Good day, welcome to Vistry PLC Trading Update conference call. My name is Priscilla, and I'll be your coordinator for today's event. Please note this call is being recorded, and for the duration of the call, your lines will be on listen only. However, you will have the opportunity to ask questions at the end of the call. This can be done by pressing star one on your telephone keypad to register your question. If you require assistance at any point, please press star zero and you'll be connected to an operator. I will now hand you over to your host, Mr. Greg Fitzgerald, the CEO, to begin today's conference. Please go ahead, sir. Thank you. Okay. Thank you, Priscilla. Good morning, everyone. Thanks for joining us. I'm here today with Earl Sibley, Chief Operating Officer, and Tim Lawlor, sorry, Chief Finance Officer. This morning, we've issued a trading update for the six months to 30th of June, and we will, of course, publish our half year results on September 11th. Let me give you the key highlights. We'll be happy to take any questions you might have. Starting with, it was a good first half performance, with the group trading in line with our expectations. The integration of Countryside, creating the leading partnerships business in the country, under the Countryside Partnerships name, has gone extremely well, better than planned. We quickly established the new operational structure for the group, allowing us to focus on increasing the supply of affordable, mixed tenure homes to the market, and driving industry-leading return on capital employed. Culturally, the businesses have come together very well. We've taken the best of both, really treated it as a merger, and continue to drive best practice, shared learning, and cost efficiencies across the group. As a result, we are on track to at least deliver our synergy target of GBP 25 million for this year, with a full run rate of at least GBP 60 million by the end of 2024. Partnerships is demonstrating its resilience. Mixed tenure completions were up 6% in the period on pro forma half 1 2022. Partnerships adjusted half one revenue is expected to be, circa GBP 930 million, and we are well on track to deliver revenue growth in the full year against the GBP 2 billion pro forma 2022. Again, proving the resilience of the partnerships business, which is why we bought Countryside. Our partnerships model pre-sales a minimum of 50% of units on each development, and it is significantly less reliant on the open market. Demand from housing associations and local authorities for affordable mixed tenure homes remains strong. Given the more challenging private sales market, our partnerships business is looking to increase the percentage of pre-sale beyond the minimum of 50%. It is very well placed to do, given the strength of relationships and track record of delivery with housing associations and local authorities. Partnerships has a strong forward order book, with 80% of forecast mixed tenure units secured, and all partner delivery revenues secured. 80% is a strong place to be, in my experience of 40 years in housebuilding. Housebuilding has faced more challenging market conditions in the period, with the higher mortgage rate environment and broader macroeconomic challenges, particularly impacting on first-time buyers. The business delivered 2,847 completions in the first half, down 22% on pro forma half 1 2022. Housebuilding has, and continues, to mitigate the fall in open market demand with bulk transactions. As part of the Vistry Group, it is well positioned to do this with our relationships through the Partnerships business. These bulk transactions have supported the sales rate and helped hold firm on private sales prices, whilst assisting with subcontract savings and management of preliminary costs. Housebuilding's forward order book total is GBP 1.2 billion, with, again, an encouraging 76% of forecast 2023 units secured. The business has put in place tight working controls environment, and has expected year-on-year, a reduction in completions for housebuilding, and that's reflected in our build rate. The group recently secured a further GBP 67 million of grant funding from Homes England, under their Affordable Homes Programme. That runs through to 2026. In addition to the initial GBP 83 million allocated, so that's about GBP 150, or GBP 140 odd million in grant, we're the only house builder in the country getting grant direct from Homes England. In total, this will enable Vistry to deliver around 2,400 affordable housing partnerships with housing associations and local authorities, a USP for us. This funding was instrumental to the formation of our partnerships with Sage Homes, where through Sage's new Home Stepper shared ownership model, Vistry will deliver an initial portfolio of 800 shared ownership homes. The scheme, which has only been going for the last couple of months, has had a very encouraging start, with strong customer interest and over 60 vetted reservations since its launch last month, and that's through housebuilding and partnerships. On costs, as an enlarged group, we are benefiting from our revised arrangement with our supply chain partners. The greater visibility of revenues within partnerships and through these bulk deals, gives us a competitive advantage, in particular with subcontractors. We offset cost increases in the first half and expect that to be the case for the full year, with some opportunity to improve on this. I honestly feel there will be deflation in the second half of this year, as all major housebuilders cut back on land, planning issues, small housebuilders are cutting back dramatically on work in progress levels. At some point, I believe in the next two months, there will be a stream of subcontractors knocking on the door for work, where we can do better deals than we have done over the last two and a half years. The subcontractors and supplies start off at a higher level. There's plenty to go for there. Net debt was circa GBP 330 million as of 30th of June. We expect this to decrease to around GBP 150 million at December. The board is committed to retaining a strong balance sheet, and we will update on capital allocation, as we said, for a number months now, with our half year results in September, as the board concludes their review, which is going well. Finishing off on outlook, we have seen a slowdown in open market private sales over the last four weeks, following the rise in the bank rate and mortgage costs. That said, this week, which is the first week, where we've just now had an announcement that inflation is lower than expected, looks to be encouraging. We had a weekend that was as good as we had at any time during the year. Only a week, but encouraging. Housebuilding partnerships are both mitigating any slowdown in sales through bulk transactions. Both businesses have historically strong forward sell positions for the year. We have a very firm focus on cost, and the synergy benefits are at least on track to what we've been stating. As such, the board continues to expect the Group to deliver at least GBP 450 million adjusted profit tax for the year. On that upbeat note, we'll take any questions. Priscilla? Thank you, sir. Ladies and gentlemen, if you would like to ask a question or make a co- contribution on today's call, please press star one on your telephone keypad. We'll pause just for a moment to allow everyone an opportunity to signal for questions. We'll now take our first question from Aynsley Lammin from Investec. Please go ahead. Your line is open. Hello? Hello, Aynsley. Hello? Hello. Can you hear me? We can hear you, Aynsley. Oh, okay. Yeah, we can hear you. Thanks. Just two questions from me, please. First of all, just on the kind of recent trade and the sales rates, if you could give a bit more color and indication of where you've seen them slow to the last four weeks, and on the pricing front, how resilient that's been. Have you used more incentives? Just your feel for the market, given the higher interest rate environment. Just on net debt, I think that was a bit higher than what I had kind of had in the model. Any thoughts around why that was higher in the, you know, the end of June? What's driving that for the full year as well, the outcome? Thanks. Okay, Tim will answer the question on net debt, but what I would say is that's lower than our expectations at the half year, that number. With regards to sales over the last four or five weeks, I would say private sales, as I say, we're making it up with bulk, have been around 20% down on where they were in April and May. Part of that, there's always a slowdown in June, and June's not as good as April and May, and a lot of our sales teams are obviously concentrating, as they will be in the entire sector, on either a half year with us or a full year with somebody like Barratt. About 20% down. Encouragingly, pricing still there or thereabouts, in line with our expectations. A reduction in sales, I think that will, if the forecast and it's only till tomorrow, for this week, come through, that this will be the first week where we're back on track, and I'm encouraged by the inflation details that came through. 20%-ish down, made up by bulk, but pricing, no real change, we're holding firm. In fact, the fact that we're doing some bulk, I would rather give some discount on a bulk deal, than offer it to Mr. and Mrs. Smith. Because that then impacts mortgage valuations. Debt, we've had all the way through the year, and including the last four weeks, no issues with down valuations, I'm pleased to say. With regards to the debt. Yeah. Hand over to Tim, but I'll just say again, the GBP 3 30 million was a lot less than we were forecasting. Yeah. It's in line with the average debt that we talked about at the year-end results. I think there's three components to the first half. In the first half, first of all, we've got the payments around dividends going out in the first half year, which is about GBP 110 million, and we also had the fire safety and the integration costs. The integration costs more front-end loaded. The second piece is that there has been net land investment in the first half of the year, as we've opportunistically secured good land sites in the first half of the year. The third piece is work in progress, where there's been increased work in progress investment, partly catching up on the end of last year, where there was a slowdown at the end of Q4 last year, and partly just the seasonal split. We always see a work in progress outflow in the first half of the year than the second, linked with the fact that we do more pockets and more positions in the second half of the year. That's what takes it down from the half year position to the full year position. I still think we, you know, we came into the year, let's not forget, off the back of a disappointing following the disastrous budget last September. October, November, December, the sales cancellation rates were incredibly high. We entered into the year and had to build up some work in progress over and above where the sales were because of that disappointing last quarter. What else would we say on debt? No, I think that's it, isn't it? Just one follow-up on land creditors at the end of June? Land creditors will be slightly higher than they were at year-end, at the end of June. Slightly. no great shakes. We again, I think have been a little bit different. My experience, in times of uncertainty, which we've definitely got at the present moment in time, there are more land opportunities out there. We're not buying any land, you know, land that we agreed three months ago, we're not actually buying it unless we actually renegotiate the terms. Some of the best sites that we've dealt with over the last 20, 30 years, have all come from buying in a market like we are at present moment in time, where an awful lot of people leave or calm down on the land market. The land market at the moment, you know, fair enough, you've got to make the call, is a pretty good one to be in, and we are doing some pretty good deals. Right. All very clear. Thank you very much. Thank you. Thank you. We'll move on to our next participant, Clyde Lewis from Peel Hunt. Please go ahead. Your line is open. Morning, Greg, Earl, Tim. I'm just gonna have. Hi, Clyde. I'm just gonna have one from my end, please. Just around the bulk sales. Just sort of, I think you've sort of flagged sort of all three categories in terms of HAs, local authorities and sort of PRS investors, as being part of the- Yeah the sort of customer base, if you like, of the extra bulk sales. Can you give us an idea, is, you know, which one is bigger? Which one is sort of becoming more aggressive, or are they all the same? It'd be also useful to sort of understand on the bulk payments around the cash flow, just in terms of sort of, is it very similar to sort of, you know, private reservations? Or are you actually getting some upfront payments in terms of completion, you know, construction? Yeah, we're getting. On entering the deal, we're getting, where we basically are with the. You know, so if we haven't started the plot, we will get the land. If we're halfway through, we'll get the land and half of the cost, and then the money comes through, kind of on stage completions, even some, in some cases, monthly evaluations. From a cash perspective, it is, it's much better. That will, you know, give equivalent sales, which is one of the reasons why we're pushing up house building sales numbers this year. From an aggressive perspective, I would say probably local authorities and Housing Associations, not really noticed too much of a difference. Maybe PRS, maybe slightly, but it's in the margin, are a bit more aggressive. Over the first six months, I would suggest that the discount has been against asking price, has been on average, less, just a bit less than 10%. Against asking price, we've got around 3% as a buffer between asking and forecast. You take off the sales and marketing costs, which are typically anywhere between 1.5%-2.25%, which you obviously don't need if you're selling a bulk deal, let's say of 100 units. We're also noticing that we are also getting subcontractors prepared to sharpen their pens on a site where they were looking at it, and sales were not going as quick as they liked, therefore, we were closing, you know, not closing, obviously, really controlling tightly work in progress. If you then speak to the carpenters, or the bricklayer, the groundworker and say, "Actually, we're just going to do a deal of 100 units, that's guaranteed. That means we'll be cracking on," we're getting some money from them as well to offset it. All I would say is probably the trend of discounts. Interesting to see how things move over the next few weeks, with maybe a turnaround on thoughts on where interest rates are going and people sitting on the fence, hence the weekend was very good. Without that, the trend of discounts was moving up as opposed to moving down. Okay, perfect. Thank you, Greg. Thanks, Clyde. Thank you. We'll move on to our next participant, Chris Millington from Numis. Please go ahead, your line is open. Thank you. Morning, everyone. Just got a quick follow-up on Clyde's last question. Can you just talk through as well, how the grant funding feeds through to the balance sheet and the PNL? That's the first one I've got. Next one is just really about the breakdown of build costs. I just wonder if you could give us a bit of a feel of kind of labor and materials components there. The final one I've got, is whether or not you're considering any other cost savings, ex the synergies you're driving from the Countryside deal. We've obviously heard a few people starting to talk around, you know, cost savings and kind of hiring freezes, et cetera. Just curious where you are on that. Yeah. We have an employment freeze, so I can say that. That's been in place for probably a couple of weeks. Maybe watch this space, Chris. Obviously, you need to be careful with what you say, but we're not an organization that sits down for too long and just contemplates our navel. We'll be looking at other areas where we can make cost savings. But back to your first question, I'll put that over to Earl. Yeah. Hi, Chris. I mean, the two parts of grant. Our own grant, which I assume was your main question, so the GBP 150 million, which, let's be clear, is as much as Homes England can offer to, you know, any PLC business. We have got the maximum grant at this point from Homes England. We do get a cash advantage from that grant. As we, you know, effectively start developing and sell on the land for the units, we do get a cash injection from that grant, and then we do get further grants as we build and then complete the units. That will start to come through in terms of the additional grants. You know, there is... Within that grant, we are also supported in terms of our timber frame manufacture, you know, clearly, which we're doing through our factories and looking to expand. That grant piece all fits together. Equally, we obviously use other people's grants as well, with the deals that we do with the housing associations. You know, back to Clyde's question earlier, I mean, the largest proportion of our bulk sales is with housing associations. You know, albeit demand is strong, you know, particularly from them and the local authorities. Does that answer the question on grants? It does, so that's exactly what I was asking. Then just to split on build costs. Build costs. Yeah, build costs, we, you know, I think we're seeing around about a 5% kind of increase. It, and it would be more if it was, if it wasn't for our revised size on suppliers. We think that's pretty much been, you know, 3%, 4% on subcontractors, but I am very confident that's gonna grow from subcontractors. The reason we've been able to mitigate it in the first half, is the rest has come from synergy savings. We, and that doesn't mean... I don't want to sound as though I don't know what the other house builders are doing. If we hadn't had done the deal, and we were just as Vistry, I think we would've been seeing similar levels of inflation. We have done the deal. We are much bigger. We have been able to renegotiate, 'cause our starting point was all of our deals were coming to group deals on materials, were coming to an end in December, and we've renegotiated all those on the back of being, you know, building a lot more houses, which has been very advantageous to us. I do think we're pretty good on managing our subcontract supply chain, and have a lot of subcontractors that want to work for us. They like the partnerships bit. You know, a subcontractor at the moment that's got half a brain, is looking to live to fight another day. If you've got a site on the left-hand side of the road, which is 1,000 houses, which is private sale, and you've got one on the right-hand side, which is a partnership scheme, the subcontractor will sharpen his pencil to work on the partnership scheme, 'cause he knows he will be finished. He'll be doing those 1,000 units as quick as possible. He also knows on the left-hand side, 1,000 private sales, that depends on the open market, and there might be nitrate restrictions, et cetera, et cetera. Particularly in these times, hence, you know, the resilience of the partnerships model, subcontractors will do an awful lot to work on partnership schemes and schemes where you've done a bulk deal and you've got guaranteed work ahead of them. Got you. Got you. Thanks, for your answers. Thanks, Chris. Thank you. Once again, ladies and gentlemen, if you would like to ask a question, please press star one on your telephone keypad. We'll move on to our next participant, Gregor Kuglitsch from UBS. Please go ahead. Your line is open. Hi, good morning. Three questions... Hi, Gregor. ..please. Good morning. Three questions, please. The first one is on margin. If you could just sort of give us your latest sense, perhaps where I think you tend to talk on growth for house building and sort of operating margin for partnerships. I guess it's in the light of, you know, the bulk sales, and I guess how all of that sort of flows through, obviously you should have good visibility at this stage for this year. The second question is on the average debt. I think it was GBP 400, I think you were looking at, and I just wanted to confirm that that's still what you're looking at this stage for 2023, and perhaps what actually the H1 figure was. Yeah. Maybe finally, you know, you've obviously seen one of your, a couple of your peers, I think, already come out with additional fire safety provisions and so on. You obviously decided not to do that, so just want to get your thoughts, how comfortable you feel about your position on the, on the provisions, regarding fire safety in legacy buildings? Thank you. Okay. Thanks, Gregor. Tim will take the margin and average debt ones, but on the fire safety, we're very comfortable with our provision. As I've said to a number of people, I'm not sure if it's to you direct, Gregor, our numbers are very prudent, and we haven't allowed for getting any money back from warranty providers, contractors, subcontractors, insurances. I'm expecting that number to be relatively substantial, and we are bonusing our teams accordingly. Yes, our number is absolutely fine. We've spent GBP 20 million-GBP 25 million in the first half of the year, and we expect that to rise to an overall GBP 50 million-GBP 60 million, all as planned, in the second half of the year. At the moment, with our portfolio, and it's being looked at by different teams because Countryside has come in, so Countryside have challenged Vistry have challenged Countryside. We feel very resilient with those numbers. Tim, margin, average debt. Yeah. First of all, in terms of margin, Partnerships margin is holding firm, no change in the Partnerships margin. On housebuilding, because of the shift to bulk, the proportion of bulk is probably up by sort of 10%. Overall units up about 10% on where we were, profits remaining the same, obviously there's a margin impact there. We're still expecting our gross margin to be in excess of 20% for the full year. In terms of average debt, yeah, H1 was around GBP 400 million average monthly net debt, we're expecting a similar sort of level for the full year. Thank you. So no significant- Understood. Thank you very much. Yes. Thank you. Thank you. We'll move on with our next participant, Anthony Manning from Bank of America. Please go ahead, your line is open. Good morning. Thanks for taking my question. Hi, Anthony. Just a quick one on me on the partnership. I know you've talked about the kind of 10% growth going forward. Should we think about that as kind of an average over the cycle, or are you still confident in that 10% in 2024? I guess, added on to that, you know, what are the biggest headwinds to get over to achieve that? Is it just a demand or availability of land or subcontractors? You know, could it even be greater than that, if the demand is there for this point in time? Yeah. Well, the demand is absolutely there, Anthony. Yeah, well, land subcontractors are all constraints, but people actually bringing in people into our organization is probably the biggest single constraint. We continue to, you know, look at all the stats out there, and the affordable housing stats in this country, you know, aren't very good, they're embarrassing, the waiting lists, et cetera, et cetera. What the housing associations, local authorities, who are coming more and more into it, want to do, what they're talking to us about, is incredible. If you like, I think getting another, decent grant out of Homes England, and the first thing I'd say with that, is Homes England wouldn't have given Vistry the grant if we weren't spending the money and we were looking, you know, being looked on well by Homes England. Maybe they can't say that for everyone they're giving money to. We seem to be pushing on an open door, because we are spending the money, and therefore alleviating what is a national crisis in this country, called affordable housing. I would suggest, as and when we have a labour government, that will only get greater. The prospects that we're seeing are enormous in affordable housing and politically, you know, they're enormous with Tories. I think they'll be even greater with a labour government, which is probably where we're heading. All I would say is, when you have uncertainty... If you take last September, when we had the disastrous Truss budget, we had PRS providers, we had local authorities, we had housing associations, all just like an individual purchaser, going into a state of paralysis, you know. If Stephen Teagle was here, he would say, "You know, whenever these things happen, it seems to take two or three months for the housing associations to come to terms with things and kind of move on." That's exactly what happened last September, October. What we've had leading up to, you know, the highest interest rates over the last 15 years, is we haven't had a single event, it's just happened. The last month there's been you know, a bit of a slowdown on private sales, not on pricing. This week could be the first week where we're back on track. We'll see, it's only a week. The Housing Associations haven't really, local authorities, haven't really stepped back from the fray, as they did for two or three months last September. Yeah, we remain confident this year and next year. The only other thing I would say is that, of course, if there is a reduction in spend, one of the things that could stop it, is their commitments to fire safety. You know, as with us or the other house builders, they've had to put a fair amount of money aside, and undoubtedly, we're not really seeing it impact us. Overall, you know, the government doing what they've done with Building Safety, will not only cut short investment in private housing in this country, but more importantly, it'll also... 'Cause that will in effect, have a knock-on effect on the amount of affordable that gets delivered, affordable as a% of private. It will also, with the housing associations doing what they happen to do from their own pocket, as it were, will impact on what they can do on producing much needed affordable homes. Long-winded answer, yeah, we're in a good place for 2023 and 2024, with 10% growth. Okay, really useful. Thank you. Thanks, Anthony. Thank you. Once again, ladies and gentlemen, if you have any more questions, please press star one. Dear speakers, it appears there is no further questions at this time. I'd like to turn the conference back to the host for any additional closing remarks. Thank you. Thanks, Priscilla. No, nothing more to say from us. Thanks for attending the call. Hope you found that interesting, and we'll update again on September the eleventh. Thanks very much. Cheers. Thank you for joining today's call, everyone. You may now disconnect. Have a nice day!