Vistry Group H2 2024 Earnings Call Transcript

Quartr
Provided by Quartr
March 26, 2025

There are 12 speakers on the call.

Operator

Good morning, everyone. Just gone half past eight, so we will kick off with our full year results. So I'm joined today obviously by Tim Lawler, Chief Financial Officer and Stephen Teagle, Chief Executive of our Partnerships business. So the agenda today, I'll give a very brief introduction, hand over for to Tim to go through all the financials, which are quite complicated this year.

Operator

Market update will be given by Stephen. I'll talk about operational matters that are going on at the moment and then finish off with an outlook, and then we'll be delighted to take any questions. So headlines to start with. So total completions increased to by 7% to 17225, which I still believe makes us the largest house builder in the country by volume. Partner funded was up by 18%, open market down in a challenging market by 15%.

Operator

And I think at this point, it would be good for just to make a point that when we announced the strategy in September 2023, we've had nothing since other than headwinds. And by that, the headwinds, some of those were expected and some weren't. So the headwind we expected was we're announcing a new strategy on the basis of hopefully labor getting into power sometime during 2024, which happened. But we knew that we were midway through, more than midway through, an affordable housing program of billion, billion $20.21, 20 20 6, where the vast majority of the funds for that program had either been spent or allocated. So the fact that we increased our partner funding by 18% last year is testament to our relationships and our teams.

Operator

And then we obviously expected a better housing market private housing market than we encountered, which we didn't expect. So adjusted revenues increased by 7% to $4,300,000,000 Average selling prices on the private side remain firm, although we continue to use incentives throughout the year. Bill cost was neutral and inflation was mitigated, again, as a testament to the new strategy. So you would have seen the analysts in the room that inflation from housebuilders in 'twenty three and 'twenty four was actually at quite high levels. We actually said during 2023, we had negative build inflation and we had neutral inflation during the course of 2024.

Operator

'16 thousand '5 hundred and '8 new plots of land, so we basically not far off replaced what we sold. We continue to be a five star house builder. And with everything going on at Vistory last year, that's no mean feat, and that's for the sixth consecutive year. We won more than 70 site quality awards, and the board remain absolutely 100% committed to the partnership's strategy. So as you all know, we significantly underperformed our financial targets that were set at the start of the year and through the year last year with a reported adjusted profit before tax of million, and that's up on the million that we indicated to the market just before Christmas and just after Christmas.

Operator

And there are reasons for that, which Tim will go through. So we all know the issues we had were in the South Division. So the total impact on profits was million, the full year 'twenty four. We've had a rigorous set of reviews and year end procedures, and no further issues have been identified. And we've just gone through, since being a Chairman or Chief Exec since 02/2003, the most rigorous challenging audit that I've ever known.

Operator

So congratulations and thank you to our finance teams in the room who did a fantastic job on that. So we all take a huge amount of comfort that nothing else has been found. Extensive work has been done since the start of the New Year on moving to enable us to move forward, which includes, which I'll come on to later, a new structure and some new people being promoted into the top echelons of the organization. The year end performance, we also had a shortfall at the year end from delays from partner agreements, the majority of which have now come through, and some commercial transactions, particularly land sales, which we pulled the plug on, having been chipped by a number of house builders as we went through December. Open market sales were behind forecast, and that was the main reason, disappointingly, for a buildup of WIP and stock, which again, I'll come on to later on.

Operator

So on the right hand side of the slide there in purple, you can a bit more detail on what happened in the South Division. So predominantly, 60% of the issues were on five very large house building or previously house building sites. All of the issues were on house building sites. And as it's been described to me very well by one of the members of our team in the last week or so, what happened in the South Division was basically a later defect in our house building business because everything that happened was already there when we announced the strategy. Nothing that happened in the South Division was anything to do with the strategy going forward.

Operator

Over to Tim.

Speaker 1

Good morning, everybody. Yes, it seems like a lot more than six months ago that we stood up here with our half year results. It's been a tough six months. Obviously, we've issued more trading updates than we would have liked, and we're disappointed with our full year performance. But hopefully, we can draw a line under 2024 today, and I can take you through the numbers now.

Speaker 1

So Greg's covered some of these areas already. Revenue was up 7% year on year. However, operating margin was down significantly, impacted by a couple of things. One was the impact of the South division issues, but also we expected margin to come down as we transitioned to the Partnership strategy model. What we didn't get was the compensating volume growth that we thought would offset that in 2024.

Speaker 1

Profit before tax and EPS both down 35%. There's some level of coincidence there. The EPS benefits from the reduction in shares following our share buyback program, but that's compensated for by a slightly higher tax rate in 2024. And reported profit before tax down more significantly because of the exceptional costs that we've taken during the course of the year, which I'll cover in a later slide. Net debt came in in line with what we expected towards the end of the year, but down on what we had expected towards the start, again impacted by the South and those delays at the end of the year.

Speaker 1

So we finished the year with GBP 180,000,000 of net debt. And as a combination of those things, ROCE was down at a level of 14.6% as you can see there. And that was 25% reduction in operating profits and an 8% increase in the average capital employed during the course of the year. So getting into some of the restatement issues. So as Greg said, we've been through a very thorough rigorous review year end process, during which we've examined all of the issues in the South.

Speaker 1

And then what you need to do is you need to go back to each of the issues and identify the extent to which it could reasonably have been known before 2024. So having gone through that exercise, it was identified that million of the million total issue could have been known in 2023 or before and hence is subject to restatement. The positive here is that the total cost impact of the South Division at 165 is the same number that we said back in November and December. So what we've done is take that £20,000,000 and moved it from '24 and '25 back into '23 and '22, which means that '23 is down by 11.8 from its previously reported number and 22 and before is down by the balance of 8.7. And twenty twenty four's number, well, then being at the two fifty that we talked about back in December, actually came in at 263.5, all due to the timing of the recognition of the South issues.

Speaker 1

For the H1 numbers, we will restate those numbers. We still need to work through all the details for the H1 numbers and we'll report those in due course. But as an indication, we expect that H1 twenty twenty four will come in at about million rather than GBP 186,200,000.0 that we reported back in September. Moving to more usual stuff. So the completions by tenure.

Speaker 1

So we had a shift to 73% partner funded, 27% open market in the year. As we've said many times, we expect a 60 five-thirty five split in the medium term and continue to think that's the optimal split. But in years, it will vary depending on market conditions at the time. And the partner market was more attractive in 2024 than the open market and hence, a relatively higher share of partner funded in 2024. You can see from the bar chart here that the biggest elements of change in the year was in PRS.

Speaker 1

So the PRS market remains active. Stephen will talk more about that in a minute. And so it's a substitution in the form private into PRS during the course of the year. In terms of revenue, so that split from partner to partner funded from open market means that the adjusted revenue growth in partner funded was 24% and open market fell by 16%. The average selling price, perhaps surprisingly across the group, actually held firm despite that split, and that's because APRS is the higher selling price within the partner funded area, and secondly, the PRS average selling price grew by 8% year on year.

Speaker 1

So that compensated for the switch from private into partner funded. What we expect in 'twenty five is a broadly similar level of ASP to where we are in 'twenty four. So in terms of the operating profit, gross profit down 163,000,000 year on year. If you take that into a sort of summary walk, GBP 92,000,000 of that is the issues related to the South Division. Restated from GBP 105,000,000 that we previously said, as I've discussed, GBP 91,500,000.0 due to that.

Speaker 1

We expected roughly £80,000,000 of margin impact from the strategy change. So as we moved to the higher partner funded mix and repurposed some of our housebuilding sites, we expected a margin reduction. As I said before, we expected that to be largely compensated with volume growth. And although there was volume growth in the year, it probably contributed about GBP 30,000,000 of year on year profit growth from volumes. That was less than we expected and largely due to the delays in Q4.

Speaker 1

In terms of the cost base, we had mutual build costs in the year, subcontractors slightly down, materials slightly up. We're expecting going into 'twenty five to see a low single digit level of build cost inflation, 2% or 3%. The other thing that's changed though is that the overheads have shifted. So in 2024, I don't know whether you described as a benefit, so there were no bonuses, no L tips. And as a result, the overheads dropped.

Speaker 1

There were also some one off benefits as we cut activity during the course of last year and got some benefits from that. So an overall reduction in overheads year on year of £45,000,000 We expect that to bounce back a bit this year, so we won't see the 24 overheads level again in '25, but we are targeting overheads to be about 5% of revenue across the group. I think the other thing to say in terms of 2025 costs as well as the 2% or 3% growth in bill costs, we are seeing the impact of the Employers NI change, which I've said before is around £5,000,000 in the year. And there is the impact of pay rises and just general inflation. So adjusted net earnings.

Speaker 1

So we've seen finance costs go up year on year GBP 95,000,000 in GBP 20 20 4, driven by a couple of things. First of all, bank interest costs went up by GBP 14,000,000. So we saw the average cost of debt up about 0.5% through the mix of the facilities and usage during the course of the year. And the average debt, as I've said before, was $698,000,000 so slightly less than $700,000,000 in 'twenty four versus $586,000,000 in 'twenty three. Some of that is related to the WIP build up during the course of the year, but also it's due to greater seasonality.

Speaker 1

So we saw a higher proportion of volumes in June and December for a short period of time, and we saw more WIP build up in the intervening months. Previously, I've talked about average month end net debt, but I've been asked lots of questions about average daily debt. So I'm not going to talk about average month end net debt anymore. We'll just talk about average daily debt, which is a more helpful guide for calculating interest costs. The other area within interest costs that has an impact is the other finance costs related to IFRS 16, in particular, and land creditors.

Speaker 1

And as land creditors move from pre-twenty twenty three rates to post-twenty '23 rates, we see that flowing through the P and L and hence an increase in the other net finance costs during the course of the year, which we expect to sustain into 'twenty five. And then tax rate was 28.3%, which is the corporation tax rate of 25%, and it's the 4% of RPDT less the savings that we get from our work where it's contracting more contracting in nature and RPDT is not charged. Okay. Building safety. So slightly more complicated area here.

Speaker 1

What we did during the course of the year was work through and assess all of the claims in some detail. We're making good progress with the assessment of claims and have now assessed over 90% of all claims. The conclusion is that we indicated back in November that there'd be a revision of the provision. In terms of the final quantification, we found an additional 41 buildings that need to slot into the provision. And those 41 are a combination of things that have been covered by the increased scope.

Speaker 1

So defects adding to the fire safety elements and just more claims that will continue to come through. Now in terms of the volume of claims coming through now, that significantly dropped, but there was a lag in terms of some of the claims coming through. So there are more claims in 2024 than we would have expected. Also, what we found is as we've been out doing building work, that there have been an extension of the amount of work that we've had to do. So sometimes you pull off the cladding and you end up finding you've got a heating issue you've got to deal with or a leakage or something.

Speaker 1

So the scope of work actually being performed on-site is slightly greater than we previously had. So we've taken all of that into account, 41 extra buildings, 117,000,000 extra cost. The next thing is the if I just walk through the left hand side of the movement on the provision, we've reduced the provision by million because a provision that we previously had for building safety issues in a joint venture are now being recorded in the joint venture. So that's just a straight transfer from our balance sheets to the JV balance sheet. We unwind the discounts because it's a discounted provision.

Speaker 1

And then during the course of the year, we have completed 28 buildings. We are on-site on a further 43, so the total utilization of the provision in the year is 68.8. So hence, the overall provision you'll see on the left hand side has jumped up by £35,000,000 On the right hand side, you see the costs that go through the exceptional line. So the first three, I've talked about. The provision recognized in JV is neutral.

Speaker 1

You move it from the provision to the JV accounts. We've also got an impairment of $16,800,000 So last year, I talked about the issues around Second Staircase. So the Second Staircase, new regulation that came in. We took an extra provision last year because this significantly adds to the cost of highways, buildings, and it also reduces the revenue that you're going to get on those highways, buildings because you've lost a whole area of floor space that would otherwise been sold. Working through that in more detail this year, actually, the impact is greater, so the impairment to schemes in London has increased by £16,800,000 Set against all that more positively, the level of recoveries has been good in the year.

Speaker 1

We've recovered £27,200,000 from third parties to contribute towards our costs of remediation and hence the overall building safety costs, $114,700,000 You may be more interested in the cash. The cash outflow in the full year was 36.8 which is broadly the utilization less the recoveries. And we expect and that was a lower level than we expected. We had a you might remember in the first half, we had a relatively low level of spend. It picked up during the second half.

Speaker 1

We expect that to sustain through to 'twenty five. So expecting a net cash outflow of 60 to 70 in 'twenty five, which is broadly in line with previous guidance. Moving to the bottom up parts of the P and L. You can see the Building Safety exceptionals of $114,000,000 We had $14,000,000 related to restructuring, integration and other costs. Big chunk of that is professional costs associated with some of the issues that we've had to tackle during the course of the year.

Speaker 1

Amortization has dropped as one of our assets has reached full write down and the tax adjustment gets us back to the reported profit of £74,000,000 So let's cover cash flow next. So our overall net cash inflow before shareholder distributions was GBP 80,700,000.0 in the year, which compares to GBP 91,000,000 outflow last year. So actually, year on year, that's GBP 170,000,000 improvement in cash flow. What we if you're working from left to right, we opened the year with a net debt of GBP 88,800,000.0. The adjusted PBT as you've seen is GBP $263,000,000.

Speaker 1

We've had an overall WIP movement of GBP 35,000,000 of investments. You've heard us talk about the billion of excess WIP. When we talk about the billion of excess WIP, which Greg will come back to a bit later, really what we're focusing on there is the late stage WIP that's just got too high. So this is stock from roof through to finished stock. At the year end, the value of that was around million.

Speaker 1

What we're saying broadly is that we want to halve that. We think that if we've got ahead of ourselves in terms of the build rates compared to the sales rate, and we think we can target a reduction in that level. Keeping going then, land creditors are crucial part of our strategy. We continue to buy land on deferred terms, and land creditors has risen by million in the year. Offsetting that, we've got an increase in partner funded receivables of million.

Speaker 1

So what these are, these are amounts owed by partners or work that's yet to be billed on partners. We're at a sort of normal level. '23 was somewhat suppressed because we had payments early payments from some of our customers towards the end of twenty twenty three. However, we will still be looking to improve our receivables by getting the right contractual arrangements in place. This number is impacted by the number of contracts we have with milestones rather than with monthly valuations.

Speaker 1

The monthly valuations, you'd expect a lower level of receivables. So we're looking to see to migrate more and more of our business to monthly valuations while the milestone based billing. I would cover all of the other areas other than say payables reduction is down, the billing safety number we've covered, and the taxation number was relatively small as we got the benefit from some of the exceptional charges during the course of the year. So our shareholder distributions then, the reason why net debt has gone up, shareholder distributions was GBP 172,000,000. There's a degree of lag in the shareholder distributions because we effectively million of that related to earnings from the previous year.

Speaker 1

And we'll come back to shareholder distribution plans later. Right. So we continued to buy land through some of the challenges we've had in the second half of the year. We stayed active in the land market. We bought 7,000 plots in the second half of the year.

Speaker 1

All of the land that we acquire goes through our investment committee to ensure that it's consistent with our strategic hurdle rates. We've said before that we want to reduce our overall land bank. With our partnerships model, we can get away with a land bank of less than four, and we've seen the a small reduction during the course of the year in terms of our land bank years to 4.4. Within the land bank is the former house building land bank. So we still have within the 74,000 plots there, 19,000 that were formerly part of the house building land bank.

Speaker 1

Within the 30,000 that we had at the time of the strategy change, around 6,000 around 9,500 of those were earmarked for pre selling, and we pre sold 5,900. So in terms of what we've got left within that 19,000, we've got about 6,500 left of private homes. Our plan is currently to sell those out as private homes, but one of the areas that we are continuing to explore is whether for the cash benefit, we might accelerate those through some deals of some variety. At the moment, our plan is to continue to or our numbers reflect the need to still sell them as private homes. But it's one of the areas that we're reviewing, and Greg will cover that later.

Speaker 1

Strutland, we topped it up a bit. During the course of the year, we've got 76,000 plots. This could be a key opportunity area for us. With the change in the planning rules, it might mean that we get more mobility out of our strategic land bank, and some of those can be converted more readily. So it's an area we're looking at, which could significantly help our growth.

Speaker 1

Capital employed fell since the half year but up year on year. I've covered most of the movements in the cash flow section. Other assets which has gone up includes the partner funded receivables. So that's the biggest driver of the growth there. You'll see that actually WIP is down year on year, but that does mask the fact that within WIP, we've had some impairments of WIP as a result of the South Division issues.

Speaker 1

Covering financing. So primary focus for the year is cash generation, And I won't steal Greg's thunder talking about what we're seeking to do there. In terms of numbers, we are looking to reduce our net debt levels during the course of the year. We're looking to get our net debt at the end of 'twenty five to be better than the net debt at the end of 'twenty three. Steady reduction during the course of the year, probably more second half weighted.

Speaker 1

So we're expecting our average debt levels to be slightly ahead in 'twenty five compared to 'twenty four. We've been asking questions about our covenants. And hopefully, putting the numbers up here gives the reassurance that we have a very good level of headroom against all of our banking covenants. We've got vocal relationships with all of our banks. We've been speaking with all of them recently in advance of a discussion to kick off an extension of our existing RCF term loan, which currently expires towards the end of 'twenty six.

Speaker 1

We're looking to move that time period out, and we'll start that discussion with some of the people in the room here over the course of the next few weeks. In terms of liquidity during the year, we managed this very closely. We have very good visibility of cash, and we've maintained a comfortable buffer during the course of the year. And then finally, in terms of capital allocation, no change to our strategy, no change to our capital allocation priorities and our capital allocation hierarchy. What we decided to do in terms of distributions is that we will continue to pursue the million program that we announced in September.

Speaker 1

Of that million, we've done million by the end of the year. We've done about £38,000,000 now, so we've got £92,000,000 left to do. And we expect to conclude that £92,000,000 at some point in H1 twenty twenty six. In terms of a final dividend for FY '20 '20 '4, in light of the disappointing earnings performance, we've concluded that we're not going to issue a final buyback, but we'll continue with the existing program instead. And of course, we'll continue to consider future ordinary distributions in due course.

Speaker 1

And that's it for me. Stephen?

Speaker 2

Thanks, Tim, and good morning, everyone. Good to see you. I'm going to spend the next few minutes running through a market update and in particular looking at the partnering market and how that we expect that to evolve over the next year, a pivotal year for the government setting the context for delivery over the next five years. But first, let's just look out the rearview mirror. So we've seen continuing momentum in our differentiated partnerships model over the last year despite the transition to a new affordable homes program, hesitancy around the autumn statement and uncertainty around the wider movement of interest rates.

Speaker 2

So we've been able to transact with partners. It was particularly focused on the second half of the year, but we've been able to transact with partners billion of contracts. That's two twenty deals having been made, creating nearly 14,000 homes. Those 14,000 homes sit within our total contracted position of around 55,000 homes. That does include homes that are in defects, but it shows the continuing momentum during that period.

Speaker 2

And if you look at the psychedelic pie chart in the center there, you can see those that segmentation actually is representative of the 70 partners that we've done deals with. Now that diversity of partner is really important. We know that the affordable sector has in terms of its financial headroom and its exposure to and its capacity to deal with exposure to downside risk is reduced. So there's pressures on there, but we are working with partners with sustained capacity and that's really important as we move forward. That includes 10 new partners as you can see on that slide.

Speaker 2

And just coming down to this pie chart in the bottom left hand corner, you can see there, as Tim has said, we've had an increase in our PRS partnering. 21% of the homes we completed last year were for the growing PRS market. That diversity also applies geographically, so we've been involved in schemes from Cornwall up into Northumberland over the last year. Now that map is representative. Don't count two twenty dots on that map.

Speaker 2

There are it's a map that we've used in engaging with government to talk about the value of our partnerships business and how that works across all housing markets. Part of that value is working with our PRS partners to attract institutional and international investment. And let's just spend a moment on that PRS market because it's quite interesting that we've seen growth in that market over the last year. Savills have issued a report saying it's a high watermark for PRS investment in this country last year, 5,100,000,000.0 was invested. Market characterized by second half deals.

Speaker 2

So if you look on the that graphic, the lilac or purple, I can't quite decide what it is, part of the histogram on the right hand side is quarter '4 deals in the PRS market. And so you can see that tendency towards it being a second half transaction process. But also one of the interesting characteristics of that market is the single family market has really grown over the last three years. So it now constitutes 50% of the PRS market. So that's the sort of work that we're doing with Sigma, with Leaf, with Gatehouse Bank where we're able to place our products, our two storey and three storey homes into that single family market.

Speaker 2

We see new entrants. So we're engaging with a number of funds and a number of new entrants to that PRS market. And everybody wants scale because that's where the efficiency comes from. And it's really important here to highlight that difference. As a partnerships business, we're not involved in single PRS one off transactions.

Speaker 2

We're looking for continuity and consistency of product, consistency of engagement with our supply chain, and that reaps benefits for our PRS partners because that gives them consistency and effectiveness in their operational costs and both of us benefit from that and that allows us to support the margins that we want to achieve in the PRS market. Now the government are absolutely clear on the value of PRS. It's really interesting that the recognition that the PRS market has profoundly professional management, so it's very good management track record. They're investing in areas of deprivation. A surprising percentage of the investment has gone into Brownfield land and areas of deprivation.

Speaker 2

And also the price points have widened, so you can now rent homes on a wider basis than was previously the case. That's freeing up other housing opportunities into the market. So think about it, that 1,500,000 homes that the government has an ambition for, it's not just open market, it's not just affordable, it is also getting the PRS market functioning very well. The open market demand over the last year, so currently we're seeing sales constrained by affordability, but the position is a stable one. What we have seen positively is a significant uptick in our website traffic in the first few weeks of this year.

Speaker 2

So that's up 85% year on year and partly driven by our contact center approach, a real improvement in the quality of our leads. So our high intent leads that are moving towards having an appointment to discuss purchasing a home, those are up 13%. And we're optimistic that we'll see further recovery during this year as interest rates move, but also as the requirement to purchase new homes increases. We're not including that in our forecast, so our forecast assume a stable position in terms of sales year on year. But important here, we have fewer sales outlets.

Speaker 2

So our sales outlets have gone down. That's a planned approach as we transition to the partnerships business. That means we need to be more effective in selling from those sites. We also have larger sites, so the volumes are there. So we're very confident in terms of the level of inquiries that we've seen over the first ten or twelve weeks of this year.

Speaker 2

And our new sales initiatives and our investment in our sales platform is designed to really reap benefits and we're seeing that already. We've implemented a national contact center. That's really working and that is harnessing the investment that we've put in our digital platform as well with our national marketing campaigns coming through. We've instigated a platform of training and behavioral training and mystery shopping across all of our sales teams and we're using incentives up to five percent through a national campaign, all helping to drive sales as we go forward. So I mentioned this was a pivotal year for the government.

Speaker 2

And this timeline, I think, gives a useful chronology of what's happened and just pinch ourselves. It's not actually a year that this is this time line. It's been incredible what the government has achieved. I have to applaud the government. I cannot remember in, sadly, three decades of involvement in housing, a government engaging with the sector as well as this government has.

Speaker 2

It is absolutely listening and that's been very positive indeed. And you can see there two or three key events. The additional 500,000,000 that was announced by the government to support additional affordable supply, I'll come back to that in a moment. That was followed by a further 300 or three fifty if you include an initiative for temporary homelessness. And most importantly, yesterday, the government announcing a further billion as a bridge as we transition from one affordable homes program 02/1926 to the next one 02/1931.

Speaker 2

Really important in maintaining momentum and absolute evidence of a government listening. What does that mean for us? So if you look at those pink arrows there, we are absolutely involved in talking to our partners about frameworks. So I mentioned earlier that we're delivering our PRS output in frameworks with Sigma and Leaf and with GateHouse Bank. We want to have frameworks with our key partners on a more established footing than they've been to date.

Speaker 2

So we're busily working on that, trying to align our opportunities with partner ambitions and doing that in the context of getting ready to procure the new affordable homes program by the end of this year. So we expect that further momentum in the second half of the year coming through as partners are looking to use their capacity and align that to what they now have visibility of in terms of grant funding. Really important piece of work and a piece of work that we're well on with and engaging with our partners to deliver. Now the government has that focus and here's a graphic that shows why. So you can really see and this is a 23%, twenty four % start.

Speaker 2

Look how those starts are down. They're down 39%, twenty three %, twenty four % on the year before. So the government can see coming down the track not only is there an absolute pressing need for affordable housing that we've talked about before, I don't need to go into now, but the conditions for delivery have been seriously constrained. That is different to our experience in Vistry, where as a result of working with our partners, as a result of our model, as a result of our investment, we've been actually lifting our output. So 52% of our output last year was affordable housing.

Speaker 2

And if you look in London, London brings that into a stark contrast. In London, there were less just over 3,000 starts in 2023, '20 '20 '4, down from 20,000 the year before. 47% of those starts were with Vistory. So it just shows how our approach is absolutely aligned with the government's approach going forward. So in September, we asked for some supply side and some demand side initiatives from the government.

Speaker 2

And well, here's a scorecard. So the government is absolutely approaching its policy for creating a transformational change in our planning system. And with the publication of the Planning and Infrastructure Bill two weeks ago, you could really see that coming through. So again, have to applaud the government to listen to the sector identifying the barriers on the supply side, bringing land public land forward and looking to free up the planning regime in all the ways that are listed there, which I don't need to go through. And in the summer, we'd expect a further report.

Speaker 2

We've had the initial report, but further report in respect of the new towns and the work that Sir Michael Lyons task force is doing, and that will be interesting in terms of bringing through opportunities as well, although those are a bit further out. And then we had the net recent announcement about investment in labor. We all know that we need to invest in skilling our labor force and that's a key area for focus as well. So really positive movement on the supply side and on the demand side demonstrating that commitment. So that additional billion coming through, which will facilitate the delivery of our forecast and then allow us to get an uptick in pace during 'twenty six as that starts to flow through.

Speaker 2

Incidentally, one of the conditions around that $2,000,000,000 is that it's going to deliver homes within the lifetime of this Parliament. So this is not about long gestation schemes. That investment is going to be focused on schemes that are going to deliver within the next three years. Further steps needed in terms of supporting the affordable sector. So it's really important that we see a sensible rent settlement and rent convergence coming through, the policies that will build capacity and make sure that we've got a financially robust purchasing sector.

Speaker 2

So it's really important we see that. We're preparing ourselves for more work with local authorities, so the freedoms for local authorities to be commissioning homes is really important. And we hope that there'll be a continuation of support for first time buyers. Shared ownership is a really effective tool to support entry towards homeownership, particularly outside the outside of London. We're seeing real demand for that and hopefully part of the government's grant funding and its program will be able to support investment in shared ownership.

Speaker 2

So in terms of partner momentum then looking forward, we've had a relatively quiet quarter one, which we did anticipate and we expect activity to step up as we transition towards that program and we've got a real evidence of that with the momentum with the announcement this week. We're assembling bids with our partners already. We've written to our partners to discuss how we can work with them on the opportunity to deliver that. And we've already under the earlier announcement of £500,000,000 we are very confident that we'll receive an initial allocation to deliver on six sites as a strategic partner of Homes England. We're negotiating those new investment partnerships with our RP partners and we're seeing that continuing strong level of interest in the PRS markets, funds being raised by our partners as we speak in order to look at portfolios of delivery with them and get that consistency.

Speaker 2

I mentioned there's still interest amongst partners with capacity for mixed tenure joint venture particularly participating in placemaking schemes where we can really make a difference and we can create a range of tenures. And our partners as long term asset holders are obviously interested in future proofing their homes and in the quality of their homes. So our ability to deliver through Vistory Works factory and capture the investment that we've made in that platform is really aligned with what our partners want and what the government wants as well when we're looking to long term quality. And those key things around delivery, engagement and quality Absolutely, Ali, an overarching approach in terms of how we work with our partners. Now what our business is about over the next twelve months, fully engaged with MHCLG and Homes England on delivering that quality and driving improved customer service.

Speaker 2

So we're accountable to our partners in terms of the quality of what they get. And I'm going to hand over to Greg now who will highlight how we're going to deliver that operationally.

Operator

Good. Thanks, Stephen. All exciting stuff. So I have no doubt, even before I touch on these next few slides, that we have got the right strategy in house building, which is completely aligned with the Labour government. Everything that Stephen said there is going to start coming through.

Operator

But we the government so far have been talking rhetoric about housing and affordable housing. They've done more than rhetoric on planning. They've done some good things already, but rhetoric was what it was on affordable housing until yesterday and the billion investment. So we are now an incredibly well placed organization to go forward. Having had a good kick up the ass, if you like me particularly, over the last quarter of twenty twenty four from a latent defect, as I'll continue to call it, from our housebuilding legacy business.

Operator

So the key priorities that said for 2025: One, first and foremost, cash generation secondly, embed the new leadership team and much leaner structure into place and standardize and enhance the control environment so the issues that happen in our house building business in the South Division don't happen again. So cash generation. So we estimated at the end of twenty twenty four, as Tim said, from roof level to completed stock, we had million, I think, too much investment at that level. And that will be released during the course of this year through open market sales. We have weekly executive calls now on monitoring stock levels like I've never seen before, and work in progress controls are really tight, much tighter than they were.

Operator

The housebuilding land bank release has been slower because of the sluggish housing market as well as the issues encountered in the well publicized SAF division. Site by site strategies to accelerate capital release are under review, particularly the top 30. And options being considered, as Tim said earlier, are discounting, which we've pretty much got covered in our forecast some land sales if they come along and some bulk sales, which the bulk sales and land sales may have some margin implications through the year. Embed the new leadership structure. As you can see, it's much, much leaner than it was particularly when we announced the strategy back in 2023.

Operator

It's been put in place towards the end of 'twenty four. It's fully operational now. We've reduced the reporting layers to create greater transparency and agility. Importantly, and this wasn't the case during 'twenty four, all of the operational leadership team in Vistry are all partnerships background. Nobody from a house building background at that level is left.

Operator

We've mandated five day a week working in the office or site for all of our business units. That was done six weeks ago and has successfully been incorporated. And we are currently going through a rightsizing program, particularly in relation to the ex house building business units so that they are set up in exactly the way as some of our best practice partnerships businesses, all of which I'll accept should have been done much earlier, but it's being done right now. And that's quite an extensive rightsizing program. Standardization and enhancement control environment.

Operator

So a clear message of compliance has gone out to all of the business units. All 26 business unit boards have been spoken to and there will be a zero tolerance approach going forward. Life of site procedures have been updated to ensure that we have the best consistent approach based on best practice across the whole group. As Tim mentioned earlier, we've got a new investment committee and that deals with all investments that we make, but particularly land investments, and that's been busy through the year as we continue to buy land in what is a soft market still. Investment in additional assurance capability at divisionalregional level, that's in our commercial teams.

Operator

Some independence has been brought into every monthly CVR that takes place. Cost value reconciliation is ratified independently. And our systems harmonization project will be pretty much complete by June of this year. So that's all there. And with the announcement yesterday of the billion injection of cash into affordable housing, which is the first real new injection of cash into the affordable housing market since we announced the strategy.

Operator

We are now positioned to basically, here we go, and the conversations we're already having with housing associations led by Stephen are immense. And that billion follows on from the million and million introduced over the last six months. We continue obviously to be focused on open market sales and we're monitoring the market for further stimulus that is required. We are standardizing all over the group our house types, which are enhancing quality and driving efficiency. And I can't explain enough the importance of having a timber frame manufacturing facility as a partnerships business.

Operator

And we are expecting to increase the output from our timber frame three factories by 50% during 2025. So that's 2,900 timber frame panels to 5,000, five thousand houses during 2025, more floors and we did no roof trusses during the course of 2024 and we expect to do about 6,000 homes roof trusses during the course of 2025. So exciting times within our timber frame side. And as Stephen said, I can't explain enough how much that aligns with our partners, what they're looking for from our houses going forward. So our medium term operating framework and targets.

Operator

This is exactly the same as what we announced back in September 2023. All we've done simply is remove the timescales. So we're looking at revenue growth, 5% to 8% growth per annum. We're looking at a ten year mix of 65% partner funded, 35% open market, and that's predominantly what we've been buying our land on over the last eighteen or so months since the announcement of the new structure. A less than 5% overhead of revenue.

Operator

A land bank of at or just below four years, which is all we need with our partnerships model and all land as it has been for quite some time deferred on sorry, bought on deferred payment terms. And our medium term targets remain a 40% return on capital and a 12% operating margin as a number of our partnerships businesses have done for the last two years. This is not pie in the sky. Our partnerships businesses, in some cases, are already doing it. So current trading and outlook.

Operator

The forward order book is at a healthy billion, and that represents 65% of forecast units for 2025. That's a good position to be in. Partner funded activity is expected to step up as we go through 'twenty five, and that's the million announced prior to yesterday in top up funding and delighted with the billion worth of affordable housing grant that's just come through yesterday. And that is exactly what the sector and Vistry in isolation, we're obviously the biggest house builder, so we have a decent say and we do have the ear, I believe, of the government exactly what we asked for. We didn't ask for $3,000,000,000 We asked for $2,000,000,000 to be brought forward, and that's exactly the number that's being done.

Operator

Again, emphasizing what Stephen is saying that the government definitely are listening to us. We expect partner funded volumes in 2025 to be at a similar level to 2024 with a greater second half weighting, obviously, because we've only just had the billion announced. So that will something might come through for the half year, but the majority will come through in the second half. Open market volumes are expected to be at a similar level to 2024 from a reduction, planned reduction, because obviously we're coming out of house building in sales outlets. We expect low single digit build cost inflation in 2025.

Operator

That will be the first year out of three now that we're expecting some inflation, but we'll be mitigating that where possible particularly on our partnership sites. And we expect to deliver year on year progress in profit in 2025. That's a better statement than we said in January because profit at the time was $2,500,000 and now it's up to $263,500,000 So that's higher than we said a couple of months ago with a greater 0.52% profit weighting than in previous years for obvious reasons because of the new funding that's only just come through. And I'll finish off on a positive note. We continue to be absolutely committed to our differentiated partnership strategy and really do welcome the government's intervention of yesterday with a very, very welcome billion worth of additional funding, which will provide about 18,000 homes.

Operator

And as Stephen said, they want that spent now. That's what they've actually said to us. They've put in it during the course of this Parliament, but they want that spending now. So on that point, we will, between the three of us, take any questions from analysts in the room. Do you want to go I think Andy probably just had his hand up first.

Operator

No, yes. Do you want to say sorry, you need to say your name and where you're from first, please?

Speaker 3

Yes. Thanks very much. Ainsley Lamon from Investec. I think I've got three actually. Just first of all, on the H1, H2 split, just a bit more clarity around the weighting you expect there.

Speaker 3

And is it presumably the kind of recovering H2, is that very much the kind of funding allowing you to sell some of that kind of completed stock quicker than you would have expected without the funding? Question one.

Operator

No, that's mainly coming from the billion and the million previously announced coming through in the second half of the year. So we expect private sales to come through, but those private sales probably will be at a lower margin than they will be in the second half of the year. Do you want to add anything to that, Tim?

Speaker 1

Yes. So we always have higher weighting of private sales in second half as well. So volumes wise, there'll be a weighting towards the second half, but also margin wise. So the impacts of the cost issues from last year and the reductions in the margins will weigh more heavily on the first half of the year. And also, we'll get the operating leverage benefits in the second half of the year as with the higher volumes the fixed costs are more covered.

Speaker 1

So we'd expect a margin increase as well as a volume increase in the second half.

Speaker 3

Okay. And then second question, just on the medium term targets, obviously keeping the margin and the ROCI target. The medium term kind of capital employed expected around 2,000,000,000 still. So is that 800,000,000 that you previously mentioned still kind of realistic target over the medium term?

Operator

800,000,000 operate. Yes, it is, but just not putting the time on it.

Speaker 3

Okay. And then last question, just what you expect the land creditors to run out maybe this year and into next year?

Speaker 1

So I think it will go up. Obviously, it all depends on how much land we're going to buy in the second half of the year and the timing of the landing, the timing of the acquisitions. I'd expect it to be slightly similar sort of levels in the half year and then grow in the second half because we'll buy more land in the second half of the year. So whether that's only $50,000,000 or $100,000,000 more by the end of the year or something like that.

Speaker 3

Is that around GBP 8 hundred million GBP?

Speaker 1

Yes, something like that, yes.

Operator

Thank you. Do you want to go on, just hand it to Gregor.

Speaker 4

Thank you. Gregor Kugic from UBS. So can I ask on the comment just to clarify on the average debt reduction? I didn't quite catch what you were trying to say. Maybe give us a sense how quickly you think you can get that?

Speaker 4

I think $700,000,000 or daily average down this year and then perhaps next year? And what you're assuming in terms of distributions to shareholders in that, please? And then I guess more broadly, if I sort of look at the gearing levels, so average debt, line creditors, there's some helpful disclosure on the JVs, I appreciate that in the appendix, I think. Just give us a sense of where you think the sort of group balance sheet structure should be ideally in a few years' time once the business sort of settles down?

Speaker 1

Okay. So let's start with the average debt profile. So the first half of the year, I'd expect our average debt to be higher than it was in 'twenty four, largely because we're starting the year with a higher debt position. So we're million higher opening debt than we had last year. And the cash actions that we're taking will be more weighted towards the end of the first half and into the second half of the year.

Speaker 1

So I'd expect the first half average to be higher and the second half average to be lower as those cash actions come through and we see that profit weighting in the second half translate into cash weighting in the second half. So the net of those two would be that we take our average debt levels down over the full year, but marginally. Then we've said that our year end net debt levels will come down, and I've said to roughly the FY 2023 levels. That's high double digit net debt at the end of twenty twenty five and we'd expect to get back to net cash at the end of twenty twenty six. So I think for simplicity what I'd do is assume that that reduction in year end applies to the average going forward as well.

Speaker 1

So the sort of million reduction would see to average net debt in 2026 as well. Okay. In terms of the border question around our balance sheet structure, we're comfortable with the idea that we carry debt. We do want to have a more a flatter seasonal profile. We want to ensure that the banks are we're giving the banks what they need and we've got the right sort of comfort there and feel confident that we'll get the extension.

Speaker 1

So going forward, if we can flatten out our profile, we're happy to have carry some level of debt. We want to make sure that that is that we're always maintaining a comfortable headroom at any particular period of time without good visibility, comfortable with that. So then it's a question of that we'll have the debt versus distribution question. At the moment, in terms of shareholder distributions, we're saying we're focusing as I said earlier, we're focusing on completing our current program, so no final distribution. For the half year this year, we need to keep our powder dry and make that decision in September.

Speaker 1

But given that we will still be ongoing with our share buyback program of 130, it's probably less likely that we'll be adding further distribution at that stage. And then we'll be looking to get back to enacting our policy from 2026, which is to distribute half of the adjusted net earnings of the group.

Speaker 4

Okay. So you're basically you're saying that this year, no distribution on top of the whatever 90 left. But for the final, you're assuming you're going to start paying out sort of cash out

Speaker 2

so that

Speaker 1

I don't want to jump the gun too much in terms of what we're going to decide and the board will decide in September. But the first priority will be to complete what we've already committed, and we won't complete that when we come to the September announcement. So it's unlikely that we'd announce something else

Operator

in addition. In £19,000,000 still.

Speaker 1

Yes, In terms of the so we've got the Yes.

Speaker 4

I was thinking for '26 is the point.

Speaker 1

So '26 come the final. If it all progresses as we'd expect and our cash has improved, then we'd expect to get back to some level of distribution in '26.

Speaker 4

Okay. And in terms of a target average debt number, is there one in your mind where you should be?

Speaker 1

I'm not going to quantify it. Just we will obviously keep in mind what our profit generation is and the cash profit generation and have a link to that. I don't want to box us in to a particular average debt number.

Operator

Okay. Thank you. Thanks, Greg. I appreciate everything you've done. And I understand you're leaving, so if I don't get a chance to say goodbye, all the best.

Operator

And I understand you're going to the buy side. So I'm looking forward to welcoming you as a shareholder very shortly. Will?

Speaker 5

Thanks. Will Jones, Rep Atlantic. The first, just as we consider the return to low single digit build cost inflation and presumably for industry that will carry on beyond the current year, just your level of confidence on existing contracts that you can weather that and then on new contracts, the extent to which you're able to mitigate the risk with indexation or whatever else.

Operator

So just on that, like pretty much all housebuilders, housebuilders generally assume no builder cost inflation because it will be offset by sales inflation. And we've obviously been operating in a period for probably two years where we've had very little, if any, build cost inflation by the time you take into account inflation. On the Partnership side, we're very, very confident. We build in build cost inflation into our margins, into our appraisals, etcetera, etcetera, and are very confident with the orders that we're placing at the present moment in time where we are still having subcontractors really wanting to come and work for Vistory because of the certainty that we're giving them with the work because it's not market reliant once they get the job. We are getting some very good bids in and probably still seeing right now a little bit of deflation on new orders being placed.

Operator

Not the same on housebuilding where you can't give the certainty that we're definitely going to build these 200 plants no matter what happens. So we're very confident we will see some single digit inflation on some of the house building sites as we build out.

Speaker 5

Second was just around discounts, I suppose, just given that soft start to the year on in the partner world. Has that changed the discounts that are being demanded? And is it still consistent, I suppose, on new contracts with a return to Yes.

Operator

With discounts, what, from clients, housing associates? Yes. No. Well, we buy, so when we're talking about we buy the land, if a PRS provider, for instance, just pick a stupid number, wanted a 50% discount from you, it doesn't matter. That is the level we put into our appraisal.

Operator

So we either buy the land or not. So our appraisals are based on a provider price at that particular time coming through and they will back to back the deal with us in normal instances, whatever that might be. So if it's a strong deal, if it's a strong price, we've got a better chance of buying the land. We've got lesser chance buying it if it's a silly price. So we try and work with the housing associations and PRS providers that are in the best place to make us the best offer.

Operator

But the discount doesn't matter because we either buy the land or we don't. Where it does matter is as we come out of the legacy house booning land, which is all based on selling to Mr. And Mrs. Smith at And if we sell it to Mr. And Mrs.

Operator

Smith times or so plots as we go forward, that's where we'll be. We have built in some discounting to force the sales to get that cash back or repatriated as quick as possible. But if we decided to do a deal there with a PRS provider and it was a 10% or whatever percent discount, that would impact because we've not priced it on that basis because it was bought to be sold on the open market.

Speaker 5

And then last one is just around the numbers maybe this year and next. Just to clarify, I think you talked about potentially accelerating some bulk sales or such like and that could have margin implications. You'd still expect to deliver higher profits year on year if you stepped on that side of it, would you? That wouldn't compromise the

Operator

If we were to do some land sales, we'll have to look at that. But those land sales would generate a higher level of cash. So it would be up on one, maybe down on the other. On bulk sales, it's very, very difficult because I'll try and keep it simple. If you had a scheme of 200 homes still to be done on an excellent housing site, If the forecast this year has got 30 of those to be sold on the open market at 300,000.

Operator

If somebody came in and said, I'll buy all 200,000 from you at a 15% discount, yes, we would get the cash in, but we would the revenue would go up because we rather than building 30, we'd try and build all 200 and that would offset the actual profit to an extent, but the margin would absolutely come down. But that all depends on the profile of what comes in and what gets offered. But we have allowed for an element of discounting within our forecast on open market sales.

Speaker 5

And then just when we think about '26, an early view, to what extent do you think that the issues you're working through this year are largely gone at that point? Or are they still persistent beyond the cost charges as an impact on potential profits in '26?

Operator

Yes. Well, I think they're largely through now and they have to be because we've just gone through a very extensive audit. We've still got a new leadership team. We still got a much leaner structure that which needs to work through. So there's still a lot of work to be done.

Operator

We're working through a rightsizing process at the present moment in time. So the business is going through a pretty much a big upheaval at the present moment in time. I would say, which is not a very good thing to say as Chief Exec, we've probably done more in the last twelve weeks on converting the whole business to partnerships than we did in the preceding fifteen months. So that needs to work its way through. So whether it's everyone back to the office five days a week, etcetera, etcetera, rightsizing, which is going through at the present moment in time, there's an awful lot going on and that will take through the year to come through.

Operator

But as we go into 'twenty six, I think it's all behind us. Thanks.

Speaker 6

Glynis. Good morning. Glynis Johnson, Jefferies. I've got 3.5%. The first one just in terms of the PRS, the 21% of PRS, how many of those were planned when you purchased the land and how many were because there were bulk deals that came along?

Speaker 6

And I guess that leads back into that question about discounts because we've had one of your peers talking very big discounts and no longer doing PRS. Another one saying, actually, the discounts are fine. That's just one question. We'll take that.

Operator

We'll take them on a time. Do you want to take that, Steve?

Speaker 2

Well, yes. It's, yes. I couldn't give you an exact percentage, but split. But undoubtedly, some of the work that we've done with our PRS partners is planned and was planned additionality. And we talk about additionality as being additional affordable or additional PRS, it's additional sales.

Speaker 2

And sometimes we respond to a price point between PRS and affordable. And where there's less appetite for affordable, then we'll increase the amount of PRS. So I would say probably 60% of what we planned to do was PRS and maybe 40% was looking at opportunities within the Old House Building Land Bank.

Operator

And putting that into context, Glynis, I would say that the majority of the 40% unplanned was coming out of housebuilding. That would particularly go down to the Blackstone Leaf deals that we announced over the last eighteen months.

Speaker 6

Second one, in terms of forwardsold, you're 65% forwardsold going to the year. What would you think is the right level? Where would you like to be given the change of model?

Operator

I think the fact that we're 65 and billion working from old affordable housing programs is a strong position. I'm delighted with the billion that's come in yesterday. So we've got none of that is in our order book and we will get a fair percentage of that. But 65% standing here right now going forward would be good.

Speaker 6

So even with a consistent affordable homes program, you'd still say 65%? Yes.

Operator

Because we performed pretty well during the course of last year working off scraps, I would call it.

Speaker 6

And question 3.5. The you talked about fewer number of sites. Does that mean, as we sit here, should we be looking for the sales per site to increase? Or how should we think about how you're going to talk about the sites? Are they sites?

Speaker 6

Are they outlets? Are they brands? Just so we know what to expect. And then the following on from that, having got my glasses out and looked at page 22, in terms of the size of sites, some of your flagship sites, particularly in the North, are actually relatively small. If the strategy is this much bigger delivery, much faster pace on-site, is there some very substantial land investments that need to be done or land that needs to come in in the North in order to get the Vistory group to the right

Operator

level. Just before I hand on to Stephen, I suspect in the next couple of days, we'll be announcing in the North a 900 unit plus scheme and a 700 unit plus scheme, Stephen. So some big ones coming through. But do you want to take that, Stephen?

Speaker 2

Yes. I'll just deal with the site element of that, please. So the we've reduced our number of sites. So in full year 2024 compared to full year 2025, we expect an 8% reduction in our numbers of outlets. So we're still going to be around the 187 outlets for this year.

Speaker 2

So yes, we are going to be improving the sale from those sites and that's part of the range of initiatives that I mentioned in terms of driving that improved sales outlook. We're seeing that come through already with the enhanced digital platform with the impact of the contact center with our focus on national campaigns, which is driving visitors to our website and driving inquiries and subsequently reservations. So all of that is positive. In terms of the brand element, we are continuing to sell through three brands at the moment. We have about 25, 20 eight sites where we have some form of dual branding or in one or two cases, tri branding.

Speaker 2

So where we've got Linden, Bovis and Countryside Homes, we're limiting the use of Countryside Homes. That's really much more focused in East Of London and where we need a third brand in order to deal with the product that we've got on a larger site. But those having that three brand approach absolutely helps us in terms of our confidence in lifting that sales rate as well.

Operator

Okay. Chris?

Speaker 7

Chris Millington from Deutsche Neumis. You mentioned some of those large PRS deals you've signed up. Can you just give us a bit of a progress update on them? How far through are we? How the Blackstone, the LEAF contracts are going?

Speaker 7

Just in a bit of generality? How do

Operator

we manage our time as well? Yes. We're probably well, they're all identified. They're all on-site now. We're probably about 50% of the way through.

Operator

I'm looking at Michael, yes, about 50% of the way through.

Speaker 7

And that would be on homes delivered and handed over?

Operator

Yes. No, it would be on homes delivered and working it's an overall contract. Yes.

Speaker 7

That's helpful. Thank you. Next one is just about that affordable housing chart you showed. It's really helpful to see the grant funded, the Section 106 side. Now if I look back at it, it looks like the grant funded has actually held up pretty well through the period.

Speaker 7

It's 70,000 a year, whereas the section 106 is down 65, 70 percent. Do you think some of this extra funding they've put in is going to, you know, either continue pushing that grant funding side or is it likely to kind of help their finances and and go back and help the section one? I'm just trying to understand it. That looks the biggest fall off in terms of delivery of affordable homes, the Section 106. But does all this money go back

Speaker 2

into grant funded properties? Yes. So it does. So the fundamental, just to be clear for everyone, is that the grant can't be applied to Section 106 homes. There is a very clear difference.

Speaker 2

The grant is applied to what's called additionality. So it's additional and beyond planning. One of the issues with Section 106 delivery for partners is if they've got scarce resources and they're investing in product and opportunities that they want, so they're being more selective, taking a residual number of Section 106 properties on a site that may not be complete, may not have been designed to the standards that they originally anticipated is less attractive. So one of the problems with Section 106 delivery for the sector is definitely capacity within the sector. But there is also the fact that the purchases of those affordable homes are being selective and they want to make sure that the quality of product that they're getting is there and also where that product sits in terms of place making.

Speaker 2

So if you've got 20 affordable homes over here and you're going across a building site to get to them, that's not going to work very successfully. What does

Speaker 7

Sorry, Tim.

Operator

Just expanding on that a minute, keeping it very, very simple. That means if you're in the same area and you've got we've got 20 Section 106 affordable homes to do a deal on and A, another have got 20 a mile down the road. We'll be offering as part of our additionality another 30 or 40 homes to that housing association. So they're looking at us and going, actually, I can do 60 on or 50 on this site. My management costs, the servicing, etcetera, etcetera, I'm going to do that rather than prioritize it ahead of that over there.

Operator

And that's why one of the main reasons we've been able to keep our affordable housing revenue up. So the housing associations are more likely to do a deal with limited funds and appetite on pure Section 106 where it's in isolation than they will where there's an additionality offering next to it. Sorry, Steve.

Speaker 2

So you should think of the grant in the context of how Vistory deploys that grant as an enabler or a catalyst. So Housing Association purchasers are much more likely to take 20 Section 106 homes if added to it are 30 additionality homes supported by grant because they can blend the grant across all 50 homes. So that's how we use Grant. We use Grant to not only deliver additionality, but it facilitates those Section 106 homes. We have a secondary advantage that mainstream house building sometimes doesn't have in that we're working upstream with those partners on the product design and delivery.

Speaker 2

So they're familiar with the product that we're offering and the quality of an engagement around the delivery of it. So that's the way that Grant is used to lift Section 106 output.

Speaker 7

Very clear. Last one just quickly on open market. There's a reference to it being a bit better over the last four weeks. I don't know if you can put any numbers around it and whether or not you're getting any traction on price increases.

Operator

We're not getting traction on price increases, and we don't put numbers out other than to say we've been encouraged by as other housebuilders have been with probably the last six weeks' worth of reservations. So we're definitely seeing a spring bounce. Thank you. Thank you.

Speaker 8

Ami Gala from Citi. Just two questions from me. The first one was on the systems harmonization approach that you talked about. You've obviously acquired businesses over the years. Is the back end IT systems in one place today, or do you still work with different business units at the back end?

Speaker 8

The second question was just a clarification on the building safety levy. Is it right to understand that you get exemption for the affordable housing component, but you're chargeable for the rest?

Operator

That is correct.

Speaker 2

That is correct. And it's 50% on Brownfield Land.

Operator

Tim, do you want to take the first question?

Speaker 1

Yes. So we operate on a single ERP, which is called coins, which is a commonly used system across the house building sector. We've also got supplementary systems for sales and for our financial planning that again everybody is on. What we're the harmonization element that needs to complete this year is getting everybody on the same instance in the setup within that system. So that process is being harmonized over the course of this year with most of the business units being done by June.

Operator

Thank you. But you're right, we haven't been because of the three acquisitions or bringing the three companies together.

Speaker 9

Thank you. Clive Lewis at Peel Hunt. I think we've got three, possibly four. The ten year rent settlement, Stephen, that you obviously flagged, is the government listening to you on that, if they were listening to you on the $2,000,000,000 And if so, do you think that's going to be announced at 12:30 today? Or sort of some idea of where you think we are in that process?

Speaker 9

And do you think it's going to be RPI plus one? That was the first one.

Speaker 2

So I'll deal with the first question. I absolutely have no idea what's going to be announced at 12:30 today. What I can say is that the sector as a whole has been really clear and we absolutely have joint articulated the case as well that if the government can give a ten year rent settlement, that obviously gives even more security than a five year rent settlement and it's CPI plus one by the way, not RPI, so CPI plus one. That gives confidence not only to housing associations to invest, but most importantly to their lenders in terms of having a hedged business plan going forward. Now governments have only ever given us sort of five year trajectory.

Speaker 2

It would be great to have that ten year confidence. Allied to that is a rather technical requirement for something called rent convergence, whereby the very different rents that are set across the sector depending upon the age of properties and when they were delivered and how under what regime they were delivered has caused differential rent pricing across the sector. If we can have rent convergence, that will also build capacity back into housing associations and local authorities. So the two issues are there's a government already given a five commitment that it will instigate the five give five year clarity, but having ten years would give it even more and rent convergence would be the two things. If you ally that with this evidential focus on the affordable homes program, put the two together, then you really do start to restore the capacity back within the sector.

Speaker 2

I think that is more likely to come following the publication of the National Housing Strategy, which is going to happen at the same time. If you look at that chronology, we expect that to be at the same time or just before the public spending review. And I think that's the point the government will announce it, but maybe proved wrong in two or three hours.

Speaker 9

The second one was around local authorities. Again, it's another part that you're expecting a lot more activity. I suppose I'm trying to get more of a flavor around how you think that is improving and that is picking up.

Operator

Definitely over the last few months. You start with one offer and then you think, hang on, there's a bit of a trend. We're definitely getting offers at the moment from local authorities to buy tranches of our stock around about the country on the back of no grant, but on the back of massively increasing Holiday Inn, Premier Inn, where they have a legal obligation to house homeless. So they're now starting to look at it proactively as an investment, why not buy X number of flat store houses? It doesn't have to be in their local authority area either.

Operator

And we can put people there, which is morally better thing to do than moving them from A to B to C to D, which which is what's currently going on. The country, as we keep saying, has got a massive homeless affordable housing problem and labor are just starting to deal with it now. But local authorities, without any grant, are just starting to look at maybe there's more than one Windermere discount. Maybe they're getting some form of loan mortgage. I'm not sure of that yet, but there is definitely something going on that we're seeing more activity with local authorities buying stock or houses from us.

Speaker 2

I was just running through my mind. We're actively involved in negotiations and discussions in with five local authorities in terms of delivering on more than one site in that local authority, if that's evidence of that appetite.

Speaker 9

Next one is on PRS. You put up the chart again that showed 24% as a sort of peak level. Do you think 25% will be another peak? And if so, how much do you think we'll see in terms of growth in that market

Speaker 2

this year? I think there is if you disaggregate the PRS market between multifamily, which tends to be high rise and how that's been impeded by Second Staircase and now is consuming cash With commissioning of much quicker turn low rise housing, I think that continuation of the investment in single family low rise housing has not reached its peak. I think that's going to continue. We know that our partners are very busily getting additional funds and that those funds are there. Global Capital wants to invest in U.

Speaker 2

K. Real estate. There's a real demand for it. People can see the sustained demand and the investment. And if you've got scale, the real key is scale.

Speaker 2

If you can achieve scale and that involves consistency of product, then you can really make PRS work. And the fundamentals of rental growth and demand will allow that to continue to grow. I think that's a I'd expect the single family to not have reached its high watermark last year.

Operator

And just putting numbers in, as Stephen said, I think I've got it right, 3,000 starts in London over the last?

Speaker 2

In '23, '20 '4.

Operator

Over two years. And we did 40, was it 7% of them?

Speaker 2

47% in 2020.

Operator

'40 '7 percent. I mean, so at the end of the day, I'm very happy to stand up here and say the strategy announced in September 2023, the strategy is absolutely starting to come through now with the government actually starting to allocate real money and acceleration into the affordable housing. What hasn't been so good is the latent defect we had in the South Division, which was house building. But the strategy going forward, we've underlined that, is absolutely proven to be right.

Speaker 9

The last one I had was on sorry, was on the billion as to how quickly do you think it will come through? Is it 200,000,000,000 this year, 800,000,000,000 next and then 1,000,000,000 All I'll

Operator

say is they've linked it to the existing program. But do you want to answer that, Stephen? Well,

Speaker 2

no, Homes England are heads down getting to the end of their financial year, so we're not there yet in March. So they haven't come up from there to determine exactly how that's going to be deployed. But the expectation of pace from the government and from the minister is absolutely clear, and I'd expect Homes England to be looking to deploy that very quickly. Key to it is it's not based on the new program, I. E.

Speaker 2

They've got to go through procurement route. This is additional money that can be used as a bridge within the existing

Operator

So it's cut out by tape. So it

Speaker 2

can be the systems are there to deploy that very, very quickly. So I'd expect Homes England to be asking for talking to partners and having discussions around likely opportunities and bids in April.

Operator

Thank you. Thanks, Clive. And to over to Alastair.

Speaker 10

Alastair Stewart from Progressive. A couple of questions. First, I suppose it's for Tim. On Slide 12, you showed fairly decent rise in recoveries, fire safety recoveries. Can you give some color on what sort of, who these were from?

Speaker 10

Was it from insurers, supply chain and so on? And what's the direction of travel going forward? And then very briefly, probably for Stephen following on from Clyde, there's a big jump in the Savills chart in Q4. Are you getting any indications some Savills are your own soundings on what Q1 will look like?

Operator

So do you want to take the first question?

Speaker 1

Yes. So in terms of where the recovery is coming from, they're coming from a combination of partners and sometimes the residents or owners of the buildings that we're doing the work on, whereas there's some degree of additional work involved. 2024 had an unusually high amount. We can't talk about specifically where the recoveries are coming from, but there was a one off amount that was large within 2024. I think as a general guide in terms of recoveries up to 20% of cost, that sort of level is what we'd expect going forward.

Speaker 2

And in terms of PRS, Alastair, we are actively talking to our partners about funds that they are accessing over the course of the next two months. I wouldn't like to sit and say what is in H1 and what is in H2. It's there has been progress in Q1, I think was your question. So we have definitely been involved in positioning PRS deals in the first quarter. But again, I expect that Savills chart actually shows a trend.

Speaker 2

So it does tend to be second half focused and I suspect that trend will continue.

Operator

Okay. I think we've got time for one more.

Speaker 11

Morning. Thank you. It's Alison from Bank of America. Just one question on the credit facility because looks like in March, you have a new 50,000,000 facility secured. Can you just give us some background?

Speaker 11

Like what's the reason behind this? What's the terms? Because if the aim is to deliver in 2025? Thank you.

Speaker 1

Yes. So this is an extra so all of our facilities by the USPP are with banks or a bank within our banking group. So one of our banking groups, I don't know whether they want to be named, so I won't name them just in case. What we're trying to do with our facilities is use them for different means to manage short term cash swings. So this particular one enables us to keep less money on deposits.

Speaker 1

So the more money we have on deposit, the less efficient our overall banking position is. So the more we can move our debt on a daily basis, the better. And what this allows us to do is that short term tweaking for and we tend to use it for mid month activity. So So it's a very specialist requirement that one of our banks has helped us with.

Operator

Okay. I'll thank you for that. I'll draw a line nearly 10 so that's an hour and a half. Thanks very much for your time and have a good day. All the best.

Powered by Quartr
Earnings Conference Call
Vistry Group H2 2024
00:00 / 00:00