Vistry’s underlying revenue fell by 6% to £1.9bn in the first half. The decline was driven by a pullback in partner-funded activity ahead of the June Spending Review, which saw average weekly sales rates fall from 1.21 to 1.02. This was partly offset by a 4% rise in average selling prices to £283,000.
Underlying operating profits fell at a faster pace of 23% to £124mn, partly due to an unfavourable sales mix.
The order book fell from £5.1bn to £4.3bn.
Free cash outflows improved from £110mn to £25mn, largely due to favourable timing of cash payments and receipts. Net debt improved from £322mn to £293mn.
Over the full year, Vistry expects to deliver an “increase in profits”, with markets currently forecasting pre-tax profit growth of around 4% to £275mn.
The shares fell 2.4% in early trading.
Our view
Vistry’s first-half results didn’t bring any surprises. A pull-back in partner-funded activity ahead of the government’s June Spending Review contributed to a drop in revenue and profits. Despite group expectations that profits will pick up over the second half, markets are remaining more cautious for now.
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.
The government’s pledge to invest an unprecedented £39bn in affordable housing over the next decade marks a significant step up in funding. The money’s expected to start flowing in the second half of the year, and Vistry looks better-positioned to benefit than many of its peers in the sector.
The huge order book, standing at a mammoth £4.3bn, is a real asset. Vistry’s huge scale allows it to negotiate harder on prices of building materials, which should help it navigate build cost inflation better than most of its peers. Currently, the group expects build cost inflation to run at low single digits this year.
Despite these positives, last year’s troubles shouldn’t be forgotten just yet – there are still plenty of issues the group needs to iron out.
Vistry spread itself too thin and took its eye off the ball last year. A series of managerial missteps and accounting issues led to several profit downgrades toward the tail end of 2024. This raised serious questions about the new structure and internal controls, and seriously hurt the company's valuation.
The group’s partnerships model also tends to have a lower margin than ordinary housebuilding projects. While selling these houses as part of bulk deals brings more cash in the door in one go, it puts further downward pressure on selling prices, meaning there’s little room for error.
Net debt has improved slightly over the first half, helped by the halt in dividend payments. Share buybacks remain ongoing for now, albeit at a much-reduced scale. But with a weaker balance sheet than most of its peers, shareholder returns aren’t the main focus, and there’s no guarantee that dividends will return this year.
Vistry looks well-positioned to benefit from government support for affordable housing. But management missteps have shaken confidence in the group’s 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
All ratios are sourced from LSEG Datastream, based on previous day’s closing values. 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 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.