Vistry Group PLC (VTY) Earnings Call Transcript
January 18, 2023
Earnings Call Speaker Segments
Hello and welcome to the Vistry Group Trading Update Call. My name is Laura, and I will be your coordinator for today's event. Please note, this call is being recorded. [Operator Instructions] I will now hand you over to your host, Greg Fitzgerald, Group Chief Executive, to begin today's conference. Thank you.
Okay. Thanks very much, Laura. And good morning, everyone, and thank you for joining us. I'm conscious that we are the [indiscernible] of the blocks with this update, so I'll keep this short, a lot of which you would have heard before over the last week or so but some of it is new. Delighted joining me today, Earl Sibley, Group COO; Tim Lawlor, our new Group CFO; and Susie Bell, Director of Investor Relations. So as usual, as I say, I'll give a brief intro and then as Laura said, we'll open it up to Q&A. For 2022, it was a great year for the group with excellent progress across both businesses. Profit before tax at GBP 418 million is a small beat against market consensus and significantly ahead of where we thought we would be at the start of the year, a good result given the market challenges seen in the fourth quarter. And that GBP 418 million includes the finance costs that we've incurred since the completion of the acquisition of Countryside on November 11, but it doesn't include any profits from Countryside in what we're calling the stub period for 6 or 7 weeks. Housebuilding delivered on its strategy of controlled volume growth and margin progression with completion of up 3% to 6,774 units and gross margin increasing to at least 23%, and that's a year ahead of our schedule. So we do talk a lot about Partnerships quite rightly. It's an important part of our business. But I'm delighted to say now that having been around for a long time, I would now say we've got a very good Housebuilding business. Partnerships also delivered on strategy with higher-margin mixed tenure completions up 17.6% and the operating margin increasing to at least 10%, again, all as we said at the time of the acquisition in 2020. The acquisition of Countryside Partnerships was a unique opportunity for the group, and I was delighted to complete the acquisition on the 11th of November, and that was the culmination of 18 months, I would suggest or thinking about it and having dialogue with Countryside. It has rapidly accelerated, of course, this [indiscernible] strategy of growing its high return, more resilient revenues and firmly position the group as a leading homebuilder with the [indiscernible] without the leading partnerships business. We hit the ground running with the integration. And the new operating structure has been in place since the start of the year. So the consultation period with staff is now complete. And 200 roles have come out of the group, and we've closed 4 offices. As a group, we benefited from the lessons learned from the integration of [indiscernible] housebuilding business 3 years ago, and they're very much in line. So we obviously there's a lot of things right but some things we did wrong, which we're not going to repeat with the Countryside as integration. So following on some very thorough due diligence, I wasn't expecting any surprises but I'm pleased to report that nearly 3 months in, I can see even growth opportunity from the combination and have increased confidence of delivering at least GBP 50 million with synergies on an annualized basis and far more than the GBP 19 million of synergies that we put into our forecast for 2023. The group, this may surprise a lot of you, ended the year with a net cash position of around GBP 115 million, which is significantly ahead of expectations and reflects stronger cash generation in the second half of both, Vistry and for that matter, Countryside. And it follows the GBP 300 million plus fees cash paid for Countryside in November, the GBP 35 million share buyback during the summer, and of course, 2 dividends paid out in November and May last year. It was a good year in the land market, and both businesses are very well positioned on land and planning for 2023. And I'm also pleased to say that the land market, we're seeing more and more signs of it adjusting to the new market, and we are seeing some very good opportunities come ahead of us as we speak. So looking at trading in a little more detail. As of our peers, we saw a significant drop-off in private sales following the September mini budget and the result in high interest rates and macro uncertainty. The combination of this wider macro uncertainty and uncertainty around the government's social housing rent ceiling also generated a hesitancy and [ months ] housing providers during the fourth quarter which is now anticipating. And I'll give you a good example of that in a second or 2. But every week that red bar in the housing market from the disastrous budget was slightly better than the week before. And as I say, we are encouraged, which I'll come back to in a sec on the first 3 weeks of this year. The group focused on year-end delivery. We have firm on prices, so prices are remaining in line with what we expect. We haven't seen any falls and have consciously slowed land acquisition within Housebuilding and somewhat within Partnerships. Both businesses are firmly focused on cost reduction opportunities within our supply chain that's subcontracted and suppliers and materials, including synergistic benefits and optimizing our work in progress. And at the current moment in time, we are seeing some major signs of our [ separate track ] supply chain, knowing and seeing there are going to be less houses built by the sector in 2023. And we're starting to see some discounts coming through which is the first time we would have seen that for over 2 years. And please don't forget that the supply chain have had a way over time over the last 2 years, some of which is absolutely the right thing because of fuel and energy prices rising but some of it was a bit more than that. So every [indiscernible] is day and our day is as we speak. Since the start of the year, we're only 3 weeks in, we've seen a strong pickup in prospect and visitor levels since boxing buybacks gone through the roof. Sales rates in the first 2 weeks and what we're expecting this week are in line with 2019 pre-pandemic levels, which we are very happy with, and that's what we're basing our internal forecast on. And as I said, pricing continues to remain firm and cancellation rates are below 20% of the historic norm. We remain firm on pricing. And indeed, last week, we actually saw pricing levels at GBP 300,000 above our forecast. On Partnerships, we see a strong quarter 1 pipeline, and we have a number of excellent development opportunities, which are close to signing. And going back to my point about we saw a little bit of hesitancy with housing associations, particularly following -- immediately following on from the September budget. On Friday, we were delighted to enter into a JV with Torus Housing Association, the largest provider of affordable housing in the Northwest for a development called [indiscernible] in Warrington. The site will deliver 1,200 new homes, of which 595 will be affordable homes managed by Torus with a land value in excess of GBP 100 million, and that's largely funded by Torus that completed or contracted on Friday. So a good demonstration there of where the RP market now is. Whilst there remains uncertainty on the market outlook, I [ sit ] a cautiously optimistic that side sentiment will improve over the coming months and recognizing, as I say, it's only week 3 of the year, there are some small green shoots of recovery. We believe the Partnership model -- I don't believe, I know, I've been around for a long year. Partnerships model is resilient and are confident that there is clear potential to generate material value with enhanced scale and superior returns in the medium term. So on that, thank you for listening. And I'll hand back to you, Laura, and we'll take any questions.
[Operator Instructions] We'll now take our first question from Chris Millington at Numis.
A few if I can, please. I just wonder if you could touch on how Countryside ended the year, obviously, we put out some profit guidance of GBP 150 million. There's no reference to it, albeit I suspect it's not 1 million miles off. So I'd love to hear about that.
I'll do it as you go through, Chris, they ended the year end September, GBP 115 million.
Got you. And [indiscernible] cash was a little bit better there than people were expecting as well.
Cash is better than people are expecting, not better than we were expecting. We've done a lot of due diligence. But a good part of the -- the fact that we ended the year in cash with those huge outlays during the year, particularly in the last quarter, when we also had a period of time where we weren't taking very many reservations and taking a lot of cancellations. So GBP 115 million of cash with GBP 300 million cash out the door in November plus fees as well as the other things I talked about, dividends and the share buyback for December of GBP 35 million was definitely better than our expectations, and it was equally a good performance in Countryside as it was in Partnerships. So good opening cash position as we got to September and that was kept up as we went through to our year-end.
Understood. That's helpful. Next one again, just a bit of a check in on the Countryside. Where are we on manufacturing? Are you any more encouraged about how that could benefit the wider group? Or -- I'm just curious about the [indiscernible].
Yes. Again, manufacturing -- when -- the more we got into the due diligence, we thought this was going to be -- it went from #7 or 8 on the strategic list of why we're doing this to a top 5 point. So one, there are 3 factories, [ Maryburgh ], Warrington and the Bardon one. Bardon was written off within those numbers, I told you earlier with Countryside after the end of September. So we are in an industry, a very good place with -- on our books for basically a pound and we will be reopening the Bardon facility in the second half of this year. The other 2 facilities are good facilities. They are both performing very, very well and we will probably be moving from closed panel to open panel timber frame going forward and then move towards -- back towards closed panel as we get better at doing it. The take-up within the Countryside and Partnerships business of Vistry as well as Housebuilding will mean that it will be fully utilized. The issue that Countryside had -- and speaking of, what I don't understand is they were using other manufacturers in different parts of the group at timber frame, where they might have saved GBP 10 a house. But of course, they were losing money at group because it was underutilized. So this year, it will be fully utilized and our strategy over the next 5 years will be to go to the majority of our production will be timber frame going forward. And we've got a great platform and far better than we thought during the due diligence and far better than we thought at the completion of the acquisition. So extremely excited about what we've got there with timber frame.
Great. And the final one, there seems to be a little less mention of incentives in your statement in your commentary there. I'm just wondering if you've taken a different approach to others and perhaps you could just flesh out kind of what your approach to incentivizing customers earlier this year.
Okay. So speaking very openly as I always try to do. If you were to just take a scenario -- none of these numbers are completely accurate, but just go with me. If we had a house on the market for GBP 300,000 in November, we always had at least a 2% differential between the asking price and our forecast price. So we would have had a house of GBP 300,000, and we needed to get GBP 294,000 to achieve our forecast. We instructed all of our business units to put prices up, not massively, but tweak them up in December, which is a notoriously slow time to sell houses. So we put prices up. So that GBP 300,000 would have gone to GBP 302,000, GBP 303,000, GBP 304,000 and up to GBP 305,000. The forecast price of GBP 294,000 would have stayed in place. So what we're finding is you do need to entice and purchases today more than you did back in May, June 2022 when the price was the price with the price. We are also, and we will be successful and are actually seeing some success as we speak. You can call it a [indiscernible] side, if you like, but particularly starting with the subcontractors who we've had a great time over the last 2 years, we aren't 1 million miles off on closing 1 or 2 of our sites and saying to the supply chain, you can come back in when you give a discount that we're looking for. And to quote the Jerry Maguire film, what we're saying to the supply chain is "help me to help you". Do you want to build 2 units on this site this year or do you want to build 4? If you want to build 4, we need a discount from the inflated levels that you've got. Those discount levels will go straight to sales. So that GBP 294,000 forecast price will actually -- every GBP 1,000 we save on the supply chain will reduce that on a lifetime basis. So we're aiming to get to somewhere around GBP 287,000, GBP 288,000 as a base price with an asking price of somewhere between GBP 302,000 and GBP 305,000 using that example I've just given you. Does that make sense? But we are and I'm encouraging our team to give incentives to continue to drive prices or to continue to drive sales. But last week, they didn't use -- which was a very good week. Week 2, last week was in line with 2019 kind of [ 0.35 ], second week of January, pretty good and we actually achieved in excess of GBP 300,000 above our forecast price.
We'll now move on to our next question from Will Jones of Redburn.
Three, if I can, please. Just coming on to that point around the sales rate being in line with 2019. Is that -- is it fair to say that's the group, including partnerships versus the business, excluding Partnerships or [indiscernible] Housebuilding back in '19?
It's probably because we had -- we didn't have Partnership business in 2019. So 2019 sales levels were based on purely [ bogus ] and we've slightly beaten in the second week, that 2019 level, which, yes, well, does include [ Bogus ] [indiscernible] and Partnership.
The comparison versus -- if you're looking at sales rates in Q4 versus '19, they wouldn't have been close to '19 or I don't think we've got the comparative, but just wondering if it is better stack versus '19 than it was in November and December.
I appreciate -- if you want to take that, Earl?
You're trying to compare back the [ 0.45 ] to what it was in '19, to be honest, it wasn't much different, it's the truth. If you want to look back. I mean, obviously, November, December is always a slower period in any event. So where Greg's talking about 2019 up to what we're doing is looking forward in terms of tracking against 2019. Those numbers are all out there. I think for the full year 2019, we're at [ 0.58 ] over the full year. And so we're looking to track along that progress with 3 weeks in.
And quoting our finance team, Will, the prospect levels since Boxing Day have gone through the roof up to and including now.
Second, just more of a general, if you can just update us Partnerships around, I guess, the behavior of [indiscernible] key stakeholders, housing associations or the PRS players, whoever you might want to call out.
Okay. So I would say resident providers housing associations are pretty much there or thereabouts back to normal business. And I would say local authorities are as well. Registered PRS, a little bit behind. But in a number of instances where they left the market, they are now back in the market and the hesitancy is the levels of discount they are looking for compared to what we are prepared to give them. So PRS back in the market. We're just -- the normal -- what is the market today discussions are going on with PRS providers. And housing associations, registry providers, as I say, back in the market and the example I gave in my opening remarks there was pretty compelling in so far as we have been talking about this site at [ Pure haul ] for the last 2 or 3 months and Torus with us actually, this is 1,200 units, the land value in excess of GBP 100 million, the Housing Association and our Partnerships business [ exchanged ] and completed on that on Friday of last week. So right up to date.
And then the last one is just -- now you've closed the books on calendar 2022. If you could give us the approximate pro forma volumes in Housebuilding, Partnerships as the 2 businesses, please?
Earl or Tim?
Sorry, Will, you're asking about pro forma volumes in '22?
Yes. Countryside and the enlarged group as posed across the 12-month [indiscernible] you have to have.
That's the Countryside. So Countryside volumes for the last year were around just above 5,500. They put the [indiscernible] for the [ fish ] flagship numbers in the same.
We'll now take our next question from Gregor at UBS.
Just to be clear, did you say [ 0.35 ] for the first couple of weeks, is that right? I mean I was just looking back at the time, I know we never got this sort of granularity, but I think for the first 7 weeks at the time back in 2019, you were doing a bit shy of [ 0.6 ], I think, with reference there.
That includes the first week of where you don't really sell anything. In second week, so it will get progressively better to follow those trends as we go forward. And week 1 was less than week 2 and our forecast for week 3 is more than week 2. So yes, please it's 3 weeks through the [indiscernible] but if you add it together in prospect levels, sometimes if you talk these things through in a semi positive way, as opposed to negative way as per the press, maybe there will be a bit of momentum around there. But we're not making -- the prospect levels have been absolutely dramatic and cost [ debt ] levels is where sales eventually come from. And that trend seems to be coming through with what we're expecting during the course of this week for sales.
Okay. Great. The second question was just maybe if you could just sort of go through as best as you can judge at this point, sort of handicapping the outlook, I guess, around forward -- you're opening forward sales position, let's say, in Housebuilding deliverable this year. And then you've given us a side guidance, and I think we can then all take our own view on sales, right? So if you could just help us out sort of how to calculate the answer would be really helpful. And maybe similar for Partnership which maybe easier, right? If you could come up something there.
So basically, if you just take the Vistry part of the business, we go into this year with a GBP 4.6 billion order book, which includes Countryside. Of that, GBP 2.6 billion is Vistry, which it coincides with the carryforward position even taken into account the last quarter of 2021. And in keeping it very, very simple, housing's carryforward position is down GBP 300 million, which, from what I've seen over the last week, that puts us in a favorable position. And that's because we did take a few bulk bills in October, November, [ seeing markets ] happening to the market and wanted to go into 2023 in a strong position. And Partnerships carry forward position because it is, as you all know, countercyclical and highly resilient, their order book was up from GBP 1.3 billion to GBP 1.6 billion in land figures. So the order book is the same. Housing down, give or take, 300 million, Partnerships cut GBP 300 million. So the partnerships number, I'm not surprised with. I was particularly pleased that we had a carryforward position of around 23% on private housing, just in our housing business at the affordable to it, 15%, and we're at in the Housebuilding business, a carryforward position of 38%. That was encouraging and far better than I thought as we were going through October, November. So if you went back to August, September, I was expecting housebuilding to have a carryforward -- a really historically strong carryforward position of 30% on the private sales, even more. And we ended the year following a very poor final quarter with 23%. And in my [indiscernible] years in Housebuilding, a 23% private carryforward and back as good as we've seen over the last 2 years. But in historical terms, it isn't too bad against the background of prices.
Okay. So maybe asking it differently in terms of the coverage for this year, sort of how much is locked in out of that GBP 4.6 billion book, how much flow has been here?
As about GBP 4.6 billion about, I think I'm right seeing and saying about GBP 2.3 billion in Partnerships and housing is into this year.
Right, okay. And then a similar question, I guess, on the margin embedded in that. I mean it sounds like you took a few bulk deals here and there, but to sort of like ballpark. Is it similar to the 23% growth in Housebuilding and maybe 10% EBIT in Partnerships? Or is there any moves on the way?
We would hope that the 23% gross margin will stick in Housebuilding this year. And yes, I would be confident that the 10% Partnerships will rise slightly because we'll have a greater amount of mixed tenure within the enlarged partnership portfolio, particularly coming from Countryside.
Okay. And that's [indiscernible] including Countryside?
Yes. We would expect it to rise from the 10%. Housing stay at the 23% gross. The operating margin in the enlarged Partnership business to be -- to grow from the 10%, not dramatically, but to grow.
Okay. And just to be clear, that assumes sort of pricing sticks. So you don't -- excluding any potential price moves either way?
Well, we've got a bit covered and we've allowed for that. But yes, broadly, pricing levels remaining relatively firm, although we have a little bit to deal with some marginal price reductions [indiscernible] close since September.
Yes. Gregor, I was just going to add is as Greg was saying, we are into our supply chain in terms of those costs. And we may give some of that back through discounts. So that is absolutely the ambition target to hold the margins. The other thing I would just highlight in part...
Why don't you tell the audience what we're targeting from our supply chain?
Well, given the increases we've had over the last 18, 24 months, we're after significant reductions in the labor rates. And we're also renegotiating with all of our material suppliers through the first 3 months of the year based on the enlarged group. And obviously, combining Countryside with Vistry. So we're looking for significant reductions from the supply chain. The other point I was going to make to Greg was...
Sorry, and Gregor, just so that you know that is any -- we're not -- we're assuming we will get those gains, and we're confident we will. We're not assuming that goes to the bottom line. That we'll deal with. That's the buffer between any movement in selling prices.
Correct. And then, Gregor, just you were asking about margins, I just want to make the point that Partnerships, the absolute priority is the return on capital. We said that at the time of the acquisition. So we're working through that. The 40% return on capital in Partnerships is a key priority. And we will work the margin and we may give away a little bit of margin in order to hit that return on capital.
We'll now take our next question from John Fraser-Andrews at HSBC.
I'll have 2, please. Could I just clarify, you did say, Greg, the GBP 4.6 billion, how much of that is for '23?
GBP 2.3 billion.
Sorry, Greg?
GBP 2.3 billion.
And then in terms of strategy in Partnerships, you clearly -- your forward order book is up, well, in Vistry Partnerships, 25%. So does that give you comfort and given the levers you've got to push volume growth in that business regardless of the market for private sales?
Yes, it does. And in all of the Partnerships that we build in and allowance for increased costs, which we've needed over the last 2 years for obvious reasons. And one of the benefits that the Partnerships business will get over the next 12 months is all the subcontractors are looking to, first and foremost, get on to a partnership scheme. So if you've got a housing scheme on the left-hand side of the road, of 200 houses and on the right-hand side, you've got a partnership scheme of 200 houses, the subcontractors are pretty savvy and they know that they want to work on the right-hand side of the road on that partnership scheme because those 200 houses will all be built. On the left-hand side of the road, the 200 houses, the bill will depend on the sales rate. And so we're seeing already our Partnership deal -- our Partnerships business getting some great deals, and I believe they will not meet the fixed price allowance that they've got. So I think the fixed price allowance they got will help the business and their margin and also get the return on capital to 40%, particularly from a Countryside perspective. But also, I think they will see some significant savings during the course of this year as there was a [indiscernible] by the supply chain to get to those Partnerships schemes [indiscernible] in these uncertain times.
Just a couple more on Partnerships. Does that entail shifting within this year, potentially a higher amount of presold or is that -- is the die already cast, the private element you're reliant on the market?
No, we don't buy any land in industry partnerships without it being at least 50% presold on average, probably near 60%. Countryside have their own way of doing things. But I would suggest from September, not the completion date of the 11th of November, the Countryside team have been operating as Vistry because they knew obviously, completion would take place and anything that they are looking at buying or have bought has been on a plus 50% presold basis. And Earl's previous point there with regards to return on capital, which is absolutely right. We think that Vistry Partnerships, the margin at 10% and plus 40% return on capital, that will just carry on the Countryside that we might lose some of their margin to absolutely generate some bulk deals to bring their return on capital more in line with the 40%. So we're determined to end 2023 with an enlarged Partnerships business at a 40% combined return on capital. That will bring the Countryside margin, which was greater than the Vistry margin down a bit, but still, I think give us some scope to increase the 10% Vistry performed last year.
Understood. And last one on [ partner ] delivery. Is that targeted for volume growth this year?
I think for volume growth, no, it will be broadly stable.
And thereafter or is that still to emphasize mixed tenure?
Yes, they're after the growth because for it to grow this year, we would need some of those contracts and things in place. But yes, from [ 20 ] through [ 4 ] onwards to grow.
We'll now move on to our next question from Aynsley Lammin at Investec.
And just 2 for me, please. First of all, just on -- I think at the time of the acquisition, you mentioned, kind of or hinted an average debt around GBP 300 million, loans credit of around GBP 600 million for FY '23. And just kind of interest, obviously, a big macro risk numbers, but outside of that, your net cash position is a lot stronger at the end of the year. Any kind of comments to add to that in terms of guidance around that balance sheet to issues? And then secondly, just on the kind of recent trade in, obviously, a prospective traffic, very good and need to convert those kind of that interest. Just interested, what's your kind of view of the -- what gets people over line? Is it mainly confidence, given all the negative media coverage and expectations when you fall in house prices? Or is it the mortgage market and interest rates and an affordability issue and you're interested where you've seen kind of mortgage rates and particularly for the first-time buyer, how much of a constraint the affordability will still be into this kind of spring selling season?
Okay. I'll take the latter one. Tim, while I'm talking you can then do the first one. So we would say what we're kind of seeing is that in the first part of 2022, you had a great mortgage market, very, very low rates on a historical basis, and rates were stable. Following on from, as you know, the September budget, products were actually withdrawn to huge media hype. And when they actually came back in the market, they were big increases, particularly on 2- and 5-year fixed rate mortgages. So a purchaser who was looking around to buy a house in April, May, is all of a sudden -- one if they could get the mortgage, was going, this is going to cost me an awful lot more if they could get the mortgage offer than what I would have got in April, May. I'm going to sit and think about this for a minute. As you then get to Christmas and you get to the first 3 weeks of this year, typically, I'm talking now, and there's been 1 or 2 examples of this. The purchaser is now looking at something and going, actually, that mortgage that you can get now, which is still higher than it was in the first half of -- and these mortgage rates are falling as we speak. Still higher and they will remain higher than what you could have got at the start of 2022. But people are now comparing it against what they were looking at in September, October, and it's a lot less. And against that, I don't know if you monitor the rental market. I mean, we're in that great sector where you've got to live somewhere. And if you don't buy a house, you have to rent. And even with the inflated mortgage levels of September, October, November, that probably still puts to you that it was still more expensive to rent because rental levels have risen dramatically than it was to actually buy. So we don't believe from the first time buyer perspective or any buyer perspective, we're seeing too many issues with affordability. We're actually seeing lots of commentary coming back about, I see the new house is the same price as a second-hand house. How is that when it's a typical 3-bedroom house compared to 1930s, '40s, '50s through that second-hand house. It's going to be GBP 2,000 to GBP 3,000 less to heat that's becoming more and more compelling. So it's a culmination and interest rates falling, interest rates being -- a mortgage market being competitive and readily available. It being cheaper now than it was in October, November to actually pay that mortgage against the background of rental charges continuing to rise. Yes, I think people can see inflation starting to come back against that fuel is dropping and energy prices are dropping, whether that stays that way, we will see, but that's what seems to be happening. And we're looking at prospect levels that are 100 million miles off where they were in 2022. But I don't think we've ever seen prospect levels rise over such a short period as we have seen since Boxing Day. So there's obviously some positive sentiment out there. And all of that is against the backdrop of there's a shortage of houses in the first place. So do you want to take the first one, Tim?
Sure. So I think in terms of net debt, obviously, we'd be hoping to going forward the over delivery from the year-end into '23. I'm not going to be pushing to not -- your net debt numbers are significantly but hopefully, there's a small upside for net debt for the full year. Land creditors is roughly in the right place. I think we're somewhere between [ 600 ] and [ 700 ] at year-end.
We'll now move on to our next question from Anthony Manning at Bank of America.
Could you just give us a bit more color on the reasons or the factors behind the better net cash position at the end of the year? And secondly, could you give us a bit more color as well on the what makes more positive about the level of synergies you can achieve? And lastly, just touching on your comments on the land market. I think maybe differently from peers, you're seeing some opportunities. And could you give us an idea of the group strategy next year when it comes to land?
Yes. So on land, the strategy is to -- we will be continuing to buy but we will be highly selective and very, very prudent and are looking for margins ahead of 25% to give us some cover and we're looking for better payment terms than we saw in '21 and '22. But I would be suggesting that from a land perspective, we are looking at a replacement in Housebuilding of land as opposed to any growth for 2024. That's the first part. Earl, Tim, do you want to take the other 2 parts of the question?
I'll take the synergies, and I'll let Tim talk on cash. So on synergies, I mean, basically, we already see how we can overachieve. And if you go out of the transaction, [indiscernible] synergies into 4 buckets. And we can see today how we can overachieve on all of those. In some areas, we have already overachieved in terms of what we are predicting going forward. So that would be some of the central costs, including some of the third-party spend where there's overlap between the 2 POCs, putting the partnership business together, which we did before Christmas and the closure of the offices that Greg mentioned, coming through. And then if anything, the procurement opportunities for the enlarged group, once we've got a better knowledge within Countryside, are bigger than we expected. So the group deals I've described earlier, but getting commonality and standardization across the group whether it's finishing spec or the way we construct. It even looking forward in terms of our approach to future homes, so how we'll build a [indiscernible] and even on to 2025. So across all those areas, we can see the opportunity, hence, the positive statement this morning. Tim?
Sorry, just adding to that. So we saw a huge amount of opportunity in the run to completion on November 11, 4 synergies. We are really encouraged with what we've already done in the [indiscernible] to Christmas and what we can still see. And then, yes, I can't say it's stronger than we are. Very, very confident that we will be well in excess of GBP 50 million annualized savings and the GBP 19 million for 2023 is a -- will be a major beat. Sorry, Tim?
Okay. And so on the cash piece, it really was a strong equation on working capital performance across the business, and that's both, the former Vistry and the former Countryside pieces. So Countryside came into the transaction having had a pre working capital performance up to its year ended September, which the business has been able to maintain through to December. And on the Vistry side of both, in Housebuilding and Partnerships, it's been a good quarter. Some of which was around concerns or contingencies not being required because the cash continues to flow well. So some of the concern of the reserve and the forecast didn't materialize. So should say, nothing specific. It's really across the business, strong performance.
We'll move on to our next question from Glynis Johnson at Jefferies.
Two, if I may. The first one's probably got a few bits and pieces on it. You talked on the sector about some of the Countryside Partnership sites actually be more into Housebuilding and going to Housebuilding. I wonder if you could just elaborate on that. And then also help us out in terms of how -- what is the pro forma of the group now in terms of Partnerships versus Housebuilding? And sort of following on from that, how should we think about outlets, particularly through 2023 within Housebuilding just so we can get some idea of the size? And then second of all, what are you hearing from government? What are the talks been in terms of the long form, what are the discussions been in terms of policy? Particularly I'm thinking you guys may have a slightly more informed view in terms of the affordable side, but anything in terms of government would be useful.
Okay. On the -- Earl, I'll let you take the first question on the long form and the negotiations continue. And I think they are. I would suggest hedging forward. So I don't think we'll be 1 million miles away from signing it importantly. And we've now got in round figures of GBP 300 million provision, GBP 200 million, Countryside, GBP 100 million, Vistry. And again, we've been very, very confident of the GBP 100 million in Vistry for some time and then 3 months into the acquisition of Countryside, we're very, very confident as well with the GBP 200 million provision within the Countryside Partnerships. So GBP 300 million overall, we are very comfortable. And the only thing I'd say to that is, I suspect we, like others, didn't allow for getting any of that back, whether it be from warranty providers, insurances, subcontractors or indeed contractors. And we become more and more confident than all we get into things and that we will see some recovery on that. So the long form, yes, moving along slowly, I don't think it's 1 million miles away from being signed and we remain very, very happy with both parts of our division totaling GBP 300 million. So [indiscernible]? And there's one other thing I was going to say. We did notice through Christmas. I don't know if you all did, but the Wales government put out a notice basically saying that their intention. So in Wales, how to buy doesn't finished until December this year. But the Wales put out an intention that they are going to extend it until December 2025. That's a further 2 years and increase the cap from GBP 250,000 to GBP 300,000, which is encouraging. So that's an interesting dynamic on the Wales government and [indiscernible]. But that's the Wales government, very early doors being proactive and extending a conservative and of course, Wales is labor control pilot have a conservative initiative for a further 2 years, both in 2 years as well as increasing the cap from GBP 250,000 to GBP 300,000. I don't know if that's making the U.K. government, the English government think about help or anything that might replace it. We're assuming there won't be, but that was quite an interesting announcement by the Wales government. So Tim, on the first parts of Glynis' question?
Yes, thanks Greg. Glynis, I think really just a follow-up from what we could say when we did the transaction. So a few parts to this in terms of what will come from the Countryside business into Housebuilding. So we talked about the legacy sites as Countryside have disclosed. So they really are Housebuilding sites in our view. And then there is a small number of active sites that I would say if you look at the ASP, you look at the mix of private versus [ normal ]. You literally look at the site and you would say that is the Housebuilding site, not a Partnership site. So there's a handful of those. And then, again as we said at the time, there was a number of land sales planned within the Countryside business. We're not going to do those land sales. We'll actually develop those and some of those will be Housebuilding. And then some of the Countryside, larger sites, we will do exactly what we do in Vistry and where we've got the advantage of deploying both, Partnerships and Housebuilding, on some of those sites. So that's what we're doing overall. If you were to look at the Vistry Housebuilding business, I would have said out pretty much flat year-on-year, so around [ 140 ]. But then it could be somewhere between 15 and 20 outlets coming through from the Countryside business and that range really around those large sites and the potential land sale sites that we're working through at the minute.
We'll now take our last question from Clyde Lewis at Peel Hunt.
I apologize if this was asked earlier. Unfortunately, I got caught up and didn't join until a few minutes in, but have you said anything or could you say a little bit about what experience you're seeing in terms of the housing associations and local authorities and also sort of the PRS customers, the buyers and how their appetite has evolved, particularly through the crazy autumn that we've seen and particularly, I suppose, in reference to the sort of funding lines that they've got and how that's sort of playing out, if you like, into the conversations that you're having with them at the moment?
And we did cover that a bit, Clyde. But where we've got to is that the -- you're right, following on from the [indiscernible] project, not only set the private market, but as would be expected in effective the PRS and affordable market as they all took stock as to what's happening. Before Christmas, if [ Stephen ] [indiscernible] was on the call, he would say that the registered providers, housing associations and local authorities are pretty much back to where they were before the budget. And we had a great example of that. Only on Friday, we completed on a huge [indiscernible] and entities on a huge deal in Warrington, 1,200 units in excess of GBP 100 million of land value. And we're doing it in a joint venture with Torus Housing Association, who are the largest housing provider in the Northwest and they're funding the majority of it. So -- and it's in excess of GBP 100 million acquisition. So their appetite is run back and their funding lines are allowing them to do it. With regards to the PRS market, the PRS market definitely closed pretty much for 2 or 3 months. We are now seeing encouragingly all of the PRS providers that we and Countryside historically dealt with now reentering the market, but they're not as far on as the housing associations because there is some negotiation between us and them, where they seem to be thinking the market is in a different place to where we believe it is. So those arguments or discussions, I should say, at the moment with regards to pricing levels. So PRS, no discussions at all. October, November, first part of December, they're now starting to get their feet back into the market but are trying to get their heads around what is the market and what is the market price. Housing associations and local authorities, we would say the market is pretty much back to where it was before the budget. Thanks, Clyde. So I think Laura was that the last question?
We have another 2 which just came in after that. We'll now take our next question from Charlie Campbell at Liberum.
Just a very quick one on sites in Housebuilding. So the comment is that you expect Vistry to be flat. Now that I understand is a Vistry-only comment and then there might be some Countryside over the top of that. But the Vistry number being flat, is that a sort of a reflection of caution on your part? So you might have grown sites, but not the time to do it now? Or is that kind of planning getting more difficult? And so site progression is being held up by planning, just sort of to understand the thinking around that?
It's more to do with portion, but there is a bit of [indiscernible] there about planning as well. I have to say, Charlie, and you tell me, but the group, including Countryside, had a purple patch with planning commissions coming through in October, November and December. So the planning environment remains disjointed, difficult, et cetera, et cetera. But for whatever reason, we're going into 2023 off the back of a great run on achieving planning. So our outlet numbers remaining flat would be yes, in part to do with planning but more in part to do with us remaining cautious.
And truth is -- sorry, Charlie, to add to that. I mean some of what I described as the Countryside, something that's going to be a landfill going to develop for an extra parcel, one large Countryside flat. That is growth in outlet in my view. So it's the Vistry stand-alone was flat. When you come to [indiscernible] was coming.
Thanks, Charlie. I think there was one other, Laura?
Yes, there is. And that would be from Ami Galla at Citigroup.
Just a couple of follow-ups from me. The first one was on the overhead base. Can you give us some pro forma numbers of what the overhead of the combined group was pre-synergies in '22? And the second one was just on [ WIP ] flows into '23. How should we think about that? Is there scope for any [ WIP ] release that as we kind of think about '23 and '24 in the business?
Go on, Tim.
So in terms of overhead pro forma with Countryside including -- I think -- well, I'm looking at Tim as well. I think we'll come back to you on that, Ami. I mean I think you can just take a full year number from Countryside previously. And what you have for Vistry in terms of the pro forma before the synergies. We've obviously given you the synergy numbers through the transaction. And Greg's given you a clear indication that we're going to beat those in terms of what comes off those numbers? And your second one was about -- was that [ WIP ]?
[indiscernible] investments. I mean should we consider any scope for release of [ WIP ] as we kind of think about '23?
Ami, for a while now, obviously, in terms of the market in [indiscernible] statement, we have got absolutely [ WIP ] controls in place, as you would expect. So we are releasing work in progress based on our sales rates. We were in the position because of such a great period, 18 months running up or not having -- really having stock. And so we are progressing in line with that. And that would also -- that will be in a position reflected at the end of last year because of where we are and those with controls will stay in place. We'll take the opportunity in the market to invest based on the sales rates and prospect numbers that we're seeing in a minute. So back to what Greg was saying about the early signs for this year.
Jump in a just on the average. So I think the overhead portion of Countryside at is very similar to the proportion that is in the Vistry before. So in terms of the sort of percentage of revenue of roughly around sort of 6% to 7% of revenue. So you can probably extrapolate what you had before from the Vistry group for the newly combined group.
Thank you. There are no further questions in queue. I will now hand it back to you for any additional or closing remarks. Thank you.
Thanks, Laura. So all I would say, I think, listening to ourselves there, the key takeaways are: one, pricing remains firm; two, it's been an encouraging start prospect levels and reservation levels, cancellation levels to 2023. I would then say that we are entering into some pretty decent negotiations with our supply chain over price cuts, and we've seen nothing but price increases over the last 2 years against the background of fuel and energy falling in some places, some people would say energy prices tumbling. The acquisition, we're delighted with the acquisition of Countryside 3 months in, it looks even better than it did at the time of the acquisition and we think the prospects of bringing together and having a huge exposure in the growth market of Partnerships is going to be great, and we believe that the synergies on an ongoing basis and in 2023 will be greater. So yes, and that's all helped by a housing forward order book of GBP 1 billion, only GBP 300 million down on the previous year. So we're quite encouraged by that. And the Vistry Partnerships business stand-alone, showing its resilience, the order book up from 1.3 numbers to 1.6. So GBP 2.6 billion order book in Vistry. Add to that GBP 2 billion from Countryside, which is obviously Partnerships. And you can see we've got a great deal of forward visibility and are in pretty good shape. So on that, thanks very much for your time. Hopefully, we've answered all those questions. If you've got any further questions, don't hesitate to [indiscernible] through to Tim, Laura and [indiscernible]. Thank you very much.
Thank you. Ladies and gentlemen, this concludes today's call. Thank you for your participation. Stay safe. You may now disconnect.
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