Vistry Group PLC (VTY) Earnings Call Transcript & Summary

Welcome, everyone. Good morning. Thank you for finding time to join us today. What I'm going to do this morning is I'm going to run through an overview of the partnership's business and how that differentiated model works. We've got some detail for you, so we'll be able to give you an opportunity to lift the bonnet and ask some questions later on. And I'm hoping that we'll be able to start to demystify partnerships. I know some of you have said to me previously. It's a little bit of an opaque business model when compared to pure-play housebuilding, well, I'm hoping that we'll be able to make that a little bit clearer for you. And we've got three specific, what I call nuggets of information that highlight our differentiation as a business as we go through the presentation. And by the end, I hope you'll not only understand the business a little bit better, but you'll also agree with me that it's not fully priced in, and that you'll see that there is further growth in both volume and quality of the returns that the business can bring. Okay. Let's go on then to the agenda. So I'm going to start with talking about the quality of the partnership's asset, I'm then going to look at how we're uniquely well placed for the market opportunity in front of us, how we're going to apply a future strategy. And then we'll look at some of those technical examples. We've got six schemes that we look at in a bit of detail to show you what partnerships looks like in action. And then we'll have an opportunity for questions. So please do fully participate in that question session because that will bring everything alive. And to help me today, I'm joined by the partnership's executive team. So there they are on the slide, book ended by myself and Earl, all smiling and hopefully, they'll still be smiling by the end of this morning's session. But what they do have is a fantastic amount of industry experience, over 160 years of experience and a lot of useful enthusiasm, which I can vouch for in terms of keeping them all under control. So as we go forward, then let's look at that partnership's asset. So I've headlined it their 21st century Partnerships business because we're about doing things with a long-term future. So it's an optimized market-facing model that we've designed. So it absolutely faces our market perfectly. And it brings together that cash-generative partner delivery with our mixed tenure investment. That's perfect for our partners. And our role is to provide land right the way through cradle to grave, providing land, constructing homes, developing schemes, identifying funding solutions and then providing the retail infrastructure for sales. That allows us to draw on our experience across all tenure products, a wide range of which we've got experience in. And in terms of leveraging our partnerships, Linden, Bovis and Drew Smith brands which, as you will know, we are a five-star housebuilder. That's a great position to be in. And we're working with affordable and private rented sector clients who are looking to invest across the cycle, contributing to the fact that we've got a sustainable business platform and core strength, our unrivaled sector knowledge, people drawn from across the sector within the business with great knowledge that they can work with clients. So our business dimensions, here we are, you can see we're operating across 11 businesses. We've got about 115 sites as of yesterday morning, 1,100 employees, and those 10 businesses beyond the executive team that you see here today have real strength in depth. So we've got people who have joined the business from across the sector. We've got people from countryside, people from Barratt's, Taylor Wimps, Keys, Keepmoat within our business, a real wealth of experience, both at divisional and business unit level, which is fantastic. And those people have come and joined our business, which has grown over the last 4 years because they want to participate in that growth. It's an exciting place to be. So here's three graphs that show the growth that we've had. This is the only time really that I'm looking out of the rearview mirror today. But you can see the growth from 2016, look at the growth in terms of GBP 340 million concentrate on that central 1 for a moment, up to over GBP 750 million turnover, which we're targeting for this full year. And the eagle-eyed amongst, you will recognize that's the first time we've shared with you our forecast targets for full year '20. But the fundamental here is that the business is used to growth and is well equipped to provide further growth. And that capacity comes from a number of sources. Firstly, we're growing in all of our regions. Every single region has seen growth over the last year. We are able to leverage the established people and operational platforms that we've got in order to facilitate that further growth. So we've got everything in place. And I'll come back to this a little bit later in the presentation. But when you add it up, we're just shy of GBP 3 billion of future work that we've got within our sites. And that's supported by the strength that Greg alluded to in terms of the Vistry Group. So now we have as a partnership business, access to capital access to shared land buying expertise, great strategic land team in Vistry. We thought we had a good strategic land team in Galliford Try, couldn't hold a candle to the strategic land team we have here in Vistry. And we've got the strength of those retail brands, and that allows us to jewel brand some sites. And critically, those procurement savings, the synergies that come from the sort of volumes we've got now across the Vistry Group all help and contribute to the business. And if you look at the pie chart on the right, where we're forecasting GBP 1 billion revenue, north of GBP 1 billion revenue in 2022, you can see we've got growth in all of our regions, in London, in the south and in the Midlands and North. So I said that I'll give you three nuggets. So here's the first one. So imagine for a moment that you're looking at the U.K. housing market are fresh. What you would see is 3 Qs from consumers. So the first Q is a Q4 social rented housing. This is the eligibility for which is very constrained, and the delivery of social rented housing is constrained by the amount of public subsidy that goes into it and obviously, subsidies through Section 106. But that's the key constraint for that Q. On the bottom Q, you've got full open market purchases, people who rely on mortgages or have the equity to be able to buy their home outright. That Q is only really constrained by mortgage availability and more particularly by planning consents allowing the supply of new homes into the market. But the middle Q which is broader and deeper than any other Q and which contains more people under 45 than any of the other Qs is the Q for intermediate housing. This is where people are unable to qualify for social rented housing. They don't meet the eligibility criteria, and they're unable in terms of affordability to complete the outright purchase. And so they need some forms of assistance, some products which will allow them to access housing. So this is where you find shared ownership. This is where you find First Homes, Help to Buy. It's where you find the private rented sector solutions. And that Q is the most deep and the broadest. And when you look at those Qs as a whole, the Partnerships business, 80% of our production is in those top 2 Qs. So that's what differentiates us from a housebuilder. Housebuilders focusing on that bottom Q, we are focusing our business on those top 2. Another aspect of focusing on those top 2 Qs is that you're looking at ESG and corporate and social responsibility, REIT large. So it's embedded in our output. And so unsurprisingly, we see the wall of capital that's looking to invest in that sector coming through. So they're investing in the economic activity, jobs and the supply of affordable housing. Now this infographic is an example of what we've recently submitted in a bid in Bristol, where we were successful with Bristol City Council's inaugural Housing Company, they're inaugural scheme. We were able to put together a bid that highlighted not only the social value of what we're delivering, but how we would measure it and the impact of that social value. And that was fundamental to us winning our bid there and becoming that joint venture's first partner. So on to our model then. So our model is a braid or a blend of two things. Partner delivery programs, which you might have seen me referred to previously as contracting and land-led, and I'll come back to that in a moment, but also mixed tenure developments. So let's look at each of those. So in terms of mixed tenure development, this is where we're focused on a retail risk. So it's a mixed tenure development but with a high degree of presale. So we look at targeting a minimum of 50% presold positions on all of our mixed tenure schemes, bringing partners in who will share build and risk and on joint ventures will also help us with pursuit costs and capital investment. Our open market sales are targeted on product in that lower and middle to middle-quartile markets. So we are looking at a product which is tenure blind and can move between tenures. And we're drawing on those great sales brands I mentioned earlier and our customer service. And what that does is it supports repeat business with partners. So others do joint ventures, but often those joint ventures are one-off single sites. Our approach is to look at working with partners on mixed tenure on a serial basis developing portfolios of work with them that give us efficiencies. And that efficiency also helps us when we're talking to our colleagues in homes. So we're able to bring together the house -- the land buying and the housebuilding skills across the group to provide our mixed tenure solutions. Now I'm introducing a new phrase here, partner delivery programs. Why? Well, contracting doesn't really describe what we do. Contracting is what you do if you've been building retail parks, if you're building bridges, harbor walls and if you're doing things like wind farms. What we're focused on is delivering a product regularly to a customer and a client who is not adversarial. They're looking for long-term partnering positions. It's a completely different risk format to contracting. And also an increasing percentage of our work is land-led. So we're actually taking the land and the build solution to our partners. That's not contracting. That's something quite different. And by aligning our investment, our land buying and our technical skills with our partners' business plans, we are able to draw out a different approach. So that means it's the cash engine of our business because it's cash generative. And it also means that we are able to derisk it because we work on the procurement packages beforehand or we make sure that our partners are sharing in on that risk. So it's a low-risk build solution, quite different from pure play contracting. And that also gives us by working with our partners on their program, strong forward visibility. And a diverse client base means that we're able to work right away from the north of the country down to the south. We're working with national players and people who are focused on regional delivery. And we can generate synergies from our mix development model. So as you'll see in a moment, it creates a virtual circle of mixed tenure investment with our partner delivery program. And if you look at that graphic at the base of the slide, you can see what's key to our success here. We are moving along to the right-hand side in terms of the work that we do. So our focus is increasingly on land-led work and on negotiated positions. So we're not waiting for a tender to drop through the letter box on a Saturday morning and then competing with 5 or 6 others. What we're focused on is taking control of the forward visibility of our work and negotiating those positions through two tenders or direct negotiation or land-led approaches. And that really helps us going forward. And by 2022, we are targeting 7 out of 10 of the homes that we build will be on land that we've introduced. So set aside London, that's going to be 100% in some of our regions. So when you apply that model, I said virtual circle a moment ago, what do you get? Well, you clearly get cash generation coming from our partner delivery. And that then gives us the opportunity to work with partners on synergies to get repeat business. So just look at that wide delta at the moment on the operating margin, why is it a wide delta? Well, if you look at the mixed tenure, it's really a function of the percentage of presold from a particular site, the lower the degree of presale, the higher the margin that we would demand in terms of that investment. And if you look at the delta on the partnering delivery, that reflects what I've just explained in terms of our move towards land-led schemes of contracting, which we initiate and we'll be looking at some examples of that in a moment. Return on capital is self-evidently infinite in terms of our partner delivery and our capital requirement in terms of our mixed tenure work is modest, modest because we're disciplined about our land negotiations, modest because of those presold positions. So we're looking at internal rates of return and return on capital from the beginning of when we first look at the site. And our risk reflects that approach. So we are selecting very carefully the schemes that we're prepared to be involved in. So a moment just on what we build. So you may have the view that we are busily building 26-story tower blocks with two-story basements next to railway lines, where we're only doing one of those. Overwhelmingly, the majority of what we deliver is two-story housing. Now you might say it's a commoditized product. We wouldn't say that, of course. We're building beautiful homes and creating great places, but the efficiency of that volume is there for you to see. So when you look at our mixed tenure development, overwhelmingly, it is low rise a little bit in London and the ones in London incidentally are selling very well at the moment. In terms of our partner delivery, we are doing some high rise, but that's on the basis that we really do understand the risks. We're working with long-term partners. And that includes incidentally things that are not very high at all. So we're looking at 4 and 6 story extra care homes, older persons housing, which is an area that we've got really established expertise and a footprint in the market for. So what we build is predominantly low-rise housing. So we've got unrivaled scale. So if you look at our joint venture work, which is what this slide is all about, our joint venture portfolio. You can see across history, historically, GBP 6 billion worth of joint ventures. Now that's -- I have to pinch myself. 25 years ago, I set up what I think was the first trading subsidiary of a housing association down in the southwest, which started to do some, at that time with Midas Homes to mixed tenure sale. And now here we are, just as history, GBP 6 billion. That's phenomenal. That profitability for our partners is significant. That's circa GBP 400 million of profit that that's generated for our partners. And what they do with that is they covenant it back into their group structures and then they reinvest in affordable housing. And who do they come and talk to about those reinvestment programs? Us. That's an example of how that works, and it works incredibly well. Supporting some of our joint activity is joint venture activity is public land, and we work very closely with Homes England. We've got an excellent relationship with the Homes England. Those of you who are unfamiliar with what that body is, it's the government quango, is the route to market for market intervention for the government. And we are working with them on 19 sites delivering over 4,000 homes. A great relationship with them. We've actually captured 1/3 of all of the public sector releases that have come through Homes England over the last 3 years. And we've also got unrivaled scale when we look at our partner delivery program. So GBP 700 million of new contracts this year. We work with over 75 housing associations, and actually, we've got very close relationships with about 25. And increasingly, there are two sets of new kids on the block. Firstly, local authorities. So we are actively working with 22 local authorities. Occasionally in joint venture, sometimes directly commissioned housing. That's a really important client base for us going forward. And we've got some great example, schemes with them that hopefully will be replicated by other local authorities. And we've got a really good relationship and repeat work, portfolios of work with the new private rented sector providers, L&G, Sigma and Sage, which you'll all be familiar with working with them across the country on portfolios of delivery, which is really useful in helping us in terms of that presale position. And those shared client arrangements help us in both our homes and our partnerships are predominantly talking about partnerships here, but just think about it. If you're over here and your Vistry homes negotiating Section 106 deals, you've got the great opportunity to look at the synergies of how that will contribute towards the Partnerships business as well. So there's some client testaments now. I'm not going to dwell on those because, frankly, I wouldn't be able to get out the door afterwards. So let's focus on market opportunity and looking forward. So most of you will be aware of what I call the fundamentals of the market here. So there's an enduring supply side deficit. We've got public sector investment from all parties. It's only the nature of those 3 Qs that they want to turn the dial up on that makes a difference. And we've got financially robust purchasing sector, I've just seen a further GBP 40 billion being borrowed by that sector to reinvest in new supply over the next 5 years. And that new supply is totally reliant on the lights of us in this room to bring forward the land and to be able to build the new homes that respond to that investment. So when you look at the demand in those top 2 Qs, it's about 100,000 homes per annum. When you look at how that demand is being met, it's about 50,000 homes. So you can do the math, it's obvious. There's a clear demand for increased supply in that marketplace. And a little bit of finer detail here just to show the government funding commitment since 2010. So you want to really concentrate on the lower 5 boxes on that slide. We're looking at GBP 2.4 billion of investment coming from the government into Homes England to support affordable housing delivery. And incidentally, we're one of the few private sector bodies that actually have access to that grant directly. So we're not only reliant upon our local -- our partners in housing associations, we've got our own program to supplement our activity. But you just look at that and just think for a moment in terms of the U.K. housing market. That market has had state aid in it since 1945. It's not going away. In a market economy, 20% of the housing provided is reliant upon some form of public subsidy. And you can see how that's continued across that graph over the last 10 years. So what about our partners' appetite? What does that look like? Well, I said we've got a robust and active purchasing sector. Well, there you are. You can see investing about each of those columns is a quarter. They're investing about GBP 12 billion a year housing associations. And this doesn't include local authorities, by the way, housing associations in new supply. So they've borrowed about GBP 83 billion, and they've got headroom to invest in more. So what that red line shows, which is what we've drafted, [ rebought ] the information in and assembled it is the actual level of supply against the forecast that those housing associations made in that quarter. So you can see actually the supply has been running below their business plan ambitions. So what's interesting is if you then come to the dip that you can see in the middle, created by COVID, and we've created a dotted line there. So assuming if you extrapolate supply on the level and that they need to deliver within their programs that they've been under forecasting previously, you can see how we can have confidence in supply out to 2022. And that supply is coming through these models. So this refers really to the things that I've been talking about so far. So look at those three, starting with the purple at the bottom, that's the foundations of our business. Housing Association, affordable delivery. Moving up to the institutional investors. Increasingly, that wall of capital coming through ticking the ESG box, looking for PRS investment across the cycle and key partners for us going forward. And then the green box at the top, local authorities, some fireworks of brilliance out there with local authorities. They've got up to speed, they're sweating their land assets, they're bidding for grant funding. The government is supporting them to deliver because of their reduced borrowing requirements. But there's a lot to go there, a lot to play for, which we're working with 22 local authorities, there's over 300 local authorities out there. That's a key market for growth. And all those three areas are interested in joint venture delivery, recognizing that mixed tenure delivery is the way to get planning success and mixed tenure delivery generates subsidy back into the core ambitions of those three cohorts of investors. So a word in terms of how our competitors look. So this is an interesting one. You can see there against mixed tenure, partner delivery, a national operating platform and housebuilding brand, we tick all the boxes. So there's only a few of us, three there who are actually fully engaged in working with partners directly on their commissioning of work. And in terms of a national platform, countryside are not national, nor Kier Living nor a Crest. So our ability to work with national housing associations is strengthened. We work with one housing association, a key joint venture partner, predominantly based in the north, wanting access to Southeast, Southern and Midlands markets. And it's by working with ourselves as a national player that they're able to do that. And our Housebuilding brand, first-class Linden, Bovis and Drew Smith, and I don't know anybody who has gone to supper or dinner and sat down proudly to say, I live in a Kier Living or a Lovell home. Those are not brands that are widely recognized. So what does that mean then in terms of going forward and looking at our strategy? So you heard this first in the video. So there we are. So Project 6000. Now our staff are absolutely committed to this, hearts and minds. So this isn't a construct just for analysts to impress you with our ambition, this is absolutely being lived right the way across the business. Every single business unit has its Project 6000 plan, all the businesses are focused and have got visibility on how they're going to deliver and that is four key metrics: GBP 1 billion plus revenue by full year '22, an operating margin and increased profitability and operating margin north of 10%, a 40% return on capital, working very carefully on what we've said previously and 6,000 homes per annum. Now obviously, the first 3 are really important, the middle 2 most important. But in terms of a proxy for those 4 metrics, 6,000 and Project 6000 is what we're using because we can share that ambition with our clients and our broader stakeholders, and everybody gets delivering 6,000 homes per annum, being far more realistic to many people and saying we're going to hit an operating margin north of 10%. But that's what that tariff looks like, all four homes delivering against those metrics. And we're going to deliver that accelerated growth through four routes, an increase in our mixed tenure work and that land led and negotiated contracting. Optimizing our business units because there's opportunity here for us to be more efficient. Looking at drawing in our we'll move on to the next one because that's the key one. Our margin progression. So firstly, here, you can see how we're going to move forward in terms of that balance of mixed tenure and land led. So at the moment, we're 35% mixed tenure and 65% partner delivery. And what we're looking to move to for full year '22 is 50-50. So this is the second real key nugget of our business and understanding the sorts of returns that the business will generate. We're looking at improving those margins and improving those returns through changing that balance. It's a key differentiator to us. If you go back to that competitor analysis, you can see that some of our competitors don't have those partner programs. This is the fundamental route to understanding our business. But we're going to apply that in a disciplined way. So we're looking at a controlled increase in our open market sales. So you can see there the growth in average, and that is average outlets for each year. So we've grown over the last 3 years, and we're projecting that forward to full year '22, where we're expecting an average of 40 sales outlets across the year. And that's supported by our mixed tenure land acquisition. So we fully acquired for next year. We haven't got any land acquisition or what we call gross profit shortfall. In full year '22, there's a little bit to go, but we've identified all of those sites, and they're nearly there. So I'm not concerned about getting our landing for full year '22. And even full year '23, where 60%, we've got those land controlled or owned in our land bank. So we're in a really strong position to deliver that growth that we talked about earlier. And here's the slide that's explaining where we got to that GBP 3 billion. So I'll just take a moment on this. So strong visibility of future years. So what can you see? Let's just focus on the pie chart on the left for a moment. So the green area, the GBP 820 million, this is what we announced earlier a couple of months ago or a month ago when we gave you an indication of our forward order book. So this is schemes where the ink is dry, the contracts left, we're probably building. It's absolutely in the bank, GBP 820 million in our forward order book. On top of that, we've got GBP 312 million, and that's net of JVs, by the way, GBP 312 million of sales in hand. And then the blue area, the GBP 1.8 billion is what we call work on the bench. And what do we mean by work on the bench? This is where we're already selected as preferred bidder with partners. We've already agreed the terms for the land that we're buying from the lights of Homes England. And we are 99% certain that those schemes are going to go forward. It would take quite a catastrophic event for those themes not to happen. And to that, we've added the gross development value of the land that we are going to pursue a mixed tenure solution in with partners. So when you look at that, that adds up to GBP 1.8 billion. And that's drawing on the land that is in the pie chart on the right, where you can see our land bank, including mostly owned and secured and a little bit more to go to, but with terms agreed. So just think about it for a moment. If Earl was to say, "right, Stephen stop, no more investment, don't want you to bid for any more schemes, don't want you to buy any more land, stop" we have GBP 3 billion as a business in our sites already there, ready to go up. Second point was optimizing our business platform. This is the other route to our Project 6000. Typically, you'd be looking at a business outside of London turning over about GBP 120 million, probably having 16 sites on the go. Go beyond that, you start to lose management control. We've got a bit of variability still within the business. So we want to optimize that. So that's one part of this. The second part is drawing on the Vistry wide infrastructure to give us those efficiencies that will support the business platform. So getting the capital to invest, looking at our shared land buying expertise, which I've already mentioned in terms of strategic land, drawing on those retail brands, and we're doing an incredible amount of work on making sure our virtual platforms and the way that we use our retail infrastructure online absolutely leads to success, and we've got some industry-leading work that we're doing there and that we can draw in. And those all important procurement savings and synergy efficiencies that come through from scale. That involves us building to [ sub ] standard house layouts that involves us looking at standard specifications drawing on that broader Vistry approach, all of which will contribute to our margin growth, all of which allows us to optimize our business platform. The third area, which I left over earlier is the geographical growth. So this is where we're looking to have a presence in some markets in an intensified way or some new markets. So you can see there, really successfully, Drew Smith joined us in 2017, great business, predominantly contracting, but with some really good land positions and a real entrepreneurial focus, great business to have joined the group, really contributed a lot already. And then pinch myself, it was only last year, 2019, seems like a [ A on a go now ] that strategic team group joined us a business platform that we brought in Yorkshire. Going forward, what we're looking at is we've got a nascent business in Thames Valley based here in our Reading office which we hope is going to deliver increased mixed tenure output in that diamond between Swindon, Reading up to Oxford and down to Newbury, an area where we have real opportunity for increased mixed tenure turnover, and that's going to be our focus. And then further on, we're looking at the opportunity to migrate some of the skills within the Kent business of our homes to support some of the things Stuart wants to do to the east and southeast of London. Right. Here's another nugget, so improved returns. This is about using our partners' capital in order to generate profit. So working with those partners with those solutions to co-invest is absolutely fundamental, and that gives us our improved returns. It's using as partners funding in order to increase the volume and quality of our work. And the nugget here is really a truism, partnerships on the can and partnerships is what we do. So every single development, unlike a housebuilder, every development we are involved in all of those 115 sites we are working with a business partner. That's a key differentiation for our business compared to others. Okay. Let's go now into some of the detail. So hopefully, you will have this, I was going to say at home, but some of you might actually be in the office. Hopefully, you will have this in front of you. So you can see the detail clearly. So what we've put together here are six live examples of schemes. I'm going to go into a bit of detail on the three on the right. So I'm just going to talk you through the three on the left. So the first one, which I think we've anonymized as Ash is a scheme of 99 homes, and that's up in the north of the country. Now the interesting thing about this is these 100 homes form part of a site of 500 homes, which had been promoted and had gained a consent. Now this particular site only required 10% affordable. So policy compliance was 10% affordable. But there wasn't really a particularly strong sense of place. It wasn't a destination. So we talk to the land owners, we talk to the promoter, and we acquired the first phase and then talk to our housing association Riverside, in fact, about preselling 50% of that site, which we did. We've now handed over. They've been handed over 3 months earlier. So the housing association is absolutely delighted. We've had excellent sales from the site, and the land owner is some impressive with what we've done. That surprise surprise, we're now just on the cusp of finalizing the acquisition of the remaining plots. A great example of how we've taken a different approach. We've actually met the [ Forteo Criteria ] for the whole site through that first phase, a really good negotiation and a very good margin that that's kicked out for us. The next example, Beach. Now this is a joint venture where we've presold 50% of the site again as affordable housing, but we've brought in a housing association partner on a joint venture basis. for the remainder of the site. And when we bring in a partner, it's an opportunity for us to enhance our margin through a land fee and through a management fee, which obviously offsets our overheads in terms of delivering that scheme. So as you can see from the figures there, that's a really positive scheme. It's positive in terms of its -- in terms of its return on capital, very positive in terms of its margin. A great example and a fairly archetypal example of how we approach those schemes where we presell and then do a JV on the site. The third example, Birch, now this is a public sector site. We bid for this from Homes England. We secured it. Now when we bid for it, we thought we were going to do a mixed tenure scheme. But we started talking to the housing association who was going to take half of that scheme, and they had a problem. They needed to increase their output. They needed to deliver more homes. They've got funding to deliver more. And because we spoke to them at the right time and in the right way, they said, "Well, actually, we'd like to take the whole site". So we have a position there, which is entirely cash generative. We've presold the whole site at a margin that is almost the sort of margin you would expect if it had been market sale. Why take market sales risk on that site when we could achieve a margin at that level? Another example of how we approach a site, another differentiator to how our housebuilder would approach it. So let's come on to the last Street, which this is a bit like one of those slow reveals because it's not anonymized anymore. So here we go. This is a scheme down in Drew Smith area of operation. And I mentioned to you that Drew Smith were very entrepreneurial and had a good position with land. Drew Smith were promoting this site and then managed to convert the promotion to an auction. And then through that auction secured a planning consent. And then when talking to the local authority, the local authority said, "well, we'd like to see an accelerated delivery of that site." Well, we said, "Okay, we can accelerate some delivery why don't you come in with us on a joint venture " it's a good returns to be had. And the local authority is coming with us on that site fully funding it. So this is a fantastic position where Eastleigh Borough Council are fully funding the delivery. We are sharing in the profit. And you can see there the 244 homes are kicking out the margin that's there. And the return rate of return is obviously infinite from our perspective. It's selling extremely well. It's a really successful site. We've got excellent customer feedback. And it's a really good exemplar for us to pick up and take around other local authorities. And we've got two other local authorities at the moment that we're talking to that we're on the cusp of doing very similar deals. Going back to that point that I mentioned earlier, using somebody else's capital in order to amplify our business. The next scheme by complete contrast if the last scheme was a greenfield site. Former farmland, here, we're looking at an urban regeneration scheme in North London. Up at Meridian, one of the largest regeneration areas in Europe. First phase came out. Now this came out through the GLA's partner program. So it came out, there were 16 people expressed interest, 16 organizations expressed interest and we were successfully through the first hurdle down to 3, and I was delighted to say that we were successful. We were successful because we were prepared to provide additional affordable housing from the start. And because, again, we put in a first-class social impact, social value proposal as part of the proposition. So there, we're providing over 700 homes, 750 homes, an opportunity to go up to 1,000. So we were talking very positively to the local authority about increasing that. And what's really interesting was I think we started with about 35% affordable, went up to 50%. Now we're at 65%. We've got a proposal for 75% presold bringing in some PRS with a partner as well as the affordable and our margin is protected. So as we increase the percentage output there on the percentage presold, our margin is protected and our cash that's shown on this slide starts to come down further. So a great opportunity of our success in those urban regeneration markets. And the product there incidentally is within the Help to Buy limits, so even if we're delivering after '23, then we'll still be at an affordable level. Finally, Lea Castle, joint venture. So now we're back up in Kidderminster so we're into the Midlands. This is a really exciting scheme. I'm really fond of this because this is the first time that we'll be flying three flags. So we've got here a scheme again, it's a delivery partner panel site that came out from Homes England. It was hotly competed for. So Barratt's were very keen on this. But we were able, because of the use of three flags to show an absorption and build rate that was better. So we were able to put together a proposal as part of our bid to deliver 600 homes on this former hospital site in a way and structured deal that involves Bovis flag flying in one part of the site, a different entry point to the site for a Linden flag, and we presold 50% of the site to Citizen Homes for affordable. So we're in a really good position in terms of our cash. So it's got excellent cash. As you can see there, in terms of our peak debt. It's pretty much 0. And what we've got is an opportunity to continue to sell at a sales rate, which meets Homes England's aspirations. Now the other positive thing about this scheme was it allowed us to get very close to our client Citizen Homes. And now they've turned around and given us another scheme with the ink dries in our forward order book. We're building it, which is a scheme for GBP 41 million on land that they own as a direct negotiated contract. So going back to some of the things I said earlier about the synergies, that virtual circle. This is an excellent site for us and it shows exactly the sort of things that we want to do. So those six schemes, which we might return to in question, those six schemes give you a good example of how we differentiate ourselves from a pure play house builder. So this slide just summarizes that. And just, as you can see, a house builder model at the top. And then some of the examples I've talked about are shown in that partnership's mixed tenure and in that partnership's partner delivery at the bottom. Okay. So in summary then, our outlook, clear strategy through a differentiated returns-based model going forward. It is very clear, it's lived within the business. Secondly, we're uniquely well placed to deliver and capture that market growth through our footprint in the industry, our track record of delivery and our capacity as a business. We've got great visibility of our future pipeline. And we've hedged our exposure across the cycle through that work within our client programs. Really good established business platforms in place to deliver that margin growth. Everybody is looking in the same direction to deliver that, and we can capture those group synergies, which will really contribute to all of those four metrics. And when you put that together, that really gives us a strong platform going forward to deliver that sustained investment value, which we want priced into the business. Okay. So that's the end of the presentation. Hopefully, you're still with us and you're getting ready for some questions. So in a moment, I'm going to invite Scott to bring forward questions, and I'll be assisted, as I mentioned earlier, by the executive here with me. So over to you, Scott.

The first question will be from Chris Millington. Chris, please go ahead.]

I've got three if I can, please. The first one is, I'd just like to understand a little bit more about the land-led solutions you're talking about. And really, first and foremost, kind of what the capital requirement there is? And just a couple of supplementals on that is also, are there many sites within the Housebuilding land bank, which would be suitable to be brought across? And also on many of those land deals kind of done on a back to that basis, so you're not actually holding the capital for so long. So that's number one. I can do the others now or we can do one by one.

Should we take that first, Chris. So yes, in a perfect world, that's exactly what we do. I think your first and third points are actually linked, which is about the way that we approach land-led solutions. So you're quite right, we would identify land through a variety of means. We would then look at who we can identify as a prospective partner. We'll find out who's hungry for that particular development in that particular area. And then we start the conversation with them. And what we've -- the way that we would approach that is that we would acquire the land essentially at midday. And at 30 seconds and 1 minute past midday, we would be selling it on to our partners. So it is predominantly a back-to-back arbitrage, if you like, in terms of the way that we make that work. And that helps us in terms of our cash for obvious reasons, it helps in terms of tax, and it gives us absolute certainty. And it gives the Housing Association, of course, price certainty because we're giving them an all-in position, which takes into account the land, all the work we've done in getting the land to that stage and then the build contract. So that's how we make it. On your second point about bringing in land from homes, yes, we're actively talking. And one of the beauties of the Vistry model is that you could stand back in a perfect world on any land acquisition, decide what is the best route for it to go through Vistry, and is it best for partnerships? Is it best for homes? You look at our strategic land bank, where we might have some significant holding, some larger sites, where we can plan now to have those different flags flying. We can plan now to get presales positions, which improve the return on capital on some of those sites. Some sites have higher levels of infrastructure than others. We might go and talk to Homes England about funding that infrastructure more successfully through a partnership route than a home route. So yes, the opportunity, we're just beginning to mine the surface here in terms of the business being together for 11 months. And it's already apparent, there's real opportunities.

That's great. Next one is just on the GBP 3 billion of future work. You talked about it in the presentation. I'm just curious, about how long the time frame of that stands? And similarly, if there's any bias towards partnership delivery or mixed [ tenure ]?

Okay. So the blue area of that pie chart is biased towards mixed tenure. Obviously, the green and the sales in hand speak for themselves. The time frame for delivery varies enormously. So we've got some schemes, which I know we're going to deliver out over the next 1, 2, 3 years, and some of it as larger sites. I think we've got sites with 1,500 units on, for instance, we're going to be delivering out over a decade or more. So it is variable. Not all -- I can't promise you that we're going to deliver that GBP 3 billion neatly, in each year, GBP 1 billion [ ticket ] off. It -- some of it goes out further than that. But all of it, of course, is capable of accelerating if you can get the absorption rate. So we'll build at the rate and grow the business at the rate that we can sell those homes. That's absolutely key. And by sell, I don't just mean sell on the open market to those 3 Qs. I'm talking about selling to Housing Associations and PRS providers as well.

And the last one, actually, is just on that point of PRS. How material is it to the business now? Does it generate materially different returns? Just a little bit more detail around PRS would be helpful.

Okay. I'm going to answer that in two ways. I'm going to bring in Stuart Brodie from London in a moment, and Stuart will just explain some of the work we've done in London. But it is significant, it's growing [ in significance ]. So we thought that PRS, really, the turnover would be mostly high rising. It would be, in the likes of Legal & General, investing in urban locations. But now, we've got sites across the regions where we're working with the likes of Sage and Sigma on low-rise private rented sector, where they are behaving just like Housing Associations. They're coming to us and wanting to take portfolios and indeed, whole sites, but mostly parts of sites in terms of delivery. So it's an increasingly important part of our portfolio. Stuart, do you want to say something about work in London?

Yes. I mean we're working with Legal & General and various others in London. And what we've seen is we've -- i mean in the last few years, we've seen a big presence coming into the market with PRS, and that's continuing to grow. I mean we've just finished [ Fairy Line ]. We're now looking at a new scheme, [ Home Buyers ], for Legal & General, and there's some sizable units in there. So we're seeing that grow -- continue to grow. And there's a lot of opportunities that brings for us on a mixed tenure and also on our delivery side. So it's been -- I see that continuing.

And our largest scheme in [ Stanton ], Stuart, that you're delivering is selling -- 1/3 of that scheme is going to Fizzy Living, which you might be aware of, at Brunel Street Works. We've got PRS -- James has done PRS with Birmingham City Council. So it's a growing market for us.

And Stephen, the returns, what would you put them as comparable to, to affordable delivery?

We got put them comparables to affordable delivery. Yes, probably it depends on the Sigma and the Sage without doubt. Again, if you're giving a land-led solution, you'd expect a better return. If they're bringing the site, which Legal & General do in some senses, then you're looking at a 2-stage negotiated tender. It's a good margin. It's far better than if you were competing on a basis in an open single-stage competitive tender. But the best margins on PRS reflect the approach that I've already mentioned, which is if you would introduce a land, you'll get the better margin.

So we have our next question, which is from Glynis Johnson. So Glynis, we would just promote you to a panelist now. If you can switch on your video and also unmute, that would be great. Glynis, please go ahead.

I'll probably take Chris' [ lead ] sort of go one by one, just so we can control it. So if I start with the first one, it's interesting in your slide right at the very beginning, you put Help to Buy on First Homes in that intermediate category, given they're both sort of mortgage-based products. But I wanted to explore how do you see your business changing if we do see this change in planning going ahead, which looks like it will put First Homes as an alternative to Affordable. How does that change your customer mix? How does that change how the business will work?

Okay. I'll start by answering that one. So First Homes is obviously another affordable product. It's what we generally call discounted market sale. So in perpetuity, there will be, say, a 70% covenant on the value of the scheme. I don't see it displacing huge quantities of social rented housing. There may be some friction between First Homes and Shared Ownership, but the Shared Ownership product that's provided by Housing Associations is still significantly different. There's clear blue water in terms of the affordability of a Shared Ownership home, where somebody might be taking 25% and now, of course, you can buy different equity shares by 1%. But 25% of a home as Shared Ownership is a different product and a different entry point and affordability to a 75% of a First Home. So I see it as a very positive move because what it's done is produced another product within that intermediate market, where that queue is most broad and most deep. But it hasn't, I don't think, displaced the other affordable products that will be around it. Now Housing Associations are not entirely happy because they see planning -- Section 106 planning consent, to which they rely upon to an extent of their delivery, having less rented and less shared ownership within the Section 106 agreement. But that doesn't mean that they won't still want to deliver the numbers that they're forecasting. So I think there's -- it's a positive move by the government, and it will increase the products within that range, and it helps us in terms of our mixed tenure delivery.

Okay. So you don't see it as a product that will reduce the amount of affordable, you don't see -- the First Homes will be a stipulated percentage of the number of homes?

Well, we don't know yet, and that remains to be seen how local authorities want to apply it. Local authorities, under the current proposal, have the ability to flex the percentage. So that's going to make a big difference to the number of other affordable homes. When you get into, as a house builder or as a [ partnership ] business, negotiating a Section 106 position, you could -- if we take it to an extreme for a moment, Glynis, you could see a situation where local authority says, "All right, that's 30% affordable. I want them all as First Homes." What that will mean is that in order to deliver the demand for rented housing and shared ownership housing, there will be an investment through Homes England grant programs, which fall outside of Section 106, in order to deliver alternative tenures. So I think it will add to, not displace, the amount of affordable housing that's delivered.

And taking that question a next step further is with the other changes, the longer-term changes that [ Boris ] is talking about, rolling out before 2025 in terms of putting in an infrastructure levy rather than having a Section 106, how does that change the business model?

We won't change our business model, but it is something that nobody can be sure of how it's going to operate yet because we haven't got clarity of how that's going to be applied. The important thing is going back to that chart that I mentioned about the GBP 2.44 billion every year to go into support supply. So the key thing to recognize here is that grant, at the moment, cannot be applied to Section 106 obligations. It sits outside of Section 106 obligations. So if there was a world in which no Section 106 obligations existed, what will happen is the likes of our sales and housing associations who are familiar with obtaining government grant in order to supply affordable housing, that will become the route that we will take rather than through what is essentially a hypothecated land tax, the Section 106 obligation. So it won't diminish supply. It will just come around from a different route.

Yes, that's -- absolutely. Can I do a few clarifications just to understand the numbers? At Slide 31 and 30, trying to time it together the GBP 312 million from your mixed tenure that's in hand. If you can just sort of clarify how much of that -- how much of your -- on Slide 30, your future sites, have you -- the full year '23 sites, for example, you're planning, are those -- do they have sales in hand, have you already signed the agreements for those?

Yes. So I'm going to bring Mark in, on my right here.

Yes. So looking at that slide, Glynis, the 7,598 plots, those are owned sites. Within those owned sites, you'll have sales in hand. So the GBP 312 million is all of those sites. And in addition, in terms of the GBP 1.8 billion, that reflects the future GDV on those units.

On the mixed tenure units?

On the mixed tenure units, yes. And the 820 is the partner delivery secured forward order book as we stand.

Okay. Next, in terms of PRS. And Chris, didn't push you perhaps as much as I'm going to push you. How much do you think PRS should become of your portfolio? Should we see it becoming 25%, 30%? Does it become an absolute call? Can I just be clear, that's not included in the forward sold or it is included in the forward sold? I'm just wondering how it's being treated if it's not necessarily being sold to the partner.

The PRS is not included in that forward sale figure that Mark just alluded to. How -- what percentage of our turnover is it going to be? That's a really good question. So that's about how much BlackRock want to put into Sage. That's about how much Fizzy Living wants to increase their output, how much Legal & General see there's a continual investment in PRS. If you wanted me to give you a sense of it, probably about 20 -- between 15% and 20% of our output would be PRS. I think that's not unreasonable. What I like about PRS is you can take a site where you've got -- so that example I gave in London, Meridian, it doesn't have to be an urban scheme, but that's a good example since I put it up as a slide. What I like about PRS is you can push your affordable and increase your presold position. And then, as a further tenure choice, you can bring in a PRS provider to presell on top of that, which gives us an even better presold position and allows us to then deliver the remaining sale on that site, knowing that there's some PRS providers. So I'll just pick one thread on that point. One of the great advantages we've got in one of our urban developments at the moment, which is 1/3 PRS, 1/3 affordable and 1/3 presold; is we're going to finish and complete the PRS first. So you're going to have 300 people moving into -- these are all apartments, moving into apartments before we start selling the final parts of our open market sales. And what we know is that people who are keen on PRS vote with their feet they're happy to live in a location. If they then get an opportunity to buy at a later date, they'll come knocking on our door to buy their homes. So PRS has actually a knock-on benefit of not only giving us presold position. Actually, if we're dealing with larger developments, then you've got footfall and you've got people who might then buy, having lived in a PRS home for 1 or 2 years.

And the last question is really putting you head to head with [indiscernible]. If mixed tenure partnership can be making an 18% operating margin, a 30% return on capital employed and you're 50% presold, why are you not seeing more capital than the Housebuilding business, which is making approximately 20% of margin and a 20% return on capital employed? What is the balance of play between the growth of your business versus the Vistry Housebuilding business?

An excellent point to make, and I'm too modest to give you the answer that I would like to give you. So I'm going to hand over to Earl.

Glynis, I'll pick up a couple of things you're asking about. One on the last question. I mean, Stephen gave you, I think, a great qualitative answer around PRS. But ultimately, the level that may get to is as much around an IRR, a return on capital decision on each development as to what the best commercial solution is. So that's what we will continue to monitor one of many different tenures. In terms of putting Stephen and Keith head to head, that's an interesting concept that we'll take internally as well. But ultimately -- just at the moment, what we've clearly said as a strategy, we are looking to have controlled growth in the housing business. We're looking to invest to replenish the land bank that they've got, and that will be -- enable us to drive that control growth in the Housebuilding business. We are looking to more aggressively grow the Partnerships business. As you've heard again today, in terms of that mixed tenure development, that will take more of the capital investments in the first instance that we're looking for to grow Project 6000, and we can certainly see how we can go beyond GBP 1 billion of turnover beyond 2022. So that is the balance at the moment. You've heard how the two work really well together. And what is really starting to come through strongly is assessing some of the larger schemes and effectively using kind of all the strings that we've got at the moment.

Thank you, Glynis. Okay. Back to Scott for the next question, please.

Thank you, Stephen. We have our next question from Will Jones. Will, you're now being promoted to a panelist. Please unmute and start your video.

The first question, if I could, please, was just around the land bank really and how you'd encourage us to think around the appropriate land bank for the Partnerships business. I think back at the H1 stage, there were about 3,300 plots in the owned land bank, which optically sounds like a low number in the context of some of the high output figures you're discussing today. I appreciate it's probably a mixed tenure versus partnership delivery split here, but just some help around that would be great.

Okay. So you can see that we are growing, and you can see that we have the capacity to accelerate that growth. Sort of it's not a typical house building model for all the reasons that I've explained. Probably 5 years land bank is not an unreasonable suggestion. It allows you to give you forward visibility of what you would like. But really, as a measure of the business, so long as you've got more than 3.5 years land bank, you're in a pretty comfortable position. And then it's a question of making sure that if you do have more than that, you've got your capital position and you're not tying up money in order to secure inefficiently a further land bank. So it's all a reflection, I would say. Beyond 3.5 years, it starts to become a reflection of your position on the land and making sure that you're not tying up capital.

And this is all just mixed tenure, is that right, when we see the land bank?

I'm talking about mixed tenure, yes. We always have the option, of course, Will. If the market says, "Oh, we don't want to do any sale on that site" to do something different, so we do have that opportunity. We're buying land efficiently. We're buying land at decent margins that allows us to then make some choices down the line. But on entry into the business, it's a mixed tenure, 50% presold assumption.

Great. And then the other one was just coming back to the journey of margin improvement. I can probably work it out if I do the percentages. But when we think about going towards 10%, is that all about the change in mix and proportions? Or is there actually in each of the areas an underlying improvement you're targeting as well? And if so, how we're getting that?

Okay. So I think the underlying improvement, directly back to my optimization slide, so I think that's what you're alluding to, Will. So, it's not only the increase in mixed tenure, and it's not only the improvement in terms of our margins where we're bidding for work on a negotiated basis and land led. It's actually about optimizing that operational platform. So how are we going to do that? Well, obviously, as we get scale, it allows us to be more efficient in terms of our overheads. We're borrowing from all of the good work that we're doing as a combined group around our standard house types. So having standard layouts is absolutely key. If you're a plumber and you're asked to go and plumb a home called Oak over here, you're doing 20 Oaks on a site in one location, and then you've got the opportunity to go and plumb the same home, some more Oaks down the road. You know exactly what materials you need, you know exactly what it's going to time -- it's going to take. So you're getting commercial efficiencies through your supply chain by building a repeat product. In terms of specification of that product, if we're buying 2,500 kitchens from one source and we're buying 5,500 kitchens from the same source in homes, then you put the two together, you've obviously got the efficiencies. So those procurement, design efficiencies, the way that we're looking at capturing synergies across the group, all contribute to the underlying improvement and optimization of those business units, and that will contribute towards the margin. So you're quite right. It isn't just increased land led.

Great. And then the last one, maybe a little unfair, but I'm just wondering, how would you [ train ] to us the resilience of this element of the business if we just see a proper housing market downturn? Clearly, you've had construction disruptions this year, they're not really a demand downturn as such. If that was to come -- I don't know if house price is falling 10%, whatever metric you can think about, is there any way that you would say actually we only see X portion of that because of this or -- any numbers you can throw out later? It's probably a qualitative answer rather than anything else, but I guess that's one of the attractions of the model should be that it's less volatile.

Okay. Well, I'll ask James to come in after me. But my first response to that would be, so for all the reasons that I've explained, our opportunity to develop schemes through different tenures is obvious. So we can speak to Housing Associations, looking at presold positions and increasing our presold percentages on sites where we think we've got an exposure. Secondly, we have direct grant funding from Homes England. Whenever there has been a cyclically driven response from the government, the government invest through Homes England. And we are incredibly well placed to be able to capture any of that, what you might call, kickstart funding if there was a real serious market downturn, so we can get that directly. And then there's a third and perhaps less visible way that we are hedged differently from others. Because of our joint venture platform, we are co-investing. So I'm sat there, we are sat there, several of us here are on the Boards of those joint ventures. And let's assume it's a site with 100 homes sold, 100 still to go, and there's a sudden market downturn. Now, we might have 20 of those plots underway. Our Housing Association partners or our local authority partners in this joint venture are not going to want to participate in something that says, "Let's just stop." They've got investment. They are incredibly well placed to accept a reduced margin and make sure those homes are delivered. So we're naturally hedged, not only through our own approach working with Homes England and others, but through our joint venture partners. They have mixed tenure ambitions themselves. They have an additional affordable requirement. So they are going to be sat around the Board table saying, "Well, actually, we'll take those 100 homes. Or actually, I know another housing association that wants 50 for shared ownership, and we'll take 50 for rent." So we're hedged by virtue of our relationships on -- in 360, both in our mixed tenure and in our partner delivery. James, is there anything you want to add to that?

Two things really. One, which is a fundamental for me, which is the resilience of our people and the relationships that they've got in terms of leveraging alternative arrangements with the [ buy-to-rent ] sector or with RPs or even with Homes England, and that is flexing the solutions to the delivery of a site if we were to see a downturn.

Thank you, Will. Good to see you. Okay. Scott, any next questions?

We have our next question. I'd like to invite Charlie Campbell to join us to ask a question.

I've got three actually, probably. First of all, just going back to the land question and sort of maybe conflicts of interest there, so who has the final say on what bit of land gets used where? Does that go to Greg maybe or Earl or other mechanisms in place for that?

Okay. So we've got -- we have a tug-of-war, Charlie. So that's normally what happens. "I can get better, it's better to look at this point." So most land comes in, whether it comes in through -- to go back to the earlier point, whether the land comes through the team through Keith in homes or whether it comes up through me, and we have an Executive Land Committee here within Partnerships, and Keith has a similar thing in Homes. And then it is looked at by Graham and Earl and ultimately, Greg. Greg can't stop himself from wanting to know about every site that we buy. So, he's sat there, surrounded by wildlife. He is able to look at that proposal. And so there is some adjudication to ensure that we don't all go for the same site. That doesn't happen. So the -- at an operational level -- so to get a step back a moment, on an operational level, we avoid rushing at sites in a dysfunctional way because of the quality of the [ layers ] on between James and Stuart and Stuart and their counterparts in Homes. So all of the businesses are talking to one another. All of us sit in almost as Non-Executive Directors on the Boards of our Homes businesses, and our Homes businesses sit on the Boards of the Partnerships businesses as Non-Executive Directors. We all can see what's going on. So that's the first thing to say. That gives us an understanding of what works. That gives us an insight into who's talking to which land promoters. It gives us an insight into who's looking at strategic land options. So once an opportunity comes in, it's determined, probably at that level, which business is best suited to go for it. If there's any more strategic reason to have a discussion, then it would come up to Keith and I to have a discussion with Graham and Greg, and we'd make a decision. So there isn't really -- I'd like to portray it as a tug-of-war, but actually, there's a lot more science and integration to it than that would suggest.

And the second question, yes, I just wanted to ask kind of out of curiosity, I suppose, and apologies if this is not relevant; but I just wonder about cladding and Housing Associations. I guess given that you're doing mainly low rise, you're Housing Association partners on mainly low rise as well. And therefore, they don't have big recladding liabilities. And therefore, the budgets are still in place. Is that the right understanding? Is cladding still a big budget issue for Housing Associations generally?

Okay. So I'll bring Marc in a moment to -- Marc T to come in and just give an overview of the priorities for Housing Associations at the moment. But I'll just share with you a thought, Charlie, of what happened when post-Grenfell, where 2 weeks after post-Grenfell, the Housing Association regulator spoke to Chief Executive of one of our scheme that we've recently built about concerns about the walling. We wrote incidentally to every Housing Association that might have had a scheme with high-rise cladding issues on to advise them of what the position was. So we were very proactive. The Homes England person learning that this Housing Association had worked with our -- with Partnerships said, "Oh, that's great then. I don't have to worry. I'm sure that will be resolved." And resolved, it has been. So we had -- there's probably half a dozen schemes where we've had an issue. 3 of those schemes we've either completed or nearly completed the work. And the financing of that has come partly from ourselves, partly from the Housing Association, partly from the supply chain, partly from designers. So we've had a proportion, but by no means the overarching proportion on putting right one or two things on those schemes. We still maintain a modest nonmaterial provision within the business for working on 3 further schemes, which may or may not need some form of solution. But we do not have, at the moment, any particular exposure in terms of Housing Associations talking to us about dealing with cladding issues. Marc, do you want to just explain how Housing Associations are focusing their investment?

Yes, sure. So Housing Associations, for the minute, they have 3 key priorities, which they're balancing off within their Board rooms: The fire safety one, which Stephen referred to, predominantly those urban London-based, Birmingham-based Housing Associations. It's number one. The second one is balancing of [indiscernible] new supply, driving the numbers. And then the third one is the sustainability agenda that's coming through, which is informing the decisions both on the existing stock, also on new supply as well. The advantage we have with our relationships with Housing Associations, we have the conversation at the top level, so we can see where the priority lays between those 3 competing ones, and we can align our investment plans with them.

And then there was just one last question. I suppose just on the government and maybe sort of Homes England as well, just one of the agendas that was notable from the planning document is a sort of continued wish from government that the Housebuilding industry is less consolidated. And it would appear to be from some of the slides you put up that you have quite a good position in Partnerships. Does the government sort of share the view that partnership supply ought to be less consolidated and open to new entrants in the same way that the government seems to want kind of more competition in mainstream housing supply?

Okay. So I think that's a very good point, Charlie. So first thing to say is there are plenty of new entrants out there. They're called joint ventures. So they may not be SMEs. But believe you me, when we talk to Homes England and we say, "Well, we are joint venturing with [indiscernible], we're joint venturing with Home, we're joint venturing with [ Asta ], we're joint venturing with any 1 of about 15 Housing Associations or citizen, that last example I gave in Kidderminster, a new form of investment coming through joint ventures is a third route to delivery. So it's not just large scale and SMEs. For me, the next 10 years, you'll see increasing collaboration, whether it's with local authorities, whether it's through PRS providers, with Housing Associations. That's part of the third and alternative route to increase capacity within the industry, is to draw on joint ventures. And then directly, to answer your point on diversity through SMEs, it's a small proportion of Homes England's public land disposals do set out a requirement for an SME to be involved. So what you might get is on a large site, and James, you have one of these up in the north; where we are required, as part of our bid, to identify an SME to take a proportion of part of a site. We then, having identified them, have no purchase, there's no exposure for us whatsoever. Our only requirement is to have identified an SME that Homes England can then directly work with. Is there anything you'd like to add to that, James?

That's correct. We identify the SME, what we see a lot of currently is lot of new entrants and particularly those from the subcontractor market. They're setting up businesses to provide full-scale affordable housing and even mixed tenure housing solutions. That site, particularly Homes England site [ Chesterfield ], 50 of the units are hived off. And the RP in question, which is Sage in that scenario, they actually contract with the SME that we've identified.

Our next question, I'd like to invite Clyde Lewis to come and ask his question.

A couple, if I may, Stephen as well. It would be really useful to sort of understand how different you think the requirements for the local authorities compare to the Housing Associations will be in terms of sort of how subtly different their agenda. And what sort of pressures that is going to put on the business and how you'll have to sort of tweak I suppose your delivery, if at all? I mean, maybe they're going to look exactly like [ HA ], but it'd be useful to learn a bit more about that if they're not going to be.

Yes. Well, I think that's a good question, Clyde. So Stuart, I'm going to bring Stuart in a moment just to share the experience that we've got, Stuart, in working with Bristol City Council and their aspirations. So -- but my general view is that it will be largely the same. But local authorities, because they are involved as committees, would like to have all the plates spinning and tick all the boxes on any investment in housing. What do I mean by that? They'd like it to not only be really good counsel housing, they want the place and invest in the public realm to be very high quality. They want very high-quality environmental footprint, so a low-carbon home. So what we find with local authorities is that their specification requirements, their ambition -- because they're determined partly by committee, their ambition is for an even higher-quality product, and we often find they're prepared to pay for that. So some of our contracts with local authorities, they've asked for one thing. They've asked for a particular level of specification. And then they've actually said, "Actually, we'd like max strength, please. Can you add this? Can you add these solar panels? Can you do this?" So that's great if we're already in contract and we're negotiating an improvement. But I think you generally find local authorities are looking to set the bar a little bit higher in terms of the quality of what they provide than Housing Associations. Stuart, would you agree with that?

Yes, I would agree with that. I think I've got two examples where I'm working in Bristol and in Eastleigh in Hampshire with local authorities, where they're putting their own funding in, the demands are greater. It'd probably take a little bit more of our control away because of their demands. They need control themselves because as Stephen says, they -- if you were in a joint venture with them, they'd agree something in contract and they seem to want more as you go along, so they need our expertise to pull them back. But I suppose if they're putting funding up, that's their prerogative. But I do see them coming more to the [ fore ] and probably being more entrepreneurial than Housing Associations, going forward, than what they've been in the past.

Okay. The second one I had was on, I suppose, the speed of growth of the business. I mean, you've clearly set out the targets, the revenue, the margins, the return on capital. But you also sort of dangle that sort of 50,000 housing shortage very much in your core markets. I mean, if you were looking at the bottlenecks that you might have as a business, I mean, which one would you describe as being the biggest to stop you growing faster? Is it the planning system? Is it sort of the funding for some of the key customers, the Housing Associations and local authorities? Is it people that just takes time to get enough people in to train up and to drive the business forward? I mean -- or is it speed [ to build ]? I mean, is that something again that you're going to have to address over the medium term?

So I'm going to ask James, Stuart or Stuart to come in on that. Any of you could quite happily deal with that. I would suggest that in a post-COVID world -- so we're back to normal. I think the biggest constraint on accelerated delivery is people and our ability -- and the supply chain getting back up to speed, that would be my -- the biggest issue I have. But fundamentally, our growth is a disciplined one. So we keep very, very tight control, to an extraordinary extent probably compared to our house builder, on our commercial control within the business. And our discipline in which we invest and in which we manage our production means that we would feel discomforted if we were to step outside that. So having the commercial controls, having the infrastructure within the business to be able to expand is the key issue, and that we invest a lot in people to be able to do that. And don't get me wrong, we've grown. 4 years ago, we were 450 people, now we're 1,100. So there is the ability to grow, but that is fundamental to our success, that management control. Who wants to go? Stuart?

Probably my biggest frustration at the moment, Clyde, and it has been for a number of years; is planning. I think that is a concern of the growth of the business. I think I've done an exercise this time last year. When I looked at our forecasts and when we expected to receive permissions and when we actually receive them, it was probably a 6-, 9-month lag. So we are now discussing, in each and every one of our business units, planning directors, if they haven't already got them, because we've got to have greater foresight of how long the planning process is taking. And I don't see that improving, particularly in the next couple of years.

Anything you want to add, James?

I mean it's a fair point about speed of growth, speed of build. There's only so fast a typical 2-storey housing site can go and only so many subcontractors or stuff that we can put on it. So both -- all the people element constrains us in many respects. I think what we're exploring though now, particularly in the [ buy-to-rent ] sector is the benefit and the potential pace offering of more modern methods of construction, particularly closed-panel timber frame systems, lightweight gauge steel frame systems for multistorey, which take a significant reduction in contract program and enable us to speed up the programs, particularly on the PRS [ buy-to-rent ] sites, where the provider is expecting more rapid delivery.

Thanks, Clyde. Okay, Scott?

So our next question is from Aynsley Lammin.

I've just got two questions, please. First of all, I thought the presentation was an excellent explanation actually of the whole business, which we just [ started ], could be quite confusing. So thanks for that. But firstly, just on the competitive landscape, wondered if you could comment just particularly on that intermediate tenure part. Whether you expect more competition from some of the more mainstream house builders or some of the contractors? I mean do you -- would you expect some of the bigger house builders to get a bit more involved in that area they may be trying to derisk the top line, for example? And would that put any kind of competitive pressure on margins and returns? And then second question, I presume that in the partner delivery and the mixed tenure, there's an element of kind of estimation in terms of where it's accounted for turnover and margin. Just wondered if you could discuss your track record, control over cost and the ultimate margin that comes out, how reliable has that been historically?