This scheme uses a 3 port diverter valve, which has only 2 settings - heating only or hot water only. Due to the significant inconvenience of only having one or the other, this system is not common.
Terminal 3 on the programmer is energised, power then goes to terminal 6 in the wiring centre and to terminal 1 on the cylinder thermostat. If hot water is required, power continues via the C terminal on the thermostat to wiring centre terminal 7, and from there to the boiler and pump.
Terminal 4 on the programmer is active, which connects to wiring centre terminal 4 and on to the room thermostat. If heat is required, power continues to wiring centre terminal 7 which activates the boiler and pump. This also connects to the hot water cylinder thermostat C terminal, and if no hot water is required, terminal 2 on the cylinder thermostat is powered, whcih connects via wiring centre terminal 5 to the valve, causing the valve to move to the heating position.
If both are selected, the hot water will take priority, since the valve can only be moved to the heating position if the hot water cylinder thermostat is in position 2.
This means that the heating will not work unless the hot water cylinder is fully heated. In properties with high demand for hot water, this can result in the heating being unable to maintain the required room temperature.
It also means that if the cylinder thermostat is set too high or is broken, the heating will never work.
These systems can be converted to a Y plan system with minimal plumbing alterations, as the valve is either identical or very similar in size to a 3 port mid position type.
The wiring does require significant modification, however all of the existing components (other than the valve) can be retained.