Crest Nicholson H1 2025 Earnings Report

Crest Nicholson EPS Results

• Actual EPS: GBX 2.20
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

Crest Nicholson Revenue Results

• Actual Revenue: N/A
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Crest Nicholson Announcement Details

• Quarter: H1 2025
• Date: 6/12/2025
• Time: Before Market Opens
• Conference Call Date: Thursday, June 12, 2025
• Conference Call Time: 4:00AM ET

Crest Nicholson (LON:CRST) engages in building residential homes in the United Kingdom. It develops and sells apartments, houses, and commercial properties. The company was founded in 1963 and is headquartered in Addlestone, the United Kingdom.

Crest Nicholson H1 2025 Earnings Call Transcript

Key Takeaways

• Financial performance: Crest Nicholson delivered H1 revenue of £249.5m, a gross margin of 14.2%, adjusted PBT tripled to £7.9m, raised the interim dividend to 1.3p, reduced net debt to £71.5m and reaffirmed FY2025 guidance.
• Project Elevate early gains: operational improvements include a rise in open-market sales rate to 0.61, a 6% reduction in overheads, improved build quality with NHBC reportable items falling below market average and a restored five-star HBF customer rating.
• Fire remediation provision stands at £298.4m (+£2.4m, <1%), with most surveys complete, £11.8m recovered in H1 (over £32m total) and remedial works proceeding to meet the July deadline.
• Land bank optimisation: sold two land parcels in H1 to unlock capital while exploring further disposals, while a seven-year strategic land supply—over 50% in allocation status at a 19% average discount—underpins future high-margin development.

Presentation

[Operator]

Thank you for joining the Crest Nicholson PLC interim results for six months ended 30 April 2025. My name is Marie, and I will be coordinating your call today. During the presentation, you can register a question by pressing star followed by one on your telephone keypad. If you change your mind, please press star followed by two. I will now hand over to your host, Martin Clark, Chief Executive Officer, to begin. Please go ahead.

[Martyn Clark, CEO at Crest Nicholson]

Thank you, Marie. Good morning, everyone, and thank you for joining us today at Crest Nicholson's interim results presentation for the six months ending 30 April 2025. I'm Martin Clark, the CEO, and I'm joined today by Bill Floydd, our CFO. It's good to see you all again. We're looking forward to updating you on our financial and operational performance in this financial period, as well as an update on the good progress we are making against the four strategic pillars which I outlined at the Capital Markets Day in March. As a reminder, the pack contains a note on forward-looking statements, which I'll take as read. The agenda for this morning is as follows.

[Martyn Clark, CEO at Crest Nicholson]

There are principally three matters we wish to run through today: the half-year financial results, the progress we have made against the strategy set out at our Capital Markets Day in March, and an update on fire remediation. This will then be followed by an opportunity for Q&A. The challenges facing the external macro backdrop have been well publicized, and the trading environment remains challenging. Despite that, I am pleased to report that Crest Nicholson's trading performance for the period is in line with expectations. We have talked previously about the launch of our transformation strategy, referred to going forward as Project Elevate, which is based on four key strategic pillars. I'm encouraged by the progress that we have made in the past few months on that critical work.

[Martyn Clark, CEO at Crest Nicholson]

We've started to see some improvements across a number of our key metrics due to the changes that we have made as a business. I've always said that it is going to take two or three years to fully execute the transformation, but the improvements we have seen to date show that we are on the right path. In terms of fire safety provisions, we obviously updated everyone on those provisions back in February. Following that update, and in line with our robust review processes, our provision has been slightly adjusted upwards by just less than 1%, but offset by some notable recoveries from third parties, which we will expand on shortly. Finally, looking into the second half of the year, we remain on track to achieve the FY25 guidance and medium-term objectives set out previously.

[Martyn Clark, CEO at Crest Nicholson]

With that, I'll hand over to Bill, who will go through the numbers in a little more detail.

[Bill Floydd, CFO at Crest Nicholson]

Thank you, Martyn, and good morning, everyone. Today, I'll take you through a financial summary of the half, and I'm pleased to say that this set of results is more in line with expectations than the others that I have presented in my time here. On the financial summary, here you can see the financial headlines for the half. Revenue was GBP 249.5 million, down by 3% on the first half of last year. Revenue from housing was GBP 233.2 million, which was up by 3%, and the reduction was driven by a GBP 14.5 million fall in land sales. I'll have more sales metrics for you on the next slide. Gross margin improved to 14.2% from 12%, with the biggest factors being substantially lower completed sites costs and also lower NRV charges.

[Bill Floydd, CFO at Crest Nicholson]

Overheads were GBP 1.5 million lower than the first half of last year, with some early restructuring benefits and tighter management focus being the key contributions. As a result of these gross margin and overhead improvements, adjusted operating profit was up by 92% to GBP 11.9 million, and adjusted PBT more than trebled to GBP 7.9 million. Exceptional items were in profit compared to last year's GBP 33.5 million loss as a result of the GBP 11.8 million recovery from third parties, and I'll give you further explanation of the exceptionals on a later slide. Adjusted basic earnings per share was GBP 2.2, more than three times the GBP 0.7 in HY2024. The board has proposed an increase in the interim dividend to GBP 1.3 per share. Net debt was better than we expected at GBP 71.5 million, with the key contribution being lower inventory.

[Bill Floydd, CFO at Crest Nicholson]

On the sales metrics, adjusted outlets was 40, in line with our guidance, and down from 45 last year as a small number of sites completed their last properties. The open market sales rate for the half year was 0.53 compared to last year's 0.47. We're pleased with the progression we've made in the sales rate since the middle of January to 0.61, and we're confident that the uplift is largely as a result of our own self-improvement initiatives rather than a broader market uplift. Martin will take you through the sales improvement components later on. On completions, we delivered 739, of which 64 were at the joint venture sites. Open market volume was in line with last year, and affordable growth was 21 units. Most notable is the reduction in bulk units.

[Bill Floydd, CFO at Crest Nicholson]

As we outlined at the Capital Markets Day, this is no longer an area of focus for us because of the discount level and commercial terms required by investors. Going forward, there are only a further 112 units contracted, and these will all be delivered by the end of FY2026. Accordingly, this will be a headwind to our total volume outputs until FY2027. The details of the exceptional items are as follows. On the combustible materials, we recovered GBP 11.8 million from third parties, bringing our total recoveries to more than GBP 30 million. We've appointed an internal litigator to bring more focus and purpose to this activity. We're carrying out a thorough qualification of all potential claims, and we're prioritizing our efforts to achieve the best overall economic outcome that we can. As a reminder, we do not recognize any recoveries until the settlement is virtually certain to be received.

[Bill Floydd, CFO at Crest Nicholson]

We continue to progress the building surveys and have completed the vast majority, with a few outstanding on track for completion by the July deadline. Our latest estimate of the total cost has increased by a modest GBP 2.4 million, less than 1% of the overall estimated total cost of remediation. In the back of your packs, you'll find a page that has the high-level key facts on the combustible survey progress and the latest financials. We've incurred GBP 2 million of restructuring costs, and I expect that to be around GBP 5 million for the full year. The net finance expense is the accounting for imputed interest on the combustibles provision, and overall exceptional items totaled GBP 1.1 million income compared to last year's first half charge of GBP 25.1 million.

[Bill Floydd, CFO at Crest Nicholson]

On the balance sheet, we've made some early progress on the overall inventory balance, with a reduction of close to GBP 30 million since the end of the year and nearly GBP 75 million compared with a year ago, with good progress on land, completed buildings, and part exchange, offset by an increase in the WIT, reflecting some infrastructure on new sites and seasonality. We've paid down a significant proportion of the outstanding land creditor balance, and I anticipate a further GBP 60 million to be paid in the second half. As a reminder, the group's committed debt facilities are an RCF of GBP 250 million, which matures in October 2027, and GBP 85 million of private placement, with the next repayment being GBP 20 million in August this year.

[Bill Floydd, CFO at Crest Nicholson]

On the cash flow, the key balances of note are the improvement in operating profits and the improvement realized from starting to get the inventory under better control. The outflow from other working capital is substantially as a result of paying down land creditors and utilization of the combustible materials provision, on which the spend in the half was GBP 34 million. We've drawn down GBP 70 million on the RCF, and the other movements comprise the net inflow from joint venture funding, interest tax, and dividends. Finally, a reminder of the guidance for the full year, which is unchanged, with volume expected to be between 1,700 and 1,900 units, outlets between 40 and 42, and an open market sales rate of 0.5-0.6. We're not experiencing any meaningful bill cost inflation and continue to reinforce operational disciplines to reduce abortive costs.

[Bill Floydd, CFO at Crest Nicholson]

You'll recall that we guided to 30% of EBIT being delivered in H1, and we remain comfortable with that split. Adjusted PBT is expected to be in the range of GBP 28 million-GBP 38 million. Overall, whilst the net debt is better than we anticipated at this point in the year, we're maintaining the guidance for the full year as there are a good number of GBP 10 million-GBP 20 million swing items that can move the overall balance quite significantly. Overall, that's where we are, and I will now hand you back to Martyn.

[Martyn Clark, CEO at Crest Nicholson]

Thank you, Bill. I'll start by providing some context on the market environment that we're currently operating in. In previous presentations, I have spoken about the well-publicized challenges that the industry has faced over the past few years. From a macroeconomic perspective, these challenges have largely been a product of the high inflation, high interest rate environment that has dampened consumer sentiment and affordability. From a regulatory perspective, challenges within the planning system have constrained our ability to bring sites through the pipeline to the point at which development can start. Based on our experience, although there are some positives to be taken from ongoing reductions in interest rates, with rates currently at their lowest level since Q4 2022, consumer sentiment remains low. As the chart on the bottom left shows, consumer sentiment is gently improving, albeit from very depressed levels.

[Martyn Clark, CEO at Crest Nicholson]

This is important to note given the need for consumers to have confidence in their own financial returns, sorry, futures to be able to commit to significant new purchases such as a new home. I think it is fair to say that the government is trying in many ways, if not all the ways we would ideally wish for, to support the housing industry and make it easier for people to buy homes. There remain challenges in the planning system, and it is unlikely that these are going to resolve themselves in the short term. Having said that, we are achieving good results despite this mixed picture. This gives me confidence that our strategic shift and ongoing transformation is positioned as well both for the market today and hopefully a more favorable market of the future.

[Martyn Clark, CEO at Crest Nicholson]

Within that market context, a quick reminder of the four key strategic pillars presented at our Capital Markets Day just three months ago. They underpin Project Elevate and show how we will transform Crest to capitalize upon the long-term opportunities we see in the U.K. housing market. It starts with the product. We need to build exceptional homes that people want to live in and that reflect the mid-premium Crest brand. Buying a home is probably the biggest financial decision someone makes in their entire life. We need to ensure that we look after the customer throughout that journey. To deliver both of these critical tasks while delivering sustainable returns for shareholders, we need to be better commercially and operationally.

[Martyn Clark, CEO at Crest Nicholson]

Finally, alongside that side of things, we have identified opportunities to optimize value in our land bank, which will improve our working capital position without jeopardizing our future growth plans. We have talked about Project Elevate, and I will now discuss the shape and objectives of this transformation project. I wanted to put the following two slides into the pack because I think it helps you all visualize the structure we are using to successfully execute this project. It is clear that the impact will be felt across the business and that we are leaving no stone unturned in the pursuit to ensure we maximize the potential. The plan is well-defined, and everyone in Crest, through a clear communication strategy, will have absolute clarity on what they are doing and what their contribution will be.

[Martyn Clark, CEO at Crest Nicholson]

Everything is focused on the objective of making Crest the best operator it can be, focused on mid-premium housing segment, which I think is the best path towards delivering sustainable shareholder returns. We have taken a comprehensive approach that covers every stage of the value chain, from the land bank itself through the design and planning phase for the plots, to make sure we have the right commercial and operational practices and culture in place to build exceptional homes, and then finally, of course, making sure the customer journey is as seamless and customer-focused as it should be. Running through those four different stages of the value chain, we think hard about making sure the overheads and costs are appropriate. That does not mean simply doing everything as cheaply as possible. Are we being efficient with our capital considering our size as a house builder?

[Martyn Clark, CEO at Crest Nicholson]

Are we able to meet or surpass the regulatory commitments we need to honor, and have we got the right systems to ensure long-term consistent performance? This is a multi-year plan, and whilst there will be some early gains in our operational performance, other work streams will take longer to fully realize benefits, such as a new house type range being designed, planned, and then ultimately needing to be built. Importantly, we've put robust governance in place. We have 24 separate projects, with each having a named sponsor responsible for delivery, and we are tracking progress closely through a clear set of metrics and KPIs. There is obviously a lot to do, and so we are prioritizing our resources and efforts on particular areas that we believe will have the most immediate impact, whilst also ensuring that work starts in areas that will have longer lead-in times.

[Martyn Clark, CEO at Crest Nicholson]

For example, in sales and marketing, where we have already carried out a lot of work and have seen an improvement in our sales rates and achieved values. Alongside this, we are running a coordinated program of internal communications to ensure we build the momentum and cultural change needed to embed these initiatives right across the business. This is not just a set of ideas. It's a detailed, actionable program with enabling foundations, governance, and accountability built in. We are confident this structure gives us the clarity and discipline to deliver on our objectives and position Crest Nicholson for sustainable growth and enhanced value creation over the medium term. I will now take you through some examples of progress across each of our four strategic pillars. Every time I've seen you, I've spent some time talking about the importance of build quality and customer service.

[Martyn Clark, CEO at Crest Nicholson]

I wanted to give an update on these two important areas, starting with build quality first. The top left bar shows, on a monthly basis, the number of reportable items found by one of our warranty providers, the NHBC. You will see that in the past few months, the number of reportable items, RIs, has dropped substantially and now compares well with the overall market average. There are a number of drivers behind the improvement in performance. We've been embedding a right first-time culture across our sites, ensuring we deliver homes with fewer defects, leading to reduced costs and higher customer satisfaction. We now directly incentivize our build teams on quality metrics, which are clearly working. There's always more to do, but I think the past few months and these data points show that we are moving in the right direction. Providing excellent customer service is paramount to Crest Nicholson.

[Martyn Clark, CEO at Crest Nicholson]

I'm very pleased to confirm we have regained the five-star HBF customer service rating, and we remain firmly on track to maintain this in the new assessment year. The bottom left bar chart shows that we have the highest HBF customer rating in recent history. To lead the next phase of our customer service transformation, we've appointed a Group Customer Service Director who is already driving important changes across the business to drive not only greater customer satisfaction, but with a remit to reduce the significant costs we have been incurring. Aligned to that, I'm encouraged by the progress we have made in rolling out the specific items within the new Crest specification introduced to enhance customer satisfaction, and which now reflect the Crest brand. This slide provides some color on the initiatives and progress that we are making regarding the customer experience we provide.

[Martyn Clark, CEO at Crest Nicholson]

All of these initiatives contributed to the five-star HBF customer service rating and show what we need to do to maintain our five-star rating going forward. The starting point was completing the extensive customer research program. I had some views and thoughts on what needed to be done, but it was important to make sure we were making the changes and improvements that would drive real results. The research has enabled us to enhance our systems and processes and will assist with the Crest Nicholson standard house type range that will be introduced in the future. Subsequently, we have upgraded the specifications of our house range to meet the expectations of mid-premium, and we have enhanced the customer journey through redesigned sales suites, targeted staff training, and the launch of Artiva, our new online portal that enables customers to browse choices and upgrades easily and efficiently.

[Martyn Clark, CEO at Crest Nicholson]

Some of you may remember the demonstration at the start of our digital offering when we visited Windsor earlier in the year. I think these enhancements will make a great difference to our consumers. Picking up on the topic of sales, we have a couple of interesting charts on this slide. The first chart shows the positive trend we are seeing regarding the net achieved reservation price versus our book value. The second chart shows the recent positive trend in the half with our sales rate, particularly compared to last year. On the previous slide, I talked about some of the initiatives and investments that have contributed towards those improving standards. The other point I think worth flagging is the extensive training that we have provided for everyone, ensuring that they now both have the tools to sell houses and know how to use those tools properly and effectively.

[Martyn Clark, CEO at Crest Nicholson]

The other theme I'd like to touch upon with this slide is the progress we have made with regard to our operational and commercial efficiency. There is, of course, much more to do in this area. We have now merged the Midlands and Yorkshire divisions, which has contributed to the 6% year-on-year reduction in our overheads, without in any way impacting our capabilities as a house builder. More generally, across the company, as a result of tighter operational focus, we are seeing a notable reduction in both completed site costs and NRV charges. Previously, we talked about the opportunity within our land bank. This is a key pillar in our strategy and a big opportunity for us.

[Martyn Clark, CEO at Crest Nicholson]

By way of reminder, we currently hold a long, high-quality land bank with around seven years of short-term land supply, which, while valuable, is not necessarily the most efficient use of capital for a company of our size. We have good plots that are either in the wrong part of the country, too far away from our divisional offices, or that are too large for a house builder of our size. For these sites, we are selectively exploring options to maximize value, whether through disposal as a whole or in part, and other strategies that unlock capital and improve returns. In the period, we completed on the sale of two parcels of land from sites with multi-phases, reflecting our strategy going forward. The figure quoted on this slide includes a deferred payment of GBP 2.2 million, payable once our service and obligations are completed.

[Martyn Clark, CEO at Crest Nicholson]

We are encouraged by the initial opportunities here and will update you as appropriate going forward. On the other hand, our strategic land portfolio remains a real strength and a critical pipeline for future growth. With over 50% of our strategic land now allocated or in draft allocation status, and with an embedded average discount of around 19% on these sites, we are positioned to deliver much higher gross margins when this land is developed. This balance between optimizing our short-term land holdings and securing strong, high-margin strategic land opportunities will play a key role in driving our strategic priorities, improving capital efficiency, and supporting long-term value creation. Alongside our approach to optimizing the current land bank, there are opportunities to improve the processes through which we buy the land.

[Martyn Clark, CEO at Crest Nicholson]

I'd like to now provide an update on the significant progress we've made in our fire remediation program, which remains a key operational and regulatory priority for the group. I have to say that I'm pleased with the progress in this area, which has been driven largely through the creation of a dedicated special projects team. We have made tremendous progress on our assessments of the 293 buildings in scope under the joint plan to accelerate. We have completed 279 external assessments and 270 covering both internal and external aspects. We remain firmly on track to meet the agreed deadline of July. In terms of the on-ground delivery, remediation works are progressing in line with plan. In our FY2024 results, we announced that total fire remediation costs of GBP 298.4 million, which covered all buildings under scope of the fire remediation program.

[Martyn Clark, CEO at Crest Nicholson]

This provision amount increased by GBP 2.4 million, less than 1% of the total in the first half of the year, following our ongoing reviews. Our provision, as we have said before, does not make any allowance for recoveries from third parties. We have successfully recovered GBP 11.8 million in the first half, bringing the total recovered to more than GBP 32 million. We will actively pursue all parties that are found to be at fault for remediation works being necessary. Overall, this reflects a centralized, disciplined, and proactive approach to managing our remediation obligations, giving us confidence in both the cost position and the delivery trajectory of this critical program. As we wrap up today's presentation, I want to take a moment to reflect on the progress we've made since our capital markets day in March.

[Martyn Clark, CEO at Crest Nicholson]

We've achieved a lot in a relatively short period, and again, I think this is a reflection of the support and open-mindedness that my colleagues have shown in embracing a lot of change. I've always been open and honest about the scale of the challenge and that this transformation is going to take at least two to three years to bed in and fundamentally change the business. That said, the early signs from Project Elevate are promising. We've already seen meaningful improvements across sales, customer service, and build quality. We're also seeing early benefits from tighter work in progress and cost optimization controls, which have resulted in a better-than-expected net deposition. Greater discipline is being applied across the business, and the benefits of that are now beginning to emerge.

[Martyn Clark, CEO at Crest Nicholson]

Looking ahead, the early phases of the transformation plan are now being rolled out and embedded across the business, and we will continue to focus on driving operational performance improvements. Importantly, we believe that the stabilization we are starting to see in the market will provide additional support, enabling us to deliver growth as we move forward. We are reaffirming our FY25 guidance, and we remain confident in our ability to deliver against it. In summary, Crest Nicholson is on a clear and disciplined path, and whilst there is much more to do, we are confident we are building the right foundations to drive long-term success. With that, I'd like to hand over to the floor for questions. Get my voice back.

[Ainsley Lemmon, Analyst at Investec]

Hi, Michael. Morning, Ainsley Lemmon from Investec. I think I've got three, please. Just maybe a bit more color on kind of recent trading.

[Ainsley Lemmon, Analyst at Investec]

Obviously, sales rate's up at 0.6. What's the kind of pattern been over recent weeks? Any comment on, are you seeing any house price inflation? What are you doing to sales incentives? It'd be quite interesting. Secondly, just on recoveries, the GBP 11.8 million, is that something that's changed? Kind of, I think Barratt had some rule in. Has it become just a bit easier to recover, or is it just a one-off kind of project where that was more possible? Thirdly, just on planning, seems to be quite positive on that beginning to free up. Just interested to hear a bit more color on what you're seeing. Does that mean that that half of the strategic land bank's quite confident to get through? Yeah, thanks, Ainsley. I mean, with regard to recent trading, most of May was pretty in line, was pretty consistent.

[Martyn Clark, CEO at Crest Nicholson]

I think it's been slightly quieter, but nothing unusual for the last half term was going on. House price inflation, I mean, our focus really is on ensuring that we are getting better at what we're doing and achieving more than our book value, and we are doing that. So it's difficult to know whether that's through our own efforts or general inflation, but I'm actually quite pleased with what we're doing. I think it's more of what we're doing rather than the market at the moment. The GBP 11.8 million recovery, I mean, I don't think that's—it isn't. I don't think it's nothing to do with the Barratt case. That was only fairly recently. That will help us in the future. I think it will enable us to perhaps get after third parties that have caused our issues with a bit more success. We'll just see how that pans out.

[Martyn Clark, CEO at Crest Nicholson]

I mean, we've got an awful lot of buildings, 293 buildings. Will we be able to get after everybody in every single site? No. Some won't have the balance sheet to be able to get after. Others do not exist. We need to look at everyone that we've got and see where the appropriate time and investment go in the short term to get the early returns. On that, in this half, we're pleased with what we've done. Planning, yeah, I mean, the mood music out of the government is they want to try and help us get planning, and we are certainly seeing that. We have a great strategic land bank. Nothing in planning happens overnight. It will take time to start seeing delivery.

[Martyn Clark, CEO at Crest Nicholson]

Certainly, with our strategic land bank, we're seeing an awful lot more progress than perhaps we have over the last few years, and we're confident that that land bank will start to materialize in the future. Thank you.

[Ainsley Lemmon, Analyst at Investec]

Harry Goad, Berenberg. I've got two, please, both on the medium-term guidance. Firstly, that 20% gross margin, can you talk about that in the context of land acquisitions that you're looking at at the moment in terms of where that's at? The second one, in terms of, I think it's 2,300 units you talked about, is that midterm target? Can you talk about the capacity within the business, what that means on a sort of units per business unit or region sort of field, just to get a feel for what the scope is to grow and what costs might be needed? Thank you very much.

[Martyn Clark, CEO at Crest Nicholson]

Yeah.

[Martyn Clark, CEO at Crest Nicholson]

On the 20%, Harry, in terms of what land we're bidding on at the moment, yeah, we're targeting that and above. It's a competitive market out there at the moment, so we'll probably see 10-15 competitors on each individual process. It is a balance. If you kind of hold out for 25% margin, you're not going to win too many. It is a balance of getting that for sure. Yeah. On the ambition to be at 2,300 units, we need to get the overall number of outlets up, kind of pushing towards the 50 level. If we can add a couple a year over the timeframe, then that should get us in roughly the right place.

[Will Jones, Senior Equity Analyst at Redburn Atlantic]

Thanks. Will Jones from Redburn Atlantic. Just a few, if I can. The first, around the gross margin, I think about 14% in the first half.

[Will Jones, Senior Equity Analyst at Redburn Atlantic]

Can you help us with how much of that was influenced by the legacy site issue and what your expectations are for the gross margin as you look into the second half? The second was maybe just coming back to outlets. I think you talked about that 40 number remaining stable in the second half. Just wondering what your expectation might be at this stage for any improvement on that into FY2026. Lastly, if you can just maybe update us with your thoughts on the government announcements yesterday, particularly the affordable housing side. I think you had talked about trying to get up to 30% affordable over time. Was that just going to be through Section 106, or are you hoping to do additional beyond the 106?

[Martyn Clark, CEO at Crest Nicholson]

Yeah. Our strategy in March, we said we'll just try and focus on doing what we have to do through the Section 106s. I think the government announcement yesterday, it was less than or just over 24 hours ago, or less than 24 hours ago. I think the devil will be in the detail. We need to see what comes out of it. I think anything that will help RPs have the confidence to bid for Section 106 sites or even additionality will help us. There's certainly been some issues recently with offers that the housing industry has been receiving from RPs, Section 106 and beyond. Yeah, I mean, it's all positive news. At least we're seeing some positive news. Our outlets, yeah, 40. I mean, we want more outlets. I want guidance for FY2026, which will probably be towards the end of the year.

[Martyn Clark, CEO at Crest Nicholson]

We're working hard internally to drive as many opportunities as we can forward. The gross margin point, Bill? Yeah. I'm not going to give you a number on gross margin, but look, we continue. I'm pleased with what we did in the first half. It's largely been around avoiding mistakes from the past. The other thing just to think about in there is the weighting of zero margin sites, and we're kind of unwinding that at the pace I expected to. There's a bit left for next year. After 2026, the zero margin stuff has kind of broadly disappeared. Those kind of underlying factors of stop making mistakes and get rid of the bad stuff will hold true.

[Will Jones, Senior Equity Analyst at Redburn Atlantic]

Does the share of legacy sites dip a little bit second half versus first?

[Glenys Johnson, Equity Research Analyst at Jefferies]

Yeah. Yeah. Thank you. Glenys Johnson-Jefferies. Three very quick ones, actually.

[Glenys Johnson, Equity Research Analyst at Jefferies]

One, the relaxation in some of the mortgage stress testing. Is it making a difference? Are you seeing anything on site? Number two, the 10-20 million number of items that might influence the net debt. What are we talking about? Are we talking about land deals? Are we talking about recoveries coming in? Just any kind of color. And then the anticipated land sales. We've seen a few others of your peers struggle with land sales to get them over the line. If there's any kind of color you can give us in terms of land sales, the appetite that you're seeing, the kind of maybe it's about the size of the sites, whatever you can give us in terms of reassurance that those are progressing.

[Martyn Clark, CEO at Crest Nicholson]

Yeah. Mortgage stress testing. I mean, anything that helps the market is great.

[Martyn Clark, CEO at Crest Nicholson]

I think at our size, it's difficult to gain any sort of meaningful statistics with only 40 outlets. Yeah, I mean, it's all positive news. It will enable people to get to the ladder or get a larger mortgage and buy a bigger property. It's all [audio distortion] positive news.Okay. A few examples of 10-20 million swing items. Yeah, we could get more recoveries in the second half. The pace at which we receive BSF invoices on the fire remediation can swing it pretty significantly. If we got to a quick resolution on the legal claim, that could be in or out. If we do more land acquisition that is not in the blank creditors at present. It's those kinds of things, Glenys.

[Martyn Clark, CEO at Crest Nicholson]

In terms of land sales, we said at the Capital Markets Day, we're not in a hurry to do any of the bigger, more strategic positioning disposals. We are in market with a couple of them. We're not going to give any color on what's going on there for commercial reasons. We'll do it when we've got the right economic deal on the table, and we're not going to be influenced by year-end boundaries and accounting and all that kind of stuff. It's if we get the right value for the shareholders rather than try and ram it into a financial year to get a better outcome. In terms of interest, yeah, good interest on those. Similarly, what we're doing, smaller parcels, there's good interest on those as well.

[Sam Cullen, Equity Research Analyst at Peel Hunt]

Thanks. Sam Cullen from Peel Hunt. I've only got one, really.

[Sam Cullen, Equity Research Analyst at Peel Hunt]

I think, Martin, you mentioned new house type ranges [audio distortion]. I guess, what's wrong with the current range? Secondly, is the land bank correctly set up for the new range, or do you need to also refresh the land bank to fit the new range?

[Martyn Clark, CEO at Crest Nicholson]

Our current house type portfolio has got some smoothing and gaps, in my opinion, in it. I think we could plot our layouts better, reflective of the mid-premium market that we're trying to attract. It needs a complete refresh. I see on sites the same house type with three different variations, for example. Things have just morphed in divisions. I need some standardization across the group. I'm taking the opportunity to listen to the feedback that we've had from the research that we've had undertaken and make sure we've got a range that actually will get the best value.

[Martyn Clark, CEO at Crest Nicholson]

Actually, building the smallest compliant box that you can sometimes does not get the best value. We need to do a complete refresh of the whole thing. Our Group Design Director started on Monday, and he has his role fairly clearly defined, and he is targeted to get it back to me by. Yeah, that is going to be quite exciting. In terms of the land bank, I mean, we obviously have planning consent on a lot of the sites we are building. We can do some amendments to those house types to make a certain size house type. When we are doing it three different ways, we can get it done one different way across the group. We can do some internal wall movements to make things better. Listen to feedback from sales and from our customers.

[Martyn Clark, CEO at Crest Nicholson]

Ultimately, if we can have a range of house types that we can either do plot substitutions fairly easily, great. That will filter through quickly. On the larger strategic sites that we have only got an outline consent at the moment, our current house type range does not affect that. Get a brand new house type range on there. Good design. [audio distortion]

[Chris Millington, Equity Research Analyst at Numis]

Morning. Chris Millington, Numis. I will not put it so close next time. Yeah, a few. Have you thought any more about where you want to get the ASP to on this mid-premium strategy? Your 435, it stayed pretty flat in the year. I mean, it is going to be quite an important component of the revenue as we look forward. Next one, nine-month HBF score. Has that made similar progress to the eight-week one? Then I think one for Bill.

[Chris Millington, Equity Research Analyst at Numis]

Average debt in the first half and land credits in the second half. It's a big move in the first half relative to where you were. Do you think that's going to shift back up? Yeah. Okay.

[Martyn Clark, CEO at Crest Nicholson]

I'll do the nine-month HBF score. Yes, we have made significant gains on that. It's even more important now because going forward from last October, the five-star rating isn't based on just a single question from the eight-week survey. It's based on a number of questions from both the eight-week and the nine-month as a combined score. Using that combined score, we are still currently trading in the five-star range. Yes. The efforts that we're putting into the nine-month score will certainly pay off. Average sale price. It's always a balance between how much I'd like to get at the property and how many properties we can sell.

[Martyn Clark, CEO at Crest Nicholson]

Yeah, I mean, I do not really want to see it going less than GBP 435,000. That does not mean I am going to be building 2,000 homes a year that are going to be GBP 600,000 a year. We need to make sure that we are right for the mid-premium, priced right for the mid-premium sector in any individual town that we are building.

[Chris Millington, Equity Research Analyst at Numis]

Does that sound like it? [audio distortion]

[Martyn Clark, CEO at Crest Nicholson]

No. No. [audio distortion] I do not think so. No. I think the other thing on just the ASP, the thing that moves it more than anything, is just the mix of what goes through in any individual year. If you have fewer apartments, more houses, it is just going to go up. I think that top-level ASP number, kind of a bit, it is what it is.

[Martyn Clark, CEO at Crest Nicholson]

On the average net debt for the half, do not have a number in front of me, but my guess would be about GBP 100 million. And land credits in the second half. We have got a lot due to go out in the rest of the year. I would kind of expect it to. We will probably top it. I expect us to do a few land deals in the second half, and so we will top it up a little bit. Net net, it should come down. Because I do not think we will do so many deals that it will compensate for the GBP 60 million off that is going to go in the second half. It is also a function of how many land deals we actually do. We have got a lot of land. We do not need to do loads of deals.

[Martyn Clark, CEO at Crest Nicholson]

The ones we are doing, they are kind of infill, relatively smaller sites, kind of in the 75-125 type territory. They are not, and obviously, yeah, we will obviously pay for it as late as we possibly can. It is not going to be a huge move up. [audio distortion]The payment profile on larger sites is a bit different to the payment profile [audio distortion] on smaller sites.

[Charlie Campbell, Equity Research Analyst at Stifel]

Morning. [audio distortion]This is Charlie Campbell at Jefferies. Two questions, please. First one is just on overheads. Obviously, kind of some reductions from merging divisions. Should we just sort of model that out as following sales from here? Second question on Graybelt. Is that something that features in your strategic land plans going forward, or is it just sort of too early and it takes too long and it is not something yet?

[Martyn Clark, CEO at Crest Nicholson]

I will find you the Graybelt question.

[Martyn Clark, CEO at Crest Nicholson]

It's quite difficult to determine what the actual definition of Graybelt is. We do have some sites that will fall into that category within our strategic land bank, so it will help us. It's not the panacea to everything. Is our strategic land bank full of brownfield sites? No. That's the nature of strategic land. It is generally greenfield. Graybelt will help us. [audio distortion] It's not. On the overhead, I think the overall reduction for the first half is similar to what it'll be for the full year.

[Martyn Clark, CEO at Crest Nicholson]

Okay. Thank you. Marie, do we have any questions online?

[Operator]

To ask a question, please press star followed by one on your telephone keypad now. If you change your mind, please press star followed by two. When preparing to ask your question, please ensure that your device is unmuted locally.

[Operator]

We will allow for a momentary pause for you to register your questions.

[Martyn Clark, CEO at Crest Nicholson]

Okay. Thank you, Marie.

[Operator]

We currently have no questions, so I will hand back to Martin Clark for closing remarks.

[Martyn Clark, CEO at Crest Nicholson]

Okay. Thank you very much, everybody, for coming out to see us this morning. We hope this has provided you some color on what our objectives are. It is going to be a two or three-year transformation. We are working really hard to get there, but thank you for your time.

[Operator]

This concludes today's call. Thank you all for joining. You may now disconnect the line.

Participants

Executives

• Bill Floydd, CFO
• Martyn Clark, CEO

Analysts

• Sam Cullen, Equity Research Analyst at Peel Hunt
• Ainsley Lemmon, Analyst at Investec
• Glenys Johnson, Equity Research Analyst at Jefferies
• Chris Millington, Equity Research Analyst at Numis
• Charlie Campbell, Equity Research Analyst at Stifel
• Will Jones, Senior Equity Analyst at Redburn Atlantic