Bellway P.L.C. (LSE:BWY) Q4 2026 Earnings Call

0:00 Thank you, good morning, and welcome to Bellway's full year results. As usual, I'm joined by Shane and Simon, with a number of our senior management team also with us today. If I could take you to the first slide. Bellway delivered a strong full year performance, and I was particularly pleased with cash generation, and that's despite Thank you very much. Operating margin of 10.1% was 80 basis points lower than FY25, but operating cash increased by 36% to almost £870 million.

1:04 As you are aware, trading across the past six months has been affected by the prolonged conflict in the Middle East and the subsequent increase The impact of those elevated borrowing costs continues to be more pronounced in the south of England whereas other parts of the UK are proving to be more resilient. Outlook is still uncertain but it is reasonable to assume that higher mortgage rates and a lower order book will lead to a lower output this year.

1:50 We are targeting volumes of between 9,000 and 9,400 homes. That said, it is still my intention to drive volumes, to drive operating cash and continue with our dual approach to capital allocation. We are both investing in the right land for growth. and extending our buyback with a further $150 million this year. That takes total dividends and buybacks to $450 million across FY26 and FY27. Given the market backdrop, We are taking action to be more efficient and to position ourselves for growth.

2:42 And you can see from the slide, Bellway has a strong platform to deliver higher returns in the future. Underpinned by a strong balance sheet, continued investment in land, operational efficiencies that I will refer to later, and government support for first time buyers. p.l.c. and based upon our past experience with Help to Buy, the new scheme has the potential to boost volumes by around 10% and with a market recovery provide a path back to at least 10,000 homes a year and a return on equity of 15%.

3:50 I'll provide an update on operations later, but first, our financial results with

3:55 Shane. Thank you, Jason, and good morning, everyone. As Jason said, we delivered a robust performance in FY26 despite the challenging market backdrop. That was supported by our opening order book and a strong contribution from bulk completions. Total volumes increased by 10.8% to 9,695 homes. We delivered double-digit growth in both private and social housing output, with social homes accounting for around 21% of completions in line with the prior year. Bulk completions more than doubled to 615 homes and that represented around 6% of our output. We had a strong pipeline of bulk opportunities and we expect bulk completions to increase to over 10% of our output in FY27.

4:47 The average selling price increased by 2.5% to just over £324,000 and that entirely reflected geographic and product mix. with no underlying house price inflation. Strong growth in volumes and revenue drove a 9% increase in underlying gross profit to £498 million. The underlying gross margin was 70 basis points lower at 15.7% and I'll provide more detail on that shortly. Administrative expenses increased to £173 million and that was in line with our previous guidance. The increase reflects annual pay awards, targeted investment in important areas of the business, which included our timber frame factory and strengthened IT, commercial and finance functions. This investment provides the infrastructure and expertise required to support our long-term growth ambitions.

5:42 Against a prolonged, challenging market backdrop, we are obviously reviewing the group's overhead cost base to ensure that our resources remain aligned with our strategic priorities and are deployed as efficiently as possible. This includes a number of areas of opportunity, use of technology and AI to simplify processes, whilst retaining the expertise and capacity needed to respond as market conditions improve. Jason will cover that review in more detail later. Admin expenses will increase in FY27, although it's important to add that that will be materially lower than in FY26 and primarily reflects annual pay awards. We'll provide more specific guidance on that once our overhead review is completed.

6:28 As market conditions and volumes recover, we expect to generate operating leverage from investments already made and the management actions now underway as we progress back towards, as Jason said, delivering more than 10,000 homes a year. Turning to underlying operating profit, this increased by 5.6% to $321 million. And whilst the reduction in gross margin and higher overhead cost base resulted in an 80 basis point reduction in underlying operating margin to 10.1%, underlying profit before tax increased by 5.7% to $306 million. I'm pleased to report that the proposed total dividend has increased by 7% to 75 pence per share.

7:16 The figures on the slides are presented on an underlying basis and adjusting items primarily relate to bill safety and they're set out in the income statement in Appendix 1. Turning now to our gross margin, we thought it was helpful to show an underlying gross margin bridge which shows the three principal drivers of the movement in underlying gross margin which reduced by 70 basis points to 15.7%. Firstly, as previously guided, the evolution of the land bank provided a 100 basis point benefit as newer higher margin land contributed to completions. Secondly, net pricing and targeted sales incentives reduced margin by 50 basis points. Importantly, these measures supported sales and volume delivery in what's been a challenging market.

8:05 and finally, bill cost inflation, net procurement savings and operational efficiencies reduced margin by 110 basis points with mixed accounting for the remaining 10 basis point reduction. Overall, the 100 basis point benefit from non-bank evolution was more than offset by pricing, incentives and bill cost inflation. Whilst these pressures will continue into FY27, The next slide, which we think is critical in the context of the strategy that we outlined previously, shows why the margin embedded in the land bank supports recovery in future years. And as you can see from the slide, the embedded gross margin in the land bank with detailed planning permission is currently around 17%.

8:53 And of these plots, 70% of those have margin above 15% including 53% above 18% which is obviously well above the current gross margin trajectory that we have on our forward order book. We do expect gross margin to reduce further in FY27 and that reflects current market conditions. The continued flow through of bill cost inflation including costs already embedded in WIP and a higher proportion of bulk completions. Whilst bulk completions typically carry a lower margin, they support volume delivery, asset turn and critically cash generation and thus value creation for our shareholders.

9:38 From FY28, we expect margin to begin recovering as higher margin land contributes a greater share of completions, although of course that pace will depend on market conditions, particularly around where interest rates are for our customers at that point. The continued discipline in land acquisition and our strategic land pipeline provide further opportunities to improve land mix and support longer-term volume growth. Turning to operating cash generation, and I guess we're conscious of the fact that trading has been difficult, One thing myself, Jason, Simon are keen to emphasize is that we are consistent in terms of the strategy we outline and we prove by doing. And I think this operating cash generation slide shows that. We generated very strong adjusted operating cash flow in FY26.

10:31 And the bridge demonstrates the benefit of our focus on capital efficiency and how that cash has been allocated whilst maintaining a healthy year-end net cash position. and also a very strong balance sheet in terms of land and the level of WIP that we have invested. Turning to the key movements, in line with our strategy, there was a 72 million reduction in total WIP. Land utilised through cost of sales was 564 million, which exceeded land investment in the year. Together with the movement in land creditors, this resulted in a 152 million reduction in land held on the balance sheet. After other working capital movements and tax, adjusted operating cash flow increased by 36% to £869 million. This cash generation provides the capacity to both invest in future growth and deliver enhanced returns to shareholders.

11:29 During the year, we invested £496 million in land, including the settlement of land creditors, and returned £224 million to our shareholders through dividends and share buybacks. Due to the share buybacks, this was significantly up on the 70 million returned in the prior year to shareholders. After 33 million of bill safety expenditure, we ended the year with net cash of 158 million after those returns and the investments that we made in land in that period. And we have a very robust and well-capitalised balance sheet and this is underpinned by our investment in land and WIP. Both remain important areas of focus as we seek to improve capital efficiency and generate further cash in the years ahead. And turning now to the key balance sheet movements.

12:23 As highlighted earlier, the land balance reduced by 152 million to 2.35 billion. During the year, we entered into new land contracts on deferred terms totaling around 177 million and made land creditor payments of around 252 million. As a result, land creditors reduced to 265 million at year end, and that's equivalent to around 11 percent of the overall land balance. As we said before, over the medium term, we intend to increase the use of deferred payments towards 15 to 20 percent of land value, and that's broadly in line with historical levels. and that obviously forms part of our ongoing move to a more capital efficient operating model whilst maintaining discipline over the terms and overall cost of land acquisition and Jason will discuss that land bank in more detail later.

13:22 Total WIP reduced to 2.26 billion with the main movements coming from site WIP. Breaking down those movements, site WIP reduced by 103 million to just over 2 billion and that demonstrates our continued progress in aligning build activity more closely with sales and improving capital efficiency and drove a decent uptick in our whip turn during the course of the year. Part exchange properties increased by 32 million and that reflected the greater use of this incentive in a slower housing market and the balance at the year end was 58 million. And finally, show homes were broadly unchanged at 143 million. Turning to bill safety, the overall provision remained broadly stable at £520 million.

14:12 We have now started our completed works on 59% of the relevant buildings and we're increasing our focus on recoveries from the supply chain. We have a significant number of claims that we're pursuing. We expect cash expenditure of at least £100 million in FY27, with further detail on bill legacy safety provided in Appendix 8. To finish, adjusted gearing including land creditors reduced by 530 basis points to 3% and the accretive effect of the share buyback supported a 4.2% increase in net asset value per share to just over £31 per share. Underlying return on capital and pre-tax return on equity both increased by 50 basis points to 9.2% and 8.7% respectively.

15:07 Turning to capital allocation and in line with my previous comment around consistency of our strategy and delivery, I just want to remind people of what we outlined in terms of our capital allocation strategy. It starts with our balance sheet. That provides the foundation for a flexible approach, balancing disciplined investment for growth with attractive shareholder returns. We'll maintain financial strength, continue to invest selectively in land and strategic initiatives, and drive greater capital efficiency, particularly through improved whip turn. And the resulting cash generation will support our ordinary dividend and multi-year share buyback program. The next slide demonstrates the strong progress we have made in executing this framework.

15:55 The 36% increase in adjusted operating cash flow to $869 million That's equivalent to 2.7 times underlying operating profit. This is well ahead of our target to maintain conversion of at least two times over the three years to FY28, which we laid out last October when we spoke to you. And that reflects the higher volume and improved land and whip turn. Driving greater whip efficiency remains a key priority across all 20 operating divisions. and whilst we've made good progress in FY26, we see further opportunity to reduce average WIP and improve asset turn by FY28 whilst retaining the capacity to invest in land and support, therefore, future growth. The stronger cash generation also provides the platform to deliver enhanced shareholder returns.

16:51 In addition to maintaining ordinary dividend cover of two and a half times underlying earnings, we've commenced a further 150 million share buyback for FY27. And together, dividends and share buybacks are expected to total, as Jason said, around 450 million across FY26 and 27. And I think that demonstrates very clearly our commitment to long-term creation of shareholder value. To conclude my section, I'll summarise our guidance for FY27. Clearly, we recognise the continuing risks to inflation, interest rates and customer confidence from the geopolitical and current macroeconomic uncertainty. Against this backdrop, we remain focused on volume delivery, driving efficiency and cash generation whilst retaining the capacity to respond as market conditions improve.

17:48 for FY27 we expect volume output of between 9,000 and 9,400 homes with a higher contribution from bulk completions and social housing representing around 20% of our total volume. An overall average selling price of around £325,000 and that's broadly in line with FY26 but margins will be lower. Bill safety expenditure of at least 100 million and land spend of around 500 million and that's consistent with our replacement led strategy and that will all be underpinned by cash dividends and share buybacks of around 225 million. I think it's important to re-emphasise looking through the near term headwinds with our management actions and the return of supported market conditions We see a clear pathway back towards an underlying operating margin and return on equity of 15%.

18:47 That's very much our longer-term strategy. We're very committed to it, and it'll be underpinned by stronger cash generation, which hopefully you'll see this morning in terms of what we've articulated and driving shareholder returns over time. I'll now hand back to Jason, who'll cover the operation review and outlook.

19:05 Thank you, Shane. I will start with trading. In FY26, we achieved a private sales rate of 0.55, including a good contribution from bulk sales of around 10%. And you will recall that we enjoyed a strong first three months to the calendar year, post-budget and pre-Middle East, where the sales rate climbed to almost 0.7 per outlet. And you can see from the slide how the sales rate has fallen as mortgage rates increased in April and across the summer period. And to put that into context, mortgage rates for an 80% LTV were below 4% at the start of the year and are now above 5%.

20:04 Repayments on a £250,000 mortgage have gone up by almost £2,000 per year. Looking at this financial year, those affordability pressures continue to weigh upon customer demand. In the first nine weeks, Thank you very much. Whereas some divisions in the south have been lower than 0.4.

21:01 And these regional differences are reflected in headline house prices, with the north generally holding firm but downward pressure on some sites in the south of England. Overall, incentives average around 5% and part exchange has increased to 10% in FY26 and may increase further to support volume this year. A similar story with bulk sales. We have a strong pipeline of opportunities. Last year we delivered around 600 homes from bulk and this year I would expect that figure to double to around 1,200 homes, supporting both volume and cash generation.

21:52 And finally, order book. As at the 2nd of October, our order book is around 5,000 homes and 1.4 billion. Moving on to land bank. A total Thank you very much. and our strategic land bank.

23:04 We are still active in the land market. Last year we contracted on 8,600 plots, with 80% of those in the better selling areas of the Midlands, the North and Scotland. Our investment is forecast to be around 500 million this year, but we have the firepower to invest more if conditions improve. And we have strong land-buying controls in place. Every acquisition is approved by either Simon or myself and the regional chairs. And that approach ensures our capital is invested in land that drives better returns.

23:52 Moving on to planning. The planning environment has improved slightly, but progress is slow. Limited local authority resources and too many consultees. And that's highlighted in strategic land, not coming through the system as quickly as we would like. That's not an impact on cash, but it is a near-term drag on outlet openings. Despite this, strategic land offers significant opportunity in the years ahead, with over half of our plots attracting a positive planning status and around 80 planning applications running in the system.

24:38 Ultimately, it will benefit margin and outlet growth. To put that into context, we expect around 15% of our completions to generate from strategic from both this year and next year, and that will likely grow to around 20% in FY29. Average outlet numbers will be around 230 this year, down from 238 last year. And from FY28, we are well positioned to grow outlets again, given our land investment and that strategic pull through. Turning now to costs.

25:27 Overall... Bill cost inflation is running at around 3% and largely driven by energy surcharges, with building materials accounting for most of that increase. As I mentioned in my introduction, operational efficiencies, cost savings and overheads are our key priorities. And I will highlight how and where we are taking action. Firstly, operational efficiencies. Our programme is well advanced. Timber frame factory is complete. Output is expanding quickly. House type redesign is complete. The new bellway collection is fully optimised for timber frame and we can improve build times by up to six weeks per house.

26:23 Brand refresh is complete. More cost effective, easier for the customer, digital first in approach. It's modern, it looks great and provides the platform for extra revenue opportunities. The final piece of work on the new platform is to deliver a step change in our additions and upgrades programme by offering customers more choice, and that will be up and running in the second half of this year. Cost savings. A few examples. Since energy costs spiked in April, p.l.c.

27:28 Since April, we have had requests for energy-related costs of over £22 million. We have authorised just £3 million. Most contractors value the relationship with Bellway, the good payment terms and the promise of future work, above any short-term gain or benefit. Centralised approach has saved Bellway around £20 million, or 1% of BCI. Another example of a cost saving is the introduction of our three-tier specification following the launch of our new house type range.

28:13 Our new base specification is still a great offer and expected to save £5 million in costs in FY27. A savings Overhead costs. As Shane has mentioned, our operational cost base is under review. 20 UK trading divisions gives us the right balance between a nationwide footprint and the platform for growth. I don't want to cut into that muscle. That's Bellway's strength. But a broad review of overheads is underway.

29:04 The next two slides look at our positioning within the market. The first slide highlights our broad product range, accessible price point, and all based upon larger two-storey housing. The second slide highlights Bellway's balanced national land bank and how it supports medium-term margin recovery. and you can also see we have the second lowest ASP in the sector with a good exposure to the first time buyer market. And if you go back to 2022, the last year of Help to Buy, 42% of completions came from first time buyers and that drove higher volumes.

29:56 Finally, Outlook. We are targeting completions of between 9,000 and 9,400 homes. And Shane has mentioned there will be margin pressure in FY27. But the challenges in FY27 give way to opportunity in 28 and beyond. Your first home could drive volumes back to 10,000 homes and as early as FY28. Capital efficiency has markedly improved. We have a strong balance sheet with net cash and a strong track record on delivery. I hope you can see that we are taking action to make the business more resilient, more structurally efficient and we have the capability to respond to stronger demand.

30:56 Thank you. Happy to take questions.

31:08 Thanks. Morning. Ainsley Laman from Investec. Just two from me, please. Just on the recent trade-in, I wonder if you could comment if you've actually seen any cancellations from first-time buyers as they await the new scheme to come in, or is it mainly just the kind of higher interest rates? And then the second question, on the kind of your first-time scheme, have you had any discussions with government? What's your kind of fear that could go wrong with that in terms of the detail at the end of budget? Are you confident that they understand what's necessary around price caps, the funding scale, etc.?

31:40 Thanks, Ashley. I'll take both, if I may. From the first-time buyer... It's early Ainslie. There's a little bit of cancellation in the south of England, but not that we can see in the north, which you'd probably expect, but nothing significant. In terms of your first home, I don't see problems, I see opportunity. My view... My view on it is that your first home, Ainslie, is going to underpin volumes, but it won't supercharge profits. The reason I think that is because I'm quite relaxed about the income caps, the regional caps. but there are more guardrails in place than the old system and I think their funding for the first round of Your First Home will be, let's see how it develops before it's funded beyond that.

32:41 So I think it will support volumes. I think it's the right thing to do for young people but I think it will be fairly measured. And sorry, you did ask me are we engaging with government. We do directly, I do, and HPF do it on behalf of the sector. Thank you. Zambikawa, JP Morgan. Two questions for me. The first is just on stamp duty. I think that was a comment in the prelims, but it seems like there's no comment on that in today's statement. Is that something that you feel like is off the cards now? And then also to come back to your first home, obviously there will be a developer's contribution, but what's your appetite to provide further incentives, cash or non-cash, beyond that? Thank you.

33:33 In terms of SDLT, I'm a big ad for supporting young people, but I think you need an SDLT cut to improve affordability in the whole market. I think it's probably optimistic or naive of me to ask government for both at the same time. So we'll see how the market unfolds in 27, but I won't be shy in going back if we need to encourage the market because it's affordability pressures. In terms of your question on your first home, I think it's a good one. I've made the point quite clearly, and I'm relaxed about income caps, regional caps. The bits I don't know are developer fees and the amount of money in the pot to fund the first round of your first home.

34:23 I've made it quite clear that there is going to be Strong appetite for your first time, both from developers and from first-time buyers. So if the scheme rules don't work, that's a political problem, not an appetite problem. I think they get that message, but we won't know the answer until October, the Budget Day. Do you mind asking some questions?

34:51 No, I think you're doing much better than me.

34:53 I think I've got one for you, Shane.

34:58 Sorry. Lewis Roxburgh, good body. Just one on cash flow. Do you have any targets that you're thinking about in terms of, you know, a specific conversion rate or level or, you know, looking at another way, a target land bank or whip or asset turn just to help us from that perspective? Secondly, just what you're seeing in terms of land prices, particularly in the north where we've seen obviously stronger pricing there. And lastly, sorry, again, your first home scheme. How quickly do you think the uptake will take to reach that 10% of your expectations, just based on the volume guide? I think that's probably more gradual, but just some colour

35:36 there. Thanks. Cash flow targets. Yeah, Lewis, it's very, I guess you probably picked it up from the presentation, we're trying to be as consistent as we can. So The capital allocation strategy that we outlined was very much lowish levels of gearing on the balance sheet. That doesn't change. And the opportunity that we identified was WIP turn was at about 1.3 when we started this cycle. Get that above 2 in this market. That's going to take a few years to do that. And in a tougher market, obviously, it's harder to do that. And we'd be very comfortable with that as a measure. So I think the comfort that people can take is a lot of the operating cash flow opportunity is coming from WIP.

36:25 So we made an important strategic decision, and this is aligned to the supply chain challenges that we have. We in the sector saw unit output go from 11,000 in our case down to 7,000 overnight. We made a very, I think, wise strategic decision then that we weren't going to reduce our WIP exponentially. You would have been reducing your WIP spend to probably 1.5 billion or 1.4 billion from 2 billion a year. The disruption that would have on your sites and everything else would be significant. So when we turn and we talk around and talk to are supply chain partners now around BCI and working with us. They believe us when we talk about our pipeline because that's Bellway and that's what we've done. And it's worked out well for us because we're now monetising that WIP.

37:11 We're going after that opportunity. And I think you can see that like we got a 20 basis point improvement in WIP turn in the year, went from about 1.3 up to over 1.5. And that will, again, we're on a good track to get that up to 2%. and we're doing that and we're buying back our shares at a discount. So that's a good timing piece for us in a world where trading is very difficult. So low levels of leverage, a very strong land bank, so we are net replacement on land and you can see from our balance sheet we've got 3% gearing including land creditors at the moment. So if Simon and Jason turn around and say that they want to buy more land we absolutely have the firepower to do that but the three of us are very much committed to net replacement on land broadly and that gives the guys plenty of firepower I think to go after the opportunities that are there.

38:01 I think on your land question, I think it's a good question. I think the answer may surprise some but the land market in the north is quite competitive. I was only talking to Clyde earlier because his recent note was quite accurate. Thank you very much. from Rothschild Redburn first one just around margins helpful bridge for the year finished when we look forward I think you've guided to 3-4% build cost inflation can we assume land mix will be similar again at 100 bps and pricing wise if we stay the same sequentially where are we at the moment in terms of what might be the price effect on margin for the year ahead second one was just maybe on that land point I know you've slightly tweaked the way you consider new land to IRR as opposed to just necessarily gross margin and rocky but perhaps you can just update us on what you're asking your new land acquisitions

39:31 to clear and then the last one just around your first home are you hearing anything on the price caps and how they might be struck clearly we exited help to buy with price caps do you think there'll be similar or more restrictive against those? Or maybe we just don't know yet.

39:49 You do margins, I do.

39:50 Yep. So on the margin bridge, I do want to answer the question as best I can. We're not guiding on margin this morning because it's just so difficult in this market, as you'll understand. But I think the one thing that three of us are very comfortable talking about is Thank you very much. there's decent margin progression in our DPP land bank all the way to the 20% plus that you have on strat land so clearly as your penetration rate goes up on strat and you trade your way through the forward order book you will get that margin progression you know the BCI you know is roughly you know our build cost is roughly half your ASP so if you divide that by two you're probably getting to about a one and a half percent so the big unknown that we have at the moment is Thank you very much.

41:20 But I would caveat that by saying you will get margin progression in future years and when we give guidance around what our land bank looks like, we're doing that mark to market at the moment in terms of what current levels of BCI and HPI look like in overall terms. In terms of our land hurdle rates, our hurdle rate is typically 20% on both rocky and on margin. and particularly in the north, we might look at certain deals where the margin is lower than that if there's a strong rocky in that where it's competitive because it makes sense to do that in those situations. But in general, they're the hurdle rates that we have and I think, Simon, they work generally for us in terms of what we're trying to... I think the land market reflects slower sales rate.

42:05 Shane was ahead of his time with capital efficiency because the land market today

42:25 Whilst prices haven't softened, payment terms have. They understand that we're selling slower than we was a few years ago. That's good. Can I just touch on price caps, Will? The reason I'm more relaxed on price caps than I am on developer fees and the pot is because in my... One-to-one discussions with the Minister. I've pointed out quite clearly that the Scottish Help to Buy product that was launched in June has only sold one home in four months because of the scheme rules and the price caps. I've pointed out, Will, that the Welsh Government are writing to me saying, Jason, would you like to increase the price cap to 375 because we recognise 300 is not working.

43:15 They understand the detail, and I think that that will be accommodated in the regional caps or the local authority caps that they're thinking about. It won't all be perfect. Nothing ever will. But I don't think you're going to go back to the price caps have helped to buy. You know, some of those, we can't even build a house for those figures, let alone sell a home. So I think they get it. I think they get it.

43:40 Yeah, it's Harry Goad at Berenberg. I've got two, please. So just extending the point about gross margin contribution from land. How many years does it take before we get to sort of fully reinvested land bank, if that makes sense? And over that period, is it fair to assume everything else being about 100 basis points of contribution per annum? and then the second question is just the point around capital efficiency. Just as a reminder, is there an implicit assumption that what you feel in terms of long-term required land holdings will be less in the future than it was in the past because of regulatory change? Thank you.

44:18 Just the first part of your question there, I get the bit about margin progression, just so I understand exactly what you're asking, just the first part.

44:25 Effectively, how many years does it take?

44:32 20% gross. Oh, at today's... Well, look, I think in terms of... There is a kind of a gross margin improvement coming through of 1% per annum. We're always careful in terms of how we articulate that at the moment because, you know, the industry itself is flagging headwinds at the moment and it's a double whammy in terms of BCI and HPI. So that 1% progression is real. My own view for what it's worth, because we can all crystal ballgaze, is that we've been long... and the question obviously is at what point do you get a little uptick in your HBI to provide at the very least that the neutralising impact so that 1% comes through but then 1% margin progression is only 3k about 3 to 4k per home in terms of a beat on HBI versus BCI so it's not a whole lot it's just in this market it hasn't really existed for the last number of years so I would say there's probably an inherent 1% uplift that you'll get off the where margin lands this year, and then it's just a case of how that whole HBI, BCI dynamic lands.

45:56 But you'd have to be somewhat optimistic insofar as we're all sitting here and there's been a series of questions around a first home scheme with a 2.5%... and so on. What macro support can be provided for house builders who are actually as well invested as we are in terms of providing much needed homes? Just a second question, Harry.

46:38 The second one was around your point of capital efficiency. Is there an implied assumption there that you just will in the future need to hold less land relative?

46:52 Yeah, I'm a bit cautious of that. We've been improving the planning system, Harry, since I left school 40 years ago. So I think you're probably always going to need a four and a half to five year land bank to compensate for that environment. You can get closer to four, I guess, in a better market when it's turning, but I'd be cautious with that at the moment.

47:23 Hi, Rebecca Parker from Goldman Sachs. Just wondering if you could provide some colour on how bulk appetite tracking you're planning to double your bulk sales into next year and the types of discounts you're having to offer there. And are there certain regions where you're targeting doing these deals, maybe in weaker performing regions? And secondly, are you seeing outlets drop into this year How is the planning environment and confidence that you can drive growth into FY28 on outlets?

47:56 Yeah, look, bulk has been a significant area of opportunity for us. Look, we haven't reinvented the wheel here or anything. It's just historically, you know, the private demand backdrop has been stronger. But we take very much a group approach out of bulk deals because what the counterparties tell us is they want to deal with Bellway. They don't necessarily want to deal with the divisions on their own. So we take a more holistic strategy in terms of how we go after bulk. But the The hopper of bulk opportunities is significant, and I think that's important, again, when we sit in front of people like yourselves. The way we can mitigate margin reduction is making sure there's a lot of appetite out there for bulk, and there is, and there's two reasons for that. One, the funding allocation that's been given around affordable housing, so we're seeing more interest levels there, but also the fact that the rental underpin is still very strong. Thank you very much.

49:17 The reduction can be around 10%, but you'll claw some of that back through obviously your site preliminaries and your sales and marketing cost. And then obviously, as Jason said already, if you can get a funded deal in particular, it can be very much NPV accretive. So that's how we look at bulk. I think we've created a good platform in terms of where there's plenty of healthy competitive tension around people who want that product. Thank you very much.

50:10 Thank you very much. Thanks. Clyde Lewis said,

50:53 and Peele Hunt, two if I may. Jason, you touched on the 20 regional offices at the same time and talked about overheads, reviewing costs there. 450 to 470 units times the 20 regional offices gets you to that 9 to 9.4. Where are you thinking is the optimum? size for a regional business these days, certainly given the bulk sales, given AI tools and other dynamics that have obviously helped the business. The second one was on the future home standard and I suppose where are you in terms of that ramp up in terms of costs for building the new standards?

51:40 How many years left have you got before you're at the full run rate and also I suppose on the impact of timber frame, how much of a drag will that be around gross margin given it's still typically more expensive than traditional build?

51:59 I'd be guessing to talk about how AI is going to impact on my regional businesses. I look at 20 UK offices and think that feels about right as a nationwide footprint at the moment. And I measure it against 600 homes per division. And there isn't a sweet spot. You can't say, look, p.l.c. Existing infrastructure gives me the ability to grow into those shoes as opposed to opening up more offices in the medium term.

52:48 Future home standards. We're fully embedded in the system, costs fully provided. It's been a long journey getting here to implement it all, but I have no concerns on that. I do worry that people are going to unwind it. After all the effort that's gone into putting it in place. Your final point is a good point. We've put a lot of investment into closed panel timber frame systems, which, trust me, Clyde, is the future of house building. Five years' time, closed panel, sealed units, wall construction, it's the answer. But it is a little bit more expensive now. p.l.c. I'm going to nip him before you there, Chris.

54:00 Surprise. Actually, just to, but they probably have a couple of bits. Firstly, Shane, you target a pre-tax return on equity rather than return on capital employed. One would assume that's the top end of guidance in terms of your balance sheet leverage and land creditors. Is there anything else in there that you would, you know, that differentiates that pre-tax return on equity from a return on capital employed? and then secondly just in terms of that 10,000 units that you're sort of aiming for 2028 is that included in that what looks like about 20% of plots that need to be bought for 2028 or would you need to step up going into the land market and kind of the follow-on from that when you tell that to government given where your completions have been previously and they say, hold on, Jason, you used to do much more than that and the ambition used to be substantially higher than that. What are the backlogs?

54:53 Do you feel there's something more that might come down the line in terms of planning? Because land availability as well as confidence in terms of being able to sell, but land availability is clearly going to be very key.

55:07 The only reason we talk about ROE is a number of our regional chairs are here and they'll all remind me. They're all measured on return on capital employed, but we think it's right that we measure ourselves on return on equity. It's myself, Jason and Simon's job to make sure we run an efficient balance sheet. I don't think you'll ever see a situation where return on equity will be running materially ahead of return on capital employed. and when we did the maths on that and we came up with our capital allocation strategy we said we weren't going to be over leveraged so around a Thank you very much.

56:09 Glynis, 10,000 homes in 28 is deliverable off owned and controlled rather than new land coming into the market. So new land would feed into 29 to deliver those numbers. I'm reasonably confident that we can deliver that if the market's there. And why not help your first home deliver extra volume by 28? The scheme's up and running. Let's go for it. Customers need it. Government needs it. More social homes, we need it. So we're certainly prepared for it. Thank you very much. We're really forcing that volume at the moment, aren't we?

57:20 Let's be honest. We're throwing everything at the private market. We're doing bulk investor deals. We're encouraging housing associations. We're forcing it at the moment. You're the last one.

57:39 Thank you. Chris Millington at Deutsche. The first one I wanted to ask about is, I'll go one at a time

58:03 Okay, I'll start with that. So I reckon our intake margins have moderated a little bit, Chris. You're quite right, probably 21%, 22%, depending upon planning and geography, those sorts of things. But I do think they're fairly robust in the north of England because we can see the sales rate, we can see the prices. If you was to invest too much in the south of England... Thank you very much. Yes, certainly.

58:58 We've got additional costs in there going forward because we're mindful that prices could be flattish and there's still that nudge of energy inflation. But until we can see a clearer picture, I don't think we'll overinvest in land, Chris. We're just going to keep the hopper where it is and stay efficient.

59:19 An extra layer of comfort on that is obviously When we update on where our margins are sitting across the tiers, we look at that bottom up around where sales rates are and everything else. Clearly, if you're in a trough, you'll take a view around what a halfway point is. But then equally, I think when Simon and Jason are buying land, they will put the business to the ringer then to say, what have we learned maybe from land we've bought before? How should we be buying now in terms of is that actually going to give you the sales rate based on what we know is actually out there in the market? So it changes your buyer behaviour. and obviously we update our margins then to reflect what we're seeing overall in the market balanced.

59:57 Can you just give us a comment about section 106 and additionality, just kind of how pricing and demands vary?

1:00:04 Yeah, I guess I mentioned that because with the past couple of years, there's been a struggle to get local authorities to invest. I think that's settled down now. So we're a little bit more relaxed on when we invest in land. Chris, we was getting to the point where if you had 40 percent of affordable on land, a site in Oxford that was a greenfield site. We didn't know the value of 40% of the land. We couldn't buy the land unless you'd contracted with someone up front. That settled down, that side of the market. The new funding round and the pressure from government into the RSL world has stabilised. So pretty relaxed there. Sorry, last one.

1:00:48 Would you go any further with vertical integration post the timber factory?

1:00:53 I mean, that's a debate I have with our chair. I'm particularly interested to see year two of our timber frame facility and whether we'd expand that approach into the south of England. But you've got to be mindful of Clyde's comments on pressure on margins. So it needs to be fed into the system rather than jumping with two feet. So all eyes on it. but need to see how it unravels. Thank you. A few questions for me. The first one was on your first home and its impact on the sector. When you think about the land sites and the site layouts that you have in place, do we need replanning?

1:01:43 When we kind of think longer term of how this could shift the tenure mix in the sector, how do you think about that? The second question, still early days, but on bill cost inflation, what is your early read and how the supply chain is thinking into next year? And do we kind of think that as the sort of surcharges unwind, there could be quite a quick sort of normalization to the bill costs in the sector? And the last one is on the strategic sites that are locked in planning, i.e. pending planning. What do you think is sort of delaying the decision there? Is it just timing and resourcing, or are there some technical elements where say councils are not willing to sort of come to a more, you know, definite terms, et cetera.

1:02:25 I'll ask your, I'll do all three, Ami. You know, I'm not brave enough to go and replan some of our sites. We've got quite a broad product range already and we are, you know, affordable family homes in the main and we think a good part of our land bank is attractive to first-time buyers. So certainly we'll take on board your comments on new land that we buy, but I'm not going to change what I've got. I think we're quite well placed as it is. You're quite right. I love talking about my... centralised approach to energy surcharges and we have generally saved nearly 20 million but if those diesel prices continue past the spring next year we'll have to rethink that approach because we have to share some of the costs with our subcontractors and suppliers.

1:03:25 We can't burden them with it all. It's a balanced approach so I will come under pressure if that conflict is still going next spring. and your final question was on planning. The plots that are applied for planning which are pending to an extent on the strategic land.

1:03:46 Sorry, the 20... So essentially, in terms of planning delays and potentially... Oh, what are the problems?

1:03:55 I think it's volume. I... There's limited resources in local authorities to deal with planning applications. And there's lots of developers and private companies with strong strategic land banks that are flooding the system of bid applications. That causes a logjam. That's point number one. The number of people that we consult to get planning, particularly on something large, is remarkable. And if you ask ten people, Ami, a question, you might get six of them to agree and four won't. Thank you very much. Thank you very much for your time. Thank you.