Vistry Group PLC

Good morning, everyone, and welcome to Vistri's Half Your Results for 2025. So I'm joined today by Tim Lawler, Chief Financial Officer, and Stephen Teagle, Chief Executive, Partnerships and Regeneration. So the agenda, very quick introduction from myself over to Tim for the financials. The highlight of the day is going to be Stephen going through where we are with the markets So hopefully Stephen hasn't used all his energy chasing down the one taxi outside Paddington Station this morning, knocking out of the way all lots of old people. But we have to get here on time. So hopefully Stephen's okay for that. I'll give an operational update and then an outlook. And of course, we'll take questions at the end. But we won't be just taking questions from the floor for the first time. We'll also be taking questions from people watching on the TV, for want of a better word. So the headlines. Delighted to say that the half year performance was very much in line with expectations. We are very confident, as you'll see as we go through the presentation, that we are on track to deliver increasing profits for 2025 over and above 2024. And a good testament to that is the serious share buying I've done in the first six months of the year. Half year debt. was down to £293 million. We say significantly lower than expectations and putting that into some numbers, that's over 100 million less than we were expecting. So a fantastic performance on that. We successfully completed refinancing on exactly the same terms with our eight banks. Tim and the team did incredibly well there. And not to be underestimated, the banks of course did extensive due diligence on the company to do that. And that takes us out to April, 2028. Excellent partnership and open market customer satisfaction. And as Stephen always reminds us, we're the only company, well, we're the only national company anyway in the partnership space, but we're the only company that gets feedback from our housing association and local authority partners and both the private HBS scores five-star, but we're also five-star with our partners. The government's unprecedented £39 billion affordable housing programme provides a long-term level of funding and visibility. But just as importantly, the 10-year rent settlement, rent convergence, and equal access to the Building Safety Fund add to this funding capacity. And Stephen will be talking a lot about that during his section. So, Vistri, as you all know, is uniquely positioned to maximise on this huge opportunity and play a key role in delivering a step-up to the much-needed affordable housing that this country so desperately needs. Tim.

Thanks Greg. Morning everybody.

So I've been encouraged by a number of people to speed through the finance slides so we can get to the more exciting slides that Stephen's going to be presenting later. But as Pink Floyd once said, you can't have your pudding if you don't eat your meat. So on with the meat. So headlines of the group results. A lot of this is Relatively old news, we reported a fairly detailed training update at the start of July and I'm very conscious that it's been two months since then. Next year we're going to aim to get our reporting done in early August, so prepare your summer holiday schedules next year for an earlier announcement so we can crack on with the second half of the year without the disruption of a later results announcement. So the headlines in terms of the group results, as Greg said, it was a slower first half than we've had in prior years, but it was as expected. We've stabilized the business and we've created the foundations for H2 delivery. So we retain the confidence in the delivery of the full year numbers after H1. Within the numbers, we've restated H1 24 to reflect the south division issues from last year. So the impact of that, is a £65 million impact to gross profit and to PBT from the numbers that we reported at this time last year. Revenue down 6% year on year, largely driven by partner funded volumes, which was impacted by the just expected uncertainties ahead of the spending review. Stephen will talk a bit more about that later. And our margins for the first half of the year were the same as the gross margins for the second half of last year. at 6.7% partly impacted, the operating margin partly impacted by the lower volume so lower operating leverage but also we had a higher proportion of low margin sites in the first half of this year and we expect in the second half part of our margin recovery story will be that the proportion of higher margin sites will increase as new margins come on screen and some of the older legacy sites starts to disappear. Point out the EPS position relative to the profit after tax position. So we're starting to see some of the benefit coming through from the buyback program. Since the start of January last year, we've spent over £220 million on share buybacks. So that's starting to create a differential between year-on-year EPS movements and year-on-year profit movements of about 3% so far. And the final points I'll bring out from this slide is the net deposition. So as Greg mentioned, significantly ahead of where we expected to be at the half year and ahead of last year, despite the fact that we opened with a significantly higher opening net deposition. So, turning to revenue, year-on-year volumes down 12%. As you can see from the table on the left that the biggest drop was in partner funded, again, due to the market uncertainty. We're expecting that to recover back in the second half of the year. In terms of open market units, the market was pretty similar to last year. The drop in units year-on-year is more attributable to having a lower number of sales outlets in the first half than last year, and sales outlets numbers are increasing again in the second half. Although the average selling price was up 3.7% year-on-year, that was largely due to mixed factors. I don't think there was an underlying price movement in the open market. What we saw in partner-funded was that ASP went up as a result of a higher proportion of southern-based delivery, where prices are slightly higher in the south than the north. and in the open market, the mix change was more due to product mix. So slightly more larger houses being sold in the first half than the prior period. But I wouldn't read too much into that. That's probably a temporary fluctuation. The other thing to say on pricing is that the discounting and incentive levels were similar in the first half to the previous year of up to 5%. In terms of the mix within the business, Partner funded was 73% of the units in the first half of the year. We expect that that will change to be above 75% in the second half of the year. Within partner funded, there was a mixed shift. So there was a lower proportion of PRS sales in the first half of the year than the previous half. And that was partly due to the large transaction that we did, a large portfolio deal that we did in 2024, which didn't repeat in 2025. But having said that, going forward, we do think that there will be a slight shift in emphasis from POS towards additional over the course of the next few months and maybe the next couple of years even, because of the relative attractiveness of the additional market, additionality market, the affordable market, compared to the POS market. And again, Stephen will touch on that later. Working our way down through operating profit, as I said before, the H1 gross margin was consistent with H2 of last year. Build cost inflation is, as we previously reported it, low single digit, slightly higher on labour than on materials, but low single digit overall. We're not seeing any significant change there. Overheads is up in absolute terms from last year. There was an additional investment in assurance resources as part of enhancing our control environment and there's also a slight increase from pay rises and national insurance contributions. So that margin increase from H1 to H2 which supports our higher growth in the second half of the year or higher profitability in the second half of the year, three main things that comes from. Number one, the new developments that are starting in the second half of the year that we'd expect to be at higher margins. Second, that the affordable housing market is becoming more attractive and we should expect to get better terms and more competition for our support. And the third is the operating leverage that comes from those volumes. Working all the way down to reported profits, so finance costs, we saw the benefit of low interest rates. Average net debt went up slightly year on year, up to 695 from 659 last year. We'd expect the average net debt in the second half of the year to be slightly higher than the average net debt in the first half of the year, because we're building in the third quarter and our income is more skewed towards the fourth quarter. But the average cost of debt fell as the interest rate cuts came through. That was offset by an unwind on discount of land creditors. So you know about this accounting funny, but we're still seeing the impact of the higher discounting as interest rates went up a couple of years ago, working its way through the land creditor system. So that should plateau soon, but that was a 3.8 impact for the half year. In terms of tax, we report an adjusted effective tax rate of 27.9, but a reported tax rate of closer to 23%. The adjusted effective tax rate is effectively the corporation tax plus the RPDT, but we don't get hit with all of the RPDT because it doesn't apply to all of our business. In particular, the 100% partner funded stuff doesn't attract any RPDT. The exceptionals were up. The prime driver on that was the voluntary contribution we made to the CMA, which we reported back in July. Our contribution there was 12.8 of the 100 million total across the seven house builders. And so we're recording that as an exceptional item that is expected to be paid and settled in the second half of the year. And we've also got an incremental building safety cost of three and a half million pounds, which I will come to now. So building safety. as you were. We had a significant increase at the end of last year. In the first half of this year, there were a few buildings that were added, seven buildings added in the first half of the year, more than offset by a good level of recoveries that we had from insurers and others in the first half of the year. So 6.7 million of recoveries in the first half of the year, 4.9 million of additions. We're making good progress working through the provision with 20 buildings completed. and cash outflow in the first half of the year was 18.3. We'd expect that in the second half, as we get onto more sites and really get momentum, that the cash outflow will be up to 40 million pounds in the second half of the year. And that sort of run rate will probably continue into next year. In terms of the cash flow, so year on year performance significant improvement year on year. So last year we had a net cash outflow of £233 million. And despite having £40 million of profit in the first half of the year, our net cash flow actually improved by £120 million year on year. And you can see the constituent parts of the cash flow here. So first of all, WIP. Now, during the course of the year, we've implemented much tighter WIP controls, much to the chagrin of some of our site managers, but we are managing WIP extremely tightly. You'd always expect a seasonal increase in the first half of the year, probably more so than ever this year, given the weighting of our second half delivery. So the 99 million of WIB increase is largely driven by that seasonal trend. However, that masks some improvements made in the finished stock levels. So we've been targeting reducing our finished stock levels. Outside London, where it's a slightly different market and London is more constrained, more challenging sales environment, outside London, Our finished stock levels are down by £46 million, which is more than half from where we were at the end of last year. So good progress there in releasing cash from stock. Land, Greg will cover land in more detail later. We're running down our land back a little bit. There's net £20 million of cash released from land. So land down by £40 million, but we have reduced our land creditor balance by £20 million as well in the first half of the year. In terms of payables and receivables, both payables and receivables are down. So we're collecting our cash faster in terms of the receivables. Payables is down partly due to lower levels of deferred income. The net investments in JVs causes a lot of head scratching when people start trying to reconcile to reported and statutory numbers. Statutory numbers are hugely confused by all of the technicalities of the form with which money moves between us and the joint ventures. but the substance of the cash movements for the joint ventures is this that we put 33 million pounds of net cash into joint ventures largely to fund WIPP in the first half of the year the form of that the form of that investment can take the form of operating investing or financing flows so it appears in different parts of the statutory cash flow which causes frankly unnecessary headaches for everybody I covered building safety and the restructuring costs are as expected and net tax payments were 10 million pounds. Captain employed is very similar to this point last year driven by the same sort of dynamics that we just looked at on the cash flow. So up on the year end position, continuing to buy land selectively and increases will support the increases in WIP and JVs will support our second half delivery. As Greg mentioned, we had a very smooth process. We've got a high quality of banking teams that supported some of the room today. We're very grateful for their support in running a very smooth process during the course of the second quarter to get the refinancing complete by the start of July. Everything on the same terms, with the same banking group, the same shares, but the maturity has moved out, as you can see from the table here, out to April 28, which gives us a little bit more time to stabilise and capture the opportunities that lie ahead in the affordable space. We've also got a couple of uncommitted facilities, the trade cycle loan and the money market line, which add 125 million of facility. We tend to use those, as I've explained before, we tend to use those to manage short-term cash fluctuations. You can ensure that we're not sitting with too much money effectively on deposits by using these facilities. And then finally on this, The headroom against the covenants. So we've got significant levels of headroom against our covenants at the half year. The three covenants there are reported and explained in the RNS if you want more details. And last for me, capital allocation. So no change to the capital allocation policy. We're making good progress with our share buyback program, which we announced this time last year, 130 million. 71 of that has been spent. We expect to complete that program at some point in Q2 next year. We remain committed to shareholder distributions. It's a core part of our strategy. At the time of our results next year, we'll provide an update on our expectations for distributions in 2026. And that's it for me. Over to Stephen.