Shares in Vistry (VTY) rose 1.8% to a fresh one-year high of £13.19 on Monday after the housebuilder upgraded its annual earnings guidance amid a rise in sales rates and home completions.
Drawing confidence from a ‘very positive’ start, Vistry expects adjusted pre-tax profit for the year to December 2021 will be around £325 million, up from previous guidance of at least £310 million and is sticking with its previous guidance for 2022.
SEEING STRONG DEMAND
In an upbeat trading update, Vistry highlighted strong demand across all areas of the business in 2021 to date and said it expects its half year performance will be ‘significantly ahead of our previous expectations in terms of profit and cash’.
So far this year, Vistry’s private sales rate per site per week is significantly ahead of the same periods in 2019 and 2020 and the company sees many opportunities to buy land at a decent price which will lay the foundations for future value creation.
Housebuilding is on track to deliver ‘a significant step-up’ in completions in 2021 to roughly 6,500 units, ahead of earlier expectations and up from 4,652 completions in 2020, as well as an improvement in gross margin.
IMPROVED CASH POSITION
Having announced its return to the dividend list - it plans to pay a final dividend for 2020 of 20p on 21 May - Vistry insisted that its December 2021 net cash position will be ‘much stronger’ than the end of 2020, which it ended with £38 million of cash in the coffers, despite the company being active in the land market.
The news will be welcomed by investors worried by the strain placed on the balance sheet by the early 2020 acquisition of Galliford Try’s (GFRD) housebuilding and regeneration businesses just before the pandemic hit.
CEO Greg Fitzgerald insisted Vistry Partnerships, the higher margin regeneration part of the business, is making ‘excellent progress towards its targets of increasing revenues from £728 million last year to £1 billion in full year 2022 accompanied by operating margin improvement to at least 10%’.
THE ANALYST VIEW
‘Vistry’s update highlights significant momentum across all its business units and we are upgrading full year 2021 and full year 2022 pre-tax profits by 5% and 6%, respectively,’ commented analysts at Numis Securities.
‘The upgrade is driven by higher volumes in the Housebuilding division, which has benefitted from reservation rates that are running 21% of the 2019 comparative. We move to a sum-of-the-parts approach for valuation given the growing importance of the Partnerships business.
‘This, alongside the upgrade and improved peer group ratings, results in our target price rising from £11 to £15.10.’
