Vistry’s first-half underlying revenue rose 11.1% to £2.0bn, reflecting improved sales rates. Average selling prices were in line with the prior year.
Underlying operating profit grew 10.0% to £227.3mn, helped by increased sales and lower building material costs.
Total completions were up 9.1% to 7,792 new homes. The forward sales position has also risen 19% to £5.1bn.
Free cash outflows improved from £323.4mn to £74.1mn. Net debt fell slightly to £322.0mn.
Vistry is “on track” to deliver more than 18,000 new homes this year, and it expects profits to be ahead of the prior year.
£130mn of share buybacks have been announced, to begin this month and are expected to be completed by May 2025
The shares rose 3.0% following the announcement.
Our view
Vistry looks to be bucking the trend of a housing market slowdown. In a tough market, sales rates have improved, and underlying operating profits rose at double-digit rates over the first half.
The group’s transition to a Partnerships giant, which specialises in providing affordable housing by teaming up with local authorities and housing associations, has helped it outperform the more traditional housebuilders of late. These partners foot most of the bill, which reduces risk and frees up cash to deploy elsewhere in the business.
But that comes at a cost, as these tend to be lower-margin than ordinary housebuilding projects. And selling these houses as part of bulk deals reduces risk further but lowers the average selling price.
That’s exactly what we’ve seen play out. While profits are moving in the right direction, that’s mainly due to increased volumes. More profitable open-market sales now make up a smaller slice of the overall pie, although that's been largely mitigated by lower building costs.
Vistry’s high volumes of affordable housing looks well aligned with the new government’s ambition to address the country’s housing shortage. We see the full-year guidance to deliver more than 18,000 new homes this year as achievable and the group says it has the capacity to step this up further if needed, so there are growth levers to pull.
The huge £5.1bn order book is a real asset too, providing good near-term revenue visibility. This allows the group to lock in most of its material prices well in advance, helping to avoid any nasty surprises on the cost side. Vistry’s huge scale also allows it to negotiate better prices on these materials, ultimately helping profitability.
Looking to financial resilience, Vistry's slipped into a net debt position, but winding down the traditional housebuilding business should help on this front. Land on the books that doesn't fit the new strategy is set to be sold off and is expected to help Vistry return to a net cash position by the end of 2024.
This is driving the group’s ambitious shareholder return targets. The plan is to return £1bn of cash to shareholders within three years through a combination of share buybacks and special dividends. This looks slightly stretching to us, but progress has been decent over the first year. As always, no shareholder returns are guaranteed.
In an uncertain housing market, Vistry’s strategy shift will likely continue to help it weather the challenges of 2024 better than many of its peers. But when mortgage affordability pressures ease and the housing market picks back up, we think other names in the sector will catch more wind in their sails.
Environmental, social and governance (ESG) risk
Most housebuilders are relatively low risk in terms of ESG, particularly for those in Europe. However, there are some environmental risks to consider, from direct emissions to the impact of their buildings on the local ecology. The quality and safety of their buildings is also a key risk.
According to Sustainalytics, Vistry’s management of ESG risk is strong.
It doesn’t disclose its greenhouse gas reduction initiatives, but it has set itself targets and deadlines. And its reporting of direct and indirect emissions is in line with best practice. However, there’s currently no disclosure of an established product and safety programme or disclosures around recycled material usage.
Vistry key facts
All ratios are sourced from Refinitiv, based on previous day’s closing values. Please remember yields are variable and not a reliable indicator of future income. Keep in mind key figures shouldn’t be looked at on their own – it’s important to understand the big picture.
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