12th Jan 2024 12:44
(Alliance News) - Vistry Group PLC shares were flat on Friday after an initial rise, after it predicted profit to be ahead of previous guidance in 2023, although brokers were mixed on their outlook for the housebuilder.
FTSE 250-listed Vistry also said its chair will step down at the company's annual general meeting, being replaced by the current chief executive.
The Kent-based firm said it now expects adjusted pretax profit for 2023 to be in line with 2022's GBP418.4 million, which is ahead of its previous guidance of GBP403 million.
Completions fell "only" 5.4% over the year to 16,124 units from 17,038 in 2022, which Vistry said represents a significant outperformance to its peers, and reflects "the resilience of [its] Partnerships model".
The company said its sales rate for 2023 averaged 0.96 sales per week per site, up from 0.71 in 2022.
Also on Friday, Vistry said Chair Findlay will step down at the company's annual general meeting on May 16. He will be replaced by Chief Executive Officer Greg Fitzgerald, taking on the roles of chair & CEO. Vistry said it has begun a search for an experience senior director to provide additional oversight on governance matters.
Shares in Vistry were up 0.1% at 968.50 pence each in London on Friday afternoon. Shortly after the open, they had risen 2.4%.
AJ Bell said better-than-expected UK gross domestic product growth in November supported the FTSE 250, with housebuilders leading the way and particularly noting Vistry.
Vistry said: "Demand in the open market has remained suppressed throughout the year reflecting the higher interest rate environment and inflationary cost pressures on household income. Incentives have been used to support open market sales and have been running at around 5% of open market price."
However, it said robust mortgage rates have abated in "recent weeks".
"We are optimistic that this will help stimulate demand in 2024," it added.
Forward sales at year-end were up 12% from 12 months prior at GBP4.5 billion, it added.
Edison analyst Andy Murphy commented: "With demand for affordable homes picking up, especially in the private rented sector, Vistry is justifiably optimistic heading into 2024 as its forward sales position is up 12.4% on the prior year at GBP4.5 billion. This, paired with the easing of mortgage rates in recent weeks and the political topicality of affordable housing puts Vistry in a confident position going into 2024."
Liberum backed Vistry at 'buy', setting a target price of 1,070p per share.
"The group has proactively managed its supply chain partners, leading to material cost reductions in [the second half of] 2023...," said Liberum analyst Edward Prest, noting year-end net debt of around GBP90 million being slightly lower than guidance of around GBP100 million, although changed from net cash of GBP118.2 million at the end of 2022.
Liberum's Prest continued: "The group is making good progress in transferring its landbank to the Partnerships model and points to good levels of demand for affordable homes from registered providers and local authorities."
Peel Hunt was unchanged in backing Vistry at 'buy' with a target price of 1,300p per share.
"The shares performed well in 2023, with a rally of 47%, the strongest among the housebuilders, and are up 28% in the last month," said Peel Hunt analysts Clyde Lewis and Sam Cullen.
Peel Hunt said Vistry shares are trading on an estimated 2024 price-to-earnings ratio of 10.9 times 8.4 times for 2025, with a price-to-tangible-net-asset-value ratio of 1.6 times, against a post-tax return on equity that year of 14.5%.
UBS, meanwhile, reiterates a 'sell' rating for Vistry, although it had raised its price target for the housebuilder to 845p from 780p before Christmas.
"We think shares look expensive on 1.5 [times price-to-tangible-net-asset-value ratio] (now highest in the sector) despite material execution risk and higher leverage than peers. That said, we expect the trading update to be a broadly neutral event after the recent run up in the shares," said UBS analysts Gregor Kuglitsch, Marcus Cole and Reece Frankland.
"There is no specific 2024 guidance at this stage, although we sense management is optimistic of growth this year. The order book has increased by 12.4% [year-on-year] to GBP4.5 billion which should 'position [Vistry] well to deliver a step-up in total completions in 2024'. Recently declining mortgage rates should also help, although private market exposure is lower given the Partnership approach of the business. After the GBP40 million charge booked to reflect lower expected margins, Vistry believes consensus now accurately reflects the new margin profile of the business."
By Greg Rosenvinge, Alliance News senior reporter
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