Vistry Group PLC

LSE:VTY

Earnings Call Transcript 2021-Q4

[Greg Paul Fitzgerald]

Good

morning, everyone, and

welcome

to

Vistry

Group's

Full

Year

Results

for

2021.

Delighted

to

be

joined

today

by

Earl

Sibley,

our

Chief

Financial

Officer;

and

Graham

Prothero,

the

Chief

Operating

Officer.

So

the

agenda,

I'll

run

through

our

performance

through

the

year

and

the

strategy

going

forward. Earl

will

then

step

in,

as

you'd

expect,

with

a

financial

review,

handover

to

Graham

with

an

operational

review.

And

then

I'll

finish

things

off

with

an

outlook.

And

then

at

10:00

this

morning,

we

will

take

your

questions.

And

that

will

be

after,

of

course,

[indiscernible]



(00:00:32)

I've

have

had

a

good

[ph]



grilling (00:00:34)

by

you

all

hopefully

at

8:30.

So

we

had

an

excellent

performance

during

2021,

with

great

progress

across

all

areas

of

the

business.

The

private

sales

rate

increased

by

an

incredible

43%

to

0.76,

reflecting

a

sustainable

sales

rate

driven

by

our

land

strategy,

which

we puts

put

in

place

four

or

five

years

ago.

Housebuilding

completions

had

a

great

year.

Completions

up

to

6,551,

well

up

on

last

year,

with

gross

margin

increasing

to

22.3%, again,

well

up

on

last

year.

Partnerships

continues

to

deliver

rapid

growth

from

their

mixed

tenure

business,

with

revenues

up

66%

and

their

operating

margin

increasing

to

9.2%,

all

as

we

said

at

the

time

of

the

acquisition.

We've

been

very

successful

in

the

land

market

and

ended

the

year

with

a

greater

land

bank

than

we had

started

having

bought 11,798

plots,

at

least

at

our

hurdle

rate

of

25%

and

our

25%

return

on

capital

rate.

Our

strategic

land

team

continues

to

impress

and

they

also

acquired

7,721

plots

during

the

year.

Net

cash

was

at

£234

million,

and

that's

way

up

on

initial

expectations.

And

that's after

taking

into

account

an

increase

in

the

land

bank.

Return

on

capital

increased

to

25.5%,

well

up

on

2020

with

the

Partnerships'

return

on

capital

remaining

well

in

excess

of

their

40%

medium-term

target.

Taking

all

of

that

into

consideration,

it

wasn't

a

difficult

decision

for

the

group

to

accelerate

our

dividend

to

two

times

cover

for

this

year,

reflecting

the

board's

confidence

in

our

future

prospects.

So

moving

on

to

some

of

the

softer

issues

which

underpin

those

great

financial

results.

From

an

NHBC

perspective,

our

reportable

items

are

under

the

benchmark

of

our

peer

group.

We

won

just

under

10%

of

the

Pride

in

the

Job

Seals

awards

last

year

with

12

from

just

under

150

awarded

around

the

country.

We

won

the

equivalent

of

another

two

Seals

from

Premier

Guarantee.

Really,

really

pleased.

And

I

don't

think

this

should

be

underestimated

with

a

company

that's

going

through

a

huge

integration

over

the

last

couple

of

years

that

our

Peakon

score,

which

is

an

independent

company

which

surveys

our

staff,

gave

an

overall

satisfaction

rate

of

8.5,

which

is

in

the

top

10%

of

all

manufacturing

companies

that

they

survey.

Also

great

to

see

that

our

company

charity,

Mind,

got

the

benefit

of

£215,000

raised

in

[ph]



the

Mind

(00:03:09)

by

our

great

employees.

From

an

HBF

customer

satisfaction

perspective,

I'll

eat

my

hat

if

we

don't

get

announced

in

the

next

few

weeks

as

retaining

our

5-star

status

for

the

year

2021.

And

behind

that,

it's

even

better

than

just

being

a 5-star

because

all

13

of

our

housing

business

units

were

5-star

as

well

as

Partnerships

and

not

one

[ph]



off

laid (00:03:31)

the

other,

which

is

really

pleasing.

And

we

started

the 2021/2022

year

in

great

fashion

with

this

score

up

again

at

93.6%.

So

great

stuff,

and

Graham

will

update

you

all

later

on

our

Science Based

Targets,

which

we've

made

great

progress

as

well.

So

one

Vistry,

we're

uniquely

positioned

for

sector

leading

returns.

And

let's

be

clear,

when

we

bought

the

Galliford

Try

housing

businesses,

I

think

we

got

it

right,

we

didn't

underestimate

what

the

combined

housing

business

would

do

or

the

Partnerships

business

would

do,

and

they're

both

performing

at

least

in

line

with what

we

expected.

What

we

did

underestimate

was

the

power

of

Partnerships

and

the

enlarged

housing

business

working

together,

and

working

together

well.

That

was

being

underestimated,

and

it's

starting

to

show

some

real

serious

dividends,

whether

it

be

on

land

acquisitions,

which

I'll talk

about

in

a minute,

as

well

as

generating

quicker

returns

from

our

huge

strategic

land

bank.

All-in-all,

bringing

the

two

together,

we

are

targeting

sector

leading

return

on

capital

employed

in

the

medium

term.

And

I

think

the

25.5%

that

I've

just

stated

is

nearly

there

already.

So

making

Vistry.

I

talked

about

working

together,

Partnerships

and

housing,

working

together,

let's talk

about

a

case

study

called Kenilworth.

So

it's

a

development

of

620

new

homes,

which

we're

doing

in

a

joint

venture

with

a

subsidiary

of

Warwick District

Council

called

Milverton

Homes.

It

was

a

rare

opportunity

to

acquire

such

a

site.

So

Kenilworth

is

a

great

area

to

sell

houses.

And

this

site

is

a

prime

site

within

Kenilworth.

So

every

single

housebuilder

in

the

country

was

looking

to

buy

the

site,

but

we

bought

it.

Our

existing

relationship

came

from

Partnerships'

relationship

with

Warwick

District

Council

on

their

great

scheme

zero-carbon

and

homes

at

Europa

Way

in

the

Midlands,

and

Milverton

Homes

is

fully

funding

the

scheme

to

the

tune

of

in

excess

of

£60

million,

which

gives

us

an

infinity

return

on

capital.

So,

that's

an

infinity

and

beyond

return

on

capital.

So

there's

my

impersonation

[indiscernible]



(00:05:36)

for

those

who

follow

that

sort

of

thing.

Both

Bovis

and

Linden

will

be

on

site.

Vistry

Homes

will

sell

all of

the

Bovis

units

and

our

Partnerships

business

will

do

all

of

the

PRS

affordable

and

the

Linden

Homes

sales,

and

it's

a

50/50 split.

So

open

market

is

50%,

pre-sold

is

50%.

But it's

a

great,

great

opportunity

there,

and

you

can

see

the

margin –

adjusted

margin

is

24%,

infinity

return

on

capital,

a

great

example

of

Partnerships

and

Housebuilding

working

together.

Looking

at

our

strategy

going

forward.

On

Housebuilding,

it

slips

off

the

tongue,

very,

very

straightforward

25%

gross

margin,

25%

return

on

capital

by

the

year

2025

with

8,000 completions

expected.

And

on

Partnerships

we

call

it

Project

Pace

and

we're

looking

for

revenues

to

grow

to

£1.6

billion,

operating

margin

of

plus

12%

and a

return

on

capital

of

plus

40%.

And

that's

medium-term

targets,

which

you

could

interpret

to

be

2026.

So

the

outlook.

We

started

the

year

in

incredible

fashion.

So

we've

still

got

the

pandemic

and

over

the

last

four

or

five

weeks,

of

course,

we've

got

talk

of

an

invasion

and

then

the

actual

invasion

of

Ukraine

by

Russia.

So

we've

seen

the

sales

rate

in the –

so

far

this

year

up

20%

to

0.79,

and

that's

risen

to

an

incredible

0.92

over

the

last

five

weeks

when

Ukraine

has

been

very

much

in

the

headlines.

We

continue

to

see

price

increases.

We

are

increasing

our

prices

every

time

pretty

much

we

release

units

on

any

particular

scheme.

And

about

four

weeks

ago,

we

increased

our

prices

across

the

board

by

at

least

2.5%,

in

some

places

more.

I'm

pleased

to

say that

after

all

the

trials

and

tribulations

of

last

year,

our

sites

are

operating

well

in

a

much

calmer

environment,

with

materials

being

much

less

of

an

issue

than

they

were

during

the

course

of

2021.

Although

we

still

see

labor

inflation

this

year,

and

we

expect

to

see,

as

I'll

talk

about

later,

a

6%

inflation

on

build

cost,

but

that

will

be

labor

as

opposed

to

materials.

Housebuilding

and

Partnerships

mixed tenure

forward

sales

are

up

23%

to

£2.2

billion

and

we've

already

secured

64%

of

this

year's

sales.

Partner

delivery

forward

order

booking

Partnerships

totals

£860

million.

That's

a

very

healthy

number

and

that's

85%

of

this

year's

revenue

already

secured.

Housebuilding

are

well

on

track

to

deliver

at

least

23%

gross

margin

for

the

year,

which

is

what

we

said

at

the

time

of

the

acquisition.

Vistry

Partnerships

are

on

track

to

deliver

at

least

£1 billion

of

revenues,

with

a

margin

of

at

least

10%

for

this

year,

again,

as

we

said

at

the

time

of

the

acquisition.

So

the

group

is

in

absolutely

great

shape

to

deliver

significant

step

up

in

profits

for

the

year.

We

absolutely,

finishing

before

we

move

on,

support

the

comprehensive

solution

to

cladding,

fire

safety.

What

I

would

say

is

Graham

and

Earl

will

about

it

in

more

detail,

but

from

where

I'm

sat

and

at

a chief

execs

level,

this

is

not

the

end

of

the

world

from

a

Vistry

perspective.

The

moneys

that

we're

talking

about

here,

after

taking

tax,

will

not impact

in

any

way

our

dividend

policy

going

forward

nor

our

growth

strategy

in

Housebuilding

nor

our

aggressive

growth

strategy

in

Partnerships.

So

all

very,

very

controllable.

With

that,

I'll

pass

over

to

Earl.

[Earl Sibley]

Thank

you,

Greg.

I

can

now

take

you

through

those

great

results

Greg

highlighted.

As

normal,

the

results

are

presented

on

both

an

adjusted

and

reported

basis.

The

adjusted

basis

means

we're

including

our

share

of

the

results

of

our

joint

ventures

down

to

the

operating

profit

level

on

a

proportional

basis.

The

group

result

was

driven

by

our

strong

operating

performance

across

both

Housebuilding

and

Partnerships,

supported

by

good

housing

market,

whilst,

at

the

same

time,

proactively

managing

materials

constraints

in

our

supply

chain.

It

is

good

to

see

the

results

reflect

the

real

potential

of

the

Vistry

Group.

You

can

see

all

metrics

moving

strongly

ahead

and we've

given

a

lot

of

guidance

throughout

2021

in

terms

of

profit

margins

in

both

Housebuilding

and

Partnerships

as

well as on

cash. And

you will

see,

as

we go

through,

that

we've

delivered

ahead

of

this

guidance

on

all

those

measures.

In

terms

of

overall

scale

of

the

business,

the

revenue

at

£2.694

billion

is

32%

up

on

2020

and

importantly,

7%

up

on

the

pro

forma

turnover

from

2019,

showing

just

how

well

the

enlarged

group

has

come

together

and

how

well

it

has

been

dealing

with

the

pandemic.

Gross

profit

delivered

was

£543

million,

and

this

translated

to

an

operating

profit

of

£368

million.

Profit

before

tax,

excluding

the

exceptional

costs

and

amortization,

was

£346

million,

up

140%

and

slightly

ahead

of

the

previous

guidance

we

set,

having

moved

expectations

forward

a

few

times

during

2021.

The

exceptional

items

of £12.2

million.

This

includes

£6.5

million,

as

expected,

for

the

final

cost

of

integration,

taking

the

total

integration

costs

to around

£30

million,

which

is

£5

million

lower

than

the

£35

million expectation

at

the

time

of

the

deal,

and

there will

be

no

further

exceptional

costs

relating

to

integration.

In

addition,

we've

recognized

a

further

£5.7

million

of

costs

in

respect

of

legacy

fire

safety,

meaning

we

hold

a

provision

of

£25.2

million

at

the

end

of

December,

and

Graham

will

comment

more

on

this

in

a

moment.

Amortization

in

the

period

was

£14

million

and

we

expect

a

similar

level

in

2023.

And

therefore,

overall,

the

adjusted

earnings

per

share

for

the

period

was

£1.255,

well

ahead

of

2020,

and

20%

ahead

of

2019,

when

we

were

just Bovis. The

slide

also

shows

the

strong

position

of

net

cash

at

the

end

of

December,

£234

million,

ahead

of

guidance

and

I'll

come

back

to

this

in

a

few

slides

time.

The

combination

of

strong

profit

delivery

and

capital

management

means

our

return

on

capital

was

moved

forward

11

percentage

points

to

25.5%

for

the

year.

So

turning

to

the

Housebuilding

financials,

and

these

show

the

first

true

combination

of

Bovis

and

Linden,

gross

profit

and

notably,

the

gross

profit

margin

have

moved

forward

significantly

with

the

Housebuilding

gross

margin

at

22.3%,

ahead

of

our

target

of

22%.

And

if

you

look

at

the

pattern

of

six

months

on

six

months,

our

gross

margin

has

been

moving

forward

for

a

number

of

periods

with

the

second

half

of

2021

showing

a

housing

gross

margin

of

22.7%,

giving

us

confidence

on

the

guidance

we

have

provided

of

being

over

23%

for

the

current

year,

when

the

focus

will

continue

to

be

on

that

margin

growth

with

controlled

volume

growth.

Factors

impacting

margin

include

the

strength

of

the

margin

embedded

in

the

land

bank

now

at

the

targeted

25%,

a

continued

contribution

from

higher

margin

strategic

land,

the

quality

of

delivery

and

operations

on

site

as

well

as

house

price

improvements

alongside

dealing

with

increasing

costs

in

our

materials.

The

TNAV

was

lower

than

2020,

reflects

a

good

position,

although

our

work

in

progress

level

was

a

little

lower

than

planned

following

supply

constraints

during

the

year,

so

we

expect

a

reversal

of

that

investment

during

this

year

and

an

increase

in

TNAV.

The

return

on

capital

for

the

business

was

22.2%,

and

we

can

see

this

progressing

along

with

the

margin

to

25%

in

the

medium term.

Key

metrics

for

Housebuilding,

just

pick

out a

few,

whilst

we

continue

to

follow

a

strategy,

reducing

the

average

size

of

our

completions,

the

private

ASP

has

moved

forward

4%,

reflecting

the

strong

demand

across

all

geographies

and

all

product

mix.

PX

of

4%,

very

low

and

not

really

a

selling

tool

that we're

using.

The

affordable

at

25%

is

as

expected

and

a

good

guide

still

going

forwards.

And

whilst

Help

to

Buy

at

21%

remains

an

important

tool

for

us,

it

is

significantly

lower

than

in

previous

periods

following

the

changes

to

the

scheme

and

much

lower

usage

than

others

in

the

sector.

Average

outlets

were

as

expected

in

2021,

with

a

nice

problem

to

have

occasionally

of

selling

out

slightly

earlier

than

we

expected.

The

FY

2020

number

actually

was

slightly

high,

with

a

number

of sites

remaining

open

for

longer

than

expected

due

to

the

pandemic, and

therefore

2022

will

see

a

similar

level

to

2021,

growing

towards

the

end

of

the

year.

Our

Partnerships business

also

ahead

of

the

target

set.

The

focus

on

mixed

tenure

coming

through,

with

volume

up

41%

and

reflecting

46%

now

of

total

Partnerships'

revenue.

And

this

increase

in

proportion

has

really

driven

that

revenue

up

to

£864

million,

up

19%,

as

we

continue

to

look

for

12%

compound

growth

each

year.

Operating

profit

up

64%

year-on-year.

And

as

with

Housebuilding,

a

focus

on

margin

coming

through

with

the

second

half

operating

margin

being

9.3%,

a

period

where

we

also

recognize

a

higher

proportion

of

incentive

costs

for

the

year.

The

margin

improvement

was

supported

by

a

higher

margin

land

led

contracting,

making

up

a

higher

proportion

of

partner

delivery

than

in

2021.

In

fact,

it

was

nearly

twice

as

much

as

it

was

in

the

previous

year,

and

we

expect

a

bigger

proportion

of

land-led

in

2022

to

help

those

margins.

However,

of

course,

the

biggest

impact

on

margin

comes

from

the

increasing

level

of

mixed

tenure.

And

overall,

operating

margin

up

2.5

percentage

points

in

the

year,

again,

meaning

we

are

confident

of

achieving

the

10%

margin

for

2022

as

we

continue

to

grow

that

mixed

tenure

business.

With

the

investment

in

that

mixed

tenure,

the

TNAV

now

has

moved

around

£100 million

from

investment

as

planned

and

we

are

planning

a

similar

level

of

investment

in

the

current

year.

And

whilst

the

return

on

capital

might

come

down

a

little

bit

in

the

next

couple

of

years,

as

we

invest

in

mixed

tenure,

it

will

remain

well

ahead

of

the

targeted

40%.

As

we

continue

to

improve

mixed

tenure

schemes,

hurdle

rates

of

40%,

and

still

have

that

ongoing

benefit

from

partner

delivery

of

somewhere

between

£50

million

and

£70 million

of

cash

in

the

business

at

any

point

in

time.

Partnership

metrics,

each

of

these

shown

with

its

share

of

JV,

really

does

show

the

growth

in

mixed

tenure

and

also

the

growth

in

outlets

during

the

year.

So,

as

we

move

into

2022,

we

expect

to

see

that

go

up

to

around

40

outlets

per

year

for

2022.

And

as

planned,

partners

delivery

remains

an

important

part

of

the

Partnerships

business,

delivering

a

stable

contribution

in

2021

and

similar

expected

for

2022.

So, a

specific

mention

for

our

procurement

and

supply

chain.

Most

importantly,

a

big

thank

you

to

all

our

supply

chain

partners

for

their

contribution

last

year

in

the

face

of

numerous

challenges

in

the

market

following

the

step

up

in

demand.

We

managed

this

really

effectively,

with

90%

of

our

materials

procured

centrally,

complemented

by

our

local

teams,

ducking

and

diving

to

make

things

happened.

We're

currently

operating

in

a

much

calmer

environment

with

teams

that

are even

better

equipped

and

ready

to

deal

with

any

challenge

that

arises.

Many

of

the

agreements

we

put

in

place

at

the

beginning

of

2020

that

gave

us

some

protection

from

cost

increases

in

2021

were

renegotiated

at

the

beginning

of

this

year.

And

these

increases

will

impact

various

states

during

the

first

half,

but

they're all

accounted

for

in

our

forecasts

and

guidance.

We've

also

taken

the

opportunity

from

that

renegotiation

to

bring

in

additional

suppliers

for

certain

materials

to

give

a

greater

surety

over

the

supply

and

ensure

that

negotiation

was

truly

competitive.

So

overall,

last

year

we

saw

build

cost

inflation

around

5%.

And

whilst

the

material

supply

has

improved,

there

will

be

some

further

cost

increases

driven

by

energy

prices.

However,

we

see

the

cost

of

living,

wage

inflation

being

the

key

driver

of

cost

increases

and

overall,

expect

to see

build

inflation

for

2022

around

6%.

The

map

here

shows

another

active

year

in

the

land

market,

dots

on

the

map

show

all

the

acquisitions

during

the

year,

so

the

purple

being

the

Housebuilding,

the

green

the

Partnerships,

and

the

new

red

ones

are

strategic

land

options.

It

really

does

show

our

nationwide

coverage.

As

Greg

said,

with

over

11,700

plots

secured,

which

ensured

we've

added

to

our

controlled

land

bank

in

the

period.

We

are

still

seeing

good

opportunities

to

buy

land

and

we

have

a

real

competitive

advantage

on

those

larger

sites.

We

have

seen

the

land

market

get

a

bit

more

competitive

in

recent

months,

which

is

impacting

the

level

of

deferred

terms

we

can

achieve

in

the

open

market.

But

importantly,

we

continue

to

buy

those

Housebuilding

plots

at

an

average

gross

margin

and

return

on

capital

in

excess

of

25%

on

average.

A

little

bit

more

on our

land

bank.

As

at

the

end

of

December

here,

the

controlled

land

bank

Housebuilding,

including

joint

ventures,

over

31,000

plots

for

Housebuilding,

where

we

are

trying

to

maintain

a

3.5-

to

4-year

land

bank.

Also

aligned

with

strategy,

you

can

see

the

number

of

plots

per

site

going

up,

reflecting

that

competitive

advantage

on

larger

sites,

so with

dual

branding

or

even

three

brands,

as

well

as

the

ability

for

Housebuilding

and

Partnerships

to

work

together

as

Greg

described.

Land

cost

per

plot

and

as

a

proportion

of

ASP

remaining

consistent,

indicating

we

are

still

buying

land

very

well

and

the

average

future

gross

margin

now

at

that

target

level

of

25%.

In

terms

of

Partnerships,

including

joint

ventures,

we

have

over

11,700

plots,

which

will

support

the

aggressive

growth

plans

for

mixed

tenure

development

towards

300

homes

per

annum.

And

again,

the

embedded

land

bank

margin

has

moved

forward

as

expected

and

will

support

future

margins

for

Partnerships

to

beyond

10%.

Our

strategic

land

has

grown

again

with

exactly

40,000

potential

plots.

And

I

have

challenged

that

number

a

few

times,

but

apparently

it

really

is

exactly

40,000

potential

plots. I'm

complete –

pleased

to

confirm

in

this

area,

we

further

strengthened

our

excellent

strategic

land

team,

both

recruiting

externally

but

also

promoting

from

within

the

team.

We

are

able

to

deliver

a

comprehensive

planning

strategy

for

local

authorities,

which

is

helping

pull

this

land

portfolio

through

in a

difficult

period

for

planning.

Our

strategic

land

is

now

feeding

all

parts

of

the

business

on

a

multi-brand

basis,

and

we

can

see

how

we

can

get

4,000

plots

per

year

to

come

from

our

strategic

land

and

in

turn,

deliver

30%

of our total completions each year, which is good news when I can confirm that the vast majority

of

our

highest

margin sites

in

Housebuilding

have

come historically

from

that

strategic

land

bank.

The

summary

of

the balance

sheet

reflects

a

really

strong

position,

in

fact,

stronger

than

any

of

the

scenarios

we

ran

at

the

time

of

the

acquisition.

As

a

reminder,

that

investment

in

joint

ventures

and

amounts

due

from

joint

ventures

really

reflects

further

work

in

progress

and

land,

which

has

increased

over

the

year.

Although

we

would

have

liked

it

slightly

more

at the

end

of

2021,

it

represents

a

really

good

position

for

the

current

year.

As

I

mentioned

earlier,

land

bank

in

total

is

growing.

And

as

expected,

land

creditors

represent

a

higher

proportion

of

land,

so

36%

this year.

And

we're

happy

at

this

level.

[ph]



Not

leased (00:22:29)

around

£70

million

of

those

land

creditors

are

not

due

any

time

in

the

next

two

years. And

given

the

overall

balance

sheet

strength,

we're

happy

at

that

level.

Other

assets

and

liabilities

in

that

really

reflect

the

increased

activity

in

the

business

during

the

year,

as

well

as

an

increase

in

our

pension

surplus

on

our

three

defined

benefit

schemes.

Overall,

£1.7

billion

of

tangible

net

assets,

£2.4

billion

of

total

assets.

So

cash

closed

better

than

expected,

ahead

of

our

already

improved

expectations

in

the

year. And

overall,

net

gearing

was

– including

our

land

creditors,

was

10.5%,

driven

by

that

great

operating

performance,

good

cash

conversion

and

good

management

of

working

capital

and

if

anything,

a

little

less

work

in

progress.

So

finally

just

a

reminder

of

our

capital

allocation

strategy,

strong

balance

sheet

and

we

are

targeting

slightly

improved

month-end

net

debt

this

year

around

£100

million

and

we

expect

to

invest

during

the

year

a

£100 million

in

Partnerships,

as

I

mentioned

earlier,

as

we

drive

the

mixed

tenure

element

of

the

business

as

we

did

in

2021.

In

addition,

we

expect

to

invest

in

Housebuilding

to

ensure

we

have

the

right

level

of

work

in

progress

and

land

to

deliver

growth

into

2023

and

onwards.

And

that

for

Partnerships,

we

continue

to see

that

compound

growth

of

around

12%

per

annum

and

the

investment

will

be

required

to support

this.

And then

Housebuilding,

whilst

2022

will

be

focused

again

on

driving

the

margin

up

with

controlled

growth,

we

will

be

looking

for

more

growth

beyond

that.

We

accelerated

our

dividend

strategy

during

2021

and

we'll

maintain

a

two

times

cover

going

forwards.

And

we have

achieved

the

total

gearing

close

to

10%

at

the

end

of

2021

a

little

earlier

than

expected,

so

we

do

expect

a

modest

cash

outflow

during

2022 and

I

would

expect

that

gearing

to

go

up

a

little

as

a

result.

And

as

I

noted,

all

that

investment

is

to

deliver

the

25%

and

40%

targeted

returns

in

Housebuilding

and

Partnerships

respectively.

And

in

the

longer

term,

it

does

remain

our

clear

intention

to

return

surplus

capital

in

the

future

and

we

will

update

you

further

on

this

later

in

the

year.

With

that,

I

will

hand

you

over

to

Graham.

[Graham Prothero]

Many

thanks,

Earl,

and

good

morning,

everybody.

As

Greg

said,

we're

really

pleased

not

only

with

some

excellent

results

in

a

good

market,

but

with

the

strength

of

the

business

and

operations.

In

Vistry

Housebuilding,

the

sales

rate

of

0.69

is

a

stepped

increase

from

where

both

Bovis

and

Linden

used

to

be,

which

reflects

the

deliberate

shift

of

– to

a

higher

proportion

of

mid-range

housing,

successful

deployment

of

two –

the

two

brands,

the

quality

of

both

of

those

ranges,

a

rigorous

focus

on

brand

promotion

and

discipline,

and

the

excellent

program

on

digital

selling

and

on

our

hub

approach.

We

regard

5-star

quality

as

a

prerequisite

and

are

pleased

to

be

at

this

level

in

every

one

of

our

Housebuilding

businesses,

and

we're

now

focusing

hard

on

improving

the

important

nine-month

score.

We

were

delighted

with

our

Peakon

score

in

February,

which

I'll

come

onto

in

a

moment.

And

we

have

an

excellent

land

bank

in

strong

locations

and

are

focusing

on

increasing

the

contribution

from

strategic

land

and

improving

the

regional

coverage

of

that

team.

Partnerships

continues

to

make

excellent

progress

against this

strategy.

We're

really

pleased

that

we've

covered

Stuart

Munro's

retirement

as

a

Divisional

Managing

Director

with

internal

promotions,

with

Sean

Egan,

who

very

successfully

led

our

North

East

business,

now

stepping

into

a

DMD

role.

The

three

nascent

businesses

are

thriving,

with

Thames

Valley

and

South

East

being

relatively

new

areas

of

operation

for

Partnerships,

and

North

Midlands,

an

expansion

of

our

existing

West

and

East

Midlands

businesses,

just

to

keep

control

as

we

respond

to

that

burgeoning

demand

in

that

region.

We're

focusing

hard

on

procuring

the

land

we

need

to

support

this

growth

and

expect

to

operate

an

average

of

40

mixed

tenure

sites

during

2022.

Greg's

talked

about

the

excellent

project

at

Kenilworth, and

we

have

a

number

of

these

large

sites

in

the

pipeline

where

our

integrated

model

really

flies,

optimizing

our

competitiveness,

profitability

and

returns.

The

Partnerships' model

continues

to

grow

a

rich

portfolio

of

strong

partners

with

huge

appetite

for

products

across

multiple

tenures.

We

have

regular

programs

with

some

25

registered

providers

and

individual

projects

with

many

more,

and

we're

working

with

more

than

20

local

authorities.

Now

turning

to

the

current

issue

of

fire

safety,

it

goes

without

saying

that

we

believe

that

leaseholders

should

not

bear

the

cost

of

making

buildings

safe

and

shouldn't

be

faced

with

the

anxiety

of

that

uncertainty.

And

hence,

we're

fully

supportive

of

the

government's

attempt

to

find

a

better

solution

than

the

previous

proposals

for

buildings

between

11

meters and

18

meters.

In

order

to

achieve

that

we

do

need

government

to

deliver

on

its

commitments

to

a

proportional

solution.

We

can't

be

in

a

situation

where

necessary

fire

safety

works

are

extended

to

include

building

refurbishments.

We

also

need

other

market

participants

to

align

their

requirements

so

that

people

can

readily

secure

mortgages

on

buildings

which

are

demonstrably

safe

in

accordance

with

agreed

standards.

We've

actively

engaged

with

the

department

on

the

issue

and,

of

course,

with

the

HBF, which

has

done

a

great

job

of

leading

and

articulating

a

highly

constructive

industry

response

to

the

aggressive

demands

from

the

Secretary

of

State.

As

Earl

said,

we've

increased

our

provision

in

the

period

in

line

with

our

known

obligations

as

they

stand

today.

That

includes

engaging

with

our

partners

in

Partnerships

where

we

were

the

contractor.

The

recommendations

from

the

HBF

would

increase

that

liability,

but

hopefully

also

start

to

bring

some

clarity

to

the

commitments

that

we're

making.

And

hence,

we've

also

given

an

indication

of

our

estimate

of

the

additional

costs

which

might

arise

depending

on

the

uncertain

outcome

of

these

negotiations

with

government

and we

assess

that

to

be

in

a

range

of

£35

million to

£50

million.

Now

those

of

you

who

joined

our

Capital

Markets

Day

in

the

autumn

hopefully

got

some

excellent

insights

into

the

way

we're

structuring

and

measuring

our

approach

to

sustainability

in

our

operations,

which

we

group

in

these

three

areas,

our

people,

our

operations,

and

our

homes

and

communities.

We've

been

really

proactive

in

addressing

the

perennial

challenge

of

attracting

and

retaining

the

bright

people

that

we

need,

and

we

have

a

wide

range

of

ideas

and

initiatives

to

differentiate

Vistry

as

a

great

employer.

And

I'd

pick

out,

in

particular,

our

agile

working

policy,

which

is

working

brilliantly

for

our

people

and

the

business,

and

several

key

actions

around

coaching

and

training

our

people

for

their

personal

development

and

for

the

enrichment

of

the

group's

talent

and

succession.

I'm

also

really

proud

of

the

expansion

of

our

Skills

Academies

program,

which

offers

the

opportunity

of

training

and

qualification

to

local

unemployed

people

on

our

larger

sites

and

the

group

wide

commitment

to

foster

and

support

this

fantastic

initiative.

And

reflecting

our

progress

on

all

of

this,

as

I

said

earlier,

we're

delighted

with

our

group

Peakon

score

of

8.5,

which

puts

us

in

the

top

10%

of

our

industry

grouping.

Our

framework

of

communications

and

feedback

with

our

people

seems

to

be

working

really

well.

Health

and

safety,

of

course,

is

a

critical

priority

and

we

were

pleased

with

an

improvement

in

our

accident

incident

rate

remaining

below

the

industry

benchmark.

Of

course,

even

one

accident

is

one

too

many,

and

we

continue

to

focus

on

improving

our

culture

and

our

process,

including

deployment

of

new

technology

in

respect

of

safety

around

moving

plant.

We're

rolling

out

a

new

data

platform

to

improve

our

data

around

waste

and

carbon

so

that

we

can

better

calibrate

our

performance

and

measure

improvements.

We're

pleased

to

sign

up

to

the

business

ambition

for

1.5

degrees,

and

we're

in

the

process

of

verifying

our

carbon

reduction

targets

through

the

Science Based

Targets

Initiative.

And

importantly,

we've

introduced

some

targets

around

sustainability

measures

into

our

– into

the

group's

bonus

system.

As

you

know,

the

supply

of

affordable

housing

is

a

key

focus

for

Vistry

and

a

core

metric

in

particular

for

our

Partnerships

business. And

we're

committing

to

deliver

year-on-year

increases

in

affordable

home

delivery

over

and

above

our

section

106

requirements.

Our

social

value

proposition

is

increasingly

a

key

element

of

major

land

bids

and

regeneration

opportunities.

And

we're

enhancing

the

way

we

can

capture

and

demonstrate

this

by

subscribing

to

the

independent

– to

independent

verification

through

the

social

value

portal.

We're

also

well

on

with

understanding

and

addressing

the

challenge

of

biodiversity

net

gain,

which

is

another

significant

planning

and

development

hurdle

to

be

negotiated and

in

some

local

authorities

already

and

nationally

from

next

year.

During

the

year,

we

finalized

and

rolled

out

our

new

standard

customer

journey,

which

is

a

key

element

of

enhancing

our

customer

experience

and

our

readiness

for

the

demands

of

the

New

Homes

Quality

Board

and

the

Ombudsman

Service.

We've

registered

to

join

the

board

with

our

first

business

units

commencing

participation

in

the

next

couple

of

months.

We're

continuing

to

enhance

our

digital

sales

capabilities,

all

aimed

at

making

the

decision

to

buy

a

Vistry

home

easier

and

more

compelling

for

today's

customer.

And

we're

making

great

progress

towards

the

future

home

standards

and

the

interim

changes

on

Part

L,

electric

vehicle

charging,

space

standards

and

accessibility.

We're

redesigning

our

Linden

and

Bovis

ranges

and

bringing

forward

the

new

third

brand

to

accommodate

these

and

ensure

we

remain

as

efficient

as

we

can

in

that

complex

transition.

All

of

this

work

is

greatly

assisted,

of

course,

by

our

learnings

from

several

partner

delivery

projects

in

Partnerships

where

the

forward-looking

mindset

of

some

registered

provider

and

local

authority

partners

requires

us

to

test

new

technology

and

designs

as

they

seek

to

future

proof

their

stock.

And

with

that,

I'll

hand

you

back

to

Greg

for

the

outlook.

[Greg Paul Fitzgerald]

So

moving

on

to

the

market

review,

we

continue

to

see

strong

consumer

demand

across

all

areas

of

our

business,

whether

it's –

be

prospect

levels,

pricing

or

in

actual

fact

sales

rates

and

we're

selling

now

well

into

quarter

three,

quarter

four

of

this

year.

As

Earl

said

earlier,

we

expect

to see

build

inflation

of

around

6%

this

year

and

that

will

predominantly

become –

come

from,

sorry,

labor,

and

material

situation

is

much

better

than

it

was

in

2021

and

our

building

sites

are

performing

much

better

than

it

did

in

2021

because

the

availability

of

materials

is

much

better.

On

the

bigger picture,

planning

remains

good

on a

historical

basis,

but

at

a

local

level,

we

continue

to

see

delays

because

of

two

things,

the

political

climate

on

planning

and

labor

resource

within

planning

departments

within

local authorities

is

just

not

good

enough.

Interest

rate

rises

will

continue,

but

we

haven't

seen

that

impact

sales

as

yet

and

we,

of

course,

are

fully

expecting

more

interest

[ph]



raises

– rises (00:34:39) as

we

go

through

the

year.

Help

to

Buy

level

17%

in

the

last

quarter

of

2021,

remain

at

sensible

levels.

And

I

really

do

feel

we

and,

for

that

matter,

the

rest

of the

industry

are

pretty

well

equipped

now

when

Help

to

Buy

finishes

during

the

early

part

of

2021.

The

market

for

affordable

housing

and

PRS

continues

unabated

and

we

continue

to

see

as

we

did

at

the

time

of

the

acquisition,

very,

very

strong

growth

opportunities

for

our

partnership's

business.

And

finally,

the

solution

to

fire

safety

really

does

need

to

be

sorted

sooner

rather

than

later.

So

in

outlook

then,

as

I

said

earlier

excellent

start

to

the

year

with

the

sales

rate

up

20%

to

0.79

and

in

actual

fact

0.92

in

the

last

five

weeks,

Who

would have thought

Bovis

let

alone

Linden

would

have been

saying

having

a

sales

rate

of

0.92,

that's

completely

new

territory

for

us.

And

that's against

the

background

of

a

month

ago

where

we

put

up

prices

across

the

board

of

about

2.5%

minimum,

but

we

continue

to

nudge

up

prices

every

time

we

release

houses at

the

present

moment

in

time.

Sites

are

running

very,

very

well,

although

we

do

expect

to

see

some

build

inflation.

Housebuilding

and

Partnerships

mixed

tenure

forward

sales

are

up

23%

to

a

very

healthy

£2.2

billion

and

that's

64%

of

this

year's

forecast

already

in

the

bag.

Our partner

delivery

forward

order

book

is

around

£860

million.

That's

a

solid

number

and

that

again

represents

85%

of

this

year's

revenue

already

secured.

Housebuilding

well

on

track

to

deliver

in

excess

of

a

23%

gross

margin.

Partnerships

well

on

track

to

deliver

at

least

£1 billion

in

revenue

and

10%-plus

operating

margin

for

the

year.

As

Graham

and

Earl have

both

touched

on,

we

fully

support

the

comprehensive

solution

to

fire

safety

that

the

HBF had

just

put

forward.

And

again

I

would

reiterate,

the

costs

of

that

will

no

way

impact

our

dividend

and

in

fact,

our

growth

aspirations

for

both

housing

and

the

aggressive

growth

aspirations

for

Partnerships.

So

all

in

all,

the

group

is

in

fantastic

shape

and

is

in

a

great

place

to

deliver

another

step

up

in

profits

for

this

year.

And

it

would

be

wrong

of

me

not

to

finish,

of

course,

on

the

Housebuilder

Awards

last

year.

So

less

than

two

years

after

the

formation

of

Vistry,

delighted

there

to

pick

up

the

award

for

Large

Housebuilder

of

the

Year.

Very,

very

proud

night

for

all

of

us

and

great

for

me

to

get

a

picture

of

a

guy

wearing

a

skirt.