Welcome to HL's reimagined News, Insights and Research experience. Find out more

Share research

Vistry - 2023 guidance intact despite slowdown in private sales

Housebuilder Vistry's first half trading update reported a small rise in the average weekly sales rate from 0.84 to 0.86.

No recommendation - No news or research item is a personal recommendation to deal. All investments can fall as well as rise in value so you could get back less than you invest.

Prices delayed by at least 15 minutes

This article is more than 6 months old

It was correct at the time of publishing. Our views and any references to tax, investment, and pension rules may have changed since then.

Housebuilder Vistry's first half trading update reported a small rise in the average weekly sales rate from 0.84 to 0.86.

The Partnerships division which includes a contribution from Countrywide for the first time has seen completions nearly treble to 3,203. Its underlying first half revenue is expected to jump from £426m to £930m.

In Housebuilding, challenging conditions meant completions fell 22% to 2,847, with adjusted revenue down from £902m to £810m. Several bulk transactions have helped private sales prices remain resilient.

Net debt at the period end stood at £330m, compared to net cash of £115m a year ago. That reflected higher cash demands of the enlarged Group, as well internal investment.

Vistry noted a slowdown in private sales activity following recent interest rises. Nonetheless, underlying pre-tax earnings are still expected to be £450m. This is underpinned by targeted cost savings and 57% growth in forward sales to £4.2bn, largely due to the integration of Countrywide.

The shares climbed 1.7% following the announcement.

View the latest Vistry share price and how to deal

Our view

Vistry's holding on to its recently upgraded full year pre-tax profit guidance.

Private sales rates improved early on in the new year, helped by an increase in customer incentives which is likely to keep a lid on margins. We remain cautious about the immediate outlook for the private housing market. Management has slowed build rates to reflect an expected decrease in year-on-year private sales rates, a trend that's been borne out in the wake of continued interest rate rises.

Despite that, Vistry remains confident it can manage its way through the tough environment and continue to grow margins. That's largely thanks to the Partnerships business, which involves construction and development work with local authorities and housing associations.

Revenues on this side of the business should be more robust. The need for more social and affordable housing doesn't go away because economic conditions look tough, and the huge £3.0bn Partnership order book is a real asset. We're supportive of Vistry's approach here, introducing more mixed tenure projects, which combine private ownership with social housing. This is helping to boost margins, while still providing large fixed-volume projects.

The purchase of smaller rival, Countryside Partnerships, back in November 2022 looks to be progressing well. This marks a bid to build scale and improve cost efficiencies, with around £60m in savings expected to be realised by the end of 2024. This should help to offset some of the pain being felt whilst build cost inflation remains a challenge for the industry to wrestle with.

Looking to financial resilience, key for any business in a cyclical sector like housebuilding, the Group's slipped into a net debt position over recent months as it looks to drive the growth of the Partnerships business. Fire-safety commitments are also taking their toll on cash resources. An update on spending priorities will accompany September's half year results, so keep an eye out for any changes to the dividend policy which may impact the 6.0% prospective yield. As ever no dividends are guaranteed.

Vistry offers something different to the broader sector, with its Partnerships business making it one of our preferred names in the sector. The valuation isn't too demanding either. There are some early signs that we've seen the worst of interest rate rises in the UK, but it's too early to call for certain so be prepared for further volatility.

Vistry key facts

All ratios are sourced from Refinitiv. Please remember yields are variable and not a reliable indicator of future income. Keep in mind key figures shouldn't be looked at on their own - it's important to understand the big picture.

This article is original Hargreaves Lansdown content, published by Hargreaves Lansdown. It was correct as at the date of publication, and our views may have changed since then. Unless otherwise stated estimates, including prospective yields, are a consensus of analyst forecasts provided by Refinitiv. These estimates are not a reliable indicator of future performance. Yields are variable and not guaranteed. Investments rise and fall in value so investors could make a loss.

This article is not advice or a recommendation to buy, sell or hold any investment. No view is given on the present or future value or price of any investment, and investors should form their own view on any proposed investment. This article has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is considered a marketing communication. Non-independent research is not subject to FCA rules prohibiting dealing ahead of research, however HL has put controls in place (including dealing restrictions, physical and information barriers) to manage potential conflicts of interest presented by such dealing. Please see our full non-independent research disclosure for more information.

Latest from Share research
Weekly newsletter
Sign up for editors choice. The week's top investment stories, free in your inbox every Saturday.
Our content review process
The aim of Hargreaves Lansdown's financial content review process is to ensure accuracy, clarity, and comprehensiveness of all published materials
Article history
Published: 20th July 2023