Vistry Group Plc (VTY) Ordinary 50p

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Vistry’s full-year underlying revenue rose 7% to £4.3bn, helped by a 7% increase in completions to 17,225 new homes. Average selling prices were broadly stable at £275,000.

Underlying operating profit fell 25% to £263.5mn. The decline was driven by a shift in demand towards lower-margin housing and the negative impact of previously announced cost issues in the South Division.

Free cash flow improved from an outflow of £74.9mn to an inflow of £132.1mn, helped by a reduction in land spending. Net debt worsened from £88.8mn to £180.7mn.

In 2025, sales rates have fallen from 0.81 to 0.59 year-to-date. Vistry expects performance weighted to the second half. Over the medium term, revenue is expected to grow by 5-8% annually.

No final dividend has been announced (2023: 32p). The final £92mn of its £130mn buyback programme is expected to finish by mid-2026.

The shares fell 6.5% in early trading.

Our view

Vistry’s full-year results wrap up a tough 2024 for the housebuilder. Profits slumped due to cost issues in its South division and demand shifted to lower-margin housing. In a bid to shore up the balance sheet, dividend payments have been halted which dampened market sentiment on the day.

At its heart, Vistry’s Partnership model specialises in providing affordable housing by teaming up with local authorities and housing associations. These partners foot most of the bill, which frees up Vistry’s cash to deploy on more projects across the business and drive faster-than-average growth.

It appears the group spread itself too thin and took its eye off the ball last year though. A series of managerial missteps and accounting issues led to several profit downgrades toward the tail end of 2024, raising serious questions about the new structure and internal controls.

The Partnerships model tends to be lower margin than ordinary housebuilding projects too. And while selling these houses as part of bulk deals brings more cash in the door in one go, it further lowers the average selling price, meaning there’s little room for error.

The huge order book is a real asset, standing at a mammoth £4.4bn. Vistry’s huge scale allows it to negotiate harder on prices of building materials, which should see it navigate build cost inflation better than most of its peers.

Looking ahead, Vistry’s high volumes of affordable housing look well aligned with the new government’s ambition to address the country’s housing shortage. Alongside early signs of improvements in open market sales, the group’s hoping to make progress on profits and cash generation in 2025, albeit off a much lower base.

Net debt has worsened over the year due to lower-than-expected sales rates and construction delays. With a weaker balance sheet than most of its peers, shareholder return targets have been scaled back and look set to take a backseat in the near term.

Vistry operates in a corner of the housing market where demand and sales should hold up relatively well, no matter the economic mood music. But management missteps have shaken confidence in the group’s costs and profit targets, and more bad news can’t be ruled out. While the valuation looks attractive versus the long-run average, we’d like to see concrete signs that management issues have been ironed out before getting too excited.

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.

This article is original Hargreaves Lansdown content, published by Hargreaves Lansdown. It was correct as at the date of publication, and our views may have changed since then. Unless otherwise stated estimates, including prospective yields, are a consensus of analyst forecasts provided by Refinitiv. These estimates are not a reliable indicator of future performance. Yields are variable and not guaranteed. Investments rise and fall in value so investors could make a loss.

This article is not advice or a recommendation to buy, sell or hold any investment. No view is given on the present or future value or price of any investment, and investors should form their own view on any proposed investment. This article has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is considered a marketing communication. Non-independent research is not subject to FCA rules prohibiting dealing ahead of research, however HL has put controls in place (including dealing restrictions, physical and information barriers) to manage potential conflicts of interest presented by such dealing. Please see our full non-independent research disclosure for more information.

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