Vustry shares jumped on Monday after announcing a shift in strategy to focus on affordable housing through their partnership model and reiterated their profit guidance.
Vistry shares surged over 15% in early trade on Monday as the group reiterated its guidance for adjusted pretax profit to exceed £450 million in 2023.
Vistry Group said it continues to see good demand for affordable mixed-tenure housing from local authorities, registered providers and PRS providers. Open market private sales have slowed further since June, partly due to the summer period but also further mortgage cost increases.
The company highlighted strong demand from first-time buyers for shared ownership delivered through its partnership model and direct grant funding. Vistry continues to expect fully offsetting cost increases for the full year after synergy benefits. With the decline in industry output, it sees opportunity to work with supply partners to deliver overall lower build costs going forward.
Vistry’s partnerships business has a £3.0 billion forward order book with 90% mixed tenure units. Its housebuilding order book totals £1.3 billion with 87% of forecast 2023 units secured. Both divisions continue securing transactions with local authorities and registered providers to deliver 2023 forecasts and increase affordable housing supply, utilising Homes England funding.
“Vistry’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,” said Aarin Chiekrie, equity analyst at Hargreaves Lansdown.
“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.”