Vistry Group shares are rising as builder plans to merge divisions
Vistry Group shares are rising as builder plans to merge divisions
- Vistry Group shares were the best performers in the FTSE 250 on Monday morning
- The merger reduces the number of regional business units from 32 to 27
- For the first half of 2023, the number of legal units completed in Vistry increased by 40%
Vistry Group shares soared on Monday after it unveiled plans to combine its homebuilding and partnerships divisions with resilient half-year results.
The Kent-based property developer said the merger would help it focus on meeting Britain’s serious shortage of affordable housing.
As part of the restructuring, Vistry’s number of regional business units will be reduced from 32 to 27, and 30,200 plots in the group’s residential land bank will be transitioned to the Partnerships model.
Good result: Vistry said the merger of its housing and partnerships divisions would help the company focus on tackling Britain’s serious shortage of affordable housing
The Countryside Partnerships brand remains unchanged, as do all three homebuilding brands Bovis Homes, Linden Homes and Countryside Homes.
Vistry expects to save around £25 million in costs from the integration, on top of the £60 million in annualized synergies from last year’s acquisition of Countryside.
After the update is Vistry Group shares were 14.75 per cent, or 118p, higher at £9.18 on Monday morning, making them the best performer on the FTSE 250 Index.
Since the beginning of this year, they have grown by about 43 percent.
Greg Fitzgerald, CEO of Vistry, said: ‘The scale of social need for affordable mixed-use housing continues to grow across the country, and it is clear that Vistry is uniquely positioned as a leader in partner housing.’
He added that a partnership “best enables sustainable growth in housing production, delivering greater benefits for our partners while maximizing value and long-term returns for shareholders.”
Vistry also announced on Monday that it was maintaining its guidance of £450 million in adjusted pre-tax profits after a resilient first-half performance against a more challenging backdrop for the UK housing market.
The number of completed legal units rose by 40 percent in the first half of 2023, boosting revenues by around a third to £1.58 billion.
Yet profits still fell 8.4 per cent to £174m due to higher finance costs due to rising debt and interest rates.
Successive increases in base rates by the Bank of England have pushed up borrowing costs over the past two years, causing mortgage applications to fall sharply.
According to Better.co.uk, the average two-year fixed rate mortgage deal is now 6.2 percent, while the equivalent five-year contract is 5.57 percent.
Vistry noted that private open market sales have continued to slow since July, although he said this partly reflected the traditionally quieter summer period.
However, the company noted that its partnerships and housing divisions have a combined order book totaling £4.3 billion and that agreements continue to be signed with local authorities and housing associations.
Mark Crouch, analyst at investment platform eToro, said: ‘Vistry’s decision to double down on its partner business is not surprising given the recent purchase of Countryside and a general slowdown in the wider housing market.
‘Demand for mixed housing tends to be more resilient, even in a weaker market, especially as MPs are keen to increase the social housing stock in this country.’