Housebuilder Vistry (VTY) was the top gainer in the FTSE 250, climbing 5.6% to £12.92, after the firm reported first half revenues and earnings that were ‘significantly’ ahead of management expectations and raised its full year guidance.
Turnover for the six months to June was £1.259 billion, a 91% increase on the first half of last year and a modest increase on the first half of 2019.
MARGIN RECOVERY
Thanks to a recovery in housebuilding gross margins to 21.8% from 14.1% and a more than doubling in operating margins in its partnership housing division from 4% to 9.1%, group adjusted pre-tax profits soared to £166.1 million from just £10.3 million a year ago.
Higher margins and strong cash generation meant the firm ended the half with a net cash position of £31.6 million against net debt of £357 million in the same period last year.
The firm also said it was able to ‘more than offset’ cost increases through higher selling prices and supply chain issues were being ‘well managed’.
HIGHER PROFITS AND PAY-OUT
With 96% of forecast 2021 housebuilding and partnership units already secured, and a forward order book of some £3 billion, the firm is ‘well positioned for the full year’ and raised its pre-tax profit forecast to £345 million, around 5% above the current consensus.
Also, given the positive outlook and the firm’s balance sheet strength, the board accelerated its move to a sustainable two times dividend cover policy, with any further excess capital generated to be handed back to shareholders via special dividends or buybacks.
PRICES STILL RISING
Despite concerns that the housing market would enter the doldrums once stamp duty relief was tapered, house prices in the UK have continued to climb according to both the Halifax and Nationwide building societies.
The latest Halifax survey showed the average house price hitting a record of almost £263,000 last month, an increase of 7.1% on August last year and nearly 10% higher than June 2020 when the housing market reopened from the first lockdown.
Meanwhile, the Nationwide survey showed average prices approaching £250,000 in August, with inflation accelerating to 11% from 10.5% in July.
‘The bounce-back in August is surprising because it seemed more likely the tapering of stamp duty relief in England at the end of June would take some heat out of the market’, said Nationwide’s chief economist Robert Gardner.
