TIDMVTY
RNS Number : 7661R
Vistry Group PLC
08 July 2022
8 July 2022
Vistry Group PLC - Trading update
Excellent first half, ahead of our expectations
Vistry Group PLC (the "Group") is providing an update on trading
in the period from 1 January 2022 to 30 June 2022.
Greg Fitzgerald, Chief Executive commented:
"The Group has delivered an excellent first half performance,
significantly exceeding our expectations at the start of the year.
Demand has been strong across all areas of the business and our
forward sales positions further strengthened.
"The business is in great shape and well positioned to maximise
the broader market opportunities. With leading capability across
all housing tenures and being one of the largest private sector
providers of affordable housing, the Group is uniquely positioned
within the housebuilding sector, and we continue to drive the
benefits from our Housebuilding and Partnerships combination.
"Whilst mindful of the wider economic uncertainties, we are
positive on the outlook for the Group and expect to see significant
margin progression in the full year, with adjusted profit before
tax for FY 22 to be at the top end of market forecasts(1) "
-- Excellent H1 performance, ahead of our expectations at the
start of the year and significantly ahead of a strong performance
in H1 21, supported by on-going positive market trends
-- Good demand across all areas of the business with an 11%
increase in the H1 22 average weekly private sales rate to 0.84 (H1
21: 0.76)
-- Housebuilding completions increased to 3,219 (H1 21: 3,126)
units with FY 22 adjusted gross margin now expected to be ahead of
our 23% target
-- Vistry Partnerships continues to deliver rapid growth in
higher margin mixed tenure completions, increasing by 24% in H1 22
to 1,106 (H1 21: 895) units, with the overall Partnerships adjusted
operating margin for FY 22 expected to be ahead of our 10% target,
whilst maintaining a return on capital employed in excess of
40%
-- Very strong forward sales position with total Housebuilding
and Partnerships' mixed tenure forward sales increasing by 16% to
GBP2,144m (2021: GBP1,847m) and 92% of total forecast units for FY
22 secured
-- Successful H1 22 in the land market with Housebuilding more
than replenishing its land bank, securing 3,360 (2021: 4,143) plots
at an average gross margin and return on capital employed both
above 25%
-- Partnerships secured 2,166 (2021: 1,499) plots in H1 22, well
in excess of completion volume, with margins on new land at the
upper end of our target range and consistent with Partnerships'
medium term targets of 12+% operating margin and in excess of 40%
return on capital employed
-- Another period of strong cash generation with the Group net
cash position increasing to c. GBP115m as at 30 June 2022 (30 June
2021: GBP31.6m), reflecting the strength of the first half
performance. Our month-end average net debt for the rolling 12
months to 30 June 2022 was GBP73m (30 June 2021: GBP239m)
(--) We remain positive on our outlook and continue to expect
adjusted profit before tax for FY 22 to be at the top end of market
forecasts(1)
(1) Bloomberg (07/07/2022) - Adjusted profit before tax: High -
GBP417.0m, Mean - GBP397.7m
Strong demand
There has been continued strong and consistent demand across all
areas of the business in the year to date, with our private sales
rate per site per week increasing to 0.84 (2021: 0.76), up 11% on
what was a strong prior year equivalent period, while the
cancellation rate has remained stable. This strong demand has been
accompanied by price increases of 5% to 8% on our private units in
H1 22 with price increases more than offsetting cost increases in
the period.
Growing need for housing across all tenures from local
authorities, housing associations, the private rented sector and
elderly accommodation providers is driving very high demand in our
Partnerships business. With our capability, proven track record and
excellent relationships, Vistry Partnerships is extremely well
positioned to maximise the benefit of this demand. We have drawn
down the first tranche of funding under the Strategic Partnership
funding award from Homes England, further aligning our approach to
the delivery plans of our clients.
Whilst we have seen consecutive increases in interest rates
during the first half of this year, rates remain at historically
low levels and mortgage availability is strong, with a competitive
lender market and Government policy remaining supportive of
mortgage lending.
The Group's forward sales position has further strengthened with
Housebuilding and Partnerships' mixed tenure forward sales
totalling GBP2,144m (2021: GBP1,847m), up 16% on prior year. 92%
(2021: 93%) of total forecast Housebuilding and mixed tenure
revenues for FY 22 are secured. The partner delivery forward order
book totals GBP835m (2021: GBP890m) with 96% (2021: 95%) of
forecast FY 22 revenue secured.
Operations
Delivering high quality new homes and excellent customer
satisfaction remain our key priorities and we were pleased to be
awarded the maximum 5-star HBF customer satisfaction rating in the
most recent annual review for the third consecutive year, with our
score at 92% in the recently published HBF 12-month rolling
customer satisfaction data. We remain focused on improving our
score for the HBF customer satisfaction survey which is sent out
nine months after completion and are very encouraged to see our
current score increasing to 78.6%, in-line with the industry
benchmark and up from 73.1% in the prior year equivalent
period.
Our sites are operating well, with good labour availability, and
are benefitting from improvements in the supply of materials,
reflecting increased stock levels for most products and the strong
partnerships we have developed across our supply chain. The Group
recently received its highest number of NHBC Pride in the Job
Quality Awards winners with 29 site managers receiving the
accolade, and a further two Premier Guarantee Excellence awards.
Our Construction Quality Review and Reportable Item scores,
on-going measurements of build quality, remain ahead of industry
benchmarks.
Wider industry cost pressures, including rising energy costs and
increasing wages, are resulting in higher costs for certain
materials. Overall, we continue to expect to see build cost
inflation for FY 22 in the region of 6%. Our focused commercial
controls and strong client relationships have enabled us to
effectively manage input-cost pressures in respect of our pre sold
volume.
Our people are key to the success of our business, and we
continue to prioritise staff wellbeing and retention. In the first
half we introduced a cost of living wage adjustment across the
business, weighted most strongly toward our lower earners, and are
pleased to report that the level of voluntary staff turnover is
down despite a tight labour market.
Planning remains the single most significant constraint on the
business, from continuing capacity issues within local planning
authorities, to the increasingly challenging political and
regulatory environment around issues such as nutrient neutrality.
We are responding proactively by factoring longer lead times into
our site forecasting, which enhances our control, and increasing
our senior expertise in these areas. Our strong balance sheet and
breadth of operations provide confidence and resilience to cope
with any specific issues.
Having committed to undertake all necessary life-critical fire
safety rectification in respect of buildings developed by the Group
and its predecessor entities in the last 30 years, we have
strengthened our dedicated team and are working hard to agree and
implement required repairs as quickly as possible.
High quality land acquisition
We have had a successful first half in the land market.
Housebuilding has more than replenished its land bank having
secured 3,360 (2021: 4,143) plots across 16 (2021: 20) developments
and has 100% of the land it requires for FY 23 completions secured.
Land has been acquired on average above the minimum hurdle rates of
25% gross margin and 25% return on capital employed.
Partnerships continues to invest in its owned land bank to
support its rapid growth in mixed tenure with 2,166 (2021: 1,499)
plots on 12 (2021: 8) sites secured in the first half, well in
excess of completion volume. Margins on new developments secured in
the period have been at the upper end of our targeted range across
Partnerships, supporting our medium term operating margin target of
at least 12% and return on capital in excess of 40%. This growing
business is well positioned with 87% of the land required for FY 23
mixed tenure completions secured.
In addition, the unique combination of Housebuilding and
Partnerships has enabled us to acquire a number of larger sites,
supporting the accelerated delivery of new homes as we utilise the
full bandwidth of the business.
With our strong strategic land capability, we remain focused on
strategically sourced land and are targeting 30% of total
completions to be delivered from higher margin strategic land in
the medium term. In the first half, we have secured 2,518 (2021:
4,660) plots on 6 (2021: 6) strategic land sites and pulled through
1,852 strategic land plots across 5 sites into the owned land
bank.
Balance sheet and capital allocation
It has been another period of strong cash generation with the
year on year Group net cash position increasing to c. GBP115m as at
30 June 2022 (30 June 2021: GBP31.6m), reflecting the strength of
the first half performance. Our month-end average net debt for the
rolling 12 months to 30 June 2022 was GBP73m (30 June 2021:
GBP239m).
With balance sheet strength, our priority remains investing in
the business to support the Group's growth strategy. The
Housebuilding business remains focused on controlled volume growth,
driving margins and return on capital employed, while Partnerships
continues to drive rapid growth in its higher margin mixed tenure
revenues whilst retaining its higher return on capital
employed.
The Group stated that surplus capital, following investment in
the business to support the Group's growth strategy and the payment
of ordinary dividend, would be returned to shareholders.
On 27 May 2022 the Group announced the commencement of a share
buyback programme to repurchase up to GBP35m of ordinary shares.
The Board considers that it is returning a prudent level of cash to
shareholders, which reflects the robust trading of the Group, while
also retaining a strong balance sheet. The programme has been
successful and as at 6 July, shares with a total value of GBP28.2m
have been repurchased, at an average price of 867p.
Outlook
Demand remains strong reflected in high prospect levels and
strong current reservation rates. Our Partnerships business is
extremely well positioned to meet the very high level of demand
across all tenures from local authorities, housing associations,
the private rented sector and elderly accommodation providers .
Given the positive trading in the first half and in particular
the strong price increases, we expect margins in both Housebuilding
and Partnerships in the year to be ahead of our FY 22 targets.
Whilst we are mindful of the wider economic uncertainties, we
remain positive on our outlook and continue to expect adjusted
profit before tax for FY 22 to be at the top end of market
forecasts(1) .
Completions H1 22 H1 21
-------------------------------- ------ ------
Housebuilding
* Private 1,836 1,853
* Private JVs (100%) 639 441
* Affordable 623 669
* Affordable JVs (100%) 121 163
Total Housebuilding 3,219 3,126
Partnerships
* Mixed tenure 643 408
* Mixed tenure JVs (100%) 463 487
Total mixed tenure 1,106 895
-------------------------------- ------ ------
Forward sales (GBPm) 30 June 2022 30 June 2021
-------------------------------- ------------- -------------
Housebuilding
* Private 718 650
* Private JVs (100%) 230 210
* Affordable 450 485
* Affordable JVs (100%) 108 111
Total Housebuilding 1,506 1,456
Partnerships
* Mixed tenure 342 200
* Mixed tenure JVs (100%) 296 191
Total mixed tenure 638 391
Total development 2,144 1,847
Total partner delivery 835 890
Total Group 2,979 2,737
-------------------------------- ------------- -------------
Certain statements in this press release are forward looking
statements. Forward looking statements involve evaluating a number
of risks, uncertainties or assumptions that could cause actual
results to differ materially from those expressed or implied by
those statements. Forward looking statements regarding past trends,
results or activities should not be taken as representation that
such trends, results, or activities will continue in the future.
Undue reliance should not be placed on forward looking
statements.
For further information please contact:
Vistry Group PLC 01675 437160
Earl Sibley, Chief Financial Officer
Susie Bell, Head of Investor Relations
Powerscourt 020 7250 1446
Justin Griffiths, Nick Dibden, Victoria vistry@powerscourt-group.com
Heslop
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END
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