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Vistry - 2022 in-line, forward sales of 4.6bn GBP

Vistry saw full year completions for the housebuilding division increase by 3% to 6,774...

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Vistry saw full year completions for the housebuilding division increase by 3% to 6,774. The division's average selling price increased 6% to £324,000, reflecting changes in the mix of houses sold and house price inflation across the year.

The group completed its acquisition of Countryside Partnerships on 11th November 2022. The acquisition is expected to deliver at least £50m in business synergies over the next financial year.

Housebuilding secured 5,352 plots, down from 7,667 plots last year. The rate of land acquisition "consciously slowed" during the fourth quarter, reflecting the increased level of uncertainty in the housing market.

Full year underlying profit before tax is expected to increase by roughly 21% to £418m, in-line with previous expectations.

The group's net cash position came in better than expected at £115m.

The group finished the year with forward sales standing at £4.6bn, up from £2.7bn at the end of last year. This includes forward sales of £3.6bn for the Partnerships business whichVistry sees as less sensitive to open market demand than Housebuilding.

The shares rose 1% following the announcement.

View the latest Vistry share price and how to deal

Our view

Vistry's full year trading update was largely what we were expecting. But in the current market, that's good going.

The recently completeled purchase of smaller rival, Countryside Partnerships, looks to be progressing well. This marks a bid to build scale, uncover cost efficiencies and batten down the hatches.

The deal had plenty to like, especially because the debt taken on to fund it appears to come with reasonable terms and a sensible repayment horizon. As with any major deal, there is an element of execution risk so we'll be keeping a close eye.

First thing's first though, the fourth quarter did show signs of a weakening private market. Though that's hardly surprising, when you consider the broader economic conditions. Higher house prices and a cost-of-living crisis mean buyers' spending power's being eroded.

For all the gloom though, pricing is proving relatively resilient - cautious would be the best way to describe managements forward looking comments when it comes to private sales.

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.

Demand for 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 £3.6bn 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 helps to boost margins, while still providing large fixed-volume projects.

We're keeping an eye on any developments from the government on local housing policies. Changes are expected in spring, with some proposals impacting housing delivery. This could impact Partnership orders but it's a little early to say.

Looking to financial resilience, key for any business in a cyclical sector like housebuilding, there was a positive surprise on the cash front. Net cash came in better than expected at £115m, after a buyback and the Countryside deal. That's nowhere near the levels of some of its main rivals, but does offer a degree of flexibility as we enter an uncertain phase.

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, but a continued decline in economic conditions would put serious pressure on the entire sector, Vistry included.

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.

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Written by
Matt Britzman
Equity Analyst

Matt is an Equity Analyst on the share research team, providing up-to-date research and analysis on individual companies and wider sectors.

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Article history
Published: 18th January 2023