Good morning, everyone. Just gone half past eight, so we will kick off with our full-year results. I'm joined today, obviously, by Tim Lawlor, Chief Financial Officer, and Stephen Teagle, Chief Exec of our Partnerships business. The agenda today: I'll give a very brief introduction, hand over to Tim to go through all the financials, which are quite complicated this year. Market update will be given by Stephen. I'll talk about operational matters that are going on at the moment, and then finish off with an outlook, and then we'll be delighted to take any questions. Headlines to start with. Total completions increased by 7% to 17,225 completions which I still believe makes us the largest house builder in the country by volume. Partner funding was up by 18%. Open market down in a challenging market by 15%.
I think at this point, it would be good just to make a point that when we announced the strategy in September 2023, we've had nothing since other than headwinds. By that, the headwinds, some of those were expected and some were not. The headwind we expected was we were announcing a new strategy on the basis of hopefully Labour getting into power sometime during 2024, which happened. We knew that we were midway through, more than midway through, an affordable housing programme of GBP 11 billion-GBP 11.5 billion 2021-2026, where the vast majority of the funds for that programme had either been spent or allocated. The fact that we increased our partner funding by 18% last year is testament to our relationships and our teams. We obviously expected a better housing market, private housing market tha n we encountered, which we did not expect.
Adjusted revenues increased by 7% to GBP 4.3 billion. Average selling prices on the private side remain firm, although we continue to use incentives throughout the year. Build cost was neutral, and inflation was mitigated, again, as a testament to the new strategy. You would have seen the analysts in the room that inflation from house builders in 2023 and 2024 was actually at quite high levels. We actually said during 2023 we had negative build inflation, and we had neutral inflation during the course of 2024. 16,508 new plots of land. We basically, not far off, replaced what we sold. We continue to be a five-star house builder, and with everything going on at Vistry last year, that is no mean feat, and that is for the sixth consecutive year. We won more than 70 site quality awards, and the board remain absolutely 100% committed to the partnerships strategy.
As you all know, we significantly underperformed our financial targets that were set at the start of the year and through the year last year, with a reported adjusted profit before tax of GBP 263.5 million, and that is up on the GBP 250 million that we indicated to the market just before Christmas and just after Christmas. There are reasons for that, which Tim will go through. We all know the issues we had were in the South Division. The total impact on profits was GBP 165 million, GBP 91.5 million in the full year 2024. We have had a rigorous set of reviews and year-end procedures, and no further issues have been identified. We have just gone through, since being a Chairman or Chief Exec since 2003, the most rigorous, challenging audit that I have ever known.
Congratulations, and thank you to our finance teams in the room who did a fantastic job on that. We all take a huge amount of comfort that nothing else has been found. Extensive work has been done since the start of the new year on moving to enable us to move forward, which includes, which I'll come on to later, a new structure and some new people being promoted into the top echelons of the organization. The year-end performance, we also had a shortfall at the year-end from delays from partner agreements, the majority of which have now come through, and some commercial transactions, particularly land sales, which we pulled the plug on, having been chipped by a number of house builders as we went through December.
Open market sales were behind forecast, and that was the main reason, disappointingly, for a build-up of WIP and stock, which, again, I'll come on to later on. On the right-hand side of the slide there in purple, you can see a bit more detail on what happened in the South Division. Predominantly, 60% of the issues were on five very large housebuilding or previously housebuilding sites. All of the issues were on housebuilding sites. As it's been described to me very well by one of the members of our team in the last week or so, what happened in the South Division was basically a latent defect in our housebuilding business, because everything that happened was already there when we announced the strategy. Nothing that happened in the South Division was anything to do with the strategy going forward. Over to Tim.
Morning, everybody. Yeah, it seems like a lot more than six months ago that we stood up here with our half-year results. It's been a tough six months. Obviously, we've issued more trading updates than we would have liked, and we're disappointed with our full-year performance. Hopefully, we can draw a line under 2024 today, and I can take you through the numbers now. Greg's covered some of these areas already. Revenue was up 7% year-on-year. However, operating margin was down significantly, impacted by a couple of things. One was the impact of the South Division issues, but also we expected margin to come down as we transitioned to the partnership strategy model. What we didn't get was the compensating volume growth that we thought would offset that in 2024. Profit before tax and EPS both down 35%. There's some level of coincidence there.
The EPS benefits from the reduction in shares following our share buyback programme, but that's compensated for by a slightly higher tax rate in 2024. Reported profit before tax is down more significantly because of the exceptional costs that we've taken during the course of the year, which I'll cover in a later slide. Net debt came in in line with what we expected right towards the end of the year, but down on what we had expected towards the start, again impacted by the South and those delays at the end of the year. We finished the year with GBP 180 million of net debt. As a combination of those things, ROI was down at a level of 14.6%, as you can see there. That was a 25% reduction in operating profits and an 8% increase in the average capital employed during the course of the year.
Getting into some of the restatement issues. As Greg said, we've been through a very thorough, rigorous review year-end process, during which we've examined all of the issues in the South. What you need to do is you need to go back to each of the issues and identify the extents to which it could reasonably have been known before 2024. Having gone through that exercise, it was identified that GBP 20 million of the GBP 165 million total issue could have been known in 2023 or before, and hence is subject to restatement. The positive here is that the total cost impact of the South division at GBP 165 million is the same number that we said back in November and December.
What we've done is take that GBP 20 million and moved it from 2024 and 2025 back into 2023 and 2022, which means that 2023 is down by 11.8 from its previously reported number, and 2022 and before is down by the balance of 8.7. 2024's number, rather than being at the 250 that we talked about back in December, actually came in at 263.5, all due to the timing of the recognition of the South issues. For the H1 numbers, we will restate those numbers. We still need to work through all the details for the H1 numbers, and we'll report those in due course. As an indication, we expect that H1 2024 will come in at about GBP 120 million rather than the GBP 186.2 that we reported back in September. Moving to more usual stuff. The completions by tenure.
We had a shift to 73% partner funded, 27% open market in the year. As we've said many times, we expect a 65-35 split in the medium term and continue to think that's the optimal split. In years, it will vary depending on market conditions at the time. The partner market was more attractive in 2024 than the open market, and hence a relatively higher share of partner funded in 2024. You can see from the bar charts here that the biggest element of change in the year was in POS. The POS market remains active. Stephen will talk more about that in a minute. There was a substitution then from private into POS during the course of the year.
In terms of revenue, that split from partner to partner funded from open market means that the adjusted revenue growth in partner funded was 24%, and open market fell by 16%. The average selling price, perhaps surprisingly across the group, actually held firm despite that split. That is because, A, POS is the higher selling price within the partner funded area. Secondly, the POS average selling price grew by 8% year-on-year. That compensated for the switch from private into partner funded. What we expect in 2025 is a broadly similar level of ASP to where we are in 2024. In terms of the operating profit, gross profit down GBP 163 million year-on-year.
If you take that into a sort of summary walk, GBP 92 million of that is the issues related to the South Division, restated from the GBP 105 million that we previously said, as I've discussed. It's GBP 91.5 million due to that. We expected roughly GBP 80 million of margin impact from the strategy change. As we moved to the higher partner funded mix and repurposed some of our housebuilding sites, we expected a margin reduction. As I said before, we expected that to be largely compensated with volume growth. Although there was volume growth in the year and probably contributed about GBP 30 million of year-on-year profit growth from volumes, that was less than we expected and largely due to the delays in Q4. In terms of the cost base, we had neutral build costs in the year, subcontractors slightly down, materials slightly up.
We're expecting going into 2025 to see a low single-digit level of build cost inflation, 2% or 3%. The other thing that's changed, though, is that the overheads have shifted. In 2024, I don't know whether you'd describe it as a benefit. There were no bonuses, no LTIPs, and as a result, the overheads dropped. There were also some one-off benefits as we cut activity during the course of last year and got some benefits from that. An overall reduction in overheads year-on-year of GBP 45 million. We expect that to bounce back a bit this year, so we won't see the 2024 overheads level again in 2025, but we are targeting overheads to be about 5% of revenue across the group.
I think the other thing to say in terms of 2025 costs, as well as the 2% or 3% growth in build costs, we are seeing the impact of the employers' NI change, which I've said before is around GBP 5 million in the year. There is the impact of pay rises and just general inflation. Adjusted net earnings. We've seen finance costs go up year-on-year, GBP 95 million in 2024, driven by a couple of things. First of all, bank interest costs went up by GBP 14 million. We saw the average cost of debt up about half a percent through the mix of the facilities and the usage during the course of the year. The average debt, as I've said before, was GBP 698 million, so slightly less than GBP 700 million in 2024 versus GBP 586 million in 2023.
Some of that is related to the WIP build-up during the course of the year, but also it's due to greater seasonality. We saw a higher proportion of volumes in June and December for a short period of time, and we saw more WIP build-up in the intervening months. Previously, I've talked about average month-end net debt, but I've been asked lots of questions about average daily debt. I'm not going to talk about average month-end net debt anymore. We'll just talk about average daily debt, which is a more helpful guide for calculating interest costs. The other area within interest costs that has an impact is the other finance costs related to IFRS 16 in particular and land creditors.
As land creditors move from pre-2023 rates to post-2023 rates, we see that flowing through the P&L and hence an increase in the other net finance costs during the course of the year, which we expect to sustain into 2025. The tax rate was 28.3%, which is the corporation tax rate of 25%, and it is the 4% of RPDT less the savings that we get from our work where it is more contracting in nature and RPDT is not charged. Okay, building safety. A slightly more complicated area here. What we did during the course of the year was work through and assess all of the claims in some detail. We are making good progress with the assessment of claims and have now assessed over 90% of all claims. The conclusion, as we indicated back in November, is that there would be a revision of the provision.
In terms of the final quantification, we found an additional 41 buildings that need to slot into the provision. Those 41 are a combination of things that have been covered by the increased scope, so defects adding to the fire safety elements and just more claims that have continued to come through. Now, in terms of the volume of claims coming through now, that's significantly dropped, but there was a lag in terms of some of the claims coming through. There are more claims in 2024 than we would have expected. Also, what we found is, as we've been out doing building work, that there has been an extension of the amount of work that we've had to do. Sometimes you pull off the cladding and you end up finding you've got a heating issue that you've got to deal with or a leakage or something.
The scope of work actually being performed on site is slightly greater than we previously had. Taking all of that into account, 41 extra buildings, GBP 117 million extra cost. The next thing is, if I just walk through the left-hand side and the movement on the provision, we've reduced the provision by GBP 20 million because a provision that we previously had for building safety issues in a joint venture are now being recorded in the joint venture. That's just a straight transfer from our balance sheets to the JV balance sheets. We unwind the discounts because it's a discounted provision. During the course of the year, we have completed 28 buildings. We are on site on a further 43 buildings. The total utilization of the provision in the year is GBP 68.8 million.
Hence the overall provision you'll see on the left-hand side has jumped up by GBP 35 million. On the right-hand side, you see the costs that go through the exceptional line. The first three I've talked about, the provision recognized in JV is neutral. You move it from the provision to the JV accounts. We've also got an impairment of GBP 16.8 million. Last year, I talked about the issues around second staircase. The second staircase new regulation that came in, we took an extra provision last year because this significantly adds to the costs of high-rise buildings, and it also reduces the revenue that you're going to get on those high-rise buildings because you've lost a whole area of floor space that would otherwise have been sold. Working through that in more detail this year, actually, the impact is greater.
The impairment to schemes in London has increased by GBP 16.8 million. Against all of that, more positively, the level of recoveries has been good in the year. We've recovered GBP 27.2 million from third parties to contribute towards our costs of remediation, and hence the overall building safety costs, GBP 114.7 million. You may be more interested in the cash. The cash outflow in the full year was GBP 36.8 million, which is broadly the utilization less the recoveries. We expect, and that was a lower level than we expected. You might remember in the first half, we had a relatively low level of spend. It picked up during the second half. We expect that to sustain through to 2025. Expecting a net cash outflow of GBP 60 million-70 million in 2025, which is broadly in line with previous guidance.
Moving to the bottom part of the P&L, you can see the building safety exceptional of GBP 114 million. We had GBP 14 million related to restructuring, integration, and other costs. A big chunk of that is professional costs associated with some of the issues that we've had to tackle during the course of the year. Amortization has dropped as one of our assets has reached full write-down, and the tax adjustment gets us back to the reported profit of GBP 74 million. Let's cover cash flow next. Our overall net cash inflow before shareholder distributions was GBP 80.7 million in the year, which compares to a GBP 91 million outflow last year. Actually, year-on-year, that's a GBP 170 million improvement in cash flow. If you're working from left to right, we open the year with a net debt of GBP 88.8 million. The adjusted PBT, you've seen, was GBP 263 million.
We've had an overall WIP movement of GBP 35 million of investments. You've heard us talk about the GBP 200 million of excess WIP. When we're talking about the GBP 200 million of excess WIP, which Greg will come back to a bit later, really what we're focusing on there is the late-stage WIP that's just got too high. This is stock from roof through to finished stock. At the year end, the value of that was around GBP 440 million. What we're saying broadly is that we want to halve that. We think that we've got ahead of ourselves in terms of the build rate compared to the sales rate, and we think we can target a reduction in that level. Keeping going then, land creditors are a crucial part of our strategy. We continue to buy land on deferred terms, and land creditors have risen by GBP 77 million in the year.
Offsetting that, we've got an increase in partner-funded receivables of GBP 85 million. What these are, these are amounts owed by partners or work that's yet to be billed on partners. We're at a sort of normal level. 2023 was somewhat suppressed because we had early payments from some of our customers towards the end of 2023. However, we will still be looking to improve our receivables by getting the right contractual arrangements in place. This number is impacted by the number of contracts we have with milestones rather than with monthly valuations. The monthly valuations, you'd expect a lower level of receivables. We're looking to see to migrate more and more of our business to monthly valuations rather than milestone-based billing. I would cover all of the other areas other than, say, payables reduction is down.
The building safety number we've covered and the taxation number was relatively small as we got the benefit from some of the exceptional charges during the course of the year. Our shareholder distributions then, the reason why net debt has gone up, shareholder distributions was GBP 172 million. You know, there's a degree of lag in the shareholder distributions because we effectively GBP 150 million of that related to earnings from the previous year. We'll come back to shareholder distribution plans later. Right, we've continued to buy land through some of the challenges we've had in the second half of the year. We've stayed active in the land market. We bought 7,000 plots in the second half of the year. All of the land that we acquire goes through our investment committee to ensure that it's consistent with our strategic hurdle rates.
We've said before that we want to reduce our overall land bank. With our partnerships model, we can get away with a land bank of less than four, and we've seen a small reduction during the course of the year in terms of our land bank years to 4.4. Within the land bank is the former house building land bank. We still have within the 74,000 plots there, 19,000 plots that were formerly part of the house building land bank. Within the 30,000 plots that we had at the time of the strategy change, around 9,500 plots of those were earmarked for pre-selling, and we pre-sold 5,900 plots . In terms of what we got left within that 19,000 plots we've got about 6,500 plots left of private homes.
Our plan is currently to sell those out as private homes, but one of the areas that we are continuing to explore is whether for the cash benefit, we might accelerate those through some deals of some variety. At the moment, our plan is to continue to, or our numbers reflect the need to still sell them as private homes, but it's one of the areas that we're reviewing, and Greg will cover that later. Strategic land, we topped it up a bit during the course of the year. We've got 76,000 plots. This could be a key opportunity area for us. With the change in the planning rules, it might mean that we get more mobility out of our strategic land bank, and some of those can be converted more readily. It is an area we're looking at which could significantly help our growth.
Capital employed fell since the half year, but up year-on-year. I've covered most of the movements in the cash flow section. Other assets, which has gone up, include the partner-funded receivables. That's the biggest driver of the growth there. You'll see that actually WIP is down year-on-year, but that does mask the fact that within WIP, we've had some impairment of WIP as a result of the South Division issues. Covering financing, primary focus for the year is cash generation. I won't steal Greg's thunder talking about what we're seeking to do there. In terms of numbers, we are looking to reduce our net debt levels during the course of the year. We're looking to get our net debt at the end of 2025 to be better than the net debt at the end of 2023.
Steady reduction during the course of the year, probably more second half weighted. Expecting our average debt levels to be slightly ahead in 2025 compared to 2024. We've been asked some questions about our covenants, and hopefully putting the numbers up here gives the reassurance that we have a very good level of headroom against all of our banking covenants. We've got very good relationships with all of our banks. We've been speaking with all of them recently in advance of a discussion to kick off an extension of our existing RCF term loan, which currently expires towards the end of 2026. We're looking to move that time period out, and we'll start that discussion with some of the people in the room here over the course of the next few weeks. In terms of liquidity during the year, we manage this very closely.
We have very good visibility of cash, and we have maintained a comfortable buffer during the course of the year. Finally, in terms of capital allocation, no change to our strategy, no change to our capital allocation priorities and our capital allocation hierarchy. What we have decided to do in terms of distributions is that we will continue to pursue the GBP 130 million program that we announced in September last year. Of that GBP 130 million, we have done GBP 21 million by the end of the year. We have done about GBP 38 million now, so we have got GBP 92 million left to do, and we expect to conclude that GBP 92 million at some point in H1 2026. In terms of a final dividend for FY 2024, in light of the disappointing earnings performance, we have concluded that we are not going to issue a final buyback, but we will continue with the existing program instead.
Of course, we'll continue to consider future ordinary distributions in due course. That's it for me, Stephen.
Thanks, Tim, and good morning, everyone. Good to see you. I'm going to spend the next few minutes running through a market update, in particular, looking at the partnering market and how we expect that to evolve over the next year. A pivotal year for the government, setting the context for delivery over the next five years. First, let's just look out the rearview mirror. We've seen continuing momentum in our differentiated partnerships model over the last year, despite the transition to a new Affordable Homes Program, hesitancy around the autumn statement, and uncertainty around the wider movement of interest rates. We've been able to transact with partners.
It was particularly focused on the second half of the year, but we've been able to transact with partners GBP 3.4 billion of contracts. That's 220 deals having been made, creating nearly 14,000 homes. Those 14,000 homes sit within our total contracted position of around 55,000 homes. That does include homes that are in defects, but it shows the continuing momentum during that period. If you look at the psychedelic pie chart in the center there, you can see that segmentation actually is representative of the 70 partners that we've done deals with. That diversity of partner is really important. We know that the affordable sector has, in terms of its financial headroom and its exposure to, and its capacity to deal with exposure to downside risk is reduced.
There are pressures on there, but we are working with partners with sustained capacity, and that's really important as we move forward. That includes 10 new partners, as you can see on that slide. Just coming down to this pie chart in the bottom left-hand corner, you can see there, as Tim has said, we've had an increase in our PRS partnering. 21% of the homes we completed last year were for the growing PRS market. That diversity also applies geographically. We have been involved in schemes from Cornwall up until Northumberland over the last year. That map is representative. Do not count 220 dots on that map. It is a map that we have used in engaging with government to talk about the value of our partnerships business and how that works across all housing markets.
Part of that value is working with our PRS partners to attract institutional and international investment. Let's just spend a moment on that PRS market because it's quite interesting. We've seen growth in that market over the last year. Savills have issued a report saying it's a high watermark for PRS investment in this country last year. GBP 5.1 billion was invested. The market is characterized by second half deals. If you look on that graphic, the lilac or purple, I can't quite decide what it is, part of the histogram on the right-hand side is quarter four deals in the PRS market. You can see that tendency towards it being a second half transaction process. Also, one of the interesting characteristics of that market is the single family market has really grown over the last three years. It now constitutes 50% of the PRS market.
That's the sort of work that we're doing with Sigma, with Leaf, with Gatehouse Bank, where we're able to place our product, our two-story and three-story homes into that single family market. We see new entrants. We're engaging with a number of funds and a number of new entrants to that PRS market. Everybody wants scale because that's where the efficiency comes from. It's really important here to highlight that difference. As a partnerships business, we're not involved in single PRS one-off transactions. We're looking for continuity and consistency of product, consistency of engagement with our supply chain, and that reaps benefits for our PRS partners because that gives them consistency and effectiveness in their operational costs. Both of us benefit from that, and that allows us to support the margins that we want to achieve in the PRS market.
Now, the government are absolutely clear on the value of PRS. It's really interesting that the recognition that the PRS market has profoundly professional management. So, it's very good management track record. They're investing in areas of deprivation. A surprising percentage of the investment has gone into brownfield land and areas of deprivation. Also, the price points have widened. You can now rent homes on a wider basis than was previously the case. That's freeing up other housing opportunities into the market. Think about it. That 1.5 million homes that the government has an ambition for, it's not just open market, it's not just affordable. It is also getting the PRS market functioning very well. The open market demand over the last year. Currently we're seeing sales constrained by affordability, but the position is a stable one.
What we have seen positively is a significant uptick in our website traffic in the first few weeks of this year. That is up 85% year-on-year. Partly driven by our contact center approach, a real improvement in the quality of our leads. Our high intent leads that are moving towards having an appointment to discuss purchasing a home, those are up 13%. We are optimistic that we will see further recovery during this year as interest rates move, but also as the requirement to purchase new homes increases. We are not including that in our forecast, though. Our forecasts assume a stable position in terms of sales year-on-year. Important here, we have fewer sales outlets. Our sales outlets have gone down. That is a planned approach as we transition to the partnerships business.
That means we need to be more effective in selling from those sites. We also have larger sites, so the volumes are there. We are very confident in terms of the level of inquiries that we have seen over the first 10 weeks or 12 weeks of this year. Our new sales initiatives and our investment in our sales platform is designed to really reap benefits, and we are seeing that already. We have implemented a national contact center. That is really working, and that is harnessing the investment that we have put in our digital platform as well, with our national marketing campaigns coming through. We have instigated a platform of training and behavioral training and mystery shopping across all of our sales teams. We are using incentives up to 5% through a national campaign, all helping to drive sales as we go forward.
I mentioned this was a pivotal year for the government, and this timeline, I think, gives a useful chronology of what's happened. Just pinch ourselves, it's not actually a year that this is this timeline. It's been incredible what the government has achieved. I have to applaud the government. I cannot remember in, sadly, three decades of involvement in housing, a government engaging with the sector as well as this government has. It is absolutely listening, and that's been very positive indeed. You can see there two or three key events. The additional GBP 500 million that was announced by the government to support additional affordable supply, I'll come back to that in a moment. That was followed by a further GBP 300 million or GBP 350 million if you include an initiative for temporary homelessness.
Most importantly, yesterday, the government announcing a further GBP 2 billion as a bridge as we transition from one Affordable Homes Program, 2021-2026, to the next one, 2026-2031. Really important in maintaining momentum and absolute evidence of a government listening. What does that mean for us? If you look at those pink arrows there, we're absolutely involved in talking to our partners about frameworks. I mentioned earlier that we're delivering our PRS output in frameworks with Sigma and Leaf and with Gatehouse Bank. We want to have frameworks with our PRS partners on a more established footing than they've been to date. We're busily working on that, trying to align our opportunities with partner ambitions and doing that in the context of getting ready to procure the new affordable homes program by the end of this year.
We expect that further momentum in the second half of the year coming through as partners are looking to use their capacity and align that to what they now have visibility of in terms of grant funding. Really important piece of work and a piece of work that we're well on with and engaging with our partners to deliver. Now, the government has that focus, and here's a graphic that shows why. You can really see, and this is a 2023-2024 start. Look how those starts are down. They're down 39%, 2023-2024 on the year before. The government can see coming down the track, not only is there an absolute pressing need for affordable housing that we've talked about before, I don't need to go into now, but the conditions for delivery have been seriously constrained.
That is different to our experience in Vistry, where as a result of working with our partners, as a result of our model, as a result of our investment, we've been actually lifting our output. 52% of our output last year was affordable housing. If you look in London, London brings that into a stark contrast. In London, there were just over 3,000 starts in 2023-2024, down from 20,000 starts the year before. 47% of those starts were with Vistry. It just shows how our approach is absolutely aligned with the government's approach going forward. In September, we asked for some supply side and some demand side initiatives from the government. Here's a scorecard. The government is absolutely approaching its policy for creating a transformational change in our planning system.
With the publication of the planning and infrastructure bill two weeks ago, you could really see that coming through. Again, have to applaud the government to listen to the sector, identifying the barriers on the supply side, bringing public land forward and looking to free up the planning regime in all the ways that are listed there, which I do not need to go through. In the summer, we would expect a further report. We have had the initial report, but a further report in respect of the new towns and the work that Sir Michael Lyon's task force is doing. That will be interesting in terms of bringing through opportunities as well, although those are a bit further out. We had the recent announcement about investment in labor.
We all know that we need to invest in skilling our labor force, and that's a key area for focus as well. Really positive movement on the supply side and on the demand side, demonstrating that commitment. That additional GBP 2 billion coming through, which will facilitate the delivery of our forecast and then allow us to get an uptick in pace during 2026 as that starts to flow through. Incidentally, one of the conditions around that GBP 2 billion is that it's going to deliver homes within the lifetime of this parliament. This is not about long gestation schemes. That investment is going to be focused on schemes that are going to deliver within the next three years. Further steps needed in terms of supporting the affordable sector.
It is really important that we see a sensible rent settlement and rent convergence coming through, the policies that will build capacity and make sure that we have got a financially robust purchasing sector. It is really important we see that. We are preparing ourselves for more work with local authorities. The freedoms for local authorities to be commissioning homes is really important. We hope that there will be a continuation of support for first-time buyers. Shared ownership is a really effective tool to support entry towards home ownership, particularly outside of London. We are seeing real demand for that, and hopefully part of the government's grant funding and its program will be able to support investment in shared ownership.
In terms of partner momentum then, looking forward, we've had a relatively quiet quarter one, which we did anticipate, and we expect activity to step up as we transition towards that program. We've got real evidence of that with the momentum with the announcement this week. We're assembling bids with our partners already. We've written to our partners to discuss how we can work with them on the opportunity to deliver that. We've already, under the earlier announcement of GBP 500 million, and we're very confident that we'll receive an initial allocation to deliver on six sites as a strategic partner of Homes England.
We're negotiating those new investment partnerships with our PRS partners, and we've seen that continuing strong level of interest in the PRS markets, funds being raised by our partners as we speak in order to look at portfolios of delivery with them and get that consistency. I mentioned there's still interest amongst partners with capacity for mixed tenure joint venture, particularly participating in placemaking schemes where we can really make a difference and we can create a range of tenures. Our partners, as long-term asset holders, are obviously interested in future-proofing their homes and in the quality of their homes. Our ability to deliver through Vistry Works Factory and capture the investment that we've made in that platform is really aligned with what our partners want and what the government wants as well when we're looking to long-term quality.
Those key things around delivery, engagement, and quality absolutely are the overarching approach in terms of how we work with our partners. They are what our business is about over the next 12 months, fully engaged with MHCLG and Homes England on delivering that quality and driving improved customer service. We are accountable to our partners in terms of the quality of what they get. I am going to hand over to Greg now, who will highlight how we are going to deliver that operationally.
Good. Thanks, Stephen. All exciting stuff. I have no doubt, even before I touch on these next few slides, that we have got the right strategy in housebuilding, which is completely aligned with the Labour government. Everything that Stephen said there is going to start coming through. The government so far have been talking rhetoric about housing and affordable housing.
They've done more than rhetoric on planning. They've done some good things already. Rhetoric was what it was on affordable housing until yesterday and the GBP 2 billion investment. We are now an incredibly well-placed organization to go forward, having had a good kick at the arse, if you like me particularly, over the last quarter of 2024 from a latent defect, as I continue to call it, from our housebuilding legacy business. The key priorities that said for 2025, one, first and foremost, cash generation. Secondly, embed the new leadership team and much leaner structure into place and standardize and enhance the control environment so the issues that happened in our housebuilding business in the South Division do not happen again. Cash generation.
We estimated at the end of 2024, as Tim said, from roof level to completed stock, we had GBP 200 million, I think, too much investment at that level. That will be released during the course of this year through open market sales. We have weekly executive calls now on monitoring stock levels like I've never seen before, and work in progress controls are really tight, much tighter than they were. The housebuilding land bank release has been slower because of the sluggish housing market, as well as the issues encountered in the well-publicised South Division.
Site-by-site strategies to accelerate capital release are under review, particularly the top 30, and options being considered, as Tim said earlier, are discounting, which we've pretty much got covered in our forecast, some land sales if they come along, and some bulk sales, which the bulk sales and land sales may have some margin implications through the year. Embed the new leadership structure. As you can see, it's much, much leaner than it was at the, particularly when we announced the strategy back in 2023. It's been put in place towards the end of 2024, and it's fully operational now. We've reduced the reporting layers to create greater transparency and agility. Importantly, and this wasn't the case during 2024, all of the operational leadership team in Vistry are all partnerships background. Nobody from a housebuilding background at that level is left.
have mandated five days a week working in the office or site for all of our business units. That was done six weeks ago and has successfully been incorporated. We are currently going through a right-sizing program, particularly in relation to the ex-housebuilding business units so that they are set up in exactly the way as some of our best practice partnerships businesses, all of which, I will accept, should have been done much earlier, but it is being done right now. That is quite an extensive right-sizing program. Standardization and enhancement control environment. A clear message of compliance has gone out to all of the business units. All 26 business unit boards have been spoken to, and there will be a zero tolerance approach going forward. Life-of-site procedures have been updated to ensure that we have the best consistent approach based on best practice across the whole group.
As Tim mentioned earlier, we've got a new investment committee, and that deals with all investments that we make, particularly land investments. That has been busy through the year as we continue to buy land in what is a soft market still. Investment in additional assurance capability at divisional regional level, that is in our commercial teams. Some independence has been brought into every monthly CVR that takes place. Cost Value Reconciliation is ratified independently. Our systems harmonization project will be pretty much complete by June of this year. That is all there. With the announcement yesterday of the GBP 2 billion injection of cash into affordable housing, which is the first real new injection of cash into the affordable housing market since we announced the strategy, we are now positioned to basically, here we go.
The conversations we are already having with housing associations led by Stephen are immense. That GBP 2 billion follows on from the GBP 300 million and GBP 500 million introduced over the last six months. We continue, obviously, to be focused on open market sales, and we are monitoring the market for further stimulus that is required. We are standardizing all over the group our house types, which are enhancing quality and driving efficiency. I cannot explain enough the importance of having a timber frame manufacturing facility as a partnerships business. We are expecting to increase the output from our timber frame three factories by 50% during 2025. That is 2,900 timber frame panels to 5,000, 5,000 houses during 2025, more floors. We did no roof trusses during the course of 2024, and we expect to do about 6,000 homes roof trusses during the course of 2025.
Exciting times within our timber frame side. As Stephen said, I can't explain enough how much that aligns with our partners, what they're looking for from our houses going forward. Our medium-term operating framework and targets. This is exactly the same as what we announced back in September 2023. All we've done simply is remove the timescales. We're looking at revenue growth, 5%-8% growth per annum. We're looking at a tenure mix of 65% partner funded, 35% open market. That's predominantly what we've been buying our land on over the last 18 or so months since the announcement of the new structure.
A less than 5% overhead of revenue, a land bank of at or just below four years, which is all we need with our partnerships model, and all land as it has been for quite some time bought on deferred payment terms. Our medium-term targets remain a 40% return on capital and a 12% operating margin, as a number of our partnerships businesses have done for the last two years. This is not pie in the sky. Our partnerships businesses, in some cases, are already doing it. Current trading and outlook. The forward order book is at a healthy GBP 4.4 billion, and that represents 65% of forecast units for 2025. That is a good position to be in. Partner funded activity is expected to step up as we go through 2025.
That's the GBP 800 million announced prior to yesterday in top-up funding, and delighted with the GBP 2 billion worth of affordable housing grant that's just come through yesterday. That is exactly what the sector and Vistry in isolation. We're obviously the biggest housebuilder, so we have a decent say, and we do have the ear, I believe, of the government, exactly what we asked for. We didn't ask for three. We asked for GBP 2 billion to be brought forward, and that's exactly the number that's been done. Again, emphasizing what Stephen is saying, that the government definitely are listening to us. We expect partner funded volumes in 2025 to be at a similar level to 2024, with a greater second half weighting, obviously, because we've only just had the GBP 2 billion announced.
That will, you know, something might come through for the half year, but the majority will come through in the second half. Open market volumes are expected to be at a similar level to 2024 from a reduction, planned reduction, because obviously we're coming out of housebuilding in sales outlets. We expect low single-digit build cost inflation in 2025. That will be the first year out of three now that we're expecting some inflation, but we'll be mitigating that where possible, particularly on our partnership sites. We expect to deliver year-on-year progress in profit in 2025. That's a better statement than we said in January, because the profit at the time was GBP 250 million, and now it's up to GBP 263.5 million.
That is higher than we said a couple of months ago, with a greater half to profit weighting than in previous years for obvious reasons because of the new funding that has only just come through. I will finish off on a positive note. We continue to be absolutely committed to our differentiated partnership strategy and really do welcome the government's intervention of yesterday with a very, very welcome GBP 2 billion worth of additional funding, which will provide about 18,000 homes. As Stephen said, they want that spent now. That is what they have actually said to us. You know, they have put in it during the course of this parliament, but they want that spending now. On that point, we will, between the three of us, take any questions from analysts in the room. Do you want to go? I think Aynsley probably just had his hand up first. No, yeah.
Do you want to say, sorry, you need to say your name and where you're from first, please?
Yeah, thanks very much. Aynsley Lammin from Investec. I think I've got three, actually. Just first of all, on the H1, H2 split, just a bit more clarity around the weighting you expect there. Is it presumably the kind of recovering H2? Is that very much the kind of funding allowing you to sell some of that kind of completed stock quicker than you would have expected without the funding? Question one.
No, that's mainly coming from the GBP 2 billion and the GBP 800 million previously announced coming through in the second half of the year. We expect private sales to come through, but those private sales probably will be at a lower margin than they will be in the second half of the year.
Do you want to add anything to that, Tim?
Yeah, we always have higher weighting of private sales in the second half as well. Volumes-wise, there will be a weighting towards the second half, but also margin-wise. The impact of the cost issues from last year and the reductions in the margins will weigh more heavily on the first half of the year. We will get the operating leverage benefits in the second half of the year, as with the higher volumes, the fixed costs are more covered. We would expect a margin increase as well as a volume increase in the second half.
Okay. Second question, just on the medium-term targets, obviously keeping the margin and the ROI target. The medium-term kind of capital employed expected around GBP 2 billion still.
Is that GBP 800 million that you've previously mentioned still a kind of realistic target over the medium term?
GBP 800 million, yes, it is, but we're just not putting a time on it.
Okay. Last question, just what you expect the land creditors to run out maybe this year and into next year?
I think it'll go up. Obviously, it all depends on how much land we're going to buy in the second half of the year and the timing of the landing, the timing of the acquisitions. I'd expect it to be slightly or similar sort of levels in the half year and then grow in the second half because we'll buy more land in the second half of the year. Whether that's, I don't know, GBP 50 million-GBP 100 million more by the end of the year, something like that.
Is that around that GBP 800 million?
Yeah, something like that.
Yeah. Thank you.
John, go on. Just hand it to Gregor.
Thank you. Gregor Kuglitsch from UBS. Can I ask on the comment just to clarify on the average debt reduction? Didn't quite catch what you were trying to say. Maybe give us a sense how quickly you think you can get that, I think, GBP 700 million odd daily average down this year and then perhaps next year and what you're assuming in terms of distributions to shareholders in that, please. I guess more broadly, if I sort of look at the gearing levels, so average debt, land creditors, there's some helpful disclosure on the JVs. Appreciate that in the appendix, I think.
Just give us a sense of what do you think the sort of group balance sheet structure should be ideally in a few years' time once the business sort of settles down.
Okay, so let's start with the average debt profile. The first half of the year, I'd expect our average debt to be higher than it was in 2024, largely because we're starting the year with a higher debt position. We're GBP 90 million higher opening debt than we had last year. The cash actions that we're taking will be more weighted towards the end of the first half and into the second half of the year. I'd expect the first half average to be higher and the second half average to be lower as those cash actions come through.
We see that profit weighting in the second half translates into cash weighting in the second half. The net of those two would be that we take our average debt levels down over the full year, but marginally. We have said that our year-end net debt levels will come down, and I have said to roughly 2023 levels. That is high double-digit net debt at the end of 2025. We would expect to get back to net cash at the end of 2026. I think for simplicity, what I would do is assume that that reduction in year-end applies to the average going forward as well. The sort of GBP 100 million reduction would see to average net debt in 2026 as well. Okay. In terms of the broader question around our balance sheet structure, we are comfortable with the idea that we carry debt.
We do want to have a flatter seasonal profile. We want to ensure that the banks, we're giving the banks what they need, and we've got the right sort of comfort there and feel confident that we'll get the extension. Going forward, if we can flatten out our profile, we're happy to carry some level of debt. We want to make sure that we're always maintaining a comfortable headroom at any particular period of time with our good visibility, comfortable with that. It is a question of that we'll have the debt versus distribution question. At the moment, in terms of shareholder distributions, we're saying, as I said earlier, we're focusing on completing our current program, so no final distribution. For the half year this year, we need to keep our powder dry, make that decision in September.
Given that we'll still be ongoing with our share buyback program with the GBP 130 million, it's probably less likely that we'll be adding further distribution at that stage. We'll be looking to get back to enacting our policy from 2026, which is to distribute half of the adjusted net earnings of the group.
Okay, so you're basically saying that this year, no distribution on top of the whatever GBP 90 left, but for the final, you're assuming you're going to start paying out, so cash out.
I don't want to jump the gun too much in terms of what we're going to decide, and the board will decide in September. The first priority will be to complete what we've already committed, and we won't have completed that when we come to the September announcement. It's unlikely that we'd announce something else in addition.
GBP 90 million still.
Yeah, in terms of the...
I was thinking for 2026 is the plan.
2026, come the final, if it all progresses as we'd expect and our cash has improved, then we'd expect to get back to some level of distribution in 2026.
Okay. In terms of a target average debt number, is there one in your mind where you should be?
I'm not going to quantify it. We will obviously keep in mind what our profit generation is and the cash profit generation and have a link to that. I don't want to box us in to a particular average debt number.
Okay, thank you.
Thanks, Gregor. Appreciate everything you've done. I understand you'll leave and so if I don't get a chance to say goodbye, all the best. I understand you're going to the buy side.
I'm looking forward to welcoming you as a shareholder very shortly. Will?
Thanks. Will Jones from Redburn Atlantic. The first, just as we consider the return to low single-digit build cost inflation, and presumably for the industry, that will carry on beyond the current year, just your level of confidence on existing contracts that you can weather that, and then on new contracts, the extent to which you're able to mitigate the risk with indexation or whatever else.
Just on that, like pretty much all housebuilders, housebuilders generally assume no build cost inflation because it will be offset by sales inflation. We've obviously been operating in a period for probably two years where we've had very little, if any, build cost inflation by the time you take into account inflation. On the partnership side, we're very, very confident.
We build in build cost inflation into our margins, into our appraisals, etc., etc. We are very confident with the orders that we're placing at the present moment in time, where we are still having subcontractors really wanting to come and work for Vistry because of the certainty that we're giving them with the work, because it's not market reliant once they get the job. We are getting some very good bids in and probably still seeing right now a little bit of deflation on new orders being placed. Not the same on housebuilding, where you can't give the certainty that we're definitely going to build these 200 plots no matter what happens. We are very confident we will see some single digit inflation on some of the housebuilding sites as we build out.
Thanks.
Second was just around discounts, I suppose, just giving that soft start to the year in the partner world. Has that changed the discounts that are being demanded? Is it still consistent, I suppose, on new contracts with a return to?
Yeah, with discounts from clients, housing associations. Now, we buy, so when we're talking about we buy the land, if a PRS provider, for instance, just pick a stupid number, wanted a 50% discount from you, it doesn't matter. That is the level we put into our appraisal. We either buy the land or not. Our appraisals are based on a provider price at that particular time coming through, and they will back to back the deal with us in normal instances, whatever that might be. If it's a strong deal, if it's a strong price, we've got a better chance of buying the land.
We've got lesser chance buying it if it's a silly price. We try and work with the housing associations and PRS providers that are in the best place to make us the best offer. The discount doesn't matter because we either buy the land or we don't. Where it does matter is as we come out of the legacy housebuilding land, which is all based on selling to Mr. and Mrs. Smith at GBP 300,000. If we sell it to Mr. and Mrs. Smith times 6,000 or so plots as we go forward, that's where we'll be. We have built in some discounting to force the sales to get that cash back or repatriated as quick as possible.
If we decided to do a deal there with a PRS provider and it was a 10% or whatever percentage discount, that would impact because we've not priced it on that basis because it was bought to be sold on the open market.
That last one is just around the numbers, maybe this year and next. Just to clarify, I think you talked about potentially accelerating some bulk sales or such like, and that could have margin implications. You'd still expect to deliver higher profits year-on-year if you stepped on that side of it. Would you, that wouldn't compromise that?
If we were to do some land sales, we'll have to look at that, but those land sales would generate a higher level of cash. It would be up on one, maybe down on the other.
On bulk sales, it's very, very difficult because I'll try and keep it simple. If you had a scheme of 200 homes still to be done on an ex-housing site, if the forecast this year has got 30 homes of those to be sold on the open market at GBP 300,000, if somebody came in and said, "I'll buy all 200 homes from you at a 15% discount," yes, we would get the cash in, but the revenue would go up because rather than building 30 homes, we'd try and build all 200 homes, and that would offset the actual profit to an extent, but the margin would absolutely come down. That all depends on the profile of what comes in and what gets offered. We have allowed for an element of discounting within our forecast on open market sales.
Just when we think about 2026 and early view, to what extent do you think that the issues you're working through this year are largely gone at that point, or do they still persist beyond the cost charges as an impact on potential profits in 2026?
Yeah, I think they're largely through now, and they have to be because we've just gone through a very extensive audit. We've still got a new leadership team. We've still got a much leaner structure which needs to work through. There's still a lot of work to be done. We're working through a right-sizing process at the present moment in time. The business is going through pretty much a big upheaval at the present moment in time, I would say, which is not a very good thing to say as Chief Exec.
We've probably done more in the last 12 weeks on converting the whole business to partnerships than we did in the preceding 15 months. That needs to work its way through. Whether it's everyone back to the office five days a week, etc., etc., right-sizing, which is going through at the present moment in time, there's an awful lot going on, and that will take through the year to come through. As we go into 2026, I think it's all behind us.
Thanks.
Morning. Glynis Johnson Jefferies. I've got three and a half. The first one, just in terms of the PRS, the 21% of PRS, how many of those were planned when you purchased the land, and how many were because there were bulk deals that came along?
I guess that leads back into that question about discounts because we've had one of your peers talking very big discounts and no longer doing PRS, another one saying actually the discounts are fine. That's just one question.
We'll take that. We'll take them one at a time. Do you want to take that, Stephen?
Yeah, yeah, I couldn't give you an exact percentage, but split. Undoubtedly, some of the work that we've done with our PRS partners is planned and was planned additionality. We talk about additionality as being additional affordable or additional PRS. It's additional sales. Sometimes we respond to a price point between PRS and affordable. Where there's less appetite for affordable, then we'll increase the amount of PRS.
I would say probably 60% of what we planned to do was PRS, and maybe 40% was looking at opportunities within the old housebuilding land bank.
Putting that into context, Glynis, I would say that the majority of the 40% unplanned was coming out of housebuilding, and that would particularly go down to the Blackstone, Leaf deals that we announced over the last 18 months.
Second one, in terms of forward sold, you are 65% forward sold going into the year. What would you think is the right level? Where would you like to be given the change of model?
I think the fact that we are 65% and GBP 2 billion working from old affordable housing programs is a strong position. I am delighted with the GBP 2 billion that has come in yesterday.
None of that is in our order book, and we will get a fair percentage of that. 65% standing here right now going forward would be good.
Even with a consistent affordable homes program, you'd still say 65%?
Because we performed pretty well during the course of last year working off scraps, I would call it.
Question three and a half. You talked about fewer number of sites. Does that mean, as we sit here, should we be looking for the sales per site to increase, or how should we think about how you're going to talk about the sites? Are they sites? Are they outlets? Are they brands? Just so we know what to expect.
Following on from that, having got my glasses out and looked at page 22, in terms of the size of sites, some of your flagship sites, particularly in the north, are actually relatively small. If the strategy is this much bigger delivery, much faster pace on site, is there some very substantial land investments that need to be done or land that needs to come in in the north in order to get the Vistry Group to the right level?
Just before I hand on to Stephen, I suspect in the next couple of days, we'll be announcing in the north a 900 unit plus scheme and a 700 unit+ scheme, Stephen. Some big ones coming through. Do you want to take that, Stephen?
Yeah, I'll just deal with the site element of that, Glynis. We've reduced our number of sites.
In full year 2024 compared to full year 2025, we expect an 8% reduction in our numbers of outlets. We are still going to be around the 187 outlets for this year. Yes, we are going to be improving the sale from those sites. That is part of the range of initiatives that I mentioned in terms of driving that improved sales outlet. We are seeing that come through already with the enhanced digital platform, with the impact of the contact center, with our focus on national campaigns, which is driving visitors to our website and driving inquiries and subsequently reservations. All of that is positive. In terms of the brand element, we are continuing to sell through three brands at the moment. We have about 25 sites-28 sites where we have some form of dual branding or, in one or two cases, tri-branding.
Where we've got Linden, Bovis, and Countryside Homes, we're limiting the use of Countryside Homes. That's really much more focused in east of London and where we need a third brand in order to deal with the products that we've got on a larger site. Having that three-brand approach absolutely helps us in terms of our confidence in lifting that sales rate as well.
Okay.
Chris.
Thank you. Morning. Chris Millington from Deutsche Numis. You mentioned some of those large PRS deals you've signed up. Can you just give us a bit of a progress update on them? How far through are we? How the Blackstone and the Leaf contracts are going? Just in a bit of generality. I'll do that at a time as well.
Yeah, they're all identified. They're all on site now. We're probably about 50% of the way through.
I'm looking at Michael. Yeah, about 50% of the way through.
And that would be on homes delivered and handed over?
No, it'd be on homes delivered and working. It's an overall contract. Yeah, yeah.
That's helpful. Thank you. Next one's just about that affordable housing chart you showed. It was really helpful to see the grant funded, the Section 106 side. Now, if I look back at it, it looks like the grant funded has actually held up pretty well through the period. It's 30,000-40,000 a year, whereas the Section 106 is down 65%-70%. Do you think some of this extra funding they've put in is going to either continue pushing that grant funding side, or is it likely to kind of help their finances and go back and help the Section 106? I'm just trying to understand it.
That looks the biggest falloff in terms of delivery of affordable homes, the Section 106. Does all this money go back into grant funded properties?
Yeah, it does. The fundamental, just to be clear for everyone, is that the grant can't be applied to Section 106 homes. There is a very clear difference. The grant is applied to what's called additionality. It is additional and beyond planning. One of the issues with Section 106 delivery for partners is if they've got scarce resources and they're investing in products and opportunities that they want, they're being more selective, taking a residual number of Section 106 properties on a site that may not be complete, may not have been designed to the standards that they originally anticipated, is less attractive. One of the problems with Section 106 delivery for the sector is definitely capacity within the sector.
There is also the fact that the purchasers of those affordable homes are being selective, and they want to make sure that the quality of product that they're getting is there, and also where that product sits in terms of placemaking. If you've got 20 affordable homes over here and you're going across a building site to get to them, that's not going to work very successfully. What does?
Just expanding on that a minute, keeping it very, very simple. That means if you're in the same area and we've got 20 Section 106 affordable homes to do a deal on, and A and other have got 20 a mile down the road, we'll be offering, as part of our additionality, another 30 homes or 40 homes to that housing association.
They're looking at us and going, "Actually, I can do 60 homes or 50 homes on this site. My management costs, the servicing, etc., etc. I'm going to do that rather than prioritize it ahead of that over there." That is one of the main reasons we've been able to keep our affordable housing revenue up. The housing associations are more likely to do a deal with limited funds and appetite on pure Section 106, where it's in isolation, than they will where there's an additionality offering next to it. Sorry, Stephen.
You should think of the grant in the context of how Vistry deploys that grant as an enabler or a catalyst. Housing association purchasers are much more likely to take 20 Section 106 homes if, added to it, are 30 additionality homes supported by grant because they can blend the grant across all 50 homes.
That's how we use grant. We use grant to not only deliver additionality, but it facilitates those Section 106 homes. We have a secondary advantage that mainstream housebuilding sometimes doesn't have in that we're working upstream with those partners on the product design and delivery. They're familiar with the product that we're offering and the quality and engagement around the delivery of it. That's the way that grant is used to lift Section 106 output.
Very clear. Last one, just quickly on open market. There's a reference to it being a bit better over the last four weeks. I don't know if you can put any numbers around it and whether or not you're getting any traction on price increases.
We're not getting traction on price increases, and we don't put numbers out there other than to say we've been encouraged by, as other housebuilders have been, with probably the last six weeks' worth of reservations. We're definitely seeing a spring bounce.
Thank you. Thank you.
Ami Galla from Citi. Just two questions from me. The first one was on the systems harmonisation approach that you talked about. You've obviously acquired businesses over the years. Is the back-end IT systems in one place today, or do you still work with different business units at the back end? The second question was just a clarification in the building safety levy. Is it right to understand that you get exemption for the affordable housing component, but you're chargeable for the rest?
That is correct. That is correct. And it's 50% on brownfield land. Tim, do you want to take the first question?
Yeah. We operate on a single ERP, which is called Coins, which is a commonly used system across the housebuilding sector. We've also got supplementary systems for our sales and for our financial planning that, again, everybody is on. The harmonization element that needs to complete this year is getting everybody on the same instance and the setup within that system. That process is being harmonized over the course of this year, with most of the business units being done by June.
Thank you.
You're right.
We haven't been because of the three acquisitions or bringing the three companies together. Clyde.
Thank you. Clyde Lewis at Peel Hunt. I think I've got three, possibly four. The tenure rent settlement, Stephen, that you obviously flagged, is the government listening to you on that?
If they were listening to you on the GBP 2 billion, and if so, do you think that's going to be announced at 12:30 today or sort of some idea of where you think we are in that process? Do you think it's going to be RPI plus one? That was the first one.
I'll deal with the first question. I absolutely have no idea what's going to be announced at 12:30 today. What I can say is that the sector as a whole has been really clear, and we absolutely have joined, articulated the case as well, that if the government can give a ten-year rent settlement, that obviously gives even more security than a five-year rent settlement. It's CPI +1% , by the way, not RPI. CPI +1% .
That gives confidence not only to housing associations to invest, but most importantly, to their lenders in terms of having a hedged business plan going forward. Now, governments have only ever given a sort of five-year trajectory. It would be great to have that ten-year confidence. Allied to that is a rather technical requirement for something called rent convergence, whereby the very different rents that are set across the sector, depending upon the age of properties and when they were delivered and under what regime they were delivered, has caused differential rent pricing across the sector. If we can have rent convergence, that will also build capacity back into housing associations and local authorities. The two issues are there's a government's already given a commitment that it will instigate the five-year clarity, but having ten years would give it even more, and rent convergence would be the two things.
If you ally that with this evidential focus on the affordable homes program, put the two together, then you really do start to restore the capacity back within the sector. I think that is more likely to come following the publication of the National Housing Strategy, which is going to happen at the same time. If you look at that chronology, we expect that to be at the same time or just before the public spending review. I think that's the point the government will announce it, but I may be proved wrong in two or three hours.
The second one was around local authorities. Again, it's another part that you're expecting a lot more activity. I suppose I'm trying to get more of a flavor around how you think that is improving and that is picking up.
Definitely over the last few months, you start with one offer, and then you think, "Hang on, there's a bit of a trend." We're definitely getting offers at the moment from local authorities to buy tranches of our stock around about the country on the back of no grant, but on the back of massively increasing Holiday Inn, Premier Inn, where they have a legal obligation to house homeless. They are now starting to look at it proactively as an investment. Why not buy X number of flats or houses? It does not have to be in their local authority area either. We can put people there, which is a morally better thing to do than moving them from A to B to C to D, which is what is currently going on.
The country, as we keep saying, has got a massive homeless affordable housing problem, and Labour are just starting to deal with it now. Local authorities, without any grant, are just starting to look at maybe there is more than one window skinny cap. Maybe they are getting some form of loan, mortgage. I am not sure of that yet, but there is definitely something going on that we are seeing more activity with local authorities buying stock or houses from us.
I was just running through my mind. We are actively involved in negotiation discussions with five local authorities in terms of delivering on more than one site in that local authority, if that is evidence of that appetite.
Next one was on PRS. You put up the chart again. They showed 2024 was the sort of peak level. Do you think 2025 will be another peak?
If so, how much do you think we'll see in terms of growth in that market this year?
I think there is, if you disaggregate the PRS market between multifamily, which tends to be high rise, and how that's been impeded by second staircase and now is consuming cash, with commissioning of much quicker turn, low rise housing, I think that continuation of the investment in single family, low rise housing has not reached its peak. I think that's going to continue. We know that our partners are very busily getting additional funds and that those funds are there. Global capital wants to invest in U.K. real estate. There's a real demand for it. People can see the sustained demand and the investment. If you've got scale, the real key is scale.
If you can achieve scale, and that involves consistency of product, then you can really make PRS work. The fundamentals of rental growth and demand will allow that to continue to grow. I think I'd expect the single family to not have reached its high watermark last year.
Just putting numbers in, Stephen said, I think I've got it right, 3,000 starts in London over the last,
In 2023, 2024.
Over two years. We did 47% of them,
47% in London.
47%. I mean, at the end of the day, I'm very happy to stand up here and say the strategy announced in September 2023, the strategy is absolutely starting to come through now with the government actually starting to allocate real money and acceleration into the affordable housing.
What has not been so good is the latent defect we had in the South Division, which was housebuilding. The strategy going forward, we have underlined that, is absolutely proven to be right.
The last one I had was on, sorry, was on the GBP 2 billion as to how quickly do you think it will come through? Is it 200 this year, 800 next, and then a billion?
I will say they have linked it to the existing program. Do you want to answer that, Stephen?
No, that is Homes England are heads down getting to the end of their financial year. We are not there yet in March. They have not come up from air to determine exactly how that is going to be deployed. The expectation of pace from the government and from the minister is absolutely clear.
I'd expect Homes England to be looking to deploy that very quickly. Key to it is it's not based on the new program, i.e., they've got to go through a procurement route. This is additional money that can be used as a bridge within the existing program. It's cut out by tape, so the systems are there to deploy that very, very quickly. I'd expect Homes England to be asking for, talking to partners and having discussions around likely opportunities and bids in April.
Thank you.
Thanks, Clyde.
Two over there, Alastair.
Alastair Stewart from Progressive. A couple of questions. First, I suppose it's for Tim. On slide 12, you showed fairly decent rise in recoveries, fire safety recoveries. Can you give some color on what sort of who these were from? Was it from insurers or supply chain and so on?
What's the direction of travel going forward? Very briefly, probably for Stephen following on from Clyde, there's a big jump in the Savills chart in Q4. Are you getting any indication, some Savills or your own soundings on what Q1 will look like?
Do you want to take the first one?
Yeah. In terms of where the recovery is coming from, they're coming from a combination of partners and sometimes the residents or owners of the buildings that we're doing the work on, where there's some degree of additional work involved. 2024 had an unusually high amount. We can't talk about specifically where the recoveries are coming from, but there was a one-off amount that was large within 2024. I think as a general guide in terms of recoveries, up to 20% of cost, that sort of level is what we'd expect going forward.
In terms of PRS, Alastair, we are actively talking to our partners about funds that they are accessing over the course of the next two months. I would not like to sit here and say what is in H1 and what is in H2. There has been progress in Q1, I think was your question. We have definitely been involved in positioning PRS deals in the first quarter. I expect that Savills chart actually shows a trend. It does tend to be second half focused. I suspect that trend will continue.
Okay, I think we have time for one more.
Morning. Thank you. It is Alison from Bank of America. Just one question on the credit facility, because it looks like in March, you have a new GBP 15 million facility secured. Can you just give us some background? What is the reason behind this? What are the terms?
Because if the aim is to deliver in 2025. Yeah, thank you.
Yeah, so this is an extra so all of our facilities by the USPP are with banks or a bank within our banking group. One of our banking groups, I do not know whether they want to be named, so I will not name them just in case. What we are trying to do with our facilities is use them for different means to manage short-term cash swings. This particular one enables us to keep less money on deposits. The more money we have on deposit, the less efficient our overall banking position is. The more we can move our debt on a daily basis, the better. What this allows us to do is that short-term tweaking, and we tend to use it for mid-month activity.
It is a very specialist requirement that one of our banks has helped us with.
Okay, I will thank you for that. I will draw a line, nearly 10:00 A.M., so that is an hour and a half. Thanks very much for your time, and have a good day. All the best.