Half-year Report
8 September 2020
Vistry Group PLC - Half year results
Vistry Group PLC (the "Group") is today issuing its half year results for the six-month period ended 30 June 2020.
First half key highlights
· Transformational acquisition of Linden Homes and Vistry Partnerships completed in January
· Successful business integration with £44m synergies now expected, £9m ahead of initial target
· 5-star HBF customer satisfaction rating awarded for 2019 and we have continued to trend at a score above 90% through 2020
· Net debt of £357.3m1 at 30 June 2020 (18 May Trading Update 2020: £476m), ahead of our expectations at the start of the pandemic, reflecting resilience of Vistry Partnerships' revenue model
· Site closures significantly impacted Housebuilding production in H1, output and performance
· Vistry Partnerships led an early return to site, underpinned by the certainty of pre-sold developments and contracting revenues
· Production capacity returned to near normal levels from 1 July
Current trading and outlook
· Strong start to the second half supported by positive market trends
· Sales rate 20% ahead of prior year since 1 July, at 0.73 (2019: 0.61) sales per active site per week including Vistry Partnerships
· Pricing remains firm
· Record forward sales position with Group forward sales totalling £2.7bn2 (30 June 2020: £2.6bn) including Housebuilding forward sales up 17% to £1,478m (30 June 2020: £1,264m)
·Minimal cost inflation with Group to realise cost savings in the second half and into 2021 from flow-through of procurement synergy benefits
· £20m of synergies expected in 2020 and the full run rate of £44m to be achieved by end 2021
· Full year profit before tax3 for 2020 expected to be in the range of £130m to £140m
· Assuming stable pricing and current sales rates and productivity levels, the Group has the ability to deliver at least £310m of profit before tax3 in 2021
· The balance sheet is strong, supported by significant and well-spread funding facilities
· Priority for capital allocation remains deleveraging, targeting gearing of 35%4 including land creditors for December 2021
· Aiming to resume dividends in respect of 2021 with a progressive dividend policy thereafter
Greg Fitzgerald, Chief Executive, commented:
"We moved quickly to integrate Linden Homes and Vistry Partnerships at the start of the year. It has been a successful process bringing together the best from each business, with the benefits from the combination expected to be ahead of our initial target. We have achieved this whilst maintaining our focus on delivering excellent service to our customers.
"Housebuilding's first half performance was significantly impacted by the lockdown and resultant site closures. Vistry Partnerships demonstrated its market resilience and robust revenue model and led the group to an early successful return to site, with production levels across the Group now back at near normal levels.
"We have seen positive sales trends since early May, with consumer interest higher than at any time in recent years. Our sales rate in the second half to date is running 20% ahead of last year at 0.73, and pricing remains robust. The Group is well positioned to capitalise on the opportunities available in the second half and into 2021 when we expect to deliver a step-up in completions and profitability, a reduction in gearing and a return to dividend payments."
Key financials 5, 6, 7 | HY20 | HY19 | Change |
Total completions 8 | 1,724 | 1,647 | +5% |
Adjusted revenue | £660.9m | £472.8m | +40% |
Adjusted operating profit | £21.2m | £75.2m | -72% |
Adjusted profit before tax | £10.3m | £72.5m | -86% |
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Reported results6,7 | HY20 | HY19 | Change |
Group revenue | £606.4m | £472.3m | +28% |
Operating (loss)/profit | £(9.7)m | £75.8m | -113% |
(Loss)/profit before tax | £(12.2)m | £72.5m | -117% |
(Loss)/earnings per share | (5.4)p | 41.9p9 | -113% |
Net (debt)/cash1 | £(357.3)m | £102m | n/m |
There will be a virtual presentation for analysts and investors at 8:00am this morning.
To view the presentation please use the webcast link available on our corporate website www.vistrygroup.co.uk or https://webcasting.brrmedia.co.uk/broadcast/5f46a6a4b14d87262643c348
A playback facility will be available shortly after the presentation and Q&A session has finished at www.vistrygroup.co.uk
This announcement includes inside information as defined in Article 7 of the Market Abuse Regulation No. 596/2014 and is being released on behalf of Vistry Group PLC by Earl Sibley, Chief Financial Officer.
Certain statements in this press release are forward looking statements. Forward looking statements involve evaluating a number of risks, uncertainties or assumptions that could cause actual results to differ materially from those expressed or implied by those statements. Forward looking statements regarding past trends, results or activities should not be taken as representation that such trends, results or activities will continue in the future. Undue reliance should not be placed on forward looking statements.
For further information please contact:
Vistry GroupPLC Earl Sibley, Chief Financial Officer Susie Bell, Head ofInvestor Relations
Powerscourt Justin Griffiths, Nick Dibden, Victoria Heslop |
01675 437160
020 7250 1446 |
Chief Executive's Review
First half review
Following the transformational acquisition of Linden Homes and Vistry Partnerships at the start of this year, Vistry Group is uniquely positioned as a top 5 UK housebuilder with a leading partnerships housing business. Building high quality new homes and providing our customers with excellent service remains our key priority and we are delighted to have been awarded a 5-star HBF Customer satisfaction rating for 2019, a significant turnaround from our 2-star rating in 2017. We have continued to trend at a score above 90 per cent through 2020 as an enlarged group.
The Group was quick to progress with the integration of Bovis Homes and Linden Homes with a clear goal of taking the best from each business and maximising the very significant benefits from the combination. The successful integration is ahead of plan and the synergy benefits from the combination are expected to total £44m, £9m ahead of the initial £35m target. £20m of this is expected in 2020 and the full run rate to be achieved by the end of 2021.
The Group delivered a rapid and co-ordinated response to COVID-19 with the safety, health and wellbeing of our employees, customers, suppliers and the wider society our top priority. A superb response from our IT team facilitated a very quick transfer to working from home. We temporarily stopped discretionary land expenditure and restricted new infrastructure works. For two months we reduced our working hours and salaries accordingly, whilst ensuring that our lower paid employees were protected from any reductions. Senior leadership accepted longer temporary remuneration reductions. We took advantage of the Government's tax deferral and job retention schemes, although we have now taken the decision to repay monies received under the latter7.
Vistry Partnerships demonstrated its strong market resilience with its high proportion of revenue from contracting and pre-sold developments and led an early return to site. Site closures during March and April significantly impacted the production, output and first half financial performance of our Housebuilding business.
We have seen positive sales trends since early May, with consumer interest higher than at any time in recent years. Productivity across the Group returned to near normal levels during July, with sites using extended working hours to facilitate this.
The Group's half year net debt position of £357m1 was significantly lower than forecast at the start of the COVID-19 pandemic reflecting the resilience of Vistry Partnerships and improved completion levels. We have a robust balance sheet with significant financing headroom.
The Group maintains a valuable and deliverable land bank with over 38,000 plots across Housebuilding and Partnerships and including JVs. The Housebuilding land bank shows an embedded gross margin of 24.2%, including our share of JV plots. We have a strong strategic land capability with over 32k strategic land plots delivering on average a 150-300 bps improvement to gross margin.
Current trading and outlook
We have seen a strong start to the second half supported by positive market trends, with our sales rate since 1 July up 20% on the prior year at 0.73 (2019: 0.61) sales per active site per week including Vistry Partnerships.
Pricing remains firm and we see minimal cost inflation, with cost gains to be realised across the Group in the second half and into 2021 from the flow-through of procurement synergy benefits.
We have a record forward sales position with housing reservations (including Vistry Partnerships) totalling £1.86bn (30 June 2020: £1.66bn) and Vistry Partnerships' contracting forward order book totalling £815m (30 June 2020: £920m).
The Group is well positioned to capitalise on the opportunities going forwards and we are on track to deliver a stronger performance in the second half, with full year profit before tax3 for 2020 expected to be in the range of £130m to £140m.
Assuming stable pricing and current sales rates and productivity levels being maintained, the Group expects to deliver a significant step up in Housebuilding completions for 2021, with all land secured for forecast 2021 Housebuilding units. The Partnerships business is fully focused on the growth of its high margin mixed tenure revenues, as well as a strong contracting order book, with a target of an operating margin of at least 10% in 2022. Combined, the Group has the ability to deliver at least £310m of profit before tax3 in 2021.
With strong future cash generation, the Group's primary focus is on deleveraging, targeting gearing of 35%4 for December 2021. The Group expects to maintain the size of its land bank for the Housebuilding operation and invest in new land opportunities to support the rapid growth in mixed tenure housing within Partnerships. The Board also recognises the value of dividends to shareholders and, subject to market conditions, is targeting to resume dividend payments in respect of 2021, with a progressive dividend policy thereafter.
Forward sales (£m) | 4 September 2020 | 30 June 2020 |
Housebuilding |
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- Private | 744 | 660 |
- Affordable | 341 | 330 |
- JVs (100%) | 393 | 274 |
Total Housebuilding | 1,478 | 1,264 |
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Partnerships |
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- Mixed tenure | 174 | 178 |
- JVs (100%) | 205 | 215 |
Total mixed tenure | 379 | 393 |
Total contracting | 815 | 920 |
Total Group | 2,672 | 2,577 |
Operational update
Trading performance
In Housebuilding, we saw a strong start to the year with a step-up in sales rates and upward momentum on underlying pricing. From the third week in March, COVID-19 had a significant impact on sales within Housebuilding. Our sales teams remained open for business throughout the lockdown period, offering an online service with virtual tours, taking new reservations, progressing exchanges and handing over completed homes where a customer wanted to move in.
Sales trends picked up from the start of May, with sales rates returning to more normal levels by the end of May. Help to Buy remains important with 30% of completions in the first half utilising the scheme, albeit lower than the industry average. In the first half 10% of private completions utilised part exchange.
Housebuilding delivered a total of 1,235 (HY19 proforma: 3,371)8, 10 completions, including 169 (HY19 proforma: 501) from JVs, in the first half of which 975 (HY19 proforma: 2,199) were private units and 260 (HY19 proforma: 1,172) were affordable units. Total Housebuilding average selling price was £294k with revenue from Housebuilding activities in the period totalling £349m (HY19 proforma: £854m)11. Housebuilding is currently selling on 160 active sites and we expect site numbers to stay at a broadly similar level for the full year.
Partnerships also started the year strongly, pursuing its strategy of accelerating growth in higher margin mixed tenure development revenues. With its high level of contracting revenues and pre-sold mixed tenure developments, Vistry Partnerships demonstrated its strong market resilience during the COVID-19 pandemic and reinforced our rationale for the acquisition of this business. Whilst impacted by a slowdown in production, the business led an early return to site and has been running at near full production capacity since July.
Vistry Partnerships delivered a total of 489 (HY19 proforma: 574) units from its mixed tenure operations with an average selling price of £222k, resulting in revenue from mixed tenure housing in the period of £88m (HY19 proforma: £94m). As at 30 June 2020 Vistry Partnerships was selling on 26 mixed tenure active sites.
Contracting revenue totalled £223m (HY19 proforma: £244m) with equivalent units of 1,31012 (HY19 proforma: 1,140). Revenue from Vistry Partnerships in the period totalled £311m (HY19 proforma: £338m).
The wide-ranging effects of COVID-19 impacted margin in the first half across the business. 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 have been identified as impacting the period. Margin was also impacted by our policy of recognising the full sales and marketing costs incurred during the period, similar to administrative expenses, rather than apportioning them into work in progress.
Integration and synergies
The Group set out to integrate the two housebuilding businesses of Bovis Homes and Linden Homes as quickly as possible, taking the best from each business to strengthen the overall Group position. This was delivered ahead of plan, positioning us well to manage the challenges of the COVID-19 pandemic.
The Housebuilding re-organisation resulted in 13 operating regions and four regional office closures and was completed by March. There has been a full review of the Bovis Homes - Phoenix Range, and Linden Homes - Linden Collection, product ranges with clear market positioning and established branding. Vistry Partnerships was successfully rebranded on acquisition.
Technical specifications have been reviewed and aligned across both divisions resulting in design improvements and cost savings. Our centralised procurement team has renegotiated over 200 supplier agreements delivering gains through increased volumes and better pricing.
The implementation programme for a common IT environment, along with consistent systems and processes is progressing well and will be delivered ahead of our initial expectations, removing third party dependencies for the acquired businesses by the end of 2020.
We now expect to deliver synergy benefits totalling £44m, £9m ahead of our initial target of £35m on acquisition, and at a cost of £30m, lower than our initial target cost. £20m is expected to be delivered in 2020 and the full run rate to be achieved by the end of 2021.
Funding and liquidity
Group net debt at 30 June of c. £357m1 (18 May Trading Update 2020: £476m) was lower than our expectations at the start of the COVID-19 pandemic, and reflects the earlier return to site within Partnerships, including their contracting business, and improved completion levels, putting the Group in a financially strong position.
The increase in net debt from the net cash position of £362m as at 31 December 2019 reflects the cash payment of £401m and assumption of £107m US Private Placement borrowing notes as part of the Acquisition consideration for Galliford Try's Linden Homes and Partnerships & Regeneration businesses ("the Acquisition"), which completed on 3 January 2020.
The Group has committed banking facilities totalling £770m, with well spread maturities out to 2027. In addition, the Group has the ability to increase liquidity by up to £300m through the Covid Corporate Financing Facility ("CCFF"), although there is no present intention to draw on this.
Quality and customer service
The Group has transformed its customer service and is delighted to have been awarded a 5-star rating by the HBF for 2019, with both Housebuilding and Partnerships continuing to trend at a score above 90% through 2020. We have also seen a significant year on year improvement in our HBF 9-month customer satisfaction survey and will continue to target further progress with this. The Group's latest NHBC Construction Quality review reported a 10% overall improvement.
We recently launched an initiative designed to empower our customers with an omnichannel, high quality and highly personalised service; making it much easier for them to do business with us. Our Keys CRM system, launched in 2019, provides an established platform for this and is being rolled out across the Linden Homes and Vistry Partnerships operations.
We are introducing regional sales centres with a more centralised 'best practice' customer experience which will reduce our reliance on traditional site-specific sales offices. This will drive the quality and transparency of our service, facilitate better efficiency and engagement, and promote cross selling between brands and developments. We are further investing in our digital capability to provide customers with an enhanced virtual sales experience to complement our sales activities on site.
People
Our people remain a key priority and we are thankful for the enormous commitment and resilience our employees, contractors and suppliers have demonstrated during this challenging period. We are conscious that this period has seen an unprecedented level of change and are very pleased that our recent Peakon employee engagement study reported a score of 7.6, ahead of the relevant benchmark.
We have placed a greater emphasis on mental health this year and have rolled out a programme of Mental Health First Aid across the Group including a half-day awareness training for all line managers.
Our centralised learning and development function continue to develop and deliver a comprehensive learning and development platform and is facilitating remote professional development in partnership with, for example, the NHBC and CITB.
Land
The Group has remained active in the land market throughout the year, contracting and progressing new development opportunities. While all discretionary land spend was paused at the end of March, we have continued to progress opportunities in all regions to meet our requirements for 2021 and beyond. We have been successful in negotiating option agreements, conditional contracts and deferred payment terms to minimise our cash expenditure in the near term.
In the year to date, our Housebuilding business has acquired 2,086 plots across 10 sites and conditionally contracted on 823 plots on 3 sites. We continue to make good progress on strategic land including the pull through of 1,000 plots at our development in Collingtree, gaining consent for 640 plots at Salisbury and a further 1,426 strategic land plots contracted under options in the period.
Vistry Partnerships has added a total of 1,320 plots on three sites to the mixed tenure land bank in the year to date and conditionally contracted on a further 523 plots across 4 sites. The land pipeline for Vistry Partnerships is strong with 645 plots across 3 sites with terms agreed.
Group strategy
The successful integration of Linden Homes and Vistry Partnerships, and formation of Vistry Group, uniquely positions us to take advantage of the strong, under supplied, housing market. Robust and efficient shared services across the Group including sales and marketing, strategic land and health and safety support both divisions to deliver their growth strategies. In addition, the Group's strong balance sheet, national coverage, established reputation and leading brands provide the platform for the whole business.
Housebuilding
The Housebuilding business is focused on driving revenue growth and delivering significant margin improvement from its existing operating structure. The business has 13 operating regions, and each are targeting annual output of between 550 and 625 units, incl. JVs, resulting in an overall capacity and target for the Housebuilding business of more than 8,000 units p.a., incl. JVs (FY19 proforma Housebuilding total completions incl. JVs: 6,826).
The business has a high quality landbank of more than 38,000 owned plots including JVs located in desirable edge or out of town locations with minimal exposure to London or other city centres. It continues to increase the proportion of two and three-bedroom homes where it sees the most resilient market demand, which will result in a lower overall average selling price. With two leading housing brands, Bovis Homes and Linden Homes, brand differentiation is key to maximising dual branding opportunities. 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.
There are 8 major projects with a total of more than 11,000 units which currently within our Housebuilding business including Wellingborough, Sherford and North Whiteley. All share similar characteristics in that they are large, strategically sourced sites with long term build out plans. They have good margins, however given the high level of upfront infrastructure investment required, have low initial ROCE, with highly attractive long-term returns. To manage risk and optimise returns, they are being developed in partnerships and are suitable to multiple forms of tenure development. The Group's key objective is to maximise the returns and we are undertaking a review of each to consider additional opportunities including PRS or other tenure opportunities, and investor options.
The Housebuilding business is focused on driving margins towards the embedded gross margin of 24.2% as at 30 June 2020 in the owned land bank.
Partnerships
Vistry Partnerships has a strong and unique position within the partnerships market, combining cash generative contracting work with an increasing proportion of margin enhancing development work. The contractor/developer model provides the optimum solution for clients with the business' national footprint aligned with both national and regional clients.
Partnerships is targeting revenues including JVs of more than £1 billion and a margin in excess of 10% by 2022, driven by a rapid increase in higher margin mixed tenure revenues to 50% of total Partnerships revenues. The operating margin for mixed tenure development ranges from 11% to 18%.
The accelerated revenue growth will be supported by the division's 11 operating regions and continued expansion into new geographies. The Group's land supply and strategic land capability will support the growth of higher margin mixed tenure developments revenues.
Environmental, Social and Governance ('ESG')
The formation of our enlarged Group has provided an exciting opportunity to build on the elements of best practice adopted by our business and leverage greater depth of skills and knowledge from our new employee population, enabling us to advance the sustainable approach that we already take as a Group, to reset our goals and develop a renewed long-term ESG strategy.
During the first half of this year, we committed dedicated resource to undertake a review of the Group's sustainability strategy to ensure that we manage material ESG risks and opportunities in a way that leverages the societal benefits intrinsic to building mixed tenure homes and communities.
This work has included a risk review of the legislative and planning context to 2050, as well as an assessment of material requirements under the Taskforce for Climate Financial Disclosures, UN Sustainable Development Goals and ESG indices. We have consulted with key stakeholders to understand their ESG priorities and concerns and have standardised the collection key data across the Group to better understand our carbon footprint. We have also appointed Sustainability Champions to increase awareness and knowledge across the Group.
The outcome of these actions will aid the development of a new Group ESG strategy which is targeted in its approach to link long term value creation and will ensure that its principles are embedded in the Group's objectives and activities. Further detail on targets, divisional action plans and next steps will be provided in the Group's 2020 Annual Report and Accounts.
Dividends
The Group's dividend policy continues to be to maintain a robust and efficient balance sheet and to maximise sustainable dividends to shareholders through a progressive ordinary dividend cover. The Board recognises the value of dividends to shareholders and, subject to market conditions, is targeting to resume dividend payments in respect of 2021.
Financial review
Trading performance
Total completions
The Group delivered 1,724 legal completions8 during the first half representing a 5% increase on the prior year, driven by the Acquisition which completed on 3 January 2020, but which was lower than expectations as a result of the COVID-19 pandemic and nationwide lockdown.
| H1 2020 | H1 2019 | % Change |
Housebuilding |
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- Private | 830 | 1,028 | -19% |
- Affordable | 236 | 616 | -62% |
- JV's (100%) | 169 | 3 | > +100% |
Total Housebuilding | 1,235 | 1,647 | -25% |
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Partnerships |
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- Mixed tenure | 299 | - | N/A |
- JV's (100%) | 190 | - | N/A |
Total mixed tenure | 489 | - | N/A |
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Total completions | 1,724 | 1,647 | +5% |
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Contracting equivalent units12 | 1,310 | - | N/A |
Proforma Completions Analysis
During the same period in 2019 on a proforma basis10 the Group delivered 3,945 legal completions representing a decrease of 56%.
| H1 2020 | H1 2019 | % Change |
Housebuilding |
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- Private | 830 | 1,854 | -55% |
- Affordable | 236 | 1,016 | -77% |
- JV's (100%) | 169 | 501 | -66% |
Total Housebuilding | 1,235 | 3,371 | -63% |
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Partnerships |
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- Mixed tenure | 299 | 288 | +4% |
- JV's (100%) | 190 | 286 | -34% |
Total mixed tenure | 489 | 574 | -15% |
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Total completions | 1,724 | 3,945 | -56% |
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Contracting equivalent units9 | 1,310 | 1,140 | +15% |
Revenue
Total adjusted revenue5 was £660.9m, 40% higher than prior year (2019: £472.8m) and 45% lower on a proforma basis (2019: £1,192.0m). On a reported basis revenue was £606.4m, 28% higher than last year (2019: £472.3m).
Adjusted gross and operating profit
Adjusted gross profit5 is £84.7m in H1 2020 (adjusted gross margin: 12.8%), which compares to £101.9m in 2019 (adjusted gross margin: 21.6%). The margin was impacted by 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 plots 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. This has been partially offset by £6.3m of furlough income received from the Government's job retention scheme which will be repaid before the end of the year when the income will be reversed.
Adjusted operating profit5 is £21.2m (2019: £75.2m) resulting from the lower than expected gross profit and the increased overhead costs of the enlarged Group following the Acquisition in January 2020, primarily resulting from higher employee numbers and additional establishment costs.
Adjusted operating margin5 was 3.2% (2019: 16.0%). Reported operating loss was £9.7m (2019: £75.8m profit).
The Group delivered an adjusted profit before tax5 of £10.3m (2019: £72.5m).
On a reported basis the Group saw a loss before tax for the six months ended 30 June 2020 of £12.2m, comprising operating loss of £9.7m after exceptional costs of £15.4m, net financing charges of £5.2m and share of JV profit of £2.6m. This compares to £72.5m of profit before tax in 2019, which comprised £75.8m of operating profit, £2.8m of net financing charges and share of JV losses of £0.6m.
Housebuilding5,6
| H1 2020 | H1 2019 | % Change |
Total completions incl. 100% JVs | 1,235 | 1,647 | -25.0% |
Adjusted revenue | £349.4m | £472.8m | -26.1% |
Adjusted gross profit | £49.1m | £101.9m | -51.8% |
Adjusted gross margin | 14.1% | 21.6% | -7.5bps |
Adjusted operating profit | £8.5m | £79.7m | -89.3% |
Adjusted operating margin | 2.5% | 16.9% | -14.4bps |
TNAV[13] | £1,693.0m | £974.6m | +74.0% |
Housebuilding total completions (including 100% of JVs) included 260 affordable homes representing 21% of total completions.
Housing prices have largely remained firm throughout the first half, with the average sales price for our private homes in Housebuilding having decreased 3.0% to £332,000 (2019: £342,800) and overall average sales price having increased by 9.0% to £294,000 (2019: £269,200).
Included within Housebuilding revenue is £5.2m (2019: £21.9m) related to land sales and £0.1m (2019: £0.4m) related to the release of deferred income from disposals within PRS joint ventures.
Housebuilding adjusted gross profit of £49.1m and housing adjusted gross margin of 14.1%, were impacted by COVID-19 direct costs in the period totalling £8.6m which had a 2.5% 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 margin.
Housebuilding gross margin is also impacted by our policy of recognising direct sales and marketing costs in the period 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. 2.8% in the period. The Group also recognised costs relating to completed sites and the impairment of inventory totalling £3.4m in the period (2019: £0.8m). In addition, the mix of homes completed in the first half included a higher proportion of completions from sites that had been largely built out at the beginning of the period which had, on average, a lower margin.
Build costs have not moved significantly in the first half; the Group saw initial inflationary pressure early in 2020 however this pressure eased with the outbreak of COVID-19 and was offset by some gains towards the end of the first half. The Group expects to benefit from material supplies synergies in the full year.
Housebuilding adjusted operating profit of £8.5m and adjusted operating profit margin of 2.5% is impacted by the above gross margin reduction in addition to the fact that a full overhead cost has been incurred despite reduced volumes.
Partnerships5
| H1 2020 |
Total mixed tenure completions incl. 100% JVs | 489 |
Adjusted Revenue | £311.4m |
Adjusted Operating profit | £12.4m |
Adjusted Operating margin | 4.0% |
TNAV7 | £64.1m |
Adjusted revenue from Partnerships in the period totalled £311.4m, made up of £223.2m from contracting and £88.2m from mixed tenure operations.
Partnerships sold a total of 489 units from its mixed tenure operations, including JVs, with an average selling price of £222k and Contracting revenue generated equivalent units12 of 1,310.
Adjusted operating profit of £12.4m and adjusted operating profit margin of 4.0% are impacted by COVID-19 as well as a full overhead cost being incurred despite reduced volumes.
Non-underlying and group costs
The reported Group segment of the business includes the non-underlying exceptional restructuring costs of £15.4m related to the Acquisition and the amortisation of acquired intangibles of £7.1m, in addition to direct PLC costs totalling £6.1m, including the costs of the PLC Board, share based payments and related items, and furlough income of £6.3m.
Financing and Taxation
Net financing charges during the first half were £5.2m (2019: £2.8m). Net bank interest and commitment fees were £7.9m (2019: £3.2m), as a result of higher net debt during 2020 following the acquisition and supporting the enlarged Group. We incurred a £3.4m charge (2019: £1.7m), reflecting the imputed interest on land bought on deferred terms. Finance income of £7.2m (2019: £0.5m) is primarily generated on loans made to JVs and the significant increase on prior year is driven by the acquisition of loans to JVs with the acquired businesses.
The Group has recognised a tax credit of £0.5m representing 4.7% of the loss before tax (2019: tax charge of £13.7m at an effective rate of 18.9%). The tax rate is driven by non-deductible costs and is based on the expected full year effective tax rate which is expected to be marginally above the standard rate of 19%. The Group has a current tax asset of £14.5m in its balance sheet as at 30 June 2020 (31 December 2019: liability of £20.9m).
Dividends and earnings/loss per share
During the period, the Board took the decision to postpone the second interim cash dividend payment totalling c.£60m to conserve cash in light of COVID-19. Following shareholder approval on 14 July 2020, this dividend was paid by way of a Bonus Issue.
The Board determined on 8 September 2020 that no interim dividend was to be paid for the first half of 2020.
Both basic LPS of (5.4)p (2019: EPS of 41.9p) and basic EPS before exceptionals and amortisation of acquired intangibles of 5.0p (2019: 41.9p) have decreased year on year, by 113% and 88.0%, respectively.
Acquisition and Integration
The Group completed the Acquisition on 3 January 2020, at a cost14 of £1,253.7m including £398.3m in cash and £855.4m in shares.
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. Provisional goodwill of £548.4m 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.
Exceptional costs of £15.4m have been recognised in the income statement relating to the acquisition, primarily driven by redundancy costs, onerous lease costs on closed offices and rebranding.
Net Assets and Cash flow
As at 30 June 2020 net assets of £2,118.8m were £846.8m higher than at the start of the year, primarily resulting from the Acquisition. Net assets per share as at 30 June 2020 were 973p (31 December 2019: 857p).
Goodwill and intangibles totalled £700.2m at 30 June 2020 (31 December 2019: £4.3m), directly resulting from the Acquisition.
Tangible net assets13 increased from £905.6m at 31 December 2019 to £1,776.0m at 30 June 2020, again primarily driven by the addition of the acquired balances in January 2020.
Within tangible net assets, inventories increased during the year by £793.3m to £2,001.0m, £716.5m of which was acquired in January and the remainder driven by the lower level of completions in the period.
Trade and other receivables increased by £146.5m, as a result of the Group being significantly larger following the Acquisition. Trade and other payables increased by £514.8m again as a result of the Acquisition and enlarged business and includes land creditors which increased by £111.6m to £372.3m (2019: £260.7m) following the Acquisition.
As at 30 June 2020 the Group's net debt balance was £357.3m1. Having started the year with net cash of £362.0m, the Group generated an operating cash outflow before land expenditure of £1.5m (2019: £64.7m). Net cash payments for land investment were reduced at £84.0m (2019: £95.9m), reflecting the Group's proactive decision to pause expenditure on new land as a response to COVID-19, as well as deferred payment terms achieved. Investing cash outflows totalling £522.6m includes the £401.3m cash consideration for the Acquisition, as well as loans made to and investments made in joint ventures and dividends received from joint ventures. Financing cash inflows of £466.8m include £475.0m of loan drawdowns, no dividends were paid in HY20.
At 30 June 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.
Land Bank
Housebuilding Land Bank
| H1 2020 | H1 2019 |
Consented plots added | 1,815 | 1,004 |
Sites added | 8 | 8 |
Sites owned at period end | 222 | 115 |
Total plots in land bank at period end incl. joint ventures | 30,531 | 16,215 |
Average consented land plot ASP incl. share of joint ventures | £313,000 | £316,000 |
Average consented land plot cost incl. share of joint ventures | £51,000 | £58,000 |
The average selling price of all units within the consented land bank decreased over the year to £313,000, 1% lower than at 31 December 2019. The estimated embedded gross margin in the consented land bank as at 30 June 2020, based on prevailing sales prices and build costs is 24.2%.
The Housebuilding land bank including joint ventures of 30,531 plots as at 30 June 2020 represents c4.0 years of supply based on the 2019 proforma completion volume. The land bank reflects our strategy to deliver c. 8,000 Housebuilding completions per year in the medium term and maintain an optimal land bank at 3.5 to 4.0 times.
The 1,235 plots that legally completed in the half year were replaced by a combination of site acquisitions and conversions from our strategic land pipeline. Based on our appraisal at the time of acquisition, the new additions, on average are expected to deliver a future gross margin and ROCE in excess of 25%. In addition to the acquisitions and conversions, during the period a further 823 plots were conditionally contracted on 3 sites.
Partnerships Land Bank
| H1 2020 |
Consented plots added | 1,320 |
Sites added | 3 |
Sites owned at period end | 51 |
Total plots in land bank at period end including joint ventures | 7,717 |
Average consented land plot ASP | £264,000 |
Average consented land plot cost | £29,000 |
The average selling price of all units within the consented land bank at the period end was £264,000. The estimated embedded gross margin in the consented land bank as at 30 June 2020, based on prevailing sales prices and build costs is 18.1%.
The Partnerships land bank including joint ventures of 7,717 plots as at 30 June 2020 and reflects our strategy to grow the level of mixed tenure development to contribute to the delivery of completions and contracting equivalent12 units in aggregate of c. 6,000 per year in the medium term.
The 489 mixed tenure plots that legally completed in the half year were replaced by acquisition of 1,320 plots and a further 420 plots were conditionally contracted on 3 sites. Based on our appraisal at the time of acquisition, the new additions, on average are expected to deliver a future gross margin in excess of 17% and ROCE of 40%.
Public sector land continues to be a strong source of opportunities for Vistry Partnerships and in the period, 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 30 June 2020 | Total sites | Total plots | |
0 - 150 plots | 46 | 3,464 | |
150 - 300 plots | 41 | 9,061 | |
300 - 500 plots | 15 | 6,076 | |
500 - 1,000 plots | 15 | 8,897 | |
1,000 + plots | 5 | 5,333 | |
Total | 122 | 32,831 | |
Planning agreed | 12 | 5,096 | |
Planning application | 8 | 2,676 | |
Ongoing promotion | 102 | 25,059 | |
Total | 122 | 32,831 | |
During the year 1,173 plots have been converted from the strategic land pipeline into the consented landbank. A further 1,426 plots were contracted under options and planning consent gained on 652 plots over the period.
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 Vistry Group presented by the Partnerships business. In particular the controls in respect of the contracting element of the business, understanding the process for tendering new work, ongoing management oversight of contracts and the commercial controls in place.
Other than the above, the directors consider that the principal risks and uncertainties facing the Group remain those as outlined in the 2019 annual report, pages 34 to 37, which were: economic and sales environment, materials and subcontract labour, project delivery, customer service, people, change and business continuity, health, safety and environmental, liquidity and funding; and increased regulation.
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 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.
Group income statement
|
Six months ended 30 June 2020 £'000 (unaudited)
|
Represented Six months ended 30 June 2019 £'000 (unaudited)
|
Represented Year ended 31 Dec 2019 £'000 (audited) |
Revenue (note 3) | 606,375 | 472,343 | 1,130,768 |
Cost of sales | (539,367) | (370,553) | (888,012) |
Gross profit | 67,008 | 101,790 | 242,756 |
Analysed as: |
|
|
|
Adjusted gross profit | 84,724 | 101,934 | 255,316 |
Other operating income | (9,180) | - | (10,675) |
Share of joint ventures' gross profit | (8,536) | (144) | (1,885) |
Gross profit | 67,008 | 101,790 | 242,756 |
Administrative expenses including exceptional items (note 5) | (85,857) | (25,993) | (73,710) |
Other operating income | 9,180 | - | 10,675 |
Operating (loss) / profit | (9,669) | 75,797 | 179,721 |
Analysed as: |
|
|
|
Adjusted operating profit | 21,179 | 75,228 | 194,355 |
Exceptional administrative expenses | (15,444) | - | (12,846) |
Amortisation of acquired intangibles | (7,120) | - | - |
Share of joint ventures' operating (profit)/loss | (8,284) | 569 | (1,788) |
Operating (loss) / profit | (9,669) | 75,797 | 179,721 |
Financial income | 6,669 | 466 | 813 |
Financial expenses including exceptional items (note 5) | (11,837) | (3,218) | (7,569) |
Net financing costs including exceptional items | (5,168) | (2,752) | (6,756) |
Share of profit / (loss) of joint ventures | 2,599 | (569) | 1,788 |
(Loss) / profit before tax | (12,238) | 72,476 | 174,753 |
Income tax credit/(expense) including exceptional items (note 5) | 573 | (13,727) | (36,374) |
(Loss) / profit for the year attributable to ordinary shareholders | (11,665) | 58,749 | 138,379 |
|
|
|
|
(Loss) / earnings per share (pence) |
| (Restated) | (Restated) |
Basic | (5.4)p | 41.9p | 97.5p |
Diluted | (5.4)p | 41.9p | 97.4p |
The comparative income statement has been represented in the above format as explained in note 1 and this representation has had no impact on the underlying financial results. Comparative EPS figures have been restated to include the impact of the bonus share issue in January 2020.
Group statement of comprehensive income
|
Six months ended 30 June 2020 £'000 (unaudited) |
Six months ended 30 June 2019 £'000 (unaudited) |
Year ended 31 Dec 2019 £'000 (audited) |
(Loss) / profit for the year | (11,665) | 58,749 | 138,379 |
Other comprehensive (expense) / income |
|
|
|
Items that will not be reclassified to the income statement |
|
|
|
Remeasurements on defined benefit pension scheme | 4,444 | 4,418 | (2,116) |
Deferred tax on remeasurements on defined benefit pension scheme | (935) | (644) | 464 |
Total other comprehensive income / (expense) | 3,509 | 3,774 | (1,652) |
Total comprehensive (expense) / income for the year attributable to ordinary shareholders | (8,156) | 62,523 | 136,727 |
Group balance sheet |
30 June 2020 £'000 (unaudited)
|
30 June 2019 £'000 (unaudited)
|
31 December 2019 £'000 (audited)
|
Assets |
|
|
|
Goodwill | 548,352 | - | - |
Intangible fixed assets | 151,798 | 2,104 | 4,336 |
Property, plant and equipment | 4,132 | 3,064 | 1,845 |
Right-of-use assets | 36,155 | 21,848 | 21,347 |
Investments in associates and joint ventures | 158,388 | 61,408 | 85,129 |
Amounts recoverable from joint ventures | 346,008 | 713 | 6,232 |
Restricted cash | 1,617 | 1,747 | 1,748 |
Deferred tax assets | - | - | 184 |
Trade and other receivables | 886 | 563 | 1,090 |
Retirement benefit asset | 22,575 | 11,134 | 4,506 |
Total non-current assets | 1,269,911 | 102,581 | 126,417 |
|
|
|
|
Inventories | 2,000,987 | 1,269,646 | 1,207,667 |
Trade and other receivables | 241,016 | 90,638 | 99,142 |
Cash and cash equivalents | 220,683 | 102,397 | 361,962 |
Current tax asset | 14,529 | - | - |
Total current assets | 2,477,215 | 1,462,681 | 1,668,771 |
Total assets | 3,747,126 | 1,565,262 | 1,795,188 |
|
|
|
|
Equity |
|
|
|
Issued capital | 108,914 | 67,424 | 74,169 |
Share premium | 360,345 | 217,227 | 359,857 |
Merger reserve | 823,513 | - | - |
Retained earnings | 826,059 | 789,140 | 837,940 |
Total equity attributable to equity holders of the parent | 2,118,831 | 1,073,791 | 1,271,966 |
|
|
|
|
Liabilities |
|
|
|
Bank and other loans | 527,976 | - | - |
Lease liabilities | 27,119 | 17,272 | 16,686 |
Deferred tax liability | 13,356 | 2,214 | - |
Trade and other payables | 181,702 | 97,457 | 122,940 |
Total non-current liabilities | 750,153 | 116,943 | 139,626 |
|
|
|
|
Bank and other loans | 50,000 | - | - |
Trade and other payables | 808,383 | 351,332 | 352,359 |
Lease Liabilities | 12,533 | 5,107 | 6,309 |
Provisions | 7,226 | 3,825 | 3,989 |
Current tax liabilities | - | 14,264 | 20,939 |
Total current liabilities | 878,142 | 374,528 | 383,596 |
Total liabilities | 1,628,295 | 491,471 | 523,222 |
|
|
|
|
Total equity and liabilities | 3,747,126 | 1,565,262 | 1,795,188 |
These condensed consolidated financial statements were approved by the Board of Directors on 8 September 2020.
Group statement of changes in equity
|
Total retained earnings £'000 |
Issued capital £'000 |
Share premium £'000 |
Merger Reserve £'000 |
Total £'000 |
Balance at 1 January 2020 | 837,940 | 74,169 | 359,857 | - | 1,271,966 |
Total comprehensive expense | (8,156) | - | - | - | (8,156) |
Issue of share capital | - | 31,912 | 488 | 823,513 | 855,913 |
Bonus share issue | (2,833) | 2,833 | - | - | - |
Purchase of own shares | (1,000) | - | - | - | (1,000) |
Share based payments | 271 | - | - | - | 271 |
Deferred tax on share-based payments | (163) | - | - | - | (163) |
Balance at 30 June 2020 (unaudited) | 826,059 | 108,914 | 360,345 | 823,513 | 2,118,831 |
|
|
|
|
|
|
Balance at 1 January 2019 | 776,762 | 67,398 | 216,907 | - | 1,061,067 |
IFRS 16 application adjustment at 1 January 2019 | 63 | - | - | - | 63 |
Total comprehensive income | 62,523 | - | - | - | 62,523 |
Issue of share capital | - | 26 | 320 | - | 346 |
Share based payments | 833 | - | - | - | 833 |
Deferred tax on share based payments | 37 | - | - | - | 37 |
Dividends paid to shareholders | (51,078) | - | - | - | (51,078) |
Balance at 30 June 2019 (unaudited) | 789,140 | 67,424 | 217,227 | - | 1,073,791 |
|
|
|
|
|
|
Balance at 1 January 2019 | 776,762 | 67,398 | 216,907 | - | 1,061,067 |
IFRS 16 application adjustment | 65 | - | - | - | 65 |
Total comprehensive income | 136,727 | - | - | - | 136,727 |
Issue of share capital | - | 6,771 | 142,950 | - | 149,721 |
Deferred tax on other employee benefits | 140 | - | - | - | 140 |
Share based payments | 2,891 | - | - | - | 2,891 |
Dividends paid to shareholders | (78,645) | - | - | - | (78,645) |
Balance at 31 December 2019 (audited) | 837,940 | 74,169 | 359,857 | - | 1,271,966 |
Group statement of cash flows
|
Six months ended 30 June 2020 £'000 (unaudited) |
Six months ended 30 June 2019 £'000 (unaudited) |
Year ended 31 Dec 2019 £'000 (audited) |
Cash flows from operating activities |
|
|
|
(Loss)/profit for the year | (11,665) | 58,748 | 138,379 |
Depreciation and amortisation | 14,391 | 3,045 | 6,253 |
Financial income | (6,669) | (466) | (813) |
Financial expense | 11,907 | 3,218 | 6,939 |
Loss on sale of property, plant and equipment | 208 | - | 3 |
Equity-settled share-based payment expense | 273 | 833 | 2,891 |
Income tax (income) / expense | (573) | 13,727 | 36,374 |
Share of results of Joint Ventures | (2,599) | 569 | (1,788) |
Profit on sale of assets from Joint Ventures | - | (401) | (972) |
Decrease/(increase) in trade and other receivables | 14,415 | (39,697) | (58,234) |
Decrease in inventories | 26,185 | 50,847 | 115,170 |
(Decrease)/increase in trade and other payables | (91,232) | (2,311) | 16,716 |
Decrease in provisions and increase in retirement benefit obligations | (20,401) | (8,886) | (8,629) |
Net cash generated (used in) / from operations | (65,760) | 79,226 | 252,289 |
|
|
|
|
Interest paid | (4,806) | (896) | (2,093) |
Income taxes paid | (14,949) | (16,645) | (33,804) |
Net cash (outflow) / inflow from operating activities | (85,515) | 61,685 | 216,392 |
|
|
|
|
Cash flows from investing activities |
|
|
|
Interest received | 87 | 105 | 131 |
Acquisition of intangible fixed assets | (308) | - | (3,706) |
Acquisition of property, plant and equipment | (757) | (2,527) | (565) |
Acquisition of Linden and Partnerships plus net overdraft acquired (note 13) | (401,278) | - | - |
Movement in loans to Joint Ventures | (105,805) | - | - |
Movement of investments in Joint Ventures | (19,100) | (36,693) | (58,511) |
Dividends received from Joint Ventures | 4,474 | 4,110 | 5,135 |
Increase/(decrease) in restricted cash | 132 | (366) | (368) |
Net cash outflow from investing activities | (522,555) | (35,371) | (57,884) |
|
|
|
|
Cash flows from financing activities |
|
|
|
Dividends paid | - | (51,078) | (78,645) |
Principal elements of lease payments | (7,209) | - | 5,562 |
Proceeds from the issue of share capital | - | 345 | 149,721 |
Purchase of own shares | (1,000) | - | - |
Drawdown/(repayment) of bank and other loans | 475,000 | (36,401) | (36,401) |
Net cash used in financing activities | 466,791 | (87,134) | 40,237 |
|
|
|
|
Net (decrease)/increase in cash and cash equivalents | (141,279) | (60,820) | 198,745 |
Cash and cash equivalents at 1 January | 361,962 | 163,217 | 163,217 |
Cash and cash equivalents at the end of the period | 220,683 | 102,397 | 361,962 |
1 Basis of preparation
Vistry Group PLC (the "Company"), formerly named 'Bovis Homes Group PLC' is a company domiciled in the United Kingdom. The consolidated financial statements of the Company for the six months ended June 2020 comprise the Company and its subsidiaries (together referred to as the "Group") and the Group's interest in Joint Ventures.
The condensed consolidated interim financial statements were authorised for issue by the directors on 8 September 2020. The financial statements are unaudited but have been reviewed by PricewaterhouseCoopers LLP, the Company's auditors.
The condensed consolidated interim financial statements do not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006.
The figures for the half years ended 30 June 2020 and 30 June 2019 are unaudited. The comparative figures for the financial year ended 31 December 2019 are an extract from the Group's statutory accounts for that financial year. Those accounts have been reviewed by the Company's auditors and delivered to the Registrar of Companies. The report of the auditors was (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 Group consolidated financial statements include the financial statements of the Company and all of its subsidiary undertakings. Subsidiaries are all entities over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns though its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases.
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".
The preparation of condensed financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amount of assets, liabilities, income and expenses. Actual results may differ from these estimates.
The income statement has been represented in order to more clearly present the financial results for the 2020 half year 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.
Judgements and estimates made by management in the application of adopted International Financial Reporting Standards (IFRSs) that have a significant effect on the financial statements and estimates with a significant risk of material adjustment in following years have been reviewed by the directors and, other than the goodwill impairment assessment, remain those published in the Company's consolidated financial statements for the year ended 31 December 2019.
Goodwill impairment
In order to assess whether goodwill and intangible assets require an impairment, an estimate must be made for the value in use of the cash generating units ("CGUs") which have goodwill allocated to them. The estimate for the value in use requires the calculation of a discounted cash flow, reflecting the future expected cashflows from the relevant CGUs. Goodwill must be reviewed on at least an annual basis for impairment, or earlier in the event that there is an indication of possible impairment.
The goodwill recognised by the Group at 30 June 2020 reflects the goodwill on acquisition of Linden and Partnerships on 3 January 2020. Details of goodwill impairment review will be disclosed in the full year annual report for 2021, when the first annual review of goodwill impairment will be available.
Covid-19
In light of the Covid-19 outbreak in the six months ended 30 June 2020 the Group has considered whether any impairment of goodwill, intangibles, receivables 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 assessment of net realisable value assessment of inventories at the half year. The value in use of the CGUs is not expected to be significantly impacted by the pandemic as the Group's strategy at the time of the acquisition remains in place despite Covid-19 causing some short term delays to the plan and therefore no impairment of assets is required.
The condensed consolidated interim financial statements have been prepared in accordance with IAS34 'Interim Financial Reporting' as endorsed by the EU and the Disclosure Guidance and Transparency Rules Sourcebook of the United Kingdom's Financial Conduct Authority. As required by the Disclosure and Transparency Rules of the Financial Conduct Authority, and with the exception of the changes in accounting policies outlined below, the condensed consolidated interim financial statements have been prepared by applying the accounting policies and presentation that were applied in the preparation of the Company's published consolidated financial statements for the year ended 31 December 2019, which were prepared in accordance with IFRSs as adopted by the EU and applicable law.
Following the acquisition of the Linden and Partnerships business in January 2020, the following accounting policies have been applied, which were not relevant to the 2019 Group financial statements:
Contracting revenue and costs
Where the Group provides design, construction and mobilisation activities on a development across multiple units simultaneously, this is considered to represent one performance obligation. Where these services are provided across multiple development sites, each site is typically considered to represent a distinct performance obligation.
Contracting revenue is recognised over time, as the value of the services are transferred to the customer during the period. For all contracts, costs are expensed in the income statement as incurred.
In fixed price contracts, revenue is recognised based on the costs incurred as a percentage of total estimated costs to complete the contract.
In contracts where revenue is directly related to the costs incurred, revenue is recognised based on the costs incurred to date plus any agreed fee or mark-up.
Fair valuation of acquired assets and liabilities
The fair values of assets and liabilities acquired on 3 January 2020 are based on estimates by management and third party valuation experts have been involved in the fair valuation of intangible assets. The fair values presented in this report, and the resultant goodwill balances, are provisional and subject to finalisation as permitted by IFRS 3 prior to 3 January 2021.
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"
As set out on page 133 in the Group's 2019 Annual Report and Accounts, the following standards became effective for the first time for the period beginning 1 January 2020 without material impact on the Group's reported results:
- 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.
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 three scenarios - a likely base case including the expected impact of COVID-19, a downside sensitivity scenario and a severe but plausible downside scenario. In the severe but plausible downside scenario the Group have assumed decreased affordability, leading to reduced demand for housing and falling house prices. In each of these scenarios, the forecasts indicated that there was sufficient headroom and liquidity for the business to continue based on the facilities available to the Group as discussed in Note 9 to the financial statements. 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 totalling c. £60m, to tightly manage working capital and to implement other specific measures to increase cash generation and reduce cash outflow.
2 Seasonality
In common with the rest of the UK housebuilding industry, activity occurs year round, but there are typically two principal selling seasons: spring and autumn. As these fall into two separate half years, the seasonality of the business is not usually pronounced, although it is biased towards the second half of the year under normal trading conditions.
2020 is not expected to reflect normal trading conditions and seasonality trends as a result of the Covid-19 outbreak during the first half of the year. The spring selling season was significantly impacted by the pandemic and is expected to increase the bias towards the second half of the year as a result of reduced trading in the first six months.
3 Revenue
Reported revenue by type:
|
30 June 2020 £'000 (unaudited) |
30 June 2019 £'000 (unaudited) |
Private housing | 327,176 | 352,357 |
Affordable housing | 47,772 | 90,179 |
Contracting revenue | 223,215 | - |
Other revenue | 8,211 | 29,808 |
Total revenue | 606,375 | 472,343 |
4 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, 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 chief operating decision maker (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.
Segmental TNAV includes items directly attributable to the segment as well as those that can be allocated on a reasonable basis, with the exception of goodwill and intangible assets, net cash or debt, retirement benefit assets/liabilities and tax balances payable/receivable.
Adjusted financial results include share of joint ventures and adjusted gross profit is stated including other operating income. The Partnerships business was acquired on 3rd January 2020 therefore the financial performance for period ended 30 June 2019 will not include comparatives.
(a) Segmental financial performance
Period ended 30 June 2020 |
Housebuilding £'000 (unaudited) |
Partnerships £'000 (unaudited) |
Group items £'000 (unaudited) |
Total £'000 (unaudited) |
Adjusted results |
|
|
|
|
Adjusted revenue | 349,442 | 311,425 | - | 660,867 |
Adjusted gross profit | 49,148 | 31,375 | 4,200 | 84,724 |
Adjusted operating profit/(loss) | 8,545 | 12,389 | 244 | 21,179 |
Adjusted gross margin | 14.1% | 10.1% | N/A | 12.8% |
Adjusted operating margin | 2.5% | 4.0% | N/A | 3.2% |
|
|
|
|
|
Reported results |
|
|
|
|
Revenue | 321,445 | 284,930 | - | 606,375 |
Gross profit | 38,128 | 24,680 | 4,200 | 67,008 |
Other operating income | 5,110 | 4,070 | - | 9,180 |
Administrative expenses (before exceptionals) | (41,772) | (24,685) | (3,956) | (70,413) |
Exceptional administrative expenses | - | - | (15,444) | (15,444) |
Operating profit/(loss) | 1,466 | 4,065 | (15,200) | (9,669) |
Period ended 30 June 2019 |
Housebuilding £'000 (unaudited) |
Partnerships £'000 (unaudited) |
Group items £'000 (unaudited) |
Total £'000 (unaudited) |
Adjusted results |
|
|
|
|
Adjusted revenue | 472,809 | - | - | 472,809 |
Adjusted gross profit | 101,934 | - | - | 101,934 |
Adjusted operating profit | 79,733 | - | (4,505) | 75,228 |
Adjusted gross margin | 21.6% | - | - | 21.6% |
Adjusted operating margin | 16.9% | - | - | 16.0% |
|
|
|
|
|
Reported results |
|
|
|
|
Revenue | 472,343 | - | - | 472,343 |
Gross profit | 101,790 | - | - | 101,790 |
Administrative expenses | (21,488) | - | (4,505) | (25,993) |
Operating profit | 80,302 | - | (4,505) | 75,797 |
(b) Segmental financial position
Segmental TNAV represents the net assets of the Group's two operating divisions. Segmental TNAV includes divisional net assets less goodwill, pension, current and deferred tax and net debt/cash.
Period ended 30 June 2020 |
Housebuilding £'000 (unaudited) |
Partnerships £'000 (unaudited) |
Group items £'000 (unaudited) |
Total £'000 (unaudited) |
Goodwill and Intangibles | 288,121 | 412,030 |
| 700,150 |
Tangible Net Assets | 1,692,991 | 64,052 | 18,932 | 1,775,976 |
Net debt | - | - | (357,294) | (357,294) |
Period ended 30 June 2019 |
Housebuilding £'000 (unaudited) |
Partnerships £'000 (unaudited) |
Group items £'000 (unaudited) |
Total £'000 (unaudited) |
Goodwill and Intangibles | 2,104 | - |
| 2,104 |
Tangible Net Assets | 974,634 | - | (5,344) | 969,290 |
Net cash | - | - | 102,397 | 102,397 |
5 Exceptional items
Exceptional items are those which, in the opinion of the Board, are material by size and irregular in nature 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.
| Six months ended 30 June 2020 (unaudited) £'000
| Six months ended 30 June 2019 (unaudited) £'000 | Year ended 31 Dec 2019 (audited) £'000
|
Administrative expenses | 15,444 | - | 12,846 |
Financial expenses | - | - | 630 |
Income tax expenses | 2,356 | - | 131 |
Exceptional expenses | 17,800 | - | 13,607 |
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 six months ended 30 June 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 relate 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.
6 Loss / Earnings per share
Loss / Profit attributable to ordinary shareholders
| Six months ended 30 June 2020 £000 (unaudited) | Six months ended 30 June 2019 £000 (unaudited) | Year ended 31 Dec 2019 £000 (audited)
|
(Loss)/ profit for the year attributable to equity holders of the parent | (11,665) | 58,749 | 138,379 |
Profit for the year attributable to equity holders of the parent (before exceptional items and amortisation) | 10,899 | 58,933 | 152,568 |
Earnings per share
| Six months ended 30 June 2020 Pence (unaudited) | Six months ended 30 June 2019 Pence (unaudited) | Year ended 31 Dec 2019 Pence (audited)
|
Basic (loss) / earnings per share | (5.4) | 41.9 | 97.5 |
Diluted (loss) / earnings per share | (5.4) | 41.9 | 97.4 |
|
|
|
|
Basic earnings per share (before exceptional items and amortisation) | 5.0 | 42.1 | 107.5 |
Diluted earnings per share (before exceptional items and amortisation) | 5.0 | 42.0 | 107.5 |
Weighted average number of ordinary shares
| Six months ended 30 June 2020
| Six months ended 30 June 2019
| Year ended 31 Dec 2019
|
Weighted average number of ordinary shares | 216,221,073 | 140,057,908 | 141,942,060 |
Basic earnings per share
Basic earnings per ordinary share for the six months ended 30 June 2020 is calculated on a loss attributable to ordinary shareholders of £11,665,000 (six months ended 30 June 2019: profit after tax of £58,749,000; year ended 31 December 2019: profit after tax of £138,379,000) over the weighted average of 216,221,073 (six months ended 30 June 2019: 140,057,908 ; year ended 31 December 2019: 141,942,060) ordinary shares in issue during the period.
Diluted earnings per share
The calculation of diluted earnings per share at 30 June 2020 was based on the loss attributable to ordinary shareholders of £11,665,000 (six months ended 30 June 2019: profit after tax of £58,749,000; year ended 31 December 2019: profit after tax of £138,379,000).
The Group's diluted weighted average ordinary shares potentially in issue during the six months ended 30 June 2020 was 216,313,359 (six months ended 30 June 2019: 140,206,105, year ended 31 December 2019: 142,082,681).
7 Dividends
The following dividends per qualifying ordinary share were settled by the Group:
|
Six months ended 30 June 2020 £'000 |
Six months ended 30 June 2019 £'000 |
Year ended 31 Dec 2019 £'000
|
May 2020: 0p (May 2019: 38.0p) | - | 51,078 | 51,078 |
November 2019: 20.5p | - | - | 27,567 |
Total | - | 51,078 | 78,645 |
The Board determined on 8 September 2020 that no interim dividend was to be paid for the first half of 2020. Following shareholder approval on 14 July 2020 and admission to Main Market of the London Stock Exchange on 15 July 2020, 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.
8 Interest in associates and joint ventures
In January 2020, the Group entered into a joint venture at Collingtree, near Northampton, with Latimer Developments Limited. As part of the initial transaction, land owned by the Group was sold into the joint venture, Vistry Latimer Collingtree LLP.
The Group acquired a number or joint venture investments as part of the Acquisition, which have also been fair valued.
Dividends received relate to the final profit distribution on certain joint ventures.
The carrying amount of equity-accounted investments has changed as follows in the six months to 30 June 2020:
| Six months ended 30 June 2020 £'000 | Six months ended 30 June 2019 £'000 | Year ended 31 Dec 2019 £'000
|
Beginning of the period | 85,129 | 28,992 | 28,992 |
Acquired with Linden and Partnerships | 56,033 | - | - |
Additions | - | 35,821 | 59,387 |
Loans made | 19,100 | 1,274 | 97 |
Profit/(loss) for the period | 2,599 | (569) | 1,788 |
Dividends paid | (4,474) | (4,110) | (5,135) |
End of the period | 158,388 | 61,408 | 85,129 |
Accounted for using the equity method: |
|
|
|
- Equity | 116,489 | 36,257 | 61,135 |
- Loans | 41,877 | 25,129 | 23,972 |
Other investments | 22 | 22 | 22 |
Total investments | 158,388 | 61,408 | 85,129 |
9 Bank and other loans
Interest rate profile of bank and other loans
| Rate | Available facility £000 | Facility maturity
| Carrying value 30 June 2020 £000 | Carrying value 31 Dec 2019 £000 |
Revolving credit facility* | LIBOR +165-255bps | 410,000 | 2025 | 255,900 | - |
Revolving credit* | LIBOR +165-255bps | 40,000 | 2023 | 19,100 | - |
Term Loan* | LIBOR +165-255bps | 150,000 | 2023 | 150,000 | - |
USPP Loan** | 403 bps | 100,000 | 2027 | 107,792 | - |
Term Loan (commenced 17 Mar 2020) | LIBOR +265bps | 50,000 | 2021 | 50,000 | - |
Revolving credit facility (commenced 27 Mar 2020) | LIBOR +155-245bps | 20,000 | 2022 | - | - |
Total Facilities |
| 770,000 |
| 582,792 | - |
*These facilities commenced on 3rd Jan 2020 and were subsequently amended on 24th Jan 2020.
**Carrying value is quoted including impact from the fair value of future interest payments.
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 also tested semi-annually. The overall financing cost of the new arrangements are marginally more expensive than the previous facility.
10 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 30 June 2020 were limited to those relating to remuneration, which are disclosed in the directors remuneration report published in the Group's Annual Report and Accounts 2019.
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 in the year ended 31 December 2019.
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 were as follows:
| Expenses paid to related parties | Amounts payable to related parties | Amounts owed by related parties | ||||||
Six months ended 30 June 2020 £'000
| Six months ended 30 June 2019 £'000
| Year ended 31 Dec 2019 £'000 | Six months ended 30 June 2020 £'000
| Six months ended 30 June 2019 £'000
| Year ended 31 Dec 2019 £'000 | Six months ended 30 June 2020 £'000
| Six months ended 30 June 2019 £'000
| Year ended 31 Dec 2019 £'000 | |
Trading transactions |
|
|
|
|
|
|
|
|
|
Ardent | 1,088 | 1,302 | 2,736 | 240 | 202 | 274 | - | - | - |
IB (SW) | 56 | - | 20 | - | - | 67 | - | - | - |
Marshalls PLC | - | - | 19 | - | - | - | - | - | - |
Forterra PLC | 159 | - | 545 | - | - | 98 | - | - | - |
Transactions between the Group and its joint ventures are disclosed as follows:
| Sales to related parties | Interest and dividend income from related parties | ||||
Six months ended 30 June 2020 £'000
| Six months ended 30 June 2019 £'000
| Year ended 31 Dec 2019 £'000 | Six months ended 30 June 2020 £'000
| Six months ended 30 June 2019 £'000
| Year ended 31 Dec 2019 £'000 | |
Trading transactions | 56,073 | 2,307 | 6,257 | - | - | - |
Non-trading transactions | - | - | - | 10,312 | 47 | 77 |
|
Amounts owed by related parties |
Amounts owed to related parties | ||||
Six months ended 30 June 2020 £'000
| Six months ended 30 June 2019 £'000
| Year ended 31 Dec 2019 £'000 | Six months ended 30 June 2020 £'000
| Six months ended 30 June 2019 £'000
| Year ended 31 Dec 2019 £'000 | |
Balances with joint ventures | 418,195 | 713 | 6,232 | 24,993 | - | 205 |
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.
11 Reconciliation of net cash flow to net cash
| Six months ended 30 June 2020 £'000
| Six months ended 30 June 2019 £'000
| Year ended 31 Dec 2019 £'000 |
Net (decrease) / increase in cash and cash equivalents | (141,279) | (60,820) | 198,745 |
(Increase)/decrease in borrowings | (577,976) | 36,401 | 36,401 |
Net cash at start of period | 361,962 | 126,816 | 126,816 |
Net (debt)/ cash at end of period | (357,294) | 102,397 | 361,962 |
Analysis of net cash: |
|
|
|
Cash and cash equivalents | 220,683 | 102,397 | 361,962 |
Bank and other loans | (577,976) | - | - |
Net cash at end of period | (357,294) | 102,397 | 361,962 |
12 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.
The definition and reconciliation of the 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:
| Six months ended 30 June 2020 £'000
| Six months ended 30 June 2019 £'000
| Year ended 31 Dec 2019 £'000 |
Revenue per Consolidated Income Statement | 606,375 | 472,343 | 1,131,768 |
Share of joint ventures' revenue | 54,492 | 466 | 8,479 |
Adjusted revenue | 660,867 | 472,809 | 1,140,247 |
Adjusted gross profit
Adjusted gross profit is defined as gross profit including share of joint ventures' gross profit, plus other operating income:
| Six months ended 30 June 2020 £'000
| Six months ended 30 June 2019 £'000
| Year ended 31 Dec 2019 £'000 |
Gross Profit per Consolidated Income Statement | 67,008 | 101,790 | 242,756 |
Other operating income | 9,180 | - | 10,675 |
Share of joint ventures' gross profit | 8,536 | 144 | 1,885 |
Adjusted gross profit | 84,724 | 101,934 | 255,316 |
Adjusted operating profit
Adjusted operating profit is defined as operating profit including share of joint ventures' operating profit, before exceptional expenses and amortisation.
| Six months ended 30 June 2020 £'000
| Six months ended 30 June 2019 £'000
| Year ended 31 Dec 2019 £'000 |
Operating (loss)/profit per Consolidated Income Statement | (9,669) | 75,797 | 179,721 |
Exceptional administrative expenses | 15,444 | - | 12,846 |
Amortisation of acquired intangibles | 7,120 | - | - |
Share of joint ventures' operating profit/(loss) | 8,284 | (569) | 1,788 |
Adjusted operating profit | 21,179 | 75,228 | 194,355 |
13 Business combinations
On 3 January 2020, the Group acquired the Linden and Partnerships and Regeneration businesses from Galliford Try PLC for consideration of £1,254m. 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 paid (ii) | 96,700 | 301,577 | 398,277 |
Shares in Vistry Group PLC issued | 815,698 | 39,685 | 855,383 |
Total purchase consideration | 912,398 | 341,262 | 1,253,660 |
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.
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 provisional assets and liabilities recognised as a result of the acquisition are as follows:
| Linden Fair value 3 January 2020 £'000 (unaudited) | Partnerships Fair value 3 January 2020 £'000 (unaudited) | Total Fair value 3 January 2020 £'000 (unaudited) |
|
|
|
|
(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 | 10,758 | 10,207 | 20,965 |
Intangible assets | 54,800 | 100,224 | 155,024 |
Investments in joint ventures and associates | 49,526 | 6,507 | 56,033 |
Retirement benefit asset | 5,646 | - | 5,646 |
Inventories | 609,744 | 106,801 | 716,545 |
Amounts owed by joint ventures | 203,091 | 74,438 | 277,530 |
Trade and other receivables | 103,878 | 155,620 | 259,498 |
Trade and other payables | (249,442) | (331,617) | (581,059) |
Borrowings | - | (108,219) | (108,219) |
Lease liabilities | (10,758) | (10,207) | (20,965) |
Provisions | (4,558) | - | (4,558) |
Net deferred tax liabilities | 12,283 | (14,189) | 1,906 |
Net identifiable assets acquired | 681,592 | 23,716 | 705,307 |
Add: Provisional goodwill | 230,806 | 317,546 | 548,352 |
| 912,398 | 341,262 | 1,253,660 |
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.
The fair value of the acquired assets and liabilities, as well as cash consideration is pending finalisation of the completion statement discussed in note ii below. Deferred tax has been provided in relation to these fair values.
Current period
(i) Acquisition-related costs
Acquisition-related costs of £15.4m are included within exceptional administrative expenses in the Group Income Statement.
(ii) Cash consideration
The cash consideration amount is subject to a closing balance sheet adjustment as set out in the Sale and Purchase Agreement. This is still being finalised with Galliford Try PLC and as such cash consideration is provisional at the date of this report.
(iii) Acquired receivables
The fair value of trade and other receivables in Linden is £103.9m 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 £155.6m 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.
(v) Revenue and profit contribution
The 100% owned development sites acquired with the Linden business contributed reported revenues of £105.5m to the Group for the period from 3 January 2020 to 30 June 2020. There would be no material difference in the contribution to revenues nor operating profit/(loss) 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 loss of the Group for the period from 3 January 2020 to 30 June 2020.
The acquired Partnerships business contributed revenues of £284.9m and operating profit of £4.1m to the Group for the period from 3 January 2020 to 30 June 2020. There would be no material difference in the contribution to revenues nor operating profit/(loss) if the acquisition had occurred on 1 January 2020.
14 Further information
Further information on Vistry Group PLC (formerly Bovis Homes Group PLC) can be found on the Group's corporate website www.vistrygroup.co.uk, including the analyst presentation document which will be presented at the Group's results meeting on 8 September 2020.
Statement of directors' responsibilities
The directors' confirm that these condensed interim financial statements have been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and that the interim management report includes a fair review of the information required by DTR 4.2.7 and DTR 4.2.8, namely:
· an indication of important events that have occurred during the first six months and their impact on the condensed set of financial statements, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and
· material related-party transactions in the first six months and any material changes in the related-party transactions described in the last annual report.
The directors of Vistry Group PLC are listed in the Vistry Group PLC Annual Report for 31 December 2019. A list of current directors is maintained on the Vistry Group PLC website: www.vistrygroup.co.uk
For and on behalf of the Board,
Greg Fitzgerald Earl Sibley
Chief Executive Chief Financial Officer
8 September 2020
[1] Net debt is quoted excluding IFRS16 lease liabilities and includes £7.8m impact from the fair value of future interest payments on US Private Placement notes
[2] Forward sales of £2.7bn includes £0.3bn in respect of our joint venture partners' share of revenue
[3] Pre-exceptional items and amortisation of acquired intangible assets
[4] Gearing calculated as Group net debt plus land creditors divided by Group tangible net assets
[5] Key financials are on an adjusted basis to include the proportional contribution of the joint ventures and before exceptional expenses of £15.4m and amortisation of acquired intangibles of £7.1m in HY20
[6] HY19 reflect Vistry Group PLC excluding the acquired businesses and are not on a proforma basis
[7] In HY20 the Group incurred £10.2m of costs directly related to COVID-19 and received £6.3m in relation to furlough claims from the Government's Coronavirus Job Retention Scheme. The Group will repay the claims in H2 2020 but had not committed to this at 30 June 2020; as a result, the £6.3m of income is recognised in the HY20 income statement and will be reversed by 31 December 2020
[8] Completions include 100% of joint venture completions
[9] Restated from 43.7p in the prior period as a result of the bonus share issue in January 2020
[10] Prior year divisional completions and revenue represent pro forma H1 2019 divisional completions and revenues calculated using published data for Linden Homes and Vistry Partnerships for the period from 1 Jan 2019 to 30 June 2019. No further proforma information is provided as the previously published data is not considered to be comparable due to the need to align accounting policies.
[11] ASP and Revenue includes proportionate contribution of JVs
[12] Contracting equivalent units is a measure of the build progress in the period in delivering residential properties under contracting contracts, and is calculated by dividing the costs incurred in the period by the total contract costs, and applying this % to the total residential units under the contract
[13] Tangible net asset value is calculated as total assets less acquired intangible assets, goodwill and net cash/debt.
[14] Cost is stated at the fair value of the consideration and cash consideration and is subject to the finalisation of the completion statement with Galliford Try PLC.
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