Annual Financial Report

RNS Number : 9754I

Vistry Group PLC

07 April 2020

Vistry Group PLC - Annual Report and Accounts 2019

Annual Report and Accounts 2019, Notice of Annual General Meeting 2020 and Proxy Card

The Company's Annual General Meeting will be held at 12 noon on Wednesday 20^th May 2020 at the Company's Head Office at 11 Tower View, Kings Hill, West Malling, Kent ME19 4UY.

The wellbeing of our shareholders is vitally important to us and, in light of the measures put in place by the Government and advice from Public Heath England, we urge our shareholders not to attend the AGM this year. Should anyone seek to attend, they will be refused entry. There will be limited Company representation at the meeting, social distancing and hygiene measures will be in place and the meeting will be limited to the formal business required. We also urge our shareholders to submit their votes by proxy as soon as possible. Further information on the submission of proxies can be found in the Notice of Annual General Meeting 2020. The deadline for submission is 12.00 noon on 18 May 2020.

The views of our shareholders are important to us and, to ensure that engagement continues, shareholders may submit any questions to the Board by email to investor.relations@vistrygroup.co.uk or by post to the Group Company Secretary at 11 Tower View, Kings Hill, West Malling, Kent ME19 4UY. All questions received will be considered and provided with a response and a Q&A will also be available on our website.

Should further changes need to be put in place at short notice for the AGM this year, updates, including any changes to the proceedings of the meeting will be published on www.vistrygroup.co.uk/investors/shareholders/agm/2020 .

In order to comply with Listing Rule 9.1.3, copies of Annual Report and Accounts 2019 incorporating the Notice of Annual General Meeting 2020, together with the Proxy Form, have been submitted to the National Storage Mechanism and will shortly be available for inspection at https://data.fca.org.uk/#/nsm/nationalstoragemechanism .

The documents are being posted to shareholders who have requested hard copies. Copies of the Annual Report and Accounts 2019 and the Notice of Annual General Meeting 2020 and are available on the Company’s website at www.vistrygroup.co.uk/annualreport2019 and www.vistrygroup.co.uk/investors/shareholders/agm/2020 shareholders receiving web communications.

Annual Report and Accounts 2019 - publication required by DTR 6.3.5

The Company published its Preliminary Results for the year ended 31 December 2019 on 27 February 2020. In order to comply with DTR 6.3.5 it is now publishing, in unedited full text, information contained in the annual financial report of a type required to be disseminated in a half-yearly financial report. To maintain coherence, this repeats some of the information contained in the Preliminary Results announcement.

Please be reminded that payment of the 2019 second interim dividend has been postponed, as explained in the Group's COVID-19 update announcement released on 25 March 2020.

The full annual financial report is available on the Company's website at www.vistrygroup.co.uk/annualreport2019

Vistry Group PLC - Annual Report and Financial Statements 2019

Chairman's statement

Further progress, delivering a record year of profits

2019 has been another very positive year for the Group with continued improvement in build quality and customer satisfaction, the successful launch of our new housing range and the continued investment in people, systems and infrastructure.

Delivering high quality homes and excellent customer service has been an absolute priority for the Group and at that core of all we have done over the past three years. As such, I am delighted to report that the Group has been awarded a 5-star HBF customer satisfaction rating for 2019.

The Group delivered another record year of profits with pre exceptional profit before tax increasing by 12.0% to £188.2m (2018: £168.1m). Operating margin improved by 60 basis points to 17.0% despite a backdrop on on-going market uncertainty during the year and return on capital employed increased by 300 basis points to 22.3% (2019: 19.3%).

Transformational acquisition

It is from this position of strength that the Group entered into discussions with Galliford Try regarding a potential combination with their housebuilding businesses. Following a period of detailed due diligence, the Group agreed to acquire the Linden Homes and Partnerships & Regeneration businesses from Galliford Try for an agreed price of £1.075 billion (the "Acquisition") on 7 November 2019. In order to fund the Acquisition, the Group completed a placing (the "Placing") of 13,472,591 new ordinary shares at a price of 1130 pence per Placing share with existing and new institutional investors, raising net proceeds of c. £150m.

This transformational acquisition was a unique opportunity for Bovis Homes to acquire both a top UK housebuilder in Linden Homes and a leading partnerships business. The combination is expected to deliver annualised pre-tax cost synergies of at least £35m, with £12m expected to be achieved in 2020. The Acquisition was completed on 3 January 2020 and as a first step of the integration process, the Group was renamed Vistry Group PLC, with the new corporate name being used for the Vistry Partnerships business.

A top five UK housebuilder

Vistry Group is a top five national housebuilder with the capacity to grow and deliver c. 14,000 new units p.a.

The enlarged Group has an enhanced national customer proposition and coverage, enabling it to compete more effectively against the major players in the UK private and affordable housebuilding sector.

Leading partnerships business

The Acquisition has firmly established Vistry Group as a leader in the high growth, counter cyclical partnerships sector. Vistry Partnerships is one of the leading and most established national brands and, with a very strong track record of growth, is a partner of choice for housing associations, local authorities and government agencies. There remains a fundamental housing shortage in the UK, and government support to increase housing supply is strong, with a significant increase in investment from housing associations in particular.

Vistry Partnerships combines contracting and development capabilities, supplying new homes across all housing tenures. As part of Vistry Group with its strong balance sheet, land supply, and strategic land capability, our strategy, whilst retaining the core ethos of the business, is to accelerate Vistry Partnerships' revenue growth with an increase in higher margin, development led revenues. The business is targeting increasing volumes to 6,000 units p.a., revenues to over £1 billion and an operating margin in excess of 10 per cent.

Two leading housebuilding brands

Bovis Homes and Linden Homes bring together two high quality, well-recognised housebuilding brands. For 2020, we are firmly focused on successfully integrating the housebuilding businesses and establishing the best operating structure from which to maximise the benefits of the combination, including the significant cost synergies. For 2021 and beyond, the strategy is to maximise output through controlled volume growth, and driving margin progression. We will maximise the benefits from dual branding, especially increasing output and returns on our larger developments.

Senior management

Greg Fitzgerald, CEO of the Group, is uniquely positioned to successfully integrate the businesses having formerly been CEO and then Executive Chairman of Galliford Try plc over a period of 11 years until 2016. Greg has established a strong leadership team across the enlarged Group bringing the best from each business, and this continuity of management will help mitigate risks arising through the integration process.

I am delighted to welcome Graham Prothero, former CEO of Galliford Try plc, Stephen Teagle, Managing Director of Galliford Try's partnerships business (now Vistry Partnerships) and Andrew Hammond, former Managing Director of Linden Homes, to our senior leadership team following the Acquisition on 3 January 2020. I believe the combination of our two managements creates a strong and experienced team to deliver value from the Acquisition.

People

People remain a key priority and we continue to invest in the training and development of our employees and subcontractors. In the year, there has been a particular focus on mental health, and we have rolled out our mental health first-aid programme across the business. We remain very committed to our Vistry Group Apprenticeship and Trainee Assistant Site Manager Schemes.

On behalf of the Board, I would like to thank all of our employees for their commitment and hard work in delivering the successful performance across all business areas in 2019, and in particular the attainment of our 5-star HBF customer satisfaction rating.

We welcome our new colleagues at Linden Homes and Vistry Partnerships and look forward to working with them and delivering the benefits from this exciting combination. I recognise the period of integration will have its

challenges and thank everyone for their patience, dedication and enthusiasm through this.

I would also like to extend my thanks to our subcontractors, suppliers and partners who have supported us during the year, and with this acquisition, and are such an important and valued component of our business.

Ordinary dividends and capital return plan

The Group dividend policy has been, and will continue to be, to maintain a robust and efficient balance sheet to deliver sustainable dividends to our shareholders.

With the Acquisition we announced the return of a further £60m to our shareholders by way of a bonus issue of shares in January 2020 on completion of the transaction.

The Board recommended that instead of paying the Bovis Homes 2019 final dividend, it would pay a second interim cash dividend of 41 pence per share on 29 May 2020 to shareholders on the register on 27 December 2019. This takes the total ordinary dividend for 2019 to 61.5 (2018: 57.0) pence per share, an increase of 8 per cent.

Going forwards the Group expects to maximise sustainable dividends to shareholders through an initial ordinary dividend cover of 2 times, moving towards a cover of 1.75 times following a period of integration and deleveraging. The Board will also consider the prevailing strength of the balance sheet and general economic circumstances, with particular regard to the cyclicality of the industry.

The Board

I would like to thank my colleagues on the Board for their support and guidance to the leadership team and to me personally in what has been a busy and significant year for the Group.

I am pleased to welcome Graham Prothero to the Group and to the Board. Graham, who was previously the Chief Executive of Galliford Try plc joined the Group as Chief Operating Officer following the Acquisition on 3 January 2020. Graham brings deep knowledge of the acquired businesses as well as broad sector experience.

The future

The Group has an exciting future with very significant opportunities to be realised from the Acquisition. The progress, achievements and learning from the past three years positions us well, and the integration process, taking the best from both, is well underway. The market fundamentals remain strong and with greater political certainty, we have seen a welcome increase in consumer confidence and demand for our new houses. I look forward to updating you with our progress.

Ian Tyler

Chairman

Chief Executive's Statement

2019 in review

The Group has made further significant operational progress in 2019 resulting in another year of record profits, with group profit before exceptional items and tax up 12.0% to £188.2m.

Building high quality new homes and providing our customers with excellent service remains our key priority, and I am delighted this is reflected in an increase in our HBF customer satisfaction rating to 5-star; a very significant step up from our 2-star rating in 2017. In addition, 2019 saw the roll out of Bovis Homes' new Phoenix Housing Collection which incorporates more modern, open plan designs and has received very positive customer feedback.

With heightened uncertainty surrounding Brexit and the general election in December, we saw downward pressure

on house prices in the second half of 2019. This was partially mitigated through a combination of the Group's own

build cost saving initiatives and a lack of cost inflation. As a result, we are pleased to have delivered further

operating margin progression, reporting an increase of 60 basis points to 17.0%, pre exceptional items.

On 10 September 2019 we announced the potential combination between Bovis Homes and Galliford Try's Linden Homes and Partnerships & Regeneration businesses. Following detailed due diligence, the Acquisition exchanged on 7 November when the Group also successfully raised net proceeds of c. £150m through a share placing to help fund the acquisition.

Completion of the Acquisition on 3 January 2020, has firmly positioned the enlarged Group as one of the UK's top housebuilders and established it as a leader in the highly attractive, high growth partnerships sector. Our priority for 2020 is to successfully integrate the housebuilding businesses and ensure we maximise the very significant benefits we are confident can be delivered from this exciting new combination.

Operational update

Strong sales performance

The Group saw a significant and sustained step up in its sales rate in 2019 to an average sales rate per outlet per week of 0.58 (2018: 0.50), an increase of 16%. Achieved against a backdrop of market uncertainty for much of the year, this uplift reflects the Group's significantly improved customer offering and build procedures.

Help to Buy remains an important scheme and 23% (2018: 27%) of total completions utilised the scheme in the year. We continue to use part exchange in a controlled manner with 7% (2018: 6%) of total completions utilising this in the period.

The Group completed a total of 3,867 (2018: 3,759) new homes in 2019 including 58 (2018: nil) joint venture completions, a 3% increase on the prior year. Private homes totalled 2,678 (2018: 2,567) units with 1,189 (2018: 1,192) affordable housing units, representing 31% (2018: 32%) of total completions.

Customer service

Customer service remains central to everything we do, and we are delighted this is reflected in our HBF customer satisfaction score being above 90% for Q3 2019, equivalent to a 5-star rating.

In 2019 we implemented our customer relationship management system, 'Keys', across our Sales and Care teams.

This provides us with a single transparent view of each customer's journey, from reservation through the warranty

period, delivering us greater insight and information. It also empowers our customers with self-reporting functionality, giving them greater control of the process and access to report any issues.

Following direct feedback from our Home Buyers Panel, we launched our first 'Unwrapped Home' at Embrook Place in Wokingham this year. Here customers can see the different phases of construction of their home, including the methods and materials used in the structure, plumbing and electrics.

We were very pleased to have received the Ministry of Defence's Gold Award in their Employer Recognition Scheme. The Group first signed the Armed Forces Covenant in 2016 and has since worked to ensure that past and present members of the Forces along with their families receive outstanding support, from mentoring placements and trainee programmes, to assisting military personnel looking to get on the property ladder. We are proud to be the only dedicated housebuilder to have achieved Gold Award status.

High build quality

Delivering high quality new homes is a key priority and we have seen very significant progress in this area over the past couple of years. The Bovis Homes site teams have been a key area of focus, and we have invested in recruiting, developing and retaining a high-quality workforce on site. As a result, we have benefitted from an improved subcontractor base, with whom we have established strong partnerships We continue to strengthen these relationships as highlighted by the improving scores from the bi-annual feedback surveys we facilitate.

We are delighted that in 2019, six of our site managers were awarded NHBC Pride in the Job Quality awards and that our NHBC Construction Quality Review for 2019 highlighted a 26% improvement in our Group score over the past two years.

Phoenix housing range
We launched the new Bovis Homes housing range, the Phoenix Collection, in 2018 and successfully replanned the Group's owned land bank during 2018 and 2019 with the new house types where appropriate. The modern design and open plan living meet today's customer needs, while the design and specification allow the Group to drive efficiency and cost reduction.

The first 'Phoenix' home was completed in June 2019, with a total of 358 completions from the range during the year, representing 14% of private completions. We currently have 1,040 units under construction using the new range and expect c. 1,400 of private completions in 2020 to be Phoenix house types.

People

People satisfaction remains a key priority and, in the year, we continued to invest in the development, training and well- being of our workforce including our subcontractors. Through our dedicated Learning and Development team we delivered more than 4,500 delegate training days in 2019, including our trainee assistant site manager programme and leadership training.

With the ever-increasing awareness and prevalence of mental health issues in the construction industry, one of our key focal points this year has been the roll-out of mental health first aid. The Group has also pledged its support for the Lighthouse Construction Industry Charity campaign which aims to tackle mental health issues across the wider construction industry. The campaign will deliver vital support including, the provision of a confidential 24/7 industry helpline, and retraining for workers who have been injured or who have suffered from an illness that means they cannot return to their normal work.

We are pleased to report our employee engagement level, as measured by our monthly employee engagement survey, has remained at a high level and ahead of the survey benchmark.

Investment in systems and processes

During the year we continued to invest in our systems and processes to drive efficiency and best practice across all business areas. We have implemented the Keys system along with a new document management solution across the whole business to support employees on site and in the office as well as our customers. In addition, we have furthered our implementation of the COINS software system with further functionality across sales, land, build and commercial.

Land acquisition

The Group continued to acquire high quality land opportunities in the year with a total of 4,531 (2018: 4,164) plots added to the owned land bank, with the land acquired expected to deliver at least a gross margin of 26% and ROCE of 25%. Strategic land remains a valuable source of land for the Group and we converted 2,146 (2018: 1,958) plots from our strategic land bank during the year including 831 plots at Comeytrowe, Taunton, and 783 plots at Cambourne near Cambridge.

Partnership housing

Excellent progress was made with the Group's Partnerships business, launched in early 2019. We entered into a total of eight land led partnerships with housing associations in 2019 including the joint venture of our development at Stanton Cross, Wellingborough with Riverside, joint operations at Alphington and Comeytrowe with LiveWest, and a joint venture with Metropolitan Thames Valley at Cambourne.

Vistry Group

Vistry Group was formed on 3 January 2020 following the acquisition of Linden Homes and the Partnerships & Regeneration businesses of Galliford Try plc for an agreed price of £1.075 billion. The acquisition presented an excellent and unique opportunity for Bovis Homes to acquire both a top UK housebuilder in Linden Homes, and one of the leaders in the highly attractive, high growth partnerships business.

Top five national housebuilder

The acquisition has firmly positioned Vistry Group as one of the UK's top five housebuilders with the capacity to deliver up to 14,000 new units p.a. With an enhanced national customer proposition and coverage, the Group can compete more effectively against the other major players in the UK private and affordable housebuilding sector. It has a high-quality land bank, with a total of 40,135 plots including joint ventures, and a valuable pipeline of strategic land totalling

31,965 plots.

Market leader in Partnerships Housing

The Group announced the launch of its own Partnerships business in early 2019, identifying partnerships housing as a key sustainable growth area with more resilient earnings across the cycle and therefore reducing the Group's risk profile.

Vistry Partnerships is one of the leading and most established operators in this area and, with a very strong record

of growth, is a partner of choice for housing associations, local authorities and government agencies. There remains a fundamental housing shortage in the UK, and government commitment to increasing housing supply is strong, with a significant increase in investment from housing associations in particular. A key strength of the Vistry Partnership business model is the ability to develop across all housing tenures through both contracting and development-led partnerships.

Synergies

As previously stated, we expect to deliver a run-rate of pre-tax cost synergies of at least £35m p.a. by the end of 2021 as a result of combining the businesses.

Of this, at least £20m p.a. is expected to come from a reduction in operating costs though the streamlining of the regional and operational models. Within housebuilding, we have streamlined the regional operations moving from 17 regional business units to 13, and we expect a c. 8% reduction in headcount across the business including central services.

At least £15m of synergies is to be achieved from procurement savings and the optimisation of specification across our three housing ranges: The Phoenix Collection, The Linden Collection and Partnerships housing. We are making good progress with this, and on renegotiating our supply contracts for the enlarged Group.

It is expected that c. £12m of this benefit will be achieved in 2020, with the recurring run-rate of at least £35m p.a. achieved by the end of 2021.

Group strategic priorities

The Group's strategic priorities remain investing in our people, ensuring we retain high levels of customer satisfaction, ensuring a healthy and safe working environment, and delivering enhanced returns to our shareholders.

We will continue to invest in the development and training of our people to ensure a committed, motivated and engaged workforce. We are firmly focused on increasing the supply of much needed new homes of all tenures across England and delivering high quality new homes and a high level of customer service that meets the expectations of our customers throughout their entire journey with Vistry Group. Ensuring the health and safety of our people is unequivocally at the core of our business. Alongside these priorities, driving enhanced returns for our shareholders through increased profitability, return on capital and total shareholder returns is our goal.

Housebuilding strategy

The housebuilding business of the Group operates with two leading brands, Bovis Homes and Linden Homes. The business has national scale and coverage with 13 operating regions, down from 17 on completion of the acquisition. Hands on management remains key and each regional office is located within easy reach of its developments. Our housebuilding business has an expanded geographic reach across England including operations in the attractive Yorkshire area, and a strengthened position in core areas in the south including along the South Coast.

The business strategy is to maximise output through controlled volume growth in the medium term while maintaining high quality delivery. Each of the 13 operating regions has the capacity to deliver c. 550 - 625 new housing units p.a., giving the housebuilding business the potential to grow and deliver more than 8,000 units p.a. The housebuilding business is divided into a North and South structure, led by a highly experienced management team combined from both Bovis Homes and Linden Homes.

Longer term, potential future geographic expansion for housebuilding could be supported by Vistry Partnerships' greater geographic reach.

Maximising the opportunities from being a dual branded housebuilder through ensuring we provide our customers a breadth of product choice to best meet their needs is a priority. Each brand will retain its own housing range, the Phoenix Collection for Bovis Homes and the Linden Collection, with the ranges currently being reviewed and refined. We already have both our brands successfully selling alongside each other on eight of our sites and see significant further opportunity. With two brands, we are more competitive in the land market. We have a greater appetite for larger sites where we can promote both brands, increasing overall production, demand and sales rates, and driving higher returns on capital employed.

Vistry Partnerships - strategy

The Vistry Partnerships business holds a strong and unique position within the partnerships market, combining contracting and development expertise on a national scale, supported by two leading housebuilding brands.

The strategy is to accelerate the revenue growth from the business' growth from the business' 10 operating regions through increasing output from the existing infrastructure and expansion into new geographies. The Group is targeting an increase in units (including equivalent units) to 6,000 p.a. and revenues of at least £1 billion. This growth is to be driven by an increase in higher margin development revenues to 50% of total partnerships revenues, whilst maintaining relatively stable contracting revenues.

The Group's land supply and strategic land capability will support the growth of higher margin development revenues. Bovis Homes' Partnerships business, launched in 2019, made very good progress in this area during the year, with eight of the Group's larger developments being put into partnership arrangements with housing associations. Three of these developments have now been transferred to Vistry Partnerships.

Development revenues typically generate an operating margin of between 14% to 18% as compared to a low single digit operating margin for contracting revenues. With this change in mix, Vistry Partnerships is targeting a significant step-up in profitability to an operating margin of at least 10%.

Operational priorities - integration

Our clear focus for 2020 is the successful integration of the businesses to ensure we maximise the significant benefits to be realised from the combination. The integration process is well under way and much progress has been made to date.

Our housebuilding business has been reorganised with the regional operating areas defined and Managing Directors for each business unit confirmed. The Phoenix Collection and Linden Collection housing ranges are being reviewed and refined, and the centralising of, and negotiations on procurement are progressing well. On operating systems, the health and safety systems are aligned, and the COINS construction software is to be harmonised across housebuilding in the first half of this year and implemented within Vistry Partnerships in the coming year.

Land

The Group has a high-quality owned land bank with strong fundamentals and excellent forward visibility. On housebuilding all of our land for 2020 has detailed planning consent and 91% of our land for 2021 is secured. All of our land for Vistry Partnerships for 2020 is secured and 87% for 2021.

We are very active in the land market and continue to see good opportunities. In housebuilding we have acquired 1,489 plots across 5 sites in the year to date and looking ahead we expect to acquire land in line with our target of maintaining a 3.5 to 4.0 years land bank. On average we are targeting slightly smaller units to maximise demand and output which we expect to result in a reduced average selling price in the land bank in the medium term.

For Vistry Partnerships, we expect to increase our land supply in-line with our strategy of increasing our land-led development revenues.

With our dual branded housing business and growth strategy for partnership development revenues, the Group has an increased appetite for larger sites and higher margin strategic opportunities.

Balance sheet

We have a robust balance sheet following completion of the acquisition with£600m of committed banking facilities, and £100m of private placement notes transferred from Galliford Try. We will continue to acquire land utilising land creditors where good deferred terms are available.

We expect the business to deleverage over the next two years with gearing including land creditors targeted to decrease below 30% by December 2020 and continue to decline in 2021.

We expect to maintain a housebuild land bank of between 3.5 and 4.0 years and to increase Partnerships' landbank in-line with our growth strategy, including investment in strategic land. We will optimise our work in progress, notably utilising our dual branding capability to drive capital efficiency on larger sites. Part exchange will continue to be utilised on a controlled basis with a focus on holding no stock properties beyond three months.

Dividends

The Group's dividend policy has been, and will continue to be, to maintain a robust and efficient balance sheet and to deliver sustainable dividends to shareholders.

In September 2017, the Group announced its intention to return surplus capital resulting from its balance sheet optimisation initiatives totalling £180m to shareholders in the three years to 2020, with the first £60m paid as a special dividend to shareholders in November 2018.

The expected special dividend for 2019 was returned to shareholders by way of a £60m bonus issue to shareholders on 2 January 2020. Reflecting the Group's new strategy following the acquisition, there will be no further special dividend payments in relation to the £180m capital return initiative.

Instead of paying the Bovis Homes 2019 final dividend, a second interim cash dividend of 41 pence per share will be paid on 29 May 2020 to shareholders on the register as at 27 December 2019. Including the first interim dividend of 20.5 pence per share, this brings the total ordinary dividend for 2019 to 61.5 (2018: 57.0) pence per share.

The Group expects to maximise sustainable dividends to shareholders with an ordinary dividend cover of 2 times initially, moving towards a dividend cover of 1.75 times following a period of integration and deleveraging. The Group will also consider the general economic circumstances, with regards to the cyclicality of the industry.

Current trading and outlook

We are pleased to report a strong start to the year with increased levels of consumer demand seen across all our operating regions in the first seven weeks.

For housebuilding in the first seven weeks, the underling average sales rate per site per week is up 15%, and we have seen some positive momentum on underlying pricing.

In 2020, we are firmly focused on successfully integrating the housebuilding businesses, delivering the significant benefits from the combination as quickly as possible, and best positioning the business to deliver controlled volume growth in the medium term. As such we are not forecasting any volume increase for this business area in 2020. We have a strong forward sales position with 48% of consensus housebuilding revenues for FY20 secured.

Vistry Partnerships will continue to pursue its growth plans for 2020, being less impacted by the integration process. Its strategy of significantly increasing higher margin development revenues, will be reflected in a step-up of land acquisition and strategic land opportunities for the Partnerships business.

This year, Vistry Partnerships has entered into a £95m development with housing association, Citizen Housing Group, for the delivery of 360 new homes at the former hospital site, Lea Castle, Kidderminster. The homes for sale will be from both the Bovis Homes and Linden Homes housing ranges.

In London, Vistry Partnerships has contracted with Red Door Ventures Limited, a newly formed subsidiary of Newham Council to deliver homes for rent in Plaistow. The £63m scheme will provide 182 residential units and associated commercial units and will extend the Group's track record in delivering homes for the build to rent and private rented sectors.

Vistry Partnerships has a strong forward sold position with mixed tenure forward sales totalling £244m (FY19: £159m) of which £162m (FY19: £81m) is for private units. On contracting, the order book stands at £890m (FY19: £960m), with 88% of the FY20 order book secured. In addition, over £1.5bn (FY19: £1.4bn) is at preferred bidder status or land acquisition stage.

Greg Fitzgerald

Chief Executive

Financial Review

Trading performance

In line with our strategy, the Group delivered controlled volume growth during 2019 resulting in a 3% increase in legal completions to 3,867 (2018: 3,759). This included 1,184 affordable homes representing 31% of total completions (2018: 32%). Total revenue was £1,130.8m, an increase of 7% on the previous year (2018: £1,061.4m).

Volume	FY 2019	FY 2018
Private legal completions	2,625	2,567
Affordable legal completions	1,184	1,192
Total legal completions	3,809	3,759
JV legal completions	58.0	-
Total legal completions including JVs	3,867	3,759
Revenue (£m)
Private legal completions	897.0	866.1
Affordable legal completions	170.4	160.7
Revenue from legal completions	1,067.4	1,026.8
Partnership land transactions revenue	42.4	-
Other revenue	14.1	20.4
Total development revenue	1,124.0	1,047.2
Land sales revenue	6.8	14.2
Total revenue	1,130.8	1,061.4

Housing revenue was £1,067.4m, 4% ahead of the prior year (2018: £1,026.9m). The average sales price for our private homes increased 1% to £341,700 (2018: £337,400) with our overall average sales price increasing 2% to £280,200 (2018: £273,200).

Other revenue was £14.1m (2018: £20.4) primarily driven by the release of deferred revenue from disposals within our PRS joint ventures. The disposals from our PRS joint ventures are largely complete as at the end of 2019.

Partnership land transactions revenue of £42.4m was generated from six land sales in the period with housing associations, where the Group will develop the sites in partnership with the housing associations, with the expected site wide development margin for the Group, at a level similar to our standard housing business.

In February 2019 we announced the launch of our new Partnerships Housing Division and following the Acquisition, we now have a leading partnerships business, working alongside housing associations to increase output and deliver best returns from our development land.

Land sales revenue of £6.8m in 2019 primarily relates to the disposal of the final out-of-operating area site in the period at Penwortham near Preston, realising £6.4m of cash and contributing £0.1m in profit.

Total adjusted gross profit was £253.4m (adjusted gross margin: 22.4%), compared with £230.9m (gross margin: 21.8%) in 2018. Housing adjusted gross margin was 22.4% in 2019, ahead of the 21.9% achieved in 2018. The adjusted gross margin was impacted by market influences during the year with sale price inflation being flat in the first six months and showed a 1-2% decrease in the second half. The Group saw construction cost inflation of c3-4% in the first six month of 2019, flattening out in the second half with the market uncertainty from Brexit and the general election.

The gross margin was positively impacted by the increasing embedded gross margin in our land bank and our operational improvements including the initial impacts from our margin initiatives.

During 2019, our construction costs decreased by 2% per square foot, reflecting the inflationary impacts being offset by reductions in our cost base as we delivered production in a controlled manner, changes in specification and the under-utilisation of contingency in line with our margin initiative.

Operating profit increased to £192.6m before exceptionals (2018: £174.2m) at an operating profit margin of 17.0% (2018: 16.4%). Administrative expenses increased in 2019 to £60.8m (2018: £56.7m) reflecting the Group's efficient operating structure, offset by higher employee costs and the ongoing investment in new processes, systems and training.

Exceptional costs of £13.5m relate to the Acquisition; this transaction completed on 3 January 2020. The costs include certain advisory costs as well as some cost relating to the refinancing of the Group.

The Group delivered a record profit before tax before exceptionals for the year ended 31 December 2019 of £188.2m, comprising operating profit of £192.6m, net financing charges of £6.1m and £1.8m of share in JV profit. After exceptional costs profit before tax was £174.8m, this compares to £168.1m of profit before tax in 2018, which comprised £174.2m of operating profit and £6.1m of net financing costs.

Financing and Taxation

Net financing charges before exceptionals during 2019 were £6.1m (2018: £6.1m) reflecting the marginally lower net debt in the period, a consistent level of commitment fees, and issue costs amortised, as well as the impact of implementing IFRS16 in the period, (£0.6m) disclosed in note 5.5 to the financial statements.

The Group has recognised a tax charge of £36.4m at an effective tax rate of 20.8% (2018: tax charge of £31.5m at an effective rate of 18.7%); this rate is higher than the current rate of 19.0% primarily as a result of non-deductable exceptional costs incurred in the year and an adjustment made in respect of the prior year. The Group has a current tax liability of £20.9m on its balance sheet as at 31 December 2019 (2018: £18.1m).

Dividends

The first interim dividend of 20.5 pence per share (2018: 19.0 pence) was paid on 22 November 2019. A second interim dividend of 41.0 pence per share (2018 final dividend: 38.0 pence) has been declared and will be paid on 29 May 2020 to holders of ordinary shares on the register at the close of business on 27 December 2019, bringing total dividends for the year to 61.5 pence per share (2018: 57 pence).

Instead of a cash special dividend, a bonus issue of shares was made to shareholders on the register at the close of business on 2 January 2020; for every one share held at the bonus issue record time, 0.03819 bonus shares were issued (2018 special dividend: 45.0 pence). The dividend reinvestment plan, introduced in 2012, gives shareholders the opportunity to reinvest their dividend.

Basic EPS pre exceptional of 111.5p (2018: 101.6p) has increased 10% year on year as a result of record profit having incorporated the Placing. Basic EPS post exceptional of 101.5p (2018: 101.6p) has remained consistent year on year.

Net assets and cash flow

As at 31 December 2019 net assets of £1,272.0m were £210.9m higher than at the start of the year, driven by an increase in the cash balance through operating cashflow which has subsequently been utilised to fund the Acquisition. Net assets per share as at 31 December 2019 were 857 pence (2018: 787 pence).

Investments increased by £56.1m since the start of the year, primarily driven by the creation of the joint venture with Riverside Regeneration Limited in respect of the development of Stanton Cross, Wellingborough, in April. In addition, the Group entered into a joint venture in December with Metropolitan Living Limited in respect of a new strategic development at Cambourne West, Cambridgeshire.

Retirement benefit assets increased by £3.1m primarily as a result of higher than expected returns on the scheme's assets and contributions to the fund in the period. This has resulted in a pension surplus of £4.5m at 31 December 2019 (2018: £1.4m).

Inventories decreased during the year by £112.6m to £1,207.7m. The value of residential land, the key component of inventories, decreased by £142.4m. This reflects completions during the period as well as the impact of Partnership land transactions and the sale of our Stanton Cross development at Wellingborough into a joint venture. Other movements in inventories included an increase in work in progress of £31.0m driven by the infrastructure investment on a number of our new developments including Northstowe, Peterborough and Essington. Whilst our usage of part exchange as a sales tool increased in the year, our part exchange properties balance has decreased by £1.6m, as we continue to make use of this sales tool, in a controlled and disciplined manner, with no properties held for more than three months unsold at the end of the period.

Trade and other receivables increased by £41.3m, driven by increased balances receivable from housing associations at 31 December 2019. Trade and other payables increased by £12.8m, predominantly reflecting increased accruals and trade creditors from production offset by £34.1m net settlement of land creditors. Land creditors decreased to £260.7m (2018: £293.3m) representing 36% (2018: 34%) of our gross land investment and includes significant balances in respect of longer-term schemes at North Whiteley and Alphington SW Exeter purchased in 2019.

Following implementation of IFRS16 in 2019, right of use assets of £21.3m and lease liabilities of £23.0m have been recognised on the balance sheet; further detail is discussed in notes 5.5 and 5.14 to the financial statements.

As at 31 December 2019 the Group's net cash balance, which reflects cash and cash equivalents less bank and other loans, was £362.0m (2018: £126.8m). Net cash is quoted excluding the lease liabilities arising on adoption of IFRS16, the impact of which is clearly disclosed in note 5.5 to the financial statements. The Group started the year with net cash of £126.8m and generated an operating cash inflow before land expenditure of £281.4m (2018: £291.2m) and recognised a reduction of £36.4m in loans. The loan reduction arose as a result of the movement of funding from Homes England into the newly formed joint venture with Riverside at Stanton Cross, Wellingborough.

Net cash payments for land investment increased to £184.7m (2018: £145.4m), reflecting the timing of land acquisitions and reduction in land creditors. Cash inflows from joint ventures were £74.7m (2018: nil), generated on the sale of land and inventory into the Stanton Cross, Wellingborough joint venture. Dividend and cash outflows decreased to £112.4m (2018: £158.8m) driven by decreased corporation tax payments and the payment of a special dividend by way of shares rather than cash; payments relating to dividends were £78.6m (2018: £129.7m). A further £152.2m of cash was raised by the Placing in November 2019.

Cashflow	2019 £m	2018 £m
Net cash at 1 January	126.8	144.9
Profit in the year	138.4	136.6
Dividends and taxes paid	(112.4)	(158.8)
Issue of shares	149.8	-
Movement in trade and other receivables	(58.2)	12.4
Movement in inventories	115.2	(1.9)
Movement of investment in joint ventures	(58.5)	(20.3)
Other	60.9	13.9
Net cash at 31 December	362.0	126.8

At 31 December 2019, we had a committed revolving credit facility of £250m in place. Following refinancing driven by the Acquisition. The Group currently has in place £150m in 3 year term borrowings, a £450m revolving credit facility (£410m 5 year, £40m 3 year) and £100m USPP 7 year term borrowings. The private placement was taken on as part of Acquisition.

Land Bank	2019	2018
Consented plots added	4,531	4,164
Sites added	18	19
Sites owned at period end	116	117
Total plots in land bank at period end including joint ventures	17,328	17,328
Average consented land plot ASP	£299,000	£305,000
Average consented land plot cost	£46,411	£54,900

The Group's total land bank including share of joint ventures as at 31 December 2019 represents 3.9 years of supply based on 4,000 completions p.a. reflecting our strategy to maintain an optimal land bank at 3.5 to 4.0 times. The 3,867 plots that legally completed in the 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 over 26% and a ROCE in excess of 25%. The average selling price of all units within the consented land bank increased over the year to £299,000, 2% lower than the £305,000 at 31 December 2018. The estimated embedded gross margin in the consented land bank as at 31 December 2019, based on prevailing sales prices and build costs is 24.8% and reflects the initial impact of our margin initiatives.

Strategic land continues to be an important source of supply and during the year 4,531 plots have been converted from the strategic land pipeline into the consented landbank.

Earl Sibley

Chief Financial Officer

Statement of directors' responsibilities in respect of the annual report and the financial statements

The directors are responsible for preparing the Annual Report, the Directors' Remuneration Report and the financial statements in accordance with applicable law and regulations.

Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have prepared the Group and Parent company financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union. Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and the Company and of the profit or loss of the Group for that period.

In preparing these financial statements, the directors are required to:

· select suitable accounting policies and then apply them consistently;

· make judgements and accounting estimates that are reasonable and prudent;

· state whether applicable IFRSs as adopted by the European Union have been followed, subject to any material departures disclosed and explained in the financial statements; and

· prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and the Group and enable them to ensure that the financial statements and the Directors' Remuneration Report comply with the Companies Act 2006 and, as regards the Group financial statements, Article 4 of the IAS Regulation.

They are also responsible for safeguarding the assets of the Company and the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The directors are responsible for the maintenance and integrity of the Company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

The directors consider that the Annual Report and Accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess a Company's performance, business model and strategy.

Each of the directors, whose names and functions are listed on pages 62 to 63 of the Annual Report confirm that, to the best of their knowledge:

· the Group and Company financial statements, which have been prepared in accordance with IFRSs as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit of the Group; and

· the Strategic Report contained in the annual report includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal risks and uncertainties that it faces.

By Order of the Board

M T D Palmer

Group Company Secretary

27 February 2020

Group income statement

For the year ended 31 December	2019 £000 Pre Exceptional	2019 £000 Exceptional	2019 £000 Post Exceptional	2018 £000
Revenue	1,130,768	-	1,130,768	1,061,396
Cost of sales	(888,012)	-	(888,012)	(830,505)
Gross profit	242,756	-	242,756	230,891
Adjusted gross profit	253,431	-	253,431	230,891
Other operating income	(10,675)	-	(10,675)	-
Gross profit	242,756	-	242,756	230,891
Administrative expenses	(60,864)	(12,846)	(73,710)	(56,723)
Other operating income	10,675	-	10,675	-
Operating profit	192,567	(12,846)	179,721	174,168
Financial income	813	-	813	481
Financial expenses	(6,939)	(630)	(7,569)	(6,585)
Net financing costs	(6,126)	(630)	(6,756)	(6,104)
Share of profit of Joint Ventures	1,788	-	1,788	5
Profit before tax	188,229	(13,476)	174,753	168,069
Income tax expense	(36,243)	(131)	(36,374)	(31,499)
Profit for the year attributable to ordinary shareholders	151,986	(13,607)	138,379	136,570

Earnings per share (pence)
Basic			101.5p	101.6p
Diluted			101.4p	101.5p

Group statement of comprehensive income

For the year ended 31 December	2019 £000 Post Exceptional	2018 £000
Profit for the year	138,379	136,570
Other comprehensive (expense) / income
Items that will not be reclassified to the income statement
Remeasurements on defined benefit pension scheme	(2,116)	(5,781)
Deferred tax on remeasurements on defined benefit pension scheme	464	1,083
Items reclassified to the income statement
Total other comprehensive expense	(1,652)	(4,698)
Total comprehensive income for the year attributable to ordinary shareholders	136,727	131,872

Balance sheet

As at 31 December	2019 £000	2018 £000
Assets
Intangible fixed assets	4,336	1,079
Property, plant and equipment	1,845	2,181
Right-of-use assets	21,347	-
Investments	85,129	28,992
Restricted cash	1,748	1,381
Deferred tax assets	184	-
Trade and other receivables	1,090	611
Retirement benefit asset	4,506	1,381
Total non-current assets	120,185	35,625

Inventories	1,207,667	1,320,229
Trade and other receivables	105,374	64,505
Cash and cash equivalents	361,962	163,217
Total current assets	1,675,003	1,547,951
Total assets	1,795,188	1,583,576

Equity
Issued capital	74,169	67,398
Share premium	359,857	216,907
Retained earnings	837,940	776,762
Total equity attributable to equity holders of the parent	1,271,966	1,061,067

Liabilities
Bank and other loans	-	36,401
Lease liabilities	16,686	-
Deferred tax liability	-	730
Trade and other payables	122,940	183,769
Total non-current liabilities	139,626	220,900

Trade and other payables	352,359	278,706
Lease liabilities	6,309	-
Provisions	3,989	4,843
Current tax liabilities	20,939	18,060
Total current liabilities	383,596	301,609
Total liabilities	523,222	522,509

Total equity and liabilities	1,795,188	1,583,576

Group statement of changes in equity

	Total retained earnings £000	Issued capital £000	Share premium £000	Total £000
Balance at 1 January 2018	773,255	67,330	215,991	1,056,576
Total comprehensive income	131,872	-	-	131,872
Issue of share capital	-	68	916	984
Deferred tax on other employee benefits	(113)	-	-	(113)
Share based payments	1,413	-	-	1,413
Dividends paid to shareholders	(129,665)	-	-	(129,665)
Total transactions with owners recognised directly in equity	(128,365)	68	916	(127,381)
Balance at 31 December 2018	776,762	67,398	216,907	1,061,067

Balance at 1 January 2019	776,762	67,398	216,907	1,061,067
IFRS16 opening 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)
Total transactions with owners recognised directly in equity	(75,549)	6,771	142,950	74,172
Balance at 31 December 2019	837,940	74,169	359,857	1,271,966

Statements of cash flows

For the year ended 31 December	2019 £000	2018 £000
Cash flows from operating activities
Profit for the year	138,379	136,570
Depreciation and amortisation	6,253	905
Financial income	(813)	(481)
Financial expense	6,939	6,585
Loss/(profit) on sale of property, plant and equipment	3	(450)
Equity-settled share-based payment expense	2,891	1,413
Income tax expense	36,374	31,499
Share of results of Joint Ventures	(1,788)	(5)
Profit released on sale of assets from joint ventures	(972)	(1,197)
(Increase)/decrease in trade and other receivables	(58,234)	12,402
Decrease/(increase) in inventories	115,170	(1,891)
Increase/(decrease) in trade and other payables	16,716	(15,692)
Decrease in provisions and retirement benefit assets	(8,629)	(7,042)
Cash generated from operations	252,289	162,616
Interest paid	(2,093)	(2,773)
Income taxes paid	(33,804)	(29,165)
Net cash inflow from operating activities	216,392	130,678

Cash flows from investing activities
Interest received	131	278
Acquisition of intangible fixed assets	(3,706)	(1,213)
Acquisition of property, plant and equipment	(565)	(1,876)
Proceeds from sale of property, plant and equipment	-	1,977
Movement of investment in Joint Ventures	(58,511)	(20,300)
Dividends received from Joint Ventures	5,135	1,067
Reduction in restricted cash	(368)	33
Net cash (outflow)/generated from investing activities	(57,884)	(20,034)

Cash flows from financing activities
Dividends paid	(78,645)	(129,665)
Principle elements of lease payments	5,562	-
Net proceeds from the issue of share capital	149,721	984
(Repayment)/drawdown of bank and other loans	(36,401)	11,192
Net cash used in financing activities	40,237	(117,489)

Net increase/(decrease) in cash and cash equivalents	198,745	(6,845)
Cash and cash equivalents at 1 January	163,217	170,062
Cash and cash equivalents at 31 December	361,962	163,217

Notes to the financial statements

1 General information

Vistry Group PLC (the "Company"), formerly named 'Bovis Homes Group PLC' is a company domiciled in the United Kingdom, England. The consolidated financial statements of the Company for the year ended 31 December 2019 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 27 February 2020. The financial statements were audited by PriceWaterhouseCoopers LLP.

The financial information set out above does not constitute the Company's statutory financial statements for the years ended 31 December 2019 or 2018 but is derived from those financial statements . Statutory financial statements for 2018 have been delivered to the registrar of companies, and those for 2019 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.

2 Basis of accounting

The consolidated financial statements of the Company and the Group have been prepared in accordance with the International Financial Reporting Standards (IFRS) and IFRS Interpretations Committee (IFRS IC) interpretations as adopted by the European Union and Companies Act 2006 applicable to companies reporting under IFRS.

The Company has elected to take the exemption under section 408 of the Companies Act 2006 to not present the Company income statement and statement of comprehensive income.

The Group has applied the following standards for the first time for its annual reporting year commencing 1 January 2019:

· Amendments to IAS28 'Investments in Associates and joint ventures'

· IFRIC23 Uncertainty over income tax treatments

· IFRS16 'Leases'

The impact of these changes on the Group's financial statements is described in Note 1.7 of the Annual Report and Accounts.

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

3 Going concern

The Directors are satisfied that the Group has sufficient resources to continue in operation for the 12 months from date of approval of these financial statements. The Directors reviewed detailed financial and covenant compliance forecasts covering the period to December 2020, including the Linden Homes and Vistry Partnerships businesses, and summary financial forecasts for the periods ending 31 December 2020 and 31 December 2021.

Having started the year with net cash of £126.8 million, the Group generated a strong operating cash flow during 2019 and raised £149.7m of cash as a result of share issues, increasing the net cash position to £362.0 million after significant investment into joint ventures. As at 31 December 2019, the Group held cash and cash equivalents of £362.0 million and had borrowings of nil. In January 2020, the Group entered into borrowing facility agreements totalling £600.0 million, including a £150.0m term loan and £450.0 million revolving credit facility to meet the liquidity needs of the enlarged business following the Acquisition.

For these reasons, the Directors consider it appropriate to prepare the financial statements of the Group and the Company on a going concern basis.

4 Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries) made up to 31 December. Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over 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.

Associates are any entities in which the Group has significant influence, but not control, over the financial and operating policies. 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 expense 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.

5 Critical accounting judgements and key sources of estimation uncertainty

The preparation of financial statements in conformity with adopted IFRSs requires management to make estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

No individual judgements have been made that have a significant impact on the financial statements, other than those involving estimates, which are outlined below.

Key sources of estimation uncertainty for the Group

Land held for development and housing work in progress

The Group holds inventories which are stated at the lower of cost and net realisable value. To assess the net realisable value of land held for development and housing work in progress, the Group completes a financial appraisal of the likely revenue which will be generated when these inventories are combined as residential properties for sale and sold. Where the financial appraisal demonstrates that the revenue will exceed the costs of the inventories and other associated costs of constructing the residential properties, the inventories are stated at cost. Where the assessed revenue is lower, the extent to which there is a shortfall is written off through the income statement leaving the inventories stated at a realisable value.

To the extent that the revenues which can be generated change, or the final cost to complete for the site varies from estimates, the net realisable value of the inventories may be different. A review taking into account estimated achievable net revenues, actual inventory and costs to complete as at 31 December 2019 has been carried out, and appropriate adjustments have been made to the carrying value of the provision. These estimates were made by local management having regard to actual sales prices, together with competitor and marketplace evidence, and were further reviewed by Group management. Should there be a future significant decline in UK house pricing, then further write- downs of land and work in progress may be necessary. Further detail on the carrying value of inventories is laid out in note 3.1 of the Group's Annual Report and Accounts.

Margin recognition

The gross margin from revenue generated on each of the Group's individual sites within the year is recognised based on the latest forecast for the gross margin expected to be generated over the remaining life of that site. The remaining life gross margin is calculated using forecasts for selling prices and all land, build, infrastructure and overhead costs associated with that site. There is inherent uncertainty and sensitivity to external forces (predominantly house prices and labour costs) in these forecasts, which are reviewed regularly throughout the year by management and are addressed on pages 32 to 37 of the Annual Report.

Defined benefit pension scheme

The Group has a defined benefit pension scheme, closed to future accrual in 2018, which is subject to estimation uncertainty. Note 5.9 of the Annual Report and Accounts outlines the way in which this Scheme is recognised in the Group's Financial Statements, the associated risks and sensitivity analysis showing the impact of a change in key variables on the defined benefit obligation.

The Company has no sources of estimation uncertainty.

6 Segment reporting

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. For the year ended 31 December 2019, there are no separate segments, either business or geographic, to disclose, having taken into account the aggregation criteria provisions of IFRS8 Operating segments.

Since the Acquisition, the Board have identified two separate segments having taken into consideration IFRS8 criteria - Housebuilding and Partnerships. At 30 June 2020, segmental reporting will be presented for these business segments to reflect the Group's new management and internal reporting structure.

7 Impact of standards and interpretations effective for the first time

The Group has adopted the following new standards and amendments to standards, including any consequential amendments to other standards, with a date of initial application of 1 January 2019:

· Amendment to IAS28 'Investments in Associates and joint ventures', which has not had a significant impact on reported results or position.

· IFRIC23 Uncertainty over income tax treatments, which has not had a significant impact on reported results or position.

· IFRS16 'Leases' replaces IAS17 'Leases', requiring all assets held by the Group under lease agreements of greater than 12 months in duration to be recognised as assets within the Balance Sheet, unless they are considered to be of low value (less than £3,000 in total payments). Similarly, the present value of future payments to be made under those lease agreements must be recognised as a liability. The Group has reviewed its leasing arrangements and the impact on reported results are disclosed in note 5.5 of the Annual Report and Accounts.

8 Impact of standards and interpretations in issue but not yet effective

A number of new standards and amendments to standards and interpretations are effective for annual periods beginning after 1 January 2020, which are not expected to have a material impact on reported results and have not been early adopted in preparing these financial statements:

· 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.

9 Accounting policies

Revenue

Revenue is recognised in the income statement when control of each home has passed to the purchaser, which is when legal title is transferred. Revenue in respect of the sale of residential properties is recognised at the fair value of the consideration received or receivable, net of value added tax and discounts, on legal completion. In certain instances, property may be accepted in part consideration for a sale of a residential property.

The fair value is established by independent surveyors, reduced for costs to sell. Net sale proceeds generated from the subsequent sale of part exchange properties are recorded as an adjustment to cost of sales. The original sale is recorded in the normal way, with the fair value of the exchanged property replacing cash receipts. Cash incentives are considered to be a discount from the purchase price offered to the acquirer and are therefore accounted for as a reduction to revenue.

The Group applies its policy on contract accounting when recognising revenue and profit on contracts. Revenue and costs are recognised by reference to the stage of completion of contract activity at the balance sheet date. This is normally measured by surveys of work performed to date. When it is probable that the total costs on a construction contract will exceed total contract revenue, the expected loss is recognised as an expense in the Income Statement immediately. The application of this policy requires judgements to be made in respect of the total expected costs to complete for each site. The Group has in place established internal control processes to ensure that the evaluation of costs and revenues is based upon appropriate estimates.

Revenue is recognised on land sales and commercial property sales from the point of unconditional exchange of contracts as long as there are no significant obligations remaining. Where the Group still has significant obligations to perform under the terms of the contract, revenue is recognised when the obligations are performed.

When the Group makes sales to joint ventures in which it owns an interest, it will only recognise revenue and profit in the period of the initial transaction to the extent of third parties' interests in the joint venture. The unrecognised element of revenue and profit will be deferred and released to the income statement when the joint venture has sold the assets to which the original transaction with the Group related.

Inventories

Inventories are stated at the lower of cost and net realisable value. Cost comprises direct materials and, where applicable, direct labour costs and those overheads, not including any general administrative overheads, that have been incurred in bringing the inventories to their present location and condition. Net realisable value represents the estimated net selling price less estimated total costs of completion of the finished units.

Land held for development, including land in the course of development until legal completion of the sale of the asset, is initially recorded at cost along with any expected overage. Where, through deferred purchase credit terms, cost differs from the nominal amount which will actually be paid in settling the deferred purchase terms liability, an adjustment is made to the cost of the land, the difference being charged as a finance cost.

Options purchased in respect of land are capitalised initially at cost and written down on a straight-line basis over the life of the option. Should planning permission be granted and the option be exercised, the option is not amortised during that year and its carrying value is included within the cost of land purchased.

Investments in land without the benefit of planning consent, either through purchase of freehold land or non-refundable deposits paid on land purchase contracts subject to residential planning consent, are capitalised initially at cost. Regular reviews are completed for impairment in the value of these investments, and provision made to reflect any irrecoverable element. The impairment reviews consider the existing use value of the land and assesses the likelihood of achieving residential planning consent and the value thereof.

Ground rents are held at an estimate of cost based on a multiple of ground rent income, with a corresponding credit created against cost of sales, in the year in which the ground rent first becomes payable by the leasehold purchaser.

Part exchange properties are held at the lower of cost and net realisable value and include a carrying value provision to cover the costs of management and resale. Any profit or loss on the disposal of part exchange properties is recognised within cost of sales in the Group Income Statement.

Trade and other receivables

Trade receivables, amounts recoverable on contracts and other debtors do not carry any interest and are stated at their nominal value as reduced by appropriate allowances for estimated irrecoverable amounts. The Group applies the IFRS9 simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance for all trade receivables and contract assets. To measure the expected credit losses, trade receivables and contract assets have been grouped based on shared credit risk characteristics and the age of the outstanding amounts. The contract assets relate to unbilled work in progress on contracts described in note 2.0 of the Annual Report and Accounts and have a historically low level of default, similar to the Group's low default levels on trade receivables.

Other debtors include amounts receivable from the Government in relation to the Help To Buy scheme.

Trade and other payables

Trade payables on normal terms are not interest bearing and are stated at their nominal value.

Trade payables on extended terms, particularly in respect of land, are recorded at their fair value at the date of acquisition of the asset to which they relate. The discount to nominal value which will be paid in settling the deferred purchase terms liability is recognised over the period of the credit term and charged to finance costs using the effective interest rate method.

Government grants

Government grants are recognised in the income statement so as to match with the related costs that they are intended to compensate. Government grants are included within deferred income.

Cash and cash equivalents

Cash and cash equivalents comprises cash balances and call deposits. Bank overdrafts that are repayable on demand and form an integral part of the Group's cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows.

Bank and other loans

Bank Borrowings

Interest-bearing bank loans and overdrafts are initially recorded at fair value, net of direct issue costs, and subsequently at amortised cost. Finance charges are accounted for on an accrual basis to the income statement using the effective interest method and are added to the carrying amount of the instrument to the extent that they are not settled in the period in which they arise.

Government Grants

The benefit on loans with an interest rate below market is calculated as the difference between interest at a market rate and the below market interest. The benefit is treated as a Government grant.

Net financing costs

Finance costs are included in the measurement of borrowings at their amortised cost to the extent that they are not settled in the period in which they arise.

The Group is required to capitalise borrowing costs directly attributable to the acquisition, construction and production of a qualifying asset, as part of the costs of that asset. Inventories which are produced in large quantities on a repetitive basis over a short period of time are not qualifying assets. The Group does not generally produce qualifying assets.

Capital & reserves

Equity instruments

Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.

Own shares held by ESOP trust

Transactions of the Group-sponsored ESOP trust are included in the Group financial statements. In particular, the trust's purchases of shares in the Company are debited directly to equity through an own shares held reserve.

Income tax

Income tax comprises the sum of the tax currently payable or receivable and deferred tax. Income tax is recognised in the income statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.

Tax assets and liabilities

The tax currently payable or receivable is based on taxable profit or loss for the year and any adjustment to tax payable or receivable in respect of previous years. Taxable profit or loss differs from net profit or loss as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group's liability or asset for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from non-tax deductible goodwill, from the initial recognition of assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit, and from differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited directly to reserves, in which case the deferred tax is also dealt with in reserves.

Share-based payments

The Group has applied the requirements of IFRS2: "Share-based payments".

The Group issues equity-settled share-based payments to certain employees in the form of share options over shares in the Parent Company. Equity-settled share-based payments are measured at fair value at the date of grant calculated using an independent option valuation model, taking into account the terms and conditions upon which the options were granted. The fair value is expensed on a straight-line basis over the vesting period, based on the Group's estimate of shares that will eventually vest, with a corresponding credit to equity except when the share- based payment is cancelled where the charge will be accelerated.

Property, plant and equipment

Plant, property and equipment is recorded at prime cost less accumulated depreciation. The sub-categories of PPE are depreciated

as follows:

• Freehold buildings on a 2% straight line basis;

• Plant, machinery and vehicles on a 33.3% reducing balance basis; and

• Furniture and fittings on a 25% reducing basis, other than computer equipment which is depreciated on a straight-line basis over 3 years.

Leases

The Group recognised lease liabilities in relation to leases which had previously been classified as 'operating leases' under the principles of IAS17 Leases. For adjustments recognised on adoption of IFRS16 on 1 January 2019, please refer to note 5.14 of the Annual Report and Accounts.

Intangible fixed assets

Intangible fixed assets are recorded at prime cost less accumulated amortisation. IT software is amortised on a straight-line basis over a period of 3 - 5 years.

Fixed asset investments

Investments in subsidiaries are carried at cost less impairment. The Parent Company accounts for the share based payments granted to subsidiary employees as an increase in the cost of its investment in subsidiaries and the value of this investment is supported by net assets. Joint ventures are those arrangements in which the Group has rights to the net assets of the arrangements and treated on an equity accounted basis in the Group's balance sheet.

Provisions

A provision is recognised in the balance sheet when the Group has a present legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability.

Employee benefits

The Group accounts for pensions and similar benefits under IAS 19 (Revised): "Employee benefits". In respect of defined benefit schemes, the net obligation is calculated by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods, such benefits measured at discounted present value, less the fair value of the scheme assets. The discount rate used to discount the benefits accrued is the yield at the balance sheet date on AA credit rated bonds that have maturity dates approximating to the terms of the Group's obligations. The calculation is performed by a qualified actuary using the Projected Unit Method. The operating and financing costs of such plans are recognised separately in the income statement; service costs are spread systematically over the lives of employees and financing costs and credits are recognised in the periods in which they arise. All actuarial gains and losses are recognised immediately in the Group statement of comprehensive income.

Payments to defined contribution schemes are charged as an expense as they fall due.

10 Reconciliation of net cash flow to net cash

	2019 £000	2018 £000
Net increase in cash and cash equivalents	198,745	(6,845)
Decrease / (increase) in borrowings	36,401	(11,192)
Net cash at start of period	126,816	144,853
Net cash at end of period	361,962	126,816

Analysis of net cash:
Cash and cash equivalents	361,962	163,217
Bank and other loans	-	(36,401)
Net cash at end of period	361,962	126,816

11 Income taxes

Current tax is the expected tax payable or receivable on the taxable income or loss for the year, calculated using a corporation tax rate of 19% applied to the pre-tax income or loss, adjusted to take account of deferred taxation movements and any adjustments to tax payable for previous years.

12 Dividends

The following dividends were paid by the Group:

	2019 £000	2018 £000
Prior year final dividend per share of 38.0p (2018:32.5p)	51,078	43,645
Special dividend per share of nil (2018: 45.0p)	-	60,483
Current year interim dividend per share of 20.5p (2018:19.0p)	27,567	25,537
	78,645	129,665

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

13 Earnings per share

The calculation of basic earnings per share for the year ended 31 December 2019 was based on the profit for the year attributable to ordinary shareholders after exceptional items of £138,379,000 (2018: £136,570,000) and a weighted average number of ordinary shares outstanding during the year ended 31 December 2019 of 136,291,860 (2018: 134,355,573).

Profit attributable to ordinary shareholders

2019

£000

2018

£000

Profit for the year attributable to equity holders of the parent (pre-exceptional)

151,986

Profit for the year attributable to equity holders of the parent (post-exceptional)

138,379

136,570

Weighted average number of ordinary shares

	2019	2018
Weighted average number of ordinary shares at 31 December	136,291,860	134,355,573

Diluted earnings per share

The calculation of diluted earnings per share for the year ended 31 December 2019 was based on the profit for the year attributable to ordinary shareholders after exceptional items of £138,379,000 (2018: £136,570,000) and a weighted average number of diluted ordinary shares outstanding during the year ended 31 December 2019 of 136,432,481 (2018: 134,557,450).

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.

Weighted average number of ordinary shares (diluted)

	2019	2018
Basic weighted average number of ordinary shares at 31 December	136,291,860	134,355,573
Effect of share options in issue which have a dilutive effect	140,621	201,877
Diluted weighted average number of ordinary shares at 31 December	136,432,481	134,557,450

Pre and post exceptional earnings per share

	2019	2018
Basic earnings per share pre-exceptional	111.5p	101.6p
Diluted earnings per share pre-exceptional	111.4p	101.5p

Basic earnings per share post-exceptional	101.5p	101.6p
Diluted earnings per share post-exceptional	101.4p	101.5p

14 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 2019 were limited to those relating to remuneration, which are disclosed in the directors remuneration report.

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

Mr Graham Prothero, appointed Chief Operating Officer, 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.

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

Ms Katherine Innes Ker, is a non-executive director of Vistry Group PLC and Forterra 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:

	2019 £000	2018 £000
Expenses paid to Ardent	2,736	2,059
Expenses paid to IB (SW)	20	-
Expenses paid to Marshalls PLC	19	-
Expenses paid to Forterra PLC	545	108

The balance of rental expenses payable to Ardent at 31 December 2019 was £274,399 (2018: £155,000) and no income was receivable (2018: £nil), the balance payable to IB (SW) at 31 December 2019 was £67,200 and no income was receivable (2018: £nil), the balance payable to Marshalls at 31 December 2019 was £nil and no income was receivable (2018: £nil), and the balance payable to Forterra at 31 December 2019 was £98,141 and no income was receivable (2018: £nil) 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.

Transactions with Joint Ventures

Vistry Homes Limited (formerly Bovis Homes Limited) is contracted to provide property and letting management services to Bovis Peer LLP. Fees charged in the period, inclusive of VAT, were £25,000 (2018: £109,000). None of these fees are outstanding at 31 December 2019 (31 December 2018: nil).

Vistry Homes Limited (formerly Bovis Homes Limited) is part of a Joint Venture, IIH Oak Investors LLP, to invest in private rental homes. IIH Oak Investor LLP repaid its loan to Vistry Homes Limited (formerly Bovis Homes Limited) in November 2019 leaving a nil balance at 31 December 2019 (31 December 2018: £1,598,319) with £77,000 of interest charges have been made on the balance during the year (31 December 2018: £118,000).

Vistry Homes Limited (formerly Bovis Homes Limited) is part of a Joint Venture, Bovis Latimer (Sherford) LLP, to build houses in Sherford. As at 31 December 2019 loans of £20,174,000 (31 December 2018: £22,256,000) were in place with an interest rate of 5%. Interest charges made in respect of the loans were £559,000 (year ended 31 December 2018: £nil). Vistry Homes Limited (formerly Bovis Homes Limited) also provides ongoing services to the LLP for construction, management, accounting, company secretariat, sales and marketing services; charges made in respect of these services were £260,700 inclusive of VAT (year ended 31 December 2018: £nil).

In April 2019, Vistry Homes Limited (formerly Bovis Homes Limited) entered into a Joint Venture, Stanton Cross Developments LLP, with Riverside Regeneration Limited, with the LLP purchasing the Group's interest in its land and infrastructure at Wellingborough, near Northampton. Vistry Homes Limited (formerly Bovis Homes Limited) provides ongoing services to the LLP for construction, sales and company secretariat support; charges made in respect of these services were £2,194,000 inclusive of VAT (year ended 31 December 2018: £nil).

In December 2019, Vistry Homes Limited (formerly Bovis Homes Limited) entered into a Joint Venture, Bovis Homes Cambourne West LLP, with Metropolitan Living Limited, with the purpose of acquiring land for development at Cambourne West. Vistry Homes Limited (formerly Bovis Homes Limited) has a loan to Bovis Homes Cambourne West LLP in place at 31 December 2019 of £3,777,000 (31 December 2018: nil) at an

interest rate of 4.5%.

15 Business combinations

On 3 January 2020, the Group acquired the Linden and Partnerships and Regeneration businesses from Galliford Try plc for consideration of c. £1,400m. This acquisition will position the Group as a top five national housebuilder by volume, expand the Group's presence across the UK and into Yorkshire and establish 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 the entire share capital and control of the holding companies Goldfinch (Jersey) Limited and Galliford Try Partneships Ltd. and all of their trading subsidiaries.

The c.£1,400.0m consideration for the Linden and Partnerships and Regeneration businesses includes cash of c.£400m, the novation of a £100m term loan, and 63,739,385 consideration shares with a fair value of £13.42 per share at the date of acquisition, totalling £855.4m in share consideration. The amount of cash consideration is deferred until April 2020, if any, is not finalised at the date of this report.

At the date of this report it is impracticable to disclose the provisional fair values of the total consideration paid and the acquired assets, liabilities, contingent liabilities and goodwill.

The goodwill that will be recognised is expected to capture synergies that will be achieved as an enlarged business, as well as intangible assets which do not qualify for separate recognition such as workforce. It is impracticable to conclude at the date of this report the total amount of goodwill which is expected to be deductible for tax purposes.

As this acquisition took place on 3 January 2020, the statement of comprehensive income does not include any revenue, profit or loss relating to the acquired Linden Homes and Vistry Partnerships businesses for the year ended 31 December 2019

16 Post balance sheet events

On 3 January 2020, the Group acquired the Linden and Partnerships and Regeneration businesses from Galliford Try plc, as detailed in note 5.13 of the Annual Report. The Board believes the acquisition will result in the Group becoming firmly positioned as one of the UK's top housebuilders (across both private and affordable housing) and more importantly establish the Group as one of the leaders in the highly attractive, high growth partnerships business.

At the date of the Acquisition the Group also entered into new borrowing facilities which are detailed further in note 4.2 of the Annual Report. Graham Prothero was also appointed as Director of Vistry Group PLC on 3 January 2020.

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

END

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