Earnings Transcript for BWY.L - Q4 Fiscal Year 2024

Jason Honeyman: Good morning, and welcome to Bellway’s Full Year Results. Keith and I are joined by Simon Scougall, who you may recall joined the Board back in August as Chief Commercial Officer. Simon is going to provide an update on the land and planning environment, and also set out our plans for a new timber frame facility. Keith, as you know will be leaving early in the new year. So, this will be his final presentation. Keith is a difficult act to replace, having spent almost 13 years on the Board, but he's also a very good act to follow. And as you would expect from him, he's leaving with an experienced finance team in place and with the balance sheet in good order. Simon joining the Board, offers me continuity. And with a strong leadership team already in place, some of whom are here today, we've got two regional RCs, Stuart Gray and Ian Goss sitting up the back here, Gavin Jago, who you're familiar with, Group FC, Phill Hope. And of course, our Chair and industry veteran, John Tutte. And so, look forward to welcoming our new CFO, Shane Doherty to the Board on the 2nd of December. Now today's presentation in addition to our results. is about providing an update on strategy and our organic growth plans. FY '24 as expected, was a year of reset following market uncertainty and leading to a reduced PBT of £226 million. Importantly, despite those challenges, we have built a strong platform from which to grow. Bellway is in healthy order to drive both multiyear volume growth and return on capital employed. And that's because we have a larger order book. We have a high-quality land bank as we kept investing. We have the ability to continue growing outlets, a healthy WIP position, capacity within our divisional structure, and we have the balance sheet to invest. Those strengths are also complemented by an improving market backdrop. Cost inflation has reduced affordability has improved and a new government has a clear agenda to increase housing supply. Overall, I would describe our business as being very much on the front foot and ready to capitalize on better trading conditions. I will cover our approach and thoughts in more detail later this morning, but first, our results with Keith.

Keith Adey : Yes. Thanks, Jason. Good morning, everybody. So, I'll start with housing revenue, which reduced as expected to £2.4 billion. The lower number of private completions reflected weaker trading conditions, particularly in H1, and a lower order book at the start of the financial year. Social housing completions were also lower, and this reflects our decision to accelerate the delivery of social housing obligations in FY '23 to add cash collection and to utilize capacity in our construction teams. The overall average selling price moderated slightly to almost £308,000, mainly driven by a decline in the prior ASP, which reduced primarily because of mix changes. In addition, the use of incentives, which were used consistently throughout the year, had a small downward effect. In the year ahead, we will begin our volume recovery, and we expect to complete at least 8,500 homes, as Jason will outline soon. Our strong outlet opening program has contributed to a healthy increase in the order book at the start of the year. And this, alongside gradually improving trading conditions means that growth in FY '25 will be almost entirely driven by private sales. Volume output will also be supported on our larger sites by both our Bellway and our Ashberry brands, with the latter now used in around 10% of completions. The overall average selling price in FY '25 is likely to be around £310,000, which is slightly ahead of that achieved in FY '24. The underlying operating margin was 10%, and the operating profit was £238 million, with the reduction compared to FY '23 mainly driven by the decline in volume. The underlying gross margin was also lower at 16% as the continued use of incentives and higher site best overheads caused by the slower sales market played their part in the decline. In addition, build cost inflation, particularly that incurred in FY '23 and therefore, embedded within site valuations also contributed to the reduction. Admin costs were flat at £142 million as the workforce plan an exercise we undertook last autumn helped to offset inflationary pressures and salary growth. Looking forward, inflationary pressures have preceded and cost rises are being further offset with our strong cost control initiatives. And this, coupled with a more robust pricing environment, means that we expect a gradual recovery in the gross margin in the year ahead. The admin expense will increase by up to 10% after holding costs flat for 2 years although the recovery of admin costs will be a little better, offering competitive reward packages to retain a high-quality workforce, investing in people and new trainees to deliver growth and the initial preoperational costs of our new timber frame factory, which Simon will come on to soon, will all contribute to the rise. And although it's difficult to be precise at this early stage, the improvement in gross margin, together with a slightly better recovery of overheads should mean that we'll deliver an operating margin approaching 11% for the full year. The net loss from joint ventures was £2.3 million, but this conceals their positive trade and performance and associated operating profit of £2.2 million. And this is offset against £4.5 million interest cost charged on the JV partners invested capital. Now given that 50% of this capital is provided by Bellway, there is a corresponding and equal credit included within the net finance expense with the details set out in the appendices. Taking this credit into consideration, the underlying finance charge was £9.7 million, and it's likely to increase in the year ahead to around £16 million mainly driven by a higher imputed interest cost on land creditors. The overall tax rate rose to 29% and the increase on last year simply reflects the rise in the U.K.-wide corporate touch rates. In relation to building safety, the net adjusted charge of £37 million includes £20 million recognized cost of sales and a £17 million finance expense. Now that cost of sales charge has two main components. Firstly, in relation to the government self-remediation contracts, there's a small true-up cost of £6 million, and that includes a credit of £2 million in the second half of the year. Secondly, there's an additional charge of £14 million relating to the one-off and isolated structural issue we reported last year on a legacy London apartment scheme. The updated cost estimate follows more intrusive investigate of surveys and modern work, which have resulted in an updated remediation solution. We do, of course, continue to pursue recoveries, but these are not yet recognized on the balance sheet given the complex nature of the process. The building safety finance charge is simply the unwinding of the discount on the provision. And in the first half of FY '25, the finance charge will be under £8 million although in the second half of the year, this would change modestly as it is in part dependent on any movement rates. In terms of remediation, we are making continual progress. We spent £146 million on building safety over the past few years. And between in Bellway, government funds in various trusted third parties, we have commenced or completed works on 137 buildings. We expect expenditure to arise in FY '25, and we are committed to accelerating the pace of remediation. Access, legal and planning issues amongst others can all frustrate matters, but we have the internal resource expertise and the balance sheet strength to meet this objective. Importantly, our building safety team have to support and the sponsorship to expedite progress. Our strong balance sheet includes our investment in land, our healthy WIP position and our low gearing, and Simon will provide an update on land in a short while. We have consciously increased investment in site-based WIP to support growth, and it has risen to £2.1 billion. WIP turn is lower as expected because of the lower output and slower sales rates. At the same time, we've progressed our ambitious site-based opening program, and on a select basis, we've also invested in foundations to secure one common set of site-wide building regulations ahead of the change from June 2024. This proactive investment in WIP in the context of our very strong balance sheet, will allow Bellway to make the most of the volume growth opportunity in both FY '25 and FY '26. Year-end net debt was a very modest £10 million. And noticeably, the average debt during the year was also low at only £46 million. Land creditors have reduced significantly, and they are low at £225 million, resulting in low adjusted year-end gearing of under 7% and I expect adjusted gearing to remain low in the year ahead. Our finance structure with £530 million of committed facilities is designed to be flexible. Four supportive relationship banks, all with appetite to lend together with our long-term private placement holders, results in a diversified debt structure, providing both resilience and capacity to invest. Our approach encapsulates the usual healthy thread of Bellway conservatism on this continues to serve us well. Given the reduction in volume output, return on capital was understandably low at 6.9%. However, on a longer-term basis, our 10-year accounting return, including both NAV growth and dividends paid per share is attractive with an annualized compound loan of 13.6% per annum with this driven by our successful organic growth strategy. And this, of course, is measured of an unusually disruptive period. It includes the dilutive effect of Brexit, COVID, end of Help to Buy, build in safety provisions and more recently, FY '24 is reduction in earnings, which was caused by high inflation and the rapid rise in interest rates from late 2022. Going forward, with these sector and economic headwinds beginning to subside, the outlook is more positive. And in this context, the management team remains focused on creating value for shareholders through delivering ambitious volume growth and proven on return on capital employed and providing a regular annual dividend return. Delivering growth will be the primary value driver and this will be achieved from our strong land outlet and WIP position and supported by our inherent structural capacity. Growth will also result in an improved asset turn. And coupled with our margin improvement initiatives, this will help unlock the intrinsic value within our balance sheet and drive a recovery in return on capital employed. Lastly, our capital allocation policy is designed to prioritize growth while providing a regular annual dividend return to shareholders with a cover of 2.5 times underlying earnings. And in that regard, the proposed final dividend is 38p per share, and this will result in a total dividend for the full year of 54p. I'm confident that these three focus areas will drive further value for shareholders in the years ahead. Now Better with Bellway is a long-term strategic priority and this encapsulates our commitment to operating in a responsible and sustainable manner. And I'm pleased to report that several initiatives are really gathering momentum and picking just -- there'll be a few highlights on this slide. We were awarded the Large House Builder of the year. Energy House 2 at the University of Salford, was voted Project of the air at the National Sustainability Awards, and we've reduced the waste on our building sites by 17%. I'm also pleased that we've made further progress in carbon. There's been a 14% reduction in Scope 1 and Scope 2 emissions and we are well on the way to beat in our 2030 targets several years early. We expect to make further meaningful progress on reducing Scope 3 emissions as we adopt the future home standard, and we are now turning our thoughts to a longer-term net zero target, which we will report upon in due course. We are focused on taking actions that make a difference rather than chasing ratings, but we also do acknowledge that our story could sometimes be better understood. So, in that regard, we are working with next generation to try to better expand some of our initiatives and also to understand whether there are any gaps in our wide-reaching strategy. So, to end, I will summarize with the key points for the year ahead. We will begin our volume recovery, delivering at least 8,500 homes. The average selling price will be around £310,000, and the underlying operating margin will approach 11%. The dividend cover is likely to be around 2.5 times underlying earnings. In summary, Bellway is in a position of strength. It's now ready to begin its recovery with a growth-focused long-term strategy set to deliver improving returns for shareholders. I'll now pass it over to Simon, who is going to provide an update on the land market and also outline plans for Bellway home space which is our new facility.

Simon Scougall: Thank you, Keith, and good morning, everyone. Now moving on to land. We contracted to purchase 4,621 plots across 27 sites in the year and continue to have a very healthy owned and controlled land bank of around 49,000 plots. This represents a land bank length of 6.4 years based on FY '24's legal completions. As you can see from the table, we have depth in all tiers of our land bank with a total of over 95,000 plots to underpin our multiyear growth ambitions. All of our divisions are now active in the land market following the improved market outlook that Jason and Keith have referred to. New opportunities are growing a number. And whilst more sites are subject to competitive bidding, I am pleased to report that we have around 8,100 plots currently agreed with heads of terms across 41 sites at attractive returns. Going forward, the outlook is encouraging, and we welcome the new government's proposals around improving the planning system and the reintroduction of mandatory housing targets, which should result in more sites coming to the market from both private and public sector landowners in calendar year 2025 and beyond. A good example of recent support from the new government for our sector is the new secretary state for housing communities and local government's decision to grant planning consent on 380 units allocated site in Durham City that we acquired Freehold 3.5 years ago. The site became caught up in the local planning system and to a degree, local politics and was ultimately called in for review by the Secretary State predecessor under the prior government. We now have an implementable detailed planning consent for the first phase of this development. We successfully opened 80 new outlets in FY '24, testament to our front foot investment in land prior to 2023. Further supported by the ongoing hard work from our land and planning teams, we delivered modest growth in sales outlets during FY '24, booking the sector trend. We have good visibility on future outlet openings with around 50 new outlets forecast to open in FY '25. And we are well positioned to maintain the average number of outlets at around 245 during the current year. And due to our strong pipeline of land, we expect to grow the average number of outlets again in FY '26, subject, of course, to the timing of planning decisions. We have also continued to invest in longer-term sites to our now well-established and dedicated business units, Bellway Strategic Land, which comprises a team of over 20 specialists principally working on medium- to longer-term option and promotion agreements. The group has signed option agreements to buy 35 sites across the U.K. in the financial year, increasing our strategic land bank to 45,500 plots with a good spread across all of our trading divisions. Our proactive investment in land has resulted in the plots in our strategic land bank growing by over 75% in the last 5 years. And as a result, we expect to deliver an increased proportion of volume output from our well-located strategically sourced land bank over the medium term. Those plots in the group's strategic land bank with a positive planning status typically have an embedded modest discount to market value and will therefore support margin improvement in the years ahead. So, to conclude on land, Bellway has a high-quality land bank with strength and depth. With positive planning reforms on the horizon, our investment in strategic land in recent years will bolster our short-term pipeline further, and it will provide a platform to support our outward opening program and deliver our long-term volume growth ambitions. I would now like to provide an update on our plans for the increased use of timber frame construction to housing across the group. As Jason mentioned at the interim results in March, we've been increasing the use of timber frame across the group, successfully trialing it in recent years several of our northern and southern divisions in addition to its long-established use in our two Scottish divisions. The learnings from these trials gives us the confidence to go a stage further by investing in our own proprietary timber frame manufacturing facility under the banner of Bellway Home space. We have recently taken possession of 134,000 square foot industrial unit in Mansfield, Nottinghamshire under a long-term lease arrangement. And this new modern facility has been chosen for strong transport links in a central location between the A1 and the M1. The group has also appointed a Managing Director with many years of manufacturing experience within our sector to run its new timber frame operations. And we are also in the process of recruiting a workforce for the new production facility. A new robotic machinery has been ordered at a cost of around £9 million from a leading manufacturer. We expect to deliver our first homes from the facility in mid-2026, with a ramp-up to full capacity of 3,000 homes by 2030. This will be an important foundation for our volume growth ambitions, and our Bellway Home space facility will support a targeted increase in timber frame us to around 30% of output by 2030 from 12% in 2024. This new strategic priority will be further supported through existing partnerships with leading experts, including a major U.K. timber frame supplier. They will assist installation and quality control on site, but they will also support our own production from the Bellway Home space facility. We expect to generate a range of benefits from the use of timber frame in the years ahead and this has been corroborated from our on-site trials. These include faster build speed and WIP turn, improve quality and customer experience, reduced waste and reduced carbon emissions. It will also lead to supply chain diversification with less reliance on blocks and bricklayers, both of which have been in short supply in previous cycles when industry output has increased. Overall, we are confident that our investment in timber frame in the years ahead will be a key driver to long-term volume growth, and it will complement the targets set out in our Better with Bellway sustainability strategy that Keith has just been updating you on. Timber frame construction is fast becoming the future of U.K. housebuilding. And our investment now in Bellway Home space will allow the group to retain control of a fundamental part of the construction process. Jason, if I can hand over to you, please.

Jason Honeyman : Thank you, Simon. I will start with trading. During the year, we continued to see a steady improvement in customer confidence. And from the first slide, you can see the recovery in the private sales rate, 0.43 in the first half, rising to a more respectable 0.58 in the second half supported by a stronger spring selling period. Overall, the sales rate averaged 0.51 per outlet, and cancellation rates reduced to a more normal level of 14%. Affordability is a key driver behind the rate of sale, and there remains good availability of mortgage finance. And as the chart shows, rates have enjoyed a period of stability since the start of the calendar year. Our experience with the new lending environment suggests that rates between 4% and 5% will support a sales rate of between 0.5 and 0.6 per outlet. We really need to see rates fall below 4% if we are to see a further pickup in sales. Unfortunately, affordability is still constrained for customers with small deposits, and that situation hasn't really changed since the end of Help to Buy. Customers needing higher LTV products are still faced with rates of between 5% and 6%. Current trading in the first nine weeks since the 1st of August, we have achieved a private sales rate of 0.59 per outlet. And to offer a little more detail and to exclude bulk sales, August achieved 0.46. September achieved 0.52. And notably, the last week in September achieved 0.58. The only word of caution, we do see some hesitancy in the market as some customers are waiting for interest rates to fall in the hope of securing better fixed deals, and others have concerns around the October budget and the prospect of further tax increases. That said, there is underlying demand for new homes, customer confidence and sales are significantly ahead of last year. Overall, headline pricing has remained solid. And in some stronger selling areas, we've started to increase prices, but mainly in the stronger selling areas to push a recovery in our margin. Incentives average just below 4% across the group, and they tend to be more widely used in the Southwest and Southeast of England, where demand is more sensitive to selling prices and mortgage rates. Our order book at the 29th of September remained healthy at over 5,100 homes and £1.4 billion, an increase of almost £200 million on the same period last year. We are currently forward sold by over 65% for FY '25. Unlike last year, our completions are weighted towards the first half. And from an operational point of view, that is often a good health indicator of a business and certainly gives me the confidence to talk to you about growth. Firstly, it's worth explaining what we mean by multiyear growth. Bellway has the capability to deliver strong volume growth, over 20% across the next 2 financial years. And that's because we have the land, the planning, the outlets, the divisional capacity and a strong WIP platform to kickstart that recovery. The ultimate rate of growth will be driven or determined by affordability and the strength of the order book. So, for Bellway, FY '25 and FY '26 is more about execution and delivery rather than being overly reliant on new outlets or securing new planning permissions. Looking further forward, the strategic decisions that we're making today are to facilitate and continue that growth story into '27 and beyond. And there are three simple components to that strategy. Firstly, new trading divisions. We plan to reopen South Midlands within this financial year, taking us back to 21 operating divisions. Secondly, continue to invest in land to further increase outlets. It's always difficult to accurately forecast outlet numbers more than 2 years out. But given a stable market and a positive planning environment, it's reasonable to assume that we can grow average outlet numbers. And finally, strategic land, this tier of our land bank is very much a key component to our growth. And as you heard from Simon, our Strat team have been very successful in recent years and our Strat land bank is now maturing after 5 years of investment, and we'll start to provide consented sites into our operational teams. In short, we are well placed for a period of multiyear volume growth, and we're making plans today to continue that growth story beyond FY '26 and beyond the 11,000 homes that we've delivered in '22 and '23. To achieve that, we recognize that we need more young people in the business and in response to our Bellway Training Academy for site managers and surveyors is now fully operational. And we also have plans to grow our on-site and office-based apprentice programs by more than 50% across the next 3 years. Turning now to production. Overall build cost inflation has eased to around 1% or 2% and still weighted towards the labor element. And as you would expect, with lower volumes across the industry, there are currently no availability issues or constraints on supply. Our Artisan standard house type range is currently being updated and the update incorporates future home standards capacity for timber frame design and a refresh to reflect today's living trends. The range extends to around 50 house types and will be completed during 2025. I would also like to mention our continued efforts to improve build quality. Keith has mentioned that we had a good year for awards. However, I'm particularly pleased with our site managers whose efforts delivered 45 NHBC Pride in the Job Quality Awards, a record for the group. Our House to Home initiative which you can just about see on the screen has proven to be very successful and received positive customer feedback. In practice, it serves as a demonstration plots and helps develop customers' knowledge of the build process and underpins confidence in the construction of new homes. Field View is our digital solution for managing on-site quality inspections is faster, more accurate and ensures a consistent approach to quality assurance across our sites. Field View allows our site managers to spend more time in the field and concentrate on good quality rather than administration. The purpose of these initiatives together with our customer-first approach is to deliver consistency across the build process and improve communication and service to our customers. And finally, outlook. This year will be a year of significant growth, volume output of at least 8,500 homes. We expect to end the year with a healthy order book for growth again in FY 26 that will drive improvement in margin and return on capital employed, and we will maintain our financial and operational strength to support our longer-term growth ambitions. Thank you. We are now happy to take questions.

Q - Ami Galla : Ami Galla from Citi. Just a few questions from me. The first one was WIP. Given your comments on WIP investment to date targeted for the volume outlook for the next 2 years, can you give us some color as to how does the WIP -- the actual -- the aggregate level of WIP move from here onwards as we think about normalized output 2 years or 3 years ahead? The second question was on Strat land and maybe a question to Simon. As we kind of think about the utilization of that Strat land, at normalized levels, what proportion of your volumes will really be delivered from that pipeline? And in terms of the planning backdrop and everything what the government is doing, at what point do we see evidence of a faster strategic conversion coming through the system? And maybe a third one, just on government demand-side support. Are you hearing anything incrementally that gives us some color as to, at some stage, do we get some demand-side support from them?

Jason Honeyman : So, on WIP, I expect the overall balance to remain broadly the same in the year ahead because we still got another 50 sites coming on board. There's still some inefficiency there because of the slower sales rates. But of course, with greater volume output, that means that we will start to recover just because of the master homeworks. And I think as you go into FY '26 broadly the same story, but you might start to see if you see an improvement in sales rates, you might start to see the WIP come down a little bit as well and get a bit more into proportion compared to where it used to be.

Simon Scougall : And on strategic land, Ami. So, the proportion of volumes currently is around 10% of completions comes from strategic land. Our Strat land team are working hard to deliver outlets for FY '27 and beyond. So, we would hope to increase up to say 20% is the target there. We submitted 24 plenty applications last year on Strat land sites and a further 20 are going in this year. So, we're doing a lot for FY '27. And your question around faster conversion rates. Well, the term from government is obviously very positive, but it is early days. So, we are still assuming a slower planning system than we'd like for now in our assumptions. But clearly, by the bit of, we would hope that the government's direction of travel has kicked into the path system and improve things further for us.

Keith Adey: Yes. I mean I what Simon is saying on planning. There are 2 tiers to planning, Ami. One, there's normal planning applications that we've seen real improvement on -- we've had applications that were sort of stayed or delayed that are coming forward. And secondly, you've got Homes England that have got a mandate to deliver bigger sites across England and they are actively seeking to support developers and landowners to get those sites through the system. So, a big positive on the planning side. In terms of government's ambition to support the delivery of 1.5 homes, Yes, it's ambitious. But I get a little bit fed up with people moaning about that number. People complained that the last government didn't want any new homes and now the new government want too many homes. I welcome the ambition. Let's get on with it. If we miss the target, we might not miss it by too much, but let's get building, create some jobs and deliver some new homes.

Will Jones : Will Jones from Redburn Atlantics. A couple, please. The first, I think you mentioned about pushing price in autumn, but in certain areas, but how widespread is that as a share of the group, you're saying and by how much? And just to understand the gross margin guidance for the year ahead, are you suggesting that price cost as it were, will be a small positive? Or is it more about fixed cost recovery on the volumes? And then just -- I guess, more generally around land. Any thoughts on the quantum you may look to buy? Are we back to replacement plus territory? And I guess as you and the industry step up in size, is it confident that the hurdles will still be available as that happens over the year?

Jason Honeyman: Do you want to do the I'll start with prices and gross margin? On prices, Will, it's not U.K.-wide. The sales rates that I sort of alluded to in my presentation in the southwest and southeast of England are a little bit slower. So, when I talk about modest price increases, I mean a couple of percent, and that's tended to be more in Northwest Midland and Scotland. But I would say, well, it's not on every site. We've always got a site that's a little bit slower but we're gently pushing that recovery in margin to repair it. But mindful of that October budget as well. We want to get on the other side of that. I'm sorry, sorry, on you to gross margin.

Keith Adey: So, the gross margin guidance for the year ahead, I suppose are best at around what we think is in the order book. And that does -- can move as you update it valuations, but that's 60.5% plus. And broadly, what we're achieving there is that you get some modest price increases, as Jason says, in 1 site or 2 sites and that inflation remains low at the 1%, 2% level throughout the duration of the period. Now if there's upside on that, that upside will tend to benefit the subsequent financial year just because of the way valuations get updated and it gets moved into the next period. And I'll just do the cash piece of land. We think on our forecasts around £550 million spent cash spend on land in the year ahead, which is probably slightly more than what goes through the P&L. So, a slight net investment. However, what I would say is if we see good opportunities, we've got capacity to deliver more than that. And I think as Simon mentioned, we've got over 8,000 plots had to terms agreed. So, we do have the ability to step up investment if we see good sites out there.

Jason Honeyman: Well, in terms of land market and Simon's articulated this to some extent. The land market is improving. The number of opportunities I wouldn't describe as plentiful, but it's improving. I think the most important thing I could say about the lower market, we are still able to buy land gross margin of 23%. I think that's the important piece. And then with hurdles going forward, very good question. I don't worry about future inflation. It's inevitable as the market picks up. But history tells us, when you get modest build cost inflation, you tend to get some modest house price inflation. So, I would expect that to repeat itself. But you have to be concerned about the supply chain and labor as the industry starts to walk towards 250,000 homes again because there will be pressure. So, we're trying to do our part in encouraging people from a young age to come through the business. So, I am concerned about that.

Simon Scougall: Just to add to Jason now, well, as well the 8,100 plots that Keith talked about the either meet or exceed our minimum hurdle rates of 23%, and we're finding success in the land market currently bidding on sites at 23% plus margins.

Chris Millington : Chris Millington at Deutsche Bank. I just want to follow up, Will's question with a question around what do you think the embedded land bank margin is? And kind of how do you see that progressing by the various different categories you've got? That's the first 1 I've got. Next one is just about site numbers, Jason. You're talking about growth, obviously, very difficult to call exactly where it is, but where would you like to see these -- the medium-term outlet position of the group? And then the final one is just around well, it's around cost, but particular costs relating to future regulations in the future home standard and how -- what sort of level of cost do you think you're going to feed through in that regard and how well prepared are you as a business.

Jason Honeyman: Can you start with margin, Keith?

Keith Adey: So, the margin in the top tier of the land bank. So that's a fully consented land bank with detailed planning permission is around 19%, I would say. And then if you look at the next 2 tiers, the pipeline in the strat, bear in mind these move all the time you constantly reassessing them, but I'd say they're around 23%, maybe a bit more on the strat side of things, but it doesn't always go right on strike, you need to have a balance there. So, you can see the throughput beginning to come through that 19% will go to the P&L, and it will slowly get augmented with those next 2 years.

Chris Millington : And just a quick supplementary on that, the differential between the 16.5% today and the 19, would that mainly be overhead recovery as volumes are depressed?

Simon Scougall: No, it's just as the profile of land begins to change. It's just trading out. I don't want to pick my words carefully not impaired land, but lower margin land. And as that trades do and gets topped up by the pipeline and the start that what drives that recovery.

Jason Honeyman: In terms of medium-term ambition for outlet numbers, it's not an exact science, Chris, as you know, and our outlet numbers change from week to week. But we've got a sense of ambition to get to 275 outlets, which we think is achievable. But obviously subject to planning permissions and land acquisitions and performance of the strat land bank. But that strat land bank gives us -- that's 5 years of investment, Chris. That gives us a string to our bow that we've not had before. So, we think we might get some increasing out of that strat land bank while we're doing the day job. So that's why we've come to that target of 275. And your question regarding Yes, future homes and regulation. We think that the government will announce that future understands will be adopted by December '26 and no later. We've got our costs included for heat pumps and PV from that date onwards, even if you bring it back to June and it comes a little sooner. So, we don't see cost inflation or build cost inflation coming out of Bellway because of future home standards because it's covered. It's whether they change what's in the regulation. We don't know any more than you. But from what we know, it's covered.

Chris Millington : Roughly how much is that?

Simon Scougall: Per £6,000 to £7,000 a unit from '23 rigs, not from.

Keith Adey: Additional over time. And I think the important point there is we have that allowance from the earlier transition date and we also include an allowance for PVs, as Jason said, and that's important because we initially didn't think PVs would be part of it. It is, I guess the consultation is suggesting that could be the case because it helps lower customers' costs. So, we have that allowance for PV. And actually, it's probably the right thing to do as well.

Jason Honeyman: And just to add the Keith serve point on margin, Chris, half our land bank is strategic and seeing from the slide, and we've yet to agree price on those sites and because we have a better discrete market value, it would help that there's some benefit there to margin in the years ahead when we actually agree land values based on true market value at the time.

Aynsley Lammin : Aynsley Lammin from Investec. I think I've got three questions, actually. Just first of all, on the bulk sales. I think it was 0.1 in August. Just a bit of color there. And should we expect that to be a kind of ongoing feature in the next year or 2, would you expect that? Secondly, maybe just a bit more color around material cost inflation trends you're seeing, obviously, you say availability is very good, but the interest inflation there? And then thirdly, just interested in your thoughts ahead of the budget kind of hopes fears what you expect might be in the budget?

Jason Honeyman: Okay. Thanks, Aynsley. I mean, bulk sales are not a big part of our business. We've got more of a focus on repairing margin than we have on doing bulk deals. I would suggest that in FY '25 bulk deals will account for about 5% of volume. And we haven't got plans to step that up there to complement rather than be part of our strategy, if that makes sense. So, we'd rather do less and drive margin. I'm not sure what I can offer on material costs other than they're pretty flat at the moment. The inflation we've got coming through the system is more labor, Aynsley than material costs. But you know as well as I do as we get into this time next year, then the market starts to improve people will be putting a little bit of pressure on the material line. I would have thought. But I don't worry too much. If I can introduce some more house price tweaks one will it offset the other to keep an eye on that margin. And then in terms of government, I mean, there's two asks from me if I had -- if I could, is one, let's keep stamp duty where it is for first-time buyers, which I think the caps at 425,000. Let's not walk it back to 300,000 because Aynsley first-time buyers or new buyers are suffering enough at the moment in terms of affordability? And secondly, I'd ask government to unlock affordable housing, the Section 106 problems. Because at the moment, housing associations across the U.K. do not have the appetite or the balance sheet to buy the affordable homes that I'm building under Section 106 agreement, and that will frustrate the delivery of homes across the U.K. So that's a quick fix. We need an immediate fix to that.

Glynis Johnson : Glynis Johnson, Jefferies. A few, if I may. Not as many as. The ASP for full year '25, can you just talk us through the mix because you talked about the growth in volumes coming through in terms of private. So, if you can just discuss that ASP. Second of all, Jason, you talked about making sure you had consistent foundations or consistent regulations across sites by making sure you had the foundations down. How many foundations do you have done how many of your sites have the full complement of ground works done to that foundation level? Thirdly, Cyber, can you give you a tough one. Why is the timber frame taking so long to get a progress 2030, given government's targets at 29? The lead time on the machinery now has come back very dramatically. So, can you just talk us through why that time line it's taken too long or so long? Finally, one last one, cash outs for fire safety or build safety in 2025. You heard it's going to go up, what will be the anticipated number?

Simon Scougall: as well. So, the average term price for FY '25, I think we said around 310. And maybe the best way to articulate that is if you look at the order book at the 31st of July, the private ASP was around 345,000 and the social ASP was around 180,000. And I think that's a pretty good indication of the outturn on each of those lines in the year ahead. And when you multiply the math out in terms of the growth mainly coming from the private side, that gets you to that short 310,000 for the full year. On building regs, I would estimate rather than look at it on sites like we have around an additional 2,000 plots across the group where we have built them slightly earlier than we otherwise would have done to help make sure that those whole sites have one consistent set of building regulations. Now sometimes you might do that on a phased basis, sometimes you might do the whole site, but it depends how big the site is. If it's a really big site, you won't do that, but it's the smaller ones, that's where you don't want to get disjointed because it just gets too complicated for the guys on the ground managing the 2 sets of and 2 sets of regulations. I'll do the last one, which I think was cash on building safety. But it can always be frustrating trying to predict building safety expenditure. What our best guess is in the year ahead is spend of up to £100 million. We do have a plan of works in place. We have stepped up investment in our team down there we are beginning to see some excess licenses come through. We've got a number of schemes in the pipeline. So, when you add all of that together, we think £100 million expenditure in the year ahead.

Jason Honeyman: Can I answer the timber frame? Just in case Simon is too enthusiastic. Keith used a lovely line in this presentation that I like a lot, that said the conservative thread that runs through Bellway. Timber frame and a new factory is our first attempt of manufacturing. And I've got no ambition to accelerate it I want to get it right, make sure the robots are working the computers are working, the logistics are working. So, we'll take it slowly, we'll do it properly and we'll take our time all the way through. So, we're not going to be put under pressure to deliver it sooner. We're already delivering timber frame through external suppliers. So, it won't stop us with that trajectory. I just don't want to rush the manufacturing process.

Keith Adey: Can I add to that, -- it's not just about getting the factory to deliver the units, which is, of course, important, and there are leading times for the equipment and commission sits like you're going to get the organization right on site and you don't just flick a switch, you build into a different set of drawings, you're procuring slightly differently, ordering your trades in a different way. There's on-site training to have you connect your services in a different way. There's all so many different nuances. So, all right saying that suddenly have 2,000 more timber frame units, but you've got to get the site logistics and organization right and that takes time.

Jason Honeyman: We have, as I mentioned before, we've trialed it in some of our divisions. So, some age haven't built with timber frame yet, so we've got to get it right. It's going to take some time to get them up to speed on a site-by-site basis, hence we've given ourselves a period of time to get there.

Clyde Lewis : Clyde Lewis at Peel Hunt. Three, if I may. One, I suppose sort of just going back to the land sort of mark in your comments from Simon, I suppose. Have you seen any change in behavior around the anticipated bump in CGT rates? Because historically, whenever you see CGT rates going up, you see a bit of a rush for the door and then there's obviously a fear afterwards that all those farmers that were sitting there were going to sell their land and they're now going to pay 40%, 45% or whatever. They've gone, they've disappeared. So that was the first question. Second question, a little bit old school units per region, 8,500 divided by 20, I think, is 425, if my math is right. That's still a low number from, I suppose, where things were historically and yet you're opening another region. So, I suppose the question I'm not there is where do you think the natural rate is for the group on that basis? And the third one is partly linked to that, but as you look forward for the group over the medium term, how do you think the asset turn of the business will evolve? I mean, again, you flagged this one and Jason, you're very much focused on driving margins higher. But part of that equation, we're all looking at is that asset turn dynamic. So, listening to the comments about WIP and land investment, et cetera. I'm wondering how you think that side of the equation will evolve?

Jason Honeyman: Thanks, Clyde. Simon is going to do the first one on CGT.

Simon Scougall: On land owner, we have seen a change in land owner behavior, not as those as we like, unfortunately, we have seen some bring them to the market. We've got a handful of sites to be done in the next fortnight because of concerns around what may happen in the budget, including quite a large farm in the Northeast, which farmers decided knows the time aim to sell up as it were. But yes, there's been some activity but not the volume we thought we might have had.

Jason Honeyman: Clyde, I like your math’s on 20 divisions, and I wish I had the calculated with me to make sure we mine it up as well. My thought process on South Midlands was -- we think 21 divisions can take us back to 11,000 homes. So, I'm making decisions today for completions in '27. That's part of the decision. And the bit that I haven't told you, Clyde, is that part of a big part of Simon's strat land bank is populated around Coventry and South Midlands. So, we think we're going to get some good successes. So why not invest now in. I've already got the office. I've still got a lease on it. We've got the strat land and it will deliver growth from '27 onwards. So that was the thought process. Can I ask you to assets No, I don't think about?

Keith Adey: Look, just to start off, maybe to return on capital, which is driving the question. You've got a multiplier effect and that you're going to get a relative roughly 10% increase in your margin in the year ahead, and you're going to get roughly a 10% improvement in asset return. We'll apply it out. And then you're going to get a compounding effect year-on-year and then you're probably going to get more rapid improvements beyond FY '25. So, the direction is positive, and I think it will gather momentum just to start off with an overview. I think the heavy days of getting asset turns of 1.3 times and such like long way off. But I see no reason why we can't aspire to get an asset turn of around 1 time again. Now I think that will be slightly longer land bank than you used to have. I used to always say a 4-year to 5-year land bank is about right. I think the world is more complicated now. It's probably 5 to 6. It's more normal. I think we're growing to that WIP to be more efficient in the years ahead. These building reg plots will begin to unwind. If you get the sales rate of 0.6 per week, that begins to get almost transformational in terms of your Whittern. And don't forget, we've kind of skipped over the benefits of timber frame as well. Back in the day, you'll get 2.1 times WIP for the group go to our timber frame divisions, that will be 2.5, 2.6. Now I'm not saying predict that across the whole of the U.K. but there's more upside potential to come there as well. So, there's lots of things which will come together. I'm not going to give you a time line because I'll only be wrong, but I do think it will begin to gather speed beyond FY '25.

Alastair Stewart : Alastair Stewart from Progressive. A couple of quite similar questions on volumes or completions. Your guidance is for FY '25 is -- at least 8.5. How -- what could the top of a range be for that year? And looking forward, you said at least 20% over 2 years. Look, if my arithmetic is right, it looks like just short of 9,200. Is that conservative? You mentioned your conservatism. You should have more sites, you should possibly have a higher sales rate. And Touchwood, you should have the affordable housing coming back if arena has her way. So, could you get nearer to 10,000 by FY '26?

Jason Honeyman: I'll do my best to answer that, Alastair. I think we can do more than 8,500 homes this year, but we've been I think that's probably a question for next year because we're -- the autumn trading period, Alastair has been slightly subdued by this October budget. I was personally expecting 0.6 plus, and I haven't seen it. So, what more than 8.5 means, I'll let you know in our trading update in February. And going forward, I didn't say 20% over 20%. And I agree with you, we have the capacity and the ability. We've got a strong ops team, and I've got the land and the outlets already in place. So yes, is the answer to the question, but I need -- we want multiyear growth. So, we're not only focused on the 26 volume. We're interested in the order book as well. So, it's getting that balance of growing the order book year-on-year and not milk at it 1 year just to have a great year. So, it's growth. I hope that answers your question.

Alastair Stewart : To be specific on FY '26 over 20%. Could you get close to 10,000 in FY '26?

Jason Honeyman: Closer.

Sam Cullen : Sam Cullen from Peel Hunt. I've got a few follow-ups if possible. Just on Ashberry I think you said kind of 10% this year. Do you have a medium-term goal in mind for where you want to get that to over the next 3, 4 years? Secondly, Keith, on your -- I know it's a wrong word, but impaired plots. How many more of those do you have to work through in either plot numbers or kind of years of production before you sort of -- you get to a more normal gross margin coming through? And then where you have been able to push price what sort of sales rate you're achieving on those sites? Is there kind of a broad rule of thumb is 0.7 or 0.75 or whatever that means you can?

Jason Honeyman: To Ashberry, Keith always answers questions on Ashberry. I think it's a good question because Ashberry now accounts for 10% of our completions and it's almost been unusually successful. It was originally to drive sales rates in a better market to increase the rate of build. The Board of Ashberry now to look at the differentiation between Ashberry and Bellway, so I can mark it out. So, it's more obvious to the market as opposed to just two brands, which is something I'm looking at, at the moment to see if we can encourage Ashberry to deliver 15% going forward and make more of it. So, we think there's an opportunity there, but probably not for a conversation today, but certainly in the entry. Keith?

Keith Adey: On the gross margin, I think your 2 years to 3 years off and things change as much as it's changed incredibly quickly this year in terms of reduction in earnings. You don't a lot of catalysts for things to change very quickly the other way. But at the moment, based on current trading conditions, 2 years to 3 years before our gross margin aligns with watching that DPP a land bank that are roughly that 19%. Bear in mind that won't be correct. But it's the direction of travel. We haven't got any really low-margin plots in the land bank. I'd say half of that DPP land bank has an embedded margin in excess of 20%. And it's a fairly normal distribution. So maybe that gives you some sort of flavor as to how that evolves. What was your last one on sales rates?

Sam Cullen : Yes, where you are able to put price. Is that?

Jason Honeyman: Yes. We give -- the RCs, Stuart Ian, would be best placed to answer that question. So, where we've got better sales rates across the division, will push in a modest price increase of around 2%. But every division Sam will have a site that's sticking a little bit. So, it's not a blanket approach, sometimes in better markets, you know the CEO right a note saying prices are increased by 2% Monday morning. It's more selective. So, if you've got a sales rate that's delivering 0.6 at the moment. We see that as good and there's to be a bit of room for improvement. If you're at 0.5 or below, we'll probably leave it alone, it's that sort of -- but it's bespoke, it's sort of targeted as opposed to a blanket approach.

Marcus Cole : Marcus Cole, UBS. Just one final question. Given what you just said on Ashberry, does that rule out any further reviewing M&A in the future?

Jason Honeyman: I've got away with that, Marcus. Listen, I've got to be honest. We spent a long summer on M&A looking at Crest. It was hard work. We need to get back to the day job of growing our business organically. So, I've got no ambition to pursuing another company we're going to get on deliver our business through organic growth through what we're good at. Occasionally, we might look at a land bank that sold Marcus, but land is our interest. Nothing more than that.

Simon Scougall: I just wanted to push you on that 10,000 unit quite no, I didn't read No, I just really wanted to say a few words given it's Keith's last outing as CFO.

Jason Honeyman: Just so I've had one request already for a selfie with Keith after the presentation.

Marcus Cole: Like despite your, he's been at Bellway for 16 years and 12 years as CFO. I think all the analysts will agree with me in thanking Keith for his support and guidance and most importantly, stopping us getting carried away of our when it speaks to us in the morning. Look, you're clearly leaving the business in great shape. And there's a really good legacy there. I was going to run through some stats over his Keith does that for us every single result. It's also about that compound, but I do think that 14% number over 10 years, clearly a little less over the 12 years you've been CFO, is really stellar. It's been done organically and nearly changed a little bit more recently as we just heard about, but it's been a great job. If we look at the share price over your 10 year, I think you started close to about £8 when you started the CFO back in 2012. So, it's nearly gone up fourfold also. We have a very good smattering of dividends there. So, I'm not going to say anymore, but just to say best of luck Keith has been an absolute pleasure, and we hope to see you around.

Keith Adey: Thanks, Marcus.

Marcus Cole: I always said you are the best on this you've always.

Jason Honeyman: That was a nice end. Thank you.