Vistry Group PLC (VTY) Earnings Call Transcript & Summary

Welcome to Vistry's Full Year Results Presentation 2023. And a bit of self-indulgence, this is my 22nd time I've presented an annual set of results. So I don't do any more you're all crying, I know. But -- but 20 seconds. So I woke up a half past 2 thinking about that. So the agenda today, good news or bad news, I'm just going to do the start and finish. The main presentations will be done by Tim, Earl and Stephen. As you can see, their financial, market opportunity and operational update, and I will finish things off with an outlook. And then, of course, we'll take any questions that I'm sure you will have. Again, we just wanted -- before we actually start the presentation, this is a photo with numerous people working for the organization. So from the ELT, it would be wrong if I didn't come out with a huge thank you to all of our staff people because this has been a tumultuous year for Vistry. Started the year, where we hadn't actually finished the integration of Galliford Try. Obviously, we had the huge integration task all the way through the -- of Countryside. We then had in September an announcement about a new strategy, which turned everything on its head again, and all of that against a difficult and uncertain market. So an incredible performance, lots of tenacity, determination and an awful lot of skill, as well by the people of Vistry to come through that. But I think when you look at our results compared to other housebuilders, I don't think we had any right with all of that going on to be in the same league as them. And I think you might actually say we've actually performed very well against the peer group. So well done to everyone at Vistry. So highlights. I think without any shadow of a doubt, Vistry has established itself as the country's leading partnerships business. We successfully integrated Countryside partnerships ahead of schedule. And of course, we have the strategy update, which we'll go through in more detail later on in September to fully focus on partnerships. The resilience of our partnerships model is clearly being demonstrated in 2023. To show that you've got a resilient business model, you obviously need a downturn in the market. So we were very fortunate to have a downturn in the market in our first year. But even the most cynical of you analysts out there, and that's not a word you hear very often in the same sentence, cynical and analysts, but there you are, must be quite impressed with the fact that we did 16,118 units last year. And I'm very confident if you take the calendar year 2023, that will make us, by some way now, the largest housebuilder by volume in the country. We -- because of that and because of the visibility we offer our subcontractors and our supply chain with our new model, we were more than able to offset the inflationary increases in build costs that came through in 2023. We remained active in the land market with just over 13,000 plots bought. The land market remains subdued, soft. And I'm really, really pleased the fact that I was interviewed 2 or 3 weeks ago by a leading housebuilding journalist, and his first question was, Greg, what have you got to say about all your competitors saying we can't compete or we're finding it really difficult to compete with Vistry in the land market? I didn't say that. He said that and other housebuilders. And I just said, and I can see it. Been around for a long time, I can see that we are, with this new model, very, very competitive in the land market, particularly on land of more than 400 units. You would find it very difficult to compete with us. We made significant progress with the timber frame manufacturing facilities, our 3 factories that we've got. When we bought Countryside, we had to come up with 10 strategic reasons why we were buying Countryside. The first one was obviously partnerships. And we had, at the time, #7 or 8 getting our hands on a timber frame manufacturing facility, which we've never had before. I can already tell you today, I put the fact that we've got a timber frame manufacturing facility, probably at #3. And if you haven't been to see it, 6 weeks ago, we launched the Vistry Innovation Center, the VIC, which is far more interesting than the one on some program called EastEnders. We've done that. I've been there. It is fantastic. You should go and have a look at it. And I can absolutely honestly see as a traditional housebuilder over the next 5 years, timber frame, forget the modular construction, the [ Ecos ], the L&Gs that I can really see a way forward as to how we are going to build the number of units that we require to be built with an awful lot of vertical integration coming from those 3 factories and no doubt more over the next couple of years. We fully expect to be awarded, again, 5 Star HBF Customer Satisfaction rating, and that would be for the fifth successive year. And on top of that and possibly even more importantly, we're making great inroads on our 9-month score, which currently sits at just under 80%. So strategic progress. We've made significant progress on our strategy since the September update. The organization change has already been implemented. That means we've now got 26 business units. We closed 6 business units, which were pretty much next to each other, led by 6 very talented divisional Chairman, who, in turn, all report through to Earl. The transition of the former housebuilding land bank is progressing exceptionally well. That enables us to focus particularly on our medium-term targets. And under Stephen, the Partnerships and Regeneration team are now working across the business, and that's important because it is a different game than pure housebuilding. So we now have some brilliant consistency about the deals we are doing, where we can match all the different housing associations, PRS providers and local authorities against each other under Stephen's leadership. And I'm delighted to say that the share buyback program has commenced. We've completed the initial GBP 55 million buyback, and this morning, we announced a GBP 100 million further buyback. And on a personal basis, I'd be very surprised if we didn't have some more encouraging news on that in the second half of this year. Over to you, Tim.

Thanks, Greg. Good morning, everybody.

Good morning.

The good news is I've got lots of slides, but somebody told me that some people have some lunch appointments, so I'll try and race through relatively quickly. So let's start with the summary of the Group results. Now most of the information on here was indicated at the trading statement back in January, so I'll just race through from top to bottom. Our revenue for the year was up 30% on prior year, but that included the benefit of the Countryside combination. On a pro forma basis, we were down a little less than 10% in a year, which compares very favorably against our peer group. In terms of the operating profit, operating profit held up well and the operating margin held up well given the market conditions, and I'll come back and cover that in a bit more detail later. Profit before tax, up marginally year-on-year. And our reported profit before tax was up more significantly. So reported profit before taxes after allowing for exceptional items, and we had a lower level of exceptional items this year than last year. EPS looks like it's gone down considerably year-on-year. And the reason for that is that there was the dilution impact, which we would have expected from the issuance of Countryside, the issuance of shares to purchase Countryside at the end of '22. In terms of net debt, we finished broadly where we expected to finish for the year, where we finished with a net debt of GBP 89 million, and I'll cover that in more detail later. And the return on capital employed at 21% is dragged down by our former housebuilding business. Again, that's an area of focus that we'll talk about a bit more later, but our former partnerships business is still delivering ROCE around 40%. So before we go too much into the numbers, we are a unique partnership model, and there is not a standard framework of terminology for this area. So we're going to use various terms during the course of this presentation, I thought it might be useful just to lay out exactly what those things are. So starting at the top, Vistry, as a Group is a 100% partnerships business. So everything we do is partnerships, which means that every scheme that we operate on, we do with a partner. Within that, we operate broadly in 2 markets. The first market we define as partner-funded. So partner-funded is effectively our B2B business, and that is where we presell to a range of customers. And the open market is the more traditional sale at the end of the process. We've said before that the minimum amount of partner-funded, we want to do on any particular site is 50%. And as a guideline, 65% is the average for the portfolio as a whole. Within any one particular year, it will vary. We did 67% in '23. Then in terms of the tenures within the market -- within the partner-funded market, there were 3 tenures we talked about. One is Section 106, which is defined by the planning obligations that we have. The second is additional affordable, where we have discretion, so we choose to sell more affordable. And the third is PRS, the private rental sector, also known as build-to-rent. And in terms of the numbers that we're going to provide, we're going to provide revenue units and ASP at a market level, and we will give you unit numbers at a tenure level. In terms of the brands, we operate under, so all of our partnership -- all of our partner-funded operates under the Countryside Partnerships brand. And we have 3 retail brands we use for open market sales, Countryside Homes, Linden Homes and Bovis Homes. And the customers you can see on the slide there for partner-funded are a mixture of local authorities, registered providers and PRS providers, and Stephen is going to provide a lot more detail on that later on. Okay. So with terminology defined, let's look at some of the group metrics for the year. So 3 things to pick out in particular here. The first is the growth of partner-funded. You can see that we're taking advantage of our model that despite market conditions, we've been able to grow the number of units in partner-funded by 36% year-on-year, and that's compensated for the lower activity in open market sales, and that's resulted in a 67-33 split. So we've moved towards our overall guideline position very quickly. In terms of ASP, ASP as a whole is broadly flat year-on-year, slightly down because of the mix effect, but not as far down as you might expect, and that's because the ASP within partner-funded has gone up for a number of mixed reasons, but primarily because the tenure mix within partner-funded has shifted more towards the additional affordable and PRS, where you would expect to charge a higher price than for the Section 106 work. So within the tenure mix, the 3 tenures, as I described earlier on. First of all, Sector106, we think broadly, that's going to be between 25% and 30% of units for the Group as a whole going forward. We were at 28% in '23. We expect we'll be roughly in the same space in '24. For the additional, affordable and PRS, that split together will be interchangeable, where there's going to be some substitution between those, but the 2 combined will be somewhere between 35% and 45% in the year. Of that, we have 13% PRS in '23. Our expectation is, if anything, that's likely to go up, as a proportion this year because the PRS market is looking very attractive at the moment. So what's driving the operating margin? Four factors on here, 2 up to down. First of all, in terms of the mix, there's a downward push on margins because we're moving more towards this partner-funded model, where you'd expect to have a lower margin. And indeed, during the year, we did a reset of all of our schemes looking at those schemes that are now going to be a mixed tenure, whereas previously, there would have been a housebuilding only sites. As a result of that, looking at the future [ like ] margins, we made an adjustment down within '23 of around GBP 40 million, and that's where we set the margin for the business going forward. The other downward driver is on pricing. So there have been some headwinds during the course of the year. On the open market sales, incentives ticked up a little bit during the course of the year, and they were up to around 5% towards the end of the year. The start of this year is looking more promising and the incentive levels that we're offering are coming back down again. And in terms of the discount that we offer on the partner-funded work, we talked about a range of 5% to 15%, if anything, slightly higher towards the end of the year. But again, we're seeing some good valuations and good offers coming through at the start of this year that encourage us to think that, that level of discount will come down a bit in '24. So those are the 2 negatives. The 2 positives in terms of margin are build costs and synergies. In terms of the build costs, I think we're really seeing the benefit here of our scale and of the visibility of our forward order book and hence, the certainty of our build program, which is enabling us to say to subcontractors and suppliers, look, there's a certainty of demand for your product or your service, and we've used that in negotiating very favorable costs going forward. So we've seen benefit of that in '23, and we'll see that benefit roll into '24. And we think that the build costs for '24 would be somewhere around 5% lower than the build costs that we had in the summer of '23 before we engaged in these renegotiations. So that's really encouraging. And in terms of the synergies, we are well on track to achieve what we said we'd achieve at the time of the Countryside combination and achieve ahead of schedule. So we believe we achieved synergies in the region of GBP 50 million during FY '23 and the run rate of about GBP 60 million will be in FY '24. And then we talked about further synergies coming from the strategy change. So from the closure of a number of business units and from the streamlining of central operations, and we're targeting GBP 15 million of savings within FY '24 and a GBP 25 million run rate thereafter. So in terms of all -- what does that all mean for '24? I mean, I think because we'll continue the journey towards slightly more partner-funded work and we'll be trading out some of the pure housebuilding sites, we'd expect margin to tick down a little bit in FY '24, but not substantially. So just working our way down the P&L. In terms of net bank interest, we've flagged before that with the higher average debt and the higher interest rates, clearly, there's been an interest in -- an increase in bank interest during the course of the year. We've seen average net debt increase from GBP 110 million to GBP 459 million, partly as a result of more WIP and partly as a result of layering the Countryside average debt on top of the Vistry average debt. And we've seen interest rates go up on average by about 2.5 percentage points during the course of the year. In terms of our facilities, we have extended our term loan, our GBP 400 million term loan, out through to September '26, which gives us more flexibility in terms of investment and funding going forward. And the other movement on finance cost is around other net finance costs, which is really just around the Countryside impact for additional net finance costs from leasing and land creditors in Countryside. In terms of tax, finally on this sheet, we have an effective tax rate of 27.2% in FY '23. And with the full year impact of the corporation tax increase coming through is going to be close to 29% in FY '24. Going to first safety, fire safety remediation is progressing well. We spent GBP 45 million or thereabouts in '23. We've also succeeded in getting about GBP 11 million of recoveries from partners and from building owners during the course of the year, which has enabled us to take a little bit more contingency in the provision rather than adjusting the provision. In terms of the provision level, we're confident with -- from the work that we've done and what we're seeing going forward in our future work that the provisions at the right sort of level. And we expect that in '24, somewhere between GBP 50 million and GBP 60 million of net cash will flow out during '24. Then reconciling net earnings on an adjusted basis, as we reported to reported profit, the excluded items are largely exceptionals and amortization. The exceptional 3 components, fire safety, we had the impact of the second staircase in the first half of the year. I won't go through that again now. We also had costs associated with the Countryside combination and the second wave of restructuring that happened in the first half of the year. And in the second half of the year, we booked the costs of the change in strategy, which is largely people costs, again, as we've reduced the number of business units, as a result of that combination, and we've removed some duplicate [ rollers ] in the center. We're going to make the GBP 25 million a year savings that I talked about earlier on. So to land, so we've been active in the land market again in '23. We've been opportunistic, but we've continued to replenish our land bank with some good opportunities. It's difficult to draw any market-wide themes around the land market because we've been quite discretionary in how we've entered it, but we've found some good deals during the course of the year, and we're confident with the geographic mix that we've got. As you can see from this chart, it's well spread. So it's filling up the hopper for the future, which means that our land bank looks like this. We have 76,000 plots owned and controlled at the end of the year, which supports on our growth assumptions in excess of 4 years' worth of growth. But of course, we're going to continue to replenish during the course of the year. The mix within that, 27% of our land bag is controlled, 73% owned. With the way that we can source land from our partners, we'd actually expect the controlled piece to be a higher proportion, as we go forward, which is good for our cash management. On start land, strategic land remains a key component of our business, both the strategic land bank and the strategic land team. And we've replenished to a lesser extent, this year, 7,300 plots added during the course of the year. We're looking at those sites to ensure that they meet the criteria of the partnerships model and looking at some contractual commercial changes to some elements of the land bank. We're going to continue to assume that in excess of 20% of our future completions will come from land sourced through strategic land and that land should give us a 1% to 2% margin benefit because of the process of the start land. So cash flow, so net cash inflow in the second half of the year of GBP 240 million, but over the course of the year, we have seen a net cash outflow. Where -- so where does that come from? Well, first of all, we had slower than anticipated sales in the second half of the year. So we have built slightly ahead of sales in the second half of the year and built up WIP. That's primarily in the open market side of the business. We've also got some timing impact around the delivery of new homes in early '24, which has created more WIP on the balance sheet. And the other thing that's happened is that at the end of 2022, when Countryside was being bought, there was less build activity in that fourth quarter and that those sites have returned to a more normal level at the end of '23 and hence, there's more WIP on the balance sheet at the end of the year. So that explains the net investment in WIP during the year. In terms of land, as I've said before, we've got the same level of land bank, so the average cost per plot has gone up around 4% during the course of the year, which is purely a mix point. It's nothing to do with the overall land market. It's just where we happen to have bought the land. Then in terms of other working capital, a small outflow, actually a relatively decent sized outflow, GBP 50 million outflow on working capital. This is largely due to trade receivables building up as part of our business model with partner-funded and it being a B2B business, there was receivables that wouldn't have been there in more of a B2C business. And the fact that we did so much work in the last couple of months of the year meant that we ended up with a higher receivables balance at the end of December. I think I've covered most of the other items before, JVs is up net investment, and that's just more JV activity in the year than we've had previously. And I think integration cost and taxation are self-explanatory. So in terms of capital employed, the capital employed has gone up by GBP 280 million over the course of the year, but comes down by GBP 140 million in the second half of the year. Overall, the movement is really the same set of explanations I've just given on the cash side with the buildup in WIP being the prime driver of the increase in capital employed. But as we'll come back to later, we have plans afoot for addressing that capital employed. Turning then to capital allocation, so we set out our new capital allocation policy in September last year, and we said that we would have ordinary distributions at 2x cover. So 50% of adjusted net earnings will be distributed as an ordinary distribution. We've elected for that ordinary distribution to be in the form of buybacks again for the final dividend. So as Greg said, we've already distributed GBP 55 million in buybacks. We completed that program in February. And we are now starting a new program next month in April for a further GBP 100 million in lieu of the year-end dividend. So that GBP 155 million of distributions in relation to '23 earnings is just over 50% distribution of net earnings. Then the other piece is around special distributions. So we remain committed to our GBP 1 billion of distributions over the next 3 years. The timing of that distribution will depend on the profile of the capital release program. And so, there's 2 steps there. Step one is determining the timing and the quantum of that capital release. And the second is making the call on for that first wave, how much of it is used to reduce our average debt and how much is used for distributions. And all of those decisions will be discussed among the Board over the course of the next quarter and into the summer, and we'll keep the markets updated, as we make decisions. So finally for me, you'll be relieved to hear, finally for me, achieving our medium-term targets and bring it back to our journey, and we're still in the early stages of that journey, but making good progress. Just laying out the 4 building blocks here to get from the 21.3% that we reported in '23 to the [ 40-plus percent ] that we'll report in '24 -- in our medium term in 3 years to 5 years. And just to remind you that in our former partnerships business, we're already at that 40%. So this is about keeping the discipline on that, and it's about turning our housebuilding business and releasing those assets to create 40% across the whole business. So what are those 4 chunks going from bottom up? First is transitioning the former housebuilding land bank, and the second is ensuring that we have the most efficient capital position on our balance sheet and release some of those slower moving assets from our balance sheet and also ensuring at the same time, operational efficiency. But I won't steal Earl's thunder anymore on that. Next point, 100% adherence to the partnership model. Discipline is going to be really important here. We know that that's where others have taken missteps, so absolute adherence. We've got a set of hurdle rates in there that are non-negotiable. And we have a new Partnerships and Regenerations team to ensure that every new deal that has the partner-funding element in it is understood and reviewed and optimized to ensure the best return on capital from that scheme. And then, finally, of course, we need to grow the business, and that's growing both the open market side and the partner-funded side. And it's a good segue of course, to Stephen, who's going to talk about our growth plans and about the attractive market ahead. So that's it for me.

Very good. Thanks, Tim. Good morning, everyone. So Greg talked about the resilience in our partnerships business model. And of course, it's that resilience, coupled with our offering as a responsible developer working with our partners across a range of tenures that drives the opportunities within the market. So let's just start with the evidence base for that market. So we've got some figures here, which are based on government '22-'23 published figures. So you can see 30,000 Section 106 homes delivered in '22, '23, 34,000 using grant. That's grant providing that additionality going back to the term that Tim used earlier, supplement that with 16,000 PRS homes. And you can see the scale of the partnerships market this year is around GBP 17 billion to GBP 18 billion. And you can see our strong placement and leadership within that market when you look at that market share of 14%. Now that market share is spread. It's spread geographically, and it's also spread, as you'll see in a moment, across a range of partners. And you can also see there the opportunity for us to grow our open market offering as well, which, of course, includes some of our JV work. The long-term trend around affordable delivery has been around 55,000 homes a year. So you can see it in that context. So what does that mean, when we look forward? So last time we were gathered here, I talked about the fact that the lack of housing supply was a disaster. I think it's now a disgrace, as we approach a general election. So it's a disgrace if you're a citizen and there's not enough housing in the country. It's a disgrace if you're on the waiting list, and it's a disgrace, if you're a taxpayer. So temporary homelessness costing the exchequer this last year, GBP 1.7 billion, is set to be GBP 2.1 billion for the next year. So from that -- it's in that context, the respective -- respected commentators, Heriot Watt and Savills have identified the current demand in this space. So you can see 140,000 homes required for affordable housing and another 50,000 for PRS. So 190,000 is what would be required in order to meet housing need today. If you were trying to get there over our plan period, you'd be looking at a compound growth of around 19% to 20%. Our expectation, shown within that graphic is that they're a much more conservative 10% growth over that period in terms of delivering those numbers. And of course, delivering those numbers involves working with our partners. So as Tim has illustrated, there are 4 particular cohorts of partners, 4 subsectors, traditional registered providers, who have some headwinds, and we'll talk about that in a moment, but we do expect that purple arrow to start to become green over the next couple of years; for profit registered providers, an area of growth; PRS providers; and local authorities much more determined by the political freedoms that they would be given going forward, but we know there's an expansive mood amongst local authorities to address housing supply. So let's drill into each of those for a moment. So traditional registered providers, so they are struggling with the dilemma that their social purpose is all about delivery, delivery of new homes, addressing the chronic housing need, but they have some headwinds. Those headwinds around reinvesting in their stock around the cost of funds around the regulatory expectations of their customer engagement, but it is an uneven platform. There are a number of housing associations, who have cut back their delivery programs, but there are others, who are managing to continue to deliver. And look at those numbers, that reflects the continuing investment in the sector, GBP 14.6 billion of investment last year, up from the previous year of GBP 12.6 billion. And the latest quarterly survey from the regulator of social housing identifies further growth in that sector. Interestingly, a faster rate of growth in new supply than actually investing in their stock over that year, which was slightly unexpected, but that's very clear. We work with a range of those partners. And so, if you look at that diagram on the right-hand side, that's not an extract from Tim's slightly dodgy psychedelic record collection. It's actually a proportionate pie chart showing our engagement with those traditional registered providers. So we're working with over 97 registered providers on delivery. And you can see that, that's both national housing associations and regional housing associations. They particularly like working with us in terms of seeing our commitment to ESG and place making. And this is the cohort, where we really expect our partnerships to flourish in addressing the chronic need for regeneration schemes across the country, looking at reinvesting in our estates, some great work that we've already done with those providers. But in addition to that, our purchasing sector is supplemented by the new for profit providers. So you can see the growth in those from 2013 when there were [ 18 ], I think they're just over [ 70 ] today of for profit providers. That has brought fresh capital into the business, unburdened by balance sheet liabilities in respect of their existing stock. So we're doing some great work with new for profit providers. Most recently, you will have read about our work with Sage. So this is a growing market for us. Back in 2013, one of those [ 18 ] was an organization called Linden First. So we have our own for profit provider, which, over the course of the next 8 months, we're intending to capitalize, and we will use that as another route to market for our affordable housing delivery. Importantly, not displacing any of the relationships that we've got with our existing partners, but amplifying those routes to market. Private rented sector providers, so here, we see a positive rental growth, a lack of supply really bringing fresh capital again into the business. We've seen the exit of small players, as you know, over the course of the last year. And so, we're really in a position that we can grow this percentage of our pie chart, as Tim mentioned earlier. We can see really good opportunities here. We're already working with the likes of Leaf Living, with Sigma, Gatehouse Bank, Packaged Living, L&G. There's a range Cheyne Capital. A range of partners that we are looking to work with, and we are working with on delivery. Really importantly, what attracts them to working with Vistry is the visibility of land supply, our end-to-end offer that allows us to give them opportunities for cross regional portfolios and the efficiency in looking at portfolio delivery is obvious. It's efficient for us, and it's efficient for our partners, and they really want that forward visibility that comes with that opportunity. Local authorities also, like registered providers, particularly interested in our place making and ESG, and it's an area that we see continued growth in. We know the majority of local authorities are aspirant to deliver homes. Why wouldn't you be faced with your revenue burden in respect of temporary homelessness, which is really weighing on local authority finances. 25% of them are very active. We're involved in local housing companies and joint ventures. And of course, they've still got significant land assets to bring forward. We're in a good position here because we work with about 30 local authorities, but we have precedent schemes, which are around regeneration, mid-rise and high-rise, but we also have a number of schemes, where we work with local authorities on portfolios of land to sequentially develop that land out. And those joint ventures really represent an opportunity for us to match our skills with the local authority commission in an effective way. Of course, what we hope is governments will be looking at giving more freedom to local authorities to deliver. So converting that is the key. So what's -- what have we got in terms of our opportunities? So you can see here the arc, this is a bridge to 233,000 homes that we have our eye on. Of those, if you take off the strategic land and the identified opportunities as being rather upstream, just focus on those first 4, our order book already delivering 21,000 homes, 15,000 homes, where we are a preferred bidder, working with our partners, whether that's a local authority, an RP or a PRS provide. 59,000 plots within our secured land bank. So this is our mixed tenure land bank. This is the land bank that we intend to apply our partnerships model to working with partners. And if you add to that, the ones that we're also in negotiation one-to-one on, you've got 102,000 homes that are already some considerable way through our hopper and being worked on within the business for delivery. Put that in the context of the numbers that we've talked about that we delivered last year, and you can see how we have the ability to respond to delivery with a new incoming government. Of course, that's all about us continuing to operate, as a responsible developer, continuing to operate efficiency -- efficiently in terms of our operations. And I'll hand over to Earl now to take us through that. Earl?

Thank you, Stephen. Good morning, everyone. Same response as everybody else. Operational update. So a lot going on at Vistry as there always is, I'm pleased to say. So look, we are absolutely structured for growth, and that is the current structure following the new strategy in September. And of course, that does follow the integration of Countryside that was only at the beginning of last year. So on this slide, they are not new priorities for a housebuilder, but there certainly is a different focus within Vistry with our differentiated model. So in terms of structure for growth, we are structured for growth in sales, almost irrelevant of the market. So local regional expertise, but also that national focus. So the Partnership and Regeneration team, Greg mentioned, headed by Stephen, really coordinating all our activities of those local authorities, RPs right the way across the country. Land, again, both local and national expertise no matter what bringing all forms of development through and that is short and long-term land, so that strength in strategic land that Tim mentioned as well. We do have ample capacity to grow over the next few years, and that's supported by our manufacturing in Vistry Works and more of that in a moment. And then our final priority at the minute, we are now one fully aligned partnerships business. We are looking at for the best way of doing everything, and that will deliver efficiency, standardization and further cost savings. So we formed a number of business improvement groups or BIGs, as we like to call them, and whether that's looking at how we drive more standard homes through the operation, how we optimize our relationships with our supply chain or deliver the best quality service for our customers and clients all of that will deliver further efficiency and cost savings over the next 12 months. And of course, through the restructuring, we have retained the absolute best-in-class support across our central functions, supporting all our regional businesses. A little bit more on a few of those areas. So land, Greg said it right up front. We really do have an unrivaled competitive advantage in terms of land. Those large sites delivering multiple tenures across multiple brands. We are driving higher absorption rates. We are driving the return on capital up. And look, we seek to build using somebody else's money. And by doing so, in that presale position, we are willing to accept a lower margin than some of our competitors. Unrivaled collaboration that Stephen has touched on. And of course, we don't actually need to take an interest in land in terms of our development. So we're very happy to have fully funded development. And regeneration is a strength in parts of our business, but that means it really is a big growth opportunity in other parts of the business. Supply chain, we do have the lowest cost production in the sector and for our suppliers and our subcontractors, we are doing exactly what we said we would. So we are delivering at scale and giving that build visibility to guaranteed pipeline of work. And that guarantee pipeline is also what is feeding our factories and is going to feed the growth in our timber frame. It's what a manufacturing facility needs as well as the standard product coming through. And optimizing relationships with our supply chains are still 90% of our materials bought centrally in order to get the best deals. And look, I do thank our supply chain for going through all the change with us over the last 12 months, and I do think that is to our mutual benefit. And yes, we have the capacity to grow. So [ 26 ] businesses, all looking to do as many as 900 units a year. We already have 8 of our businesses looking to do over 800 this year. We are flexible in terms of our geographical coverage with divisions working together. And a key differentiator is we are not constrained by private sales, right? We are build rate led. So if we have around 350 build outlets, yes, we have 200 that are selling private homes, but even those 200 are looking at 50% or more presold and then another 150 that are fully presold, so we are build rate led. Couple of slides just on our transition to a fully partnerships model, Tim referred to this. So this was an analysis I shared with you in September, just bringing you up to date. So at the end of December last year, we have presold 4,300 plots of an identified 9,500, so about 45% done by the end of last year. We've got a remaining 5,200 we've identified. We think we will presell the majority of those this year, and we've done a few deals already this year. Then an additional 1,500 we've identified that we will look to trade as well, leaving around 8,300 private and the balance 7,000 is affordable, broadly in line with our partnerships model. So really good progress so far. And this transition becomes part of our capital efficiency program, again, Tim referred to in terms of bringing that capital employed down in the business. But we're looking at it in 4 buckets, so operational excellence, all the really good things you'd expect any housebuilder to do, but I'll pull out 2 differentiations the absolute speed of delivery, so multi-tenure and using our timber frame and then building with our partners' money. So really optimizing the funding that we have in our organization. Commercial structures, Stephen mentioned the number, we are unrivaled in terms of the number of different commercial structures we have with our partners. So whether that is with local authority funded like we have with Warwick District Council at Kenilworth we've talked to you about before. Our RP joint ventures, we mentioned Peel Hall at Warrington before. And of course, there are new partners coming in and new structures we're looking at and working with Homes England, not least with our strategic partnership program. There continues to be opportunities for land sales and swaps. We have done one sale to an SME already and got terms agreed on a second sale. And as I already mentioned, that fully partner-funded delivery, including regeneration, but we will continue to work with Leaf, Sage, Sigma and others in terms of frameworks and portfolio deals. Open market sales remains really important to us. And of course, like others, we did see a subdued market last year. And we have seen a bit of a step up this year, and we'd happily see a little bit more of a step up. We are focused on what we can do in the market. And really important was our shared ownership scheme we set up with Sage during last year, it's a Homestepper. We've already done nearly 500 reservations through that scheme. And I really do see shared ownership options, as a key part of our delivery going forward, in particular for first-time buyers trying to get on the housing ladder. Other things, as you would expect, for a good housebuilder, really focused on our digital marketing. National marketing campaign went out again last week. Wider use of part exchange, done it in the right way, of course. And importantly, we have integrated our whole business onto common IT systems, as of the last quarter of last year. So all our customers can use our customer-facing portal keys in terms of their customer journey. As Greg said, significant progress with Vistry Works, so 2,500 homes delivered last year as planned, 4,000 or more this year, so that will be 60% growth. We've got the capacity for 8,000 units. And there, it is beautifully in the sunset that is our reopened East Midlands factory, which does deliver a lot more of that capacity going forward. We are manufacturing predominantly open panel at the minute, as we grow, but we have all the capability already for hybrid and closed panel in due course, and it is that standard product across all our brands and our affordable range we're looking to put through, but we've also expanded what we're doing. So roof trusses, joists, floor cassettes, firstly, for our own timber frame, but we can also use that as a supply for our traditional construction out on site as well. And yes, where we can get that accelerated delivery helped by the presale, the cost base for that is broadly in line with our masonry construction. We are leading the way in terms of sustainability, and we've combined the best of Countryside and Vistry in terms of strategy, launched our new carbon action plan that supports the road map we've got to achieve our science-based targets. These were reset following the combination of the Group, and they are now embedded in our incentive plans as well. And that has all been reflected in the A score that we've got from the Carbon Disclosure Project, which puts us in the leadership category, where we are at the minute. Over 600 [ 0 ] carbon in use homes. I don't think anybody else can boast that kind of level of production already. And our academies over 300 graduates we expect to go through our academies this year and growing in terms of delivering much-needed resource into the sector. And finally, Greg mentioned it, the Vistry Innovation Center opened last month and look at the picture on the screen, the best thing about that is that, that is the most plotted standard Linden House type built with timber frame that we've then worked with 18 trades, 54 different suppliers to put 100 different solutions into that home, and it really is our future show home. So please do come and see it, as Greg said, but we are bringing our partners to see that home. We do expect them to buy some of the technologies in there, and we will be able to deliver that out on the site. They will pay for that because they are looking to future proof their homes, and that is another competitive advantage for us. And with that, I'll hand you back to Greg to wrap up.

Great. Thanks very much, Earl. So as you can see, an enormous amount going on at the moment, and it's all pretty good and exciting stuff. But let's look at market trends. So we're in a good build market at the moment. The subdued selling market is good news for Vistry and let me make it clear now. I'm happy with where the housing market is. I don't want the housing market getting that much better. That wouldn't do Vistry any good whatsoever. So I'm okay with where we are today. Our supply chain absolutely gets a new model like I hope you do as well. And the reason they get the new model is they love the visibility. They look at Vistry as the mortgage. They look at the other housebuilders as maybe paying for the holiday, but you've got to pay your mortgage, and that's why they come and given us some really, really strong deals because when we say we're going to hear, here is a scheme for 200 units, what if the market changes? No, no, no, we're going to build 200 units. [ What's ] quick as you can. We're going to build 200 units as quick as you can. That is what is driving them through. And believe it or not, these are the people that I talk to all the time, my friends, so they absolutely get this model, and that is why they are prepared to give us some very, very good deals. We are incredibly competitive in the housing market, I'm hearing it from a peer group. Earl said it himself there. So land market, but we are very disciplined. It's got to meet our hurdle rates. And more often than not, we're using other people's -- our partners' money. There has been some improvement in the housing market. It's no great stakes, but it is better than it was in the second half of last year, and that's great. And I'm sure it will continue as long as it's gradual to improve, as we go through this year going into next year. Traditional RPs definitely are seeing some headwinds. As Stephen said, cost of finance and the management, as well as the financial burden of bringing their homes up to decent standards, their legacy stuff, as well as building safety concerns. But for profit RPs and PRS are more than making up for that shortfall there. And as Stephen said, the RPs are telling us themselves, the traditional RPs that this is a 2-year, maybe 3-year slowdown on their side. But the numbers don't lie. There has got to be some increase in funding to help deal with the housing crisis disaster, whatever you want to call it, in this country. So current trading and outlook, so the Group is on track to deliver strong growth in completions this year. You won't have heard that before, and we're targeting in excess of [ 17,500 ] units. By far and away, I would suggest the biggest housebuilder in the country. And that's underpinned, we've got visibility of that by a forward order book of GBP 4.6 billion, that's 11% up on last year with GBP 2.1 billion of that coming through in this year. And this year, we will continue all the way through the year to continue to transfer -- transition, particularly on our housebuilding side to a capital-light partnerships model, where we fully expect to be cash -- in cash by the end of the year. Now we made some bold predictions last September with the announcement of our new strategy. So today, I'm telling you now, I'm more confident than I was in September of last year that we will achieve these goals. That's 5% to 8% growth; 40% return on capital employed in the medium term; an GBP 800 million operating profit in the medium term, with a 12% plus operating margin. So why am I more confident than I was in September? Firstly, the biggest risk we had, I said it last September, getting the right people into the organization. Well, over the last 6 months, we've taken on a lot of people. We're taking people on quite easily. Two reasons. One, young people, particularly young people for me is under 55, by the way. That's young people are particularly like the responsible developer tag that we've got. They like the fact that we're giving, if you like, something back by actually addressing the country's need on affordable housing. We're also seeing, particularly since the start of this year, with regards to housing consolidation and awful lot of people, who are uncertain about their positions, looking to come to somewhere where they see a particularly bright future. So people have seen some huge encouragement over the last 6 months. Next, land. I thought we would be competitive in the land market. I've looked at it every which way you can, I'm hearing from the peer group. We are incredibly competitive in the land market. We will get the land that we require going forward. You look at what Stephen said, the demand. We've done an awful lot of work leading up to coming up with a new strategy. Obviously, we've done a lot of work since the demand is growing. The demand is embarrassing for this country. So whether it's the conservatives or more particularly labor, I'm pretty sure there is going to be some increased trending into this area, not that we require it with our growth levels, but I think there will be some increase funding in this area. And as I keep saying, I think we're a year, maybe 2 years away from a building boom in affordable housing in this country, which is very much needed, and there won't be another organization that will capitalize on that as much as Vistry. Earl talked about it, the drive for standardization, that is going really, really well. Our big groups really, really well. I can see it that we've told everyone standardization is the way to go forward. If you don't want to be in a standardized housebuilder, maybe you should get off the bus now. We've been as blunt as that with our people, but people are staying. They absolutely want that standardization, and that will massively help our timber frame manufacturing business, where I've got some really, really high hopes on that going forward. So they are the 4 main reasons, but I'm going to add to it, and I'm not being self-indulgent. I've been in the industry for 42 years [ perhaps ] not talking about it, writing about it, that's doing building houses all the way through that 42 years to sell to Mr. and Mrs. Smith and doing deals with housing associations and local authorities all the way through that time. And I -- my gut feel, which I completely rely on is absolutely telling me that we have got the timing of this transition, absolutely spot on right, whether it's politically timing with the housing market, timing with the -- where we are with the crisis that we've got in front of us with regards to affordable housing, we've got it absolutely right. And everything that I'm seeing at the moment coming through is telling me that. So I am really, really encouraged by where we are and the progress that we've made in the last 6 months or 7 months with a good set of results in '23, and we've made a great start to 2024. So on that, we will take any questions. So if you -- you'll be handed a mic, if you give your name, we'll answer them, as effectively as we can. So, Glynis?

Glynis Johnson, Jefferies. Four, if I may. Clearly, there's going to be a lots of parts to that.

Yes, probably expected, nothing less.

In terms of -- there was a difference between the adjusted and the reported because of the JVs. It's the nature of exactly what you're showing us. But can you talk to us about where we should anticipate the JV is going in the future. The JV seem to be making much higher margin as well. So any kind of sort of color on that would be helpful?

Can we do that? Do you want to take that, Tim?

Okay. Is it working? Yes, it is. The first part of that, in terms of the JV share, I mean, JV is a good vehicle, particularly for some of the partner-funded. We haven't got a specific target in terms of JV growth, but we probably would expect a higher proportion of JVs going forward. In terms of the margin, there's no reason why JV should make a higher margin than other parts of the business. So I'm not sure if that's -- if there's something in the detail that we need to just work through to unpick that because just by the nature of things, they're not necessarily higher margin.

Second of all, in terms of -- can you talk us through where you're sourcing your land from where you think it will come from? One of your slides seems to show that this year, half that came externally was owned and half of it was controlled. Is that open market versus partner? And what was utilized was all owned. Can you just talk us through that?

Earl, do you want to take that off?

Yes, happily. So the land bank owned and controlled, owned is, as it sounds, controlled is we've already got a contract on it. So when you say it will have been controlled, then owned and then through. So it's all our land bank, Glynis, so try not to get [ too compute ]. I mean, in terms of the source of land, what do I say? You name the source of land. I think we've got a really strong position. So it's coming from all sources. So yes, we are absolutely competitive, as I said, in the open market, larger sites, in particular, but we will have the best supply of public land coming through, whether that is local authority housing association. We've talked about regeneration opportunities throughout. So it is coming from every source of land you can think, including, obviously, development on somebody else's land. So we don't necessarily need to take the land.

I'd also add that Homes England are probably our biggest single source, where price is important, but there are a lot of other things they take into consideration. And I would also say the land market over the next 12 months is interesting because when you look at the number of units that housebuilders are currently producing, including ones that they have announced during the course of this week, whereas you might have thought there's a [ 5 year ] maybe -- well, around about a 5-year land bank, they might be looking at, if you look at the number of units, they've just done and the number of units they are talking about this year, maybe it's -- as much as a 8-year land bank, which is too long. And I can already see some opportunities for some swaps and some divestment of some of the land banks that other housebuilders have got around the country.

So sorry, just to tie you down, rather than just the sources, proportions, the largest proportion comes from Homes England.

I would say, it does. Yes.

And then it's the affordable -- it's the registered providers and that is the open market.

Well, I would have thought is that the open market will be bigger. There's a number of our larger sites are still coming through the open market, but we are purchasing them alongside a partner. So in terms of how we are purchasing and securing them, it's through some of the structures that we've talked about.

Thirdly, just in terms of partnership delivery, where is it now? Where are you -- where have you slotted it into it? It used to be a separate category. Now it's not -- it obviously makes a much higher return on capital employed, almost infinite in return on capital employed. So it would be useful as to where it is and how that's influencing the return on capital employed?

Tim?

So this is part of our partner-funded business. The way we tend to describe it internally is 100% partner-funded. So the models are the same. But as you say, higher capital -- low capital employed, so high ROCE, but lower margin. But we can have that -- the customer mix can be -- you can do some with PRS, but it's largely RPs. So most of it's within the RP bucket.

And it's still 15%?

It could be more in some regions. Geographically, it can make more sense in areas of higher land value. But at the moment, it's slightly -- it's somewhere [ between ] 15% to 20%, something like that.

Yes. And the last one, you'll be glad to hear. The order book and the preferred bidder, what time frame does it actually stretch over?

That's -- most of those preferred bidders will convert over the course of the next 3 months.

For delivery when...

For delivery, I'll have to deliver it over 2 years to 3 years.

The preferred bidders or the order book.

The preferred bidder.

The preferred bidders. The order book is over 2 years.

The unwind of the order book is in Slide 47, you can see the unwind.

Did you not get to that page?

No.

Will?

Will Jones. Redburn Atlantic. The first, if you could just remind us, please, on gross margin by the 4 buckets that you've laid out, if you were to targeting making the 12 operating, how would those 4 stack up at gross? And does the extra affordable you've highlighted today do better than the Section 106?

Yes. Go on, Tim.

So we're not going to provide margin guidance by those 4 buckets because we want to try and simplify the way this is modeled, and we don't want -- we look at this on a blended basis. So we're not going to provide margins by those different categories. In terms of...

So we do, but we're not telling you. That's what I think Tim just said.

Well, we are trying to make your life easier to avoid your models having 4 sections in. You can have 2 -- 1 or 2 sections in. Yes.

Second, just understanding the sales rate a little better with [ 0.7 ] year-to-date. I think nearly [ 1 ] for the whole of last year. Clearly, bulk sales when they come in are a big influence. But just if you can help us understand?

I would say, the [ 0.72 ], I think it was for this year. I would be so far about [ 0.45 to 0.5 ] would be private. The remainder would be portfolio, as we're calling it.

And so, coming back to the sites, the 200 sales roughly in the 350 build. When you make a sale on the 150 that are forward sold, how does that influence the sales rate we see. Did you say that you've got 150 that where you basically sold it upfront. Is that right?

Yes. Well, so that's sold up. Do you want to take that, Earl?

I can. So look, yes, where we've got -- well designated private units, and we sell them. We do put the bulk sales through that sales rate. I mean, we're very open about that in terms of it going through. But obviously, it's not straightforward in terms of a number of our developments, we presell the whole lot before we even secure it. No, we don't put that anywhere near our sales rate. And so, I think what -- as Tim said, what we're going to try and give you is the volumes, et cetera, in the buckets, as Tim described on that slide earlier, I give you that consistently to try and drive it through. I mean, the sales rates, so we were already 67% presold last year. We could easily be a little bit more than that this year. The market is subdued. So we are driving a sales rate, but we will supplement it. We've told the PRS market is stronger we've seen today. So we will supplement it where we need to. So therefore, that's how we're going to continue to drive a blend through the business.

And then just big picture, as you think about the target of GBP 800 million medium term, roughly GBP 500 million base. The biggest levers, as you go from one to the other sounds in the way you're talking today that it's probably volume, but all 3 contributing.

Yes, it's volume and standardization, which will drive through further cost savings and probably an overhead saving as well.

Aynsley Lammin from Investec. I think I've just got 2 actually. Obviously, you talked about the sources of land. Just interested, do you get more kind of favorable treatment in terms of planning? Is it quicker to get through the system? Everybody else is moaning about that planning. Just wondered what are the risks for you to kind of maintain the land coming through...

Yes. I noticed this hugely when we have the housebuilding business and partnerships business leading up to September last year. So planning is a complete disaster in the country. It has been for a number of years. A big part of that is the fact that local authorities just don't have the people to deal with. So one of the hardest things in the world to do is to have an argument with somebody who's not there. You've got to have somebody on the other side of the table to have a ding dong with. If they're not there, it's difficult. What we have found, and it's continued to happen in the 6 months since the partnerships team still very difficult with planning, but the partnerships team had people there more often to have that debate with. That's because the partnerships team always took with them in the main, somebody from a housing association or from a PRS provider that was the partner of the local authority, or we were doing it with a local authority. So the partnerships will -- I believe it is more straightforward to get planning, but still incredibly difficult than housebuilding, which is who knows what happens there. So yes, it's better because we are giving something that the local authority and working with a partner more often than not, that is affiliated in some way to that local authority.

And then just on the kind of -- you hinted quite strongly that we should expect maybe some share buybacks in the second half. Just wondered where you're thinking is around leverage kind of the balance and what criteria you use share buybacks and bringing that average, leverage down quickly in the near term?

That's the conversation we're going to have. I mean, we've got all of these capital initiatives going on. They're going on as we speak. I expect to make some -- we expect to make some big progress on that in this end of this first half going into the second half. That's going to throw up an amount of cash. And there will be a debate, particularly with Tim and I and then with the Board with regards to, are we better off using that cash to reduce. Have no average month end debt going into '25 or is there a compromise, where we have less and we do some more share buybacks, which will depend on where the share price is at that particular time. But yes, I'll stick with them. I personally think there will be more on top of the capital allocation plan in the second half of the year.

Just on that, the land creditors still happy to kind of run with GBP 700 million roughly. Is that the...

Yes. I think as we grow, we're happy to grow the proportion of land creditors in line with the growth of the business. And of course, that will be one of the considerations when we look at the distributions, we will consider our financial commitments, which include land creditors, as we decide -- make those decisions.

But as Tim said as well, we are very confident of the GBP 1 billion returns.

Ami Galla from Citi. Just 2 questions from me. One was on the capital-light model that you've kind of emphasized here. Can you remind us as to how much of forward funding you get typically on a project? And does the overall medium-term view on -- be running a capital-light model depend on the planning system also running quite efficiently in the future? The second one was on standardization. You made a clear point that that's an area of focus here. Having 3 brands in open market, how practical is it to achieve the standardization benefits that you're looking at the build level?

Okay. So on the standardization one, it is pretty practical because it's more to do with the specification inside than the actual construction of the property itself. So we're going to end up with somewhere between [ 45 and 70 ]. I think standard house types, [ 45 ] will be the core. They will be the house types we use. We will just put a different specification into a Bovis, Linden and Countryside home. I think that's good enough on that. But Tim, do you want to take the financial?

So the first part of your question is around the upfront funding, and clearly, they help fund the land purchase. We will try and maximize the amount of money that we get as part of that initial wave and to get -- ideally to get more land funding than the land has cost to help our capital allocation. And then, as we go through the process, they'll fund on a valuation basis as we built it out. Ideally, that's on some sort of monthly valuation, where we can ensure that we're getting the money in from our partners no later than we're paying the money out to our subcontractors. So that's funny. But -- the second part of your question, Ami, was about whether there's impact on the planning.

Yes. I mean, does it essentially -- typically, you would probably not have to carry as much land bank across the business if the planning system is better in the future. Is that one of the...

That's certainly one of the factors. And this is one of the reasons why our land bank will migrate to have a higher proportion of controlled, where we're going to aim to put money out because we're sourcing that land through partners. And hence, we're getting the benefit that we don't actually need to spend any money until we've got the planning and we're actually buying the land.

And if I can add to that, one of the issues that if you've got your traditional models that you're looking at, let's talk about can we go beyond 20,000 units. No one's done 20,000 units before. Nobody's sold and build more -- more than 20,000 houses a year. So more often than not now, we are looking at big schemes, 2,000 houses. Go back to yesterday on the housebuilding world, the question is, how quickly can we sell those 2,000 houses. That's -- can we do it at [ 0.5, 0.6, 0.7 ]. Nobody is going to go building as quick as you like because your work in progress levels will be dramatically high. It takes away all of your flexibility. You might want to change the scheme later on. With our model now, 2,000 houses more often than that, we're going to go on there with 35%, maybe even slightly less for sale. That's a real small element. We'll be happy to just charge on and build. And basically, the units we'll be building going forward, we won't be building 5 and 6-bedroom houses. It will be 2, 3 small 4-bedroom houses. There's only so much that can go wrong with that particular model. So it's bread and butter private housing. The majority of it is going to be presold. So we'll be looking at that scheme going, right, that's a different question. How quickly can we build that scheme? We could end up with 5 compounds, 5 site managers, 200 units, get it all done within a couple of years. That can be absolutely done particularly that's without all the standardization. So buying the bigger sites means we -- the reason we can go to 900 units, as I would expect, as we go forward, our individual business units to actually be, yes, they've got 5 sites on that one big site, but it really is one big core site. That's an awful lot easier to manage, one roundabout to get in, one set of drainage connections, one set of service connections, it's an awful lot easier to manage than a site here, here, here and around about the place. That is why we are confident we can do it. But the question is, can you build quicker than what you can sell? Of course, we can. We can build a hell of a lot quicker than what we can sell. But why would you with work in progress being a big contingent of what we do, cash constraints, why would you build quicker than what you can sell? We're not in that game anymore. Chris [indiscernible]. So well, no, Clyde was quicker than Chris.

Sorry, Chris.

[indiscernible] first.

Clyde Lewis at Peel Hunt. I think I've got 3, if I may, maybe 4 with a clarification on a couple of bits. But earlier standardization, the efficiency benefits that you're talking about there, are they included in the synergies that you're actually talking about the GBP 25 million that would come through in GBP 25 million and GBP 15 million this year? Or is that on top of those numbers?

I would say it's on top. So in terms of changing the way we're working to do it all the same way, and we're looking at every function. We've got some thoughts on that. But I would say it's on top of that.

It is, yes.

Follow-up to that then is, would you like to put a scale on that number?

Good question, Clyde. At this point, no would be the right answer to that. I mean, look, we've launched these at the beginning of this year. So I'm sure we will come back next time around and give you a better view. But that's where we are. They are up and running in terms of initial ideas of which direction we're going in. That's where we're at.

If I can just add to that. I think while they're not in the GBP 25 million, they are considered in our medium-term target of getting to above 12% operating margin. So just stick with that and don't add nothing more.

Okay. Second one was on probably one for you, Tim. I think receivables and WIP obviously, you did see a step-up in terms of what you had last year. Will that rise again this year? And where does that, I suppose, peak out as the sort of model sort of shifts fully across?

So I think in terms of the WIP in particular, we would expect that to come down this year as the releasing of the housebuilding land bank and the other capital efficiency measures that Earl talked about largely come out of inventory or WIP during the course of the year. So we'd expect that to drive that down in terms of the receivables and to a certain extent WIP, a lot is just around the timing. So I would love the business to be doing more of their deals earlier in the year. So we wouldn't have such a big receivable at the end of the year. But I think for now, we should just assume that, that is a steady state receivables number.

And the last one is probably for Stephen. You have the best partnerships business in the market, but you're only dealing with 97 of 202 of the RPs. Why aren't you dealing with the other 105?

Well, it's a good question.

Yes. Why aren't we?

Yes. Thanks for that. Yes. No, it's a very good question. And there are definitely traditional registered providers that we should be working with that we're not. So there are some with balance sheets, with aspirations, with capacity that we haven't yet developed sustained programs with. And that's an area that we're focused on trying to deliver. So we want to do more with our existing partners, but there are certainly new partners, traditional and for profits out there that we want to do more with. So I see that as a -- it's a good question because it's encouraging our further expansion. So we'll get on with it.

I think the bigger growth area though is going to be with local authorities, isn't it?

Yes. You would expect local authorities to come forward with using our assets, wanting to really commission for the reasons that I gave earlier around the fact that temporary homelessness is weighing so heavily on them. So local authorities, we're working with around 30. There's an opportunity to do more. We've got 2 or 3 local authorities we've concluded deals with recently. So we've got deals with Bristol, with London Borough of Kingston, with Barking & Dagenham, all in the last 3 months. And today, we've actually got a site launch to deliver over 520 homes with London Borough of Brent. So there's 4 good examples of local authority momentum -- our momentum working with local authorities on delivery.

Thanks, Clyde. Do you want to go to -- Chris?

Chris Millington at Numis. First one, just wanted to ask you around pricing and discounts. You mentioned it's got a little bit better at the start of this year. Perhaps you can just talk around the PRS and the private market in that respect?

So the private market, we would say headline prices maybe came back 1% or 2% last year and 3% to 5% use of incentives. I would say headline prices in the first, whatever it is, 12 weeks of this year are stable and incentives of 3% to 4%. So that's that. With regards to deals, with regards to portfolio deals, we've said 5% to 15% last year, maybe slightly more in the fourth quarter. I would actually say that gap is narrowing. So I would say 5%, but probably on average 12% to 13%.

Next one is just on Linden First. I'm just understanding practically how it gets up to scale, what it requires from you on funding? Is the third-party funding in mind, perhaps just a bit of detail around Linden First?

Okay. So Linden First is a for profit registered provider in order to deliver 1,000 homes, it's going to need a capitalization of around GBP 150 million to GBP 175 million. So our approach is -- has been to strengthen that board to get it into a fit-for-purpose scalable vehicle, and we've spent some time over the last 6 months doing just that. And what we're now intending to do is go out to the market. So we're working with that Board on developing a prospectus to bring in that third party finance for that vehicle to be established and capitalized. There would then be a relationship between that vehicle and Vistry and potentially that vehicle with others because that's what the regulator will require in terms of commissioning further delivery. So what it essentially does is it adds to the sector's capacity. A first step would be around about 1,000 homes over 2 years, and that's the scale of capitalization that it would need. And it's an absolute project for us to deliver over the next 8 months. So I would expect you will see opportunities for transactions between Linden First and Vistry to take place during this year.

And become one of our bigger customers going forward.

And how does that work from a balance sheet point of view? Will it appear on the balance sheet given it's third-party funded or does it stay off of the balance sheet?

Yes. They stay off balance sheet. That's the -- one of the fundamental underpins of it to keep it off the balance sheet.

Last one is just on grant funding. I think you're about [ GBP 170 million requirements ] at that sort of region. Has it got the potential to go higher? And how does it unwind as well? I presume it's maybe on a per unit basis, as you deliver these...

It is. So it's paid quarterly in arrears, which seems normal to wait for it, but it is paid quarterly in arrears. So we're doing well within our program. We're running ahead of the original forecast program for committing that. So as you'd expect, we are successfully doing that. We've actually pitched for some additional funding. And we, with our partners, we're able to achieve some additional funding during last year for delivery. Homes England are waiting for an incoming government and a settlement, which would allow them to describe the arc of their post '26 program. So at the moment, we're involved in the program for delivery to '26. Over the course of next year, the next successor program will be developed, and it's obviously a political decision in terms of the degree of that is funded. But we're getting in place early discussions with Homes England and with our partners on delivering post '25, post '26 within that program. We have also got a bid in at the moment for any additional funding that might be available during '24 in order to supplement the work that we've already got with our partners. So our work with Sage is a good example of how we want to capture additional funding in order to expand our existing portfolio work with them.

Again, I think from a competitive advantage, so we're aware [ of other ] housebuilders have made bids for grant and haven't got it. If you showed some of our old housebuilding businesses, what we have to go -- do to get grant, they would -- what are you exactly you talking about? This is [ double Dutch ]. I mean, I have no idea what you're talking about. You also have to be set up that you get inspected because it's regulated. So people will come in and do audits, external audits and housebuilding just [ aren't ] used to it. So that GBP 170 million is GBP 170 million more than any other housebuilder because we're the only one that has at the present moment in time. The Sage deal that we announced Leaf, the 2,800 units last year, that wouldn't have been able to be done without a grant program. So no other housebuilder would have been able to do that. We only -- we're able to do that because of that grant.

The other thing I would add to...

Unless they would take a complete haircut, as it were, which they wouldn't.

We have the other advantage that we've always delivered. So the really important aspect with grant funding is that you make your -- and [ all your ] promises in terms of expenditure. And we're in a great position for all the reasons we've talked about to do that. We also have additional grant in respect of MMC. So there's an alignment there directly of grant funding with the additional use of Vistry Works, which really helps us.

So we get additional grant, where we get housing grant, we get additional grant if we use MMC.

Gregor?

Gregor Kuglitsch from UBS. I've got a few questions on the shorter term, some of the longer term. So maybe just on the short term, you obviously signaled a bit of a margin drop this year. Can you just sort of give us a bit of a range on that. Are you thinking kind of [ 11-ish ] for '24.

We'll just take that, Gregor. Yes. Tim?

Yes. That's [ about the right ] range.

In terms of the EBIT guidance, the GBP 800 million, is there sort of more thoughts on the sort of timing of that now that we're sort of, I guess, 6 months on and the market sort of stabilized. So if you just give us a bit of...

[indiscernible] saying before 2028.

And then third question on debt. So I think you were suggesting maybe next year you could be average debt free. I don't know if that was...

No. I said, we could get closer to being average net debt free. That would be one of the considerations we would take if we were to do a further capital distribution in the second half of the year. That will be the debate. So we're going to have cash. What we've said is, we will be in cash at the end of this year. And we've said at the time of September, all things being equal, we would have no month end debt by 2020 -- end of 2025, isn't it, or '26?

No year end debt after this year. So we're net cash positive. In terms of average net debt, our plan is to reduce that to eliminate that in the medium term. We will still have debt during the course of the year because that average we talk about month end net debt, there will be points both at month end, but particularly intramonth, where there was debt. So we're still going to need facilities, there will still be finance costs. And then the debate we're going to have following up, as we talked out with Aynsley's question during the course of the summer will be that balance between distributions and debt levels, which we still need to iron out in detail.

Yes.

Yes. So I guess asking it differently, the GBP 2.3 billion of capital that you've got, how quickly does that go down to sub [ GBP 2 million ]? Is it -- I mean, obviously, this year, you're aiming to take out [ 200-ish ], right?

Yes. So what we'd be looking to do is try and get down below GBP 2 billion earlier in the 5-year cycle in order to build up. So I would expect that we're going to be building up capital in the last couple of years of that -- of the plan. Therefore, we need to be at sort of [ GBP 1.8 million, GBP 1.9 million ] by the end of '26.

Okay. And then Greg, you sort of said don't really fancier market recovery because it would sort of cost pressures on you and perhaps more pressure on land, too. So I guess, is your view that, let's say, if there's a cyclical market recovery and mortgage rates come down, the kind of the benefit you get on the private sales, you kind of lose on the cost side of land? Or are you...

We'll get the benefit on the private sales, but not as much as a pure housebuilder because there's less of it. We get the benefit on PRS because PRS takes a view on where the market is going. It's just the portfolio deals outside of PRS, where we wouldn't gain. Now what I'm trying to say is, from a timing perspective, we are going through a major upheaval, as we sit here at the present moment in time, and I really don't want a housing market boom in the next 12 months. If the housing market really took off, and I don't expect it to take off in a boom, but really took off in 12 months' time, the organization would be far more settled, far more stable and we'd be able to deal with it. So I'm talking about not a profit margin perspective, I'm just talking about at the present moment in time, we can attract people. We need people at this moment in time. The last thing we need is difficulties on site with regards to getting, as we saw in '21 and '22 and how do we get bricks and blocks and all the rest of it. It's much more straightforward to build. And that is what we've needed over the last 6 months. And as we go over the next 12 months, every day that goes by, we'll be better -- in a better position to deal with those fluctuations and difficulties in the market because our change will be more complete than it is today.

And then maybe just a final question on the CMA. I guess, what your thoughts are as to what's going on? I mean, obviously, they are sort of alleging information sharing. I'm hearing that sort of an affordable housing, potentially. I don't know if that's really true.

[ Got it. I'm hearing ].

What kind of -- well, that is basically in joint site was affordable housing that there's information sharing on pricing and things like that, I don't know if that's true. But if you could care to comment and how you think about the risk and obviously holding back some capital just in case, so obviously, if you apply 10% to GBP 4 billion, it's obviously a large number. So I'd appreciate that comment.

Yes. Well, I'll take that. We're -- I'm in a good place on it, having been involved in the construction one whenever it was back in 2010, so I know how this all kind of pans out. We have absolutely worked with the CMA, as other housebuilders over the last 12 months, and we will continue to work proactively with the CMA over the next however long period it takes. But standing here today, I'm relatively comfortable that -- and maybe I wasn't from a construction perspective that if we are doing things anticompetitive, I don't think we're very good at it. So that's where I would be.

Joe Spooner from HSBC. Just going back to the issue of standardization, it's obviously an important steppingstone on the route to that GBP 800 million. Can you just give a sense of how well adopted that is in the business today and how far you have to take it in order to get to that GBP 800 million? And then just secondly, on costs. I think you start to lap some of the initiatives that you took in the summer of last year in the months ahead. How do you think about the cost outlook once you're kind of through that annualization of those initiatives?

Do you want to take the cost one, Earl?

Can do. So Joe, I think you were talking about sort of looking even further forward because our cost base today is lower than it was last year. But if I look further forward, look what would I say that some of our suppliers are putting increases into the market that we are not suffering through our business, and that does reflect all the things we've talked about this morning. So -- but there is a little bit of cost pressure from labor and materials further down the line, but we're going to be in a better place than anyone else. And that's what we're still seeing right, as we speak today.

And then on the standardization, I think to a lesser or greater extent, we've got 26 business units, and they're all doing things slightly differently, and in some cases, quite a lot differently. So I think the potential there when we standardize it and bring it all in, and Mike Woolliscroft sat in front of you is dealing with this. He's Head of the BIGs, but it sounds a big title, Head of the BIGs. But now I think it's an immense opportunity for us because it was Bovis, 7 business units, and they weren't doing everything together. You brought in Galliford Try. They certainly weren't doing everything together and different to Bovis. And then, you've got Countryside. So we have 26 business units doing things a lot differently or subtly differently. And over the next 12 months, that has got to change. It will change, and we'll have the benefits of that. I agree with Tim, we can't put a number to that. But I think it will be more than a minor saving for the organization going forward. Brilliant. There you go, nearly 1.5 hours, well done, everyone. Thanks very much, and have a good rest of the day. Thank you.