Interactive Investor

Insider: head housebuilder spends £½m on shares 

8th March 2021 09:22

Graeme Evans from interactive investor

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Despite recovering much ground lost during the pandemic, this chief exec keeps buying.

Confidence in the house market and outlook for profits at Vistry Group (LSE:VTY) has prompted its boss to snap up another £500,000 shares in the former Bovis Homes business.

The purchase by Greg Fitzgerald was made on the day he revealed strong current trading, with the last four weeks particularly robust despite the lockdown and uncertainty caused by changes to the Help to Buy scheme and potential ending of the stamp duty holiday.

Dividend payments resumed with 20p a share in 2020 results before Fitzgerald reiterated guidance that profits will double to at least £310 million, sending shares 3% higher.

Fitzgerald, who has been a frequent buyer of the company's shares, bought at a price of 925p, which compares with more than 1,300p prior to the pandemic sell-off.

The FTSE 250 stock sank as low as 510p in April and 540p in early November, but has been buoyed by a resilient property market and a strong second half performance in which it delivered completions at the top end of its revised expectations.

Numis Securities and Jefferies are backing the shares to reach 1,100p and 1,087p respectively, while Goodbody analysts said the results were more evidence of Vistry delivering on targets.

Fitzgerald has done an impressive job at the housebuilder, having joined in 2017 when Bovis had a reputation for poor build standards and had failed to capitalise on the Help to Buy boom.

A three-year turnaround mission complete, the company changed its name to Vistry in January 2000 after a deal with Galliford Try (LSE:GFRD) to buy Linden Homes and its Partnerships & Regeneration business. Fitzgerald knew Linden as well as anybody, having overseen its purchase in 2007 during 10 years in charge of Galliford up until 2015.

The Vistry Partnerships business, which works with housing associations and local authorities and was a key driver of the Galliford acquisition, delivered an improved performance during 2020 and is on track to meet 2022 targets of £1 billion revenues and 10% operating margin.

The Housebuilding arm delivered 4,652 completions at an average selling price of just over £300,000, with Help to Buy a significant contributor after 36% of completions utilised the scheme.

As well as a good level of sales under the new format Help to Buy scheme, Vistry also noted that the majority of reservations taken since December were for completions after the anticipated March end date for the stamp duty holiday. This has now been extended to September.

Assuming stable market conditions, Vistry expects to deliver a step-up in housebuilding completions to about 6,300 units and an improvement in adjusted gross margin to 22%.

Vistry ended the last financial year with debt of £38 million, compared with a post-acquisition peak of £357.3 million in June. This progress allows the payment of the 20p final dividend on 21 May, with a longer-term target to reduce dividend cover from 2.5 times to 1.75 times.

Reiterating its buy recommendation, Numis said it did not believe Vistry's momentum, improved balance sheet and Partnerships fundamentals were reflected in the current December 2022 price/earnings multiple of seven times and a yield of 6.4%.

Nichols chiefs buy cheap round

The imminent re-opening of pubs and restaurants has boosted boardroom optimism at soft drinks company Nichols (LSE:NICL) after its two most senior directors bought shares in the Vimto maker.

Andrew Milne, who became chief executive in January after eight years with the group, and his finance boss David Rattigan acquired shares on Friday afternoon in deals worth almost £20,000 in both cases.

Their purchases at prices of 1,159p and 1,144p were made two days after Nichols posted results for 2020 showing a 64% drop in adjusted profits to £11.6 million. The impact of the pandemic sent revenues down 19.3% to £118.7 million, with sales in the out of home category off 61.4%.

Nichols said it was too early to give profits guidance on 2021 trading, meaning shares closed the week at 1,145p after falling as much as 4% on the day of the results. Vaccine-driven optimism had sent them as high as 1,400p in December, but they fell back as far 1,080p in late February as new variants of Covid-19 delivered a setback to recovery hopes.

The signs are now more encouraging, with some pubs able to open from next month and the extension of the furlough scheme boosting survival hopes in the hospitality industry.

Chairman John Nichols said the company was in the best possible place to “build back better” from the crisis, with the strength of the Vimto brand a particular asset. The group, whose other brands include Feel Good, Levi Roots and Sunkist, also has a strong balance sheet following a strong cash flow performance in 2020.

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

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