Year of two halves for Vistry

The year has proved to be one of two contrasting halves for Vistry Group (LSE:VTY), with a weak opening six months partly reversed by the Government announcement on affordable housing, which plays into the group’s Partnerships strategy.

• Our Services: SIPP Account | Stocks & Shares ISA | See all Investment Accounts

Vistry is now focused on a Partnership programme with organisations such as local authorities and housing associations, which drives the majority of completions. The Government announcement of a £39 billion, 10-year Social and Affordable Homes Programme (SAHP) was one which the group unsurprisingly welcomed, since it will benefit from this unprecedented funding which is aimed, in part, to deal with the national housing supply shortage. Indeed, the group has already secured a £50 million grant for affordable housing from Homes England, which it hopes to receive towards the middle of this year.

In the meantime, the numbers themselves could point to the worst being over for Vistry. In a trading update for the year ended 31 December 2025, the company said annual revenue is expected to be marginally lower at £4.2 billion compared with £4.3 billion previously, although adjusted pre-tax profit is estimated to have risen to £270 million from £263.5 million in the corresponding period. Completions fell to 15,700 from 17,225 homes, with Partner demand suffering prior to the June spending review and with open market business still hampered by consumer affordability challenges and fewer interest rate cuts than had previously been anticipated.

• Investment outlook: expert opinion, analysis and ideas
• 20 top small-cap share tips for 2026
• Stockwatch: things just got interesting for this small-cap

However, the group has a substantial forward order book of £4 billion, which provides a strong springboard for the year to come. It also gives some visibility on earnings which, coupled with the additional growth which the SAHP should provide, bodes well for immediate prospects.

Vistry has been keen to contain build cost inflation to reduce overall costs, as evidenced by an increasing reliance on timber frame units, where this offsite construction led to the delivery of 4,600 units compared to 2,900 the year previous. The move also contributed to an improvement in operating margin from 6.7% in the first half to 8.4% for the year, helped along by a 3% increase in average selling prices to £282,000, while also enabling the rebuild of the group’s financial position.

The group had previously suspended its dividend as part of that process and in the period reduced net debt from £180.7 million to £145 million, while at the same time being able to purchase 9,500 plots in the second half (and 12,600 for the year) with an eye on future profitability.

Partner Funded deals fell foul of funding uncertainty during the year which led to some delays in timing, while apprehension ahead of the Autumn Budget, especially in the third quarter, reduced the number of sales per site per week to 0.96 from a previous 1.07. From an investor viewpoint, there is also a lingering hangover from the previous series of profit warnings which led to the company being relegated from the FTSE100 in December 2024.

• Global Market Outlook 2026: trends, risks and the road ahead
• 5%-plus yields: fund and investment trust ideas in 2026
• Sign up to our free newsletter for investment ideas, latest news and award-winning analysis

More positively, a general rerating of the sector and a rising tide of optimism has lifted all boats, leading to a share price increase for Vistry of 33% over the last year, as compared to a gain of 16% for the wider FTSE250 index. However, this is far from sufficient to offset the damage wrought by the previous profit warnings, which leaves the shares down by 30% over the last two years.

With some investor trust having evaporated as a result, it could be some time until confidence in the group’s prospects can be rebuilt. As such, the market consensus of the shares as a hold is likely to remain in place until a more sustained recovery becomes evident, as reflected by a downcast reaction to the numbers in opening trade.

Full-year results are scheduled for 4 March.