Vistry Group PLC (BVHMY) Earnings Call Transcript & Summary

Hello, and welcome to this Vistry Trading Update Call. Today, we will hear from Chief Executive Officer, Greg Fitzgerald; and Chief Financial Officer, Tim Lawlor. [Operator Instructions] I'll now hand you over to Greg Fitzgerald. Greg, please go ahead.

Thank you, Oliver, and good morning, everyone, and happy New Year to you all. I'll start with a brief introduction, if I can, before we open the lines for your questions. And as usual, I have Tim Lawlor with me. So in 2025, we delivered our market expectations with profits ahead of 2024. This required a particularly strong second half performance delivered despite ongoing subdued market demand in the private sales market. This is absolutely a testament to the incredible hard work of the teams, but also a recognition of our differentiated market positioning. We start 2026 in a fundamentally better shape than a year ago, a leaner, more efficient business. The pent-up demand for housing is greater than ever and the affordable market, in particular, should take off in 2026. We had a well-documented difficult year in 2024, and this required us to stabilize, simplify and reorganize the business in the first half of 2025. These steps were successfully completed and helped us position -- helped position us for a strong second half. Demonstrating the resilience of our strategy and in the midst of challenging private sales market, revenue in 2025 was encouragingly pretty flat, and that's the most important thing, with a fall in total completions, largely offset by higher average selling prices and higher land sales revenue as we continue our strategy of selling surplus Housebuilding land. Out of interest, there is still circa GBP 80 million of cash to be received from the land sales predominantly over the next couple of years that we did during the year. The lower volumes can be put down to the economic uncertainty we all experienced last year and in particular, the hiatus ahead of the budget in late November, together with a weakening demand picture in the private rental or PRS sector as a number of active PRS partners paused delivery as they refinance. However, and this is important, there was a 30% growth in the second half in additionality units from housing associations, which more than compensated for the shortfall in PRS volumes. And going forward and for the first time since our announcement of our partner strategy in September 2023, I expect this trend to continue, which will be very positive for us. Strong margins enabled us to mitigate the top line headwinds and reflect the focus within the business on driving improved site mix and cost management over the last 12 months. Margins have improved from the commencement of new higher-margin developments, a better tenure mix and also the benefit of resolving the cost issues in the South division. This has resulted in a strong second half operating margin performance and a full year margin of 8.4%, the half 2 margin was 9.6%. I'll say that again, 9.6%, and that was comfortably ahead of the 6.7% we reported in the first half. Again, this demonstrates that the company is absolutely moving in the right direction. Low single-digit build cost inflation was guided and given the benefits of the scale inherent in our Partnerships model, aided by increased use of timber frame construction and further standardization and efficiency through Vistry Works, which saw record manufacturing volumes during 2025, and we believe they are the highest in the sector. Group adjusted profit before tax for 2025 is to be around GBP 270 million, which is both in line with our guidance throughout the year of year-on-year profit improvement and consensus, of course. In November, Homes England released the guidance for bidding under the Social and Affordable Homes Programme, brackets if you like, SAHP, 2026-'36 confirming bids will be invited from February and seeking an increase in volumes and pace of delivery of affordable homes. I can confirm that our bid will be submitted in February/March. The group is strongly positioned to work with Homes England, the GLA and partners on delivering this GBP 37 billion investment with an identified very important pipeline of opportunity. We are currently, as most of you know, a strategic partner, one of around 31 on the basis -- and on the basis that we have performed well over a number of affordable housing programs, we are aiming to become one of only a few organizations in a new category called Strategic Plus. The prospectus from Homes England says a Strategic partner can bid up to GBP 350 million, while a Strategic Plus bidder can bid up to GBP 700 million. So putting that into context, our first bid for 2021-'26 program was GBP 83 million. And with additions, we have now been allocated GBP 253 million. So we are looking and we will be bidding to become a Strategic Plus partner and looking to get nearly 3x as much as we actually had at the end of the 2021-'26 program, and that's at the start. As a long-standing and reliable partner of Homes England, we would expect some visibility, and that's been confirmed to us on the program starting to come through in quarter 2. The 10-year rent settlement, together with clarity on rent convergence, which importantly is expected this month, will further add to the funding capacity of our partners. Vistry is uniquely positioned to benefit from this unprecedented government commitment on affordable housing. And let's not forget the government is behind target in one of their flagship policies. And only in the last couple of weeks, we've had 2 national housing associations talking to us very seriously about joint venture opportunities. They weren't doing that in the first half, even the third quarter of 2025. There is renewed vigor and ambition within the affordable housing market. Now unlike the majority of our housebuilding peers, we were very active in the land market in the second half, continuing to do the right thing for the business by investing for our future and taking advantage of an incredibly soft land market. In the second half, we secured 9,500 plots. I think it's over 12,500 plots in the year. This included GBP 25 million of opportunistic spend on the day before the budget on November 26 last year, taking advantage of some growth opportunities presented by keen sellers and buying on exceptional terms, albeit requiring some upfront cash investment. In the statement, we call out 3 particularly large sites we purchased in the second half at Worcester, Rugeley and Bury St. Edmunds, which will underpin regional delivery for years to come. We also come into the year with well in excess of 10,000 plots with terms agreed and solicit in structure, which demonstrates both the weakness in the land market as well as our competitive in the land market, particularly on larger sites with our new strategy. So turning to our debt position. We achieved our guidance of reduced year-on-year net debt position at December '25, closing at around GBP 145 million compared with GBP 180 million at December 2024. The higher-than-expected land purchases in part explains the net debt position being marginally higher than consensus at GBP 109 million as we took advantage of opportunities that present themselves, as I just said. Our lower year-on-year net debt position was also despite the impact of delayed timing on certain of our partner deals, not helped by the late November budget, which overall could have generated over GBP 150 million of additional year-end cash. We now expect most of this to complete in the first half of this year. That's not -- which wasn't included in our budgets. And I can already tell you that GBP 15 million has been received in the first -- just over a week of this year. So let me be very clear. This slightly higher debt position and consensus is more than covered by circa GBP 25 million worth of land spend, which are sanctioned the day before the government's budget in November, some of the GBP 50 million of grant that we're not expecting to be paid until April and most importantly, over -- in excess of GBP 150 million of cash from deals, and we've already received GBP 15 million of that in round numbers. I also want to share with you that in December, we passed a significant milestone with Vistry's joint venture, unique joint venture with Homes England [ PlacePoint ], completing its first site acquisition, and we anticipate further engagement with newly formed National Housing Bank, which is a subsidiary of Homes England as it becomes operational and publishes its investment perspective, seeking to deploy loans, equity and guarantees to accelerate delivery. The group enters the year with a GBP 4 billion forward sales position, which is a strong carryforward position, in fact, much higher than we were expecting, particularly when you consider we're at the end of the current affordable housing program. So we're at the low point of a forward order book because as you'd expect, as the new program comes through, that will rise. But importantly, the current percentage for 2026 is better than a year ago than we came into 2025. So we're in better shape coming into this year on a forward order book than we were coming into 2025. Whilst market conditions remain uncertain in the very near term, further benefits of our cost, productivity and mix enhancement initiatives will support the delivery of good year-on-year financial and strategic progress. And as a result, I'm looking forward with confidence more than ever for this year and certainly more than I did this time last year. So with that, Tim and I are happy to answer any of your questions. Back to you, Oliver.

[Operator Instructions] Our first question is going to come from Aynsley Lammin at Investec.

Two from me, please. Just in terms of the completions for FY '26, just would appreciate a bit of guidance there. I mean, given on the open market side, obviously, what you do with site numbers have a big impact. But if you assume kind of stable markets, do you still expect to grow from that 4,100, and on the partner funded, which is a bit more difficult to predict from outside against that 11,600, I mean, should we be expecting group completions to be up more like 5% rather than 10% for FY '26? And then just the second question, on the land sales, GBP 200 million during the year, if you could give us a profit number that was associated with those sales, that would be helpful.

Okay. Do you want to take the land sales first then, Tim?

Yes. Okay. The reason why we call it land sales, been asked about this for a couple of e-mails that have come through. The reason why we call out land sales is because it's one of the areas that explains why our revenue is broadly flat despite the fact that our completions numbers have dropped down. And that's because we don't take completion numbers. We don't take any units on land sale revenue. When we talk about land sale revenue in the main, what this relates to is selling parcels of land on big sites that we acquire where if we buy a big site, we will -- the site strategy could be we buy a site with 1,000 plots, and we may say we want to presell 600 of those, sell 200 under our flag, sell them privately and parcel out 200 to be sold to another housebuilder or somebody else to buy and they can develop it themselves or sell it under their flag. So that is the source of this land sale revenue. The margin that we take on that is consistent with the margin that we take on the site as a whole. We still take a blended margin. So the margin on that GBP 200 million of land sale revenue is equivalent to the target margins that we have across the rest of the group. So you probably associate GBP 30 million to GBP 40 million of profit with those land sales. That's a fairly long-winded answer to question.

Yes. But it certainly wasn't Tim, a plot number. And then unit numbers, we would expect to be over 17,000 units. We'll get further into that as we get into March. But there's well in excess of GBP 150 million that 6 weeks ago, we expected to come into last year, which will be added to this year. If you look at last year on January 2025, we were not expecting the new program to come through. We were hoping that there would be some additional funding to come through and that additional funding did come through GBP 2 billion, although we haven't been paid any of that yet. We'll get that money, which will further enhance revenue and our cash position in April. So I would expect [ 5500, 6500, 7000 ] units to rise by over 10%, taking us back into 17,000 this year as the new program comes through. And that new program will come through. We are aiming, hopeful, confident that we are going to be one of only a handful of Strategic Plus partners our initial bid and Homes England are absolutely aware of this, will absolutely have the full weight of our land bank behind it, and we would expect our initial bid to have in excess of 1,500 plots that are ready to go straight away as we go into around the half year.

Our next question comes from Clyde Lewis.

Three, if I may. Greg, you sort of talked about '26 obviously for -- I think you described as takeoff for affordable housing. In terms of sort of key dates, obviously, we've got sort of rent convergence this month. What are the other key dates that we should be looking at for the balance of this year, I suppose, to kick off that...

You're right, rent convergence that was confirmed to me a couple of days ago will be this month. I think the National Housing Bank, they're intending to get that up and ready, and we'll be taking advantage of that, particularly in a number of our JVs. That should be up and running with announcements from us and others by the end of March going into early April. We will submit our bid. And when you submit a bid with the relationships that we've got, we're working with Homes England as we speak with that bid. So the bid will be submitted in February, maybe the first week of March. And we will expect as we get into April and May to be told what we're going to get. The government has said that they will make the official announcement, which includes all small housing associations and small bidders in September with regards to here is the result of what the bidding round has come through. But we would absolutely expect and have had it confirmed from Homes England that we'll be on with our program, which, as I say, will be submitted in February, March, long before that September announcement. So we will have confirmed funds coming through to us before that date. We've also been told by the GLA as well as Homes England that we will have -- so I've just said Homes England there. The GLA have confirmed that before the summer recess, we will have visibility on our funding.

Second is around, I suppose, your view on the sort of capital-light model of partnerships. Has that changed at all over the last 6, 12 months in terms of how much land and capital you're going to need to sort of grow the business in the way you want?

So back to the basics, Clyde. In September 2023, when we announced this strategy, it was all about a labor government coming into power and it was all about a labor government following through on their promises of absolute investment in affordable housing, all of which has happened, I'm pleased to say. right. You then got a situation in September '23, we were at the end of the '21-'26 program. Most of the money has been spent or allocated. So we were -- we have been up until, I'd say, the fourth quarter of last year, looking at scraps with regards to the affordable housing associations who were already struck for cash with mould and building safety, et cetera, et cetera, they were struck from a financial perspective as well as from a management perspective. So that led us to a very strong in the last part of '23 going into '24 and even the first part of '25, a strong PRS market. And the deals you do with PRS providers, I mean, the best thing I can say is a PRS provider is buying something from us and it happens to be a house, it could be a car, it could be a washing machine that they are looking to turn as soon as possible. They're looking to sell it on. Of course, the housing association never sells what we're giving them. And we are very confident that our model is more suited to working with housing associations and PRS providers. We will continue and have great relationships with PRS providers but our model is more suited to housing associations. And I'm delighted to say that in the last quarter of 2025, that has now started to come through. So the PRS market has subdued and it's been more than made up by a 30% increase in the previous period with housing associations coming through. The payments and payment profile that housing association will do entering into joint ventures, which PRS providers don't do either is far better. So basically, going forward, we're going to do more with housing associations than we do with PRS providers. That's already starting to come through and is here yesterday, we -- last night, we exchanged contracts on a large scheme in the Northeast of England 900 units with a presold deal to a housing association. So it's all starting to be business as usual. And the terms and the money that are paid upfront are better than we've seen in the last 18 months because housing associations are better to deal with, frankly, than PRS providers are from a cash perspective. But the market hasn't been there until the last quarter. And the last quarter not only is it the GBP 50 million worth of -- sorry, the GBP 2 billion worth of money brought forward from the GBP 39 billion into this program, but not being -- but no cash is going out the door until April. But the last quarter has -- we had the usual scenario where housing associations were let down, they've done this and all of a sudden, they thought they spent the money. And in some instances, they had a shortfall. So there was a lot of scrambling around, and that's a lot of where this in excess, it's near GBP 200 million, if I'm perfectly honest with you, in excess of GBP 150 million worth of deals that were coming through has fallen into the first half. And the majority of this money will come through in January and February. We said the first half, but the majority will come through in January Feb's come from them being behind. I didn't think they were, but they're behind on their program, and housing associations like Vistry are absolutely paranoid to absolutely benefit from a once-in-a-generation spending spree by the government on affordable housing, which is a '26-'36 program. You've got to have demonstrated that you're spending the money in the '21-'26 program. So we have, and that's why we're confident we are going to be a Strategic Plus going forward. That will mean more deals with housing associations, which will more than -- long answer again, Clyde, sorry, more than underpin our capital-light model.

My last one was on the open market, private sales. How do you think that evolves for you this year?

We're assuming that it was a challenging year last year. Then we throw in the hiatus of a month of the budget. So I don't think we'll have any hiatuses. We hope we don't during the course of this year. Interest rates are moving in the right direction. I think we're budgeting no difference in the private sales market. If you push me at the margin, it might be slightly better with interest rates coming down, but we're hoping to come down. But we're assuming a flat private sales market this year. And as I said, we've got around -- I don't know if that's come through in anything. Yes, so it's an unspectacular housing market, but we've got around 60% forward sold across all the tenures coming into this year, which is slightly up on last year, and that's without the benefit yet of hopefully being a Strategic Plus partner and a GBP 700 million grant funding allocation to us.

Next questions come up from Rebecca Parker.

I was just wondering how you expect margin progression into 2026 to play out, just given some of the phasing of those lower-margin sites and perhaps that push out of the GBP 150 million into early next year.

You want to take that, Tim?

Yes. So I think -- the full year margin for this year ended up at 8.4% for '25 and '26, which is actually this year, for '26, we'd expect to see some margin progression, perhaps not to the extent that we saw in the second half of the year, but we'll be edging up from 8.4% this year because some of those lower-margin legacy sites will start rolling out. And we're seeing with each period that goes by, less impact from the South Division issues that we identified back in 2024. So we expect to see margins go up, but not to the same extent as we saw in H2.

And just adding to that, Rebecca, and I think it was -- I'm sure I think it might have been talking about land sales. Of course, we're driving for cash and we are trying to target the book. There were at least 2 land sales that we did last year where we lost money, but we thought it was the right thing to do to clean the book. And so do not -- please any of you go away with the fact that we've plugged a gap with land sales. The land sales are all planned. And the ones that we -- the ones that weren't planned the ones where we thought, well, do we move on from this scheme or land that we bought years and years ago and take the hit and bring in the cash, and that's what we did. So the land bank is far cleaner than it was 12 months ago than it was 24 months ago.

Our next questions come from Chris Millington.

Sorry, I couldn't quite hear the intro into the question. There's a bit of an echo there. Well done on H2 and a good outcome for the year there, guys. Just wanted to ask a few really. First one is just really on kind of how we should be thinking about debt as we go into 2026 and what remaining kind of surplus land and work in progress assets have you still got? Should I go one at a time, and then I can chip in with the other ones afterwards.

Do you want to take that?

Yes. So too early to give specific guidance on '26. So we're working through the implications of how we finish the year. But first of all, of course, we start with a lower opening debt position, which we will be maintaining during the course of the year. And it continues to be a priority focus for us to release capital from the balance sheet. Now some of that capital probably in '25 was a bit more stubborn than we had hoped it would be, and we were not prepared to sell stuff and destroy value in doing so -- in doing some sales. But we've got a program of capital release that we're working through to reduce debt steadily during the course of the year. So we're still looking to reduce closing debt and reduce our average debt during the course of the year as we work through the Housebuilding land bank and some of those developments that just don't work for us. So yes, further debt reduction is expected in '26.

Thanks, Tim. Next one I just want to ask is, obviously, a big jump in the second half margin here. How much of an impact was the new schemes falling in? I mean from your perspective, are they kind of adhering to your 12% margin target, 40% ROCE target? And obviously, you've been dragged down by the legacy issues. Just curious about the new stuff coming on stream.

Yes. The new stuff is coming on stream at 12% and probably better than 40% return on capital. The land we bought -- I wouldn't even want to say the margins and particularly the return on capital that we've secured land in the second half of last year because if I told you the numbers, you wouldn't necessarily believe. So the return on capital and the land we bought in the second half of the year, including the day before the budget were exceptional. The 10,000 -- in excess of 10,000 plots that we have with -- this is not just we've made offers. This is terms agreed, so this is instructed. So 12,500 plots bought last year. And we actually spent -- so let me get this right. I think we spent over GBP 100 million, if I got that right, in land in '25 more than we did in '24. So included in all these numbers, and let's be clear. I could have quite easily have sat and saying, why do I want to buy all this land guys? This is all for the future and medium term. I just want to look good on January 13 when we make this announcement, and I could have done all of that, but we decided not to. So we spent more money on land. And a year ago, one of the questions from the floor was, do you think you can buy land? And do you think your model is competitive? And here we are now. Of course, yes, we can. We've probably bought more than most people. And if you take into account what we got with terms agreed, this is we most definitely have. So yes, long answer again, Clyde (sic) [ Christopher ] it was profits coming through on the new sites, which are performing incredibly well. We set up an investment committee in early January, which has put a lot more vigor into the land buying process. I still sign up every piece of land, but that's after a land committee -- investment committee have gone through everything in incredible detail. So that's now coming through incredibly well. But the land we bought particularly in the second half, the 9,500 plots in the second half of last year is margins and particularly return on capital, incredible deals.

That's great. Just one final one for me is just considering your comments earlier around affordable versus PRS, you think PRS needs to be an integral part of this model going forward? Or the terms on affordable and the weight of money mean it is becoming, well -- periphery.

It's integral. But whereas in the end of '23, all of '24 and the first part of '25, it was the biggest part of the Partnerships market with the affordable being slightly better than the periphery. That is now and is flipped. We are now in a situation where the affordable will be the predominant part of our Partnerships strategy with the PRS being very important, but not -- but it will be the minor player. And again, when you're doing Section 106 deals, if you're doing the Section 106 and you're doing your additionality with a PRS provider, that -- you're splitting it. If you're doing the additionality with the same person or the same organization that will do the Section 106, you're getting a better deal on the Section 106 as well as on the additionality. For the last 18 months, we have just been dealing with what is the market forces, and that is an affordable housing provider reluctantly in some instances, looking at the Section 106. And then a PRS provider driving an incredibly hard deal on the additionality. And we're now in a situation where we're dealing with the 2, which makes life much easier, one contract, one organization to deal with rather than 2. And we will -- we work close, let's leave no doubt about it. We are really -- we have no joint ventures with a PRS provider. We have lots of joint ventures with now Homes England unique and housing associations. And I'll repeat what I just said a minute ago, we're going to enter into some very large deals with housing associations, one on a site for 2,200 units. Have they got their grant yet? No. Why are they doing it? Well, they're doing it, and they're going to do it in the next couple of months on the basis that we know it's coming. We've got visibility as we have with Homes England. It's coming. And we know -- and we've just got this rent settlement, and we've got a good idea where we're going on convergence. Our balance sheet is that much better. We're 3 years on from dealing with [indiscernible] . We're 3 years on from dealing with build safety. We've got far better management capabilities now. we're up and running. So if you were to speak to our 25 business units, all of a sudden, they're all reporting the same thing. The housing association movement is alive and kicking and is woken up. And that's not a criticism against them. They've had other things to deal with and no funds. We are up and away and the affordable housing '26-'36 program coming through will be important. But a quote from a CEO of the London housing Association, "Rent convergence is more important than the brand."

And you think rent convergence is going to happen later this month is the expectation?

Yes. As of 2 days ago, that's been reiterated.

Next, we will go to Will Jones.

Just 2 or 3 to tie up if we can, please. First, just double checking on the charge related to the Southern Division in 2025, what -- roughly what that number was? And just confirming that's pretty much all done. I think a little bit of a tail for '26, but any color there would be great. Second was just on outlet. I don't think you've had a number yet, but just where you are roughly around compared to that 190 mark previously and expectations from here. And then the last just tying up on fire safety and your take on the latest situation for the group as we kind of wrap up the books for last year?

While Tim is busy writing away, on the build safety, we are in the upper quartile of doing the right thing [ of ] other developers. So we're not in the bad books of the government. We're out there doing what we're supposed to be doing. That's the first thing. We are surprising ourselves we did last year, and I suspect we will this year. We will obviously be spending money. There's no change to our provision, but we continue to surprise ourselves with an excellent team of recovery. So we are continuing to recover monies from suppliers, from housing associations, from insurers, even from -- in the past, the NHBC as it were. So we're continuing to get money back from those organizations. So -- and again, we start the year in our cash forecast with a high number that we're going to spend, and we continually surprise ourselves with actually how much that cash actually turns out to be by the time we get in the recoveries. So we are in a much better place, obviously, as time goes by in the housing associations with regards to build safety, very little new buildings coming through, as you would expect, because they haven't come through yet, are they really? We've got it tried and tested practices as to we know what we're doing more than we did 2 or 3 years ago because it's 2 or 3 years ago, it was what do we do here. Now we know exactly what we're doing, and we remain confident with our provision that we've got out there. And more and more confident that we're going to keep -- continue to surprise ourselves on the upside with regards to what recoveries we will get. So that's that. On the other 2 questions. Tim?

And just to wrap up on the fire safety. So there will always be a couple of smallish claims that come in that are immaterial that add into the provision. But as Greg said, higher-than-expected recovery. So in terms of our guidance for ongoing cash outflow for fire safety in the next few years, it's as we were, it will be around sort of net GBP 80 million in 2026. In terms of the South Division issues, so no change in terms of the overall impact. In terms of the profile of that working through, probably slightly less hit in '25 because the impact hits as the revenue hits and some of the sales were a bit slower than we expected when we put the timing together our first estimate of the timing of the impact. So it's probably like a GBP 40 million hit to the numbers in '25 and it will be something like GBP 10 million, GBP 15 million in '26. So it's one of the drivers of an improved profitability in '26. And then final question in terms of sales outlets. Yes, at the moment, we're expecting sales outlets to be similar sort of numbers in '26 to '25, no significant change. It will depend on the timing of some of the site starts of the stuff that Greg mentioned that we are looking at signing up to in the next few months. But I think broadly, we should assume for now the same sales outlets in '26 as in '25.

The first 10 days of private sales and over Christmas have actually been pretty good. So no very early days, and we wouldn't make anything of it. But yes, pretty good. And just as a general comment at the end of what Tim said there, the fact that having read some of the notes that have come through with regards to guidance, we're just being cautious. We're still off the back of what happened in 2024. Our position at the present, I'm feeling incredibly bullish about 2026 and going forward. We're just not going to come off the fence a little bit with regards to guidance. So don't take the fact that we're not giving guidance as a weakness. The guidance will come out in March. We're in very, very good shape with carry forward. The deals -- the land deals that were coming through at the present moment in time are -- [indiscernible] only yesterday, a massive smile face, over 10,000 plots, and that means in our model, that's 10,000 deals because we don't buy land going forward without having back-to-back deals with housing associations coming through. So we're in pretty good shape here. The South Division I don't even -- we don't talk about the South Division. We don't even talk about that. That's gone. The South Division has been incorporated around. The new reorganization has captured all of that. And we haven't had any downsides with regards to the South Division throughout this year.

Our next questions come from Ami Galla.

Three questions from me. I'll go one at a time. The first one was just on pricing on PRS. I think in the outlook comments, you mentioned that you expect that to improve. Can you give us some color as to how much discount do you offer currently? And what are your expectations ahead of how that evolves?

Some of the deals we did with PRS providers during '24 and '25 were in excess of 15%, that's the market. The deals we're doing in the second half of last year are much more -- were better than forecast, hence, the improvement in margin, and we're anywhere between now 5% and 11%, I would suggest. So the deals are dramatically better because we're doing less with PRS providers. And then those deals that we do, we're getting more cash upfront.

My second question just was on build cost inflation. Any color as to how should we think about that into 2026? And what are the sort of pressure points that you're seeing in the market currently?

Okay. So we -- with our -- I'll use this saying quite internally at Vistry. The subcontract fraternity that we use, unlike the Vistry, I would suspect, love our model because the subcontractors, what they want is certainty. And when we say we're going to start on site and do 200, 300, 400 units, whatever it is, they know it because it's presold. So the deals we get from subcontractors are far better than -- and it's not a criticism to housebuilders because we give the certainty to the subcontractors. So during the course of this year, if you take suppliers and subcontractors, we have seen very little, if any, build cost inflation. Internally, going into next year, going back to one of the reasons why I'm feeling bullish, we are seeing, as we sit here at the moment, some pretty substantial subcontract reductions on the schemes that we are bringing to them now. So openly, outwardly, we're saying we're expecting single -- very low 1%, 2% build cost inflation. Internally, we're pushing for negative build inflation during the course of this year because of our model and what's coming through. And we don't expect the private selling market to be any better. Therefore, that's not good news. But from not good news, there must be a positive somewhere. There's less work out there for subcontract fraternity. They are desperate for certainty, and we are taking full advantage of that. So internally, our target is to have negative build inflation during the course of this year. Easier with subcontractors and suppliers. But on suppliers, most of our 140 to 160 group supply deals come up for renewal in January and February, and we will be looking to be incredibly robust in our negotiations with them.

And the last question I just had was a follow-up on the forward sales point. Can you give us -- of that GBP 4 billion, can you give us a color as to how is that split between, say, '26, '27, '28? How far is that sort of tail there in terms of the orders that you have currently?

In round numbers, if we've just done GBP 4.2 billion of revenue in '25, and '26 will be kind of maybe a bit more than that, and I'm saying [indiscernible] So I would say GBP 2.4 billion, GBP 2.5 billion of that is for this year, '26 with then I haven't really, to be perfectly honest, you looked at what that goes into on '27. But I would say about GBP 2.4 billion for this year, '26 and then '27 will be greater than '28 and going forward. But we do have within that GBP 4 billion some very, very large schemes in London, which will be going out for in excess of 10 years. The best I can help you with is around GBP 2.4 billion for this year, which if someone said that to me 6 months ago, [indiscernible]. So again, just reiterating, we're in a good position for 2026. I think I've read a few notes around '26 not being certain. Well, it's not, of course, but it's more certain than it was in '25.

Our next questions come from Allison Sun.

Just 2 questions from my side. So first one, I apologize if I missed your conversation earlier. So on the net debt for 2026, I know you are saying the net debt reduction. So does that mean we do not expect to return to a net cash position yet for 2026? This is my first question. And the second one is on the market momentum because, I mean, obviously, you guys had a very strong second half market coming back. And now you're expecting a strong second half '26 as well. So I wonder how about first half '26? Do you expect the momentum to be, I don't know, stronger or flattish versus what you have seen in the past 6 months?

We expect -- the first half of '26, we expect to be better than the first half of '25. That's the first thing we'll say. Every business like ours and particularly housebuilders always has a second half weighting, so 60-40. So we'll have a second half weighting, but it will nowhere near be as pronounced as it was in 2025. The bottom line is we've produced a GBP 190 million profit in the second half compared to GBP 80 million in the first half, 2x GBP 190 million is GBP 380 million. So we're not expecting anything like that, of course. But it will be more pronounced in the second half as it always is but far more normalized, and that will be helped by -- you may have heard it or not Ami (sic) [ Allison ], earlier in the call, I said we had in excess of GBP 150 million of cash and deals coming from -- going into this year that we were, frankly, in November, hoping would come through in December last year for whatever reason, mainly just run out of time and they come into this year. So 2000 -- we've come up with, I believe, a great result, particularly on a strong second half in 2025. And that hides the fact that a lot of what we were hoping to come through has now gone into this year. And all of that what we were hoping to come through, the vast majority of it will come through in the first half. So pronounced second half, but nowhere near as much. Your point about net debt, we would still expect to be in cash at the end of this year.

Yes, absolutely. Just to back that up as we go into the -- I referred earlier on one of the answers to the fact that we're working through a capital release program over the next couple of months. And so we'll be able to provide a bit more color on that in the March results. But absolutely going into that, our target is to say how -- what do we need to do to get to net cash at the end of this year.

Our next question comes from Charlie Campbell.

A lot of the more obvious questions have gone. But just one last one for me. Just on the open market sales, this is a smaller part of the business. I'm just wondering if there's anything to say on incentives towards the end of FY '25 and whether that maybe leaves margin erosion on the open market side given you're quite well forward sold.

Yes, I'd say there's no change to what we said before, Charlie. It was up to 6%, but there certainly wasn't any increase in the latter months of the year. We're holding firm on that. And our hope would be that we can reduce the amount of incentives required in '26. Obviously, we're hoping that the interest rate reduction that we saw at the end of last year, the reduced uncertainty that clearly was casting a cloud over all of our markets from the budget at the end of last year, that will dissipate. And so we're hopeful that the incentives requirement comes down. But I think for the moment, probably the prudent thing to do is to assume same level of incentives in '26 as in '25.

Thank you very much for all of your questions today. I will now hand back to Greg for some closing remarks.

Okay. Thanks, everyone, for listening. I think all I want to say is we were delighted to get to where we needed to get to in 2025, incredibly difficult, but we did it. And we are in a great position going into 2026 with an affordable housing market absolutely starting to wake up, and we're in a great position to take advantage of that. On that, thanks very much, and no doubt speak soon. Thank you.

Thank you for joining today. You may now leave the call.