ii view: Vistry upbeat about 2025 after difficult year

Full-year results to 31 December

• Build completions up 7% to 17,225
• Adjusted revenue up 7% to £4.33 billion
• Adjusted pre-tax profit down 35% to £263 million
• Reported pre-tax profit down 64% to £105 million in H1 2020
• Net debt up 103% to £181 million

Guidance:

• Forward order book of £4.4 billion, down from £4.6 billion
• Expects to make profit progress during 2025

Chief executive Greg Fitzgerald said: 

"2024 was a challenging year for the Group resulting in a disappointing financial performance, despite strong growth in completions and revenue.  We have concluded a rigorous set of reviews and year end procedures with no further issues being identified, and much work has been done to ensure the Group has the right people, structure, systems and controls in place to move forward with confidence.

“We continue to drive a capital light, high return model, with a targeted 40% return on capital employed in the medium term. Finally, demonstrating that the Group retains a strong financial position remains a top priority for 2025 and we expect to deliver improved cash generation and reduce net debt through the year."

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ii round-up:

Housebuilder Vistry Group (LSE:VTY) today detailed reduced sales and a lower forward order book, although it did flag expectations for profit progress in 2025 albeit second-half weighted. 

An early 2025 sales rate of 0.59 per site per week is down from the 0.81 rate achieved in 2024, with the forward order book of £4.4 billion reduced from £4.6 billion in March 2024. Impacted by factors including build cost discrepancies and a reassessment of commercial terms on some deals with partners such as housing associations, Vistry reported pre-tax profit fell 64% last year to £105 million. Adjusted pre-tax profit and excluding exceptional items dropped 35% to £263 million, beating management’s reduced and last estimate of £250 million. 

Shares in the FTSE 250 housebuilder fell 4% in UK trading having come into these latest results down by almost a half over the last year. More traditional housebuilders Taylor Wimpey (LSE:TW.) and Persimmon (LSE:PSN) are down around 15% over that time. The FTSE 250 index itself has fallen 3% over the last year given increase growth concerns for the UK economy. 

Selling across the three brands of Bovis, Linden and Countryside Homes, Vistry’s strategy is now focused on affordable homes as it looks to partner with organisations such as local authorities and housing associations to develop mixed tenure homes like shared ownership.

Vistry’s profit optimism for 2025 follows a series of operational changes already made such as new management and hopes for an uptick in partner funding given the government’s previously announced new allocation of £2 billion towards affordable housing. 

Group provisions for building safety remediation increased by £117 million in 2024 to £324 million. Company net debt rose 103% year-over-year to £181 million with a return to net cash position by 2026 now a management focus. 

No final dividend was declared, although a previously announced share buyback programme of £130 million is expected to conclude by the first half of 2026.     

Vistry’s AGM is scheduled for 14 May with a trading update expected on the 10 July. 

ii view:

Founded in 1965, the Kent headquartered housebuilder and former Bovis Homes today works with more than 150 housing providers across the UK, including local authorities, for-profit registered providers and private rented sector bodies. Group changes made following 2024 operational difficulties, largely focused on its Southern division, now see Vistry working across three UK divisions from a previous six.  

For investors, operational challenges suffered in 2024, impacting profit performance and resulting in a series of profit warnings, have arguably dented investor trust. Group net debt has also risen. The lack of any dividend payment compares to income yields over 3% at rivals Barratt Redrow (LSE:BTRW) and Persimmon, while changes in national insurance and rising building costs will offer headwinds to profits going forward. 

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More favourably, demand from partners persists, with the government’s focus on funding affordable housing likely proving supportive going forward. Changes in management and group structure have been made. Group build completions and revenues both rose year-over-year, while M&A activity across the sector and following Barratt’s acquisition of Redrow should not be forgotten. 

In all, a need for affordable housing remains, with Vistry now a key building sector provider. That said, confidence is hard won and quick to lose, with investors likely awaiting evidence of at least a stabilisation in performance before taking any interest.

Positives: 

• Differentiated business model
• Ongoing share buyback programme

Negatives:

• Rising costs
• Uncertain economic outlook

The average rating of stock market analysts:

Hold