Taylor Wimpey plc (TW) Earnings Call Transcript & Summary

Okay. Good morning, everyone, and thank you for joining us today. I'll start with some key areas of focus in trading and bring you up to date on what we're seeing before Chris takes you through the financials and capital allocation in more detail. I'll then return to cover the proactive actions that we're taking to protect margin and improve returns and the progress that we're making on executing the strategy we set out last year, which I think sets us up well for the current market. So as you're all aware, the housing market backdrop remains challenging. Underlying demand remains resilient, but customer confidence is subdued. So our focus in the first half and my key messages today is on controlling what we can, sharp disciplined execution and a relentless focus on improving return on capital. In other words, we are carefully managing the business to protect value [ NOI ] while also preparing for a cyclical recovery. Our teams worked extremely hard to deliver these results, and I'd like to thank them all and our subcontractors for their work and the commitment in the delivery. As I've set out here, the first priority is maintaining our tight grip on cost, and we are navigating the current uncertainty with decisive cost and efficiency actions across the business. I'll come on to these in more detail later. But for NOI, I'd just like to pick out a couple of examples for you. Through tight WIP discipline, we are driving enhanced efficiency with WIP per outlet down 6% year-on-year, which, as you know, from October is in line with our plans. Our scale, rigorous approach and established partnerships have enabled us to identify further procurement efficiencies to offset some of the build cost inflation through retenders, rebates and e-auctions. Our second priority is continuing to drive outlet growth. As you've heard me say many times, we've been proactive and assertive in our planning applications over several years to unlock the opportunity brought by the recent planning reform changes. And you will see the benefit of this as a key lever for future volume recovery. In the period, I'm pleased to say that average outlets increased by 6% year-on-year. And third, capital allocation. Our priority here continues to be maintaining a strong balance sheet to underpin our ability to deliver attractive returns through the cycle. You will have noted the change to shareholder returns this morning, revising our total payout to 4% of net asset value. Chris will take you through this shortly, but there's no change to how we allocate capital, but the housing market downturn has been more prolonged than anticipated and affordability pressures continue to affect demand and profitability expectations, which remain lower than when the current distribution level was set. More recently, uncertainty arising from the events in the Middle East has added to an already challenging backdrop. Taken together, these factors have led the Board to conclude that a lower level of annual distribution is appropriate for the current environment and will give us greater flexibility and resilience through the cycle. So despite the uncertain backdrop, on the whole, trading in the first half remained pretty resilient. I'm really pleased that during the period, we made further progress on outlets, one of our key priorities, operating from an average of 219 outlets in the period and opening 39 new outlets compared with 32 in the first half of last year. Turning to sales. The first quarter was solid, though more subdued than the comparable period in 2025. However, from April, the market has been incrementally more challenging and uncertain given the conflict in the Middle East and also recent domestic political uncertainty. Our net private sales rate was 0.75 per outlet per week, about 5% lower than the GBP 0.79 in the first half of last year, whilst bulk sales remained around the same level. Private average selling prices increased to GBP 371,000, up from GBP 350,000 in the first half of 2025, mainly to do with mix. The cancellation rate reduced to 14%. The order book as at the 28th of June stood at GBP 1.9 billion, representing 6,882 homes. So looking at current trading. As you know, the summer is a traditionally slower season for sales, and this is only 4 weeks' worth of data. But you can see that the net private sales rate per site is running 7% down on the same period last year, 5% down excluding bulk. Pricing, which has seen a gradual decline through the first half has stabilized in more recent weeks. Customer behavior is cautious, and they are taking longer to make decisions. On a site-by-site basis, this means our focus is on driving more appointments and our regional teams are using targeted incentives where they genuinely support conversion rather than taking a blanket approach. And I'll talk you through this a little bit more shortly. Affordable housing providers remain quite constrained in the Section 1 and 6 market, so securing affordable housing delivery remains challenging. We are in a good place for 2026 affordable completions, but with the flexibility introduced by the ministerial statement in January, having a December 2027 delivery cutoff, the challenge remains. We continue to press government for greater flexibility in type and tenure through cascade mechanisms to support the delivery of affordable housing. And with that, I'll now pass over to Chris, who will take you through the financial performance, cash flow and capital allocation in more detail.

Thanks, Jenny. Good morning, everyone. I'll start as normal with our first half financial performance before moving on to the balance sheet, how we're improving our capital efficiency, supporting cash flow and capital allocation and then finish with our outlook and guidance for the remainder of the year. As Jenny has outlined, market conditions remain challenging through the first half. Against that backdrop, the group delivered a solid first half performance. Group revenue increased to GBP 1.68 billion, supported by disciplined U.K. delivery, higher average selling prices and GBP 32 million of land sales, partly offset by lower completions. Margins and profitability were impacted by the ongoing pressure from lower underlying pricing and build cost inflation. Gross profit was GBP 254 million, down 10% year-on-year, with gross margin reducing by 200 basis points to 15.1%. The reduction in gross margin was the primary driver of lower earnings in the period. Adjusted operating profit was GBP 130 million compared with GBP 161 million last year, while adjusted operating margin also reduced by 200 basis points to 7.7%. Our balance sheet remained resilient with tangible net asset value per share broadly unchanged at 117p and return on net operating assets measured over the last 12 months, also broadly stable at 10%. Turning to U.K. performance. U.K. completions, excluding joint ventures, were 4,723, down 3.5% compared to half 1 last year, but ahead of the first half weighting assumptions we outlined at the start of the year and updated at the AGM. Average selling price, excluding joint ventures, increased by 6.7% to GBP 334,000. Private ASP increased by 6% and affordable ASP by 9%. Mix was the principal driver of these movements with a higher proportion of completions from the South and homes that were on average around 3% larger than last year. And these factors were partially offset by lower underlying pricing, reflecting ongoing market pressure. For the full year, we now expect the blended U.K. average selling price to be around 1% ahead of last year with affordable homes contributing approximately 21% of completions. Joint venture completions increased to 88 with our share of joint venture profits contributing GBP 4 million in the first half. We aren't expecting any net contribution in the second half, and therefore, guidance remains at GBP 4 million of JV profit for the full year. U.K. gross profit margin was 14.4%, down 180 basis points year-on-year, which will be explained on the next slide. And this slide, which will be familiar to you, sets out the key drivers of the movement in U.K. adjusted operating profit margin versus half 1 last year. Overall, margin reduced by 160 basis points. The largest driver was the net market impact of 280 basis points, comprising around 110 basis points from lower selling prices and 170 basis points from build cost inflation. Starting with pricing, performance was broadly in line with the trends that we've highlighted since January. Following modest softening through the spring selling season, particularly in the southern markets, pricing has been more stable in recent weeks. Overall, underlying pricing on half 1 completions was around 1.5% below the prior year. Build cost inflation in the half was 2.5%. We continue to challenge supplier cost increases robustly and leverage our scale and procurement initiatives to mitigate inflation. Conditions appeared to be easing during May and June, and we were actively discussing the removal of certain surcharges with suppliers. However, the subsequent increase in energy and fuel costs has slowed that progress, and we now expect surcharges to remain in place for at least the next few months. Land bank evolution has no impact on the half 1 margin as the contribution from newer land offset the reduction in older, higher-margin sites bought after the Brexit referendum. The 130 basis point positive movement reflects the absence of the GBP 20 million charge for historical defective workmanship recorded in the prior year. Land and property sales reduced margin by 20 basis points and joint ventures provided a modest benefit. We remain firmly focused on the areas within our control, build efficiency, cost discipline, procurement, WIP management and disciplined capital allocation, which I'll come on to shortly. Looking ahead to the second half, the margin outcome will continue to be shaped by the balance between pricing, build cost inflation and volume delivery. Underlying pricing is currently around 2% below prior year levels and has been stable in recent weeks. Build cost inflation is expected to increase to around 3% to 4% for the full year, reflecting the factors I've just discussed. Accordingly, both pricing and build costs are expected to remain headwinds in the second half. We will continue to focus relentlessly on procurement and cost discipline to mitigate those pressures wherever possible. Turning to the balance sheet. A key message from our October strategy update was that growth would come from unlocking value within our existing land bank rather than increasing investment. The GBP 169 million reduction in land, net of land creditors over the last 12 months demonstrates that approach in action. With all the land required for 2027 already owned, we remain focused on improving capital efficiency while supporting future growth. The quality of our land bank continues to reflect many years of disciplined investment and asset management. With a reported U.K. gross margin of 14.4% in the period, there remains plenty of embedded value across the portfolio. To give you some sense of this by way of illustration, our sensitivity analysis indicates that a further 5% reduction in prices today would result in an NRV charge of only around GBP 30 million. Work in progress is in line with our expectations at this stage of the year, but remains higher than where we ultimately want it to be. It reflects the second half weighting of completions, investment to support new outlet openings and certain legacy more capital-intensive sites. However, as I'll show you on the next slide, we are making good progress against the actions that we set out last October to normalize that position. Debtors at the half year were elevated principally due to deferred receipts on land sales and BTR deals, and we expect that elevated position to unwind by the end of the year. Provisions have reduced over the last 12 months as fading remediation works have progressed. There was no material change in the gross provision in the period with only minor movements for discounting and inflation. Spend in the first half was GBP 36 million, and we now expect around GBP 100 million for the full year, lower than previous guidance due mainly to delays in securing approvals and building safety fund reimbursements. Importantly, our expectation to complete all works in 2030 remains unchanged. Before moving on to cash and capital allocation, I wanted to briefly revisit the commitments we set out at our investor and analyst event last October around improving capital efficiency. As we said at the time, improving returns is not dependent on a recovery in the market. It is fundamentally about improving the efficiency with which we deploy capital across the business. Since October, we've continued to make tangible progress against the operational actions that underpin that strategy. We've improved WIP efficiency with WIP per outlet reducing by 6% year-on-year. We've continued to recycle capital from London apartment schemes and other infrastructure-intensive investments, releasing capital for redeployment into higher return opportunities. We've increased outlet numbers by 9% while maintaining a stable short-term land bank, demonstrating our ability to generate more selling outlets from our existing land position. We're continuing to increase the proportion of smaller, more capital-efficient sites entering the business, which supports higher outlet density, lower capital intensity and improved asset turnover time. We've also reduced land bank years and lowered the capital tied up in land, further improving the efficiency of our capital base. I see this as encouraging early evidence that the actions that we set out last year are gaining traction with the business responding to pace to improve efficiency. While the full benefits will take time to flow through into volumes and returns, the progress achieved demonstrates our focus on controlling the factors within our influence despite a challenging market backdrop. The actions we're taking today continue to strengthen the business, laying the foundations for improved asset turn, stronger cash generation and higher returns over the medium term. Having shown the progress that we've made against our capital efficiency commitments, this slide illustrates how that translated into cash generation and capital deployment during the first half. We started the year with net cash of GBP 343 million and generated GBP 130 million of cash from adjusted operating profit. Consistent with the disciplined approach we outlined in October, we've been highly selective on land approvals and land spend during the period, resulting in a GBP 49 million reduction in land investment. We also invested GBP 108 million in work in progress, consistent with the operational priorities and phasing discussed earlier. As a result, the business generated GBP 52 million of cash from operations during the first half. After tax, shareholder distributions and other cash outflows, we closed the period with net cash of GBP 169 million. The key takeaway is that we remain disciplined in how we allocate capital across the business. While the timing of cash generation will naturally vary between periods, our focus remains on improving capital efficiency, maintaining balance sheet strength and preserving the flexibility to deploy capital in line with our long-term priorities. Turning to capital allocation. First of all, by way of context, there is no change to the strategy we set out at our investor and analyst event last October and no change to the capital allocation framework that underpins it. Our priorities remain straightforward and consistent. First, we maintain a strong balance sheet appropriate for the cyclical nature of the industry. Second, we invest selectively in land and work in progress for growth and long-term value creation, noting our clear focus on driving improved capital efficiency. Third, we understand the importance of cash returns to our shareholders and remain committed to delivering attractive returns through the cycle. And finally, where capital is genuinely surplus to the needs of the business, we return that excess cash to shareholders. Those priorities remain unchanged. However, given the prolonged housing market downturn and in particular, the continuing uncertainty in the macroeconomic and political environment in which we're operating, the Board has determined it is now prudent to reassess the level of cash returns we are making. As you will have seen in this morning's announcement, we're updating our distribution policy from a total annual return equivalent to 7.5% of net assets to 4% of net assets. Before turning to the mechanism, I'd like to explain the basis for the Board's decision. Whilst we're making good progress against our operational priorities, the current cycle is seeing a more prolonged downturn than we anticipated, exacerbated by the crisis in the Middle East. Consistent with our long-standing priority of maintaining a strong balance sheet and financial flexibility, the Board has concluded that a distribution level equivalent to 4% of net assets is the appropriate basis for shareholder returns going forward. This will comprise an annual ordinary dividend equivalent to 2% of net assets, supplemented by a further return of 2% of net assets by way of incremental dividends or share buybacks. Cash dividends remain an important element of shareholder returns, but at current valuation levels, we see significant merit in complementing them with share buybacks. Overall, we believe this approach strikes the right balance between delivering attractive shareholder returns, maintaining confidence in the sustainability of distributions and preserving financial flexibility in a less supportive market environment. Before turning to guidance, I just want to reiterate some of Jenny's comments about what we are seeing in current trading. Whilst underlying demand for new homes is robust, affordability remains stretched in a number of markets and customers continue to take a measured approach to purchasing decisions, which is reflected in the lower sales rate that we saw in the first half. Accordingly, we expect the headwinds from both pricing and cost that we experienced in half 1 to persist through the second half. While underlying pricing has been broadly stable in recent weeks, it remains on average approximately 2% below prior levels. At the same time, we anticipate build cost inflation on completions will increase to around 3% to 4% for the full year, given the continuing pressure from energy and fuel-related costs. Conditions also continue to vary across the country with the South generally experienced a more challenging backdrop than other regions, given affordability pressures and a greater reliance on discretionary movers. So pulling this together, we're adjusting our guidance for U.K. completions this year to a range of 10,600 to 10,800 homes, which is the lower half of the range we provided in March. We expect blended U.K. average selling prices for the full year to be around 1% higher than last year, driven by mix and assuming an affordable share of approximately 21%. However, as noted earlier, we expect further pressure from underlying pricing, which is currently running at 2% down year-on-year compared to 1.5% in half 1. Build cost inflation, as I called out earlier, is expected to increase from 2.5% in the first half to around 3% to 4% for the full year. Group net operating expenses were GBP 128 million in half 1 and will be at a similar level in half 2. We don't expect any net contribution from JVs in the second half, and therefore, guidance remains at GBP 4 million of JV profit for the full year. Net finance costs are expected to be around GBP 25 million, GBP 5 million less than previous guidance. Net cash is expected to improve during the second half, increasing from GBP 169 million reported at the half year to around GBP 250 million at the year-end, assuming approximately GBP 100 million of cladding-related cash outflows during the year. So in conclusion, the market remains challenging, but our priorities are clear. We're focused on disciplined execution, improving capital efficiency, maintaining balance sheet strength and allocating capital responsibly. Those actions position us well to navigate current market conditions while continuing to execute against our strategy and create value for shareholders over the longer term. I'll hand you back to Jen.

Thanks, Chris. So I'll now turn to how we're managing the current uncertainty and how we're positioning the business to protect value now while preparing for a cyclical recovery over the medium term. So let me first step back and just put the current environment in context, looking at both demand and supply. On demand, sentiment, confidence and affordability continue to be affected by the global and domestic backdrop. So while there continues to be very high underlying demand, effective demand has been weakened. It's not all bad news as the consumer has proved pretty resilient and continues to transact, albeit they're very value focused. Mortgage availability remains good and lenders remain committed to the market. On supply, there's been a little disruption due to the local elections. But despite this, we've been able to drive continued planning momentum and are pleased to see positive progress with planning and continuing commitment to positive determinations, especially by planning officers. There have also been some positive policy measures from government off the back of the Planning and Infrastructure Act, although we await the formal introduction of the National Scheme of delegation and await the NPPF redraft, which is now expected in September. Build cost is facing increased pressure because of knock-on energy surcharges, particularly in materials and mitigation is a key focus for the business, which I'll come on to in a moment. The labor side has been more stable, and there's good capacity in the industry, though there are some signs of financial stress. We've spoken previously to you about the cumulative impact of regulation. The HBF recently estimated that these factors, together with the underlying build cost inflation have added approximately GBP 76,000 to the cost of delivering a new home since 2020. In London, the figure is closer to GBP 98,000. These additional costs are now visibly impacting the viability of new sites, especially in areas of lower ASP or underlying ground conditions or infrastructure demands or Section 106 agreement requirements are overweight. This subject remains one we raise regularly in our engagement with government, and we will continue to do so. It's particularly important given the recognized economic multiplier effect of new housebuilding as well as the scale of the opportunity and job creation our sector brings to local communities and the support it provides for the wider supply chain. So the environment is not a straightforward one, but it is one we understand, and we are sharply focused on the areas we can control. From a customer's perspective, affordability remains the key challenge to overcome as it has been for some time, particularly for the South and for first-time buyers. We're responding by helping customers navigate affordability through tailored incentives and our summer campaign, your home, your budget, your way, helps our customers understand the support available and to see a route through to homeownership. We continue to generate a healthy level of site activity with a good number of appointments, although customers remain cautious. More visits are needed prior to reservation and as a result, time to reservation is taking longer. All in all, I'd characterize it as a buyer's market out there with listing levels near 12-year highs for this time of the year according to Rightmove. Our approach over the last couple of years, as you'll know, has been to prioritize high-quality leads as opposed to overall traffic, upweighting investment in the channels we have assessed as delivering this objective. We're applying an increasingly more systematic approach to sales, leveraging our customer database using targeted media spend to drive higher quality leads and applying incentives in a disciplined way to support conversion. This is having a positive effect in driving customers to book appointments predominantly through our website with website appointments up 13% per outlet year-on-year. Overall, when we include all types of appointments, so that includes walk-ins and appointments booked by our sales executives directly, they're also up year-on-year in absolute terms. However, on a per outlet basis, the picture is pretty stable. Right, there we go. Tight operational discipline and cost management are business-as-usual at Taylor Wimpey. But here, I want to give you a sense of what we're doing to drive this even further throughout the business. I'm really pleased with how the business has responded and I have a few examples to share with you this morning. Firstly, we're applying the lessons that we learned in the 2022, '23 energy price shock and have been quick to respond even before the cost pressure emerged. That included a surcharge model, forensic input scrutiny to challenge increases, seeking substitutions where appropriate and using procurement scale to mitigate the impact and of course, through our partnership negotiations. A second example is how we've been actively preparing for the building safety levy, which is expected to come into effect from the 1st of October this year in relation to both new and existing land assets. Through considered action, so in effect, the submission of new initial notices for existing and pipeline sites, we've been able to mitigate these costs, ensuring that sites will not be liable for building safety payments until 2029. We are implementing tangible and deliverable savings through our value improvement program. And these aren't theoretical initiatives. They're site level actions that can be delivered quickly. So for example, as you know, taxation for landfill increased last year, and we're therefore driving savings in site waste and disposal costs using the Nexus ReGen digital materials exchange platform to identify reuse opportunities across our own national network. This is delivering meaningful savings on waste disposal costs as well as enhancing our sustainability. We're working proactively with 15 key partners in high-value areas to identify new opportunities to drive value. So for example, rationalization and change of white good providers aligned with customer research. Individually, the improvement is incremental, but overall, it is meaningful and importantly, embedded in our mindset with the team driving operational excellence and a cost focus, which is now considered business as usual. And finally, we're continuing to increase delivery from the standard house type range and standardized products and processes so that each improvement is repeatable across the business, levering cost and efficiency benefits. So that's just a flavor of some of the core initiatives underway. We are relentlessly seeking ways to improve the cost base of the business, and we'll continue to do so over the coming months. So turning now to the actions that allow us to unlock value from the existing land bank and underpin future growth. We've continued to stoke the planning momentum we've created, and we currently have around 32,000 plots in planning for first principle determination. And there are 11,000 plots targeted for a set of planning application submission over the remainder of 2026, and that's over and above our business-as-usual activity. We converted around 3,000 plots from the strategic pipeline in the first half compared to around 1,000 in the first half of last year, showing some improvement on delivery as expected. We also achieved a 72% increase in detailed planning commissions in the first half compared to the first half in 2025. And importantly, we own all the land required for 2027 completions, over 97% of which have detailed planning permission. The quality of our land bank has allowed us to be highly selective. And in the first half, we approved around 3,000 new plots. In terms of the current land market, though we remain highly selective, we are seeing a modestly improving pipeline, albeit from a fairly low level of activity. Where there are realistic landowners, there are some deals to be done and our financial resilience and market positioning means that we are well placed to benefit. The focus on smaller, more capital-efficient sites with lower planning and technical risk aligns with our commitment to drive capital efficiency. And in the first half, the average site approved was 166 plots, and you can see on the graph here how that has moved over time. Together with planning commissions unlocking value from the existing land bank, smaller sites will support outlet growth without the need for new net land investment. I'm really pleased that despite the backdrop, we remain on track to open more outlets this year compared to last year and continue to expect higher average outlets in 2026 than in 2025. To summarize then, we're firmly focused on the areas that we can control, including outlet growth, cost and improving return on capital, and I'm pleased to see the progress being made across these measures. We continue to support the government's housing ambition. And if we are to unlock delivery at scale, targeted action is needed to support both demand and viability. And we're committed to disciplined capital allocation in line with our long-established capital allocation framework, which demonstrates our commitment to prioritize -- to the priorities of managing a strong balance sheet, disciplined investment in the business and a commitment to returns for shareholders. So thank you. And with that, we'll now open up for questions.

Aynsley Lammin from Investec. I think I've got 3 actually, please. Just first of all, on price and incentives, just kind of what you're doing there, what they're currently running at and the kind of slowdown you've seen over the last 4 weeks, is that, in your view, just the more summer kind of seasonal slowdown? Or have you increased price incentives as a reaction to that? And then secondly, I guess, related, just what you're seeing on mortgage rates, how big an impact is that having on kind of sales rates? And just on your strategy in the CMD, the kind of obviously saying that hasn't changed fundamentally. But when you look out for the medium term in terms of return on capital and the targets you'd expect to reach, has that changed given the backdrop of where you think the medium-term kind of returns for the business can get to?

Okay. So as Chris mentioned, we have seen a real sort of gradual erosion of on price over the half year, and we're now running at about sort of 2% down on year-on-year. There has been some stabilization over the last few weeks. But as you've seen, sales rates have also sort of shallowed off. In the last 4 weeks, I mean, we are now in proper summer season, and we would expect a slowdown, but it is perhaps disappointing to see it come off just quite as much as it has. But that, I think, correlates Aley to your question about mortgage interest rates. We have seen a move in mortgage interest rates within those weeks also. So if we think back to sort of Middle East sort of conflict, we saw a sharp increase in mortgage interest rates. I think through last year, we've seen some gradual improving, obviously, of interest rates, but we also had the benefit of the FCA and the PRA improvements, which for some borrowers, improve the multiple of income that they could borrow. We saw interest rates easing a little bit, albeit some of the stress testing didn't maintain the benefits from the previous year. And then really on the collapse of the cease fire at the start of July, we've seen a sharper correction and interest rates rose again just in the last few days. So the mortgage rates are, I think, having an effect on affordability. And the sales teams would report that we're seeing people right on the very edge of affordability and that that's qualification is proving challenging for some. The -- I mean, in terms of our CMD and the strategy, I think as we've said this morning, fundamentally, there's no change in that strategy. We've got an excellent land bank and the opportunity to leverage that as well as investing cautiously or highly selectively at the moment in smaller sites, I think will help drive our outlets and ensure that we're driving stronger sort of capital efficiency. And overall, in terms of the medium term, clearly, the current conditions aren't conducive of one of the fundamentals that underpins the medium-term targets you think the regulatory -- offsetting of build cost inflation, including regulatory cost against house price inflation. And clearly, that's not the environment that we're currently operating in. So at this point, we still feel that the strategy is correct. There's the opportunity to get there, albeit it's probably moved out given the current climate.

Kate Middleton, Panmure Liberum. Three questions from me, if that's all right. So you've reduced WIP by 6% per outlet. I was just wondering if you see this coming down any further? And if you can maybe talk about the optimum levels that you see for WIP per outlet efficiency. Secondly, there's been a nice progression of outlets opening year-on-year. Just wondering how we can think about this one moving forward and if it will continue to progress at a similar rate? And finally, the distribution policy, should we think about that staying at 4% moving forward in the medium term? Or is there perhaps any catalyst that could cause that to move? And if so, what might those be?

Okay. If I take the outlets and the sort of distribution policy and Chris, if we do the web, that would be helpful. We don't guide on outlets. And although we are seeing momentum in the planning environment, we are waiting at this point now to see what government's new sort of housing and planning policy looks like. We're very hopeful that the national scheme of delegation that will kick in from October will help ease some of the bottlenecks and planning resource issues that we've seen through the last few years. So I remain optimistic. And as you've heard, we continue to prime sort of the planning system to take the benefit of that. But that and how the land market operates really is what will drive sort of outlets overall. You heard us say that we're in a good position for 2027 with all land owned for completions in 2027 and the vast -- well, 97% of it has detailed planning permission. So I feel that we're in as good a position for 2027 as we can, but there are a number of other moving parts that will contribute to outlets over the medium term. And in terms of the distribution policy, we believe that the revised annual return of the 4% of net assets strikes the right balance between continuing to provide an attractive level of shareholder return but given the group much greater flexibility and resilience through the cycle. I think NAV is still the correct way given that we're an asset-backed business. And clearly, you've seen that we've made the decision that given the share price at the moment that there's the opportunity to include the share buyback on that. And we remain committed to delivering sort of sustainable returns for shareholders. In terms of catalysts, this is the best judgment that we make at the time, given the conditions that we observe. We're confident in the 4% that we've declared today, but the Board will review as they always do, the share and the dividend structure on a regular basis. So Chris, on WIP.

Yes. So okay, we reduced WIP per outlet down to 9.3 million. And you've heard me talk about sort of normalizing the WIP balance in terms of reducing the capital that's locked up in the London apartment schemes and also in the infrastructure-intensive sites. I think if you strip that out, we could get down to something like GBP 8 million per site. So that would be a medium-term sort of target to try and be helpful.

Allison from Bank of America. Only one question, very big picture. Do you have any comment or thoughts on the recent rumors on this potential renewed Help to Buy thing from the new leadership?

I mean, look, we will plan and run the business based on the environment that we see. I think they're just that at the moment, rumors. There is regular engagement, both from Taylor Wimpey and the sector. Given all that we see in the current operating environment, the risks that we see potentially to contraction across the sector for a government that's ambitious for housing delivery, we do think that they need to address demand and viability, as you heard from me this morning. So it's certainly something that we're leaning into. But I haven't heard anything substantive from the new government.

It's Charlie Campbell at Stifel. Two questions, please. Land market, I think you're suggesting that some land vendors are more realistic. But just wondering kind of how many and at what point -- how long it will take for the land market to adjust to current selling prices and current build costs? And then secondly, it seems that what you've been saying and others have been saying is that a lot of the energy has been dealt with through surcharges, which kind of gives the impression that if energy prices sort of come back, then build costs would come down quite quickly. Just wondered if that's the right interpretation?

Okay. I mean just dealing with energy quickly. We've been very deliberate and our teams have been really deliberate to ensure that we are marking this market increase in build cost as surcharge as distinct from underlying or other of the sort of variable inputs for exactly that reason, Charlie, that if we see energy costs coming back in again, that we can get those surcharges removed visibly as quickly as possible. And I think as Chris mentioned, there was a period through May and June where we had started the discussion and some of the sort of material suppliers were talking about starting to reduce the surcharge because the barrel price of oil had come down. That has unfortunately been reversed with the sort of the recommencement of facilities. And so we're keeping a really close eye on those surcharges. That's exactly the approach. In terms of the land market, there's always a difference between a transaction and whether that's the market or not. We've talked about being highly selective. I think it's fair to say that there was a noticeable pause across the sector through spring, real visible reduced bidding depth, so less active bidders in the market, but also a few contracts actually being completed. Some parts of the market have become more realistic. I would say that landowners are often the very last to accept that things have changed, potentially hoping that there'll be a reversal on some of those costs. But we have noted more recently that the markets have become just a little bit busier. But I would again just check that, that's from quite a low base. And I don't really think that, that's showing an easier transaction environment. But what we are seeing is landowners and promoters possibly checking the market for value at an earlier stage, particularly if they're in the planning process and understanding really what sort of value they would be. a lot of reliance on deferrals and conditional structures at this moment. And probably fair to say that landowners are really struggling, even if you took the more recent sort of build cost, really struggling to process the impact of those regulatory costs that have been sort of loaded into the sector. So land price adjustment, there's a number of elements that play into that. We would say, so the sector and our land teams, we're looking really closely at house price, what we're seeing absolutely current day in build cost, and we're looking at sales rate in a very known basis, landowners are often still thinking about a few years ago before some of these issues hit. So I think adjustments, we've learned, I think, over the last couple of years that adjustments in the land market take longer than they have done in other parts of the cycle.

Rebecca Parker from Goldman Sachs. Just 2 questions from me. Firstly, on appetite for bulk sales and what type of discounts you're seeing in the market at the moment? And then secondly, on operating costs, just noting that the guidance for the full year is up about 7%. Just wondering if you can provide some color on the key drivers there and then potential cost out into next year and where we could see some of those costs come from?