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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Okay. Good morning, everyone, and welcome to Vistry's full year results presentation for 2022. Delighted to be joined by Tim Lawlor, our new Group Finance Director; and of course, Earl, who's been around for a long time, the Chief Operating Officer.
So the agenda. So I will run through the full year performance and the group strategy, Earl and Tim will respectively run through the financials and operational update. The bad news is there's 26 pages that you're going to have to listen to them, so there you go. And I'll come back with an outlook and summary at the end.
So 2022, I've stood here a number of times over the years, this is the best year I can remember presenting. So you will have to go some way through the annual accounts to find any disappointing numbers, not just the headlines. So it's a great set of numbers. On top of that, we completed the transformational acquisition of Countryside on the 11th of November, and that follows pretty much a year of on and off discussions. So these results were against the background of lots of people spending lots of time thinking or actually acting on buying Countryside.
The integration is making excellent progress. We are ahead of schedule. And we've increased the synergies that we're expecting on an annualized basis from the GBP 50 million we said at the time of the acquisition to at least GBP 60 million per annum, and also what we expected in this year, 2023, from GBP 19 million to at least GBP 25 million. So everything going exceptionally well, and I'll come back to that at the end.
Partnerships. Countryside Partnerships continues to deliver rapid growth in higher-margin mixed tenure completions with those at 18% and the adjusted operating margin increased to 10.7%. That's ahead of schedule at the time when we bought Galliford Try. So Stephen and his team have actually produced -- increased revenue to just under GBP 1 billion and increased the margin at the same time quite considerably. So I think that's a fantastic performance.
We have got -- against that, we quite often get accused particularly by the housebuilders within the business, of focusing on Partnerships. And of course, we do that for a particular reason. But we now have, and I don't think anyone should forget, a quality Housebuilding business. So we achieved 3% growth, which is the [ stated A ], and that's against a very, very challenging last quarter with adjusted margin going at -- gross margin going up to 23.4% against 22.3% in the previous year. So I think that's a fantastic result. Again, well done, Keith, and to the Housebuilding fraternity.
The group delivered a 21% increase in group adjusted profit, a record to GBP 418.4 million against GBP 346 million in 2021. We've got a really high-quality land bank, which basically doubled to 81,342 with the acquisition of Countryside, and we also have a strategic land bank of 65,813, which didn't double, but it's gone up by at least 50% because of the contribution from Countryside. And again, we thought at the time of the due diligence of Countryside, but definitely 4 months in, the Countryside strategic land bank is at least as good a quality as the Vistry land bank. So we're really, really pleased with that.
We had year-end net cash of GBP 118 million, which is well ahead of our expectations, down on last year, but ahead of expectations, as I said. And that includes a net cash outflow of GBP 95 million on completion of the Countryside deal, where we put out GBP 300 million. The Countryside basically had GBP 200 million in the bank, which was well ahead of their expectations, well ahead of your expectations, and I think maybe gives you some idea as to the underlying strength of the business at the time of the completion. We also had GBP 35 million worth of share buybacks through the summer and GBP 139 million worth of dividend. So again, cash, excellent. Because of the cash, group return on capital increased to 28.3% against 25.5%. Partnerships' return on capital was an embarrassing 77.6%, and Housebuilding return on capital increased to 28.2% from 21.3%. So great group results with great individual contributions from Partnerships and Housebuilding.
We've made progress in all areas outside of all the financials. So from the NHBCs perspective, CQRs, RIs, we're ahead of industry benchmark and ahead of where we were in 2022. We were more proud in the job awards than we've ever been before. On the HBF, the customer satisfaction score for 8 weeks, 92.6%, ahead of the industry benchmark, as you can see, and ahead of where we were this time last year. And that's again against the backdrop of the Countryside acquisition. The 9-month score, I'm particularly pleased with. That's up to 79.6%. That's nearly a 10% increase on a year ago and again ahead of the benchmark at 78.3%. We carried out 2 Peakon surveys, this is independent staff surveys, and we're in the top 10% on engagement in the manufacturing sector. The progress we're making on Science Based Targets to 1.5 degrees is moving in the right direction. I'm particularly pleased that we raised a huge, thanks to our people, GBP 258,000 for our charity last year with Papyrus. A lovely photograph there of Earl doing what he does best, giving money away.
So we are a leading homebuilder with what I think is a unique market position. So we've got 3 exceptionally strong brands: Bovis, Linden and Countryside. On the Housebuilding side, it's all about build quality, customer service and controlled growth. On the Partnerships side, we're now -- we're not just the leading partnerships business, we're the leading partnerships business by a [indiscernible]. We've got an unrivaled track record. We've got incredibly strong relationships as the Countryside with Homes England, local authorities and housing associations. And I've been involved in a number of calls with Stephen and with Mike with regards to [indiscernible], I'll come back to you later on talking to our partners with regards to the acquisition. And to be honest with you, sometimes it was quite gushing. There is nobody out there who was worried about bringing the 2 organizations together. They all took it as a positive and believe that the 2 coming together for various reasons will make the proposition even stronger. So no issues there with any of the customers.
I was -- one of the positives, but it was way down the list of the acquisition, was the timber frame manufacturing capability within Countryside. In 4 months, I've become pretty excited about the potential of this timber frame facility -- or facilities, I should say. So we have 3 of them. We're about to open in the second half of this year, reopen the East Midlands, huge facility that Countryside had. That will reopen in the second half of the year. We currently have a capability of 2,800 units per year. But when this -- when we reopen the East Midlands business, that will go up to 5,000 in the medium term. And with changes in building regs this year and in 2025, I fully expect that the majority of the units that we complete after 2025 will be timber frame. So it's great to have it with in-house apart from high storey in and around London probably.
We've got not only a great strategic land bank, but the 2 parts of the business, Countryside and Vistry, the strategic land bank -- and again, I've been around a long time, the strategic land team are really, really strong, as is the centralized procurement team that we've got, which brings the strength of both Countryside and Vistry together. More on that later.
So Countryside Partnerships. First thing I want to say is we've got the ability to produce 12,000 units per annum from our existing offices. And as you can see, I won't read all the strategy down the right hand -- left-hand side there, but it's all about aggressive growth in excess of 10% per annum, 40% return on capital, which we expect to get to at the time of the acquisition, we said in 2024, but we'll have a bloody good go at getting there this year; GBP 400 million of adjusted operating profit in the medium term with an adjusted margin -- operating margin of 12%, that's up from the 10% that Vistry just recorded.
On Housebuilding, controlled growth of 3% and ability to produce 8,000 units from their existing infrastructure, so 8 and 12. So with our existing infrastructure across the group, we've got the ability to produce 20,000 houses per year without opening any new offices. And on Housebuilding, the medium-term targets at 8,000 completions, 25% gross margin, 25% return on capital, and as you just heard, housing under Keith actually produced that during 2022 with a GBP 400 million adjusted operating profit. So you can see already that the balance between Partnerships and Housebuilding's profits, which were up to last year, very much weighted to Housebuilding, are now becoming 50-50. And what we expect during the course of this year, which maybe Tim will talk on, is probably a 55%-45% split in profits. So very much a balanced business as opposed to a good partnerships business, but a small part of the overall profit.
So the investment proposition. I'm not going to read all of this out, but structural growth, so you should look at us as a business that is growing. So you've got aggressive growth of at least 10% in Partnerships, but also growth in a much more controlled manner of 3% in Housebuilding. If we had aggressive growth in Housebuilding as well as Countryside Partnerships, we would fail. So it's done that way around for a reason.
I believe we have a huge competitive advantage against our peer group. We've got 3 very strong brands: Countryside, Linden and Bovis. But in the land market, which is key, which is, I'm pleased to say, softened since the trust budget last September, we have a visibility where Housebuilding and Partnerships can bid for large sites together. I will put my money that we will always win that bid when they work closely together and they work together properly. It's a real USP.
We are resilient with Countryside Partnerships, more resilient than a pure housebuilding business to any downturn. But I was thinking about this last year, so obviously, we had a terrible downturn in 2008, where housebuilders made lots of money in 2007 and then lost lots of money in 2008. And I keep getting told it's a cyclical business. So 2009 seems to be a long, long time ago. And here we are now in 2023, and you just wonder why housebuilders are still valued in the way they are. We've had Brexit. We've had a pandemic, where housebuilding [ led ] the country and back to work. We've had the Ukraine, we've had the trust budget. Housebuilding might not make as much money, but they still seem to be going through things, and I think that's a great credit to the sector and how disciplined they are in particularly with regards to acquiring land. I don't know how many more hits it will have to take before people look at it may be slightly different and say, how cyclical is this business? Is it any less cyclical than many others?
We have some fantastic sustainability credentials. And I'm pleased to say this is really led by Countryside. So we've got [ 0 ] homes being constructed, but all of the initiatives, 95% of them, are paid for by our partners as opposed to ourselves. So these initiatives are paid for by the local authorities and housing associations that we're in joint venture with. But of course, the benefits and learnings from that are spread over and passed over to our Housebuilding business as well.
So on that, I will hand over to Tim Lawlor to go run through the financials. I'll just move the microphone down a bit.
Good morning, everybody. I'm delighted to be here to present for the first time the financial results of the combined group, and I'll take you through the most interesting slides now.
So if we start with the group results. So I won't cover all of these again. We've -- Greg has covered a number of these points already, maybe just pick out a couple of highlights. The first is on revenue, so up 14.1% year-on-year which, excluding the impact of the Countryside acquisition, was growth of 8.6% year-on-year. Greg has already touched on the operating margin increase, so 100-basis points increase in operating margin, largely driven by good tight control of our supply chain and our cost management, and that more than being offset by -- some increase in costs being offset by sales price growth.
The reported profit before tax, you see has come down year-on-year, and that's because of the impact of the exceptional items. So we've taken exceptional items in the year for the fire safety provision, which I'll come to later and for the costs associated with the acquisition. And 2 particular better-than-expected metrics there: net cash coming in at GBP 118 million, as Greg mentioned; and the return on capital employed of 28.3%.
So we're presenting our numbers this year with 4 segments. The 2 primary segments remain: The Partnerships and Housebuilding. Partnerships, for the purpose of these numbers, are the former Vistry standaone Partnerships business. Countryside was reported separately for the 7-week period since the acquisition, which is always a quiet period for Countryside. Traditionally, Countryside's peak comes at the end of September. Within group items, we've got GBP 33 million of costs, which is broadly in line with the first half [ '18 ]. From 1st of January 2023, we're going to be reporting everything in the 2 segments of Partnerships and Housebuilding still with some group on the side, and that integration is well progressed.
So Partnerships financials. A couple of things to pick out here. First is the switch from partner delivery to mixed tenure, which is helping to drive the operating margin increase that we see in this business. So last year, in FY '21, it was a 54-46 split for partner delivery to mixed tenure, and it switched the other way around in '22. So the higher mixed tenure, we would expect higher operating profit margin. And you can see there that we've got 150-basis points improvement in operating profit margin in the year. And the big target that Stephen and team were aiming for was hitting the [ century ] operating profit of GBP 100 million, which despite all the challenges that we had in the fourth quarter with some of the hiatus there, was still achieved. So delighted, the team there, to hit the GBP 100 million profit target in the year.
And the return on capital employed, we'd expect that return on capital employed number to come down. It's still at a very high level. The Vistry stand-alone business will be trending towards the above 40% number. And with the acquisition of Countryside, which comes in at a slightly lower ROCE, we targeted getting back towards 40% in FY '23 but we expect it to deliver in excess in FY '24.
In terms of a couple of the metrics there, you can see the mixed tenure, partner delivery splits there. Partner delivery dropped in '21. We do expect -- sorry, in '22, we expect some bounce back in '23. So there will be some small growth in partner delivery in '23. In terms of the mixed tenure sales price, about an 8% increase year-on-year. Joint ventures, you see as a higher average sale price. That's driven by the geography of joint ventures, which tend to be more London-based. The average active sites has actually fallen year-on-year from '21 to '22. This was due to the closeout of a number of sites in '22 and the delay of some site starts towards the end of '22. We expect that particularly with the addition of Countryside in '23 that, that number will increase. We're expecting it to be somewhere around 75 sites in '23.
In terms of Housebuilding, as Greg said earlier, good control of growth with very strong margin improvements. The margin improvement was around good cost control, taking advantage of the market conditions, particularly at the end of '21, coming into '22 with strong sales, some drop-off in sales rate in the fourth quarter, which had minimal impact in the period of FY '22, but we'll have some knock-on impact into '23. The return on capital employed there of 28% is really driven by that higher return. Capital employed was held relatively flat year-on-year.
And in terms of metrics, you see the affordable split there has reduced in FY '22 to a slightly higher mix of private in '22. We expect affordable proportions to go back up in '23. And the average active sites were relatively flat '22 versus '21. We expect a small increase in site numbers as a result of those sites transferring from Countryside in '23. And the average sale price increase was around 6%. Finance costs. So finance costs went up year-on-year, primarily due to the higher interest rates. There were 3 components of finance costs. The first is bank interest. So bank interest comes on our -- primarily our 3 facilities: so we have the U.S. private placement, we have the RCF and we have the term loan. We expect that in 2023, we'll see a step-up in bank interest costs, largely due to the higher interest rates but also due to an increase in average month-end net debt. So average month-end net debt in '22 was at similar levels to '21, and '21 was around GBP 130 million. We expect average monthly net debt to be around GBP 300 million to GBP 400 million in '23.
The second component of the finance costs are those sort of accounting interest items, so the unwind of land creditors and the impact of leases. That was around GBP 8 million in '22. We expect that to go up with the acquisition of Countryside to about 15% in '23.
And the final component is the movement on JV interests. And the net impact is around a charge of around GBP 7 million in '22. So the overall picture, summarizing all of that for '23, is that we expect that adjusted finance costs will be in the region of GBP 50 million to GBP 60 million in '23.
In terms of tax, the adjusted effective tax rate was 22.4%, so above the statutory rates, largely due to RPDT, the Residential Property Development Tax, of 4%, which is burdened on the house builders. And we expect in '23, because of the Corporation Tax increase and the full year impact of RPDT, for the tax rate to be 27.5%.
On fire safety. So I mean, the first thing we'd say on fire safety is that we're committed as a combined group to ensuring that all places that have been constructed by Vistry and Countryside are safe places to live. We've signed a Developer Remediation Contract in England. And actually, last week, we signed the Welsh version as well. And the final agreement was in line with the expectations that we had at year-end. The management of that is now managed by an integrated and separate team. The integration has gone well. We've got good combined plans and work is starting. And in fact, of the 304 sites that were identified, 59 have actually -- the work has been completed. And honestly, those were fairly light pieces of work on the first 59.
So what does that mean for the provision? So this is well flagged. We took GBP 71 million of provision in Vistry at the half year. The Countryside provision that came with the acquisition was GBP 191 million, and that included already the impact of the long form contract. The impact of the long form contract on Vistry buildings was a GBP 24.7 million additional. So with some unwind in the period, we have a closing provision of GBP 309 million. In terms of the cash outflow related to that, I'd expect that the cash outflow will be somewhere in the region of GBP 50 million to GBP 60 million this year. Let's talk about a bit of accounting. So the purchase consideration for buying Countryside was GBP 1.1 billion. There's 2 stages of the accounting that we have to do for this. The first is to align our accounting policies. So in aligning accounting policies, about GBP 87 million of inventory was written off because of the approach that Vistry takes, to take more costs upfront and take more cost to the P&L upfront. So this is a timing impact. So that was the first adjustment.
Then the second thing is to go through all of your assets and liabilities and to revalue them according to what's described as fair value. So that process has been largely complete. We have a few more months to complete it. In theory, you've got 12 months from the date of acquisition. So there will be some minor tweaks to the assets, but we expect that this will be substantially the final position.
In terms of the Countryside combination, GBP 57 million of exceptional costs were taken, which was roughly split half and half between transaction costs and the costs of integration.
Just to give you a sense then of what the business looks like together, this slide takes you through the completions and the revenue of the Countryside and how it splits between Housebuilding and Partnerships. So you see in the middle column there, that is the calendar year for Countryside 2022. Approximately 20% of the completions of FY 2022 will go across the Housebuilding. And the way we've done this is we've looked at the characteristics of individual sites, looked at their ROCE potential, looks at the nature of the sites to determine where they go. So roughly 20% goes into Housebuilding, including all the sites that were referred to as legacy within Countryside. That 20% will drop to about 15% in FY '23 because those sites transferring are more mature in nature.
I won't take you through the balance sheet line by line. But clearly, the net assets has risen as a result of the Countryside combination. One point of note is those first 4 lines in the tangible net assets section are effectively our investments in land and development, and that's worth about GBP 3.5 billion for the combined group.
So we finished the year with GBP 118 million of cash, which was a net outflow of GBP 116 million in the year. Just walking through from left to right the components of that cash flow. On the left-hand side, net trading, GBP 605 million of inflow, and that includes the receipts from developments and the construction costs and the overhead costs. And that's broadly in line with the last year. Land expenditure was up last year from -- in '22 from '21, so GBP 476 million outflow on land in the year. The Countryside acquisition that Greg mentioned earlier was around GBP 95 million of cash outflow. So what we've included in that box is the consideration of GBP 300 million, about GBP 230 million of cash that came in with Countryside and about GBP 20 million of cash going out on transaction costs.
In terms of distributions, we distributed about GBP 176 million of cash in the form of dividends and buybacks in the year. So in terms of next year, where we're going to with net debt, I would expect a similar profile in terms of trading. There may be slightly more land expenditure as land creditors unwind. And we're going to have the impact of the exceptional items. So we'll have the exceptional costs of fire safety in particular, as I mentioned earlier, going out. So I think we're looking for net -- looking at our net debt position at the end of '23. In terms of the average month-end net debt, somewhere between GBP 300 million and GBP 400 million for the year.
And finally, for me, the dividend. So we have a capital allocation methodology in place and a policy in place, which involves a 2x cover for dividend payouts. We said at the time of the transaction that we would review our capital allocation methodology after a period of integration. So we're now there and ready to give this some thought. We will take some feedback from shareholders over the next couple of weeks as we go around and meet shareholders, and we'll review this over the course of the summer. But for the final dividend this year, we took the 2x cover approach, took adjusted earnings of GBP 325 million. We are paying in total over the full year GBP 162 million out in dividends. We paid GBP 50 million at the interim. Therefore, paying out GBP 112 million with the final, which, based on our increased shareholder numbers, gives us a dividend per share of 32p. And we'll be paying that on the 1st of June.
And that's it for me. Let me hand over to Earl for some operational stuff.
Good morning. Thank you, Tim. Much better than the last finance guy, whoever that was.
Operations, okay. So Partnerships, we now have since November the largest U.K. partnerships business and the integration is moving at a pace. So leadership structure all in place before the end of last year, led by Stephen Teagle, and we've taken the experience of Vistry and got the quality of Countryside. And as Greg mentioned earlier, particularly pleased that [indiscernible], co-CEO at Countryside, has agreed to join us on a permanent basis. So he's experienced in the group and leading our London Partnerships division, very valuable. We have rebranded the whole business to be Countryside Partnerships, so using that quality reputation that came before [indiscernible] across the business. We did restructure again at the end of last year, so 19 business units spread across 3 divisions. And we are already benefiting from the scale of the Vistry Group, so changing specification, changing suppliers, taking advantage of the more advantageous Vistry terms and conditions. And there's plenty more to come here.
We are still renegotiating around 140 supplier contracts, and it is a good time to be doing that. So if the housing market is a little bit quieter, that is a good time to be negotiating with your supply chain. And we're also looking to take the best of both organizations, so in terms of process, whether that be taking an automated induction, health and safety process from Countryside or putting in the Vistry systems, which we'll do rolling those out over the ex-Countryside business in the balance of this year.
So a few stats on partnerships. You've already heard the absolute focus on return on capital. So the 77% for Vistry Partnerships last year was flatted a bit, as Tim said, in terms of the proportion of cash-funded partner delivery. And we will trade in a bit of margin release capital out of the Countryside business in order to deliver on that 40% return on capital target. And really pleasing, everything that we have approved since November hitting those return on capital targets for the group.
A number of stats, now I'll pick out just a few. But really pleased, 5-star customer satisfaction in Partnerships and a real step-up in the 9-month customer satisfaction score. Employee satisfaction, we've only just done the Peakon survey, which given we've done 2 phases of restructuring and redundancy either side of the year-end, the 7.5 is a very impressive score. So very good.
A few other key actions going on. We are close to finalizing our Countryside range of homes. We'll put those together with the Phoenix range we've got for Bovis, the Linden Collection. So standard housing getting all the cost benefits of standard housing, and they will all be available for timber frame. And particularly with the Countryside business coming in, a real focus on some of those quality measures that Vistry has held dear for some time, so focused on RIs, CQRs working with the NHBC and that 9-month customer satisfaction.
So our high-quality Housebuilding business really have got a cohesive leadership team led by Keith Carnegie, which is invaluable during the current market uncertainties. And we really -- you can see from the stats, 13 high-quality, consistent businesses delivering right away across the country. So I would pull out again, the customer satisfaction at 92.9 5-star, the step-up again in 9 months but also very strong scores on RIs and CQRs. Right now, really important, build, sales, customer service working together in what is a more difficult sales market, and we are doing that very well.
We're also working well with our supply chain. So we are getting cost reductions certainly on our longer-tailed sites and new sites coming on. So in terms of getting cost reductions on those budgets. And as I've already mentioned, in terms of through our material supply, yes, there's still inflationary pressure. But because of the bigger scale of the group, we are looking for that to be net neutral during this year. Of course, we are managing working capital very tightly. We are building what we can sell.
And again, I'll come back to the stats. The people. So the employee satisfaction we have had a process through Housebuilding, I would say, to rightsize the business. So 8.7, an incredibly impressive performance in terms of that employee satisfaction and very low staff turnover during the year. And we do continue to selectively invest in land in Housebuilding, which is a good link to the next few slides.
So the map, the dots show the investment within Vistry last year. So the purple are the Housebuilding sites, the green are the Countryside Partnerships sites. Overall Housebuilding, just a little bit less than replenishment in Vistry, but I'll come back to the addition from Countryside in a moment, and more than replenishment in Partnerships. So looking to deliver that growth -- that 10% growth going forward. Overall, about 40,000 plots into the land bank from Countryside and over 20,000 plots into the strategic land bank. And we've also had a good start to this year as well. So in addition to that, we've had another 4,000 plots this year split broadly equally between the 2 parts of the business. And yes, we are attracting good land terms at the minute, both in terms of price and the deferred land payments.
So a few stats for you on the land bank, I won't touch on too many of these, but you can pick out the total land bank halfway down the page. So for Housebuilding, 32,700. So that includes the legacy plots from Countryside and the additional sites that we have moved across. And you can see there a land bank that will allow for the 2% to 3% controlled growth that we're looking to do in Housebuilding. Countryside Partnerships obviously benefited hugely from that pipeline that's coming from the Countryside business in order to take the growth forward.
Go to the bottom of the page, just pick up gross margin. So a little bit of impact to the housing gross margin in the second half, so cost inflation running a bit ahead of pricing. But that's actually less than 1% impact on that gross margin. The remainder of the impact is more about bringing in the Countryside legacy sites into that number. But really pleasing, the 19.4% gross margin in the mixed tenure land bank in terms of the profitability of Partnerships going forward.
Briefly on strategic land. Look, a real strength for the group and now even more of a strength with over 20,000 plots coming in from Countryside. Vistry did add in 4,500 plots itself during last year, and it really is a pipeline that is feeding both Housebuilding and Partnerships. Yes, we have got that unique opportunity of 3 brands. We can deliver housing across every single tenure there is, and therefore we are able to develop more of that strategic land, I would suggest, than others, including even the very largest of sites that are coming through that strategic land bank.
It does also give us the opportunity to be a one-stop shop for the planners. And I'm afraid the planning situation is difficult, but that can give us a bit of an advantage compared to others. And yes, we do continue to see that we're getting better returns from our strategic land. So still looking for 150 to 300-basis points betterment compared to buying land out in the open market.
So new for Vistry, manufacturing. And as you can see, significant progress being made. So we have rebranded our manufacturing to be Vistry Works. And I would say that means 2 things: that is Vistry Works for the business as well as our business needs to work with manufacturing, but also it is more than timber frame. So we are looking at what other products we can manufacture ourselves internally. So that will be the likes of trusses and joists, so getting the benefits. We are looking for the lowest cost manufacturing, and therefore we really are looking for our standard houses to be used. And we will be mandating, where appropriate, the use of timber frame right at the land acquisition stage, and so we can utilize the capacity that we've got in the business.
So currently, 2 factories operating at Warrington and Leicester. So we've got capacity from about 2,800. And as Greg mentioned earlier, we're looking to reopen the East Midlands factory in the second half following a full review, and that will take our capacity towards 5,000 in the relatively short term. As I say, standard housing, absolutely key to this, so avoiding redesign, ensuring the factories can do what they do, the same day in, day out, coming through. and also that timber frame helping to meet Future Home standards.
People, people, people, still absolutely the mantra within Vistry. And it has been a very difficult period within the group. So I do thank all our employees for the professionalism and commitment as we've gone through integration and restructuring. We continue to do the right thing by our employees where we can. So a temporary cost of living increase early in 2022, a pay rise as well, all of that became permanent and were certainly targeted to the lowest paid employees where we could. Huge amount of communication going on, as you'd expect, and that is both the executive listening to the business as well as guiding the business through change. And I've already mentioned the Peakon score, which overall 7.8 is a great score given what we've been through.
A few other things. We continue to aim to be the employer of choice, and we've just recently been certified as a top employer by the Top Employers Institute. We smashed our target for our skills academies, which we restarted after COVID last year. And I was pleased to be at the opening of our most recent one last week, which was in Colchester in Essex, which we've actually opened up with building heroes. So that is looking to get ex-servicemen into housebuilding as a career. And alongside that, we remain the only housebuilder with a gold armed forces covenant that we're also very proud of.
Future Home standards. We are undoubtedly leading the way. We are doing more than anybody else in terms of delivery for our clients. We've talked before about the 54 zero carbon homes in Warwick. But on the back of that, we are now delivering another 310 net zero homes for the same Warwick District Council. Other sites are listed, I won't go through them all, but the use of air source, heat pumps, modular homes. We will, of course, be focused on our timber frame going forward in order to hit future requirements and, in particular, be more sustainable. And we do believe we've got the lowest cost solution for future standards, so both Part L and F, and for 2025. And why do we think that? Well, we are already building, as Greg said, to those standards for many of our clients. Fortunately, they're also paying us to do that, but all that experience we're rolling out across the business.
Sustainability. Has been a significant year moving sustainability forward. So I've already said in terms of our targets, absolutely delivered on our skills academies. We delivered a further increase in additional affordable homes. So that's affordable homes beyond what is required by policy as a target, all that now linked to both remuneration but also our financing facility. We did have our targets signed off by the Science-Based Target initiative. Our carbon action plan is on the website, and the Carbon Disclosure Project increased our rating to a B. Much more to come. We're currently looking again to take the best of both Countryside and Vistry in terms of sustainability. We will be redoing our materiality assessment this year, resetting the baseline for the large group and setting targets that we can hit for '24 and beyond.
With that, I'll pass you back to Greg.
Great. Thanks very much, Earl and Tim. So some good stuff there. So market review. So we've seen improved consumer confidence since the disastrous budget last September, although first-time buyers are, of course, struggling somewhat with the demise of Help to Buy. Mortgage rates are trending downwards and there is increased availability. Mortgage finance is cheaper than renting, which is the alternative if you don't buy a house. And it's interesting to see Halifax saying they thought it was, on average, about GBP 500 per year cheaper to buy with current mortgage rates than to rent. Unemployment has been maintained at a relatively low level.
Pricing has remained firm in the first 11 weeks. And for that matter, the 12th week, which is this week, will be the best week we've had for probably 6 or 7 months. So this week is going to be even better than the last 4 weeks. So pricing has remained firm. We are using incentives. Actually, some developments, we're actually seeing price increases. Build inflation is falling with reduced demand. So I will give you some figures on this. So Earl touched on it, but where we have an existing scheme just coming to an end, we are basically holding back subcontractor increases over the first quarter and keeping them at neutral. Where we have long-running sites and new sites, we are seeing somewhere between 2% and 5% reductions from our subcontract chain. They are particularly fighting, as they would be, to get the Partnerships work because they know that it's guaranteed work over the next couple of years, and they're looking for some bread and butter sites to keep their businesses going. As analysts, I'm sure you do the same when you value us on a sum of the parts basis. Of course, the subcontractors even though that the Partnership business is absolutely countercyclical. So we're seeing 2% to 5% with that.
Next, we successfully -- our Group Procurement Director, [ John Boe ] is having [indiscernible] at the time at the moment. So first of all, we've got in excess of 140 supply chain partners. This is your likes of your rig stock, H&H, et cetera, et cetera. We successfully negotiated with them. All of those deals were coming to an end at Christmas. But with the increased size of the business, John managed to, on 95% of them, put it back to end of March. So we've seen no net increases from supply chain in the first quarter. And today, we are part way through renegotiating where we are with -- let's face it. This business now is 16,000 or so units this year. I noted Persimmon 2 or 3 weeks ago at 9%, being no doubt that if you're H&H or you're a stock, the big one you've got to win is Vistry. And we are taking absolutely full advantage of that. Earl said, we're expecting 0 increase from our supply chain for this year. I'm expecting a reduction, and the early signs are we will get a reduction. So we're going to see a reduction there And we're seeing reductions from the subcontractors.
The political environment, unfortunately, remains challenging. We're trying to help that out. Every single 1 of our 32 business units has invited Michael Gove to their Christmas news this year. As of so far, he hasn't responded to any of them. So the political environment, all joking aside, is difficult. Planning remains difficult, although we are having some successes. And of course, we are working with the CMA on at least the fourth time they've looked at Housebuilding to see if we are land banking. And again, they'll come up with the same answer as the previous 4, I'm sure. The only banking we do is with the likes of HSBC, Lloyds and NatWest and Barclays.
So current trading. Private sales rate, improving. So the first 11 weeks 0.54, the last 4 weeks, 0.62, and that will rise when we take into account week 12, which is going to be the best, as I said, for at least 7 or 8 months. There's a good level of demand from housing associations and local authorities out there. And interestingly, the PRS market is reservicing and coming back to life. Net pricing has remained firm, supported by increased use of incentives. So just giving a bit of flavor to that. We unusually took the view, and I'm glad we did it, we put our prices up at Christmas or in December, so -- where you don't sell that many houses. So today, on average, we've got somewhere between 4% and 5% buffer between asking prices and forecast prices, which is quite a considerable amount. We are using incentives. So those incentives are predominantly through the likes of carpets, curtains, where we all have, select and enhanced packages where the perceived value is less than the cost. So I'm delighted to say [indiscernible] now, we are not seeing any reduction to our forecast prices. We are using those gains that we are seeing on subcontractors and from our supply chain at the moment. to actually enhance the sales rate and passing that on to our purchases. So net-net, we're not seeing any inflation.
We're in active consultation with DLUHC over the proposed second stair case on buildings over 30 meters. This is again another sorry tale, and there are tens of thousands of flat in high-rise buildings in the likes of London, which are going to be put back and put back during this consultation. And the last time I looked, it's not just tens of thousands of flats and houses -- flats, sorry, that are being put back. And awful lot of those are affordable. And the last time I looked, we had an embarrassing shortage of our affordable houses in the country.
Housebuilding continues to select in high-quality land opportunities that at least meet our hurdle rates of 25% gross margin and 25% return on capital and are seeing great strides in further deferring the terms. We've got an opportunity for cost reduction. So we're seeing those cost reductions, as I've said, with the supply chain and subcontractors. It's interesting to note that since the acquisition of Countryside in November, I would say, 11% or 12% of the overall roles in the business have been reduced. So we did an awful lot of that as part of the integration this side before Christmas. But there have been, as Earl touched on, some downsizing, particularly in Housebuilding to rightsize the business. So we've done all the hard work on that and it's been incredibly difficult period of time for us when you are a people-based organization. But we have to put the company first.
Key focus on working capital management, and that's the one biggest thing I would say that Vistry have brought to Countryside. We really do concentrate on the cash. The resilience of the Partnerships business is reflected in the incredibly strong order book of just under GBP 3 billion, with 68% of their forecast mixed tenure revenues already secured this year with all, of course, of the partner delivery work secured. That's why the subcontractors are clamoring for that. On Housebuilding, an equally strong position, GBP 1.34 billion is our forward order book, and 55%, and that's a good total before the end of March, of this year's revenue already secured. So the year is looking at pretty good as we come up with some guidance, which I'll come on to in a minute.
So just summarizing that. So we've got, I believe, an incredibly strong management team. So that management team is being bolstered by 2 people on the ELT over the last [indiscernible] 6 months, one, Michael Stirrop, who sat over there. He's one of our divisional managing directors in Housebuilding. He's now joined the ELT, responsible for a number of things, including building safety and the exciting timber frame proposition that we've now got. And I'm also delighted to welcome Mike Woolliscroft. Now who was the Co-CEO of Countryside at the time of the acquisition, I tried really hard to persuade Mike to join the business at the time of the acquisition and failed badly. But I'm delighted to say -- and I think it's a bigger endorsement to the business that Mike has come on. So we agreed with Mike that he would originally stay with us to help with the integration until the end of May. Mike has basically tried the business. So Mike has decided, having been with the group now for 4 months, to stay with us. And we're delighted that he's joined us. So Mike will work again across the group, but particularly working with Stephen.
We've made some Board changes announcements this morning, and I'm delighted that Jeff Ubben has joined the Board. He was particularly instrumental in getting the deal with Countryside done. So we're all very, very pleased with that. The integration of Countryside is making excellent progress. The hard work has been done with regards to office closures and people losses, I'm afraid to say. And the synergy savings have been increased, as I said earlier. The Board is committed to maintain a healthy and resilient balance sheet. So for the full year, we're announcing overall a 55p dividend, 32p in final payment. And that is against -- is down, the actual 32p, on this time last year, but the overall amount we're paying is up.
The capital allocation policy will be reviewed going forward in the next 6 months in complete consultation with all of our shareholders. And following what I would say, a brilliant performance in 2022, we're in a really strong position for 2023, as reflected in the forward order books of both Housebuilding and Countryside Partnerships. And based on our market assumptions, which is we are saying, and we have done since last September, we're expecting a return to a 2019 pre-pandemic market, which after week 12, is pretty much what we are seeing to the week. We are very, very pleased that we have come out with some guidance this morning. I think we're the first housebuilder to do it, albeit we are 11 weeks into the year as opposed to maybe 8 or 9. And we expect the group to deliver adjusted profit before tax in excess of GBP 440 million, and that's ahead of consensus, which is around GBP 400 million, depending on which metrics you look at. So very very good set of results, a very good -- better than we expected first 11, 12 weeks of this year, and the group is in a great position, including all of the integration, bolstered by a couple of changes to the management team.
So on that, we will take any questions, and we'll have questions from the room first. And then through Susie, there might be some questions from people listening on the webcast. So questions, please.
Aynsley Lammin from Investec. Just 3 for me, please. So on the sales rates, are there any kind of bulk sales within those? Have you increased the part exchange used in the first kind of 11 weeks of the year? And then secondly, just on your assumptions for your profit guidance. I think you've mentioned the sales rates get back to 2019. What would the average private sales rate be in 2019, what you need to get through for that? And then obviously, very early days, but just given recent events in kind of banking sector, when you're looking at mortgage lending, do you expect the U.K. lenders, any signs that they are changing or might be a bit more cautious given what we've seen recently?
On the mortgage lending, that was mentioned by the press discussion that I've had this morning. Frankly, we don't know, but we haven't seen anything in the last week or so. What I would say is last week was the best week of the year on sales and this week is going to be better again. So I'm not sure from a keeping you as to the ground from a people perspective. I'm not -- it's not 2,000. I don't think people quite are taking onboard Silicon Valley Bank as they've never heard of and Credit Suisse. So I think the bank of it might come. We've not seen any signs of that at the present moment in time. Sorry, Aynsley. The first question was?
Just any bulk sales...
We always do bulk sales. We've priced in for bulk sales during the course of this year, giving away a discount. So yes, those numbers are bolstered but not dramatically. But there have been bulk sales, part exchange, yes, there is an increased use of part exchange, I would say, 1 in 8 month sales now or through exchange. We've got hardly any stock. We manage it very, very well. We've got hardly any stock over 3 months old.
And what do you need the average private sales rate to be this year to get to...
0.55 to 0.6.
Will Jones, Redburn. I'll try 3 as well, please. And just coming back to that sales rate review for the year, I think it would be normal that Q1 for any housebuilding business is higher than the full year as a whole. Whereas I think you needed to be better in the 3 quarter...
We're saying the last 4 weeks have been 0.62, and I'm saying, for the year, 0.5 to 0.6. So I would expect it to be lower Yes, the first 11 weeks aren't bad, but the first 2 or 3 weeks of that 11 are not very good at all because you're just coming out of Christmas.
Okay. Second is whether you could just help us with Housebuilding pro forma. Any net views for gross margin and completions in '23?
Do you want to take that, Earl or Tim? I really don't know the answer.
So in terms of -- I'll jump in first. So in terms of the gross margin, we should see some reduction. So at 23.4% in '22, we should see that coming off by a couple of percent in something in that region for 2023. In terms of volumes, I think we're down -- we're probably expecting it to be down 15%, 20%, something like that.
And the last one is just around the capital structure you talked about, reviewing capital allocation. But can you just help us with what your starting point would be as a preference for the appropriate balance sheet ratios?
Well, I think all of that is in the to-be-determined category, which is why we need to spend some time thinking about it. Obviously, there's 2 parts of that question. There's the first bit is in terms of capital allocation, first is how much we're going to have to distribute; and the second bit is in what format. We're open on both of those. We see the benefits that could come from increasing the share buyback element. We're not sure with the yield we're getting on dividends. It doesn't feel like we're getting the value from that is quite a high level of dividend distribution. But I think we're going into the summer open-minded, and we genuinely want to hear what our shareholders had to say.
And I would just add to that. We also have to look at -- we're frankly flabbergasted by the opportunities in the Partnerships business. And I would not want the capital allocation plan to get in the way of growing that Partnerships business, so -- where the opportunities are immense. So it's -- particularly, I think we've got Housebuilding coverage. Particularly, we've said 10% to 12% growth. Is there opportunities to grow that more quicker? We're looking at that. And I'm absolutely delighted with the 2 businesses coming together. The quality of the management, I think, we could grow it quicker. But we might have to look at the cash from that, and then as we've said, I think a lot depends on what we decide we're going to pay out. But it doesn't feel we're getting any benefit of paying out a dividend with the share price at GBP 7, which is incredibly low. If you just look at economics share buybacks are better at definitely at these kind of levels, and there's going to be a level where you think, where is that level is to -- it's better to pay a dividend, not sure, but it's certainly above GBP 7.
Chris? Sorry, no.
Chris Millington at Numis. It sounds as if you're taking a slightly more cautious view on incentives, talking about carpets and curtains, others are talking about growing 5%. And can you just talk about where you're positioned on a relative basis? Should we do them one at a time?
Yes. So you heard me say at the start, we've got between 4% and 5% between our asking price and our forecast for us. We can only speak as we're fine. We're not -- we don't think price actually is getting in the way of actually the sales rate. So we're going along nicely as the subcontract and supply chain savings increase, as we're fully expecting them to during the course of this year. So we are being very cautious on that. We're not letting 100 units.
We're letting contracts for 20 or 30 because we know when they are finished, we think it will be even tougher out there with what some of the volume housebuilders are saying. So we're expecting larger gains. We will, if necessary, throw more money from those gains because we're not programming any or forecasting any gains we made on subcontractors or the supply chain.
We're not putting anything to the bottom line. We are passing that on -- or assuming we'll pass it on to the purchasers. So whether that continues in the form of incentives, carpets, curtains, stamp duty, et cetera, or maybe during the course of the year, if we want to accelerate the build -- sorry, the sales rate even more, we think we've got some ammunition from these savings we're making now, which we think will increase during the year. Don't forget, and that's off the back of 2 years of inflation that I've never ever seen in 40 years in housebuilding. I mean, these subcontractors and supply chain have got a long way to come back before I start feeling sorry for them. So they've had their day undoubtedly and fair enough in 2021 and 2022. Housebuilders are and will start having their day as we go forward over the next 12 months. .
Just on the incentives. We are obviously targeting -- the perceived value to the customer is actually much higher than the cost in reality in terms of what we're aiming to do.
So the margins we typically make through select and enhance, which is our incentives are 30% to 40%.
That's helpful. Next one is just on the land market. I think you mentioned some softening there. I just wondered if you could put any numbers or anecdotal thoughts around that.
I would say, Keith, Stephen, probably 50% to 60% of everything we agreed before Christmas, we've continued to buy. But we've chipped further the prices. So the prices have come back because we've gone back to the land owners and said because of current market conditions we need to check the price. But even more than that, we've managed to defer the land payments more and more.
So definitely a softer market as the large housebuilders who are the biggest players in this look at their land banks and go, "We've got a x% land bank based on 16,000 per annum. Now we're looking at 9. We don't need to buy too much land, do we?" So -- and we are more and more moving into buying larger sites where we can bring Housebuilding and Partnerships together. And by the very nature, the competition for larger sites is a great deal less than it is for a smaller sites.
And the final one is just about zero carbon homes. And in your experience doing those schemes, what is the uplift you've experienced and in as much gain to be had going forward from the economy side?
You want to take, Earl?
I can do. So look, I think there is going to be a huge game in time. Most of the schemes we've done at the minute have been for local authority partners, registered providers who are looking to future proof their housing stock, and that's where we learn from the experience and they are paying for the uplift because there is an additional cost. We've had various conversations with some of the colleagues, the banking colleagues in the room in terms of looking at the mortgage market, in terms of lending additional against those green homes. And certainly, we'd like to say those further, we absolutely see a green premium coming, not least, of course, the cost of fuel, et cetera, at the minute, which is only heading overall one way.
So at the moment, we don't get a premium, as you know, for newbuild house. As the -- this year, the standard of housing insulation is greater. 2025, it will be greater again. Mortgage companies surely will take into account the cost of running has today, but definitely by 2025 as opposed to a 1930s, 1940s, 1950s housing standards with very little insulation.
I'm sorry, the additional cost to build those versus current regs?
I mean, it depends from one scheme to another. But you can be talking anywhere between sort of GBP 8,000, GBP 12,000.
Yes?
Gregor Kulich from UBS. I've got a few questions. So can we just go to the fair value accounting slide that you put up? And I think from memory, kind of the last balance sheet of Countryside, so it was like GBP 860 million of tangible assets. Now it's kind of GBP 300 million less. I appreciate there was obviously a fire safety provision. I think you mentioned, you can't remember GBP 100 million or so of inventory write-down? Or -- and I guess I want to understand what's the balance. And is that sort of reflected -- I guess, does that help the profitability in the short term? I guess it does.
Do you want to take that?
Yes, sure. So the 2 missing bits, the 2 components, the first is the accounting policy alignment piece where effectively what we're doing in Vistry is charging cost rates the P&L on predevelopment. Whereas on the Countryside, we would have capitalized those. So while there's the benefit that comes through from the lower amortization because of the write-off of the assets of those assets, that's more than offset by the additional costs that are going to go straight to the P&L for the former Countryside business that previously would have been capitalized. So those 2 -- that piece has a P&L neutral position.
The other bit of, the fair value bit, is around GBP 107 million of net write-down. And so that unwinds through the P&L. As we mentioned in the O&S, it's over 6 to 8 years that the majority goes out. Actually, in total, it goes out over sort of 15 years or so. So the majority of that comes out through the next 6 to 8 years. But whether that's seen as P&L enhancing or not, I guess, is a question of enhancing against what. So if country cited stayed on a stand-alone basis without any of the other changes, it would have increased Countryside's profits because it would have written down the inventory. In calculating our GBP 440 million this year, there's a lot of moving parts. So it's part of that. But obviously, we've had significant changes in market movements since then. We have reevaluated certain schemes. So it's all taken account of and getting to that GBP 440 million.
And the important word was that we didn't say GBP 440 million. We said in excess of GBP 440 million.
Yes. So I guess coming back to the then therefore the gross margin on the Housebuilding business. So you obviously stand out, right? I mean, you've mentioned some of your peers that are talking some substantial decline, 200 basis points sort of.
Well, we...
Right? So the question is, what's the gap here, right? I mean, is it...
We said a margin of 23.4% down to kind of 22%, didn't we?
Yes.
So we're expecting the gross margin in Housebuilding to come back in those numbers.
But the Countryside coming is broadly around 19%, if that's part of your question, Greg, in terms of what's coming into that Housebuilding.
Okay. So the Countryside coming into the Housebuilding business will deflate the numbers. But that's where it is.
Okay. So all said and done, you're going to give a lot of information on cost. What do you think cost inflation was last year and what will it be this year? I don't know how you...
Cost inflation was between 6% and 8% last year. And we would expect overall cost in deflation, I'm going to pump for somewhere between 2% to 3%.
But I think that is unique to Vistry. So it's back to -- we are renegotiating 140 supply contracts. There is cost inflation in the marketplace. And so you put some numbers around it, we would have said there was a risk of over GBP 30 million worth of potential cost inflation coming into our business that we are looking to negate. Greg is looking to more than negate, as you heard a moment ago.
That makes sense. And then finally, sort of hold the debt and cash guidance, what are you assuming land creditors do? This year, they ended last year it was GBP 68 million. So do you assume the flat, down, up?
Slightly down this year. You'll see there's a slide at the back.
Yes. But what's coming in, so net?
So net, so I would say that we're going to see liquidity come down a bit because we've got that significant increase in -- we've got a significant outflow from previous land creditors in '23.
Gregor, all I'd add to that is you know we do some very big schemes. There are some big individual land creditors, and you can see that in some of the long tail of land creditors. So we'll see exactly which starts we secured during the year.
Charlie Campbell, Liberum. Just sort of one question really on the overheads within the Housebuilding division. Clearly, kind of a reduction in '22, if I've done the math right. Is there sort of an incremental benefit still to come in '23? Or is the '22 number the right base rate thinking going forward?
I think going forward, the '22 base rate is correct. But for '23, it will actually get higher because we'll be doing -- we have made and had some losses in both people and roles. But that won't cover the shortfall in 15% to 20% of the number. So I would expect the Housebuilding had to go up by about 0.5% from...
Yes. So as a percentage of revenue, it will go up in '23. I think the '22 base is a sensible one. In time, there is still potential in terms of is a business that could deliver up to 8,000 homes from its 13 business units. So...
Which would take the Over down to about 4%, yes.
Yes, you get a bit more efficiency in the percentage. Clearly, direct staff on site, but the office kind of more base staff could still spread itself a bit more efficiently when we get that growth.
Yes. Okay. And I guess I can do the math, but there isn't very much overhead then coming in from the Countryside plots that move from the Housebuilding side?
Very minimal.
Only directly what is on site. We are...
which is on our way.
We are operating them from the existing structure.
I'm looking at Keith, but I would say less than 10 people? No, not even that. So 0. Yes. Clyde?
Clyde Lewis at Peel Hunt. I think I've got 3 as well. So maybe I'll do one at a time. Timber frame, obviously, you're going hard now at it. As you look at the savings and the benefits, is it going to be saving you money or saving time or a bit of both?
Right. So as and when we get -- first of all, the problem that Countryside, I think, had with timber frame was it wasn't mandated, Therefore, their losses came from being massively underutilized. So that isn't going to happen with Vistry. So whatever they can make, we will use. So I would suggest that there is a saving, obviously, on time. But in current building regs, I would suggest it's probably bordering on a neutral because if we don't put any margin on it. Because obviously, we can supply it for what it costs compared to discount. The East Midlands factory being reopened, which was a large loss in the Countryside numbers, so we're in for a pound, basically is a game changer. So we've got this fantastic huge new facility that will reopen in July, August this year, which will take capacity to at least 5,000. And at that point, with the overheads, we will expect it to actually make some money going forward today. As we get to 2025, it will be a cheaper alternative than building in the traditional way we are at this moment in time. So as of July change of building regs this year, the gap will be closed by 2025. I expect that the 8,000 to 12,000 which will come down, as it always does in any case, as we get closer to 2025 as people get the technology right, it will give us a real edge, as it will the likes of Barratt who have their own factories and Persimmon to take you forward because it will be the cheapest one to build, without any shed of a doubt by then.
Okay. Second one is on Countryside. And I think you obviously referred to the final quarter, i.e., October, November, December being very quiet for traditionally because it's got a September year-end. Changing the year-end to a December year-end sort of obviously matches the Vistry Group. How much of a challenge is that for the Countryside business?
No, they've managed to make all their completions to December already. So whereas -- it's incredible. Whereas their year-end was September and half year was March, we've done all the budgets. And all of a sudden, March and September seem to have moved to June on Christmas. So they've fallen into line very, very quickly. Unfortunately, that's still something we're working on.
Okay. The last one was possibly one for Stephen around housing associations, and it's always useful to get an update on what are they saying, what are they thinking. Obviously, quite a few of them have pulled back from doing private development. Has their appetite for using you and the Partnerships business increased over the last 6 to 12 months?
So I'll deal with the private development one first. There's still a real appetite for joint ventures. We were able to enter a joint venture in January on a very large site and land acquisition up in Warrington. We're talking to 2 national housing associations about joint ventures. We're just entering a joint venture with the Guinness Trust, and we're entering joint ventures with local authorities as well, most notably with Warrington District Council. So the investment in the mixed tenure multi-tenure delivery is definitely there. In terms of housing associations, there's definitely been a hardening of price because there is a bit more choice around for them as they look at bulk sales with some of the other housebuilders. And they have got headwinds to negotiate.
So I think there was an analysis looking at the G15 in London about how their operating margin has moved back from to 33% to 28% over the last year. So dealing with inflation and building safety both in terms of mold and fire risk and decarbonization clearly does weigh on the sector. But there are new for-profit providers there. It is not uniform. There's a lot of housing associations still looking to fill their programs. And if you ask yourself who you would want to work with, you're far more likely to want to work with an organization like Vistry that can offer you opportunities for Section 106 joint ventures, introduce land, partner delivery, can rapidly and easily use MMC, which is also a key area. And those housing associations are moving more quickly towards the adoption future home standards. And as others have explained, we've got a track record there. So we're definitely seeing pricing come in. A lot of partners still want to work with us, and that's continuing to be a robust, financially robust providers who want to work with us.
Can you just mention Linden First then Heylo?
Okay. Yes. We have -- unlike a lot of our building groups. We've got a full-profit RP within the group, Linden First. We established it 10 years ago with a great idea to do some an equity loan idea. And then along came Help to Buy, so we left it on the shelf. It's got a very small portfolio of homes. But we can now -- we're now looking at 2 or 3 options to capitalize both in the short term and longer term that for-profit RP, which would allow us at the point of sale to offer shared ownership. So the great product that could replace Help to Buy is shared ownership. But we know there's lots of demand. Keith has had a business that has really led the way in working with Halo across the country being able to offer our customers shared ownership at the point of sale as a sales incentive essentially, as an enabler. And we think there are ways that we can work with our other RPs on capitalizing that Linden First and being able to offer shared ownership across a range of our sales outlets in housebuilding and partnerships.
But it's very -- I think we're on the cost or something quite big in the next couple of months with Linden First, working with Heylo, that could very well or somebody else. But Linden First, which could give us an edge on our competitors and offering a real shared equity product that would in a lot of instances be like-for-like without to buy.
Can I ask a follow-up on local authorities? I mean, again, traditionally, they've not been allowed to get into development. Are they -- how quickly is that changing now with the rule changes?
Well, that's a very timely question. Yesterday morning, I had a couple of meetings with consultants who were both saying that they are being approached by local authorities through advice on how they can bring forward land assets they've got and how they can work with the development sector to bring forward mixed tenure developments. So I think local authorities have enormous capacity. We're working across the group now with 30 to 40 local authorities. We were with 22 when we were just Vistry. If you add the Countryside Partnerships with local authorities, it's a considerable number. But there's more to go at. So I'm expecting local authorities to continue to be stepping forward and looking for delivery as that market develops. .
But I think over the next 2 years, they will be a bigger part of our business.
Well, if you look at our joint venture with Warwickshire here, they've put 3 large sites into a joint venture, asked us to work with them and bring that forward. Local authorities, of course, then get affordable supply but they also get revenues. And it's a way of bringing forward housing across the whole of their area. And they're proactive. What they need is partners who speak their language and partners who've got a track record of delivery, and that's an area that we obviously can present.
Sam Cullen from Peel Hunt. I've got 2, really. First one is on planning. I think Tim, in your section, you outlined the site increases that come across some countryside. Are you organically increasing site numbers this year in household and in partnerships in terms of the -- kind of pro forma basis? The second one is..
No. So we'll be sticking to broadly where we were, so it won't be an increase.
Second one is you mentioned kind of larger sites, Greg, and some of your peers probably struggle from having unable to convert plots in the land bank into saleable outlets. Can you talk a bit about the advantages that you think Partnerships gives you in that context in terms of...
Yes. I think Stephen touched on a site in Warrington that we acquired in January. So if I've got it right, Stephen, tell me when I go wrong kind of 1,200 units? 1,200 units, kind of GBP 112 million acquisition. So we -- you're looking at it and the land owner wants as much money as they always do upfront. And In some instances, they're prepared to have a lesser overall some for the more money you can give them upfront. So we work with Torus Housing Association. Torus is the largest housing association in the Northwest. And broadly, I haven't got it quite right, but probably 340 of the units on a phase that are being done by housebuilding. And they will -- and partnerships have entered into a joint venture with Torus for the 900 or so remaining units as part of that joint venture, they will service the site for house buildings. The house building are going to get a service road services, all the utilities in and construct circa 300 units as they would do. And Partnerships have entered into the JV. And we have paid a considerable part of that, GBP 108 million. And when we say we, Torus have because we haven't paid anything. So with the -- such is the shortage, embarrassing shortage of affordable housing, it is amazing what local authorities Warwickshire, to say one, and housing associations are prepared to do to use the vast balance sheet to get land over the line. And they're borrowing -- they had bonds of 50 years, their borrowing rates are incredible. So they're much better at it. So they see the strength that they can bring to the party is their balance sheet and their borrowing capability compared to where Vistry with a decent balance sheet. They want to enter into a JV with somebody who's going to be around for 5 years, and they're looking at the expertise plus also our balance sheet. And undoubtedly, we will be here.
But I think the probably 10 schemes now we've done with partnerships and house build and working together with local authorities and housing associations, so it's not one or two. One, it never ceases to amaze me the hunger that these people have to get affordable housing because they can't get it any other way. And they're matching that hunger with balance sheet and payments upfront, which basically on Warrington, blew the competition away. At Warwickshire, we paid all the money upfront. Again, how much money did this Vistry put in that? None. Whereas actually district council were paid all GBP 60-odd million upfront. And we pay a ticket as a joint venture at about 2.6%. So it's incredibly cheap money, and that's what they're prepared to do because they've got to get affordable housing sorted out, and it's embarrassing where we are as a country with affordable housing. What have I said wrong, Stephen?
No. You've said it absolutely perfect. I was just going to make one other point about Warrington. When you look at that slide, it's a great example of where we'll have all 4 brands, so the 3 retail brands and the Countryside Partnership brand, all those flags flying. And of course, it's got great proximity to our factory Warrington. So we're really capturing all the benefits of the group. .
Yes. And be in no doubt, we're talking about this site in Warrington would be seen as 1 of the best sites in that area. So it's prime, prime, prime. .
Just the last one is on -- you mentioned first-time buyers struggling and just kind of prospects for potential government schemes to... .
Earl, take that one.
Well, it was a bit silent last week, wasn't it? Let's be honest. So not really relying on government. You've just heard we are trying to do, which is trying to bring in shared ownership scheme somewhere of our own, and we've got our own RP to try and look at that. And then we were one of the first to sign up to the likes of deposit unlock, but it's not getting the traction still in terms of what's coming through. We've got various schemes running, including the widest definition of the bank of mom and dad or uncut friends, et cetera, to try and help, but the first-time buyers are struggling at the minute to get on the latter. And look, we do think that the shared ownership answer is the right one, wherever that can come from.
Okay. John?
John Fraser-Andrews, HSBC. I'll start with Partnerships, if I may. The -- I think it's 10% revenue growth that you're planning this year, Greg, is that all in volume? Or is there any price impact in that 10%?
There is an increase in the partner -- sorry, the mixed tenure. So that will be a part of it. But the biggest part is growth.
And partner delivery specifically. Tim has flagged a rebound this year in '23. The decline last year, was that just delays in the back end? Were there any sort of specific issues?
Some planning issues, as we always had. But no, the planning issues would be the only scenario I'm aware of, but that will rebound to -- what are we talking about, GBP 0.5 billion?
Yes.
GBP 0.5 billion this year.
So that would be cash upfront more than holding its own then in the 10% revenue?
Great. Yes, it's about the same. Yes.
Okay. And then Partnerships margin within the GBP 440 million, what's baked in there? What's expected on the Partnership's margin? And how does Countryside blend into the 10.5%, if I remember rightly, last year?
I think the overall blend, lots of moving parts within margins. So I think we were at 10.7% in FY '22. If anything, it's going to edge up slightly. But overall, the overall blend should be about the same.
So circa 11%, John.
Yes.
Then, if we can come on to fixed costs, GBP 33 million in '22. What's the outlook for '23 and what pay rises, if any, are you you're planning for staff this year?
Well, first of all, pay races have gone through just in line with -- I don't know about how open we've been, but a sort of a roughly 5% sort of wage.
That was down from the 1st of January.
Yes, from the 1st of January. In terms of the central cost of GBP 33 million, there will be a slight increase due to the size of the enlarged group, but not materially different from FY '22.
And are the synergies impacting that GBP 33 million number? So...
Yes. Although most of the synergies will be within the business. There will be some benefit of synergies because...
There are some synergies.
So things like the PLC costs of Countryside have all pretty much gone and absorbed into one single set of PLC costs.
Okay. Great. And just finally then, 2 quick ones. The Part L and F cost, the solution, you have the low-cost solution, if you could elaborate on that and the a shared ownership product. Is that -- are you passing on an interest cost to the purchaser in that product so it's sort of net neutral for yourselves just trying to facilitate business?
Yes. So sorry, the first one was the Part L and F. Yes. So I mean, the low-cost solution is from continually technically challenges the SAP analysis in terms of working with our supply chain partners, in terms of the materials that are going into it. Still certainly for L and F predominantly fabric first, but we've -- in terms of the design of our standard homes, we've recently had a further reduction in cost, looking at the amount of PV that we need to put on some of those homes, et cetera. So that is how we're doing it. And as I say, we've been building some of these homes for local authorities and providers to actually get the experience and making sure we're getting the right ratings with those, both for L and F and now for 2025. So that's where that is coming from.
And then sorry, your second question was around shared ownership?
The costs that the customers must be bearing some sort of interest cost on...
Correct, as they always would do. I mean, I would think of it as a Help to Buy product, or if you wanted to liken it to one that we have used before, which is the one where we've partnered with Halo before. You can find the Home Reach scheme on their website, and you can see exactly how that works, but it's similar to Help to Buy scheme.
Yes. they pay interest straightaway as opposed with Help to Buy. They have 5 years on the house, excludes the plan.
2.75% on the return.
Thanks. Thanks, Steve.
Okay. I think -- sorry, Susie?
Conscious of the time, Gregory. We have had a few questions online, but I think we'll just ask one for the moment and we'll deal with the rest separately. And just a quick one Andy Murphy. So I'm very impressed with the customer satisfaction survey results. Please, can you give me some color on your action points that resulted in these improvements and the cost of it, if relevant.
I would suggest there's no cost. The improvement has come from every day starts with a league table. So if your score goes down and you're a Managing Director of a business unit, it's a very bad day. And there's been lots of people coming back in the group basically saying, can we make it weekly? And the answer is always no. So every single day, every score gets logged in and every business unit knows where it is in the current league table. We also have to -- within 28 days, every business unit has to write to the executive explaining why they've received a no, which I'm sure is a pain in the a** for them, but they -- we don't want any no. So it's a complete and utter total focus on a day-to-day basis. .
I would just add to that, I mean, it is the whole journey. It's build, sales, customer service working together throughout. The quality scores and the focus on RIs and CQRs are absolutely fundamental, do it right first time, great quality home, great customer service. No extra cost.
That's an even better answer.
As I say, we had a few, we'll deal with the rest off-line given it's nearly 10:00.
Great. Okay. Thanks much for your -- sorry.
There was one hand in the room.
Sorry, go on.
Sorry, last one. Anthony Manning, Bank of America. Just quickly, could I have a bit more color on the cash flow guidance this year, for example, how much of the costs of the cost reductions you made. And then thinking about the net debt, how should we think about that over the medium term, considering the growth that you see and the kind of cash returns to shareholders priorities as well.
You want to take that, Tim?
So I think for '23, we have a very similar cash profile to the one we put up for '22 and the 3 significant movements that we would -- had would be, one, the fire safety costs of somewhere between GBP 50 and GBP 60 million; the second is the cash outflow from integration, something around GBP 40 million for integration costs; and the third would be increased land and working capital of around GBP 100 million. So that -- those movements gets to the sort of net debt guidance that I talked about earlier on. And over time, I think what our long-term strategy is, I'll put that into the same bucket as the capital allocation review because we need to look at all of our stakeholders, all of our investment needs and all of the long-term strategy that we need to deliver our long-term targets. So ask me again in September.
I will do.
Don't forget. Okay. Thanks very much, everyone. All the best.