Vistry Group PLC (VTY) Earnings Call Transcript & Summary

Good morning, everyone. So welcome to our Full Year Results Presentation for 2025. Delighted to be joined today by our Finance Director, Tim Lawlor; and our Chief Executive of Partnerships, Stephen Teagle. So the agenda. I will do a very quick introduction. Tim will follow up with the financial review. Stephen will talk about the markets, and then I will go into a few -- quite a few slides on strategy and operational update, finishing off with an outlook. And then, of course, we'll have the Q&A, which we all can't wait for. So the 2025 headlines. So 2025, profit before tax in line with expectations, which included a very, very strong 2025. And just on that, thank you to our team because there were a lot of skeptics around following the issues we had at the end of 2024 that didn't think we would get to the numbers, particularly when we said it would be dramatically second half weighted, but we did. And the important thing there is showing the resilience of the business and the model is we had absolutely no help whatsoever from the market. So I've been around for 45 years, and quite often, you see a housebuilder get into trouble and the following year, it's boom time and they get out of jail because the market has been quite good. We had no help whatsoever last year from markets. And we're all very proud of the fact that we are producing 1 in 7, that's 15% of the total affordable homes being constructed in the country. The group following massive reorganization is lean, efficient and incredibly stable. We were probably along with Persimmon, I would suggest, the only active housebuilders in the land market last year, which was incredibly soft. And we bought some great land last year, taking advantage of those soft markets, which will help the company dramatically over the next few years. Net debt reduced down to GBP 144 million at the end of '25. And Stephen Teagle and I would both say we're very delighted that during the year, and it was not start coming through at the end of this year, the GBP 39 billion affordable housing program, '26 to '36. Stephen and I have been around for, as I say, a long time, have never seen an injection of capital in affordable housing of that nature ever. So we're positioned for growth. So just going off script slightly, there were 2 announcements this morning. The first, obviously, about our results; the second, announcing my retirement. I'm told by Tim that some of the feedback as people were surprised. I'm not sure why people are surprised. It's been -- it's all planned. The Board have been expecting it. I've done 45 years. I'm 62 in June. My wife is older than me, and she's very lucky, of course, but she is older than me. And I just want to enjoy myself. And as some of you will know, I've got 1 or 2 spare sets to clothes. So I'm in a pretty good place, and there's nothing more to it than absolutely that. But I will be around. So it's very much business as usual. That's the message within the group for quite some time to come. So no issues, nothing -- no second guessing. It's just me. It's coming up to that sort of time. The business is in good shape. There's a new social housing program coming forward. It's the right time for all concerned. So as I say, where are we? The business has stabilized. The new organization structure with the executive chairs that we've got is working exceptionally well. We are differentiated from our housebuilding peer group, and we're completely aligned with the government, and we'll keep coming back to that, Stephen and I during the presentation. We've got some great long-term relationships with the largest housing associations and Homes England. And these relationships aren't over the last 2 or 3 years, these are relationships that kind of Stephen and I have had since before 2000, years and years and years of doing affordable housing. And don't forget, your average housing association is generally wary about your average housebuilder because they know they only really want to deal with them when the markets are poor. When the markets are good, they drop them like a stone. We're positioned ideally to capture the social grant program that's coming up now 2026 to 2036, and we've started the bidding process. And this last point, not to be underestimated, and I'll come back to this time and time again, we are very vertically integrated with our Vistry Works operation, so -- which has got 3 factories, incredibly good. The product that they're producing is excellent. And what I would say, timber frame is generally net more expensive than -- well, not generally, it is more expensive than building traditionally. Where you gain is speed, reduction in prelims. I'm not sure timber frame works for pure housebuilders. It does when they're going hell for leather and they're building quickly. But when they're not building quickly, as is the case at the moment, you're not getting that speed because what's the point of building when you can't sell as quick as you want. So timber frame works very, very well for a partnership business where you've got the visibility, not so well for a housebuilder. And just a little quip on that, Cala Homes, private equity are pulling out of timber frame because it's more expensive because they're not selling quick enough and they're fed up with the prelim overruns without that coming through. So just something to bear in mind, it is vital with a partnerships business and the government and housing associations also like the MMC. So it really, really works well for us. So looking ahead, we're absolutely set to benefit from the Partner Funded growth. Now rent convergence and rent settlement have both now been announced, which is great. And I'll just remind some of you that at least one housing association in London has said that rent convergence is as important to their balance sheet and building going forward as the 2026, '36, GBP 39 billion. So rent convergence for housing associations, it repairs their balance sheet is huge and also don't underestimate the 10-year rent settlement. We're 15% of the market. So you just need to look and do the numbers. We'll obviously be looking to increase our market share, but even maintaining our market share at 15% shows that we've got a fantastic opportunity ahead of us. And that opportunity is now coming at the end of this year. Are we disappointed with the delay since it's been announced? Yes. But the process is happening. It will all be announced in September. We'll have visibility before that. It's coming. Open Market growth in the end is inevitable. It's highly cyclical. I just don't see it anytime soon. And what's going on at the present moment in time in Iran is making that even more uncertain because not only will we potentially see prices going up, which we've made a little line in our forward projections, which we're talking to analysts about, but early days, and it could all end tomorrow. The longer it goes on, the more those prices will start to come through, but don't underestimate consumer confidence also being hit by what's going over there as well. So we're reducing our inventory, and that will give us more options with capital allocation. And we absolutely, with our 25 business units and our Vistry Works operation, which is capable of doing 10,000 units a year just from the 3 factories, we are very, very able and willing to respond to the opportunities that are ahead of us. So on that, I'll hand over to Tim. And I'm just dying to see what Tim's joke is going to be with this. Always changed it. I'm looking at my screen, sorry. Something's gone wrong there, isn't it? It's probably me, but -- there we are. So I'm very much looking forward to the joke that inevitably has got to come from that photo. Every dog has its day.

So we've got a picture of our sites in Tottenham and the Meridian site. And in the foreground there, we've got members of the Vistry management team watering the green shoots of recovery. There we go. It's pretty pause. let's move on from that. So the year-end numbers are old news. We went through most of these numbers with you back at the trading update in the middle of January. So no surprises really within here. As Greg said, profit before tax came in, in line with our guidance. We had a strong second half of the year, where we saw a tick up in op margin and a strong proportion of the full year growth in '25. Revenue-wise, we were down 4% despite being down 9% on completions. So we had a slight increase on ASP, which I'll come to in a second. And it's worth noting that EPS growth is greater than the APBT growth because we're starting to see some of the benefits of the share buyback program coming through there. So that's the principal reason why EPS grew at 6% rather than PBT at 2%. In terms of net debt, we reduced it during the course of the year. We did see a tick up in average net debt. So we went from GBP 698 million of average daily net debt, and it's important that it's -- remember it's daily net debt rather than what most people talk about, which is month end net debt, average daily debt of GBP 698 million to GBP 734 million during the course of the year. And ROCE is obviously still some way away from where we want it to be. We want to be a high ROCE business and hence, some of the actions that we're taking this year to try and release capital from the balance sheet. Okay. On to revenue. So as we've talked about, the total units were down 9% year-on-year, hit by a couple of market forces. In the first half of the year, there's a fair degree of uncertainty in the partner market, particularly in anticipation of the uncertainty around what was going to get announced in June with the GBP 39 billion program that was eventually announced. So we saw some pickup in the second half of the year, particularly around affordable, albeit the PRS, the PRS market remained pretty moribund during the course of the year. A lot of the POS providers were going out for funding or reaching the end of their funding allocations. There are some signs that, that might pick up this year, but we still expect more growth to come from the affordable side of Partner Funded rather than the POS side. And then Open Market completions, this is largely driven by having fewer sales outlets as we've migrated away from the former housebuilding sites, so fewer sales outlets. There are clearly some self-help measures that will help us improve the sales rate, but it would be nice to have some market tailwind as well to push up Open Market completions. And there's no really underlying theme, I think, around average selling prices. I think most of our movements are related to mix factors. So in the partner world, we sold more in London and the Southeast where the average cost of a unit is higher than in the north. And in Open Market, we had more large products being sold during the course of the year, which again was a higher ASP. But the underlying theme was that generally house prices were pretty flat during the course of the year. We did have higher land sales in the year, as we mentioned back in January. So our land sales were about GBP 180 million of revenue. We'll continue to have land sales as part -- a core part of our strategy. So when we buy a site, we will identify parcels of land, particularly for large sites where part of our capital strategy is to sell those parcels. And that's in a main what happened last year. The margin that we take on those is not exceptional margin. We just take the blended site margins of the rest of the site. So you can assume that it's around sort of 20% gross margin on those land sales. So it's not the exceptional driver that some thought it might be of the profit growth in the year. Not a lot to say on tenure mix year-on-year. It's pretty similar to '24. And we saw a mix within affordable, as I mentioned before, from POS to additionality. I think during FY '26, we'll probably see a similar overall mix between Partner Funded and Open Market. And there are 2 forces there. One is the push that we'll talk about during the course of the presentation on Open Market, which will push up Open Market volumes. And then the arrival of the affordable housing program will push up on the Partner Funded side. And at the moment, we're expecting they'll be roughly equal. Obviously, the timing of both how long the Open Market push goes for and when the affordable housing finds its way through will impact the mix. But at this stage, we'd say it's probably about the same for '26 as it was for '25. Okay. Into operating profit. So the margin went up in the second half of the year. We had overall for the year, 100 basis point improvement in gross margin. What we're seeing is the new sites coming on at higher margin. We're buying sites on a higher margin and a higher ROCE. And as we had the tail off, particularly the southern -- the South Division issues from '24, we're seeing some margin improvement coming from that. Overhead is up a little bit year-on-year. In light of the South Division issues of '24, we invested more money in assurance activities. So that contributed to additional overhead. And there was also more a return to some variable pay again with all bonuses ceased in '24 in light of the issues we experienced. So what about '26 margin? Well, the underlying margin of the business will continue to tick up as we get efficiencies and we get operation -- we'll get economies of scale and operating leverage. There will be some reduction as a result of the sales push activity. So covering that briefly. At the start of the year, straight after the trading statement, we gathered together to say, look, the sales at the end of last year weren't good enough. Also, the capital and the balance sheet is proving to be too sticky. And we recognize that we need to give some push into sales in advance of the spring selling season. And there was a feeling that there was some constraint on our selling within the business because people don't want to -- they love the value -- they love the houses. They think there's intrinsic value there, and it's quite hard for a salesperson to offer the discount if they think they're going to sell it later at a higher price. And the other thing is that there were some constraints in people's minds about not touching the margin. And so what we've done is say, look, we need to get the sales going. We recognize that, that may have some margin implications, but it will give us good momentum. And crucially, it will generate cash and reduce our WIP. So that was the driver behind the change. And so far, so good. We've seen this 40% year-on-year improvement in sales rate in the year-to-date. So that's really encouraging. We'll start to see the cash come through from that in the second quarter. What it does mean is that there's going to be some margin tightening, particularly in the first half of the year as we see the impacts of that on those sites. I think the other thing we'd say in terms of margin for the year is we keep being hit as we all are by international surprises, international events. We don't know exactly how they will play out. I think this time last week, we might have been slightly more bullish and we're perhaps slightly more cautious this week, given what's happened in the last week in the Middle East. We don't yet know what impact that's going to have, if any. Is it going to impact our build costs? Is it going to impact cost inflation? Is it going to impact customer confidence? It's too early to call it, but we're probably slightly tempering our expectations for '26 in light of the uncertainty that, that brings. So that's operating profit. In terms of build costs, so we continue to get the benefit of the scale of operations and the fact that we keep building. So our build costs came in at during '25, about 2.5% up year-on-year, which is pretty much as we guided throughout last year. We have framework arrangements with all of our material suppliers or 90% of our material suppliers, and we contract in advance, which gives us some protection against short-term volatility in pricing. And subject to whatever happens coming out of the Middle East, then we're expecting minimal material cost increases during the course of the year. And just in terms of what's the impact of the higher fuel costs are and the higher gas prices are, in terms of the direct impact, it's not that significant, but it's obviously what happens with our suppliers and the supply chain and what they do, particularly those suppliers that are heavily reliant on gas that I'm sure there will be some discussions at some point if this price increase is sustained about our material costs. The labor supply is good. The fact that others aren't building helps us. It makes -- puts us in a stronger negotiating position and our subcontractors continue to like the certainty that our business model offers to them. So that enables us to hold prices pretty flat in some places, in some parts of the country, we are seeing some reductions in subcontractor costs during '26. So overall, minimal impact on build costs subject to whatever happens as we go through the year. On Vistry Works, Greg mentioned this before, really good progress in terms of production. So up 60% year-on-year in terms of the timber frame units. And the roof trusses, it was the first year of production, and we did over 3,000 units in 2025. We're expecting further growth in '26. So as we see on the slide here, 6,000 timber frame units in 2026, and we still got capacity for more. We can probably find a way to deliver up to 10,000 units without having to buy or take a new factory on. And so we've got a couple of years to see how things develop before we expand our factory footprint. Working through the rest of the P&L. So overall net finance costs were down by 9.7% year-on-year. In terms of bank interest, although the average debt went up, the impact on interest costs of the increase in average debt was offset by better daily management of cash balances. So we've got these new mid-month facilities, which is slightly cheaper and enable us to be -- give us more levers to pull in terms of making drawings. So that's offset the daily debt increase. And then the average cost of debt reduction from 7% to 3% -- to 6.3% is the driver of the reduction in net bank interest. The land creditor discount unwind was flat year-on-year. But you may have spotted that land creditors has gone up during the course of the year, and that was largely due to land being bought towards the end of 2025. As a result of that, there will be higher land creditor discount unwind in '26. So we expect finance costs overall will go up slightly with the land creditor impact probably slightly higher than the benefits we've got from the reduction in average net debt. And the net JV interest is down there. There's lower average cost of debt and lower average cost of borrowing as well, finding its way through to us as well. Tax. Our effective tax rate was 27.9% compared to 28.3% last year. We just find some more benefits coming through in terms of claims and reliefs. So 27.9% is probably the number to put in the models going forward. And then in terms of the exceptionals, we talked before about the GBP 12.8 million settlement with the CMA. Unfortunately, there were also some eye-watering fees, legal fees and IT fees that went alongside that as we had to stop deleting everything, saw everything off-site and spend a lot of time with lawyers. So that contributed a bit to the restructuring costs as well. But exceptionals were down significantly year-on-year because last year, we had GBP 100 million hit on the building safety provision that went through exceptionals. So that's why the reported profit for the year has jumped significantly because we haven't got that big exceptional. So turning to building safety then. So we're making good progress. We've worked our way through 21 buildings, spent GBP 46 million on those buildings in the year. I think it's fair to say progress still isn't quite at the pace that we would like it to be. We know that building safety regulator are taking steps to improve the sign-off process and get us out on site faster. So we are expecting a pickup in '26, albeit it's still not at the full sort of rate of efficiency that we would like. We identified a few more buildings or probably better to say we had a few more buildings identified to us, principally sites that we worked as the contractor on years ago that came up through claims that we weren't aware of. We're expecting -- so that's 11 buildings. We added GBP 14 million to the provision for those 11. We expect that those will tail off. I think it's with each year that goes by, less likely that buildings come out of the woodwork to add to the provision. So then against that, we've had recoveries. So recoveries are ahead of where we expected it to be. We've got GBP 17 million of recoveries identified, GBP 13 million of which we got the cash for in year. And the other movement on here is discounting where we have to discount our provision and unwind that discount each year and move the discount rate each year. So that's an GBP 11 million charge, noncash really to the exceptionals during the course of the year. So in terms of next year, to say at the bottom there, the ramp-up in spending. I have said in the past, it's one that I've got consistently wrong and I've overestimated how much money we spend on -- we're going to spend on building safety. I think we're always expecting that it's going to speed up. So I'd say now it's going to be roughly GBP 70 million of gross spend next year, probably around GBP 60 million of net spend in '26 on building safety. In terms of land activity, so we secured over 11,000 plots in the period. A lot were towards the end of the year. We were opportunistic in the buildup to the autumn statement when there were a few nervy landowners who wanted to sell quickly, and we had some good deals that we could take there. So that's good. The overall size of the land bank coming down, we probably expect a similar sort of level next year. So we'll continue to wind down to have a land bank of somewhere around 3.5 years of coverage in the land bank. In terms of strategic land, that continues to be a good source. It's probably not provided as much into the business over the last couple of years as we'd like. Planning is -- getting planning is still slow from the time of planning application to actually getting full planning is still 18 to 24 months, which is longer than we would like. But that still feels like the right source, a good source of 25% of our land, particularly with some of the NPPF announcements that are going to make it easier to free up that strategic land. Right. So in terms of the cash flow. So overall, during the course of the year, our cash flow was about GBP 130 million better than the previous year. So an inflow this year of GBP 36 million compared to an outflow last year of GBP 92 million. Walking through this bridge from left to right from the opening to the closing. Obviously, we made GBP 270 million of profit. There was a net decrease in inventories. This has got some constituent parts, which I'll come to on the balance sheet in a second. Net outflow on payables and receivables. So the big bit was probably in receivables where the receivable balance has picked up during the course of the year. We've got land sale debtors has gone up by GBP 55 million year-on-year. Again, land sales were towards the end of the year. And we've also had a pickup in Partner Funded receivables, again, really from year-end activity not coming in. And most of that cash will be received in the first quarter. The other side is on payables at the end of last -- at the end of '24, we had a higher deferred income balance. In other words, we had cash in advance, which we've not yet recognized in the P&L at the end of '24, which has unwound slightly and reduced that balance down during 2025. Not much to say on net investment in JVs. Building safety, we've covered. Restructuring and others where those -- the costs of the reorganization. Some of that cost was taken in '24, the reorganization following the South Division issues. We've also got in there some CapEx, particularly around Vistry Works, where we've added some more machinery into the factories during the course of the year. So in terms of capital employed, this is not where we wanted to be yet. We've said a couple of years ago, our rough target is to get to capital employed of around GBP 2 billion, and we're significantly above that. And the principal area is WIP. So we know that -- we knew this time last year that WIP was higher than we wanted. We set an expectation that we try and reduce WIP by GBP 200 million. But for some of the reasons I mentioned earlier, it's proved to be stickier. I think particularly in London. So London has had a very poor sales year. I think that's widely known. And WIP can be lumpier in London because we're building apartment blocks. So you can't sort of stop halfway through and sell -- start selling flats. You've got to build a whole lot if you're going to sell anything. So you end up with lumpier WIP there. We've also had WIP impacted by the end of year deals. So there were some build-out, which we expected to sell at the end of the year and the deal slipped into '26. So we'll get the money for that in '26. There are probably a few sites where the infrastructure is higher than we would like it to be. And some of the build programs would have been from quite a while ago, and we've had to -- and even before the partnership strategy change. So you end up building out some infrastructure. You've got a build program that relies on putting infrastructure in place for the private and the Partner Funded at the same time. So while a Partner Funded is selling, we've got infrastructure embedded that will only recover when the private houses are sold. And finally, on a more positive note, it wasn't that the action we took last year didn't reap some benefits. So our heavy focus on unsold stock did reduce the unsold stock balance by more than half outside London. So GBP 50 million of unsold stock reduction during the course of 2025. On the JV side, so the JV overall hasn't moved particularly much year-on-year. But within that, there is just like on our own fully owned balance sheet, there's more WIP than we would like, and we're working closely with our joint venture partners to try and find ways to accelerate some of the slow-moving stock in our joint venture sites to release capital for both us and our partners. And finally, I think I've covered the other asset movement, which is around the rise in partner receivables and the land debtors. And finally for me, in terms of capital allocation, so we've got GBP 30 million to go on our share buyback program that we announced back in September '24. We'll continue to plug away at that, and we'll complete that in the year. I think previously, we said we'd completed it by the AGM. It may now be slightly slower than that. And then come the half year, we will, as a Board, look at where we are with the progress we've made on sales, the progress we made on debt reduction and determine if there will be an interim distribution announcement. And if there isn't, then we'll continue to consider that during the second half of the year. So I think that does it for me. Over to you, Stephen.

Thanks, Tim. Good morning, everyone. Good to see everyone. That's a great picture there of our scheme at Ledbury, that's some Section 106 plots with a small rural housing association or local regional housing association called Connexus. So just exemplifying our diversity of partners that we work with. So we've just been looking back over 2025. What I'm going to do is look at how we drive value going forward through the market conditions that we've got, and we leverage our strategic assets of our long-term relationships with our partners and our vertical integration, as Greg mentioned, and importantly, our ability to work closely with government on applying grant. So let's just look at the opportunity at the moment. It is very much undoubtedly a strengthening opportunity. So we see our position within the market and our long-term engagement with partners, really encouraging partners to engage with us as they build their programs and as we go forward with delivery. The government has done what the government is going to do on the demand side for affordable housing. So we now have visibility of all those changes, and we'll touch on those in a moment, feeding through. So those government commitments are now writ large, we can see all of them. And that's resulted in a step change in partners' ambitions. And in a moment, I'll refer to that as an inflection in the market. It is undoubtedly a time that we have not seen before, as Greg mentioned. This is a moment when we can really start to work with our partners and deliver on the homes that they're trying to invest in. And we've seen early part of the spring season, although it's rained a lot, we've actually seen some very positive movement in the open market in terms of what's happening at our outlets. So we'll touch on that. First, though, our alignment with the government strategy, which we've mentioned before, is both strengthening us and also very profound. So Greg said 15% of affordable housing market last year, 15% of the delivery of new build homes was via Vistry. The total expenditure annually is around the GBP 15 billion mark in terms of investment in new affordable homes, and that covers Section 106 and grant funded. And we've been very successful in moving up our Section 106 homes, partly because we engage with partners early, so we haven't had the problems that others have had, but also partly because we are able to align that with our grant-funded delivery, what we call additionality, which has allowed us to work with our partners on delivering that. So that has not been a problem for us. And we've been able to, therefore, deliver an increase in the grant award over the last year. So we saw a 37% increase in our grant award from Homes England last year. That's not just because of 1 year's delivery. That's because we've delivered consistently across the 5 years. And that delivery performance is one of the things that gives us confidence in our bidding under the SAHP. We've been able to also do additional schemes where we've captured funding from partners who have needed to finish off their program commitments or where there's been slippage. So that's allowed us to deliver more. And our total grant level has risen to GBP 252 million. Now the reason that's important is we'll be talking about a new program in a moment. So over the life of that 5 years of this program, we've seen a threefold increase in our allocation to GBP 252 million. Again, that demonstrates our ability to deliver with partners and the fact that we've deployed those funds very quickly. And it comes as no surprise that we anticipate the national housing strategy, therefore, to focus on mixed tenure and the partnerships model as one of the ways that the industry should be evolving towards delivering the government ambition. So what do we see in our customer and partner markets at the moment? So on the Open Market, we've had a mixture of external and internal factors. Externally, we've seen an increase in the availability of higher loan-to-value mortgages, and we've seen rate reductions and some more positive customer sentiment before the events of last week. That's resulted through our contact center, we've been able to see higher levels of inquiries and interestingly, higher levels of appointments than any week in 2025. So not only are people digitally looking at what we've got offering, they're prepared to come and meet with us in our sales outlets as well. And that's resulted in a very positive start to the spring selling season. So we have -- sales are 40% up year-to-date on where we were in 2025. So that's a stat that's extremely important. Now we've been focused on targeted discounting and also using tactical use of enablers in order to get people into our marketing, but that is really giving us momentum. On the PRS side, and Tim described it as moribund, I think there's a structural weakness in the PRS side. So we've certainly seen a transition to more single-family homes from multifamily. That's an interesting occurrence over the last 12 months. But there remain a paucity of players who have got the ability to commit volume consistently and engage with us where they've got both the funding and the operational platforms aligned. And the people that we've worked with most frequently over the last 2 or 3 years have been refinancing. So that's caused a pause in that market last year, and it is a market that needs to mature before it will really deliver on what the government's ambitions are for it. But of course, working with Vistry is a great opportunity because we give standardized product, we can optimize yields by giving forward visibility to partners. And affordable housing, where partners now cited on that improved financial capacity, now cited on the ability to bid for funds, a really important moment for affordable housing. So I'd just remind you of our 3 submarkets that we operate in. So those traditional registered providers are the ones that had a lot of the headwinds and have had stock liabilities. Interestingly, the regulator described there then receiving robust investment for new homes over the last quarter. So GBP 4 billion raised by traditional and registered providers to go into investing in new homes. Local authorities, this is an interesting fact. '24, '25, there was the highest level of local authority delivery of affordable housing for 40 years, 16% of all affordable homes was local authorities. And it's interesting today to think back 40 years ago in a field somewhere in a place called Newton Abbot, somebody did a deal with the town council about delivering on some public land there, some affordable housing. So there you go 40 years ago. And for-profit registered providers who we refer to increasingly as institutionally backed registered providers. And we have one of those within our group called Linden First, and we're at the final stages of confirming who we're going to work with as a partner to capitalize Linden First. And we see entering a framework with Linden First as a way of our routes to market amplifying, not displacing, but amplifying the work that we already do with registered providers and bringing capacity into the sector. Those 3 markets, the wheels are turning. It's beginning to come through, which is great. Now we've added this slide because we thought it would be helpful at this point in time to give you some idea of how grant enters the ecosystem. So 3 things here. Firstly, you can see on the left-hand side there, grant accessing grant funding from the government, we are able to bid for that directly as Vistry or our partners obtain the funding. Either way, we'll be delivering homes, whether we get the grant direct or whether our partners get it, that allows us to both bid for grant from Homes England, and that bidding has now opened. On the right-hand side, on one level, we can be agnostic who gets the grant, whether it's our partners or whether it's Vistry because the P&L effect is the same. The P&L takes valuations, and we take that through on regular, hopefully, monthly or sectional completion valuations throughout the life of the scheme. So there's no difference in the P&L. Where there is a difference is in terms of the cash. So when we get the grant directly under the new SAHP, the proposals are that you would receive 40% of the grant when you buy the site and 35% when you start on site. So on the basis that we obtain the grant for schemes that we've already got, you can see how that would benefit our cash flow in terms of accessing that grant at that stage. The third thing, which isn't on this slide, but is really important for our business as a mixed tenure platform, but also extremely important for the government is the leverage that grant provides across the whole market. If you've got a presold model and you're preselling and you're using grant funding to deliver affordable housing, you're more likely to open that site and deliver on the PRS. You're more likely to open that site and deliver on the open market. So one of the things, and I don't think that government measures this and captures it, the leverage from that grant funding across all tenures is really significant. And I think you'll see that flowing through as the grant funding dynamics in the future. So I said it's an inflection from funding policy to delivery. And that's what we've seen. The government, I think, very quickly has stepped up and delivered on its -- came out with its policy. Translating that to funding has taken a bit longer than we would have liked. But the reality is now the SAHP is open. Bids need to be in by April. Homes England has already received bids through an alternative route for funding. So the wheels are turning. People are beginning to receive funds and get siting on allocation. I suspect allocations announcements will be in the late summer, but we'll have an indication of how successful we are with our bidding then. Really importantly, though, partners are not waiting to receive allocations. They're talking to us now. So they're pricing schemes for us at the moment. They're wanting to talk to us about having frameworks in place that give them visibility of forward delivery. They're looking for what land opportunities they can come in with us on. So people are building their programs, and I expect that to really be a consistent theme over the next 6 months. So what does the net effect of those reinforced demand side elements have? It's improved capacity. I think there will be an absolute focus on early delivery. So we know that grant awards measure, they will be weighted towards early delivery. So I expect an uptick in the first 3 years in that. And obviously, that will be one of the things that informs our bid. And if you take together collectively, those policy changes by government, the rent settlement, rent convergence, GBP 39 billion and a Section 106 environment, which is encouraging higher levels of affordable housing. Even with an increase in social rent, I would expect to see the average long-term affordable housing move from around 55,000 new build, this is new build per year to around 70,000. So that's a 30% increase in volumes. So we've already got 15% of a market. That market is growing, and we have a platform and an operation that allows us to respond to the opportunity. So what are we doing with that opportunity? Well, we're bringing together 2 elements. That mixed tenure platform is what we think will drive value for the business and also in terms of the growth. So we're taking those elements on partnering, the ability to have frameworks that give visibility to us and our partners, bidding for direct grant awards. We know how beneficial that is. We've been receiving direct grant in different forms since 2008. We were a very early player in that particular space. Doing more work with local authorities. We've got precedents to work with local authorities, both in joint venture and directly commissioning. And we are focusing on being best-in-class as a partner, really important elements when you're looking at long-term relationships with partners. And then fusing that with that developer ethos of being able to offer successful Open Market sales. Self-help there around our branding and our use of the contact center, which has definitely driven a more successful engagement with prospective purchasers earlier, focused on sales excellence. And I'm really pleased to see we've -- that's been reflected in some improvement in our Trustpilot scores. So bringing that mixed tenure offering of Open Market sales along with presales is really important. Put that together in that delivery Venn diagram, that allows us to increase our platform of work in joint ventures with local authorities and RPs. Really pleased to see us off and running with PlacePoint, our joint venture with Homes England, the bid and Linden First and our position in terms of public sector land, which is extremely strong, and we intend to focus on more of that in our engagement with local authorities and combined authorities. Right. I'm going to pass over to somebody who is in the field in Newton Abbot.

Thanks very much, Stephen. Great presentation and a good presentation from Tim as well. Good to see him talking about roof trusses. If you close your eyes as I did, you can nearly believe that he actually knows what one is. But great to see. So our strategy and our competitive advantage. So strategy on land and planning, a 3.5 year or thereabouts land bank, and we've got more than that at the present moment in time. We are exceptionally competitive in the land market with our strategy, particularly on larger sites. As far as I'm concerned, if we're bidding for a large site, we would be favorites to win it with our strategy end of. From an actual competitive advantage perspective, we have a great relationship with our partners. Our partners have land. The government have land. We are very, very good on bidding for public land, where it's not just price that counts. So land 3.5 years in a strong place on public land and our model makes us very, very competitive. On build, frankly, nobody is building cheaper than Vistry. I would put my reputation on the line on that by some distance. Just look at over the last 2 to 3 years, what the others have been talking about with regards to build inflation and what we've been talking about. Subcontractors absolutely love our model. They treat us as paying the mortgage. They work for the other housebuilders on the back of that might pay for a holiday, but they need the visibility. They do not want to get the phone calls as they're getting at the present moment in time on a Friday afternoon. I only need 2 guys next week, Fred, because we're slowing right down because we're just not building quick enough. The vertical integration that Vistry Works gives us is absolutely essential to the model. If you have visibility, you know you're going to build 200, 300, 400, 500 units on a site. That's when Vistry Works comes into itself. If you've got a timber frame manufacturing facility and you don't -- you've got lots of sites, but you don't know how quickly you're going to build, that whole benefit goes out of the window. So Vistry Works works incredibly well from a build perspective as a partnerships business. When -- if you look at sales, when we start on site, we basically market test up to 75% of what we're going to do because as you've seen from the stats that Tim put up there, 75% of our model is either Section 106 or presold. So it's only 25% or thereabouts percent that we're actually taking a risk on, which is the private sales within the market. So our relationships with our competitive advantage, if as I'm sure they are, and we know they're all looking into it, it's not straightforward to get in with Homes England. As Stephen touched on a number of times there, to get into and get a really strong position in the '26-'36 program, you've got to have a track record, and we're the only housebuilder, Persimmon to a little bit and maybe McCarthy Stone, but that's a different model that has got a track record for the last 20 years on dealing with a program. And if you look at the '21-'26 program, the best-performing partner, strategic partner within Homes England, and there's 32 of them is Vistry. Hence, we're very confident with the outturn of what we'll get from the '26-'36 program. Housing associations have been around for a long time. They know how cyclical housebuilding is. They know housebuilders come are calling sometimes and then they drop them for dead. I was recently at a big meeting with the government, Chancellor Exchequer, Housing Secretary, Housing Minister, Chief Secretary to the Treasury in a room with some contractors and some large housebuilders and the Chief Exec of the National Federation of Housing, which is the body that deals with housing associations rather embarrassing me just came out in the room and said, the problem, sir, talking to the Secretary of State of Housing is there's only one company that treats housing associations as they want to be trapped with, and that's with respect ongoing relationships. And she said, and that's Vistry. I got over it quite quickly. I was sat next to David Thomas, and he didn't enjoy that as much as I did. But these things are built on years and years and years of experience. It's a real barrier to entry. So we've talked about -- I've got 3 case studies. So last year in November, we bought a very large site, 2,200 units in Worcester. We took massive advantage of the fact that we completed the day before the government's budget, as Tim talked about last year and did very, very well out of it, I have to say. So we were about to enter into a JV with a top 5 housing association because the housing associations, they're not just waiting for the grant to come through. They know the grants coming in. They've got the rent settlement. They got the convergence. They are now active, as I'll come on to in 2 or 3 slides' time. So housing associations are now talking to us again with vigor about entering into JVs and what opportunities have we got. But this particular housing association in the next 6 weeks will enter into a JV on part of this site. But also to enable us to get the return on capital plus 40%. And in fact, it's way over 40% on this site. We've also built in some land sales. So these are planned land sales that we will do during the course of this year going into next year. So land sales are a part of the everyday operation, not a fire sale to get to a half or full year position. 45% will be partner funded and the brand, I'm not sure whether we'll use 2 brands, Bovis and Linden, we might even use a third brand on that. But a great example of what we've done last year and a great example of one being competitive in the land market, that is a prime site, by the way. That is a prime, prime, prime housebuilding site, and we're the ones who have bought it. It's not a site that no housebuilder would want. That's prime. Strategy case #2, innovation. So on top of Vistry Works, timber frame and all the rest of it, we've got the Mauer Brick Cladding system. So this is 3D computer generated, built a lot quicker. Now again, would we be doing that at the present moment in time on a new build house that we're going to sell to Mr. and Mrs. Smith? Probably not. That's a bit of a risk for the minute. We'll work with our housing association. Places for people. This is a site we've got with Places for People, one of, again, top 5 housing association up in Bradford. What do you think about this? Yes, we'll work with you, and we're doing it on their site. It will be their risk. I don't think there is any risk with regards to selling the units. But the housing associations in Homes England love this kind of stuff. So that is going to -- we're going to roll that out to 10 sites during the course of this year. And if the government want to build 300,000 homes a year, guys, this is how things are going to have to be done because there just aren't enough tradesmen out there in the industry. And the average age of a bricklayer is 54. So we'll do well to replace the number of bricklayers, let alone get more into the game. Our timber frame apprentice program is going incredibly well. And standardization, again, we've now got 50 standard homes, future homes house types, which have been designed specifically with timber frame in mind to reduce that cost time and time again. And that's a great photograph there. Some comedian in the business has put down a bit of career development for me. I didn't fix all of the panels there. I just fixed that one, and I have to own up immediately, I fixed it. It was taken off and put into the skip as a very, very poor job. Strategy case #3. So partner journey. This was introduced in the summer of 2025, would you believe we're the only housebuilder that goes out to our housing associations and asks how are we doing on a proper standard format and the housing associations love it. We all do it through the HBF. So we're a 5-star housebuilder on the HBF, and we're also a 5-star housebuilder with regards to -- and this was done independently, a 5-star housebuilding with our housing association local authority customers. We have a simple framework of 16 steps to ensure the highest level of service. 21 of our 25 businesses are 5-star, the other 4 are 4 star. And 97.5% of our partners responded indicated that they would like to work with Vistry again. So again, long, long-term relationships. We're always trying to improve, and it's bizarre that we're the only people out there that actually canvas and get their opinion on how we're doing. We do get some comments as well about how we can improve, which we obviously take on board. So current trading and outlook. Well, headline here is we have started the year exceptionally well. So Tim talked about what we're doing with regards to sales. So we announced the snapshot of our results, I think it was on January 14. A week or so later, I'm about to start doing business unit reviews where I sit down with all the individual business unit boards and go through state of the nation on a quarterly basis and what we're looking for. And yes, as you get older, you use a yard of pace, but I know where the ball is going. And I actually -- in all of those meetings, and this is from week 5 onwards, and we're in week 10 now, I didn't ask, I demanded that each business unit go forth and double their sales rate, because I am concerned about what might happen to the private market during the course of this year with regards to housebuilders just not building enough units, and that will start hitting them at some point. So I like to get one step ahead. The business units, I've said to them, you tell me on your individual prices, you're going to double, you tell me what you need to do to get those sales through. And that initiative has gone exceptionally well. So the fact that we're 40% ahead hides the fact that after week 4, we were 9 units ahead of 2025. That 40% has come from 5 weeks, basically over a 10-week period, if I'm making sort of a sense. So that is really, really, really worked well. And with what's going on in Iran at the moment, which obviously I didn't know was going to happen, we're very, very pleased with what we're doing. So the current order book stands at GBP 4.5 billion. And again, at the end of a program, that is when you're going to have the lowest order book. At the start of the new program is when you have the highest. So it's great to see that our order book is GBP 4.5 billion. That is up on GBP 4.4 billion 3 weeks earlier than when we announced our results last year. And 67% of this year's units are in hand against 65% in 2026, again, 3 weeks earlier. So we're in a great place on that. So reflecting the phasing of sales in early 2026, as I've said, we've introduced this tactical. On some sites, there's no discount. We're just -- we're doing very, very well. But I just wanted to make sure on every site, we absolutely get the desired sales rate. So if you look now at our sales rate -- overall sales rate, 1.42 last year, 0.59. So this is private sales and deals we're doing with housing associations and the like. So housing associations have woken up. They woke up towards the end of last year. They know what's coming. They love the rent convergence. They love the 10-year rent settlement, and they want to get ahead of the game. The other thing that we're benefiting from in the first 10 weeks and will continue for the next few weeks is a lot of housing associations also want to go into the bidding round for the '26-'36 program with a good record on the '21-'26 program. So there's a lot of running around at the present moment in time, and we're getting lots of calls from housing associations over the last 4 weeks. Actually, what we thought was going to happen by the end of March, their year-end and the end of the '21-'26 program hasn't happened. Can we do a quick deal with you, Vistry. And a lot of that is happening. Hence, we've got a 1.42 sales rate, which we've not seen since the start of -- since announcing the strategy back in 2023 in September, and that includes a 40%, as I say, increase in the private sales rate. So we expect to deliver -- even with all of the discounting, we expect to deliver an increased profit on 2026. The margin will be lowered because of the sales incentives, as we said. But the big news is we're now targeting and confident and have bottom-up budgets from the 25 business units, we're targeting in excess of GBP 100 million of cash at the end of the year. And those initiatives that we put in place are working exceptionally well. So our priorities then. So first one, cash generation. So we're absolutely 100% laser-focused on that. And can I say that since asking the business units to double their sales rate, on average, I'm doing 5 calls a week with a Managing Director and a Sales Director of a business unit who hasn't done what I asked them to do. And it's a very, very uncomfortable meeting for the Managing Director and Sales Director. They don't want to do it 2 or 3 times. So we're absolutely laser-focused, very hands-on on making sure that happens. We're positioned for growth. We've got 25 business units that are capable of doing with their same geography in excess of 20,000 units. And Vistry Works with the 3 factories that we've got is capable of doing up to 10,000 units and probably in excess of 5,000 units for roof trusses, and I do know what a roof truss is. And maintaining our operational excellence. Again, when I joined Bovis, which in 2017, which was a 2-year gig, they had some financial issues. But what happens normally when you have financial issues is everything else goes -- excuse my French to rat s***. So at the time I joined, their star rating was 0. The NHBC were about to kick them off because their build quality was absolutely hopeless. Everything followed on. The business last year has maintained all of our KPIs. We're a very good builder. Customer satisfaction 5 -- star, everything is good. We're in a great position to actually move this business forward with this wave of affordable housing grant that is coming through. So we're on track to get to our margin progression targets of 12% and return on capital of 40%. And I -- in summary then, I would have loved to have come up with this quote, but I have to put this one down to Stephen, Vistry, a partnerships business aligned to the scale of the opportunity. And you'll all have your own idea of what the opportunity scale is, we would say it's huge, and it's about to come through in the latter half of this year as that program gets announced and housing associations get busy with spending. So on that, we will take any questions, Kate, wherever you want to go.

Rebecca Parker from Goldman Sachs. Just wondering on your guidance for year-on-year improvement in volumes and revenue. Are you still expecting that 17,000 units that we talked to at the trading update?

Yes.

Yes. And then also in terms of the incentive levels that you're offering, can you provide us some quantum on what those are and also what types of incentives that you're offering in the market?

There's been no real change to the incentives with regards to carpets, turfing, bit of landscaping in a garden. We were doing that anyway. So the incentives that I'm talking about over and above that, which we announced or which we asked the business units to get into on week 4 would be to do pretty much with pricing. I can't give you a number because, as I say, it is -- on some sites, it's nothing. On some sites, it's more. So what I can tell you is the numbers that we are guiding include for that level of discount, whichever it is, and it's different on each individual business unit as well. And that guidance has come from the individual business units absolutely knowing that they've got to double their sales rate and they're absolutely put into their forecast the price they need to do that at. But there isn't a simple -- I'd love to say it's X percent, it's just not as simple as that, I'm afraid.

Yes. And last one as well. I think I saw in the presentation that you've become a strategic plus partner as you talked to in the trading update. Can you just remind us of how much increase that allows you to apply for direct funding?

We haven't -- I don't know where that's come from. We haven't become -- we're bidding and we'd like to become a strategic plus partner, but we're not yet. We're hopeful. From what I understand, a strategic plus partner would get around GBP 700 million. And if you go back to what Stephen said, our first bid for the '21-'26 program was about GBP 85 million, and we ended up over GBP 250 million. And if we are successful with being a strategic plus partner, the initial bid would be, Stephen, I got this right, about GBP 700 million.

[indiscernible] funds become available. And Greg is quite right. We haven't -- the bids are in for April. It would be preemptive to think that we're a strategic plus partner.

But we are the top partner on the '21-'26 program, if that's helpful. I'm just letting Kate put it wherever you want.

Three questions from my side, if I may. So first, because you mentioned several times on the Middle East. So can I ask if there's going to be an impact, what kind of impact should we be expecting? Is the labor, raw material or energy price?

Yes. I mean all -- I mean, if you take our ground workers, I mean, they are heavily into diesel. So there will be -- every time there is increases in fuel prices, ground workers will come and knocking and look for increases. Plastic comes directly from it. So if this was to continue, and that's an if, none of us actually know. So we've got a line within the forecast that we've -- or the guidance that we put out this morning. We think there will be an impact, but that impact will have to be seen as we go forward. But you could easily -- these sorts of things could be a 5% increase on your build costs. Now you've already spent some money, you're in fixed price contracts, but these sorts of things can come through. So we will just have to wait and see. But at the moment, we are confident in what we're saying, but we will watch with interest, as I'm sure everyone will, how long this goes on for and what [indiscernible] out there. But what I can be confident of is, I think we're building cheaper. I think if there's an increase, we'll still be building cheaper, but we might be building more than building at a greater cost than we are at the moment.

Great. Maybe I can just add one thing to that. So that's the supply side.

Yes, there's also consumer confidence as well...

We haven't had -- just to be clear, nothing has come up yet. This is just a recognition that things are changing fast. So we need to put something in there and be cautious. On the demand side, we've been encouraged that there's been probably greater customer confidence. So much of our Open Market demand comes down to customer confidence. It does feel like that's moving in the right direction. Of course, it's fragile. And there could be knock-on impacts just on customer confidence, whether it's cost of living, people having to pay more for their fuel at the pump or whether it's potentially mortgage rates or rates not coming down as fast as we expect. We don't know really, but it could be a demand side as well as the supply side impact.

And at the flip side to all of that as well, which would be a positive to us, if those sorts of things happened, that means that housebuilders will be building less. We're already in contract. So we would expect to get some benefits from that as well because a lot of what we're doing is already in contract. So we should benefit from that to an extent.

Second question is on the land sales because I think Tim just mentioned it remains to be a core part of sales. So what kind of level should we be expecting this year versus last year? It's going to be higher, lower?

We're not entirely sure what it's going to hold out. I think it would be -- we would expect to be 3 digits again this year. But whether it's as much as GBP 180 million, we don't know yet. It will partly depend on where we are with planning processes and how quickly sites go through the planning.

But I don't expect the land market to be anything other than soft, and that will come into it as well.

Okay. Last one from me is, I think you also mentioned on this inventory reduction effort, you will be working together with the JV. So I wonder, does that mean your JV partner is also happy with the strategy that probably the margin will be lower, but...

Yes, because we've discussed it with them, and they're a valued partner, and we're saying we need to sell quicker than we currently are, and they absolutely get that. So yes, they're on board, and we have -- and we would obviously have to get approval to do that where we're on a JV. And I don't think we've had any -- I'm looking around the room, I don't -- no, I don't think we've had any pushback from any of our housing association partners.

Aynsley Lammin from Investec. Just 2 for me, please. Maybe just coming back to the question on kind of average hit to -- or reduction in prices, average hit to margin, however you want to look at it. If you look at the full year and your guidance, kind of what's acceptable in terms of the margin hit in terms of your discounting on pricing? And would you expect the margin to be versus that 8.5% as we kind of sell today?

So what's acceptable is whatever the answer is. And the answer is from the 25 business units is a profit greater than 2025. So we want to sell units, and we want to sell units at pace and get a step ahead of what I believe the housebuilders will follow. And there is some instances of you can see that already around about the place if you study the website. So we want to get ahead of the game, and that's what we're doing in the second part of that. But the actual discount level, again, it's how long is a piece of string. In some places and in some businesses, it's very little. In other places, it's more.

Okay. And then I guess, so the motivation -- because the other housebuilders are talking about kind of improving sales rates, yourself seem to also be saying that the private Open Market has actually been quite good. So the motivation for that increase or discounting, is it more kind of balance sheet and cash? Or is it because you believe the market is about to fall over and the other housebuilders will be chasing sales? Not quite clear on that.

It's balance sheet and cash, but I also believe that on the basis of no Help to Buy coming in during the course of this year, I've been around for a long time. If you're a public housebuilder and you're selling at 0.5, 0.6, that doesn't really work. Your prelims stop, start. So I think there will be pressure on the housebuilders. And again, if you look at the housebuilders, their balance sheets have -- they might -- it wasn't that long ago, they're all operating or a lot of them with GBP 1 billion in the bank. Those days have gone. Most of them are borrowing money now from banks at various times of the year, maybe not at the period ends. So at some point, I think they will have to look at things and go, how do we -- we're hanging around for Help to Buy. Is it going to come in? Yes, no. Maybe it will in due course, but I don't think it's anytime soon. And I think that will drive pressure for them to actually sell units quicker. That's my -- that's what I'm paid to do. That's what I think rightly or wrongly, that might turn out to be the case. So it's twofold, what's going to happen and balance sheet.

[ Emily Biddle ] from Barclays. I've got 2, please. Firstly, you talked about margins on newer sites coming through being stronger. Can we just understand the price assumptions you have built into those margins? Do they assume that the current discounting that you're doing is the ongoing spot price for the duration of projects? Or that you're assuming that current pricing is a sort of short period of discounting that unwinds to support the margin?

We will. It's the latter. We're assuming -- we've been very prudent with the prices that we put in. So we generally start a site at a higher price than what we allowed at the time of the land acquisition. So that's the first thing I would say. But yes, we are assuming that over a period of time, we will push prices back up, but that will be sometime during the course of this year and certainly not in the next 2 or 3 months.

I think it's also worth pointing out that the incentive impact is more likely to be on more mature sites, so sites that are nearing the end rather than sites that we've just started. That tends to be where we've got the slower moving stock that we particularly want to focus on. So that's where the more margin that would come.

Okay. So just to be clear, the discounting is mostly focused on particular sites with slower moving stock and therefore you...

Definitely, yes. Where they're selling quickly, there's no need to. No concern.

And then secondly, if the outlook for this year is worse and the market is weaker, sort of what other levers are that you can pull on cash? Like is there more that you can do on WIP? Because if you're doing that already, like is there -- can you go lower on WIP? Or is there anything else that can come out? And if affordable funding does start to flow, is -- will the business consume working capital? So does the current debt position constrain growth into a slightly better affordable market?

No, because the affordable housing market is forward funded. So it would affect growth if we were a pure housebuilder because obviously, that's where you put your money. But with housing associations, we would like to think we are paid when we buy the land, and we're paid more than we've actually done during the course of the month, which helps then offset some of the private stuff on the same site where that's an investment. And as Stephen just said earlier, we would expect to do well on the '26-'36 affordable housing program. And I think Stephen has just said, when we buy the site, we would get 40% of the grant upfront and then 35% when we actually start on site. So that is cash helpful.

Okay. So those sites you talked about where you currently have infrastructure that's sort of tied up where you've had to sort of fund the private infrastructure....

Yes. I mean during the course of last year, I wanted to bring -- Tim has made the point, and I'm very happy to say we wanted to bring WIP down last year, but we -- it didn't dramatically go up, but we certainly didn't bring it down because the private selling market just was not that good for anybody, including Vistry. And of course, we didn't have -- we were hoping to get a much more injection from housing associations, we thought there was going to be some really good numbers on the '26-'36 program, but -- which there has been. But the delay in announcing it and the delay in it coming through has been slightly disappointed. So yes, they did bring forward GBP 2 billion of the GBP 39 million as a bridge to add to the '26-'36 -- sorry, '21-'26 program. But -- and we've got some money due, but they're not giving any of that GBP 2 billion out until April. So we will get and be able to draw down what we -- a decent sum of money in April from stuff we've already spent because that bridge funding, it's there and it's going to be paid for us, we've got that acknowledged, but we would have liked to have had that during the course of last year. We'll actually get it April and May onwards.

Sorry, just one more thing. So addressing your point, Emily, about cash levers in the downturn. Obviously, we can choose how long we go with the discounting side of things. But one of the levers that we've got that housebuilders don't have is that we can flip from private selling into more affordable selling. And that's actually cash advantageous because they give us the cash upfront. There may be a profit impact -- but I think -- so it's more likely we're probably putting more emphasis on the impact being on profit rather than on cash because we've got those levers on cash that we can pull in either scenario.

The other thing I can say to everyone about being practical about this, when I said I want to increase the sales rate, the actual words I use to the individual business units is if you go back to 2024 and 2025, week 1, we didn't sell as many units on the private side as we wanted to, not because they're not very good because of the market. Week 2, we didn't sell as many. Week 3, we didn't sell as many. Week, it's a bit too late. We still haven't sold as many. I know what we'll do. Let's do a bulk sale, and we'll sell a bulk sale to a PRS provider or to a housing association. What I can assure you is what we're doing at the present moment in time, whatever the discount we're giving away will be a lot less than we would inevitably got to by doing a bulk sale at some point down the year with all the pressure that comes from that to half and full year. So this is using experience, let's crack on and deal with it now rather than kidding ourselves, kicking the can down the road as other housebuilders are. Being no doubt, we're getting calls all the time from our partners saying, oh, I've just said so and so on. They're doing a Vistry. What do you mean? Well, I've never heard from them, and they just want to do a bulk sale. They want to sell their show homes. They want to do this. So everyone's at it. I'm just trying to beat that. Whatever we sell to Mr. and Mrs. Smith will be advantageous to doing a deal with a long-term partner or a PRS provider.

Glynis Johnson, Jefferies. Three, if I may. The first one, just in terms of land, your controlled -- sorry, your owned land as a percentage of your land bank has actually gone up slightly. And you've obviously referenced some of these bigger sites. Can you maybe just talk us through -- you gave us an example on the big sites. When does the return on capital employed start getting to the 40%? You talked about being very confident getting above so the 10-, 15-year sites. So when...

We haven't put a time to it, Glynis, but it will be -- if you're asking me, I would say '29, '30.

Okay. Second one, just in terms of oversight on the incentives. You've talked a lot about wanting to double the sales rate. But what is the oversight on the discount? When does it come across your desk, across Tim's desk? Does it get tied into margin?

It doesn't come across my desk. It will come across the -- we've got 3 executive chairs, and they will sign off everything.

I guess what I'm looking for is some reassurance that it's not going to impact the site margins and therefore, previously accounted profits.

Yes. And we've just gone through an audit accordingly.

Last one...

So just to be clear, so the site margins will be impacted if the expectation of the overall revenues from that site are going to drop. So there will be -- now that's all reflected prospectively, and that's how our accounting works. So you don't go back and review what's happened before, but you're constantly changing the site margin up or down depending on your expectations of revenues and costs. So -- and this is why there will be a slight reduction in the margin this year because our absolute revenues on those sites will drop as a result of the discounting.

But have you, for example, taken land sales on those sites previously at a margin, which is not going to match the revised view of site margin?

I would suggest on 95%, no. So the land sales were predominantly on planned new sites as we bought them.

Okay. And then the last one, 50 standard housing types seems like quite a lot, but you have a whole range of brands. Can you maybe just give us a little bit of context about why 50 is the right number, why that works from an efficiency standpoint when you kind of got a Ford Model T, you need in a factory of just repeatability?

You're right, Glynis. It is more than I would have liked, but you've got different housing associations. So we've discussed it with housing associations. They have different requirements amongst themselves. We've got 2 brands, Bovis, Linden and Countryside, which adds to it. And then on top of that, you've also got future home standards coming through, and you've got different local authorities from a planning perspective, interpreting that in different ways. So it's 50. I would very much hope that -- and I'm looking over there, I'd like to think that less than 20%, will make up 80% of everything we do going forward. So that would be our assumption, but 50 is there.

Will Jones at Rothschild & Co Redburn. First, just returning to the flexibility around price and margin. Is this just limited to Open Market? Or are you being flexible...

Yes, limited to open market.

Yes. And sorry, partly linked to that. But when we think about the difference in gross margin between PRS and additional affordable as you shift your mix, how would you frame that to us?

I would say that PRS providers are buying a product that they will eventually and in not-too-distant future, sell, and they are very commercial people. A housing association or local authority is buying a product that they will never sell. So I'm pretty happy with being diplomatic doing more with housing associations than PRS providers, but we'll continue to work with both, obviously.

Second, just around cash flow and the moving parts for this year, whether you'd call out anything to us on that front. I know from the back, I think there's GBP 250 million more land creditor obligations this year than last. So that's obviously one negative start, but presumably WIP and others...

Yes, and not necessarily a negative start because on the land creditors, it's our strategy to defer payments. So we will continue to defer payments this year. So we'll pay for last year's land, but we won't pay for this year's land. So -- but I think probably the land creditor balance will come down slightly during the year. There will be a slight headwind in terms of cash generation from land creditors, maybe GBP 100 million, something to that sort of level. Then obviously, in cash, we just sort of broad bridge, we've got the profit coming in. We've got the WIP reduction coming down. And then we've got against that, we've got the tax. We've got the share buybacks. We've got the fire safety, and we've got that land creditor. Overall, to get to growth target of GBP 100 million, that's a GBP 250 million reduction in WIP and lands to deliver that.

And just to check as we think about the shift -- modest shift in strategy maybe today against the balance sheet. Is there any signal here that your comfort levels around the balance sheet and what you want average net debt to be have changed at all? And are you happy that the operational focus and the lack of distributions can get you there?

So I think no change. And we've said before that we want to bring down average net debt steadily over time. I think what these actions signal that we're not satisfied that we're making enough progress. So the end game is still the same. We just want to get there quicker and cognizant that we didn't make as much progress last year as we wanted to.

Chris?

Chris Millington at Deutsche. Firstly, I just got to ask really about succession planning and kind of what's in toe at the moment? What's the expectation of timetable for both the Chair and the CEO role? I'll go one at a time.

Okay. Well, the CEO role, I'm -- will be definitely here until March next year. If it goes on a bit longer than that, I would, of course, be flexible on that. But the process has started. We've been discussing it for quite some time. This is not a shock to the Board. This has been on the cards for some time. So that process is well on, started and moving in the right direction, and we're very confident we'll be able to do it in those time scales. And I've said I'd like to do things orderly and a Chairman should stand down at an AGM. The AGM is in May. The next AGM then will obviously be May 2027, which by then, I will be a special adviser as opposed to being on board full time. That's the expectation. And on the Chairman succession, we have a number of options, and we just wanted to give ourselves another week or 2 to get that right. But again, it's all in hand, nothing to say here.

Got you. Very clear. Next one is just about affordable housing funding. It's kind of -- it slips like a lot of things with this government. Do you think there's much of a danger it doesn't land in Q3? I mean what could happen to kind of slow the progress there?

So the bidding opened at the end of February. And there are 2 routes that people can bid for funding. You can bid to be a strategic partner and a strategic partner plus a second category that's just been introduced this year. The outcome of that, there will be a process of discussion, all bids having to be in by the second week of April. This is where you're going for this sort of GBP 700 million total would be the maximum anybody would be awarded. That will then prompt some discussions with those bidders. And I would expect in June and July, we'll get some citing and there will be an announcement in late summer. But we move forward with confidence, I think it's fair to say. The second aspect of looking for funds is you're not a strategic partner, you go for individual, what's called continuous market engagement grant awards. So that's essentially, you can knock on the door and say, I'd like you to fund this scheme, please. That process takes 6 to 8 weeks. Homes England have already received bids under continuous market engagement at the end of April. So you can work out the chronology of that. So people will be getting funds -- sorry, at the end of February, people will be getting funds during March and April under that continuous market engagement route and looking to commit them. So my view is it will all wash through over the next 4 or 5 months, and everybody will be able to share the visibility of what they've been awarded and that will start to be implemented. But the interesting thing for me is -- and my point with the slide of inflection, we are past the point of that dampening progress, yes. So whilst the visibility of what everybody is going to be awarded as funds is not yet there, housing associations have reworked their business plans, putting into effect the -- introducing the assumptions following the government's policy decisions. So they're already now out there looking to trade, looking to commission. So that process is underway.

That's helpful. And last one is really just about -- but I suppose it relates to previous questions, and I may get a similar answer. But what's the right capital employed? And kind of what do you think the right WIP balance is? Last year, you were talking about GBP 200 million release. It went up a bit. Where do you think you could get to there?

Well, over time, our direction is to get to 40% ROCE. So really to get to that in the time period that we're talking about in the next 5 years or so, we need to get capital employed down sub GBP 2 billion, right? So how are we going to get there? We're going to keep acquiring new sites with that 40% being a minimum hurdle rate for new acquisitions and others will work their way out and we'll start to leverage some of these economies of scale as the volume builds up. So that's the sort of level. And it's the areas we've got to try and take it out of is WIP, land and joint venture investment.

Clyde?

Clyde Lewis at Peel Hunt. I think I've got 3, if I may. Stephen, you put up the sort of or I think maybe, Greg, did the sort of mix for affordable homes. Obviously, your share went up with PRS going down. What happened within local authorities within that part as opposed to housing associations? Are you working now with more local authorities? And is that starting to ramp up as a share of the total?

I'll deal with that part. Yes. So yes, local authorities, we are engaging with more. We are doing more work. We have sustained a pretty good platform over the years, particularly our footprint in London has been nearly all with local authorities as hugely beneficial long-term relationships for delivery with local authorities in London. And outside of London, we're working with local authorities in Cornwall. We're working with local authorities in Manchester, working with local authorities in Gateshead. So the geographic distribution is good. Those local authorities, of course, benefit from the policy changes the government has made. So rent convergence, 10-year rent settlement, ability to bid for grant, those are all benefits that local authorities will have within their business plans for their own stock and their own commissioning. So I do expect local authorities to play an increasing role going forward because they've got that -- the additional capacity within their business plans to do that.

Okay. Greg, the 40% uplift that you're talking about for sort of year 1...

Sales, yes.

For the sales rate. How is that built? Is that still very much got more momentum in it? So is that 40% going to continue to increase? Or do think that?

No, I think 40% is about what we are looking for. So there or thereabouts. So yes, it was 35% 2 weeks ago. So it's building momentum because obviously, marketing and everything takes a little bit of time, but 40% will be about the level that I'm happy with and the level I would expect to go forward. I don't -- it doesn't need to get to 50% or 45%, 40% is absolutely fine. So we're selling at -- and we don't give private sales rates, and we're not. So we said it's up, but we're selling at sales rates I've not seen in the 9 years I've been at Bovis, Vistry.

Okay. And are you expecting to see a competitive response that might dull that 40%?

I'm expecting to see it, and we've allowed for that because if we're in Vistry East Anglia, and we're doing what we're doing, that might affect a few sites in East Anglia, but we are Vistry and we're everywhere. So yes, I would expect to see some increases in competition. So it's no different than GT back in 2008, '09. We're selling aggressively, others weren't. In the end, they did.

Adrian Kearsey, Panmure Liberum. A few, if I may. In terms of the GBP 39 billion of affordable homes grant, getting clarity for September, what proportion of that GBP 39 billion will it be allocated? Will there be presumably a proportion sort of left floating for later allocation?

Continuous engagement, yes.

Yes. We don't know, put simply. That's a conversation that Homes England will be having with the Treasury in terms of the rate at which that is deployed. Certainly, they will be making allocations across the 10-year program, yes. How that's then structured and how that's pulled down and how that's annualized is a conversation that each of the bidders will have with Homes England and then Homes England have a corresponding conversation with Treasury. So we're not aware of that yet. But we do know that the weighting in the bids. So there are several things weighted. Are you using MMC? Are you able to deliver quickly? Are you supported by local authorities? There's a range of things that contribute to nonfinancial appraisal of your bid. And one of them is the ability to deliver within the lifetime of this parliament, i.e., over the first 3 years of the program. That is given a positive weighting with Vistry, with our land bank, with our relationship with RPs, with our frameworks and that forward visibility. As you'd expect, we will score highly on that. So that would -- I would expect a significant amount of what we bid for and receive will be deployed within 3 years.

And linked to that, the ability to deliver, when you look in terms of the number of your average sites, you're going to be building on this year next. Can you perhaps sort of give some guidance in terms of the number of individual sites? And I'm thinking of triangulating it back to that 1.42 unit sales rate that you currently got.

Well, we've got -- we're on -- in terms of outlets, we're about 180 outlets at the moment. So...

In terms of build units, we're about 300.

300, yes, over 300, yes.

So build units significantly above the sales outlets, obviously, because we are building after we finished selling and building before we started selling and there are also sites where we don't sell because they're fully Partner Funded.

Okay. Sorry, I can't hear that.

Sorry, Ami Galla from Citi. A few follow-ups from me. The first one was on the discounts. Can you give us some color regionally, if that is concentrated in a few locations? Or is it across most of the sites across the country?

Yes. It's concentrated, I would suggest, in a few places.

And can you talk regionally about where should we look at in terms of the sort of [ biggy ] points?

London, Southeast would be the biggest areas.

Okay. That's helpful. The second one was on the land bank margin. Can you comment a bit about where does the current land bank gross margin sit? And how has that shifted over the last year?

Tim, you got that?

Yes. So the land bank margin is slightly above the overall group margin, still lower than we would like it to be because we still got the impacts of some of the legacy sites working its way through. So it's sort of mid-teens.

And maybe just a technical one on the forward sales position. Assuming that step-up that you've seen from December is largely driven by the Open Market sales...

No, no, it's not. It's helped by Open Market sales, but it's also housing association entering into the market again for 2 reasons: One -- 3 reasons actually, rent convergence, rent settlements is reason 1. Reason 2 is housing associations can see and they're talking to Homes England, the GLA, and they know what kind of money they're going to be getting and the government putting huge pressure on them to actually start building. And three, shortfalls in their programs. So they've actually now gone -- March is their year-end. That happens every year, obviously. But this is not only a year-end, it's the end of the '21-'26 program and Homes England have been specific saying the people that will do the best in the '26-'36 program are those that deliver well in the '21-'26 program. And a number of housing associations out there are a little bit short, and that's caused a huge amount of activity for us over the last 6 or 7 weeks. So 3 areas, but it's not just private.

And is that -- and maybe in terms of the technicality, is that largely tiered for 2026? Or is that -- is there a tail into '27?

No, that's mainly targeted for '26, yes. I'm getting told to do that by Kate unless it's just me. Okay. Thank you very much. Have a good day, and thanks for coming. Cheers.