ii view: strong demand is boost to housebuilder Vistry

Shares for this traditional and affordable partnership builder are down around 30% year-to-date. Buy, sell or hold?

First-half trading update to 30 June 

• Average weekly private sales up 11% to 0.84
• Forwards sales up 8.9% to £2.97 billion
• Net cash of £115 million, up from £32 million as of 30 June 2021

Chief executive Greg Fitzgerald said:

"The Group has delivered an excellent first half performance, significantly exceeding our expectations at the start of the year. With leading capability across all housing tenures and being one of the largest private sector providers of affordable housing, the Group is uniquely positioned within the housebuilding sector, and we continue to drive the benefits from our Housebuilding and Partnerships combination.”

ii round-up:

Housebuilder Vistry Group (LSE:VTY) today flagged good demand across all areas of its business as it reiterated its expectation for full-year profit to come in at the upper end of City forecasts of around £417 million. 

The average weekly private sales rate rose 11% in the first half to the end of June to 0.84, with build completions up 3% to 3,219 units.

Vistry shares rose by more than 2% in UK trading having come into this latest update down by almost a third year-to-date. Shares for rivals Redrow (LSE:RDW), Bellway (LSE:BWY) and Taylor Wimpey (LSE:TW.) are all down by a similar amount in 2022, while the FTSE All World index is down by almost a fifth. 

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Vistry operates both a traditional housebuilding business and a partnership business, which aids partners including governmental bodies and housing associations with affordable homes and regeneration projects. 

High demand for its partnership business remained broad, with local authorities, housing associations, the private rented sector and elderly accommodation providers all contributing. 

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Total forward sales for both its housebuilding and partnership businesses totalled £2.97 billion, up from £2.73 billion a year ago. 

First-half results are scheduled for 8 September. 

ii view:

Vistry Group was formed following the purchase by Bovis Homes of Linden Homes and its partnership and regeneration businesses in January 2020. Today its housebuilding business operates across 13 regional businesses and its partnership business 10 divisions. Its brands are Bovis Homes, Linden Homes and Vistry Partnerships. 

For investors, squeezed incomes and a cost-of-living crisis for consumers cannot be overlooked. Interest rates are rising to try and counter 40-year high inflation, while the government’s finances remain stretched because of heavy spending during the pandemic, potentially favouring tax rises as opposed to tax cuts. 

More favourably, demand for new housing still looks to remain robust. Its partnership business offers opportunities not seen at rivals, rising material costs are being countered by rising selling prices, while net cash of £115 million was held as of the end of June. On balance, and with housing demand holding up and the shares sat on a historic and estimated future dividend yield of over 7%, income investors at least are likely to stay interested.  

Positives: 

• Differentiated business model
• Attractive dividend yield (not guaranteed)

Negatives:

• Uncertain economic outlook
• Rising raw material cost inflation

The average rating of stock market analysts:

Buy