11th Sep 2023 13:49
(Alliance News) - Vistry Group PLC shares soared on Monday after it announced an "exciting" restructuring plan, which analysts believe will diversify the company from other housebuilders.
Shares in Vistry were up 14% at 911.00 pence in London on Monday afternoon.
"Having another string to its bow is proving useful to developer Vistry. Unlike rival housebuilders it has a significant regeneration and affordable housing footprint which it can pivot to when times are tough," said AJ Bell's Russ Mould.
The Kent-based housebuilder said on Monday it is revising its strategy to focus solely on building affordable homes through its "high return" Partnerships division, to help address the UK's "chronic shortage of affordable mixed tenure housing".
Vistry said it plans to focus operations on its "high return, capital light, resilient partnerships model" by merging its Housebuilding and Partnerships businesses before the end of this year. It expects this to result in "a significant release of capital" and, in the medium term, will target revenue growth of 5 to 8% and a 40% return on capital employed.
UK housebuilders have struggled recently, with rising interest rates reducing affordability for buyers. At the start of August, the Bank of England enacted its 14th successive interest rate hike, lifting bank rate by 25 basis points.
"That's no surprise though, given housebuilding's a notoriously cyclical sector. In contrast, Partnerships' revenues tend to be more robust - the need for more affordable housing doesn't go away because economic conditions look tough. This provides large fixed-volume projects which should hold up better in a downturn," Aarin Chiekrie, equity analyst at Hargreaves Lansdown, said.
AJ Bell's Mould also noted that affordable housing "is much less sensitive to interest rates and the economic backdrop." It should therefore "should give Vistry some solid foundations which its peers could only dream of right now – reflected in a resilient set of first-half results," he added.
In the first half of 2023, Vistry said statutory pretax profit increased 2.6% to GBP114.2 million from GBP111.3 million the prior year. Adjusted to include contributions of joint ventures and exclude exceptional expenses and amortisation, it fell 8.4% to GBP174.0 million from GBP189.9 million.
Revenue increased 33% to GBP1.58 billion from GBP1.19 billion on a statutory basis, and 31% to GBP1.78 billion on an adjusted basis.
Statutory net debt was GBP328.7 million at the end of June, down from net cash of GBP115.0 million.
Administrative expenses, including exceptional items, increased 73% to GBP153.9 million while exceptional expenses decreased 61% to GBP28.1 million. Share of JVs and associate gross loss widened to GBP35.3 million from GBP30.9 million.
Vistry expects Countryside Partnerships, which it acquired for GBP1.25 billion in November last year, to deliver at least GBP35 million in synergy benefits this year, ahead of its GBP25 million target.
It also expects group net debt to have reduced to around GBP100 million by December 31, and reaffirmed its target of adjusted pretax profit in excess of GBP450 million for the full year.
"The integration of Countryside has progressed well in the first half, firmly establishing Vistry as the leading provider of affordable mixed tenure housing in the UK," commented Chief Executive Greg Fitzgerald. "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."
He added: "Delivering on the acute social need for housing across the country...is at the core of the group's social purpose and vision, and I look forward to delivering upon this exciting and unique opportunity for Vistry."
Vistry also said it intends to launch a buyback programme of up to GBP55 million in November.
By Sophie Rose, Alliance News reporter
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