- Full-year profit target maintained
- Strategic shift into affordable homes
- Up to £1 billion of shareholder returns
The fact shares in housebuilder Vistry (VTY) jumped the most in over three years on news the firm is sticking to its forecasts for this year speaks volumes about the pessimism which has pervaded the sector.
By 9am the shares were trading up 14% at 915p, although they touched 942p at one point, a gain of almost 18% on their previous close and the highest level for more than a year.
STRONG FIRST HALF
In contrast to many of its peers, Vistry recorded a significant increase in first-half completions and revenue thanks to its Partnerships business which provides affordable mixed-tenure housing.
Completions in the six months to June were up 32% to 7,143 units, generating a 31% increase in revenue to £1.777 billion.
‘The group delivered a robust half year performance despite the challenging macro-economic conditions with Partnerships continuing to see good demand, demonstrating its market resilience’, commented chief executive Greg Fitzgerald.
Although open-market sales have slowed since June due to rising mortgage costs, the company expects to fully offset increased build costs and is sticking to its guidance of more than £450 million in adjusted pre-tax profit for the full year.
STRATEGIC SHIFT
Thanks to the acquisition of Countryside, Vistry is now the UK’s leading provider of affordable mixed-tenure housing and the board has decided that merging its Housebuilding and Partnership operations will not only allow it to grow its output but will also generate higher returns and free up resources.
‘Focusing fully on partnerships best enables sustained growth in housing output, provides greater benefits to our partners, while maximising value and long term returns for shareholders with the group targeting a 40% ROCE and the distribution of £1bn to shareholders over the next three years’, said Fitzgerald.
The firm increased its forecast of synergy targets from the integration of Countryside from £25 million to at least £35 million this year, with another £25 million to be delivered next year, and announced a £55 million share buyback starting this November.
EXPERT VIEW
‘It says something stark about the state of the property market that Vistry is going to stop building private homes for the foreseeable future’, observed AJ Bell investment director Russ Mould.
‘By doing so Vistry can take costs out of the business by scaling back its workforce and free up capital to such an extent that it is able to commit to paying out £1 billion to shareholders over the next three years.
‘The company signaled its own view on its current market valuation by announcing the first tranche of these returns will be made in the form of purchasing its own shares’, added Mould.
Disclaimer: Financial services company AJ Bell owns Shares magazine. The author of the article (Ian Conway) and the editor of the article (James Crux) own shares in AJ Bell.
LEARN MORE ABOUT VISTRY
