Vistry released a short trading update ahead of its annual general meeting.
Vistry reported a year-to-date sales rate of 0.91, down slightly from last year's 0.94. Performance has been better over the last eight weeks, with sales rates averaging 1.32 (2024: 1.17). Increased open market activity has been the driver of the recent improved performance, while partner-funded activity remains at a relatively low level.
The order books has declined from £4.9bn to £4.6bn, with £2.1bn of that expected to be delivered this year.
Vistry is seeing “some upward pressure” on both material and labour prices, which it is attempting to mitigate through negotiations with contractors and suppliers. Overall build cost inflation is expected to be in the low single digits.
Vistry continues to expect to deliver an increase in profits this year, weighted to the second half.
The shares fell 2.2% in early trading.
Our view
Vistry’s showing early signs that some parts of the business are returning to life in 2025. While partner-funded activity remains subdued, demand in the open market has begun to pick back up in recent weeks, helped by recent interest rate cuts by the Bank of England.
Last year’s troubles shouldn’t be forgotten just yet though – there are still plenty of issues the group needs to iron out.
At its heart, Vistry’s Partnership model specialises in providing affordable housing by teaming up with local authorities and housing associations. These partners foot most of the bill, which frees up Vistry’s cash to deploy on more projects across the business and drive faster-than-average growth.
It appears the group spread itself too thin and took its eye off the ball last year though. A series of managerial missteps and accounting issues led to several profit downgrades toward the tail end of 2024, raising serious questions about the new structure and internal controls.
The Partnerships model tends to be lower margin than ordinary housebuilding projects. And while selling these houses as part of bulk deals brings more cash in the door in one go, it further lowers the average selling price, meaning there’s little room for error.
The huge order book is a real asset, standing at a mammoth £4.6bn. Vistry’s huge scale allows it to negotiate harder on prices of building materials, which should see it navigate build cost inflation better than most of its peers. Currently, the group’s expecting build cost inflation to run at low single digits this year.
Looking ahead, Vistry’s high volumes of affordable housing look well aligned with the new government’s ambition to address the country’s housing shortage. Alongside early signs of improvements in open market sales, the group’s hoping to make progress on profits and cash generation in 2025, albeit off a much lower base.
Net debt has worsened last year due to lower-than-expected sales rates and construction delays. With a weaker balance sheet than most of its peers, shareholder return targets have been scaled back and look set to take a backseat in the near term. Income-focused investors should keep in mind that dividends were halted at full-year results, and there’s no guarantee they will return this year.
Vistry operates in a corner of the housing market where demand and sales should hold up relatively well, no matter the economic mood music. But management missteps have shaken confidence in the group’s costs and profit targets, and more bad news can’t be ruled out. While the valuation looks attractive versus the long-run average, we’d like to see concrete signs that management issues have been ironed out before getting too excited.
Environmental, social and governance (ESG) risk
Most housebuilders are relatively low risk in terms of ESG, particularly for those in Europe. However, there are some environmental risks to consider, from direct emissions to the impact of their buildings on the local ecology. The quality and safety of their buildings is also a key risk.
According to Sustainalytics, Vistry’s management of ESG risk is strong.
It doesn’t disclose its greenhouse gas reduction initiatives, but it has set itself targets and deadlines. And its reporting of direct and indirect emissions is in line with best practice. However, there’s currently no disclosure of an established product and safety programme or disclosures around recycled material usage.
Vistry key facts
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