Persimmon Plc (PSN.L) Earnings Call Transcript & Summary

Good morning all. Thanks for joining us today. I'm joined by Andrew, I and other members of the team, are around as well if you want to catch them later. So the theme of these half year results is that we've continued to grow the business and, at the same time, enhanced our capabilities for the future. As I pointed out in our statement, our focus on self-help has continued to deliver. We've grown in several key areas: completions, ASPs, sales rates, ex bulk, outlets, consents and profits, and all whilst reducing our exposure to cladding. This differentiated performance is a product of our strategy and execution, and that's been brought about by the skill and expertise of my colleagues at Persimmon, whom I want to thank for this great performance. Persimmon's strategy involves choosing where to build, what to build and how to build. And that approach enables us to provide exceptional homes at attractive prices to our target customer base. We continue to double down on our clear strategy through our investment in land, in our brands, in our build quality and customer service, and our factories. We're doing this whilst continuing to maintain a secure and strong balance sheet. Our strategy and our execution are enabling us to deliver profitable growth in contrast to a challenging market. And I believe it will enable us to continue to grow in the coming years. So our strategy is consistent and is clearly delivering as the next slide, which I presented to you in March shows. These five enablers: land, brands, quality and service, innovation and vertical integration, and balance sheet support and enable the delivery of our strategy. Our high-quality land bank and industry-leading planning success combined are driving outlet growth. Our three strong and distinct brands are well positioned as attractive and very good value products in their respective markets. This brand diversification is undoubtedly driving sales and growth. Our significant and sustained progress on build quality and customer service is enabling us to better compete for customers, and that improved sales rates in a challenging market. Our investment in innovation and vertical integration is enhancing our build efficiency and our delivery now with much more opportunities to come. Finally, our balance sheet remains a key strength. Our strategy and these enablers, coupled with our experienced teams, are both helping us to outperform now as well as give us the confidence we will continue to do so in the future as we build our differentiated platform. So now I'll turn to what we've achieved in the first half. As you can see, we had a good first half. Our underlying PBT is up 11%. I think that's a great performance, and it reflects our strong pricing and rigorous cost controls. Outlets are up 4% against industry trends. Our weekly sales are up year-on-year and together with more outlets that's driving more completions. We continue to invest in our excellent and growing land bank. And we've maintained our HBF 5-star and are now rated Excellent on Trustpilot for both Persimmon and Charles Church. Our underlying EPS is also up 3%. As Andrew will explain later, the reason EPS is up more is because 2024 benefited from a prior year tax credit. What I'm really pleased about is that our current total forward order book is up 9%, with private up 11%, giving us excellent visibility. So it's been a strong performance despite the continued challenges in the market. Andrew will now take you through the results in more detail, and then I'll say more on how our strategy has delivered and gives us confidence for the future.

Thank you, Dean. Good morning, everyone. So I'm really pleased that we have delivered further growth in volumes and in profits in the first half of 2025, which is an excellent performance in the context of a very challenging market backdrop. New home completions were up 4%, our blended average selling price increased 8% to GBP 284,000, and I'll come to the detail of this in a moment. The combination of volume and pricing drove housing revenue up 12% to over GBP 1.3 billion, and gross profit up 11% to GBP 262 million. Gross margin was maintained at 20.1%, which is a good performance given the change in cost base over the last few years. Underlying operating profit increased 13% to GBP 172 million, and I'm pleased to report a 10 bps increase in our margin to 13.1%. Underlying PBT is up 11%, and this is after a GBP 4 million increase in interest costs, because of our lower cash balances as expected. And although not on the slide, statutory PBT is flat after allowing for a GBP 16 million exceptional charge in relation to the CMA commitments that you're aware of. Our tax rate is close to statutory 29%. And if you remember, the first half in 2024 had a lower tax rate, because of some one-off items, and that boosted last year's underlying EPS. And putting all this together, underlying EPS this year has increased 3% to 36.8p. We generated cash of GBP 183 million before movements in working capital and our return on capital employed has increased to 11.2%, reflecting the improved profitability and our continued balance sheet discipline. And I think this is a particularly good metric in the period. So I'll now come back to sales mix and ASP in a bit more detail. Of the total new homes delivered, 3,987 were private. That's 7% higher than last year. And this increase reflects our strong sales rate and an increased number of outlets, which has meant that our total sales per week, including bulk sales, has increased to 191 a week. Private completions includes 590 book sales, which is 13% or 66 houses higher than last year as we continue to engage strategically with this sector. 34% of private sales were to first-time buyers, and this has always been and it remains a very important market for us. And Charles Church increased in line with our planned growth to 11% of private sales or 10% of total completions. Partnerships output fell to 13% of total completions, and this continues to reflect the acceleration of delivery in 2023. Importantly, all of our affordable delivery is signed up for this year. The blended ASP on completions in the period was up 8%, and private ASP increased strongly, even allowing for the increase in bulk sales. And there's a couple of things to just draw out. Firstly, pricing has been robust, particularly in the north of England and in Scotland, and we pushed it on where we can do. And secondly, the pricing on our bulk units has also been strong, reflecting our more strategic approach. Overall, our product remains affordable with our Persimmon Homes' average selling price well below the new build national average and with over half of completions below GBP 300,000. And across the period, average incentives on completions were around 4.5%, which is similar to 2024, but of course, of higher pricing. So putting this all together, the combination of increased volume and increased ASP drove revenue up 12%. This slide provides the normal bridge showing underlying operating profit movement. And you can see the positive effect of increased volumes, increased average selling prices and the mix of more private units. The movement in the cost line is small, and we remain focused on commercial disciplines and managing our costs closely. Net operating expenses have increased by GBP 7 million, which is a 9% increase, less than the 12% housing revenue increase despite our ongoing investment in capabilities for the future. This bridge is on an underlying basis. The only exceptional item in the period is GBP 16.2 million in relation to our proposed contribution and the cost to date of the CMA investigation. And this is shown within administration expenses in the income statement. So I'll now turn to the balance sheet. Our strong balance sheet is a platform that allows us to invest in the future growth of the business. Land and WIP has increased GBP 292 million since the turn of the year. We've invested in more land than we've utilized, and we've also increased our work in progress. And there's three things to mention on WIP. Firstly, the seasonality. We have more WIP at June than in December because we'll deliver more units in H2. Secondly, as we are opening new sites, there is increased WIP in relation to infrastructure spend. And of the increase in WIP, about half is related to external infrastructure, including on new sites. And thirdly, we held GBP 164 million of PX stock at the end of June. And this is an important sales tool for us, and we're focused on recycling these units back into cash quickly. Land creditors are a little bit lower than the start of the year, but the key thing is that we're still able to agree appropriate payment terms in the market. We reported net cash at June of GBP 123 million. And taken together with land creditors, that means our gearing is about 8%. Our building safety provision stands at GBP 208 million, which is down in the period, and I'll come back to this in a moment. Net assets are up 2.4% since last June, and assets per share are 22p higher than this time last year. And return on average capital employed is 120 bps higher than this time last year. These are all showing good progress. So this is the normal cash bridge with the reduction in cash reflecting our investment in land and WIP as we grow the business. And this is an important point to grow the business, we need to invest cash. And we've chosen to make this investment and we can make that choice partly because our fire safety obligations are relatively smaller than for others. So on the graphic, you can see cash inflow from operations was GBP 183 million. That's 11% more than in H1 2024. WIP and other working capital movements of GBP 163 million include the investment in new outlets and in H2 delivery that I referred to earlier. We spent GBP 46 million on interest and tax, and GBP 25 million on capital expenditure, including on our new Space4 line. So before building safety remediation and investment into land, we had net cash of GBP 204 million. We have net investment of GBP 50 million into new land, and that's the net of land spend and land utilization in the period. And we spent GBP 31 million on our safety remediation program. So I expect net cash at the year-end to be between GBP 0 and GBP 200 million, which is in line with previous guidance, depending, of course, on the speed of investment into new land. Before I get to land, I'll just cover two other capital allocation matters, the building safety remediation and our FibreNest disposal. So building safety provisions and the progress of remediation work is a very important topic, and we are making good progress as we expected to do, and that is the right thing to do for everyone involved. We're on-site or completed at 77% of known developments or 80% of buildings, and there's no change to the total number of developments in the period. We've assessed all known developments, and we expect to be on site at all of these developments by the end of the year. That is well ahead of the overall industry position. You can see that there's 19 sites still to start. And of course, there is some cost risk on these sites until they're completed, both cost inflation and scope changes. And that's another reason that we've been pushing on to complete our work. So far this year, we've spent GBP 31 million, and that brings our total spend to date to around GBP 150 million, and we'll spend close to GBP 100 million across the whole of 2025. The provision at 30th of June was GBP 208 million, with the reduction being the GBP 31 million spent, offset by some imputed interest. The bulk of the remaining spend will be made over the next 18 to 24 months with a tail of spend beyond them. But importantly, completing this work quickly will create capital allocation opportunities for us. In May, we announced an agreement to dispose of FibreNest, which was a non-core operation for us, and I'm pleased to say that this sale completed last week. So congratulations to everybody involved. This will provide our customers with a larger choice of Internet service providers, and it will free up significant cash for redeployment into our business, both the consideration received and the annual saving on capital expenditure. We'll reinvest this money into the growth of the business, including new land opportunities. And in doing so, we'll create better returns than would have been generated through the FibreNest business. And so I'll move on to land. Our disciplined investment into land has allowed us to grow our outlet base again this year and to grow our business. Dean will cover this in more detail in a moment. So I'll just draw out some key metrics. Total plots owned and under control at 82,500 is up 420 since the start of the year, and owned plots with planning are 7% higher than this time last year. The land bank continues to be well proportioned across the country, as you can see. And this provides confidence that we'll achieve our ambition of growing to at least 300 outlets. The cost to assumed revenue in the land bank is about 12%, a very good indicator of future margin potential. These landholdings are high quality. And building on the point from the previous slide, you can see that land cost to assumed revenue has remained very stable over the last few years, and that's really pleasing. The average embedded site margin within our owned land holdings is still around 29%. And within this, nearly 80% of plots will deliver a slight margin in excess of 25%. This is site margin. So there are some other costs within statutory gross margins such as maintenance spend and some of the fixed selling and construction cost base. But the important thing is this is shown on a consistent basis to previous years. And taken together provides the confidence that we've got the land in place for our growth ambitions. The structure of our capital allocation policy is unchanged, and it's proving successful. We're maintaining a strong balance sheet whilst prioritizing dealing with our building safety remediation through this year and next. Secondly, we're continuing to invest in the business to deliver our growth objectives. And this has allowed us to return to growth ahead of the sector. And we're paying a sustainable dividend well covered by profits. And today, we've declared an interim dividend of 20p in line with last year. And we'll look to review this policy again as we derive growth plans and as we progress through our fire remediation works. So to summarize, these are very good first half year results that are showing good growth. Assuming that conditions remain stable, we're on track to deliver growth in 2025 to a volume of 11,000 to 11,500 as previously guided. I said in March that our medium-term margin growth wouldn't be straight line. It would be back-ended, and that's still the case. So this year, I expect some margin growth on the 14.1% that we achieved last year, which is probably near the lower end of the range shown depending on market conditions in the next few months, but I'm comfortable with our 2025 consensus, operating profit and PBT are currently. 2025 will be our second year of growth since the downturn. And although not expecting any significant improvement in market conditions, we're looking to grow again into 2026, and this shows the strength of our operating model and our ability to address the challenges in the market. So looking to 2026, the pace of margin growth will be impacted by various factors, including embedded inflation and customer affordability. And none of these points will be new to you. Embedded inflation is still an important feature. As you would expect, over half of our delivery in 2026 will be on sites acquired before inflation normalized. And of course, average build costs were up 30% in that period. We now have relatively normal inflation, but on a higher total cost base. And so that will restrict margin progression before the effect of embedded inflation begins to diminish. On sales, there's likely to be some uncertainty ahead of the budget, and that could affect consumer confidence during our autumn selling season and could also affect build-to-rent sales for next year. And real income increases are uncertain with persistent affordability challenges, and this makes driving further ASP growth more difficult. And the cost of doing business are increasing across the industry. For example, regulatory costs, dealing with nutrient neutrality, the cost of discharging planning conditions in order to open new outlets and so on. And these are all points that I know you're well aware of. But taken together, it means, I expect the margin progression in 2026 will be perhaps 50 bps lower than the current consensus, although that's probably about GBP 15 million before interest costs. So as an early indication, building on our growth in 2024 and growth in 2025, I expect further volume growth to around 12,000 units in 2026 and further margin progression a similar rate to this year, which will bring us within the lower end of the range of current estimates for 2026. And you can work out, that will mean further mid-single-digit percentage profit growth again next year. And that will make 2026 our third successive year of profitable growth. So with that, I'll hand back to Dean.

Thank you, Andrew. I said in March that I was pleased we achieved a rapid return to growth in 2024, and I'm very pleased that we're sustaining that in 2025. Our strategy to focus on self-help is securing results. On all of our five enablers, we've made real progress, and they continue to support Persimmon's growth. I'll now describe this in more detail. Our investment in land, coupled with industry-leading planning success is driving out that growth. We've also strengthened our strategic land bank. With private sales in all three brands growing, our diversification is selling more homes. Our sustained reputational improvement is seen on our HBF and Trustpilot scores. And that reputational rise is improving inquiries, sales, and partner relationships. Our state-of-the-art Space4 line and brick and tile factories are delivering more products. Automation and digitalization are securing further operational and cost efficiencies. Unsurprisingly, we're resolute in maintaining a strong balance sheet. As Andrew said, we expect our progress on building safety to provide capital allocation opportunities from 2027. As I said earlier, we're delivering growth despite a challenging market. I'll now say more on how and why. We've continued to invest in our land bank. We added more plots and completions. Our own plots with detailed planning increased by 7%, and we're outperforming the industry on planning because we do it differently. We treat an application like a political campaign. We engage early and understand local priorities. Ultimately, we aim to provide the local politicians a reason to say yes to our plans. Too often, planning applications rely on telling politicians why they can't say no. As the graph shows, we're outperforming our peers. The industry-wide data looks similar. Our 22% increase in full or reserve matter applications over the last 12 months compares to a 3% decline in the industry. Our investment in land, combined with our planning success means we have more outlets and have good momentum. And I think that's reflected by a 4% growth in outlets compared to a 3% decline in the industry, and we're confident there's more to come. The government planning reforms are presenting opportunities for acceleration of applications. We've now identified 50 potential sites in our land bank up from 38 in March, 31 of these are already proceeding with an application. So we have a good pipeline of outlet openings this year and remain on track to deliver 300 outlets within 18 months. That's a good platform for future growth. If I turn now to our strategic land bank, you'll see how we're strengthening it further. Persimmon's high-quality strategic land bank is a real source of strength. That's reflected by the fact that 41% of completions in the first half came from strat land. Building on that, we've been investing in our teams to grow our strategic land bank yet further. Adding over 6,000 plots in the first half, means our strat land bank is now 8% larger this year. Plus it's really well spread geographically as the pie chart shows. That larger land bank supports our three brand strategy as examples, such as Cheltenham show. It's a great piece of land that I've referred to before. We bought it after many, many years of delay, ahead of last November's budget. Since I mentioned this last time, we've secured outline planning on over 1,000 plots. That's a great site for many years to come. With margins typically 300 to 500 basis points higher than open market land, our strategic land bank is really adding excellent opportunities to our growth platform. But it's not just about great land bank, our improved reputation means we're better able to capitalize on it. We've sustained our progress on build quality and customer service. We retained our HBF 5-star for the fourth consecutive year. As the graph shows, our consistent progress on persimmon and Charles Church, Trustpilot scores means both are rated excellent. And our NHBC, CQR score has improved further this year, and this is being noticed. Customer trust in our brand is up 17% since December '22. More BTR partners are working with us. And we've grown our affordable forward order book despite the well-publicized challenges in the sector. The combination of more outlets and active and expanding pipeline of opportunities and an enhanced reputation is driving growth, and it provides a platform for continued growth into the future, supported by our on-site mantra, "Build Right, First Time, Every Time." Our continued investment in sales and marketing has helped us convert the opportunities in our markets. More potential customers now consider buying from us up 26% since December '22. And we've been innovative to make it easier for our customers to buy our homes. For example, our exclusive partnership with Generation Home is the first shared equity products since Help to Buy. As well as securing additional sales is also bringing customers to our sites. So far this year, our website visitors are up 20% and website inquiries are up 12%. As you can see from the graph, recent weeks have seen a further uptick. And I'd emphasize that the strong growth has also been across the country. As the graphs show, we've shown consistent growth in recent years. We're investing in our teams. Our mystery shopping scores have shown a notable 7% improvement, helping drive performance and sales conversions. And as a result, we've grown our market share in the first half of the year. And a new customer website and a marketing platform to accelerate this progress are in development. Our improved reputation and investment in enhanced sales and marketing with new programs means there is undoubtedly more opportunity to come. So if I turn to our brands, I'm really pleased with our brand diversity and we've grown private completions in all three of them. And the next slide shows the breadth of progress we've made and the size of the opportunity we have. All three brands are well placed as a good value products in their respective markets. Persimmon's traditional strength, of course, has been price, but we're now also great value. Our quality and service improvements mean we build homes our customers can trust at a price they can afford. Indeed, as I tour our sites, I'm struck by how good they now look in comparison to their major competitor, the local secondhand market. With our growing outlets and stronger sales and marketing, core Persimmon has a real opportunity for further growth in the years to come. Turning now to Charles Church. I'm excited by the difference we're already seeing. We've relaunched the brand earlier this year, and we're investing in our teams to drive its growth. Of the 53 Charles Church sites we now operate from, 35 are dual branded. This demonstrates the opportunity to drive returns through a diverse market offering. We think there's a real opportunity now to grow Charles Church across the country. And we've identified many local markets where this affordable premium product is highly attractive. Our ambition remains to double Charles Church's output, a 20% increase in completions and a 30% increase in revenue in the first half, I think, is a good start. Turning now to Westbury. We've also improved our reputation with our BTR and affordable partners. Build-to-rent is a growing feature of the market. Recent Savills data shows investment grew in the first half of 2025 compared to 2024. We delivered 13% more completions in the first half compared to last year. And we're securing targeted deals, employing clear discipline to improve returns. We're working with more partners and are targeting further growth. Turning to our affordable housing. We've already managed to fully secure our order book for the year. While challenges persist for RP financing, we'll build on our improved reputation to strengthen our relationship in the years to come. These three stronger brands with better reputations should provide more resilience and underpin growth into the future. I believe this growth will only be supported and secured with more off-site manufacture, innovation and vertical integration. And it's to our factories where we significantly invested, that I'll now turn. Our factories are already supporting our growth by contributing more of their high-quality, cost-efficient products to our business. Indeed, I think they're essential to our future growth. That's why we're investing so they'll contribute even more. A state-of-the-art automated line is now operational our timber frame factory. You can see the photos on the slide. We've also expanded our product range to include roof trusses. This investment is providing a broader range of industry-leading quality products consistently and cost efficiently. All regions have plans to use the product with seven new regions starting this year. Our second factory in Loughborough will help meet this growing demand and expand the products we can offer even further. We're starting an on-site trial of the Mauer brick facade combined with our timber frame this month. I've spoken before about the significant benefits here and we've identified additional sites to roll this out further. Our brick and tiles use continues to grow. The brick factory is now operating 24/7 and we're also investing in an additional line next year to meet demand. In a similar vein, the tile factory is planning a third shift next year to meet its own growing demand. As well as getting more from our factories, our use of on-site digitalization is really driving cost efficiency. Granular management of materials is reducing lost tolling and damage costs as well as daywork costs, with the results dropping straight to the bottom line. My vision is that within a few years for a large proportion of our houses, we'll be able to provide all the main components of the superstructure from our own factories: timber frame, roof truss, joist, brick or brick facade and tile, all Persimmon manufactured. The output opportunities as well as the cost efficiency benefits are really exciting. So if I turn to what's been a good start to the second half. I'm really pleased with our sales this year. Our current forward order book is up 9% on last year. Within this, our private forward order book is up 11% and affordable, up 4%. In the last 5 weeks, our sales have been encouraging, with total sales up 3% and ex bulk sales up 17% year-on-year. Pricing is robust, private ASPs in the forward order book are up 1% compared to a year ago. In the last 5 weeks, ASP on private reservations are up 5%. We continue to remain disciplined with incentives currently around 4.5%. It's a good performance and gives us good visibility for the rest of the year. And it's to that future that I'll now turn. Our strategy is delivering growth. It's done so in a market that continues to be get constrained by affordability. I'm pleased to say that we're on track to deliver our guidance of 11,000 to 11,500 completions, reflecting a second year of strong outlet volume and profit growth. As we look ahead, we're not expecting a demand stimulus from the government or a significant improvement in affordability, other than through real terms, wage growth and modest reductions to interest rates. So growth remains dependent on our own self-help measures. I've set out today that there's more investment and innovation to come to build on the success and progress we've already seen. An enhanced reputation together with improving sales and marketing are crucial to selling more of our attractively priced good value homes. And our expanding factories and vertical integration are crucial to meeting demand in an efficient way. We're creating a growing platform with diversified brands selling more homes and then building them more efficiently. We expect to see further growth in 2026 as we keep opening outlets and increasing sales across all our brands, building volume, key drivers of growth in this market. As Andrew originally set out in March, the pace of margin improvement will be gradual, uneven and back-end loaded. Historical build cost inflation is still working through our sites, albeit as we look ahead, it's a diminishing headwind. That, coupled with constrained affordability and the challenges and increasing costs of opening sites, including, in particular, between outline and reserve matters means there will be a drag on margins. Nevertheless, I'm confident we'll still grow volumes, profits and margins next year. As we expect -- we expect volumes to grow broadly in line with outlet openings, and we anticipate margins to grow at a similar pace to this year. Assuming a stable market, the combined effect of increasing volumes and margin expansion will produce robust profitable growth in 2026. Looking beyond 2026, our ambitions remain to grow our operating margin and return on capital employed to 20%. With the bulk of our building safety works completed by the end of 2027, we'll have a flexibility to deploy the capital, how we choose. As you saw on Andrew's slide, work has started or finished on over 80% of our buildings compared to the industry, which is at 48%. This is a real competitive advantage. As a result of the decisions we've taken, we have a growing company with growing prospects and growing ambitions. And we're seeking to build a structural competitive advantage for the business. The business is in a really good place and we're really looking forward to the growth to come. So on that positive note, I'll take some questions.

Will Jones from Rothschild & Co. Redburn. First, if you could help us just put some numbers around your price and build cost experience at the moment, I think you mentioned 5% on the private ASP second half to date. What would you estimate of that is organic and similar for build costs, please? And then the second was really just exploring the point around land mix, quite active in the first half on new land buying. Do you think you're achieving margins akin to the embedded land bank you currently got? And when we think about the feed-through of that, I think you mentioned next year, over 50% of the outlets with embedded build cost inflation, is that a lower number than in 2025? And any thoughts on the pace of that reduction, I suppose, as you go beyond '26?

Okay. So yes, so look, ASP, we are pushing -- I mean, clearly, there's a whole raft of things in there, whether it's about the mix of product, Charles Church and so on. But as I said earlier, we're seeing opportunity to push on prices, particularly in the North and in Scotland, more than in the South. Affordability is just a more acute challenge in the South. But we are -- we don't forecast that kind of ASP inflation or ASP growth, but you can see in the order book that the ASP has continued to be robust, so which encouraging. And build cost inflation in the current year is where we said it would be. We said it would be low single digits, and that's really still what we're seeing. So just coming to your third question, just whilst we're on inflation. So yes, of course, that will diminish, but it diminishes over time. So as we get through into '27, '28, that will continue to diminish as a feature. What you have to remember and the reason -- I'm kind of telling you what you all know, but it's just useful sort of articulate out loud, I suppose. When you buy a large site or you might buy a site on outline with detailed planning for Phase 1, but then Phase 2 and Phase 3 will come through in due course. So that's why when you see inflation a couple of years ago, it does take time for that to wind its way through the system. So it's just a kind of mathematical factor of that. But yes, that will reduce beyond '26 and it will gradually taper off. And land buying, I think the key thing is there is a lot of opportunities. There's lots of opportunities to buy land, lots of opportunities to buy land at the right hurdle rates with the right cash profiles. And there is a lot of opportunity that we're seeing and it comes across our desk. So we are making sure that we're trying to buy the right sites for the future. So absolutely pleased with what we've been able to do in the land market.

Aynsley Lammin from Investec. Two questions, please. I was interested a bit more color on recent trading kind of into the second half. It doesn't seem to be as incrementally negative as maybe some others have said, just what you're seeing there, pricing, sales rates? And second question, I guess on the FY '26 outlook, it seems quite early to be speaking about FY '26. Is that just a reflection -- you just stating the facts of what you see in the land bank and the cost embedded there, as you said? Or when you look at the macro outlook and the U.K. backdrop, are you just incrementally less hopeful of any HPI coming through it? And what's driving the timing of that comment for today?

I'll have a go, you can correct me if I get it wrong. The trading is good at the moment. We did see, as others have commented on for about 3 weeks in May, a bit of a decline, but then it bounced back. And it's continued to be pretty good. I mean, we always see a decline in sales at this time of year. It's just seasonal. But relative to last year, our performance is good. A few weeks ago, I thought pricing was maybe going a little bit softer. That seems to have bounced back. So I think as well, it's important to remember, when you're growing a business, you've got more choice. So you can afford to take different decisions. And we haven't quite got that pressure to sell from a constrained and declining base. So I guess we've got more opportunities. And look, the product is really good. We're also seeing a kind of renaissance of Charles Church, which the whole business is incredibly excited about. But actually, I -- much as I love what we're doing in Charles Church, I just think what we're doing in Persimmon gets better and better. I think we're building -- as I roam around the business, causing Mayhem, I see we're building fantastic products in locations where the real competitor is the secondhand market. And what we're building actually is in those niche markets actually aspirational for people in those markets. So I'm just delighted with the progress we're making, and we're seeing that strength come through. So I think that's really important. On '26, do you want to cover that? I think, we just wanted to get across the point about this embedded inflation that it's just going to tip over. Actually, it becomes over time, it will go from a tailwind -- headwind to a tailwind as it drops off, which gives us the confidence to reiterate our margin opportunities. But we just thought this was the right moment to set our views, and we depend on self-help, don't we?

Yes, we do. So I think to the point of your question, Aynsley, we're not expecting the market to change. We're not trying to make a call on the market. So we're looking in the current market and what we're doing around self-help around outlets, what we see as the opportunity in the business. But I think it's also just a little bit of tidy up on the margin progression. It's just the pace. I mean, it's just a nudge on that, which I think is just to try to give you an early line of sight. It's just to try and be straightforward on it really is what we're trying to do.

I'll come to that side in a moment.

It's Allison Sun from Bank of America. I have two questions from my side. So first on this cost inflation, which you mentioned was quite high a couple of years ago, I guess, since COVID. Can you remind us what's the driver of that? Is that raw material, labor, maybe land cost perhaps? And the second is on this capital allocation opportunities you mentioned. I mean, after we've done this building safety work, what kind of capital allocation are you thinking? Could share buyback be an option?

Okay. No problem. Well, if you -- I mean, if you cast your mind back, Allison, in 2022, you had energy spikes going into material pricing, you had inflation running in double digits for a prolonged period of time. And of course, where you have bought a piece of land, that the feature of that period was that, that inflation was not mirrored in house price inflation. And hence, that cost inflation became a margin squeeze at that period of time. So that's all -- that's all sort of the matter of fact as it was at the time. The point that we're just flagging is that, those land is a -- clearly, it takes a long period of time between agreeing terms and buying a piece of land until you have finished trading out on those sites. And so that's the point that we're flagging, that impact will continue to be felt this year, next year and then it starts to diminish. I think on the capital allocation point, I mean, I'm not going to give you the answer to what we'll do with the policy review. The point is, I'm spending GBP 100 million a year in ransom, at the moment. So that's 30p a share, cash cost. So clearly, once I'm through my fire safety work in a couple of years' time, that gives me GBP 100 million of opportunity, if you like, to think about how I deploy that money, whether that be around growing the business, whether that be about shareholder returns, there's a whole raft of pieces. But the point is it's a -- at that point, it becomes an opportunity for us to make that decision positively as opposed to just having to deal with the remediation work. So it's good that we're dealing with. It's the right thing to do. And what we're doing is pointing out this is a cash opportunity for us in due course.

Mark Howson from Dowgate. Just a few questions. Just obviously, the bulk of the story -- the first question, the bulk of the story is obviously about Persimmon the product, getting that land right, et cetera. But can you just shed a bit more light on Charles Church, why that's a better margin product going forward? How you positioned it? That's the first question.

Okay. So in each of our segments, we're very much focused on the affordable end of it. So it's an uptick from Persimmon. It's bigger, but it's still very much premium economy. But we're finding -- I mean, we're building bigger products. So naturally, there's a bigger ASP associated with it. But what we're finding is that if you pick your markets well and there's some good markets out there, there's real demand. So I can think of one of our sites in Bristol, for instance, where it's a really good development. We're building it well. We're continuing to improve what we're building, the appearance of what we're building and the demand gets stronger and stronger, because it's really -- again, it's competition. It's not really the new build around it. It's competition, is secondhand houses up the hill in Westbury-on-Trym. And it's doing really well. So we're getting downsizes coming to it. It's the right size for people, and they're willing to pay a premium for that product. And we're seeing that in other locations that I can talk to others at Lichfield and elsewhere. If you choose your markets well, and we've got plenty of opportunities, the demand is really strong.

Just a second question for me. Just on the Mauer, the product up in Castle Bromwich, you can get that water type within 5 days as opposed to 8 to 10 weeks. Can you just say how -- what the early feedback is on how the construction teams are finding that product on site? That's the second question.

Well, so why don't I cover -- so there's two bits. So the Mauer product itself, Mark, is still early. So we're doing a trial on that product in sit with a customer this half year, but that is still -- that's still very early days in terms of taking it into production on site. But it is exciting, because it gives us an opportunity for both speed and delivery with fewer resources required. So that particular piece is early still, but is showing the continued progress that we're making in terms of innovation around vertical integration. But the timber frame product itself, I think the important thing is that we are using that now more widely around the country. So it's -- for whatever reason, it's always been used in some regions extensively and in some regions have just stuck to traditional build. So what we're looking to do, particularly with the new line in Castle Bromwich with the new factory that we're looking to develop is to make sure that our take-up of timber frame is more consistent across the country. And so we're now trialing and using timber frame in those regions that haven't had the experience previously. And that's actually working well. And some really good examples, when you talk to the teams, actually, they've been really pleased with how that's worked. I think probably the timber frame products more generally in the industry is better now than it used to be. And so some of those legacy concerns actually have proved not to be the case anymore. So I'm really pleased with how our local construction teams and managing directors have lent into that and taken that on board as they look to extend the use of timber frame.

Kind of perversely as well, actually, where the market is strongest for us at the moment is where we're slowest to build. So if we can get the adoption of timber frame through the business, and it is a particular skill which teams have got to learn to get used to, then you've got the compounding benefit of there's a really strong market out there. So we can sell them as fast as we can build them, so.

Adrian Kearsey, Panmure Liberum. A couple of questions, if I may. One on dual branded sites, 35 of the 53 Charles Church sites are dual branded sites. Is that a similar kind of proportion you'd expect going forward as you grow the business? And related to that, when you look at a dual branded site, are the sales rates for Charles Church similar to single brand sites? And then a third question, if I may. You're increasing outlets or plan to increase outlets by 5% in '26. You talked about the changing WIP dynamics coming through from the investment in infrastructure. How should we think of the evolution of WIP in relation to that infrastructure investment sort of going into '26?

It really -- there's plenty of opportunities for us to continue to roll out dual-branded sites across the business, and we'll continue to do that. So over time, I would hope that we increase that proposition. But of course, it really does depend on every single individual market and other opportunities of land that come through. So it's -- as well as the strategy, there's also opportunism in there. It depends just where the land is. Charles Church being a bigger product inevitably has a slower sales rate than Persimmon, but what it is doing is overall accelerating the sales rate and therefore, the asset turn on a dual-branded site. So it's doing the job. It's -- we're asking it to do really.

Yes. And then, Adrian, on the outlets, and -- I mean, obviously, it depends site-by-site, because they're all different. But I'm probably thinking you're at GBP 10 million, GBP 20 million of WIP to get a new outlet open. Clearly, it depends on off-site works. It depends on access. It on a whole raft of features. But clearly, there is investment. And I think what we're probably also finding is that -- and probably particularly on Charles Church, actually customers want to see the product. So again, as you open the site, there's probably a bit more WIP, because you want to be a bit further through on the build so that the customers can see the products. And that maybe is a different feature to a decade ago when you probably sold more than plan. So I think -- and particularly, I think at a higher price point, we're seeing that is undoubtedly a feature.

Chris Millington, Deutsche Numis. First one, I just wanted to ask about is the shape of the balance sheet. Obviously, you're looking forward to the end of the fire safety. What would you like to see adjusted gearing in this business? Obviously, land creditors are potentially quite a big moving part. And I'll go one at a time, it's probably better.

So Chris, so we haven't set a target for adjusted gearing. I think what we have said is at this point of the market, then we're happy that we are using the balance sheet strength more, which is why our gearing has increased a shade. So 8% adjusted gearing is still -- I think it's still entirely fine. And I think then as we progress, probably not in '26, but certainly through '27, '28 as the fire safety piece comes back and as the business is growing, then I think you'll see that starting to come back the other way. But I'm happy that at this part of the cycle, investing for growth is the right thing to do. So I think that adjusted gearing just increase a little bit is fine.

That's very helpful. Next one I've got really is the 20% target margin plays the 14.5% at the moment. What are the components together? I presume it's a land mix and overhead recovery. I'm not asking for specifics, just the general sort of build there.

Yes. So it's after pieces in there, Chris. So overhead recovery. So clearly, as we continue to grow volumes, and that will be a big piece of there. We've already talked through the Q&A on Charles Church, which clearly we've said we will grow faster, and that's delivering a higher margin. Clearly, the land mix and in particular, within that, the embedded inflation as that starts to come off, that will also feed in there. And then as we deliver more volume with that vertical integration piece and that speed of build that we just talked through, with Mark's question. So those are the key pieces. But we set out in March, as we said at the -- during the presentation, it will be back-ended and it will be bumpy, and there will be pieces coming towards us, whether say on regulatory costs and so on, which we will need to deal with as we go through that. So I think it's not -- we always said it wouldn't -- it's not just a kind of straight-line trajectory up there. But those are the key building blocks.

If I may just come in, I think when you think to the consequences of us suffering 33% build cost inflation and flat to modest ASP growth, that's a hell of a thing to absorb. And inevitably, we are working through sites that we bought that suffered -- we bought ahead of that, that suffered that build cost inflation and nobody prices that sort of level into the market. So for instance, last week, we got a ticket on a piece of land up in Teesside. That was one of the first bits of land I was asked to sign off when I joined the business 5 years ago. So two things in that. You can see what's happened there, and you can see how long it's taken us to get planning through. But that is still, nevertheless, a good piece of land that I wouldn't turn away. Is it as high as our historical margins? No, it's not. But is that going to create shareholder value going forward? Yes, it is. So we're going to transact and buy that piece of land. So you can see that impact. But that is actually quite a beefy piece of drag on the margin, which will impact us for the next few years. But when that comes off and writes itself, then it has a really positive impact. So I think going -- going forward, as we're buying land adjusted to new cost, it really does help our margin story. And also, I think the benefits of vertical integration will help us as well. There's a margin uptick coming from that as we build faster.

Final one, and it's about whether the government are likely to give us anything in this sector rather than take away at the moment. Are you hearing anything on demand side stimulus? Yes, I could go on about the government.

So it's not our central case that we think that there's -- everybody can see that fiscal pressures are really tight. I think, we've seen real positivity on planning and getting consent. So that's a really good piece of news. I think though, we need to see a focus brought further down, if you like, the pipeline of bringing a site from consent into production. So the log jams that were there on providing consent have now gone, but we're now seeing it can be quite challenging to go from where you've got the ticket, well to getting on to it, because you've got discharge conditions or you've got water problems you've got to deal with, nutrients problems you've got to deal with and so on. So there is still blockages there. As you can see, we're knocking them over, because we're growing. So if there was a plea from me to the government, it would be please unlock -- as you've unlocked planning, can you unlock our discharge conditions as well, so we could move faster. So our strategy, though, is about self-help, and that's what we're really focused on. And you can see in these results, I think, that it's working. We've grown ASPs. We've grown completions. We've grown consent. We've grown outlets. We've grown profits. So it's working.

Ami Galla from Citi. A few questions from me. The first one, a follow-up on the margin evolution next year. Can you give us some color as to the sales and marketing investments that you've been making. Has that spend normalized now? Or you touched upon a new marketing platform next year. So is there sort of an incremental OpEx investment on that bucket? The second question was on planning. You've given some helpful color on your approach to planning. On the successes that you've had so far into this year, is there a regional bias? Or has it been broad-based? And the last question was just on the CapEx spend, your ambitions on investment in space for across the brick tile facility -- a brick facility as well. I mean, can you give us some sort of guiding post as to how to think about CapEx in the business over the sort of next 2 to 3 years?

Do you want to do the planning one, Dean?

Yes. No,, planning across the countries is pretty consistent. So there's no regional bias.