- £250 million target reiterated
- Downgrade cycle looks over
- Shares rally sharply on update
The relief following today’s scheduled trading update from Vistry (VTY), the UK’s largest housebuilder in volume terms, was palpable as the group confirmed its full-year 2024 profit forecast and talked up the 2025 outlook for its partnership business.
The shares rallied as much as 50p or just shy of 10% to 565p, lifting its larger FTSE 100 peers Barratt Redrow (BTRW), Persimmon (PSN) – which reported earlier this week – and Taylor Wimpey (TW.) by around 3% each.
SOLID OPERATIONAL RESULTS
For the year to December 2024, Vistry reiterated its revenue guidance of £4.4 billion and pre-tax profit guidance of around £250 million after some projects were delayed and others defrayed due to unattractive terms.
Completions are seen totalling 17,200, a 7 increase on the previous year, with partner-funded projects accounting for 12,600 units or 18% more than previously while open-market units decreased by 15% to 4,600 in line with its new model.
The sales rate, a measure closely watched by analysts, averaged 1.07 units per outlet per week, up 11% on the prior year, while average selling prices were stable at around £275,000.
The firm said it had seen good levels of demand from the partner-funded market during 2024 albeit with some slowdown in activity in the third quarter ahead of the Autumn Budget.
During the year, more than 220 new agreements were signed with over 70 partners, including more than 70 agreements with 35 partners in the fourth quarter including registered providers, local authorities and PRS (private rented sector) providers.
The open market remained ‘constrained’ throughout the year, according to the company, primarily reflecting mortgage affordability, meaning sales had to be supported with incentives of up to around 5% of the price.
Importantly, build cost inflation was neutral last year, with increases in some areas offset by reductions in others, while there was good news on the net debt position which is now seen around £180 million or £20 million less than previously forecast.
AN END TO DOWNGRADES
After three profit warnings in quick succession last year, the final one on Christmas Eve, it would appear earnings downgrades have run their course with the confirmation today of 2024’s profits.
The next question for investors therefore is if and when analysts will start to think about raising forecasts, which could come in March when the firm releases its final 2024 results but also sets out its new medium-term targets.
For the time being, the company is saying its primary focus is on increased cash generation together with ‘continued capital discipline’.
Working capital levels were higher than expected at the year-end, reflecting a slower open market sales rate than forecast and a resulting build-up in stock, so the group is targeting a significant reduction in stock and work in progress levels this year and will adjust build rates in line with changes in market conditions.
Although its new national consumer marketing campaign on Boxing Day generated an uplift in enquiries across the business over the past couple of weeks, the firm is working on the assumption that open market demand stays at a similar ‘subdued’ level to 2024.
Build cost inflation is seen in the low single digits, which should be offset by benefits of scale and efficiency gains, while the impact from increased employer National Insurance Contributions is estimated at £5 million this year rising to an annual £7 million from next year.
