Vistry's half-year underlying revenue rose 31.4% to £1.8bn. This was driven by an increased number of completions in the affordable housing-based Partnerships division as a result of the Countryside acquisition, which more than offset a 28.3% decline in Housebuilding.
Underlying operating profit rose 4.3% to £206.7m, with the positive contribution from the Countryside acquisition largely offset by reduced volumes and margins within housebuilding.
Total completions rose 39.9% to 6,050, with Partnership completions almost tripling as a result of the Countryside acquisition. The order book stands at £4.3bn with almost 90.0% of revenue this financial year already secured.
Net debt was £328.7m, compared to a net cash position of £115.0m last year, as Vistry invested heavily to support growth in the Partnerships division. Free cash outflow worsened from £48.6m to £300m.
There's been a big strategy shift, with Housebuilding set to be fully merged into the Partnerships division by the end of the second half.
Full-year pre-tax profit guidance has been reiterated, expected to be in excess of £450m.
The shares rose 11.5% following the announcement.
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Our view
Half-year results brought with it a big change in strategy. The Housebuilding division is set to be wound up by the end of this financial year, with Vistry shifting its focus and resources solely towards its more defensive Partnerships business.
The purchase of smaller rival, Countryside Partnerships, back in November 2022 has been a huge success. The new enlarged division is a differentiation point from peers, and its increased scale and efficiencies are expected to fully offset build cost inflation this year.
Partnerships specialises in providing affordable housing by teaming up with local authorities and housing associations. These partners foot most of the bill, which reduces risk and allows Vistry to operate as a capital-light business. But that comes at a cost, as these tend to be lower margin than ordinary housebuilding projects.
That's where Vistry's strategy change comes in. Increasing its size and scale in the Partnerships space looks set to increase volumes, which should offset the margin decline's effect on overall profits. The huge £3.0bn Partnership order book is a real asset too, providing good revenue visibility with 90% already secured this financial year.
There are a couple of tailwinds working in Vistry's favour as well. Partnership revenues are typically more defensive than those from ordinary housebuilding operations. The need for more affordable private and social housing doesn't go away because economic conditions look tough. And the withdrawal of the Help to Buy scheme and increased mortgage costs have only intensified affordability pressures for buyers. Coupled with a historic undersupply of new homes in the UK, demand for the types of houses Vistry builds looks to be secured for years to come.
Looking to financial resilience, Vistry's slipped into a net debt position as it looks to drive growth in its Partnerships business. Fire-safety commitments are also taking their toll on cash resources. But winding down the traditional housebuilding business looks set to help. Land on the books that doesn't fit the new strategy is set to be sold off, and Vistry expects to return to a net cash position by the end of next financial year.
Vistry offers something different to the broader sector. The Partnerships focus and undemanding valuation make it one of our preferred names in the sector. It's an exciting time as Vistry transitions into a Partnership giant, but there will undoubtedly be plenty of operational hurdles to overcome. In the meantime, be prepared for further volatility.
Vistry key facts
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