ii view: affordable homes builder Vistry stays 2025 confident

First-half results to 30 June

• Build completions down 12% to 6,889
• Revenue down 6% to £1.85 billion
• Adjusted pre-tax profit down 33% to £80.6 million
• No interim dividend payment
• Net debt down 9% to £293 million

Guidance:

• Continues to expect an increase to full-year 2025 profits compared to 2024
• Forward order book of £4.3 billion, down from £5.1 billion in late June 2024 

Chief executive Greg Fitzgerald said: “The group’s first-half performance was in line with expectations and we are well positioned to deliver for the full year. Working with our partners, we have a strong pipeline of development opportunities which will drive our second-half performance, with an expected significant step-up in completions and profits.”

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ii round-up:

Vistry Group (LSE:VTY) today detailed results broadly matching its previous trading update, although with the housebuilder flagging the uncertain economic outlook as potentially hindering its ambition to improve second-half sales. 

First-half build completions down 12% to 6,889 left revenues 6% lower at £1.85 billion, pushing a one-third drop in adjusted pre-tax profit to £80.6 million. However, the builder of both affordable and open market homes continues to expect an improvement in full-year 2025 profits compared to 2024. 

Shares for the FTSE 250 housebuilder fell 3% in UK trading having come into these latest results down by 55% over the last year. The FTSE 250 index is up 4% from a year ago. Shares for more traditional housebuilder Taylor Wimpey (LSE:TW.) are down 39% during that time. 

Selling across the three brands of Bovis, Linden and Countryside Homes, Vistry’s strategy is now focused on affordable homes as it looks to partner with organisations such as local authorities and housing associations to develop mixed-tenure homes such as shared ownership.

Just days ago, Vistry announced a new long-term investment joint venture with Homes England, the UK government’s housing and regeneration agency, to accelerate the development of large-scale residential sites across England.

Forward sales as of 30 June totalled £4.3 billion, down from £5.1 billion a year ago. Vistry previously suffered cost-discrepancy issues at its Southern division, resulting in an impact to 2024 profits. 

Group net debt fell 9% to £293 million with management’s ongoing focus on cash performance expected to result in an end-of-year net debt reduction. 

A third-quarter trading update is scheduled for 6 November. 

ii view:

Began in 1965 and formerly Bovis Homes, Vistry today operates via six divisions across England, supported by three factories producing items such as timber-frame panels and roof trusses. The FTSE 250 company is partner to more than 90 organisations such as local authorities and housing associations in developing mixed-tenure affordable homes such as rent-to-buy. Almost three-quarters of homes build during this first half were partner-funded with the balance built for the open market. 

Operational challenges during 2024 impacting profit performance and resulting in a series of profit warnings have arguably dented investor trust. An estimated price/earnings (PE) ratio above the three-year average may suggest the shares are still not obviously cheap. The lack of any dividend payment compares to income yields of over 4% at rivals Barratt Redrow (LSE:BTRW), Taylor Wimpey and Persimmon (LSE:PSN), while factors such as affordability and potential tax rises at the pending UK Budget may dampen demand. 

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More favourably, government support for affordable housing and partners continues to be seen with Homes England expected to invest £150 million. Changes in management and group structure have been made following operational challenges in 2024. Group net debt is down with a refinancing package achieved to 2028, while M&A activity across the sector and following Barratt’s acquisition of Redrow should not be forgotten.

In all, demand for affordable housing persists, with Vistry now a key building sector provider. That said, a consensus analyst estimate of fair value sat at close to 620p per share may suggest the shares are up with events for now. 

Positives: 

• Differentiated business model
• Ongoing share buyback programme

Negatives:

• Increased employer tax costs
• Uncertain economic outlook

The average rating of stock market analysts:

Hold