Final Results

RNS Number : 1123R

Vistry Group PLC

04 March 2021

 

4 March 2021

Vistry Group PLC - Full year results

Vistry Group PLC (the "Group") is today issuing its full year results for the 12-month period ended 31 December 2020.

Full year highlights

·Strong second half performance with adjusted full year profit before tax⁽¹⁾ of £143.9m ahead of our expected range

·On a reported basis after exceptional items and amortisation the Group made a profit before tax of £98.7m (2019: £174.8m)

· Significant deleverage resulting in a year-end net cash⁽²⁾ position of £38m down from net debt of £357m as at 30 June 2020, having started the year with net cash of £362m prior to the acquisition

· Sustained step up in demand with H2 2020 weekly private sales rate per outlet up 15% to 0.62 (H2 2019: 0.54)

· Further improvement in quality and customer satisfaction and expect to be awarded the maximum 5-star HBF customer satisfaction rating for 2020 and started 2021 well

·Completed full review and stakeholder consultation on strategy for sustainability, defining a range of targets and commitment to set clear roadmap in 2021 for Group to achieve net zero carbon

· Excellent progress at Vistry Partnerships with higher margin mixed tenure volumes up 70% in the second half on the prior year equivalent period, and an increase in adjusted operating margin in the year to 6.7%

·Housebuilding delivered 4,652 (2019 proforma⁽³⁾: 6,884) completions at an average selling price of £303k, with the H1 performance significantly impacted by Covid-19

· Firm pricing with 0.5% to 1.0% price increase and resilient supply chain with low-cost inflation

·Active in the land market maintaining controlled land bank size at 40,218 plots whilst reducing land creditors since acquisition by £79m to £323.2m

· Resumption of dividends with 20 pence per share final dividend proposed in respect of 2020

Current trading and outlook

· Strong start to the year with private sales per active site per week of 0.66 in first 8 weeks (2020: 0.64) and the underlying sales rate ahead of the positive start to 2020

· Last 4 weeks particularly strong with private sales rate of 0.78

· Pricing remains firm and good supply of material and labour

· Selling well for completions post 31 March 2021, with little impact from changes to HTB and previously expected end to stamp duty holiday

·Strong forward sales position with 64% of total Housebuilding and Partnerships mixed tenure forecast units for 2021 already secured, totalling £1,747m

· Partner delivery forward order book totalling £880m

· Forecast increase in land and WIP investment in 2021 of c. £100m supporting Partnerships' growth plans

· On track to deliver full synergy run rate of £44m by end of 2021, 26% ahead of initial target and at a lower than expected cost

· Assuming stable market conditions, the Group is positioned to more than double adjusted profit before tax⁽¹⁾ in 2021 to at least £310m with EPS in 2021 higher than 2019

· Group is targeting an improved net cash position for 31 December 2021 and an average month-end net debt for 2021 of less than £200m (2020: £350m)

· Resumption of dividends with progressive dividend policy and a move towards 1.75x dividend cover over time

Greg Fitzgerald, Chief Executive, commented:

"The Group has achieved an enormous amount in 2020, and despite the challenges I am in no doubt we start 2021 as a stronger business.

We had a strong second half performance with a sustained step up in demand, firm pricing, and a robust supply chain.  Vistry Partnerships made excellent progress against its growth targets of £1bn revenue and a 10% plus operating margin by 2022, delivering a 70% increase in H2 2020 mixed tenure completions and adjusted operating margin progression in the year to 6.7%.

Our firm focus on cash management resulted in a year end net cash position of £38m.  As a result of these actions and our positive performance, the Board is pleased to resume dividend payments with a proposed final dividend of 20 pence in respect of 2020.

2021 has started well with strong demand across all areas.  We have seen no impact from the national lockdown or changes to the Help to Buy scheme and the expected end to the Stamp Duty exemption. We have a strong forward sales position, with 64% of forecast units for 2021 already secured.  Assuming stable market conditions, the Group is confident it will more than double profits in the year, with a profit before tax of at least £310m.

On behalf of myself and the rest of the Board, I would like to thank all our employees, subcontractors and suppliers for their incredible hard work and commitment during what has been a uniquely challenging period."

Key financials(4)(5) (6)	2020	2019		Change
Total completions(7)	8,954	3,867		+>100%
Adjusted revenue	£2,040.1m	£1,139.2m		+79.1%
Adjusted operating profit	£171.0m	£194.4m		-12.0%
Adjusted profit before tax	£143.9m	£188.2m		-23.5%
Adjusted basic EPS	52.6p	104.3p		-49.6%
Reported results(5)(6)	2020	2019		Change
Group revenue	£1,811.7m	£1,130.8m		+60.2%
Operating profit	£91.7m	£179.7m		-49.0%
Profit before tax	£98.7m	£174.8m		-43.5%
Earnings per share	34.8p	94.6p		-63.2%
Net cash(2)	£38m	£362m		-89.5%
Forward sales (£m)			1 March 2021
Housebuilding
-  Private			620
-  Private JVs (100%)			215
-  Affordable			434
-  Affordable JVs (100%)			135
Total Housebuilding			1,404
Partnerships
-  Mixed tenure			151
-  Mixed tenure JVs (100%)			192
Total mixed tenure			343
Total development			1,747
Total partner delivery			880
Total Group			2,627

There will be a virtual presentation for analysts and investors available on our corporate website from 7:00am this morning www.vistrygroup.co.uk or at

https://webcasting.brrmedia.co.uk/broadcast/602d4fba1fc46330548fa366

Greg Fitzgerald, Graham Prothero and Earl Sibley will host a live Q&A session for analysts at 8:30am.  To watch the session please use the webcast link available on our corporate website at https://www.vistrygroup.co.uk/investors/reports-and-presentations/2020 or at

https://webcasting.brrmedia.co.uk/broadcast/603fba571e24d464e23e659c

A playback facility will be available shortly after the Q&A session has finished at www.vistrygroup.co.uk

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 GroupPLC Earl Sibley, Chief Financial Officer Susie Bell, Head ofInvestor Relations Powerscourt Justin Griffiths, Nick Dibden, Victoria Heslop

01675 437160 020 7250 1446 [e-mail]

 

Chief Executive Review

2020 review

I am incredibly proud of all the Group has achieved in 2020 and would like to thank our employees, subcontractors and suppliers for their effort and commitment.  Despite the obvious challenges of 2020, I firmly believe we finished the year as a much stronger business.  Building high quality homes and providing our customers with excellent service has remained a key priority and I am delighted this is reflected in our HBF customer satisfaction score, with the Group again set to achieve the highest 5-star rating for 2020.

At the start of the year, our clear focus was the successful integration of Linden Homes and Vistry Partnerships, ensuring we maximised the significant benefits from the combination and delivered upon the compelling strategic rationale for the acquisition⁽⁸⁾.  With our aim of bringing together the best from each business we hit the ground running, and the re-organisation of the enlarged Housebuilding business was largely completed by the end of March.

This positioned us well to deliver a rapid and co-ordinated response to the first national lockdown in late March, with the safety, health and wellbeing of our employees, subcontractors, suppliers, and customers our top priority.  On average, our Housebuilding sites were closed for seven weeks which had a significant impact on our first half performance.  Vistry Partnerships demonstrated its strong market resilience and led the industry in an early return to site, underpinned by the certainty of pre-sold developments and partner delivery revenues, with its strong cash flow profile giving good support to the Group during these months.

With Covid-safe operating procedures in place across the business, productivity returned to normal levels in the second half, and the Group delivered a strong performance with a sustained step up in demand, firm pricing, and a resilient supply chain.

Vistry Partnerships made excellent progress against its ambitious growth strategy in 2020 with mixed tenure units up nearly 30% in the year and 70% in the second half, driving an improved operating margin.

Following the completion of the Acquisition, we entered the year with net debt of £136.3m.  We have been firmly focused on deleveraging throughout the year, and I am very pleased to report a net cash position of £38.0m as at 31 December 2020, a step change from our £357.3m net debt position as at 30 June 2020.  This performance was driven by continued strong trading, good working capital management at an individual business level, and the ongoing benefits from the combination of the enlarged business.  With a robust balance sheet and strong forward sales position going into 2021, the Board is pleased to resume the payment of dividends with a 20 pence per share final dividend proposed in respect of 2020.

One Vistry - a stronger business

At the start of the year, our focus was on maximising the benefits from the combination and delivering on the compelling strategic rationale for the Acquisition.

The integration has been successful with the benefits ahead of plan.  The full synergy run rate of £44m to be delivered by the end of 2021 is 26% greater than initially expected and will be achieved at a lower than expected cost.

We are a top 5 national housebuilder set to deliver significant growth in revenue and profits in 2021.  The Group operating structure has the capacity to deliver c. 14,000 completions from both Housebuilding and Partnerships, representing an additional c. 35% capacity on the 8,954 completions delivered in 2020.

Vistry Partnerships, a key driver of the Acquisition rationale, has strengthened its unique market leading position during 2020, delivering growth in profits and margin progression.  We expect further significant growth in 2021 with the business on track to meet its 2022 targets of £1 bn revenue and a 10% plus adjusted operating margin.

Vistry Group has capability across all segments of the housing market and is in a unique position to maximise development opportunities across multiple housing tenures, using both its leading housing brands, Bovis Homes and Linden Homes, alongside Vistry Partnerships.  We are seeing more and more attractive opportunities like this where the business works as one to maximise output and returns.

Sustainability

At the same time as restructuring and integrating our operations, we set ourselves the challenge to review our priorities and enhance our focus on the sustainability of our operations.  The enlargement of the Group, and the addition of the Vistry Partnerships business presents exciting opportunities to enrich our purpose of developing sustainable new homes and communities across all sectors of the UK housing market.

We consulted widely with stakeholders, and reviewed our objectives for our people, our operations and our homes and communities.  We have established a range of targets for the current year, set out in detail in this report, and including our commitment to establish our timetable and plans to achieve Net Zero Carbon, on which we intend to conclude by the time of our half year announcement in September 2021.

The nature of our business offers many key areas where we can make a difference, from minimising the environmental impact of our operations, and enhancing biodiversity on our sites, to enhancing the communities which we serve, both by creating high quality homes and great places to live, and by the opportunities generated for local people and businesses.

We are also actively addressing diversity and inclusion.  We have consulted with our people on how we might improve in this area and are now in the process of identifying our priorities and an action plan for the year.

I have been greatly impressed by the passion with which our team has embraced these challenges and look forward to the formal launch of our strategy in the Spring, and to reporting our progress over the coming year.

Cladding and building safety

The Group is closely monitoring the issue of building safety.  Recent changes to regulations and guidance, made in light of the Grenfell tragedy in 2017, are causing some buildings constructed in compliance with  regulations at the time to now be deemed non-compliant, in some cases resulting in significant rectification costs.  We are concerned by the plight of leaseholders facing potentially large and unaffordable costs for remediation and are working with the Home Builders Federation in order to derive an industry solution that is both practical and fair to all parties.  We are supportive of the Government's proposal for an industry levy to accelerate remediation works and the resolution of this issue.

In the aftermath of events at Grenfell, potentially relevant buildings were identified, and clients contacted, in order to carry out investigations and consider solutions where necessary.  Vistry Partnerships has over the past three years worked with clients to rectify the position on a small number of buildings over 18 metres and continues to liaise closely with clients where improvements to meet current regulations are required.

The Group has also identified ten projects where it has acted as developer, which are occupied by leaseholders, and where remediation works may be required.

Whilst the Group is not aware of liability in any of these cases, we are committed to proper consideration of any relevant case and to meeting any liability which we identify, and, in addition, to offering appropriate support in circumstances where building owners do not meet their obligations.  We anticipate that this will give rise to financial liabilities, which we have estimated to be between £10m and £25m.

We have brought forward provisions in the balance sheet of £9.9m, and have now increased this to £20.9m, by way of an exceptional charge to the Profit and Loss account of £11m.

Current trading and outlook

We have seen a strong start to the year with a private sales rate per active site per week of 0.66 in first 8 weeks (2020: 0.64), and the underlying sales rate ahead of the positive start to 2020.  The last 4 weeks have been particularly strong with a private sales rate of 0.78.  Pricing remains firm and we see a good supply of materials and labour with minimal cost inflation.  We have a strong forward sales position with 64% of total Housebuilding and mixed tenure units for 2021 secured and the partner delivery forward order book totals £880m.

We are alert to the wider market uncertainty and the changes for Housebuilding from an end to the existing Help to Buy scheme at the end of Q1 and the end to stamp duty holiday now in Q4.  We have seen no impact from this to date, with good levels of sales under the new Help to Buy scheme and the majority of reservations taken since Dec last year for completions post March 2021 when the stamp duty holiday had been expected to end.

Assuming stable market conditions we expect to deliver a step-up in Housebuilding completions in 2021 to c. 6,300 units and an improvement in adjusted gross margin to c. 22%.  Partnerships expects to deliver significant growth in higher margin mixed tenure completions in 2021 and is on track to meet its 2022 targets of £1bn revenue and an adjusted operating margin of 10% plus.  The Group remains confident it can deliver more than double profit before tax⁽¹⁾ to at least £310m with EPS in 2021 higher than in 2019.

Operational update

Trading performance

There was a strong start to 2020 with a step up in our private sales rates and positive price momentum, however from the third week in March we started to see a significant impact, particularly on our Housebuilding business, from Covid-19.  Our developments temporarily shut down from the end of March with a return to site commencing in late April.  Sales trends picked up from the start of May and we saw a return to more normal levels by the end of May.

In the second half we saw sustained strong demand with the Group's private sales rate per outlet per week increasing by 15% in the period to 0.62 (proforma H2 19: 0.54).  Encouragingly, customers continued to reserve homes during the second national lockdown in November and December, with our underlying sales rate up c. 20% in the last 6 weeks of the year.

The Group delivered completions in 2020 at the top end of our revised expectations reflecting a strong second half performance.  Pricing remained firm through the year and overall, we saw a modest increase in underlying prices.

Help to Buy remained important with 36% (2019: 23%) of our Housebuilding completions in the year utilising the scheme, albeit this is lower than the industry average.  Our land bank is well positioned for the future following our strategy, over the last two years, to purchase land for the development of smaller homes and with lower average selling prices.  In the year, 8% (2019: 7%) of Housebuilding completions utilised part exchange.

Housebuilding^(3)(4)(7)

Housebuilding delivered a total of 4,652 (2019 proforma: 6,884) completions, including 820 (2019 proforma: 946) from JVs.  Private completions in the year totalled 3,668 (2019 proforma: 4,775) with 984 (2019 proforma: 2,109) affordable units.  Total Housebuilding average selling price was £302.5k with adjusted revenue from Housebuilding activities in the year totalling £1,312m (2019 proforma: £1,821m).  Housebuilding is currently selling on 149 active sites and we expect the average for 2021 to be c. 150 sites.

Housebuilding adjusted gross margin declined to 17.6% (2019: 22.4%) reflecting the wide-ranging impact of Covid-19.  The business incurred additional costs directly related to the period of lockdown, lower levels of operating efficiency from social distancing and the lengthening of development period expectations.  A total of £10.2m of non-productive direct costs were identified as impacting the first lockdown period, all of which were recognised in the first half.  Margin was also impacted by our policy of recognising the full sales and marketing costs incurred during the year, similar to administrative expenses, rather than apportioning them into work in progress.  Our Housebuilding business is well positioned going forwards and we expect a step up in housing adjusted gross margin for 2021 to c. 22% as we move towards the 24.2% gross margin embedded in the land bank.

Partnerships^(3)(4)(7)

Vistry Partnerships made good progress in the year, pursuing its strategy of accelerating growth in higher margin mixed tenure development revenues.  With its high level of pre-sold units and contracting revenues, Vistry Partnerships demonstrated its strong market resilience in the first half of the year and led an early return to site in late April.

Mixed tenure completions increased by 28% in 2020 to 1,479 (proforma 2019: 1,158) units including 608 (2019 proforma: 530) JV units, with completions in the second half up 70% year on year to 990 (proforma H2 19: 584).  The average selling price of mixed tenure units in the year was £204k resulting in mixed tenure revenue of £238m (2019 proforma: £195m) for 2020.  Vistry Partnerships is currently selling on 30 mixed tenure sites and we expect this to increase to an average of c. 32 for 2021 with further growth into 2022.

Partner delivery⁽⁹⁾ revenue for 2020 was £490m (2019 proforma: £513m), with equivalent units increasing to 2,823 (2019 proforma: 2,556).

Total adjusted revenues from Vistry Partnerships increased by 3% to £728m (proforma 2019: £708m) with adjusted operating margin increasing to 6.7%.  This margin improvement has been driven by the strong increase in higher margin mixed tenure revenues and is in-line with the business' target of achieving at least a 10% adjusted operating margin in 2022.

Integration and synergies

Following completion of the Acquisition on 3 January 2020, the Group set out to integrate the two housebuilding businesses of Bovis Homes and Linden Homes as efficiently as possible, taking the best from each business to strengthen the overall Group position.  This was delivered ahead of plan and positioned us well to effectively respond to the challenges of Covid-19 from late March.

Housebuilding was re-organised into 13 operating regions with four regional office closures.  To maximise the benefit from two brands, there has been a complete review of both the Bovis Homes and Linden Homes product range to ensure product differentiation and clear market positioning.  We also refreshed both the Bovis Homes and Linden Homes brand identities, with Vistry Partnerships being successfully rebranded on acquisition.

The technical specification has been aligned across our product range to maximise best practice and efficiency, and all our Group procurement agreements have been renegotiated.  We have strong central services teams to support the operational businesses including sales, marketing, land, health & safety, HR, and IT.  There has been a significant investment in IT to deliver high quality and consistent business processes and systems across the business including the implementation of COINS across the enlarged Housebuilding business and Vistry Partnerships.  Third party dependencies for the acquired business were all removed by the end of 2020, ahead of our initial expectations.

Synergies are expected to be 26% greater than initially expected at £44m p.a. with the full run rate to be achieved by the end of 2021.  The expected cost to achieve this is c. £27m, which is lower than the initial target cost of £35m.  The synergies impacting 2020 are estimated at £25m, flowing through both the Group's cost of sales and administrative costs.  Exceptional integration costs of £20m have been recorded in 2020 with a further c. £7m expected in 2021 as we complete the final integration of systems and processes.

Quality and customer service

Building high quality new homes and providing our customers with excellent service has remained a top priority during 2020 and we are set to achieve an improved HBF Customer satisfaction score for 2020 and the maximum 5-star rating.  It is particularly pleasing to note that all three divisions within the Housebuilding business, as well as the Partnerships business, will achieve a 5-star rating.  The new HBF year has started well, and we are continuously striving to deliver further improvement.  We are also very focused on improving our score for the HBF customer satisfaction survey which is sent out 9 months after completion and this metric has been added to our annual bonus criteria and targets.

Our strategic focus for our customers remains the delivery of a seamless, transparent end to end experience which makes us easier to do business with.  We have rolled out our customer relationship management platform, Keys, across the enlarged Housebuilding business during 2020, which provides a single platform to deliver ongoing improvements in our selling and service capabilities and facilitates improved customer communications.  We have plans to adopt the same system across Partnerships in the near future.

People

Our people are key to the success of our business and we are thankful to all our employees for the enormous commitment and hard work they have given this year.  We are conscious that it has been a period of unprecedented change and are very pleased that our latest Peakon engagement study reported a score of 7.9, an improvement on the 7.6 in August last year and ahead of the benchmark at 7.4.  We have also seen a reduction in our unplanned staff turnover to 15%.

There has been a big effort to improve employee communication channels this year which has proved successful and well received.  We have placed a significant emphasis on mental health and during 2020 have trained up over 70 mental health first aiders across the business and run half-day awareness training for all line-managers.  We have introduced weekly 'Time to Talk' drop-in sessions specifically designed to address some of the challenges brought on by the pandemic and working from home.

Our primary focus for training and development during 2020 has been on safety, health and environment with content being digitised and delivered virtually.  Looking ahead, a key area of focus will be leadership training and succession planning in the enlarged group.

Land

The Group remained active in the land market throughout the year, maintaining the size of our controlled landbank at 40,218 plots (31 Dec 2019 proforma: 40,135).  We continue to see a good supply of attractive opportunities that at least meet our minimum hurdle rates.

In the year, Housebuilding secured 6,281 plots across 31 developments and has a strong land pipeline, with 100% of land required for forecast 2021 completions secured.

Partnerships is investing in its owned land bank to support its targeted step-up in mixed tenure and in the year secured 2,371 plots on 11 sites for mixed tenure development.  It is also well positioned with 100% of the land required for forecast 2021 mixed tenure completions secured.

Strategic land is a key component of the Group's land supply and as at 31 December 2020 the Group had a total of 34,053 (31 Dec 2019 proforma: 31,965) strategic plots.  In the year, we are pleased to have secured options over 2,856 strategic land plots across 10 developments.

Balance sheet

The Group started the year with a net cash position of £362.0m prior to the Acquisition.  As at the 30^th June 2020 the Group reported net debt of £357.3m.  There was significant deleverage in the second half resulting in a net cash position as at 31 December 2020 of £38.0m.  This was driven by continued strong trading, good working capital management at an individual business level, and the ongoing benefits from the combination of the enlarged business.

Looking forwards, the Group is targeting a month-end average net debt position in 2021 of less than £200m as we build for 2021 completions and deliver a stronger net cash position at 31 December 2021.

The Group is operating with substantial funding headroom, with committed banking facilities totalling £770m and well spread maturities out to 2027.

While the scale of the land bank has been maintained, the Group land creditor position has reduced since Acquisition by £79m to £323.2m as at 31 December 2020.

Group strategy

Vistry Group exists to develop sustainable new homes and communities across all sectors of the UK housing market with 'Doing the right thing' at the core of our strategic focus and operations.

Following the formation of Vistry Group and successful integration in 2020, we are a top five national housebuilder with a leading Partnerships business, uniquely positioned us to take advantage of the strong, under supplied housing market.

Housebuilding

The Housebuilding business is focused on driving revenue growth and delivering significant margin improvement from its existing operating structure.  The business has national coverage through its 13 operating regions with each targeting annual output of between 550 to 625 units including JV's, giving an overall volume capacity for Housebuilding of more than 8,000 units (2020 Housebuilding total completions incl. JVs: 4,652).

The business has a high quality landbank of c. 32,000 controlled plots including JV's located in desirable edge or out of town location with minimal exposure to London or other city centres.  Our focus is on increasing the proportion of two and three-bedroom homes where we see the most resilient demand.  With two leading housing brands, Bovis Homes and Linden Homes we are focused on maximising the benefits of dual branding supported by our brand differentiation.  Bovis Homes is positioned to feature larger, more distinctive homes with enhanced design features and Linden Homes to offer well designed, more competitively priced homes.

The Housebuilding business is focused on driving margins towards the embedded gross margin of 24.2% as at 31 December 2020 in the owned and controlled land bank.  This margin improvement will be driven by a combination of the acquisition of new land with a minimum gross margin hurdle rate of 25%, the pull-through of strategic land which delivers an enhancement to margin of c. 150 to 300 basis points, maximising sales rates and driving improved efficiency through high quality build and cost efficient product, processes and output.

Partnerships

Vistry Partnerships holds a strong and unique position within the partnerships market, combining higher margin mixed tenure development and market resilient cash generative partner delivery.

The business has a clear and ambitious growth strategy targeting the delivery of £1bn of revenue, an adjusted operating margin of at least 10%, and a 40% return on capital employed in 2022.  This growth will be driven by a rapid increase in higher margin mixed tenure completions with mixed tenure revenues to increase from 33% of total partnerships revenues in 2020 to 50% in 2022.  The adjusted operating margin for mixed tenure development ranges from c. 11% to 18% as compared to partner delivery with a c. 3% to 11% adjusted operating margin.

The accelerated growth is supported by the division's 11 operating regions and continued expansion into new geographies.  The Group's land investment and supply, and its strategic land capability will support the growth in higher margin mixed tenure development revenues.

Dividend policy

With the Group's strong second half performance, the year-end net cash position and solid forward sales, the Board is pleased to confirm the resumption of dividend payments with a 20 pence per share final dividend proposed in respect of 2020.  Going forward the group is targeting to maintain a strong balance sheet while operating with a progressive dividend policy which allows the Group to move towards a 1.75x dividend cover over time.

 

Financial Review

Trading performance

The Group delivered a solid financial performance in light of the challenges from Covid-19.  In particular, the strong performance of the Partnerships business growing revenue and margin, demonstrating its robust characteristics despite the market pressure.

In line with the strategy at the time of the acquisition, the Group integrated the Housebuilding businesses of Linden and Bovis swiftly to deliver synergies ahead of expectations and at a lower cost.  Delivering across these key areas contributed to the strong cash delivery in the year resulting in a net cash balance and enabling the Group to return to paying dividends.

Total completions

During the year the Group delivered 6,131 (2019: 3,867) legal completions⁽⁷⁾, including 100% of JV completions, representing a 58.6% increase on the prior year. This was driven by the Acquisition which completed on 3 January 2020, however, was lower than expectations as a result of the Covid-19 pandemic and the temporary closure of developments during the first nationwide lockdown.

	2020	2019	%Change
Housebuilding
-  Private	3,010	2,625	+14.7%
-  Affordable	822	1,184	-30.6%
-  JV's (100%) Private	658	53	+>100%
-  JV's (100%) Affordable	162	5	+>100%
Total housebuilding	4,652	3,867	+20.3%
Partnerships
-  Mixed tenure	871	-	n/a
-  JV's (100%) Private	397	-	n/a
-  JV's (100%) Affordable	211	-	n/a
Total mixed tenure	1,479	-	n/a
Total completions	6,131	3,867	+58.6%
Partner delivery equivalentunits	2,823	-	n/a

 

Proforma completions analysis

During the same period in 2019 on a proforma basis⁽³⁾ the Group delivered 8,042 legal completions representing a decrease of 23.8% in 2020.

	2020	2019	%Change
Housebuilding
-  Private	3,010	4,088	-26.4%
-  Affordable	822	1,850	-55.6%
-  JV's (100%) Private	658	687	-4.2%
-  JV's (100%) Affordable	162	259	-37.5%
Total housebuilding	4,652	6,884	-32.4%
Partnerships
-  Mixed tenure	871	628	+38.7%
-  JV's (100%) Private	397	260	+52.7%
-  JV's (100%) Affordable	211	270	-21.9%
Total mixed tenure	1,479	1,158	+27.7%
Total completions	6,131	8,042	-23.8%
Partner delivery equivalentunits	2,823	2,556	+10.4%

Revenue

Total adjusted revenue⁽⁴⁾, including share of JV revenue, was £2,040.1m, 79.1% higher than prior year (2019: £1,139.2m) and 21.3% lower on a proforma basis (2019: £2,592m).  On a reported basis revenue was £1,811.7m, 60.2% higher than last year (2019: £1,130.8m).

Adjusted gross and operating profit⁽³⁾

Adjusted gross profit was £318.8m in 2020 (adjusted gross margin: 15.6%), which compares to £255.3m in 2019 (adjusted gross margin: 22.4%). The margin was impacted by sites closing during the first national lockdown due to Covid-19, including the impact of non-productive site overhead costs being expensed directly to the income statement which under normal productive circumstances would be capitalised into inventory and recognised in the income statement as homes complete. There were also costs incurred relating to the closing and reopening of sites as a result of lockdown, and implementation of Covid-19 safe working procedures and health and safety precautions.  The direct costs identified relating to Covid-19 recognised in the income statement totalled £10.2m; these costs were all incurred in the first half of the year. In December 2020 Vistry repaid a total of £7.1m of furlough claim income received from the Government's Job Retention Scheme.  This included £6.3m which was received during HY20, positively impacting profit in the first half of the year.  The repayment in the second half of the year meant the income was reversed.

Adjusted operating profit is £171.0m (2019: £194.4m).  This includes the increased overhead costs of the enlarged Group following the Acquisition, primarily resulting from higher employee numbers and additional establishment costs.  Adjusted operating margin⁽³⁾ was 8.4% (2019: 17.1%).

Reported operating profit was £91.7m (2019: £179.7m profit). The Group delivered an adjusted profit before tax of £143.9m (2019: £188.2m).

On a reported basis, the Group saw a profit before tax for the year ended 31 December 2020 of £98.7m, comprising operating profit of £91.7m after exceptional costs of £31.0m, net financing charges of £7.9m and share of JV profit of £14.9m. This compares to £174.7m of profit before tax in 2019, which comprised £179.7m of operating profit, £6.8m of net financing charges and share of JV profit of £1.8m.

Housebuilding(4)⁽⁵⁾

	2020	2019	%Change
Total completions incl. 100% JVs	4,652	3,867	+20.3%
Adjusted revenue	£1,311.8m	£1,139.2m	+15.2%
Adjusted gross profit	£231.2m	£255.3m	-9.4%
Adjusted gross margin	17.6%	22.4%	-4.8pps
Adjusted operating profit	£139.4m	£207.1m	-32.7%
Adjusted operating margin	10.6%	18.2%	-7.6pps
TNAV	£1,491m	£922m	+61.9%

Housebuilding total completions including 100% of JVs at 4,652 included 984 affordable homes representing 21.1% of total completions (2019: 1,189 affordable homes, 30.7% of total completions).

Housebuilding pricing remained firm through the year and overall we saw a modest increase in underlying prices, with the average sales price for our private homes in housebuilding having increased  0.4% to £343,200 (2019: £341,700).The total average sales price increased by 8.0% to £302,500 (2019: £280,200) driven by a lower proportion of affordable.

Included within Housebuilding revenue is £17.2m revenue (2019: £49.2m including partnership land sales) related to land sales, including the sale of a parcel of land on our large-scale development at Twigworth.

Housebuilding adjusted gross profit of £231.2m and housing adjusted gross margin of 17.6%, were impacted by Covid-19 direct costs in the year totalling £8.6m which had a 0.7% impact on housing adjusted gross margin.  Additional costs relating to implementing safe working practises and the reduced operating efficiency on site are estimated to have a further 0.9% impact on adjusted gross margin.

Housebuilding gross margin is also impacted by our policy of recognising direct sales and marketing costs in the year they arise, similar to administrative expenses, rather than apportioning them by volume. The impact of this, on margin, due to the lower than expected volume was c. 0.7% in the year. The Group also recognised costs relating to the impairment of inventory totalling £5.7m in the year (2019: £0.3m).  In addition, the mix of homes completed in the year included a higher proportion of completions from sites that had been largely built out at the beginning of the year which had, on average, a lower margin.

The housing gross margin saw a step up in the second half and a further step up is expected in 2021 as the business moves towards delivering a gross margin in line with the embedded land bank margin of 24.2% in the future. This future margin includes an estimate for the additional costs of implementing future building regulations (Part L) for all appropriate plots.

In 2020 the Group saw low levels of cost inflation and expects this to continue into 2021 with benefit coming through of supplier agreements re-negotiated as a consequence of the Acquisition. The Group also benefitted from material supply synergies in the full year.

Housebuilding adjusted operating profit of £139.4m and adjusted operating profit margin of 10.6%.  Whilst the group has restructured to realise synergies and ensure Housebuilding has an efficient overhead going forwards the adjusted operating margin reflects the increased overhead from the enlarged group spread across lower than expected volumes.

Partnerships⁽⁴⁾

	2020
Total completions incl. 100% JVs	1,479
Adjusted revenue	£728.3m
Adjusted operating profit	£48.6m
Adjusted operating margin	6.7%
TNAV(10)	(£30m)

Adjusted revenue from Partnerships in the year totalled £728.3m, made up of £489.5m from partner delivery⁽⁹⁾(contracting) and £238.7m from mixed tenure operations.

Partnerships sold a total of 1,479 units from its mixed tenure operations, including JVs, with an average selling price of £203,900k and partner delivery revenue generated equivalent units of 2,823.

Adjusted operating profit of £48.6m and adjusted operating profit margin of 6.7% are impacted by Covid-19 as well as a full overhead cost being incurred despite reduced volumes.

The adjusted operating margin reflects an improvement to the proforma operating margin reported by the Partnerships business for the full year to the 30 June 2019 of 5.6%.  This improvement reflects the strong counter cyclical nature of the business including a high proportion of pre-sold homes and a strategy of aggressively growing the mixed tenure element of the business and administrative costs benefiting from synergies in the enlarged group.

Non-underlying and group costs

The reported Group segment of the business includes the non-underlying exceptional restructuring costs of £20.0m (2019: £13.6m), related to the Acquisition.

In addition, the Group has recognised an exceptional charge of £11.0m in relation to the potential financial liabilities for legacy property building safety.

The Group segment reported direct PLC costs totalling £17.0m (2019: £12.7m), including the costs of the PLC Board, share based payments and related items.

Financing and Taxation

Net financing charges during the year were £7.9m (2019: £6.8m).  Net bank interest and commitment fees were £18.5m (2019: £1.9m), as a result of higher net debt during 2020 following the acquisition and supporting the enlarged Group.  We incurred a £4.6m charge (2019: £3.4m), reflecting the imputed interest on land bought on deferred terms.  JVs which are funded through loans are charged interest by the Group, which generated the majority of the £18.2m of finance income recognised (2019: £0.8m) .The significant increase on prior year is driven by the additional loans to JVs with the acquired businesses.

The Group has recognised a tax charge of £21.9m at an effective tax rate of 22.1% (2019: £36.4m at an effective rate of 20.8%).  The effective tax rate is driven by non-deductible exceptional costs.  The Group has a current tax asset of £14.4m in its balance sheet as at 31 December 2020 (31 December 2019: liability of £20.9m).

Dividends and earnings per share

During a period of significant uncertainty in late March the Board focused on protecting the Group's cash position, liquidity and maintaining a robust balance sheet. The decision was taken that no interim dividend would be paid in respect of H1 2020. A final dividend of 20 pence per share (2019: 41.9 pence) has been declared and, subject to shareholder approval at the AGM, will be paid on 21 May 2021 to holders of ordinary shares on the register at the close of business on 26 March 2021. Total ordinary dividends for the year are therefore 20 pence per share (2019: 61.5 pence).

Both adjusted basic EPS before exceptional expenses and amortisation of acquired intangibles of 52.6p (2019: 104.3p) and basic EPS of 34.8p (2019: 94.6p) have decreased year on year, by 49.6% and 63.2%, respectively.

Acquisition and integration

The Group completed the Acquisition on 3 January 2020, at a cost of £1,233.5m including £378.1m in cash and £855.4m in shares. The novation of £108.2m in USPP Notes Payable is classified as an acquired liability and not consideration.

As shown in the table below, the Acquisition resulted in the recognition of £155.0m of intangible assets related to the Linden and Drew Smith brand names, as well as customer relationships and secured contracts held by the acquired businesses.  Goodwill of £547.5m has been recognised, reflecting intangible assets which do not qualify for separate recognition including relationships with private customers and the assembled workforce, in addition to future prospects and the synergies that will be achieved as an enlarged business going forwards.

Purchase consideration	Linden (£'000)	Partnerships (£'000)	Total (£'000)
Cash	76,300	301,800	378,100
Shares consideration	815,698	39,685	855,383
Total purchase consideration	891,998	341,485	1,233,483
Reflecting:
USPP notes payable	-	(108,219)	(108,219)
Intangible assets	54,800	100,224	155,024
Net tangible assets	608,870	30,299	639,169
Goodwill	228,328	319,181	547,509
Total net assets recognised	891,998	341,485	1,233,483

Exceptional costs of £20.0m have been recognised in the income statement relating to the Acquisition, primarily driven by redundancy costs, integration costs from moving the enlarged business onto consistent processes and systems, and rebranding.  The initial expectation for the costs to achieve synergies and integration were £35m, the current estimate is c. £27m in total, with c.£7m expected in 2021.

At the time of the Acquisition the integration of the new businesses into the Vistry Group was expected to achieve synergies of c. £35m.  The Group is now targeting synergies of c. £44m on an annualised basis from 2022 onwards with synergies of c. £25m arising in 2020. The full impact of synergies from 2022 onwards is expected to come through cost of sales at a rate of c. £25m per annum and administrative expenses of c. £19m per annum.

Net assets and cash flow

As at 31 December 2020 net assets of £2,195m were £923m higher than at the start of the year, primarily resulting from the Acquisition.  Net assets per share as at 31 December 2020 were 988p (2019: 857p).

Goodwill and intangibles totalled £691.1m at 31 December 2020 (2019: £4.3m), directly resulting from the Acquisition.

Tangible net assets increased from £905.6m at 31 December 2019 to £1,466.1m at 31 December 2020, again primarily driven by the addition of the acquired balances in January 2020.

Within tangible net assets, inventories increased during the year by £628.8m to £1,836.5m. This balance reflects the slowdown in land acquisition early in the year.

Trade and other receivables increased by £126.3m.  Trade and other payables increased by £558.5m and includes land creditors which increased by £64.4m to £323.2m (2019: £258.8m).

As at 31 December 2020 the Group's net cash balance was £38.0m⁽²⁾.  Having started the year with net cash of £362.0m, the Group generated an operating cash inflow before land expenditure of £440.9m (2019: £281.4m).  Net cash payments for land investment were increased at £259.0m (2019: £184.7m). During the second half the group has continued to achieve good deferred terms on new land investment as well as securing a number of new sites on a conditional basis.  This has typically been on a subject to detailed planning basis, delaying the initial land payments closer to the time when development on site will commence and supporting return on capital employed.  Investing cash outflows totalling £383.8m includes the £394.6m cash consideration for the Acquisition net of overdraft acquired, as well as loans made to and investments made in joint ventures and dividends received from joint ventures.  Financing cash inflows of £181.2m include £200m of loan drawdowns net of repayments, no dividends were paid in the year.

At 31 December 2020 the Group has borrowing facilities of £770m, including a 5 year committed revolving credit facility of £410m, a 3 year revolving credit facility of £40m, £150m of 3 year term loans, a £100m US Private Placement facility and £70m of additional facilities.  In addition, Vistry Group have been confirmed as eligible for the CCFF, for borrowing of up to £300m although the Group has no expectation of using this facility.

Land bank

Housebuilding land bank

	2020	2019
Plots added	6,281	4,531
Sites added	31	18
Sites owned at year end	199	116
Sites controlled at year end	14	-
Total plots in land bank at year end incl. joint ventures	31,994	17,328
ASP incl. share of joint ventures	£306,000	£299,000
Average consented land plot ASP	£46,000	£46,411

The average selling price of all units within the consented land bank increased over the year to £306,000, 2.3% higher than at 31 December 2019. The estimated embedded gross margin in the consented land bank as at 31 December 2020, based on prevailing sales prices and build costs is 24.2% (June 2020: 24.2%).  This embedded margin includes new acquisitions estimated to deliver on average 25% gross margin based on the appraisal at the time of acquisition and trading out of older sites with lower margins all of which have been impacted to a greater or lesser extent by Covid-19 in the year.

In addition, we have increased the cost base in the land bank to include our current estimate of costs for elements of the Future Homes Standards (Part L).

The Housebuilding land bank including joint ventures of 31,994 plots as at 31 December 2020 represents c. 4.3 years of supply based on the 2020 completion volume.  The land bank reflects our strategy to deliver controlled growth in Housebuilding completions year on year in the medium term and maintain an optimal land bank at 3.5 to 4.0 times.  The Housebuilding business has the capacity from its existing operating structure to deliver up to 8,000 homes in the long term.

The 4,652 plots that legally completed in the year were replaced by a total of 3,195 plots from a combination of site acquisitions representing 2,022 plots and conversion of 1,173 plots from our strategic land pipeline and a further 3,086 plots  secured on a conditional basis across 14 sites.

Investment in the land bank was paused during the first half of the year in response to Covid-19 however during the second half the Group has been active in a good land market and has maintained its total controlled land bank plots whilst reducing the land creditor balance.

Partnerships Land Bank

	2020
Plots added	2,371
Sites added	11
Sites owned at year end	50
Sites controlled at year end	6
Total plots in land bank at year end including joint ventures	8,224
Average consented land plot ASP	£282,000
Average consented land plot cost	£31,000

The average selling price of all units within the consented land bank at the year-end was £282,000.  The estimated embedded gross margin in the consented land bank as at 31 December 2020, based on prevailing sales prices and build costs is 18.1%.

The Partnerships land bank including joint ventures of 8,224 plots as at 31 December 2020 reflects our strategy to grow the level of mixed tenure development to contribute to the delivery of completions and partner delivery units in aggregate of c. 6,000 per year.

The 1,479 mixed tenure plots that legally completed in the year were replaced by acquisition of 1,505 plots on 5 sites and a further 866 plots were conditionally contracted on 6 sites. Based on our appraisal at the time of acquisition, the new additions, on average are expected to deliver a future gross margin of 17% and ROCE of 40%. The margin and ROCE on each new development will to some extent, reflect the risk and reward trade off that comes from the proportion of pre-sold volume specific to the development opportunity.

Public sector land continues to be a strong source of opportunities for Partnerships and in the year, we exchanged contracts with Homes England on five sites.  In addition, we have obtained detailed planning on two Homes England sites - Sandymoor, Runcorn and Lea Castle, Kidderminster, which will provide over 900 new homes.

Strategic land

As at 31 December 2020	Total sites	Total plots
0 - 150 plots	42	3,253
150 - 300 plots	46	10,362
300 - 500 plots	14	5,610
500 - 1,000 plots	16	9,995
1,000 + plots	4	4,833
Total	122	34,053
Planning agreed	16	6,416
Planning application	8	2,221
Ongoing promotion	98	25,416
Total	122	34,053

Strategic land continues to be an important source of supply and during the year, 1,173 plots have been converted from the strategic land pipeline into the consented landbank.  A further 2,856 plots were contracted under options and planning consent gained on 848 plots over the year.

Strategic land remains well positioned to deliver high quality developments in the near to medium term with good progress on a number of significant projects.

Risks and uncertainties

The Group is subject to a number of risks and uncertainties as part of its activities.  The Board regularly considers these and seeks to ensure that appropriate processes are in place to manage, monitor and mitigate these risks.

Following the Acquisition and Covid-19 pandemic the Board have considered additional risks to the Group presented by the Partnerships business.  In particular the risks in respect of the partner delivery element of the business, understanding the process for tendering new work, ongoing management oversight of contracts and the commercial controls in place.

The outbreak of Covid-19 in 2020 required the Group to respond quickly and carefully to protect the health and wellbeing of our employees, customers, suppliers and wider society. The Executive Leadership Team has been, and continues to be, focussed on managing the business to balance the protection of profitability and preservation of operating cash flow with the long-term needs of the Group, and conserving cash in a time of great uncertainty.

Other than the above, the directors consider that the principal risks and uncertainties facing the Group remain those that are outlined on pages 50 to 55 of the Annual Report and Accounts 2019, which is available from www.vistrygroup.co.uk.

 

Group income statement

For the year ended 31 December	Note	2020 £000	2019 £000
Revenue	2	1,811,727	1,130,768
Cost of sales		(1,564,831)	(888,012)
Gross profit		246,896	242,756
Analysed as:
Adjusted gross profit	10	318,765	255,316
Other operating income		(26,422)	(10,675)
Exceptional cost of sales		(10,975)	-
Share of joint ventures' gross profit		(34,472)	(1,885)
Gross profit		246,896	242,756
Administrative expenses including exceptional items		(181,595)	(73,710)
Other operating income		26,422	10,675
Operating profit		91,723	179,721
Analysed as:
Adjusted operating profit	10	171,023	194,355
Exceptional expenses	4	(30,984)	(12,846)
Amortisation of acquired intangibles		(14,240)	-
Share of joint ventures' operating profit		(34,076)	(1,788)
Operating profit		91,723	179,721
Financial income		18,232	813
Financial expenses including exceptional items		(26,158)	(7,569)
Net financing costs including exceptional items		(7,926)	(6,756)
Share of profit of joint ventures	7	14,867	1,788
Profit before tax		98,664	174,753
Income tax expense including exceptional items		(21,851)	(36,374)
Profit for the year attributable to ordinary shareholders		76,813	138,379

Earnings per share		2020	2019 restated
Basic	5	34.8p	94.6p
Diluted	5	34.7p	94.5p
Basic earnings per share (before exceptional items and amortisation of intangibles)	5	52.6p	104.3p
Diluted earnings per share (before exceptional items and amortisation of intangibles)	5	52.5p	104.2p

 

Group statement of comprehensive income

		2020	2019
For the year ended 31 December	Note	£000	£000
Profit for the year		76,813	138,379
Other comprehensive expense
Items that will not be reclassified to the income statement
Remeasurements on defined benefit pension scheme		(11,654)	(2,116)
Deferred tax on remeasurements on defined benefit pension scheme		2,124	464
Total other comprehensive expense		(9,530)	(1,652)
Total comprehensive income for the year attributable to ordinary shareholders		67,283	136,727

Balance sheets

As at 31 December	Note	2020 £000	2019 £000
Assets
Goodwill	11	547,509	-
Intangible fixed assets		143,585	4,336
Property, plant, and equipment		5,091	1,845
Right-of-use assets		38,511	21,347
Investments	7	145,153	85,129
Amounts recoverable from joint ventures		323,650	6,232
Restricted cash		1,193	1,748
Deferred tax assets		-	184
Trade and other receivables		1,544	1,090
Retirement benefit asset		9,077	4,506
Total non-current assets		1,215,313	126,417
Inventories		1,836,521	1,207,667
Trade and other receivables		225,022	99,142
Cash and cash equivalents		340,988	361,962
Current tax asset		14,350	-
Total current assets		2,416,881	1,668,771
Total assets		3,632,194	1,795,188
Equity
Issued capital		111,127	74,169
Share premium		360,657	359,857
Merger reserve		823,513	-
Retained earnings		899,785	837,940
Total equity attributable to equity holders of the parent		2,195,082	1,271,966
Liabilities
Bank and other loans	8	253,103	-
Lease liabilities		26,848	16,686
Deferred tax liability		17,637	-
Trade and other payables		139,316	122,940
Provisions		33,786	-
Total non-current liabilities		470,690	139,626
Bank and other loans		50,000	-
Trade and other payables		894,503	352,359
Lease liabilities		15,304	6,309
Provisions		6,615	3,989
Current tax liabilities		-	20,939
Total current liabilities s		966,422	383,596
Total liabilities		1,437,112	523,222
Total equity and liabilities		3,632,194	1,795,188

 

Group statement of changes in equity

	Note	Own shares held   £000	Other retained earnings £000	Total retained earnings £000	Issued capital £000	Share premium £000	Merger reserve   £000	Total £000
Balance at 1 January 2019		(3,620)	780,382	776,762	67,398	216,907	-	1,061,067
Profit for the year		-	138,379	138,379	-	-	-	138,379
Total other comprehensive expense		-	(1,652)	(1,652)	-	-	-	(1,652)
Total comprehensive income		-	136,727	136,727	-	-	-	136,727
IFRS16 opening adjustment		-	65	65	-	-	-	65
Issue of share capital		-	-	-	6,771	142,950	-	149,721
Deferred tax on share based payments		-	140	140	-	-	-	140
Share based payments		-	2,891	2,891	-	-	-	2,891
Dividends paid to shareholders	6	-	(78,645)	(78,645)	-	-	-	(78,645)
Total transactions with owners recognised directly in equity		-	(75,549)	(75,549)	6,771	142,950	-	74,172
Balance at 31 December 2019		(3,620)	841,560	837,940	74,169	359,857	-	1,271,966
Balance at 1 January 2020		(3,620)	841,560	837,940	74,169	359,857	-	1,271,966
Profit for the year		-	76,813	76,813	-	-	-	76,813
Total other comprehensive expense		-	(9,530)	(9,530)	-	-	-	(9,530)
Total comprehensive income		-	67,283	67,283	-	-	-	67,283
Issue of share capital		-	-	-	70	800	-	870
Share issued as consideration		-	-	-	31,870	-	823,513	855,383
Bonus issue		-	(5,018)	(5,018)	5,018	-	-	-
LTIP shares exercised		164	(164)	-	-	-	-	-
Purchase of own shares		(3,500)	-	(3,500)	-	-	-	(3,500)
Share based payments		-	2,741	2,741	-	-	-	2,741
Deferred tax on share-basedpayments		-	339	339	-	-	-	339
Total transactions with owners recognised directly in equity		(3,336)	(2,102)	(5,438)	36,958	800	823,513	855,833
Balance at 31 December 2020		(6,956)	906,741	899,785	111,127	360,657	823,513	2,195,082

 

Group Statements of cash flows

		2020	2019
For the year ended 31 December	Note	£000	£000
Cash flows from operating activities
Profit for the year		76,813	138,379
Depreciation and amortisation		31,710	6,253
Financial income		(18,232)	(813)
Financial expense		26,158	6,939
Loss on disposal of property, plant, and equipment		15	3
Equity-settled share-based payment expense		2,741	2,891
Income tax expense		21,851	36,374
Share of results of joint ventures		(14,867)	(1,788)
Profit released on sale of assets from joint ventures		(234)	(972)
Decrease / (increase) in trade and other receivables		17,894	(58,234)
Decrease in inventories		168,580	115,170
(Decrease) / increase in trade and other payables		(97,208)	16,716
Increase / (decrease) in provisions and retirement benefit assets		15,821	(8,629)
Cash generated from operations		231,042	252,289
Interest paid		(14,661)	(2,093)
Income taxes paid		(34,712)	(33,804)
Net cash generated from operating activities		181,669	216,392
Cash flows from investing activities
Bank interest received		90	131
Acquisition of intangible fixed assets		(109)	(3,706)
Acquisition of property, plant, and equipment		(2,632)	(565)
Acquisition of Linden and Partnerships net of overdraft acquired	10	(394,578)	-
Loans made to joint ventures	7	(17,869)	-
Loan repayments from joint ventures	7	3,682	-
Investments in joint ventures	7	-	(58,511)
Distributions from joint ventures	7	27,043	5,135
Decrease / (increase) in restricted cash		555	(368)
Net cash used in investing activities		(383,818)	(57,884)
Cash flows from financing activities
Dividends paid	6	-	(78,645)
Principal elements of lease payments		(15,325)	5,562
Net proceeds from the issue of share capital		-	149,721
Purchase of own shares		(3,500)	-
Drawdown of bank and other loans		475,000	-
Repayment of bank and other loans		(275,000)	(36,401)
Net cash generated from financing activities		181,175	40,237
Net (decrease) /increase in cash and cash equivalents		(20,974)	198,745
Cash and cash equivalents at 1 January		361,962	163,217
Cash and cash equivalents at 31 December		340,988	361,962

 

1 Basis of preparation

General information

Vistry Group PLC (the "Company") is a public company, limited by shares, domiciled in England, United Kingdom.  The consolidated financial statements of the Company for the year ended 31 December 2020 comprise the Company and its subsidiaries (together referred to as the "Group") and the Group's interest in Joint ventures. The financial statements were authorised for issue by the directors on 4 March 2021.

The registered office for Vistry Group PLC is 11 Tower View, West Malling, Kent, ME19 4UY.

Basis of accounting

The financial information set out above does not constitute the Company's statutory financial statements for the years ended 31 December 2020 or 2019 but is derived from those financial statements. Statutory financial statements for 2019 have been delivered to the registrar of companies, and those for 2020 will be delivered in due course. The auditors have reported on those financial statements; their reports were (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

The condensed financial statements have been prepared in accordance with the international accounting standards in conformity with the requirements of the Companies Act 2006 and international financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union.

The Group has applied the following standards for the first time for its annual reporting year commencing 1 January 2020:

· Amendment to IAS 1 'Presentation of financial statements', effective 1 January 2020

· Amendment to IAS 8 'Accounting policies, changes in accounting estimates and errors', effective 1                             January 2020

· Amendment to IFRS3, 'Definition of a business', effective 1 January 2020

These changes have not had a material impact on the Group's financial statements.

In accordance with section 612 of the Companies Act 2006, advantage is taken of the relief from the requirement to create a share premium account to record the excess over the nominal value of shares issued in a share for share transaction. Where the relevant requirements of section 612 of the Companies Act 2006 are met, the excess of any nominal value is credited to a merger reserve which is distributable.

All other accounting policies have been applied consistently to the Company and the Group.

The income statement has been represented in order to more clearly present the financial results for the year ended 31 December 2020 and comparative periods. This representation has had no impact on the underlying financial results.

The prior year EPS has been restated to include the impact of the bonus issue of 5.7m shares in January 2020 and 4.3m shares in July 2020.

The financial statements are prepared on the historical cost basis unless otherwise stated.

Going concern

In light of the Covid-19 pandemic, a revised cashflow forecast has been completed for the Group to confirm the appropriateness of the going concern assumption in these accounts. The forecast was prepared using two scenarios - a likely base case including the expected impact of Covid-19 and a severe but plausible downside sensitivity scenario.

In the severe but plausible downside sensitivity scenario the following assumptions have been applied:

· A 15-20% reduction in private sales volumes, with a corresponding reduction in development spend

· A 5-10% reduction in private sales prices

The impact of these downsides is then mitigated by:

· Cessation of uncommitted land spend

· Reduction in overheads to reflect reduction in bonuses, temporary employee costs, etc.

In a severe but plausible downside scenario the delivery of affordable housing is not expected to be impacted as it will typically have been contracted for delivery in advance to a Registered Social Landlord or similar entity. As such the volumes and prices for affordable housing are not sensitised in the severe but plausible downside scenario.

In both the base and the severe but plausible downside sensitivity scenario, the forecasts indicated that there was sufficient headroom and liquidity for the business to continue based on the facilities available to the Group. In each of these scenarios the Group was also forecast to be in compliance with the required covenants on the aforementioned borrowing facilities. Consequently, the Directors have concluded that using the going concern basis for the preparation of the financial statements is appropriate.

The Board continues to take prudent decisions to best support the business through this period of uncertainty, including measures to protect the Group's cash position, liquidity and maintain a robust balance sheet. This includes the decision to postpone the second interim dividend payment totaling c. £60m, to tightly manage working capital and to implement other specific measures to increase cash generation and reduce cash outflow.

Having started the year with net cash of £362.0m, the Group generated a strong operating cash flow during 2020 and paid a net of £394.6m in cash consideration for the Acquisition, as well as invested £14.1m into joint ventures.

As at 31 December 2020, the Group held cash and cash equivalents of £341.0m and had borrowings of £303.1m.

At 31 December 2020 the Group has borrowing facilities of £770m, including a 5 year committed revolving credit facility of £410m, a 3 year revolving credit facility of £40m, £150m of 3 year term loans, a £100m US Private Placement facility and £70m of additional facilities. In addition, Vistry Group have been confirmed as eligible for the CCFF, for borrowing of up to £300m.

Covid-19

In light of the Covid-19 outbreak in the year ended 31 December 2020, the Group has considered whether any impairment of goodwill, intangibles or inventories is appropriate, and has concluded that none is required. Non-productive costs in the period driven by Covid-19 have been expensed directly to the income statement and are not capitalised into WIP. The impact of Covid-19 on future profitability of sites has been reflected in the net realisable value assessment of inventories at 31 December 2020.

Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (itssubsidiaries)made up to 31 December. Subsidiaries are entitiescontrolled by the Group. The Groupcontrols an entitywhen it isexposed to, or has rights to, variablereturnsfrom its involvementwith the entity and has the ability to affectthosereturnsthroughits powerover the entity.

 

In assessing control, the Group takes into consideration potential voting rights that are currently exercisable. The acquisition date is the date on which control is transferred to the acquirer. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.

The consolidated financial statements include the Group's share of the comprehensive income and expense of associates on an equity accounted basis, from the date that significant influence commences until the date that significant influence ceases.

A joint arrangement is an arrangement over which the Group and one or more third parties have joint control. These joint arrangements are in turn classified as:

· Joint ventures whereby the Group has rights to the net assets of the arrangement, rather than rights to its assets and obligations for its liabilities; and

·Joint operations whereby the Group has rights to the assets and obligations for the liabilities relating to the arrangement.

The consolidated financial statements include the Group's share of the comprehensive income and expenses of its joint ventures on an equity accounted basis and its share of income and expenses of its joint operation within the corresponding lines of the income statement, from the date that joint control commenced.

Impact of standards and interpretations in issue but not yet effective

Certain new accounting standards and interpretations have been published that are not mandatory for 31 December 2020 reporting periods and have not been early adopted by the group. These standards are not expected to have a material impact on the entity in the current or future reporting periods and on foreseeable future transactions.

2 Revenue

Revenue by type	2000 £000	2019 £000
Private housing	1,152,281	897,017
Affordable housing	146,972	170,379
Partner delivery revenue	489,507	-
Partnership land transactions	-	42,432
Land sales	17,243	6,811
Release of deferred revenue from joint ventures	187	7,766
Other	5,537	6,363
Total	1,811,727	1,130,768

3 Segmental reporting

All revenue and profits disclosed relate to continuing activities of the Group and are derived from activities performed in the United Kingdom.

The Chief Operating Decision Maker (CODM), which is the Board, notes that the Group's main operation is that of a housebuilder and it operates entirely within the United Kingdom. Following the acquisition of the Linden and Partnerships businesses ('The Acquisition') from Galliford Try PLC, the Board have identified two separate segments having taken into consideration IFRS8 criteria - Housebuilding and Partnerships.

Segmental reporting is presented in respect of the Group's business segments reflecting the Group's management and internal reporting structure and is the basis on which strategic operating decisions are made by the Group's CODM.

The Partnerships segment specialises in partnering with housing associations and other public sector businesses across England, including London, to deliver either the development of private and affordable housing on land owned by the Group or the Group's joint ventures, or to provide contracting services for development. The Partnerships segment operates under the Vistry Partnerships and Drew Smith brand names.

The Housebuilding segment develops sites across England, providing private and affordable housing on land owned by the Group or the Group's joint ventures. Housebuilding offers properties under both the Bovis and Linden brand names.

Segmental adjusted operating profit and segmental operating profit include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Central head office costs are allocated between the segments where possible, or otherwise reported within the separate column for Group items together with exceptional items and amortisation of acquired intangibles.

Segmental tangible net asset value (TNAV) includes items directly attributable to the segment as well as those that can be allocated on a reasonable basis, with the exception of net cash or debt, retirement benefit assets/liabilities and tax balances payable/receivable.

Adjusted financial results include share of joint ventures and exclude exceptional items. Adjusted gross profit is stated including other operating income. The Partnerships business was acquired on 3 January 2020 therefore the financial performance for period ended 31 December 2019 was nil.

 

Year ended 31 December 2020	Housebuilding £'000	Partnerships £'000	Group items £'000	Total £'000
Revenue	1,170,936	640,791	-	1,811,727
Add: Share of JV revenue	140,904	87,483	-	228,387
Adjusted revenue	1,311,840	728,274	-	2,040,114
Gross Profit	180,681	66,215	-	246,896
Share of JV gross profit	22,038	12,434	-	34,472
Exceptional cost of sales	10,650	325	-	10,975
Other operating income	17,810	8,612	-	26,422
Adjusted gross profit	231,179	87,586	-	318,765
Operating Profit	104,295	24,456	(37,028)	91,723
Add: Share of JV operating profit/ (loss)	21,714	12,362	-	34,076
Add: Exceptional items	10,650	325	20,009	30,984
Add: Amortisation of acquired intangibles	2,760	11,480	-	14,240
Adjusted operating profit / (loss)	139,419	48,623	(17,019)	171,023
Adjusted gross margin	17.6%	12.0%	-	15.6%
Adjusted operating margin	10.6%	6.7%	-	8.4%
Year ended 31 December 2019	Housebuilding £'000	Partnerships £'000	Group items £'000	Total £'000
Revenue	1,130,768	-	-	1,130,768
Add: Share of JV revenue	8,479	-	-	8,479
Adjusted revenue	1,139,247	-	-	1,139,247
		-
Gross Profit	242,756	-	-	242,756
Share of JV gross profit	1,885	-	-	1,885
Other operating income	10,675	-	-	10,675
Adjusted gross profit	255,316	-	-	255,316
		-
Operating Profit	205,279	-	(25,558)	179,721
Add: Share of JV operating profit/ (loss)	1,788	-	-	1,788
Add: Exceptional items	-	-	12,846	12,846
Adjusted operating profit / (loss)	207,067	-	(12,712)	194,355
		-
Adjusted gross margin	22.4%	-	-	22.4%
Adjusted operating margin	18.2%	-	-	17.1%

Segmental financial position

At 31 December 2020	Housebuilding £'000	Partnerships £'000	Group items £'000	Total £'000
Goodwill and intangibles	283,428	407,666	-	691,094
Tangible net assets/(liabilities) excluding investment in joint ventures	1,361,786	(46,626)	5,791	1,320,951
Investments in joint ventures	128,826	16,327	-	145,153
Net cash	-	-	37,885	37,885
At 31 December 2019	Housebuilding £'000	Partnerships £'000	Group items £'000	Total £'000
Goodwill and intangibles	4,336	-	-	4,336
Tangible net assets/(liabilities) excluding investment in joint ventures	836,788	-	(16,249)	820,539
Investments in joint ventures	85,129	-	-	85,129
Net cash	-	-	361,962	361,962

 

4 Exceptional expenses

Exceptional items are those which, in the opinion of the Board, are material by size and irregular and therefore require separate disclosure within the Income Statement in order to assist the users of the financial statements in understanding the underlying business performance of the Group.

	2020	2019
	£000	£000
Administrative expenses relating to the Acquisition	20,009	12,846
Finance expenses relating to the Acquisition	-	630
Exceptional expenses relating to the Acquisition	20,009	13,476
Cost of sales relating to legacy property building safety	10,975	-
Exceptional expenses relating to legacy property building safety	10,975	-
Total exceptional expenses	30,984	13,476

On 3 January 2020, the Group completed the acquisition of Linden and Partnerships from Galliford Try PLC. The administrative fees incurred in the year ended 31 December 2019 in relation to this transaction include legal, financing and accounting advisory services, transaction insurance costs and other expenses. In the year ended 31 December 2020, exceptional administrative expenses include legal fees incurred in relation to the completion and completion statement, as well as costs directly related to the integration and restructuring of the Group as a result of the Acquisition, including the cost of redundancies and office closures.

The exceptional interest costs incurred in the year ended 31 December 2019 related to the accelerated amortisation of capitalised facility arrangement fees on the 2015 revolving credit facility; this results from the early termination of this facility in January 2020 triggered by the refinancing for the Acquisition.

Exceptional expenses relating to legacy property building safety reflect estimated costs relating to finished developments in relation to potential build defects including building fire safety. The Group has undertaken a review of all of its current and legacy buildings where a potential liability has been identified and has provided for the expected costs of any remedial works that may be required.

Tax on exceptional items in 2020 was £5.9m (2019: £0.1m).

5 Earnings per share

Profit attributable to ordinary shareholders
		2020		2019
		£000		£000
Profit for the year attributable to equity holders of the parent		76,813		138,379
Profit for the year attributable to equity holders of the parent (before exceptional items and amortisation of acquired intangibles)		116,109		152,568
The prior year EPS has been restated to include the impact of the bonus issues in January and July 2020, of 5,665,723 and 4,369,992 shares, respectively.
Earnings per share	2020		2019 (Restated)
Basic earnings per share	34.8p		94.6p
Diluted earnings per share	34.7p		94.5p
Basic earnings per share (before exceptional items and amortisation of acquired intangibles)	52.6p		104.3p
Diluted earnings per share (before exceptional items and amortisation of acquired intangibles)	52.5p		104.2p
Weighted average number of shares
	2020		2019 (Restated)
Weighted average number of ordinary shares at 31 December	220,916,654		146,300,079

Basic earnings per share

Basic earnings per ordinary share for the year ended 31 December 2020 is calculated on a profit attributable to ordinary shareholders of £76,813,000 (2019: £138,379,000) over the weighted average of 220,916,654 (2019 restated: 146,300,079) ordinary shares in issue during the period.

Diluted earnings per share

The calculation of diluted earnings per share for the year ended 31 December 2020 was based on the profit attributable to ordinary shareholders of £76,813,000 (2019: £138,379,000).

The Group's diluted weighted average ordinary shares potentially in issue for the year ended 31 December 2020 was 221,142,212 (2019 restated: 146,440,701).

The average number of shares is increased by reference to the average number of potential ordinary shares held under option during the year. This reflects the number of ordinary shares which would be purchased using the aggregate difference in value between the market value of shares and the share option exercise price and fair value of future employee services. The market value of shares has been calculated using the average ordinary share price during the year. Only share options which are expected to meet their cumulative performance criteria have been included in the dilution calculation.

6 Dividends

The following dividends were paid by the Group:
	2020	2019
	£000	£000
Prior year final dividend per share of nil (2019: 38.0p)	-	51,078
Current year interim dividend per share of nil (2019:20.5p)	-	27,567
	-	78,645

The 2019 Special dividend was paid by way of a bonus shares of 5,665,723 shares in January 2020 with a total value of £66.0m.

Following shareholder approval on 14 July 2020 and admission to Main Market of the London Stock Exchange on 15 July 2020, the second interim dividend in respect to 2019 with a value of £60.0m was paid in the form of a bonus issue. 4,369,992 ordinary shares of £0.50 each were issued to shareholders as a bonus issue on the Company's register of members as at 6.00 p.m. on 27 December 2019.

The Board determined on 8 September 2020 that no interim dividend was to be paid for the first half of 2020.

A final dividend of 20 pence per share has been declared and, subject to shareholder approval at the AGM, will be paid on 21 May 2021 in respect of 2020.

7 Investments

The movement in investments accounted for using the equity method during the year is as follows:

	2020 £000	2019 £000
Beginning of the period	85,129	28,992
Acquired with Linden and Partnerships	56,034	-
Additions	-	59,387
Loans made and net interest charged	16,166	97
Profit for the period	14,867	1,788
Distributions paid	(27,043)	(5,135)
End of the period	145,153	85,129

8 Bank and other loans

Interest rate profile of bank and other loans

At 31st December	Rate	Available facility £000	Facility maturity	Carrying value 2020 £000	Carrying value 2019 £000
Revolving credit facility*	LIBOR +165-255bps	410,000	2025	-	-
Revolving credit facility*	LIBOR +165-255bps	40,000	2023	-	-
Term Loan*	LIBOR +165-255bps	150,000	2023	150,000	-
USPP Loan**	403 bps	100,000	2027	107,359	-
Revolving credit facility (commenced 27 March 2020)	LIBOR +155-245bps	20,000	2022	-	-
Prepaid facility fee	n/a	n/a	n/a	(4,256)
Total non-current borrowings		720,000		253,103
Term Loan (commenced 17 March 2020)***	LIBOR +265bps	50,000	2021	50,000	-
Total current borrowings		50,000		50,000
Total borrowings		770,000		303,103	-
*These facilities commenced on 3 January 2020 and were subsequently amended on 24 January 2020. **Carrying value is quoted including impact from the fair value of future interest payments. *** The maturity date for this facility was amended on 23 February 2021 to January 2023.

The combined £450.0 million revolving credit facility syndicate comprises eight banks. The revolving credit facilities, USPP Loan and Term Loan all include a covenant package as per the previous agreement, covering interest cover, gearing and tangible net worth requirements, which are tested semi-annually. The overall financing cost of the new arrangements are marginally more expensive than the previous facility.

9 Related party transactions

Transactions between fellow subsidiaries, which are related parties, have been eliminated on consolidation, as have transactions between the Company and its subsidiaries during this year.

Transactions between the Group, Company and key management personnel in the year ended 31 December 2020 were limited to those relating to remuneration.

Mr. Greg Fitzgerald, Group Chief Executive, is non-executive Chairman of Ardent Hire Solutions ("Ardent"). The Group hires forklift trucks from Ardent.

Mr. Ian Baker, is the Managing Director of Baker Estates Ltd where Mr Greg Fitzgerald is a majority shareholder. The Group receives advisory services from Ian Baker's consultancy company IB (SW).

Mr. Graham Prothero, appointed as Chief Operating Officer on 3 January 2020, is non-executive Director and Chair of the Audit Committee of Marshalls PLC. The Group incurred costs with Marshalls PLC in relation to landscaping services.

Ms. Katherine Innes Ker, is a non-executive director of Forterra PLC and Vistry Group PLC. The Group incurred costs with Forterra PLC in relation to the supply of bricks.

 

The total net value of transactions with related parties excluding joint ventures were as follows:

	Expenses paid to related parties			Amounts payable to related parties			Amounts owed by related parties
		Year ended 31 Dec 2020 £000	Year ended 31 Dec 2019 £000		31 Dec 2020 £000	31 Dec 2019 £000		31 Dec 2020 £000	31 Dec 2019 £000
Trading transactions
Ardent		2,498	2,736		632	274		-	-
IB (SW)		56	20		-	67		-	-
Marshalls PLC		21	19		-	-		-	-
Forterra PLC		1,321	545		115	98		-	-

Transactions between the Group and its joint ventures are disclosed as follows:

				Sales to related parties			Interest income and dividend distributions from related parties
					Year ended 31 Dec 2020 £000	Year ended 31 Dec 2019 £000		Year ended 31 Dec 2020 £000	Year ended 31 Dec 2019 £000
Trading transactions					129,663	6,257		-	-
Non-trading transactions					-	-		45,014	77

				Amounts owed by related parties			Amounts owed to related parties
					31 Dec 2020 £000	31 Dec 2019 £000		31 Dec 2020 £000	31 Dec 2019 £000
Balances with joint ventures					323,650	6,232		20,157	205

Sales to related parties including joint ventures are based on normal commercial terms available to unrelated third parties. The loans made to joint ventures bear interest at rates of between 3.5% and 5.1%; all balances with related parties will be settled in cash.

There have been no other related party transactions in the financial year which have materially affected the financial performance or position of the Group, and which have not been disclosed.

10 Alternative performance measures

The Group uses alternative performance measures which are not defined within IFRS. The Directors use these alternative performance measures, along with IFRS measures, to assess the operational performance of the Group. New alternative performance measures have been implemented in 2020 in order to reflect the enlarged Group, specifically the contribution of the joint venture investments now held and the impact of amortisation of intangibles which were recognised on acquisition of Linden and Partnerships.

The definition and reconciliation of financial alternative performance measures used to IFRS measures are shown below:

Adjusted revenue

Adjusted revenue is defined as revenue including share of joint ventures' revenue:

	2020 £000	2019 £000
Revenue per Group Income Statement	1,811,727	1,130,768
Share of joint ventures' revenue	228,387	8,479
Adjusted revenue	2,040,114	1,139,247

Adjusted gross profit

The definition of adjusted gross margin has been amended in the period to reflect the enlarged Group and the contribution of joint ventures to the Group's financial results. The exclusion of exceptional costs included within gross margin allows the assessment of the underlying performance of the Group at gross margin:

	2020 £000	2019 £000
Gross Profit per Group Income Statement	246,896	242,756
Other operating income	26,422	10,675
Exceptional cost of sales	10,975	-
Share of joint ventures' gross profit	34,472	1,885
Adjusted gross profit	318,765	255,316

Adjusted operating profit

Adjusted operating profit is defined as operating profit including share of joint ventures' operating profit, before exceptional expenses and amortization of acquired intangibles:

	2020 £000	2019 £000
Operating profit per Group Income Statement	91,723	179,721
Exceptional expenses	30,984	12,846
Amortisation of acquired intangibles	14,240	-
Share of joint ventures' operating profit	34,076	1,788
Adjusted operating profit	171,023	194,355

 

Adjusted profit before tax

Adjusted profit before tax is defined as profit before tax before exceptional expenses and amortisation of acquired intangibles:

	2020 £000	2019 £000
Profit before tax per Consolidated Income Statement	98,664	174,753
Exceptional expenses	30,984	13,476
Amortisation of acquired intangibles	14,240	-
Adjusted profit before tax	143,888	188,229

11  Business combinations

The Group applies the acquisition method to account for business combinations. The consideration transferred for the acquisition of a subsidiary, are the fair values of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity interests issued by the Group. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. Acquisition costs are expensed as incurred as required by IFRS 3 "Business combinations".

On 3 January 2020, the Group acquired the Linden and Partnerships and Regeneration businesses from Galliford Try PLC for a consideration of £1,233.5m. The acquisition positions the Group as a top five national housebuilder by volume, has expanded the Group's presence across the UK and into Yorkshire and established the Group as one of the leaders in the highly attractive, high-growth partnerships business. 

Linden Homes is a top UK housebuilder, and Vistry Partnerships is a market leading partnerships business. The combination of these businesses with the existing Vistry business will create the capacity to deliver more than 14,000 new units per year over the medium term, deliver an enhanced customer proposition, enhance the Group's geographical footprint, realise synergies and strengthen the senior management team.

The acquisition was of 100% of the share capital and control of the holding companies Vistry (Jersey) Limited (formerly Goldfinch (Jersey) Limited) and Vistry Partnerships Limited (formerly Galliford Try Partnerships Limited) and all of their subsidiaries.

Details of the purchase consideration, the net assets acquired, and goodwill are as follows:

Purchase consideration	Attributable to the acquisition of Linden £'000	Attributable to the acquisition of Partnerships £'000	Total £'000
Cash consideration (iv)	76,300	301,800	378,100
Shares in Vistry Group PLC issued	815,698	39,685	855,383
Total purchase consideration	891,998	341,485	1,233,483

The share consideration included 63,739,385 shares with nominal value of £0.50 per share. £823.5m has been recognised within the merger reserve in relation to these consideration shares issued, being the excess of the share price on the date of issue over nominal value of the shares.

 

In addition to the above cash and share consideration, the Group assumed a liability with fair value of £108.2m for Notes Payable in relation to the acquisition of Partnerships, included within Borrowings in the table below.

The assets and liabilities recognised as a result of the acquisition are as follows:

	Linden Fair value 3 January 2020 £'000	Partnerships Fair value 3 January 2020 £'000	Total Fair value 3 January 2020 £'000
(Bank overdraft)/Cash and cash equivalents	(35,368)	32,367	(3,001)
Property, plant, and equipment	295	1,783	2,078
Right-of-use assets	10,757	10,207	20,964
Intangible assets	54,800	100,224	155,024
Investments	49,527	6,507	56,034
Retirement benefit asset	5,646	-	5,646
Inventories	606,371	103,401	709,772
Amounts owed by joint ventures	208,034	74,439	282,473
Trade and other receivables	98,983	157,928	256,911
Trade and other payables	(322,797)	(326,865)	(649,662)
Borrowings	-	(108,219)	(108,219)
Lease liabilities	(10,758)	(10,207)	(20,965)
Provisions	(17,706)	(4,750)	(22,456)
Net deferred tax asset / (liability)	15,886	(14,511)	1,375
Net identifiable assets acquired	663,670	22,304	685,974
Goodwill	228,328	319,181	547,509
	891,998	341,485	1,233,483

The acquired intangibles include the Linden Homes and Drew Smith brand names, the customer relationships within the Linden and Partnerships businesses, and the secured contracts of the Partnerships business. The acquired intangible assets have estimated useful lives of between 4 and 25 years.

The goodwill for Linden reflects intangible assets which do not qualify for separate recognition including relationships with private customers, and the assembled workforce, in addition to synergies that will be achieved as an enlarged business.

The goodwill for Partnerships reflects their strong position in the market and future prospects, as well as the assembled workforce and synergies that will be achieved as an enlarged business.

None of the goodwill is expected to be deductible for tax purposes.

(i) Acquisition-related costs

Acquisition-related costs of £20.0m are included within exceptional administrative expenses in the Group Income Statement.

(ii) Acquired receivables

The fair value of trade and other receivables in Linden is £99.0m and includes trade receivables with a fair value of £89.4m. The gross contractual amount for trade receivables due is £104.5m, of which £0.6m is expected to be uncollectible.

 

The fair value of trade and other receivables in Partnerships is £157.9m and includes trade receivables with a fair value of £150.7m. The gross contractual amount for trade receivables due is £155.7m, of which £0.1m is expected to be uncollectible.

(iii) Revenue and profit contribution

The 100% owned development sites acquired with the Linden business contributed reported revenues of £395.4m to the Group for the period from 3 January 2020 to 31 December 2020. There would be no material difference in the contribution to revenues nor operating profit if the acquisition had occurred on 1 January 2020. Due to the full integration of the Linden business within the first half of the year it is not possible to calculate the impact of the Linden business to the operating profit of the Group for the period from 3 January 2020 to 31 December 2020.

The acquired Partnerships business contributed revenues of £640.8m and operating profit of £24.1m to the group for the period from 3 January 2020 to 31 December 2020. There would be no material difference in the contribution to revenues nor operating profit if the acquisition had occurred on 1 January 2020.

(iv) Consideration

At the balance sheet date, £13.5m was receivable by the Group in relation to reimbursement of cash consideration previously paid.

Circulation to shareholders

The consolidated financial statements will be sent to shareholders on 6 April 2021. Further copies will be available on request from the Company Secretary, Vistry Group PLC, 11 Tower View, Kings Hill, West Malling, Kent ME19 4UY. Further information on Vistry Group PLC can be found on the Group's corporate website www.vistrygroup.co.uk, including the slide presentation document which will be presented at the Group's results meeting on 4 March 2021.

---

[1] Pre-exceptional items and amortisation of acquired intangible assets

[2] Net cash / debt is quoted excluding IFRS16 lease liabilities and includes £7.4m (HY20: £7.8m) impact from the fair value of future interest payments on US Private Placement notes

[3] Proforma completions and revenue are calculated using published data for Linden Homes and Vistry Partnerships and represent the Vistry Group period of 1 Jan 2019 to 31 December 2019

[4] Key financials are on an adjusted basis to include the proportional contribution of the joint ventures and before exceptional expenses of £31.0m and amortisation of acquired intangibles of £14.2m in 2020

[5] 2019 reflect Vistry Group PLC excluding the acquired businesses and are not on a proforma basis

[6] In 2020 the Group incurred £10.2m of costs directly related to Covid-19

[7] Completions include 100% of joint venture completions

[8] Acquisition by Vistry Group PLC of Linden Homes and Partnerships & Regeneration businesses from Galliford Try, completed on 3 January 2020 (the "Acquisition").

[9] Formerly classified as Vistry Partnerships contracting

[10] TNAV represents tangible net assets excluding net cash or debt

 

END

 

 

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