ii view: Vistry’s affordable homes are in demand

Full-year results to 31 December

• Adjusted revenue down 9% to £4 billion 
• Adjusted pre-tax profit flat at £419 million
• Net debt of £89 million, down from net cash of £118 million
• New share buyback of £100 million

Chief executive Greg Fitzgerald said:

"As a leading Partnerships business, the Group is committed to creating quality new homes through the development of sustainable new communities and places people love.  We see high demand for mixed tenure housing and regeneration across the country and are uniquely placed to deliver on this market opportunity, helping address the country's acute need for housing.

“The business has started the year with a real passion and commitment to deliver on its strategy and medium-term financial targets, and we expect to make good progress during 2024."

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ii round-up:

Housebuilder Vistry Group (LSE:VTY) today detailed improving sales and a new £100 million share buyback programme as it focuses on building and selling mixed tenure affordable homes built under partnerships including with local authorities.

Sales of 0.72 per week per site for 2024 so far is up from 0.61 in 2023, with forecast build completions of 17,500 in 2024 up from 16,118 the year before. Expectations are underpinned by forward sales of £4.6 billion including £2.1 billion for 2024. 

Shares in the FTSE 250 housebuilder rose 7% in UK trading having come into this latest news up by close to a half over the last year. That’s similar to takeover target Redrow (LSE:RDW) and way ahead of a near 3% rise for the FTSE 250 index itself. 

The former Bovis Homes and aquirer of Countryside Homes announced last year a strategy to become a partnership focused housebuilder only, with a subsequent move to merge its traditional housebuilding business into the existing partnerships division.

Adjusted sales for the full year 2023, including its Countryside acquisition, fell 9% to £4 billion, leaving adjusted pre-tax profit flat at £419 million. 

Land buying continued during 2023 with 13,067 new plots acquired, up from 8,547 in 2022, with increased capacity at its timber frame building plant to deliver a planned 4,000 units during 2024 versus 2,500 in 2023. 

Net debt of £89 million as of the 2023 year-end is expected to return to net cash by the end of 2024, with the new £100 million share buyback possibly being enhanced during the year with other special distributions.

An AGM and trading update are scheduled for 16 May. 

ii view:

Vistry Group was formed following the purchase by Bovis Homes of Linden Homes and its partnership and regeneration businesses in January 2020. It then acquired Countryside in 2022, and in 2023 merged its two businesses into one. Today it operates across 26 regional businesses, down from 32 previously. Each regional business is targeted to deliver up to 900 new homes each year, with a total group capacity to deliver more than 20,000 units. 

For investors, the merging of its more traditional housebuilding business leaves it without the likely upside it offers during a potential housing market recovery. An investigation by the Competition and Markets Authority is now underway into the broader housebuilding industry, while the potential for unemployment to rise, impacting the billing paying ability of renters and homeowners alike, also warrants consideration.  

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On the upside, Vistry’s differentiated business model now sets it apart from fellow traditional housebuilders. Rising demand for its affordable homes has also been seen. Cash generation is expected to move it back to a position of net cash by the 2024 year-end, while a target to return £1 billion to shareholders over the next three years is now being pursued. 

For now, and while some caution looks sensible, positive 2024 trading momentum is likely to keep existing shareholders happy.   

Positives: 

• Differentiated business model
• Significant medium term share buyback programme

Negatives:

• Reduced business diversity
• Uncertain economic outlook

The average rating of stock market analysts:

Strong hold