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Business Review – Lucy Real Estate

STRATEGIC REPORT

“ While our rental business delivered another strong performance, our development business experienced difficult trading conditions and incurred losses. Our focus on quality and sustainability continues to underpin both businesses.”

Customer feedback has been very encouraging, even on the

Over the next five years, we foresee a period of significant growth and have plans in place to ensure that the Lucy Developments business returns to profitability. This will be based not necessarily on market improvements, but on better margins achieved through in-house skills, land buying, construction, design efficiencies and site optimisation. The planning environment is improving, but it will take time for policy changes to translate into any real increase in housebuilding numbers. Also, increased regulation – with the Building Safety Levy and the Future Homes Standard – means extra costs for property developers while land values are largely unchanged. On the positive side, additional government funding for affordable housing should help with the viability of affordable housing developments. Performance summary In another good year for Lucy Properties, income exceeded expectations and demand from tenants remained consistently high. At Lucy Developments, achieving revenue growth in the face of a persistently slow market was a noteworthy accomplishment, notwithstanding low margins and recorded losses. Most importantly, across both businesses, our skilled, motivated teams will ensure Lucy Real Estate thrives in the market conditions we are faced with. I’d like to say a big thank you to all our people for their energy, enthusiasm and commitment during 2025.

where all the houses sold off plan, and at Old Marston Paddock, where 40 affordable units were built for OX Place, Oxford City Council’s housing company. Tempering these gains in turnover, gross margins continued to be under pressure and a sluggish selling market led to further losses. Operations At Lucy Developments, the focus has been on increasing margins through improved efficiencies. The Head of Lucy Developments, along with a new senior quantity surveyor and enlarged technical team, has brought more rigour and scrutiny to our processes, particularly those relating to costing and to optimising product specifications and spatial layouts. This has given us much more cost certainty than ever before. On the construction front, Old Marston Paddock is now nearing completion. A hugely complex 40 unit scheme on a former landfill site, this is the product of a highly successful partnership with OX Place, who are delighted with the results. Building is also progressing well at Bodicote, our first direct-sale site, with sale rates of two a month. Land acquisitions include sites at Radley and Wilstone, and we exchanged contracts on a 90-unit scheme at Deddington. This is our largest-ever scheme and is set to generate revenue over the next three years. Overall, the strategy is to consider a mix of sites, and to build in-house partnering with tried and significantly in a new management information system and migrated its finance and project operations to a fully supported Microsoft D365 platform earlier in the year. Lucy Properties will follow in 2026. trusted subcontractors. The business has invested

developments where sales have been slow. Interviews and surveys have produced some glowing testimonials on the quality of our homes and sites, and our Net Promoter Score is now 88 – a considerable improvement on last year’s figure. Our expanding, talented team has consistently supported operational delivery and performance, underpinning the business’s capacity for growth. Sustainability With Lucy Developments, all the new homes we’re building have an EPC A or B rating. In May, working towards the government’s Future Homes Standard on energy efficiency and carbon reduction, it launched the Future Homes Hub, which sets out the plans to meet the regulatory changes designed to achieve net zero housing by 2030. We’re ahead of the curve in that none of our new homes have fossil-fuel heating. Also, we’re working with a Finnish modular housebuilder to look at building truly carbon-neutral homes on one of our development sites, cutting energy bills virtually to zero and speeding up the construction process. Outlook Lucy Developments should benefit from changes in national planning policy to increase housing numbers. Signs of economic growth in Oxfordshire look likely to outperform the national average, with new investment in technology and research at the university, and infrastructure developments in the city, including rail enhancements. This is a good place to be building new homes. The prices we can obtain for these homes, however, are not expected to grow next year and better margins will come from the more recent large development sites and through further improvements in performance.

Ian Ashcroft

CEO Lucy Real Estate

Tenant surveys were also good news for Lucy Properties, with scores fractionally lower than the prior year but still recording a high customer satisfaction rate and a Net Promoter Score of 89. The favourable rating is largely due to the service provided by our in-house repair and maintenance team, as well as the effort we put into creating a sense of community among our tenants through initiatives such as yoga classes, group activities and seasonal events. We are lucky to have exceptionally talented people, with many years’ combined experience. This serves us well and helps to maintain our market-leading position. Sustainability At Lucy Properties, investment in energy improvements has continued this year. When we began our energy efficiency programme in 2023, roughly 50% of our properties had EPC ratings of D or below – now 86% have a C or better rating. Our varied social investment activities continued and, this year, we’ve also begun supporting a local youth charity, Inspire Sounds, which gives vulnerable and disadvantaged teenagers a chance to experience working in creative fields such as music and poetry.

Outlook For Lucy Properties, the future remains very positive. We do, however, have concerns about the potential impact on rent reviews of the Renters’ Rights Bill. We have yet to see the final legislation but expect a key feature will be giving tenants the right to appeal against rent increases, a lengthy and bureaucratic process even when comparative evidence substantiates the proposed rent increase. We expect rental growth to continue, but to be more muted next year than in 2025 after successive years of above-inflation growth. Countering this, our investment in property standards and customer service will provide resilience. Lucy Developments Performance Lucy Developments still faced the challenges of a tough selling market. Oxfordshire house prices have fallen by 1%, with a lack of confidence and market uncertainty leading to a shortage of proceedable buyers. Although trading conditions remained difficult, sales revenues did increase. This was due partly to successes at Manor Farm, Henton,

Lucy Properties Performance

A strong local residential rental market continued to benefit Lucy Properties. The supply-demand imbalance we reported last year still exists, as renters compete for a very limited number of properties. Lucy Properties’ rent roll surpassed £11m during the year, with rental growth in excess of 9%. Occupancy remained high at 98%, reflecting the quality of our rental properties and the service we offer our tenants. On the commercial side, we negotiated a five-year lease extension with Oxford University on Eagle House in Jericho. Operations Lucy Properties made significant investments in its property stock, particularly to improve energy efficiency, which will future-proof the portfolio and improve asset value. As well as upgrading existing properties, we are developing a residential block of flats at Girdlestone Close in the Headington area of Oxford to add two new storeys, providing eight new flats as well as a new lift. The project is due for completion in August 2026.

Ian Ashcroft CEO Lucy Real Estate 24 March 2026

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Lucy Group Ltd Annual Report & Accounts 2025

LUCYGROUP.COM

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