Vistry Group Plc · LSE:VTY
Vistry — FY2023 Earnings Presentation
54 slides from Vistry's earnings presentation, Mar 14, 2024
Slide 1: Full Year Results 2023
FULL YEAR RESULTS 2023 Greg Fitzgerald Tim Lawlor Stephen Teagle Earl Sibley Chief Executive Officer Chief Financial Officer Chief Executive, Chief Operating Officer Countryside Partnerships 14 March 2024
Slide 2: Agenda
AGENDA • Introduction • Financial review • Market opportunity • Operational update • Outlook • Q&A XXX Countryside Homes - Beaulieu, Chelmsford 2
Slide 3: Highlights
HIGHLIGHTS • Vistry established its position as the country’s leading Partnerships business - Successful integration of Countryside Partnerships - Strategy update to fully focus on Partnerships • Resilience of our Partnerships model clearly demonstrated in FY23 Beam Park, London East - Delivered 16,
Slide 4: Strategic Progress
STRATEGIC PROGRESS • Significant progress on strategy since September update - Organisational change implemented - Transition of former Housebuilding landbank progressing well • Focused on delivery of our medium-term targets - Partnerships & Regeneration team working across the business - Capital re
Slide 5: Financial Review
FINANCIAL REVIEW Tim Lawlor Chief Financial Officer Countryside Homes - August Fields, Southampton 5
Slide 6: Summary of Group Results
SUMMARY OF GROUP RESULTS Adjusted basis unless otherwise stated (£m)(1) FY23 FY22 Change Revenue 4,042.1 3,115.1 29.8% Operating profit 487.9 451.1 8.2% Operating margin 12.1% 14.5% (2.4ppts) Profit before tax 419.1 418.4 0.2% Reported profit before tax 304.8 247.5 23.2% EPS (pence per share)(2) 88.
Slide 7: Vistry's Unique Partnerships Model
VISTRY’S UNIQUE PARTNERSHIPS MODEL Vistry Group – 100% Partnerships Minimum Partner Average Partner Funded (units) Funded (units) Markets Partner Funded Open Market 50% 65% Tenures S106 Additional Affordable PRS Private ownership Bovis Linden Countryside Brands Countryside Partnerships Homes Homes H
Slide 8: Group Metrics
GROUP METRICS FY23 FY22 (Proforma) Partner Partner Total Open Market Total Open Market Funded Funded Units(1) 16,118 10,722 5,396 17,038 7,865 9,173 Unit growth (5%) 36% (41%) Mix 67% 33% 46% 54% ASP(2) £276k £222k £390k £289k £194k £381k Revenue (£m) 4,042.1 2,124.0 1,918.1 4,459.0 1,427.6 3,031.4
Slide 9: Tenure Mix
TENURE MIX FY23 Total completions by tenure • Targeting 65%:35% Partner Funded:Open Market mix through the cycle - FY23 - 67% Partner Funded vs 46% in FY22 • S106 Affordable: - Set by planning obligations 28% 33% S106 Affordable 100% - Expected to be 25-30%, geographic Open Market variations • Addit
Slide 10: Operating Margin: Key Drivers
OPERATING MARGIN: KEY DRIVERS 1. Mix Adjusted basis (£m) FY23 FY22 • Strategy change Gross profit 731.4 636.9 2. Pricing • Average incentive level on open market sales of up to Gross margin 18.1% 20.4% c. 5% in FY23 • Discounting on Partner Funded of 5-15% in FY23 Operating profit 487.9 451.1 Operat
Slide 11: Operating Profit to Net Earnings
OPERATING PROFIT TO NET EARNINGS £m FY23 FY22 Adjusted operating profit 487.9 451.1 Net bank interest (43.4) (16.3) Other net finance costs (15.3) (7.7) Net JV interest (10.1) (8.7) Total adjusted finance costs (68.8) (32.7) Adjusted profit before tax 419.1 418.4 Adjusted tax expense (113.8) (93.8)
Slide 12: Fire Safety
FIRE SAFETY £m • £45.0m of cash spend on fire safety remediation in FY23 Provision as at 31 Dec 2022 309.2 • £33.3m of provision utilisation, reflecting £11.7m of Cash spend in year (45.0) cash recoveries • Continue to make good progress with remediation Cash recoveries 11.7 works - of the 327 build
Slide 13: Adjusted Net Earnings to Reported Profit
ADJUSTED NET EARNINGS TO REPORTED PROFIT £m FY23 FY22 Adjusted net earnings 305.3 324.6 Exceptionals – Fire safety: second staircase impact (19.3) (97.0) Exceptionals – Combination with Countryside (16.7) (56.8) Exceptionals – Change in strategy (29.6) - Amortisation of intangibles (46.3) (17.1) Tax
Slide 14: Land Activity in Year
LAND ACTIVITY IN YEAR FY23 FY22 Sites Plots Sites Plots Owned 30 7,883 36 6,656 Controlled 14 5,184 15 1,891 Total 44 13,067 51 8,547 • The Group continued to secure attractive development opportunities at or above hurdle levels • Taken a selective and opportunistic approach in a more subdued market
Slide 15: Land Bank
LAND BANK Land bank FY23 FY22 Owned 55,707 56,061 - of which relates to JVs 14,935 15,810 Controlled 20,727 21,702 - of which relates to JVs 10,268 10,412 Total owned and controlled 76,434 77,763 - of which relates to JVs 25,203 26,222 • Healthy land bank, positioning us well for growth - Supports c
Slide 16: Strategic Land
STRATEGIC LAND 31 Dec 23 31 Dec 22 Total sites Total plots Total sites Total plots • Added 7,360 plots (FY22: 4,503) to our 0 - 150 plots 60 4,769 63 5,548 strategic land bank in FY23 150 - 300 plots 54 11,078 49 10,402 • Expect to grow strategic land bank in 300 - 500 plots 34 11,849 20 8,698 line
Slide 17: FY23 Cashflow
FY23 CASHFLOW FULL YEAR RESULTS 2023 17
Slide 18: Capital Employed
CAPITAL EMPLOYED £m 31 Dec 23 31 Dec 22(1) Investments & amounts due from JVs 562.7 552.4 Work in progress 1,219.0 1,016.4 Land 1,881.7 1,821.7 Land creditors (662.2) (667.4) Other assets 732.6 653.4 Other liabilities (1,308.6) (1,230.8) Capital employed 2,425.2 2,145.7 Fire safety provision (289.0)
Slide 19: Capital Allocation
CAPITAL ALLOCATION Capital allocation policy Capital allocation hierarchy • Capital allocation approach announced in September 2023 • Two times adjusted earnings ordinary distribution cover in respect of a full Cash Generation financial year • Ordinary distributions to be made either through share b
Slide 20: Achieving Our Medium-Term Targets
ACHIEVING OUR MEDIUM-TERM TARGETS Growth opportunities Target ROCE 100% adherence to Partnerships model 40%+ Capital and operational efficiency Transitioning former Housebuilding land bank Current ROCE 21.3% AOP: £488m AOP: >£800m Ave. capital Ave. capital employed: £2.3bn employed: <£2.0bn FULL YEA
Slide 21: Market Opportunity
MARKET OPPORTUNITY Stephen Teagle Chief Executive – Countryside Partnerships Countryside Homes - Ashmere 21
Slide 22: The Partnerships Market Today
THE PARTNERSHIPS MARKET TODAY Partner Funded Market Open Market S106 Additional Affordable PRS Total Units p.a. 30k(1) 34k(1) 16k 80k 155k(3) Value p.a. £5.5bn £7.6bn £4.5bn(2) £17.6bn £46bn Vistry Vistry Partner Funded Vistry Open Market FY23: 10,722 units FY23: 5,396 units c. 14% market share 3.5%
Slide 23: Partner Funded Market Opportunity
PARTNER FUNDED MARKET OPPORTUNITY (1) Heriot Watt - Housing supply requirement for c. 145k affordable homes p.a. (2) Savills Research - The Future of Build to Rent Homes estimates need for additional 800k to 1m PRS households by 2031 FULL YEAR RESULTS 2023 23
Slide 24: Capturing Growth
CAPTURING GROWTH Markets Partner Funded Open Market Traditional For Profit PRS Local Private Customers Registered Registered buyers Providers Authorities Providers Providers Vistry opportunity FULL YEAR RESULTS 2023 24
Slide 25: Traditional Registered Providers
TRADITIONAL REGISTERED PROVIDERS • 202 largest RPs hold 95% of Acute need for affordable housing housing stock • Over 1m households on waiting lists for social and affordable rented homes • £187bn assets • Demand for shared ownership at record levels post withdrawal of • 2023: £14.6bn investment in
Slide 26: For Profit Registered Providers
FOR PROFIT REGISTERED PROVIDERS 2013 18 High growth subsector FPRPs • Significant capital entering sector driven by supply / demand gap • FPRPs have limited exposure to legacy stock issues – sub sector launched in 2008 187 homes • Huge growth potential, with FPRP’s housing stock expected to increase
Slide 27: Private Rented Sector Providers
PRIVATE RENTED SECTOR PROVIDERS • Significant demand / supply imbalance • Number of homes available to rent nationally has greatly reduced - Tenancy lengths increased - Significant increase in number of private rental properties being listed Projections for the private rented sector for sale indicat
Slide 28: Local Authorities
LOCAL AUTHORITIES Local Authority Vistry Group • LAs have a statutory duty to provide housing in their areas • 94% are prioritising housing, 23% are very active Design, placemaking, • LA’s ability to build impacted by financial and skills Development build, sales and Additional capacity land marketi
Slide 29: Strong Pipeline
STRONG PIPELINE FULL YEAR RESULTS 2023 29
Slide 30: Operational Update
OPERATIONAL UPDATE Earl Sibley Chief Operating Officer 30 Countryside Homes – Radclyffe Green, Chadderton 30
Slide 31: Structured for Growth
6 Divisions STRUCTURED FOR Divisional Chair GROWTH Divisional Finance Director 26 Regional businesses Managing Land Finance Commercial • Organisational restructuring complete Director Director Director Director Construction Sales Technical Sales - Customer and partner facing Director Director Direct
Slide 32: Structured for Growth
STRUCTURED FOR GROWTH Operational Land Supply chain capability Competitive advantage Lowest cost production Capacity to grow • Large sites • Unrivalled position in • 26 business units - targeting • Absorption rates the market up to 900 units p.a. • Partner Funded - Scale • 8 business units targeting
Slide 33: Good Progress Transitioning Former Housebuilding Landbank
GOOD PROGRESS TRANSITIONING FORMER HOUSEBUILDING LANDBANK Targeted tenure 30 June 2023 31 December 2023 Pre-sold to date c. 1,000 c. 4,300 Targeted pre-sale remaining c. 8,500 c. 5,200 Identified SME or land swaps c. 1,200 c. 1,000 Higher capital schemes to be traded out c. 500 c. 500 Private sales
Slide 34: Capital Efficiency Programme
CAPITAL EFFICIENCY PROGRAMME Opportunities Actions • Increase speed of delivery supported by timber frame Operational excellence • Partner funding optimisation • Further existing partner arrangements Commercial structures • Introduce new partnering structures • Homes England Strategic Partnership Pr
Slide 35: Open Market Sales
OPEN MARKET SALES • Open Market demand remained supressed during FY23 • Group used incentives to support demand - up to 5% of Open Market price • Launched Home Stepper shared equity product in July 23 • Sales programme focused on: - Optimising price - Digital marketing and prospect management - Nati
Slide 36: Vistry Works
VISTRY WORKS • Significant progress with timber frame operations and capability - 2,500 units delivered in FY23 - over 4,000 units targeted for FY24 (60% year on year growth) - existing capacity to deliver 8,000 units • Manufacturing open panel and hybrid panel frames • Product includes standard hou
Slide 37: Leading Sustainability
LEADING SUSTAINABILITY • Completed double materiality assessment and aligned sustainability strategy • Launched new Carbon Action Plan • Reset Science-Based Targets • A- Score in Carbon Disclosure Project (CDP) • Developing over 600 zero carbon (in-use) homes • Creation of Sustainability Committee •
Slide 38: Vistry Innovation Centre
VISTRY INNOVATION CENTRE • Vistry Innovation Centre opened on 1 Feb 2024 • Showcases innovative solutions for Future Homes Standard and beyond • Utilises 18 different trades and 54 suppliers • Features over 100 different products - MMC - multiple heating solutions - smart technology - sustainable bu
Slide 39: Outlook
OUTLOOK Greg Fitzgerald Chief Executive Officer Bovis Homes – Twigworth Green, Twigworth 39
Slide 40: Market Trends
Market trends • Good build market - Vistry well positioned with supply chain partners • Continue to see high quality land opportunities that Insert image showing meet our hurdle rates build on a site • Some improvement in Open Market trends - encouraged by increase in sales rate since 1 Jan • Tradit
Slide 41: Current Trading and Outlook
CURRENT TRADING AND OUTLOOK • Group on track to deliver strong growth in completions Medium term financial targets in FY24 – targeting in excess of 17.5k units • Underpinned by forward sales position totalling £4.6bn, up 11% on prior year, with £2.1bn for delivery in FY24 5%-8% revenue growth p.a. •
Slide 42: Appendices
APPENDICES Countryside Homes– Beam Park, London East 42
Slide 43: Disclaimer - Important Notice
DISCLAIMER - IMPORTANT NOTICE • Certain statements in this presentation are forward looking statements • Forward looking statements involve evaluating a number of risks and uncertainties, many of which are beyond the Group’s control, that could cause actual results to differ materially from those ex
Slide 44: FY23 Revenue Analysis
FY23 REVENUE ANALYSIS Partner Open Market £m unless otherwise stated Total Funded Sales Units (incl. 100% JVs and JOs) 16,118 10,722 5,396 - Joint venture units 2,781 1,464 1,317 - Joint operation units(1) 875 581 294 ASP(2) £276k £222k £390k Housing Revenue 3,904.5 2,124.0 1,780.5 Other Revenue(3)
Slide 45: Forward Sales
FORWARD SALES Forward sales (£m) 13 Mar 24 31 Dec 23 20 Mar 23 31 Dec 22 Open Market 441 298 770 610 Partner Funded 4,182 4,168 3,409 3,363 Total Group 4,623 4,466 4,179 3,973 £m FY24 FY25 FY26 FY27+ Forward order book unwind 2,115 1,231 788 489 FULL YEAR RESULTS 2023 45
Slide 46: Operational KPIs
OPERATIONAL KPIs Group FY 23 FY 22 Target Sales rate 0.96 0.71 - Customer satisfaction - 8 weeks 91.6% 91.9% 5-star (>90%) - 9 months 78.3% 79.0% 75% - 80% Build quality - RIs 0.21 0.23 <0.26 - CQR 4.5 4.5 >4.0 Employees Employee satisfaction 7.6 8.6 >7.0 Staff turnover 15.9% 17.7% <18.0% HBF 8 week
Slide 47: Bridge Between Adjusted and Reported Results by Group
BRIDGE BETWEEN ADJUSTED AND REPORTED RESULTS BY GROUP Amortisation of Share of joint Exceptional acquired Other operating For the year ended 31 December 2023 Reported ventures items intangibles income Adjusted Revenue 3,564.2 477.9 - - - 4,042.1 Gross profit 545.4 85.6 (0.1) - 100.5 731.4 Operating
Slide 48: Land Activity in FY23
LAND ACTIVITY IN FY 23 Plots Total Owned Controlled Brought forward 77,763 56,061 21,702 Land acquired externally 10,724 5,431 5,293 Transferred from strategic 2,343 2,194 149 Transferred into owned from conditional - 5,999 (5,999) Utilised in year (13,859) (13,859) - Land Sales (142) (142) - Adjust
Slide 49: Land Creditor Payment Profile
LAND CREDITOR PAYMENT PROFILE The land creditor payments profile is on an absolute cash basis. Balance sheet creditors figure of £662.2m as at 31 December 2023 is on an IFRS accounting basis. FULL YEAR RESULTS 2023 49
Slide 50: Other Assets
OTHER ASSETS (£m) 31 Dec 2023 31 Dec 2022 Debtors - Trade receivables 240.6 148.5 - Contract assets 165.9 159.9 - Prepayments and accrued income 60.6 80.4 - Amounts due from joint arrangements 113.3 97.7 - Other receivables 46.0 56.6 Right of use assets 82.9 77.2 Deferred tax assets - 1.8 Corporatio
Slide 51: Other Liabilities
OTHER LIABILITIES (£m) 31 Dec 2023 31 Dec 2022 Creditors 973.8 926.0 Deferred income 180.1 156.5 Other tax and social security 6.8 17.3 Lease liabilities 98.3 86.6 Deferred tax liability 21.2 - Provisions (excluding fire safety) 28.4 44.4 Other liabilities 1,308.6 1,230.8 FULL YEAR RESULTS 2023 51
Slide 52: Adjusted Finance Costs
ADJUSTED FINANCE COSTS (£m) FY23 FY22 Net bank interest (41.3) (14.9) Issue cost amortisation (2.1) (1.4) Bank interest (43.4) (16.3) Imputed interest on land creditors (11.5) (7.1) IFRS16 interest on leases (5.5) (1.4) Pension financing 1.7 0.8 Other net finance costs (15.3) (7.7) Interest receivab
Slide 53: Bank and Other Loans
BANK AND OTHER LOANS Available Carrying Carrying facility value FY 23 value FY 22 Facility £000 maturity Margin £000 £000 Revolving credit facility 500,000 2026 SONIA + 160-250 bps - - Term Loan* 400,000 2026 SONIA + 190 - 310 bps 400,000 400,000 USPP Loan 100,000 2027 403 bps 104,626 105,564 Prepai
Slide 54: Capital Allocation Hierarchy
CAPITAL ALLOCATION HIERARCHY • Partnerships model yields strong underlying cash conversion Cash Generation • Cash inflows to be supplemented by multi-unit pre-sale of Housebuilding land bank • Cash commitments including fire safety and RPDT expected to reduce in medium term • Return to year-end net