Ahead of its AGM, Vistry provided a trading update covering its year-to-date performance. The group said that sales rates continue to improve, with average weekly private sales rates coming in at 0.83. Open market pricing has remained "resilient" but has been supported by the use of incentives, particularly targeted towards first time buyers.
The forward order book stands at £4.5bn, with the Partnerships and Housebuilding businesses accounting for £3.1bn and £1.4bn of this respectively. Both businesses also invested in their land bank, growing the number of plots owned.
Given the strength of the forward order book, full-year underlying pre-tax profit is expected to be in excess of £450m, slightly ahead of previous guidance.
The shares rose 2.9% following the announcement.
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Our view
Vistry's trading covering year-to-date performance showed that things are largely trending in the right direction for the housebuilder. That's led to a slight upgrade to full year pre-tax profit guidance.
Private sales rates have improved in the new year, helped by an increase in customer incentives which is likely to keep a lid on margins. We remain cautious about the immediate outlook for the private housing market. Management has slowed build rates to reflect an expected decrease in year-on-year private sales rates.
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Despite that, Vistry remains confident it can manage its way through the tough environment and continue to grow margins. That's largely thanks to the Partnerships business, which involves construction and development work with local authorities and housing associations.
Revenues on this side of the business should be more robust. The need for more social and affordable housing doesn't go away because economic conditions look tough, and the huge £3.1bn Partnership order book is a real asset. We're supportive of Vistry's approach here, introducing more mixed tenure projects, which combine private ownership with social housing. This is helping to boost margins, while still providing large fixed-volume projects.
The purchase of smaller rival, Countryside Partnerships, back in November 2022 looks to be progressing well. This marks a bid to build scale and improve cost efficiencies, with around £60m in savings expected to be realised by the end of 2024. This should help to offset some of the pain being felt whilst build cost inflation remains a challenge for the industry to wrestle with.
Looking to financial resilience, key for any business in a cyclical sector like housebuilding, net cash was £118.2m at the last count. Given the group's added to its land bank, this figure may well be lower now. While not in danger territory, it's nowhere near the levels of some of its main rivals, so we'd like to see the group's cash cushion built back up.
Vistry offers something different to the broader sector, with its Partnerships business making it one of our preferred names in the sector. The valuation isn't too demanding either, but a continued decline in economic conditions would put serious pressure on the entire sector, Vistry included.
Vistry key facts
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