Half Year Results
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8 September 2020 Vistry Group PLC - Half year results Vistry Group PLC (the “Group”) is today issuing its half year results for the six-month period ended 30 June 2020. First half key highlights Transformational acquisition of Linden Homes and Vistry Partnerships completed in January Successful business integration with £44m synergies now expected, £9m ahead of initial target 5-star HBF customer satisfaction rating awarded for 2019 and we have continued to trend at a score above 90% through 2020 Net debt of £357.3m1 at 30 June 2020 (18 May Trading Update 2020: £476m), ahead of our expectations at the start of the pandemic, reflecting resilience of Vistry Partnerships’ revenue model Site closures significantly impacted Housebuilding production in H1, output and performance Vistry Partnerships led an early return to site, underpinned by the certainty of pre-sold developments and contracting revenues Production capacity returned to near normal levels from 1 July Current trading and outlook Strong start to the second half supported by positive market trends Sales rate 20% ahead of prior year since 1 July, at 0.73 (2019: 0.61) sales per active site per week including Vistry Partnerships Pricing remains firm Record forward sales position with Group forward sales totalling £2.7bn2 (30 June 2020: £2.6bn) including Housebuilding forward sales up 17% to £1,478m (30 June 2020: £1,264m) Minimal cost inflation with Group to realise cost savings in the second half and into 2021 from flow-through of procurement synergy benefits £20m of synergies expected in 2020 and the full run rate of £44m to be achieved by end 2021 Full year profit before tax3 for 2020 expected to be in the range of £130m to £140m Assuming stable pricing and current sales rates and productivity levels, the Group has the ability to deliver at least £310m of profit before tax3 in 2021 The balance sheet is strong, supported by significant and well-spread funding facilities Priority for capital allocation remains deleveraging, targeting gearing of 35%4 including land creditors for December 2021 Aiming to resume dividends in respect of 2021 with a progressive dividend policy thereafter 1 Net debt is quoted excluding IFRS16 lease liabilities and includes £7.8m impact from the fair value of future interest payments on US Private Placement notes 2 Forward sales of £2.7bn includes £0.3bn in respect of our joint venture partners’ share of revenue 3 Pre-exceptional items and amortisation of acquired intangible assets 4 Gearing calculated as Group net debt plus land creditors divided by Group tangible net assets 1 Greg Fitzgerald, Chief Executive, commented: “We moved quickly to integrate Linden Homes and Vistry Partnerships at the start of the year. It has been a successful process bringing together the best from each business, with the benefits from the combination expected to be ahead of our initial target. We have achieved this whilst maintaining our focus on delivering excellent service to our customers. “Housebuilding’s first half performance was significantly impacted by the lockdown and resultant site closures. Vistry Partnerships demonstrated its market resilience and robust revenue model and led the group to an early successful return to site, with production levels across the Group now back at near normal levels. “We have seen positive sales trends since early May, with consumer interest higher than at any time in recent years. Our sales rate in the second half to date is running 20% ahead of last year at 0.73, and pricing remains robust. The Group is well positioned to capitalise on the opportunities available in the second half and into 2021 when we expect to deliver a step-up in completions and profitability, a reduction in gearing and a return to dividend payments.” Key financials5,6,7 HY20 HY19 Change Total completions8 1,724 1,647 +5% Adjusted revenue £660.9m £472.8m +40% Adjusted operating profit £21.2m £75.2m -72% Adjusted profit before tax £10.3m £72.5m -86% Reported results6,7 HY20 HY19 Change Group revenue £606.4m £472.3m +28% Operating (loss)/profit £(9.7)m £75.8m -113% (Loss)/profit before tax £(12.2)m £72.5m -117% (Loss)/earnings per share (5.4)p 41.9p9 -113% Net (debt)/cash1 £(357.3)m £102m n/m 5 Key financials are on an adjusted basis to include the proportional contribution of the joint ventures and before exceptional expenses of £15.4m and amortisation of acquired intangibles of £7.1m in HY20 6 HY19 reflect Vistry Group PLC excluding the acquired businesses and are not on a proforma basis 7 In HY20 the Group incurred £10.2m of costs directly related to COVID-19 and received £6.3m in relation to furlough claims from the Government’s Coronavirus Job Retention Scheme. The Group will repay the claims in H2 2020 but had not committed to this at 30 June 2020; as a result, the £6.3m of income is recognised in the HY20 income statement and will be reversed by 31 December 2020 8 Completions include 100% of joint venture completions 9 Restated from 43.7p in the prior period as a result of the bonus share issue in January 2020 2 There will be a virtual presentation for analysts and investors at 8:00am this morning. To view the presentation please use the webcast link available on our corporate website www.vistrygroup.co.uk or https://webcasting.brrmedia.co.uk/broadcast/5f46a6a4b14d87262643c348 A playback facility will be available shortly after the presentation and Q&A session has finished at www.vistrygroup.co.uk This announcement includes inside information as defined in Article 7 of the Market Abuse Regulation No. 596/2014 and is being released on behalf of Vistry Group PLC by Earl Sibley, Chief Financial Officer. Certain statements in this press release are forward looking statements. Forward looking statements involve evaluating a number of risks, uncertainties or assumptions that could cause actual results to differ materially from those expressed or implied by those statements. Forward looking statements regarding past trends, results or activities should not be taken as representation that such trends, results or activities will continue in the future. Undue reliance should not be placed on forward looking statements. For further information please contact: Vistry Group PLC Earl Sibley, Chief Financial Officer 01675 437160 Susie Bell, Head of Investor Relations Powerscourt Justin Griffiths, Nick Dibden, Victoria Heslop 020 7250 1446 3 Chief Executive’s Review First half review Following the transformational acquisition of Linden Homes and Vistry Partnerships at the start of this year, Vistry Group is uniquely positioned as a top 5 UK housebuilder with a leading partnerships housing business. Building high quality new homes and providing our customers with excellent service remains our key priority and we are delighted to have been awarded a 5-star HBF Customer satisfaction rating for 2019, a significant turnaround from our 2-star rating in 2017. We have continued to trend at a score above 90 per cent through 2020 as an enlarged group. The Group was quick to progress with the integration of Bovis Homes and Linden Homes with a clear goal of taking the best from each business and maximising the very significant benefits from the combination. The successful integration is ahead of plan and the synergy benefits from the combination are expected to total £44m, £9m ahead of the initial £35m target. £20m of this is expected in 2020 and the full run rate to be achieved by the end of 2021. The Group delivered a rapid and co-ordinated response to COVID-19 with the safety, health and wellbeing of our employees, customers, suppliers and the wider society our top priority. A superb response from our IT team facilitated a very quick transfer to working from home. We temporarily stopped discretionary land expenditure and restricted new infrastructure works. For two months we reduced our working hours and salaries accordingly, whilst ensuring that our lower paid employees were protected from any reductions. Senior leadership accepted longer temporary remuneration reductions. We took advantage of the Government’s tax deferral and job retention schemes, although we have now taken the decision to repay monies received under the latter7. Vistry Partnerships demonstrated its strong market resilience with its high proportion of revenue from contracting and pre-sold developments and led an early return to site. Site closures during March and April significantly impacted the production, output and first half financial performance of our Housebuilding business. We have seen positive sales trends since early May, with consumer interest higher than at any time in recent years. Productivity across the Group returned to near normal levels during July, with sites using extended working hours to facilitate this. The Group’s half year net debt position of £357m1 was significantly lower than forecast at the start of the COVID-19 pandemic reflecting the resilience of Vistry Partnerships and improved completion levels. We have a robust balance sheet with significant financing headroom. The Group maintains a valuable and deliverable land bank with over 38,000 plots across Housebuilding and Partnerships and including JVs. The Housebuilding land bank shows an embedded gross margin of 24.2%, including our share of JV plots. We have a strong strategic land capability with over 32k strategic land plots delivering on average a 150-300 bps improvement to gross margin. 4 Current trading and outlook We have seen a strong start to the second half supported by positive market trends, with our sales rate since 1 July up 20% on the prior year at 0.73 (2019: 0.61) sales per active site per week including Vistry Partnerships.