REG - Vistry Group PLC - Trading update

VistryAnnouncement

15/01/2025 07:00

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RNS Number : 3347T  Vistry Group PLC  15 January 2025

 

15 January 2025

Vistry Group PLC

Trading update

Vistry Group PLC ("Vistry" or the "Group") is issuing a scheduled trading
update for the year ended 31 December 2024 ("the Period"), ahead of
publication of its full year results on 26 March 2025.

FY24 highlights

·    Group adjusted profit before tax is expected to be c. £250m (FY23:
£419.1m), in-line with the revised company guidance announced in December

·    Total completions up c. 7% to c. 17,200 (FY23: 16,118) with adjusted
revenues expected to be up c. 9% to £4.4bn (FY23: £4.0bn)

·    More than 220 new partner deals with over 70 partners agreed in FY24,
with more than 70 deals agreed in Q4

·    Group net debt position as at 31 December 2024 of c. £180m (31
December 2023: £88.8m), £20m lower than revised guidance, with the increase
on prior year reflecting higher than expected finished stock and work in
progress

·    Strong pipeline of attractive new land and development opportunities
secured in the year totalling 16,500 (FY23: 15,288) mixed tenure units

 

Outlook

·    Group continues to believe the Partnerships market remains very
attractive and is committed to its asset light, high returns Partnerships
strategy

·    Group is working well with new and existing partners and progressing
a wide range of development opportunities

·    Group has a strong forward sales position totalling £4.4bn (31
December 2023: £4.5bn)

·    Increased cash generation and continued capital discipline is a
primary focus for FY25 with the Group targeting a significant reduction in
stock and work in progress

·    Confident of rebuilding underperforming regions in the former South
Division in FY25, with new operational leadership already in place

·    Market conditions in FY25 for both Partner Funded and open market
sales remain uncertain, with the outcome of the Government's spending review
and transition to a new Affordable Homes Programme important for unlocking a
step up in momentum in the Partner Funded market, and a recovery in consumer
confidence key to open market sales growth

·    The Group expects to make year on year progress in both profit and
cash generation in FY25 and will provide an update on its medium-term targets
with the full year 2024 results announcement scheduled for 26 March 2025

Full year performance

Total units were up c. 7% on prior year at c. 17,200 (FY23: 16,118) including
c. 3,200 (FY23: 2,781) from JVs.  Partner Funded units increased by c. 18% to
c. 12,600 (10,722), with open market units decreasing by c. 15% to c. 4,600
(5,396).  The mix for the full year was 73% Partner Funded and 27% open
market.

The Group expects total adjusted revenue to be up by c. 9% in the year to
£4.4bn (FY23: £4.0bn), with the total average selling price remaining stable
at c. £275k (FY23: £276k).  The Group's sales rate for FY24 was up 11% on
prior year, averaging 1.07 (FY23: 0.96) sales per site per week.

Group adjusted profit before tax is expected to be c. £250m (FY23: £419.1m),
in line with the revised company guidance issued in December when the Group
highlighted a number of factors that adversely impacted expectations on
profits for FY24 including:

-     the delay to a number of partner agreements which are now expected
to complete in FY25

-     the decision not to proceed with a number of anticipated land
transactions with other housebuilders and developers where we considered that
the commercial terms had become unattractive

-     some delay to open market completions

Overall, we saw good levels of demand from the Partner Funded market during
2024 albeit with some slowdown in activity in Q3 ahead of the Autumn Budget.
In the year, we signed more than 220 new agreements with over 70 partners,
including more than 70 agreements with 35 partners in Q4 2024 including
Registered Providers, Local Authorities and PRS providers.

The open market has remained constrained throughout the year primarily
reflecting mortgage affordability.  The Group has supported its open market
sales strategy during the year with incentives of up to c. 5% of open market
sales price.

The Group experienced neutral build cost inflation in FY24 with increases in
some areas offset by reductions in others.

The Group's net debt position as at 31 December 2024 is expected to be c.
£180m (31 December 2023: £88.8m), £20m lower than revised guidance.
Average month-end net debt for FY24 was c. £535m (FY23: £459.4m) with the
increase reflecting the accumulation of work in progress due to delayed
completions and lower than expected sales rates.

Securing high quality Partnership opportunities

During 2024 the Group secured a strong pipeline of attractive new land and
development opportunities totalling 16,500 (FY23: 15,288) mixed tenure units
across 61 sites.  The Group is well positioned for land in FY25 with more
than 90% of the land secured for targeted FY25 completions.

Recent development opportunities secured by the Group include:

-     a partnership with Homes England for the regeneration of a former
city hospital in Birmingham which will deliver 750 mixed tenure new homes,
including 263 affordable homes

-     a development in Longbridge, Coventry, delivering 688 new homes, of
which  250 will be affordable homes for Bromford Housing and 215 will be PRS
homes for Sigma Capital Group.  The homes will be built  using timber frame
from Vistry Works and will feature air source heat pumps, PV panels and
wastewater recovery systems

-     the pre-sale of 285 additional affordable homes to Notting Hill
Genesis as part of the final phase of our Fresh Wharf development in East
London

-     a joint venture with Clarion Housing at our Sherford development in
Cornwall which will deliver 1,200 new homes, of which 50% will be affordable
and PRS.

High quality housing

Vistry is committed to delivering high quality homes and excellent customer
service.  The Group was awarded a 5-star HBF Customer Satisfaction rating for
the fifth consecutive year in 2024 and for the year to date, the Group's HBF
8-week Customer Satisfaction score is 94.6%.  We are pleased to report that
Vistry employees have been awarded more than 70 quality awards during 2024
including 42 NHBC Pride in the Job awards, 13 Premier Guarantee awards and 8
LABC awards.  The Group's Construction Quality Review score averaged 4.5
(FY23: 4.5) in FY24 with the Average Reportable Items per inspection at 0.20
(FY23: 0.21).

South Division cost issues

On 8 October 2024, the Group reported it had become aware of cost issues
identified in its South Division.  An update on 8 November 2024, following
both an independent and internal review process, stated that the expected
impact to adjusted profit before tax from the adjustments identified in the
review in the South Division would total £105m in FY24, £50m in FY25 and
£10m beyond FY25.

As part of the process all sites across the Group's other five divisions were
reviewed and no systemic issues were found outside the South Division.  There
were a number of small value adjustments from the detailed site cost value
reconciliations (CVRs) carried out across the other five divisions which, in
aggregate, resulted in an £8m reduction to the Group's adjusted profit before
tax in FY24.

The Group implemented a series of control enhancements across the Group during
Q4 2024 including a tightening of procedures around the  monthly site cost
reviews, and an investment in increased commercial assurance.  Whilst these
control enhancements have been applied group-wide, the Board remains confident
that the significant issues identified in the South Division have not existed
elsewhere in the Group.

Reorganisation

A review of the Group's operational structure has been completed with the
objective of reducing reporting lines and enabling the CEO to get closer to
the business whilst ensuring the Group is well positioned to execute upon its
Partnerships strategy.

The Group's divisional structure has been consolidated from six divisions into
three larger divisions, each being led by an Executive Chair reporting
directly to the CEO.  The three Executive Chairs are all former Divisional
Chairs and have extensive Partnerships experience.  They are members of the
Executive Leadership Team (ELT) and are supported at a divisional level by
newly appointed Divisional Commercial Directors, Divisional Operational
Directors and Divisional Finance Directors.  The Group retains 26 operating
regions.

Capital allocation

The Board believes that investing in our Partnerships business to deliver
growth, whilst maintaining a strong balance sheet, remains the most attractive
use of capital, with the Group continuing to secure attractive new development
opportunities throughout FY24 and into FY25.

Alongside this investment, the Board remains committed to the capital
distribution via a share buyback programme announced with the half year
results in September 2024 consisting of an ordinary distribution in respect of
the H1 24 adjusted earnings of £55m and a special distribution of £75m.
The timing of the completion of this programme, which was previously expected
to complete in May 2025, remains under review and will be confirmed with our
full year results.

Outlook

We continue to believe the Partnerships market remains very attractive and are
committed to our asset light, high returns Partnerships strategy.

Increased cash generation together with continued capital discipline is a
primary focus for FY25.  Working capital levels were higher than expected at
the year end reflecting a slower open market sales rate than forecast and a
resulting build up in stock.  The Group is targeting a significant reduction
in stock and work in progress levels in FY25 and will adjust build rates in
line with changes in market conditions.

A significant amount of work has been done to understand and address the
issues faced in our former South Division and with new operational leadership
in place, we are confident we will make rapid progress in stabilising the
affected regions within this business area in FY25.

The Group has a strong forward sales position totalling £4.4bn (31 December
2023: £4.5bn).

We are working closely with our affordable and PRS partners in aligning their
future programme requirements with opportunities.  We are progressing a good
range of partner transactions for FY25 and expect to see overall partner
demand at similar levels to FY24.  We are supportive of the Government's
drive to address the shortage of affordable housing and are encouraging early
clarity on rent settlement and meaningful investment in the funding programme
for affordable housing to accelerate the supply of housing, provide certainty
to the supply chain and support economic growth.

The open market remains constrained with a recovery in consumer confidence key
to open market sales growth.  For FY25 we are assuming open market demand to
be at a similar level to FY24.  The Group launched a new national consumer
marketing campaign on Boxing day and is pleased to have seen an uplift in
enquiries across the business over the past couple of weeks.

For FY25, based on current market expectations, the Group is expecting low
single digit build cost inflation.  We will look to mitigate this where
possible through our benefits of scale and visibility of revenues, as well as
through efficiency gains.  In addition, we expect the impact from increased
Employer National Insurance contributions to be c. £5m in FY25, increasing to
an annualised cost of c. £7m from FY26.

The Group expects to make year on year progress in both profit and cash
generation in FY25 and will provide an update on its medium-term targets with
the full year 2024 results announcement scheduled for 26 March 2025.

 

Conference call at 08:30am today

There will be a call for analysts and investors at 8:30am today hosted by Greg
Fitzgerald (Executive Chair and CEO) and Tim Lawlor (CFO).  To join the call
please register at
https://storm-virtual-uk.zoom.us/webinar/register/WN_F9xiJgXaQGuVWIlC-zWOyw
(https://gbr01.safelinks.protection.outlook.com/?url=https%3A%2F%2Fstorm-virtual-uk.zoom.us%2Fwebinar%2Fregister%2FWN_F9xiJgXaQGuVWIlC-zWOyw&data=05%7C02%7Csusie.bell%40vistry.co.uk%7C8d09c9d814ab4de3d69a08dd2b2a4962%7C614e635a0fb64f3fb7d37f9191fef772%7C0%7C0%7C638714182827356401%7CUnknown%7CTWFpbGZsb3d8eyJFbXB0eU1hcGkiOnRydWUsIlYiOiIwLjAuMDAwMCIsIlAiOiJXaW4zMiIsIkFOIjoiTWFpbCIsIldUIjoyfQ%3D%3D%7C0%7C%7C%7C&sdata=D9IXrgsa%2BRwZLg1GRrCVi2BDq%2Bx3boVq0tng1sqxcKY%3D&reserved=0)

UK Dial-in details:

United Kingdom: +44 208 080 6591

Webinar ID: 863 1736 8805

 

For further information please contact:

 Vistry Group PLC

 Tim Lawlor, Chief Financial Officer             020 3048 3393

 Susie Bell, Group Investor Relations Director

 FTI Consulting

 Richard Mountain / Susanne Yule                 020 3727 1340

 

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