Vistry – Strategy Shift To Focus On Affordable Housing

  • Half-year underlying revenue rose 31.4% to £1.8bn
  • Underlying operating profit was £206.7m, up 4.3%
  • Net debt of £328.7m, compared to net cash of £118.2 at 31 Dec 2023

Vistry’s Big Strategy Change

Vistry Group PLC (LON:VTY)’s overall performance was impressive given the challenging environment for UK housebuilders, and the group’s announced a big strategy change today. Vistry’s set to shift its operations to focus solely on the more defensive, high-return Partnerships business, which focuses on affordable housing. This means Housebuilding will be fully merged into Partnerships by the end of the second half, freeing up capital to strengthen the balance sheet and help fund shareholder returns as well as the continued growth of the Partnerships division.

It’s fair to say the Housebuilding division’s been stuttering lately. Recent interest rate rises have reduced affordability for buyers, causing private sales rates to decline and completions to be wound lower as a result. 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.

Partnerships, which for the first time includes a contribution from the recently acquired Countryside, saw completions nearly treble to 3,203 in the first half. Cost-savings as a result of the acquisition are progressing well and helping to keep underlying pre-tax profit guidance for the full year intact, expected to be in excess of £450m.

Article by Aarin Chiekrie, equity analyst at Hargreaves Lansdown