H1 Beat Overshadowed by Distribution Reset and Softer Trading

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H1 Beat Overshadowed by Distribution Reset and Softer Trading

UpdateMin ahead of market expectations, although margins remained under pressure year on

year. The adjusted operating margin was 7.7%, 39bps above MSe and 106bps ahead

of consensus, but down 200bps year on year as softer underlying pricing and build-

cost inflation offset the benefit of mix and cost control.

Looking ahead: The more cautious elements are current trading and the outlook. In

the four weeks to 26 July, the private sales rate was 0.55 per outlet per week versus

0.59 last year, while pricing remained approximately 2% below prior-year levels.

Management now expects 10,600-10,800 UK completions, within the lower half of

its previous range, alongside 3-4% build-cost inflation. Lower volumes and

heightened BCI create further pressure on an already weakened margin.

The forward order book was £1.93bn across 6,882 homes at period end, down 9%

and 5% year on year respectively. Encouragingly, this had improved to £2.00bn and

7,085 homes by 26 July but remains below last year and reflects the softer sales

backdrop.

View on shares: The cut to the Distribution Policy, softer July sales rate, lower order

book and completion guidance in the lower half of the previous range point to

prolonged pressure on earnings and cash generation. We expect the shares to

underperform as investors reset dividend expectations and factor in greater

downside risk to volumes, margins and returns, with any sustained recovery likely

dependent on a meaningful improvement in affordability and sales rates.

Underweight.

Exhibit 1: Headline results vs. estimates

% vs.

£ millons 1H26 1H25a % YoY Mse % diff VA Consensus

consensus

Revenue 1,683 1,655 2% 1,560 8% 1,595 6%

Gross profit 254 283 -10% 245 3% 230 10%