Okay. Morning, everyone, welcome to Vistry's full year results presentation for 2022. Delighted to be joined by Tim Lawlor, our new Group Finance Director, and of course, Earl, who's been around for a long time, the Chief Operating Officer. The agenda. I will run through the full year performance and the group strategy. Earl and Tim will respectively run through the financials and operational update. The bad news is there's 26 pages that you're gonna have to listen to them. There you go, and I'll come back with an outlook and summary at the end. 2022. I've stood here a number of times over the years. This is the best year I can remember presenting.
You will have to go some way through the annual accounts to find any disappointing numbers, not just the headlines. It's a great set of numbers. On top of that, we completed the transformational acquisition of Countryside on the November 11th, and that follows pretty much a year of on and off discussions. These results were against a background of lots of people spending lots of time thinking or actually acting on buying Countryside. The integration is making excellent progress. We are ahead of schedule, and we've increased the synergies that we're expecting on an annualized basis from the GBP 50 million we set at the time of the acquisition to at least GBP 60 million per annum. What we expected in this year, 2023, from GBP 19 million to at least GBP 25 million.
Everything going exceptionally well. I'll come back to that at the end. Partnerships. Countryside Partnerships continues to deliver rapid growth in higher- margin mixed tenure completions. With those up 18% and the adjusted operating margin increased to 10.7%. That's ahead of schedule at the time when we bought Galliford Try. Stephen and his team have actually produced increased revenue to just under GBP 1 billion and increased the margin at the same time quite considerably. I think that's a fantastic performance. We have got against that, we quite often get accused, particularly by the house builders within the business of focusing on partnerships, and of course, we do that for a particular reason. We now have, and I don't think anyone should forget, a quality Housebuilding business.
We achieved 3% growth, which is the stated aim, and that's against a very, very challenging last quarter, with gross margin going up to 23.4% against 22.3% in the previous year. I think that's a fantastic result again. Well done, Keith, and to the housebuilding fraternity. The group delivered a 21% increase in group adjusted profit, a record, to GBP 418.4 million against GBP 346 million in 2021. We've got a really high- quality land bank, which basically doubled to 81,342 with the acquisition of Countryside.
We also have a strategic land bank of 65,813, which didn't double, but it's gone up by at least 50% because of the contribution from Countryside. Again, we thought at the time of the due diligence of Countryside, but definitely four months in, the Countryside strategic land bank is at least as good a quality as the Vistry land bank. We're really, really pleased with that. We had year-end net cash of GBP 118 million, which is well ahead of our expectations, down on last year, but ahead of expectations, as I say.
That includes a net cash outflow of GBP 95 million on completion of the Countryside deal, where we put out GBP 300 million. Countryside basically had GBP 200 million in the bank, which was well ahead of their expectations, well ahead of your expectations, and I think maybe gives you some idea as to the underlying strength of the business at the time of the of the completion. We also had GBP 35 million worth of share buybacks through the summer and GBP 139 million worth of dividend. Again, cash, excellent. Because of the cash, group return on capital increased to 28.3% against 25.5%. Partnerships return on capital was an embarrassing 77.6%, and housebuilding return on capital increased to 28.2% from 21.3%.
Great group results with great individual contributions from partnerships and housebuilding. We've made progress in all areas outside of all the financials. From the NHBC's perspective, CQRs, RIs, we're ahead of industry benchmark and ahead of where we were in 2022. We won more Pride in the Job awards than we've ever done before. On the HBF, the customer satisfaction score for eight weeks, 92.6%, ahead of the industry benchmark, as you can see, and ahead of where we were this time last year. That's again against the backdrop of the Countryside acquisition. The nine-month score I'm particularly pleased with. That's up to 79.6%. That's nearly a 10% increase on a year ago, and again, ahead of the benchmark at 78.3%. We carried out two Peakon surveys.
This is independent staff surveys, we're in the top 10% on engagement in the manufacturing sector. The progress we're making on Science Based Targets to 1.5 degrees is moving in the right direction. I'm particularly pleased that we raised a huge, thanks to our people, GBP 258,000 for our charity last year, which was PAPYRUS. Lovely photograph there of Earl doing what he does best, giving money away. We are a leading home builder with what I think is a unique market position. We've got three exceptionally strong brands: Bovis, Linden, and Countryside. On the housebuilding side, it's all about build quality, customer service, and controlled growth. On the partnership side, we're not just the leading partnerships business, we're the leading partnerships business by a country mile.
We've got an unrivaled track record. We've got incredibly strong relationships, as did Countryside, with Homes England, local authorities and housing associations. I've been involved in a number of calls with Stephen and with Mike with regards to Mike Woolliscroft, that is, who I'll come back to later on, talking to our partners with regards to the acquisition. To be honest with you, sometimes it was quite gushing. There is nobody out there who's, who was worried about bringing the two organizations together. They all took it as a positive and believe that the two coming together for various reasons will make the proposition even stronger. No issues there with any of the customers. I was, you know, one of the positives, but it was way down the list of the acquisition, was the timber frame manufacturing capability within Countryside.
In four months, I've become pretty excited about the potential of this timber frame facility or facilities, I should say. We have three of them. We're about to open in the second half of this year, reopen, the East Midlands huge facility that Countryside had. That will reopen in the second half of the year. We currently have a capability of 2,800 units per year. When this, when we reopen the East Midlands business, that will go up to 5,000 in the medium term. With changes in building regs this year and in 2025, I fully expect that the majority of the units that we complete after 2025 will be timber frame. It's great to have it with in-house, apart from high story in and around London, probably.
We've got not only a great strategic land bank, but the two parts of the business, Countryside and Vistry, with the strategic land bank, and again, I've been around a long time, the strategic land team are really strong, as is the centralized procurement team that we've got, which brings the strengths of both Countryside and Vistry together. More on that later. Countryside Partnerships. First thing I wanna say is we've got the ability to produce 12,000 units per annum from our existing offices. As you can see, I won't read all the strategy down the right-hand, left-hand side there, but it's all about aggressive growth in excess of 10% per annum.
40% return on capital, which we expect to get to at the time of the acquisition, we said in 2024, but we'll have a bloody good go at getting there this year. GBP 400 million of adjusted operating profit in the medium term with an adjusted operating margin of 12%. That's up from the 10% that Vistry just recorded. On housebuilding, controlled growth of 3%, an ability to produce 8,000 units from their existing infrastructure. 8 and 12. With our existing infrastructure across the group, we've got the ability to produce 20,000 houses per year without opening any new offices. On housebuilding, the medium-term target's 8,000 completions, 25% gross margin, 25% return on capital.
As you just heard, housing under Keith actually produced that during 2022 with a GBP 400 million adjusted operating profit. You can see already that the balance between Partnerships and Housebuilding's profits, which were up to last year, very much weighted to Housebuilding, are now becoming 50/50. We, what we expect during the course of this year, which maybe Tim will talk on, is probably a 55%, 45% split in profit. Very much a balanced business as opposed to a good Partnerships business, but a small part of the overall profit. The investment proposition, I'm not gonna read all of this out, but structural growth. You should look at us as a business that is growing.
You've got aggressive growth of at least 10% in Partnerships, but also growth in a much more controlled manner of 3% in Housebuilding. If we had aggressive growth in Housebuilding as well as Countryside Partnerships, we would fail. It's done that way around for a reason. I believe we have a huge competitive advantage against our peer group. We've got three very strong brands, Countryside, Linden and Bovis. In the land market, which is key, which has, I'm pleased to say, softened since the Truss budget last September, we have this ability where Housebuilding and Partnerships can bid for large sites together. I will put my money that we will always win that bid when they work closely together, and they work together properly. It's a real USP.
We are resilient with Countryside Partnerships, more resilient than a pure housebuilding business to any downturn. I was thinking about this last year. We obviously had a terrible downturn in 2008, where house builders made lots of money in 2007 and then lost lots of money in 2008. I keep getting told it's a cyclical business. 2008 seems to me a long, long time ago, and here we are now in 2023, and you just wonder why house builders are still valued in the way they are. We've had Brexit, we've had a pandemic, where housebuilding led the country back to work. We've had the Ukraine, we've had the Truss budget.
Housebuilding might not make as much money, but they still seem to be to going through things. I think that's a great credit to the sector and how disciplined they are in particularly with regards to acquiring land. I don't know how many more hits it will have to take before people look at it maybe slightly different and say, "How cyclical is this business?" Is it any less cyclical than many others? We have some fantastic sustainability credentials, and I'm pleased to say this is really led by Countryside. We've got zero homes being constructed, but all of the initiatives, 95% of them are paid for by our partners as opposed to ourselves. These initiatives are paid for by the local authorities and the housing associations that we're in joint venture with.
Of course, the benefits and learnings from that are spread over and passed over to our housebuilding business as well. On that, I will hand over to Tim Lawlor to run through the financials. I've just moved the microphone down a bit.
Oops. Morning, everybody. Yeah, I'm delighted to be here to present for the first time the financial results of the combined group. I'll take you through the most interesting slides now. If we start with the group results. I won't cover all of these again. We've, you know, Greg has covered a number of these points already. Maybe just pick out a couple of highlights. The first is on revenue, up 14.1% year-on-year, which excluding the impact of the Countryside acquisition, was growth of 8.6% year-on-year.
Greg's already touched on the operating margin increase, 100 basis points increase in operating margin, largely driven by good tight control of our supply chain and our cost management, and that more than being offset by some increasing costs being offset by sales price growth. The reported profit before tax you see has come down year-on-year, that's because of the impact of the exceptional items. We've taken exceptional items in the year for the fire safety provision, which I'll come to later, and for the costs associated with the acquisition. Two particular better-than-expected metrics there, net cash coming in at GBP 118 million, as Greg mentioned, and the return on capital employed of 28.3%. We're presenting our numbers this year with four segments. The two primary segments remain, partnerships and housebuilding.
Partnerships for the purpose of these numbers are the former Vistry standalone partnerships business. Countryside was reported separately for the seven-week period since the acquisition, which is always a quiet period for Countryside. Traditionally, Countryside's peak comes at the end of September. Within group items, we've got GBP 33 million of costs, which is broadly in line with the first half of Runight. From J anuary 1st 2023, we're gonna be reporting everything in the two segments of partnerships and housebuilding with still with some group on the side, and that integration is well progressed. Partnerships financials, I mean, a couple of things to pick out here. First is the switch from partner delivery to mixed tenure, which is helping to drive the operating margin increase that we see in this business.
Last year in FY 2021, it was a 54/46 split for partner delivery to mixed tenure, and it switched the other way around in 2022. The higher mixed tenure you'd expect higher operating profit margin, and you can see there that we've got 150 basis points improvement in operating profit margin in the year. The big target that Stephen Teagle and team were aiming for was hitting the century of operating profit of GBP 100 million, which despite all the challenges that we had in the fourth quarter with some of the hiatus there, was still achieved. I'm delighted the team there to hit the GBP 100 million profit target in the year. The return on capital employed, we'd expect that return on capital employed number to come down.
It's still at a very high level. The Vistry standalone business will be trending towards the above 40% number and with the acquisition of Countryside, which comes in at a slightly lower ROCE, we're targeting getting back towards 40% in FY 23, but we expect to deliver in excess in FY 24. In terms of a couple of the metrics there, you can see the mixed tenure partner delivery split there. Partner delivery dropped in 21. We do expect in 22. We expect some bounce back in 23, there will be some small growth in partner delivery in 23. In terms of the mixed tenure sales price, about an 8% increase year-on-year. Joint ventures you see is a higher average sale price that's driven by the geography of joint ventures, which tend to be more London based.
The average active sites has actually fallen year-on-year from 21 to 22. This was due to the closeout of a number of sites in 22 and the delay of some site starts towards the end of 22. We expect that particularly with the addition of Countryside in 23, that that number will increase. We're expecting it to be somewhere around 75 sites in 23. In terms of housebuilding, as Greg said earlier, good controlled growth with very strong margin improvements. The margin improvement was around good cost control, taking advantage of the market conditions, particularly at the end of 21 coming into 22 with strong sales. Some drop off in sales rate in the fourth quarter, which had minimal impact in the period of FY 22, but will have some knock-on impact into 23.
The return on capital employed there of 28% is really driven by that higher return. Capital employed was held relatively flat year-on-year. In terms of the metrics, you see the affordable split there has reduced in FY 2022, slightly higher mix of private in 2022. We expect affordable proportions to go back up in 2023. The average active sites were relatively flat, 2022 versus 2021. We expect a small increase in sites, in site numbers as a result of those sites transferring from Countryside in 2023. The average sale price increase was around 6%. Finance costs. Finance costs went up year-on-year, primarily due to the higher interest rates. There were three components of finance costs. The first is bank interest. Bank interest comes on our primarily our three facilities.
We have the U.S. private placement, we have the RCF, and we have the t-term loan. We expect that in 2023, we'll see a step up in bank interest costs, largely due to the higher interest rates, but also due to an increase in average month-end net debt. Average month-end net debt in 2022 was at similar levels to 2021, and 2021 was around GBP 130 million. We expect average month-end net debt to be around GBP 300 million-GBP 400 million in 2023. The second component of finance costs are those sort of accounting interest items, the unwind of land creditors and the impact of leases. That was around GBP 8 million in 2022. We expect that to go up with the acquisition of Countryside to about GBP 15 million in 2023.
The final component is the movement on JV interests, and the net impact is around a charge of around GBP 7 million in 2022. The overall picture, summarizing all of that for 2023, is that we expect that adjusted finance costs will be in the region of GBP 50 million-GBP 60 million in 2023. In terms of tax, the adjusted effective tax rate was 22.4%, above the statutory rate, largely due to RPDT, the Residential Property Developer Tax of 4%, which is burdened on the house builders. We expect in 2023, because of the corporation tax increase and the full year impact of RPDT for the tax rate to be 27.5%. On fire safety.
I mean, the first thing we'd say on fire safety is that we're committed as a combined group to ensuring that all places that have been constructed by Vistry and Countryside are safe places to live. We've signed the developer remediation contract in England, actually last week we signed the Welsh version as well. The final agreement was in line with the expectations that we had at year end. The management of that is now managed by an integrated and separate team. The integration's gone well. We've got good combined plans, work is starting. In fact, of the 304 sites that are identified, 59 have the work's been completed. Obviously, those were fairly light pieces of work on the first 59. What does that mean for the provision?
This is well flagged. We took GBP 71 million of provision in Vistry at the half year. The Countryside provision that came with the acquisition was GBP 191 million, and that included already the impact of the long form contract. The impact of the long form contract on Vistry buildings was a GBP 24.7 million additional. With some unwind in the period, we have a closing provision of GBP 309 million. In terms of the cash outflow related to that, I'd expect that the cash outflow will be somewhere in the region of GBP 50 million-GBP 60 million this year. Time to talk about a bit of accounting. The purchase consideration for buying Countryside was GBP 1.1 billion. There's two stages of the accounting that we had to do for this.
The first is to align our accounting policies. In aligning accounting policies, about GBP 87 million of inventory was written off because of the approach that Vistry take to take more costs upfront and take more costs to P&L upfront. This is a timing impact. That was the first adjustment. The second thing is to go through all of your assets and liabilities and to revalue them according to what's described as fair value. That process has been largely complete. We have a few more months to complete it. In theory, you've got 12 months from the date of acquisition. There'll be some minor tweaks to the assets, but we expect that this will be substantially the final position.
In terms of the Countryside combination, GBP 57 million of exceptional costs were taken, which was roughly split half and half between transaction costs and the costs of integration. To give you a sense then of what the business looks like together, this slide takes you through the completions and the revenue of Countryside and how it splits between housebuilding and partnerships. You see in the middle column there, that is the calendar year for Countryside 2022. Approximately 20% of the completions of FY 2022 will go across the housebuilding. The way we've done this is we've looked at the characteristics of individual sites, looked at their ROCE potential, looked at the nature of the site to determine where they go.
Roughly 20% goes into housebuilding, including all the sites that were referred to as legacy within Countryside. That 20% will drop to about 15% in FY 2023 because those sites transferring are more mature in nature. I won't take you through the balance sheet line by line, but clearly the net assets has risen as a result of the Countryside combination. One point of note is those first four lines in the tangible net assets section are effectively our investments in land and development, and that's worth about GBP 3.5 billion for the combined group. We finished the year with GBP 118 million of cash, which was a net outflow of GBP 116 million in the year. Just walking through from left to right, the components of that cash flow.
On the left hand side, net trading, GBP 605 million of inflow, that includes the receipts from developments and the construction costs and the overhead costs. That's broadly in line with last year. Land expenditure was up last year, from in 2022 from 2021, GBP 476 million outflow on land in the year. The Countryside acquisition, as Greg mentioned earlier, was around GBP 95 million of cash outflow. What we've included in that box is the consideration of GBP 300 million, about GBP 230 million of cash that came in with Countryside, and about GBP 20 million of cash going out on transaction costs. In terms of distributions, we distributed about GBP 176 million of cash in the form of dividends and buybacks in the year.
In terms of 2023, where we're going to with net debt, I mean, expect a similar profile in terms of trading. There may be slightly more land expenditure as land creditors unwind, and we're going to have the impact of the exceptional items. We'll have the exceptional costs of fire safety in particular, as I mentioned earlier, going out. I think we're looking at a net debt position at the end of 2023. In terms of the average month-end net debt, somewhere between GBP 300 and GBP 400 for the year. Finally, for me, the dividend. We have a capital allocation methodology in place and a policy in place which involves a 2x cover for dividend payouts.
We said at the time of the transaction that we would review our capital allocation methodology after a period of integration. We're now there and ready to give this some thought. We will take some feedback from shareholders over the next couple of weeks as we go around and meet shareholders, and we'll review this over the course of the summer. For the final dividend this year, we took the two times cover approach. Took adjusted earnings of GBP 325 million. We are paying in total over the full year GBP 162 million out in dividends. We paid GBP 50 million at the interim, therefore paying out GBP 112 with the final, which based on our increased shareholder numbers, gives us a dividend per share of GBP 0.32.
We will be paying that on the June 1st. That's it for me. Let me hand over to Earl for some operational stuff.
Good morning. Thank you, Tim. Much better than the last finance guy, whoever that was. Operations. Okay, partnerships. We now have, since November, the largest U.K. partnerships business, and the integration is moving at a pace. Leadership structure all in place before the end of last year, led by Stephen Teagle. We've taken the experience of Vistry and got the quality of Countryside. As Greg mentioned earlier, particularly pleased that Mike Woolliscroft, who was co-CEO at Countryside, has agreed to join us on a permanent basis. His experience in the group and leading our London partnerships division, very valuable. We have rebranded the whole business to be Countryside Partnerships, so using that quality reputation that came before right the way across the business. We did restructure again at the end of last year, so 19 business units spread across three divisions.
We're already benefiting from the scale of the Vistry Group, so changing specification, changing suppliers, taking advantage of the more advantageous Vistry terms and conditions. There's plenty more to come here. We are still renegotiating around 140 supplier contracts. It is a good time to be doing that. If the housing market is a little bit quieter, that is a good time to be negotiating with your supply chain. We're also looking to take the best of both organizations. In terms of process, whether that be taking an automated induction health and safety process from Countryside or putting in the Vistry systems, which we'll do rolling those out over the ex-Countryside business in the balance of this year. A few stats on partnerships. You already heard the absolute focus on return on capital.
The 77% for Vistry Partnerships last year was flattered a bit, as Tim said, in terms of the proportion of cash- funded partner delivery. We will trade in a bit of margin, release capital out of the Countryside business in order to deliver on that 40% return on capital target. Really pleasing everything that we have approved since November, hitting those return on capital targets for the group. A number of stats on there. I'll pick out just a few. Look, really pleased, five-star customer satisfaction in partnerships and a real step up in the nine-month customer satisfaction score. Employee satisfaction, we've only just done the Peakon survey, which given we've done two phases of restructuring and redundancy either side of the year end. The 7.5 is a very impressive score. You know, very good.
A few other key actions going on. We are close to finalizing our Countryside range of homes. We'll put those together with the Phoenix Range we've got for Bovis, the Linden Collection, so standard housing, getting all the cost benefits of standard housing, and they will all be available for timber frame. Particularly with the Countryside business coming in, a real focus on some of those quality measures that Vistry has held dear for some time. Focus on RIs, CQR is working with the NHBC and that nine-month customer satisfaction. Our high- quality Housebuilding business. Really have got a cohesive leadership team led by Keith Carnegie, which is invaluable during the current market uncertainties. You can see from the stats, 13 high quality, consistent businesses delivering right the way across the country.
I would pull out again the customer satisfaction, 92.9 five star, the step up again in nine months, but also, you know, very strong scores on RIs and CQRs. Right now, really important build sales, customer service working together in what is a more difficult sales market, and we are doing that very well. We're also working well with our supply chain, so we are getting cost reductions, certainly on our longer-tailed sites and new sites coming on. In terms of getting cost reductions, on those budgets, and as I've already mentioned, you know, in terms of through our material supply, yes, there's still inflationary pressure, but because of the bigger scale of the group, we are looking for that to be net neutral during this year. Of course, we are managing working capital very tightly. We are building what we can sell.
Again, I'll come back to the stats, the people. The employee satisfaction we have had a process through housebuilding, I would say, to right size the business. 8.7, an incredibly impressive performance in terms of that employee satisfaction and very low staff turnover during the year. We do continue to selectively invest in land in housebuilding, which is a good link to the next few slides. The map, the dots show the investment within Vistry last year. The purple are the housebuilding sites, the green are the Countryside Partnerships sites. Overall housebuilding, just a little bit less than replenishment in Vistry, but I'll come back to the addition from Countryside in a moment, and more than replenishment in Partnerships. Looking to deliver that growth, that 10% growth going forwards.
Overall, about 40,000 plots into the land bank from Countryside and over 20,000 plots into the strategic land bank. We've also had a good start to this year as well. In addition to that, we've had another 4,000 plots this year split broadly equally between the two parts of the business. Yes, we are attracting good land terms at the minute, both in terms of price and the deferred land payments. A few more stats for you on the land bank. I won't touch on too many of these, but you can pick out the total land bank halfway down the page. For housebuilding, 32,700. That includes the legacy plots from Countryside and the additional sites that we have moved across.
You can see there, a land bank that will allow for the 2%-3% controlled growth that we're looking to do in housebuilding. Countryside Partnerships obviously benefited hugely from that pipeline that's coming from the Countryside business in order to take the growth forwards. Go to the bottom of the page, just pick up gross margin. A little bit of impact to the housing gross margin in the second half. Cost inflation running a bit ahead of pricing, but that's actually less than 1% impact on that gross margin. The remainder of the impact is more about bringing in the Countryside legacy sites into that number. Really pleasing, the 19.4% gross margin in the mixed- tenure land bank in terms of the profitability of Partnerships going forwards.
Briefly on strategic land, look, a real strength for the group and now even more of a strength with over 20,000 plots coming in from Countryside. Vistry did add in 4,500 plots itself during last year, and it really is a pipeline that is feeding both housebuilding and Partnerships. Yes, we have got that unique opportunity of three brands. We can deliver housing across every single tenure there is, and therefore we are able to develop more of that strategic land, I would suggest, than others, including even the very largest of sites that are coming through that strategic land bank. It does also give us the opportunity to be a one-stop shop for the planners, and I'm afraid the planning situation is difficult, but that can give us a bit of an advantage compared to others.
Yes, we do continue to see that we're getting better returns from our strategic land. Still looking for 150-300 basis points betterment compared to buying land out in the open market. New for Vistry, manufacturing, and as you can see, significant progress being made. We have rebranded our manufacturing to be Vistry Works. I would say that means two things. That is Vistry Works for the business, as well as our business needs to work with manufacturing, but also it is more than timber frame. We are looking at what other products we can manufacture ourselves internally. That could well be the likes of trusses and joists, so getting the benefits.
We are looking for the lowest- cost manufacturing, and therefore we really are looking for our standard houses to be used, and we will be mandating where appropriate, the use of timber frame right at the land acquisition stage, and so we can utilize the capacity that we've got in the business. Currently two factories operating at Warrington and Leicester. We've got capacity for about 2,800. As Greg mentioned earlier, you know, we're looking to reopen the East Midlands factory in the second half following a full review, and that will take our capacity towards 5,000 in the relatively short term.
As I say, standard housing absolutely key to this, so avoiding redesign, ensuring the factories can do what they do the same day in, day out coming through, and also that timber frame helping to meet future home standards. People, people. Still absolutely the mantra within Vistry, and it has been a very difficult period within the group. I do thank all our employees for the professionalism and commitment as we've gone through integration and restructuring. We continue to do the right thing by our employees where we can. A temporary cost of living increase early in 2022, a pay rise as well, all of that became permanent and was certainly targeted to the lowest paid employees where we could.
Huge amount of communication going on, as you'd expect. That is both the executive listening to the business as well as guiding the business through change. I've already mentioned the Peakon score, which overall 7.8 is a great score given what we've been through. A few other things. We continue to aim to be the employer of choice. We've just recently been certified as a top employer by the Top Employers Institute. We smashed our target for our skills academies, which we restarted after COVID last year. I was pleased to be at the opening of our most recent one last week, which was in Coggeshall in Essex, which we've actually opened up with Building Heroes. That is looking to get ex-servicemen into housebuilding as a career.
Alongside that, we remain the only housebuilder with a Gold Armed Forces Covenant that we're also very proud of. Future home standards, we are undoubtedly leading the way. We are doing more than anybody else in terms of delivery for our clients. We've talked before about the 54 zero- carbon homes in Warwick, on the back of that, we are now delivering another 310 net- zero homes for the same Warwick District Council. Other sites are listed there. I won't go through them all, the use of air source heat pumps, modular homes. We will of course be focused on our timber frame going forwards in order to hit future requirements and in particular, be more sustainable.
We do believe we've got the lowest cost solution for future standards, so both Part L and F and for 2025. Why do we think that? Well, we are already building, as Greg said, to those standards for many of our clients. Fortunately, they're also paying us to do that, but all that experience we're rolling out across the business. Sustainability has been a significant year moving sustainability forward. I've already said in terms of our targets, absolutely delivered on our skills academies. We delivered a further increase in additional affordable homes, so that's affordable homes beyond what is required by policy as a target. All that now linked to both remuneration, but also our financing facility. We did have our target signed off by the Science Based Targets initiative.
Our carbon action plan is on the website, and the Carbon Disclosure Project increased our rating to a B. Much more to come. We're currently looking again to take the best of both Countryside and Vistry in terms of sustainability. We will be redoing our materiality assessment this year, resetting the baseline for the enlarged group and setting targets that we can hit for 24 and beyond. With that, I'll pass you back to Greg.
Great. Thanks very much, Earl and Tim. Some good stuff there. Market review. We've seen improved consumer confidence since the disastrous budget last September, although first- time buyers are of course struggling somewhat with the demise of Help to Buy. Mortgage rates are trending downwards, and there is increased availability. Mortgage finance is cheaper than renting, which is the alternative if you don't buy a house. And it's interesting to see Halifax saying they thought it was on average about GBP 500 per year cheaper to buy with current mortgage rates than to rent. Unemployment has been maintained at a relatively low level. Pricing has remained firm in the first 11 weeks, and for that matter, the 12th week, which is this week, will be the best week we've had for probably six or seven months.
This week is gonna be even better than the last four weeks. Prices remain firm. We are using incentives. Actually, some developments we're actually seeing price increases. Build inflation is falling with reduced demand. I will give you some figures on this. Earl touched on it, but where we have an existing scheme just coming to an end, we are basically holding back subcontractor increases over the first quarter and keeping them at neutral. Where we have long-running sites and new sites, we are seeing somewhere between 2%-5% reductions from our subcontract chain. They are particularly fighting as they would be to get the partnerships work because they know that is guaranteed work over the next couple of years, and they're looking for some bread and butter sites to keep their businesses going.
As analysts, I'm sure you do the same when you value us on a sum- of- the- parts basis, of course. They, the subcontractors even know that the Partnerships business is absolutely countercyclical. We're seeing 2%-5% with that. Next, we successfully, our Group Procurement Director, John Bowen, is having a whale of a time at the moment. First of all, we've got in excess of 140 supply chain partners. This is your likes of your Ibstock, H+H, et cetera, et cetera. We successfully negotiated with them. All of those deals were coming to an end at Christmas, but with the increased size of the business, John managed to, on 95% of them, put it back to end of March.
We've seen no net increases from supply chain in the first quarter. Today we are partway through renegotiating where we are with... You know, let's face it, this business now is 16,000 or so units this year. I noted Persimmon two or three weeks ago at nine. Be in no doubt that if you're H+H or you're Ibstock, the big one you've got to win is Vistry, and we are taking absolutely full advantage of that. Earl said we're expecting zero increase from our supply chain for this year. I'm expecting a reduction, and the early signs are we will get a reduction. We're going to see a reduction there, and we're seeing reductions from the subcontractors. The political environment, unfortunately, remains challenging. We're trying to help that out.
Every single one of our 32 business units has invited Michael Gove to their Christmas dos this year. As of so far, he hasn't responded to any of them. The political environment, all joking aside, is difficult. Planning remains difficult, although we are having some successes. Of course, we are working with the CMA on at least the fourth time they've looked at housebuilding to see if we are land banking. Again, they'll come up with the same answer as the previous four, I'm sure. The only banking we do is with the likes of HSBC, Lloyds, NatWest, and Barclays. Current trading. Private sales rate improving. The first 11 weeks, 0.54.
The last four weeks, 0.62, that will rise when we take into account week 12, which is going to be the best, as I said, for at least seven or eight months. There's a good level of demand from housing associations and local authorities out there. Interestingly, the PRS market is resurfacing and coming back to life. Net pricing has remained firm, supported by increased use of incentives. Just giving a bit of flavor to that. We unusually took the view, and I'm glad we did it. We put our prices up at Christmas or in December. Where you don't sell that many houses. Today, on average, we've got somewhere between 4% and 5% buffer between asking prices and forecast prices, which is quite a considerable amount. We are using incentives.
Those incentives are predominantly through the likes of carpets, curtains, where we have select and enhanced packages where the perceived value is less than the cost. I'm delighted to say, sat here now, we are not seeing any reduction to our forecast prices. We are using those gains that we are seeing on subcontractors and from our supply chain at the moment to actually enhance the sales rate and passing that on to our purchasers. Net-net, we're not seeing any inflation. We're in active consultation with DLUHC over the proposed second staircase on buildings over 30 meters. This is, again, another sorry tale, and there are tens of thousands of flats in high-rise buildings in the likes of London, which are going to be put back during this consultation.
The last time I looked, it's not just tens of thousands of flats that are being put back. An awful lot of those are affordable. The last time I looked, we had an embarrassing shortage of affordable homes in the country. House building continues to select in high- quality land opportunities that at least meet our hurdle rates of 25% gross margin and 25% return on capital and are seeing great strides in further deferring the terms. We've got an opportunity for cost reductions, so we've seen those cost reductions, as I've said, with the supply chain and subcontractors. It interesting to note that since the acquisition of Countryside in November, I would say 11% or 12% of the overall roles in the business have been reduced.
We did an awful lot of that as part of the integration, this side before Christmas. There have been, as Earl touched on, some downsizing, particularly in housebuilding to rightsize the business. We've done all the hard work on that, and it's been incredibly difficult period of time for us when you are a people-based organization, but we have to put the company first. Key focus on working capital management, and that's the one biggest thing I would say that Vistry have brought to Countryside. We really do concentrate on the cash. The resilience of the partnerships business is reflected in the incredibly strong order book of just under GBP 3 billion, with 68% of their forecast mixed tenure revenues already secured this year, with all, of course, of the partner delivery work secured.
That's why the subcontractors are clamoring for that. Housebuilding, an equally strong position. GBP 1.34 billion is our forward order book and 55%, and that's a good total before the end of March, of this year's revenue already secure. The year is looking pretty good. Hence, we've come out with some guidance, which I'll come onto in a minute. Just summarizing then. We've got, I believe, an incredibly strong management team. That management team has been bolstered by two people on the ELT over the last six months. One, Michael Stirrop, who sat over there, was one of our divisional managing directors in housebuilding, is now joined the ELT, responsible for a number of things, including building safety and the exciting timber frame proposition that we've now got.
I'm also delighted to welcome Mike Woolliscroft, now, who was the co-CEO of Countryside at the time of the acquisition. I tried really hard to persuade Mike to join the business at the time of the acquisition and failed badly. Bastard. I'm delighted to say, and I think it's a bigger endorsement to the business that Mike has come on. We agreed with Mike that he would originally stay with us to help with the integration until the end of May. Mike has basically tried the business. Mike has decided, having been with the group now for four months, to stay with us, and we're delighted that he's joined us. Mike will work again across the group, but particularly working with Stephen.
We've made some board changes, announcements this morning, and I'm delighted that Jeff Ubben has joined the board. He was particularly instrumental in getting the deal with Countryside done, so we're all very, very pleased with that. The integration of Countryside is making excellent progress. The hard work has been done with regards to office closures and people losses, I'm afraid to say. The synergy savings have been increased, as I said earlier. The board is committed to maintaining a healthy and resilient balance sheet. For the full year, we're announcing overall a 55p dividend, 32p in the final payment, and that is down, the actual 32p on this time last year, but the overall amount we're paying is up.
The capital allocation policy will be reviewed going forward in the next six months in complete consultation with all of our shareholders. Following what I would say a brilliant performance in 2022, we're in a really strong position for 2023, as reflected in the forward order books of both housebuilding and Countryside Partnerships. Based on our market assumptions, which is we're saying, and we have done since last September, we're expecting a return to a 2019 pre-pandemic market, which after week 12 is pretty much what we are seeing to the week. We are very, very pleased that we have come out with some guidance this morning. I think we're the first house builder to do it, albeit we are 11 weeks into the year, as opposed to maybe eight or nine.
We expect the group to deliver adjusted profit before tax in excess of GBP 440 million, and that's ahead of consensus, which is around GBP 400 million, depending on which metrics you're looking at. Very, very good set of results. A very good, better than we expected first 11, 12 weeks of this year, and the group is in a great position, including all of the integration, bolstered by a couple of changes to the management team. On that, we will take any questions, and we'll have questions from the room first, and then through Susie, there might be some questions from people listening on the webcast. Questions, please.
Thanks. Aynsley Lammin from Investec. Just three from me, please. On the sales rates, are there any kind of bulk sales within those? Have you increased the part exchange use in the first kind of 11 weeks of the year? Secondly, just on your assumptions for your profit guidance, I think you've mentioned the sales rates get back to 2019. What would the average private sales rate be in 2019? What you need to get to for that. Obviously very early days, but just given recent events in the kind of banking sector, when you're looking at mortgage lending, do you expect the U.K. lenders, any signs that they're changing or might be a bit more cautious given what we've seen recently? Thanks.
On the mortgage lending, that was mentioned by the press discussions I've had this morning. Frankly, we don't know, we haven't seen anything in the last week or so. What I would say is, last week was the best week of the year on sales, this week is gonna be better again. I'm not sure from a, you know, keeping your ear to the ground from a people perspective, it's not 2000. I don't think people quite are taking on board, you know, Silicon Valley Bank, who they've never heard of, Credit Suisse. I think the bank a bit might come. We've not seen any signs of that at the present moment in time. Sorry, Aynsley, the first question was?
Just any bulk sales or anything?
Yeah, there is. We always do bulk sales. We've priced in for bulk sales during the course of this year, giving away a discount. Yes, those numbers are bolstered, but not dramatically. There have been bulk sales. You'll remember, part exchange, yeah, there is an increased use of part exchange. I would say one in eight of our sales now are through part exchange. We've got hardly any stock. We manage it very, very well. We've got hardly any stock over three months old.
What do you need the average private sales rate to be this year to get to you?
0.55 to 6.6 .
Thanks.
Will?
Thank you. Will Jones at Redburn. I'll try three as well, please. Just coming back to that sales rate view for the year, I think it would be normal that Q1 for any housebuilding business is higher than the full year as a whole, whereas I think you need it to be better in the.
We're saying.
the three quarters.
the last four weeks have been 0.62, I'm saying for the year, 0.55-0.6. I would expect it to be lower. Yes, the first 11 weeks, aren't bad, the first two or three weeks of that 11 are not very good at all because you're just coming out of Christmas.
Okay. Thank you. Second is whether you could just help us with housebuilding, pro forma, any net views for gross margin and completions in 23?
Do you wanna take that, Earl or Tim? I will if you don't know the answer.
In terms of... I'll jump in first. In terms of gross margin, we should see some reduction. At 23.4% in 2022, we should see that coming off by a couple of percent in something in that region for 2023. In terms of volumes, I think we're down, we're probably expecting it to be down 15%-20%, something like that.
Thank you. The last one was just around the capital structure. You talked about reviewing capital allocation, but can you just help us with what your starting point would be as a preference for the appropriate balance sheet ratios? Thanks.
I think all of that is in the to be determined category, which is why we need to spend some time thinking about it. Obviously, there's two parts to that question. There's the first bit is in terms of capital allocation, the first is how much we're gonna have to distribute, and the second bit is in what format. We're open on both of those. We see the benefits that could come from increasing the share buyback element. We're not sure with the yield we're getting on dividends, it doesn't feel like we're getting the value from what is quite a high level of dividend distribution. I think we're going into the summer open-minded, and we genuinely wanna hear what our shareholders have to say.
I would just add to that. We also have to look at, you know, we're frankly flabbergasted by the opportunities in the partnerships business, and I would not want the capital allocation plan to get in the way of growing that partnerships business. Where the opportunities are immense. It's particularly, I think we've got housebuilding covered. Particularly, we've said 10%-12% growth. Is there opportunities to grow that more quicker? We're looking at that, and I'm absolutely delighted with the two businesses coming together. The quality of the management, I think we could grow it quicker, but we might have to look at the cash from that. As we've said, I think a lot depends on what we decide we're going to pay out.
It doesn't feel we're getting any benefit of paying out a dividend with the share price at GBP 7, which is incredibly low. You know, if you just look at economics, share buybacks are better at, definitely at these kind of levels, and there's gonna be a level where you think, "Where is that level as to, it's better to pay a dividend?" Not sure, it's certainly above GBP 7 . Chris, I think was next. Oh, sorry. No? All right.
Yes, great. Morning. Thanks. Chris Millington at Numis. It sounds as if you're taking a slightly more cautious view on incentives, you know, talking about carpets and curtains. Others are talking about, you know, throwing 5% in. Can you just talk about where you're positioned on a relative basis? Like, should we do them one at a time?
You heard me say at the start, we've got between 4% and 5% between our asking price and our forecast price. We can only speak as we're find. We don't think price actually is getting in the way of actually the sales rate. We're going along nicely. As the subcontract and supply chain savings increase, as we're fully expecting them to during the course of this year, we're being very cautious on that. We're not letting 100 units. We're letting contracts for 20 or 30, because we know when they're finished, we think it will, it'll be even tougher out there with what some of the volume house builders are saying, we're expecting larger gains.
We will, if necessary, throw more money from those gains, 'cause we're not forecasting any gains we make on subcontractors or the supply chain. We're not putting anything to the bottom line. We are passing that on, or assuming we'll pass it on to the purchasers. Whether that continues in the form of incentives, carpets, curtains, stamp duty, et cetera, or maybe, during the course of the year, if we want to accelerate, sorry, the sales rate even more, we think we got some ammunition from these savings we're making now, which we think will increase during the year. Don't forget, that's off the back of two years of inflation that I've never, ever seen in 40 years in housebuilding.
I mean, these subcontractors and supply chain have got a long way to come back before I'll start feeling sorry for them. They've had their day undoubtedly, and fair enough, in 2021 and 2022. House builders are and will start having their day as we go forward over the next 12 months.
Chris, just on the incentives, we are obviously targeting extras. The perceived value to the customer is actually much higher than the cost in reality, in terms of what we're aiming to do.
The margins we typically make through select and enhance, which is our in-incentives are, you know, 30%-40%.
That's helpful. Thank you. Next one is just on the land market. I think you mentioned some softening there.
Yeah.
Just wonder if you've got any numbers or anecdotal thoughts around that?
I would say, Keith, Stephen, probably 50%-60% of everything we agreed before Christmas, we've continued to buy, but we've chipped further the prices.
Yep.
The prices have come back because we've gone back to the landowners and said, because of current market conditions, we need to chip the price. Even more than that, we've managed to defer the land payments more and more. Definitely a softer market as, you know, the large house builders who are the biggest players in this look at their land banks and go, "You know, we've got a X% land bank based on 16,000 per annum. Now we're looking at 9. We don't need to buy too much land, do we?" We are more and more moving into buying larger sites where we can bring housebuilding and partnerships together. By their very nature, the competition for larger sites is a great deal less than it is for smaller sites.
The final one is just about zero carbon homes. In your experience doing those schemes, what is the uplift you've experienced, and do you think there's much gain to be had going forward from economies?
Do you wanna take that one?
I can do. Look, I think there is going to be huge gain in time. Most of the schemes we've done at the minute have been for local authority partners, registered providers who are looking to future-proof their housing stock, and that's where we're learning from the experience, and they are paying for the uplift 'cause there is an additional cost. We've had various conversations with some of the colleagues, the banking colleagues in the room in terms of, you know, looking at the mortgage market in terms of lending additional against those green homes, and certainly we'd like to take those further. We absolutely see a green premium coming, not least of course, you know, the cost of fuel, et cetera, at the minute, which is only heading, you know, overall one way.
At the moment, we don't get a premium, as you know, for a new- build house. As the, you know, this year, the standard of housing insulation is greater. 2025, it'll be greater again. You know, mortgage companies surely will take into account the cost of running a house today, but definitely by 2025, as opposed to a 1930s, 1940s, 1950s, semi-detached house with very little insulation.
Sorry, the additional cost to build those versus current regs?
I mean, depends from one scheme to another, but you can be talking anywhere between sort of GBP 8,000 and GBP 12,000.
That's really helpful. Thanks.
Yep.
Thank you. Gregor Kuglitsch from UBS. I've got a few questions. Can we just go to the fair value accounting slide that you that you put up? I think from memory, kind of the last balance sheet of Countryside was like GBP 860 million of tangible assets, now it's kind of GBP 300 million less. I appreciate there was obviously a fire safety provision. I think you mentioned, can't remember, GBP 100 or so inventory write-down or... I guess I wanna understand what's the balance, and is that sort of reflected, I guess? Does that help the profitability in the short term? I guess it does.
Do you wanna just-
I think-
Do you wanna take that one?
Yeah. Sure. Sure. The two missing bits, the two components. The first is the accounting policy alignment piece, where effectively what we're doing in Vistry is charging costs straight to the P&L on pre-development, whereas on the Countryside, we would've capitalized those. While there's the benefits that comes through from the lower amortization because of the write-off of that assets, of those assets, that's more than offset by the additional costs that are gonna go straight to the P&L for the former Countryside business that previously would've been capitalized. Those two, that piece has a P&L neutral position. The other bit, the fair value bit, is around GBP 107 million of net write-down. That unwinds through the P&L.
As we mentioned in the RNS, it's over six to eight years that the majority goes out. Actually, in total it goes out over sort of 15 years or so. The majority of that comes out through the next 6-8 years. Whether that's seen as P&L enhancing or not, I guess, is a question of a question of enhancing against what. If Countryside had stayed on a standalone basis without any of the other changes, it would've increased Countryside's profits because it would've widened down the inventory. In calculating our GBP 440 this year, there's loads of moving parts, it's part of that. Obviously we've had significant changes in market movements since then. We've reevaluated certain schemes. It's all taken account of and gets into that GBP 440.
The important word there is that we didn't say GBP 440, we said in excess of GBP 440.
I guess coming back to the gross margin in the housebuilding business. You obviously stand out, right? Because you've, I mean, you've mentioned some of your peers that are talking some, you know, substantial declines. You know, 200 basis points is sort of-
Well.
More like 1,000, right? The question is, what's the gap here, right? I mean, is it-
We've set a margin of 23.4 down to, kind of 22%, haven't we?
Yep.
We're expecting the gross margin in housebuilding to come back in those numbers.
The Countryside coming in is broadly around 19%, if that's part of your question, Gregor, in terms of what's coming into that housebuilding.
Okay.
Yeah, the Countryside coming into the housebuilding business will deflate the numbers, but that's where it is.
Okay. All said and done, you just kinda give a lot of information on cost. What do you think cost inflation was last year, and what will it be this year? I don't know how you measure it.
Cost inflation was between 6% and 8% last year. We would expect overall cost in deflation, I'm gonna plump for somewhere between 2%-3%.
I think that is unique to Vistry. It is back to, you know, we are renegotiating 140 supplier contracts. There is cost inflation in the marketplace. You know, put some numbers around it. We would have said there was a risk of over GBP 30 million worth of potential cost inflation coming into our business that we are looking to negate. Greg is looking to more than negate, as you heard just a moment ago.
Okay. Thank you. That makes sense. Finally, in sort of hold a debt and cash guidance, what are you assuming land creditors do this year? They ended last year was GBP 680. Do you assume they flat down, up?
Slightly down this year. You'll see there's a slide at the back in appendix-
Yeah. It's new ones coming in, so net.
Net, I would say we're gonna see land creditors come down a bit because we've got that significant increase in, we've got a significant outflow from previous land creditors in 2023.
Okay. Thank you. Thank you very much.
Greg, all I'll add to that-
Right
is you know we do some very big schemes. There are some big individual land creditors, you can see that in some of the long tail of land creditors. We'll see exactly which sites we secure during the year.
Thanks very much, Gregor.
I see you've got Charlie, Clyde at the moment.
Thanks very much. Charlie Campbell at Liberum. Just sort of one question really, on the overheads within the housebuilding division. Clearly kind of a reduction in 2022, if I've done the math right. Is there a sort of an incremental benefit still to come in 2023, or is the 2022 number the right base rate thinking going forward?
I think going forward.
Yeah
...the 2022 base rate is correct. For 2023 it will actually get higher because we'll be doing... We have made and had some losses in both people and roles, that won't cover the shortfall in 15%-20% of the number. I would expect the housebuilding overhead to go up by about 0.5% from 2023 from 2022.
Yeah. As a % of revenue, it will go up in 2023. I think the 2022 base is a sensible one. In time, there is still, you know, potential in terms of, you know, it is a business that could deliver up to 8,000 homes from its 13 business units.
Would take the overhead down to about 4%. Yeah.
Yeah. You get a bit more efficiency in the percentage. Clearly, you know, direct staff are on-site, but the office kind of more base staff could still spread itself a bit more efficiently when we get that growth.
Yeah. I guess I can do the math, but there isn't very much overhead then coming in from the Countryside plots that move through into the housebuilding side.
Very-
Yeah.
Minimal.
Yeah.
Okay.
Well, it's only directly what is on site.
Which is not an overhead.
No.
Yeah.
We are-
Okay.
We are operating them from the existing structure.
Yeah. I'm looking at Keith, but I would say less than 10 people.
No.
No. Not even that. Zero.
Yeah.
Yeah.
That's very clear. Thank you very much.
Clyde.
Thank you. Clyde Lewis at Peel Hunt. I think I've got three as well. I'll maybe I'll do one at a time.
I think you should.
Timber frame, obviously you're going hard now at it. As you look at the savings and the benefits, is it gonna be saving you money or saving time or a bit of both?
Right. As and when we get... First, first of all, the problem that Countryside, I think, had with timber frame was, it wasn't mandated, therefore, their losses came from being massively underutilized. That isn't gonna happen with Vistry. Whatever they can make, we will use. I would suggest that there is a saving obviously on time, but in current building regs, I would suggest it's probably bordering on a neutral because if you don't put any margin on it. 'Cause obviously we can supply it for what it costs, competitors can't. The East Midlands factory being reopened, which was a large loss in the Countryside numbers, so we're in for a pound, basically is a game changer.
We've got this fantastic, huge new facility that will reopen in July, August this year, which will take capacity to at least 5,000, and at that point, with the overheads, we will expect it to actually make some money going forward. Today, as we get to 2025, it'll be a cheaper alternative than building in the traditional way we are at present moment in time. As of July, change of building regs this year, the gap will be closer.
By 2025, I expect that the GBP 8,000-GBP 12,000, which will come down as it always does in any case, as we get closer to 2025, as people get the technology right, it'll give us a real edge, as it will the likes of Barratt, who have their own factories and Persimmon, to take it forward, because it will be the cheapest form to build without any shadow of a doubt by then.
Okay. Thank you. Second one was on Countryside, and I think you obviously referred to the final quarter, i.e., you know, October, November, December being very quiet for.
Yeah
...traditionally because it's got a September year end. Changing the year end to a December year end, so that it obviously matches the Vistry Group-
Yeah
how much of a challenge is that for the Countryside business?
No. They've managed to make all their completions into December already. Whereas it's incredible, don't it? Yeah. Whereas their year end was September and half year was March, we've done all the budgets and all of a sudden, March and September seem to have moved to June and June and Christmas. They've fallen into line very, very quickly. Unfortunately, that's still something we're working on.
Okay. Thank you. The last one was possibly one for Stephen around housing associations. It's always useful to get an update on what are they saying, what are they thinking. Obviously, quite a few of them have pulled back from doing private development.
Yeah.
you know, has their appetite.
Stephen
...for using you and the partnerships business increased over the last 6-12 months?
I'll deal with the private development one first. There's still a real appetite for joint ventures. We were able to enter a joint venture in January on a very large site, a land acquisition up in Warrington. We're talking to two national housing associations about joint ventures. We're just entering a joint venture with The Guinness Trust, we're entering joint ventures with local authorities as well, most notably with Warwick District Council. The investment in the mixed- tenure and multi-tenure delivery is definitely there. In terms of housing associations, there's definitely been a hardening of price because there is a bit more choice around for them, as they look at bulk sales with some of the other house builders. They have got headwinds to negotiate.
I think there was an analysis looking at the G15 in London about how their operating margin has moved back from 32, 33 to 28% over the last year. Dealing with inflation and building safety, both in terms of mold and fire risk, and decarbonization, clearly does weigh on the sector. There are new for-profit providers there. It is not uniform. There's a lot of housing associations still looking to fill their programs. If you ask yourself who you would want to work with, you're far more likely to want to work with an organization like Vistry that can offer you opportunities for Section 106, joint ventures, introduce land, partner delivery, can rapidly and easily use MMC, which is also a key area.
Those housing associations are moving more quickly towards the adoption of future home standards. As others explained, we've got a track record there. We're definitely seeing pricing come in. A lot of partners still want to work with us, and that's continuing to be a robust, financially robust, providers who want to work with us.
Can you just mention, Linden First and Heylo?
Okay. Yeah. We have, we're, unlike a lot of housebuilding groups, we've got a for-profit RP within the group, Linden First. We established it 10 years ago with a great idea to do some an equity loan idea. Then along came Help to Buy, so we left it on the shelf. It's got a very small portfolio of homes. We're now looking at two or three options to capitalize, both in the short term and longer term, that for-profit RP, which would allow us at the points of sale to offer shared ownership. The great product that could replace Help to Buy is shared ownership. That we know there's lots of demand.
Keith has had a business that has really led the way in working with Heylo across the country and, being able to offer our customers shared ownership at the point of sale as a sales incentive, essentially, as an enabler. We think there are ways that we can work with our other RPs on capitalizing that, Linden First and being able to offer shared ownership across a range of our sales outlets in housebuilding and partnerships.
I think we're on the cusp of something quite big in the next couple of months with Linden First working with Heylo. That could very well or somebody else, but Linden First, which could give us an edge on our competitors and offering a real shared- equity product that would, in a lot of instances be like for like with Help to Buy.
Can I ask a follow-up on local authorities? I mean, again, traditionally, they've not been allowed to get into development. How quickly is that changing now with the rule changes?
That's a very timely question. Yesterday morning, I had a couple of meetings with consultants who were both saying that they are being approached by local authorities for advice on how they can bring forward land assets they've got and how they can work with the development sector to bring forward mixed-tenure developments. I think local authorities have enormous capacity. We're working across the group now with 30 to 40 local authorities. We were with 22 when we were just Vistry. If you add the Countryside Partnerships with local authorities, it's a considerable number, but there's more to go at. I'm expecting local authorities to continue to be stepping forward and looking for delivery as that market develops.
I think over the next two years, they will be a bigger part of our of our business.
Well, if you look at our joint venture with Warwickshire, they've put three large sites into a joint venture, asked us to work with them and bring that forward. Local authorities, of course, then get affordable supply, but they also get revenues. It's a way of bringing forward housing across the whole of their area. They're proactive. What they need is partners who speak their language and partners who have got a track record of delivery, and that's an area that we obviously can present.
Perfect. Thank you.
Thank you.
Thanks. Morning, everyone. Sam Cullen from Peel Hunt also. I've got two really. First one's on kind of on planning. I think, Tim, in your section, you outlined the site increases that come across from Countryside. Are you organically increasing site numbers this year in housebuilding and partnerships in terms of the, on a pro forma basis? Second one is-
No. No.
Okay.
We'll be sticking to broadly where we were, so it won't be an increase.
Thank you. Second one is, you mentioned kind of larger sites, Greg, and some of your kind of peers probably struggle from having unable to convert plots in the land bank into-
Yeah.
-saleable outlets. Can you talk a bit about the advantages that you think Partnerships gives you in that context in terms of-
Yeah.
-preplanning?
I think Stephen touched on, a site in Warrington, that we acquired in January. If I've got it right, Stephen, tell me when I go wrong. Kind of 1,200 units?
Correct.
1,200 units, kind of GBP 112 million acquisition. We, you're looking at it, the landowner wants as much money as they always do up front. In some instances, they're prepared to have a lesser overall sum for the more money you can give them up front. We work with Torus Housing Association. Torus are the largest housing association in the Northwest. Broadly, I haven't got it quite right, but probably 340 of the units are on a phase that are being done by housebuilding. They're and Partnerships have entered into a joint venture with Torus for the 900 or so remaining units. As part of that joint venture, they will service the site for housebuilding.
Housebuilding are going to get a service road, services, all the utilities in and construct circa 300 units as they would do. Partnerships have entered into the JV, and we have paid a considerable part of that GBP 108 million. When we say we, Torus have, because we haven't paid anything. With the such is the shortage, embarrassing shortage of affordable housing, it is amazing what local authorities, Warwickshire, to say one, and housing associations are prepared to do to use their vast balance sheets to get land over the line. They're borrowing, you know, they have bonds of 50 years. Their borrowing rates are incredible, so they're much better at...
They see the strength that they can bring to the party is their balance sheet and their borrowing capability compared to where Vistry are with a decent balance sheet. They want to enter into a JV with somebody who's gonna be around for five years, and they're looking at the expertise plus also our balance sheet, and undoubtedly we will be here. I think the probably 10 schemes now we've done with Partnerships and housebuilding, working together with local authorities and housing associations, so it's not one or two. It never ceases to amaze me the hunger that these people have to get affordable housing 'cause they can't get it any other way, and they're matching that hunger with balance sheet and payments up front, which basically on Warrington blew the competition away.
At Warwickshire, we paid all the money up front. How much money did Vistry put into that? None. Warwick District Council paid all GBP 60 odd million up front. We pay a ticket as a joint venture at about 2.6%. It's incredibly cheap money, and that's what they're prepared to do because they've got to get affordable housing sorted out, and it's embarrassing where we are as a country with affordable housing. What have I said wrong, Stephen?
You've so not. You've said it absolutely perfectly.
Right.
I was just gonna make one other point, to about Warrington.
Mm-hmm.
Which is if you look at that slide, it's a great example of where we'll have all four brands, so the three retail brands and the Countryside Partnerships brand, all those flags flying. Of course, it's got great proximity to our factory at Warrington. We're really capturing all the benefits of the group.
Yeah. Be in no doubt, we're talking about this site in Warrington would be seen as one of the best sites in that area, it's prime, prime.
Thank you. Just the last one is on, you mentioned first-time buyers struggling and just kind of prospects for potential government schemes to address that.
Do you wanna take that one now?
Can do. Well, it was a bit silent last week, wasn't it? Let's be honest. Not really relying on government. You've just heard what we are trying to do, which is trying to bring in a shared ownership scheme somewhere of our own, and we've got our own RP to try and look at that. Then, you know, we were one of the first to sign up to the likes of Deposit Unlock, but it's not getting the traction still in terms of what's coming through. We've got various schemes running, including, you know, the widest definition of the bank of mum and dad or uncle, friends, et cetera, to try and help. The first-time buyers are struggling, you know, at the minute to get on the ladder.
Look, we do think that a shared ownership answer is the right one, wherever that can come from.
Okay. John?
Thanks. John Fraser-Andrews, HSBC. Start with partnerships, if I may. I think it's 10% revenue growth that you're planning this year. Greg, is that all in volume, or is there any price impact in that 10%?
There is an increase in, sorry, the mixed tenure, so that will be a part of it. The biggest part is growth.
Partner delivery, specifically, Tim's flagged a rebound this year in 2023. The decline last year, was that just delays in the back end? Were there any sort of specific issues?
Some planning issues, as we always have. No, the planning issues would be the only scenario I'm aware of. That will rebound to, what are we talking about? GBP half a billion?
Yeah, something like that. Yeah.
Half a billion pounds this year.
That would be...
Cash up front.
More than holding its own then in the 10% revenue growth.
Yeah. Yeah, it's about the same.
Yeah.
Yep.
Okay. Partnerships margin, within the GBP 440 million, what's baked in there? What's expected on the partnerships margin, and how does Countryside blend into the, is it 10.5%, if I remember rightly last year?
Yeah. Do you want to take that one Tim?
I think it, the overall blend, lots of moving parts within margins. I think we're at 10.7% in FY 2022. If anything, it's gonna edge up slightly. Overall, the overall blend should be about the same.
circa 11%, John.
Yeah.
If we can come on to fixed costs. GBP 33 million in 2022. What's the outlook for 2023 and what pay rises, if any, are you planning for staff this year?
Well, first of all, pay rises have gone through. They're just in line with, I don't know how open we've been, but sort of roughly 5% sort of wage growth.
That was down from the January 1st.
From the J anuary 1st . In terms of the central cost of GBP 33 million, there'll be slight increase due to the size of the enlarged group, but, you know, not materially different from FY 2022.
Are the synergies impacting that GBP 33 million number?
Yeah. Although most of the synergies will be within the business. There'll be some benefit with synergies.
There are some in the group, yeah.
...some of the synergies. Things like the PLC costs of Countryside have all pretty much gone and absorbed into one single set of PLC costs.
Okay, great. Just finally then, two quick ones. The Part L and F cost, the solution you have, the low-cost solution, if you could elaborate on that. The shared ownership product, is that, are you passing on an interest cost to the purchaser in that product, so it's a sort of net neutral for yourselves? You're just trying to facilitate business.
Yes. Go on.
Sorry, the first one was the Part L and F.
Yes.
I mean, the low-cost solution is from continually, you know, technically challenges the SAP analysis in terms of working with our supply chain partners in terms of the materials that are going in. It's still, you know, certainly for L and F, predominantly fabric first. We've, in terms of the design of our standard homes, look, we've recently had a further reduction in cost looking at the amount of PV that we need to put on some of those homes, et cetera. That is how we're doing it. As I say, we've been building some of these homes for local authorities and registered providers to actually get the experience and, you know, making sure we're getting the right ratings with those, both for L and F and now for 2025. That's where that is coming from.
Sorry, your second question was around shared ownership.
The costs, you know, the customers must be bearing some sort of interest cost on
Correct. As they always would. I mean, I would think of it as a Help to Buy product or, you know, if you wanted to liken it to one that we have used before, which is the one where we partnered with Heylo before, you can find the Home Reach scheme, you know, on their website. You can see exactly how that works. That's similar to a Help to Buy type scheme.
The only difference is they pay interest straight away as opposed to with Help to Buy. They had five years on the house exclusive upon.
Mm.
2.75% on the retained equity.
Thanks. Thanks, Steve. Thank you.
Sorry, Susie.
Conscious of the time, Greg. We have had a few questions online. I think we'll just ask one for the moment, and we'll deal with the rest separately. Just a quick one from Andy Murphy, to say, "I'm very impressed with the customer satisfaction survey results. Please, can you give me some color on your action points that resulted in these improvements and the cost of it, if relevant?
I would suggest there's no cost. The improvement has come from every day starts with a league table. If your score goes down and you're a managing director of a business unit, it's a very bad day. There's been lots of people coming back in the group basically saying, "Can we make it weekly?" The answer is always no. Every single day, every score gets logged in, and every business unit knows where it is in the current league table. We also have to, within 28 days, every business unit has to write to the executive explaining why they've received a no, which I'm sure is a pain in the ass for them, but there you are. We don't want any no. It's complete and utter total focus on a day-to-day basis.
I would just add to that. I mean, it is the whole journey. You know, it's build, sales, customer service working together throughout. The quality scores and the focus on RIs and CQRIs are absolutely fundamental. Do it right first time, great quality home, great customer service. No extra cost.
That's an even better answer.
As I say, we had a few. We'll deal with the rest offline, given it's nearly 10:00.
Great. Okay. Thanks ever so much for your... Sorry.
There was one hand in the room. That was all.
Oh, sorry. Go on.
Sorry, last one.
Didn't get it yet.
Me, Anthony Manning, Bank of America. Just quickly, could I have a bit more color on the cash flow guidance for this year? For example, how much the costs of the cost reductions you made? Then thinking about the net debt, how should we think about that over the medium term, considering the growth that you see and the kind of cash returns to shareholders priorities as well?
Do you want to take that one, Tim?
I think, for 23, we have a very similar cash profile to the one we put up for 22, and the three significant movements that we would flag would be, one, the fire safety costs of somewhere between GBP 50 million and GBP 60 million. The second is the cash outflow from integration, something around GBP 40 million for integration costs. The third would be increased land and working capital of around GBP 100 million. That, those movements get to the sort of net debt guidance that I talked about earlier on.
Over time, I think, what our long-term strategy is, I'll put that into the same bucket as the capital allocation review 'cause we need to look at all, you know, all of our stakeholders, all of our investment needs, and all of the long-term strategy that we need to deliver our long-term targets. Ask me again in September.
I will do.
Okay.
Thank you very much.
Don't forget.
Hmm.
Okay. Thanks ever so much, everyone. All the best.