -- so the gross reduction, is it worth from the 1.1 billion, could be kind of bigger than that and you reinvest it...

If we were not going to do 2,300, 2,400 and -- then we stuck at 2,000, then yes, we wouldn't need as much land going forward. So there's a trade-off there.

And then sorry, just you gave some numbers to that slide and obviously [ my eyes ] weren't quickly enough. I think you gave us some numbers for the reduction in each of the 3 categories land, WIP and sort of other. Can you remind me?

I gave you the starting point. I didn't give you the end point.

Rajesh Patki from Barclays. I've got two please. What do you see as the biggest challenge or risk do you get into this plan? And the second one is more around what kind of market improvement have you factored in? Is there anything that you've included in the plan?

So in terms of the market, relatively benign, small levels of improvement alongside the Labor government, who have clearly gotten the bit between the teeth here, but we're not looking for the market to go gangbusters similarly. If there's a macro shock that kills it, then that's outside of our control.

And that's the biggest challenge, really, is things that are outside of our control. Anything we can control, we'll sort it.

Do you want to do challenge?

That was the challenge. I can't control what I can't control.

I don't think there's anything difficult in this plan, but there's a lot in this plan. And so it's just having all the streams working together and just making sure we keep the pace high enough that it's uncomfortable but manageable versus getting it going too fast and people can't live with it.

Well, that concludes the formal presentation and Q&A. Thank you.