ii view: housebuilder Vistry welcomes £39bn government support

First-half trading update to 30 June

• Expects revenues to be 10% lower at £1.8 billion
• Build completions down 13% to 6,800
• Expects pre-tax profit down 34% to £80 million
• Expects net debt to be 8% lower at £295 million
• £57 million of a £130 million share buyback programme now completed

Guidance:

• On track to deliver an increase in profit compared to 2024
• Forward order book of £4.3 billion, down from £5.1 billion in late June 2024 

Chief executive Greg Fitzgerald said: 

"I am pleased to report that the Group has delivered first half profits in line with expectations which underpin the Board's confidence in its full-year outlook.

“Working with our partners, we have good momentum and a strong deal pipeline which support our second half delivery and medium-term targets."

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ii round-up:

Housebuilder Vistry Group (LSE:VTY) sells across the three brands of Bovis, Linden and Countryside Homes.

Formerly Bovis Homes, Vistry today operates via six divisions across England and supported by three factories producing items such as timber frame panels and roof trusses.

For a round-up of this latest trading update, please click here. 

ii view:

Started in 1965, the Kent headquartered builder is today focused on affordable homes as well as selling some homes direct on the open market. Vistry is the partner of choice for more than 90 organisations such as local authorities and housing associations in developing mixed tenure homes such as shared ownership and rent-to-buy. A total of 73% of homes built during this latest half-year were partner funded, with the balance of 27% built for the open market. 

For investors, operational challenges suffered during 2024, impacting profit performance and resulting in a series of profit warnings, have arguably dented investor trust. A forecast price/earnings (PE) ratio above the three-year average may suggest the shares are still not obviously cheap. Factors such as elevated interest rates and affordability continue to dampen open market sales, while the lack of dividend payment compares to yields in excess of 4% at rivals Barratt Redrow (LSE:BTRW), Taylor Wimpey (LSE:TW.) and Persimmon (LSE:PSN).

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To the upside, the government's recently announced £39 billion 10-year affordable homes programme compares to a previous £11.5 billion five-year package. Group net debt has fallen, with a refinancing package achieved to 2028. Changes in management and group structure have been made following operational challenges in 2024, while M&A activity across the sector and following Barratt’s acquisition of Redrow should not be forgotten. 

On balance, a need for affordable housing remains, with Vistry now a key building sector provider. That said, a consensus analyst estimate of fair value close to 620p per share may suggest the shares are broadly 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