Vistry Group shares rise as builder plans to merge divisions
- Vistry Group shares were the best performers on the FTSE 250 on Monday morning
- The merger will reduce the number of regional business units from 32 to 27
- During the first half of 2023, the number of Vistry legal unit terminations increased by 40%
Vistry Group shares soared on Monday after it revealed plans to combine its homebuilding and partnerships divisions alongside a strong set of half-year results.
The Kent-based property developer said the merger would help it focus on meeting the acute shortage of affordable and mixed tenure housing in the UK.
As part of the restructuring, the number of Vistry’s regional business units will be reduced from 32 to 27 and 30,200 plots of land in the group’s residential land bank will move to the partnership model.
Good outcome: Vistry said merging its housebuilding and partnership divisions would help it focus on meeting the serious shortage of affordable and mixed tenure housing in the UK.
Its Countryside Partnerships brand will remain unchanged, as will the three homebuilding brands, Bovis Homes, Linden Homes and Countryside Homes.
Vistry expects to save around £25m in costs through the integration, in addition to the £60m in annualized synergies from the acquisition of Countryside last year.
After the update, Vistry Group Shares They rose 14.75 per cent, or 118 pence, to £9.18 on Monday morning, making them the best performers on the FTSE 250 index.
They have expanded about 43 percent since the beginning of this year.
Greg Fitzgerald, chief executive of Vistry, said: “The scale of social need for mixed tenure affordable housing across the country continues to increase, and it is clear that Vistry is uniquely positioned as a leader in associated housing.”
He added that an alliance “better enables sustained growth in housing production, provides greater benefits to our partners while maximizing long-term value and profitability for shareholders.”
Vistry also announced on Monday that it was maintaining its forecast of £450 million in adjusted pre-tax profits following a strong first-half performance amid a more challenging backdrop for the British property market.
Statutory unit completions rose 40 per cent during the first half of 2023, helping to boost revenue by around a third to £1.58 billion.
However, profits still fell 8.4 per cent to £174 million due to higher financing costs resulting from rising debt and interest rates.
Successive base rate increases by the Bank of England have raised borrowing costs over the past two years, causing a sharp drop in mortgage approvals.
According to Better.co.uk, the average two-year fixed-rate mortgage deal now stands at 6.2 per cent, while the equivalent five-year deal is 5.57 per cent.
Vistry has noted that private sales on the open market have continued to slow since July, although he said this partly reflects the traditionally quieter summer period.
However, the company said its housebuilding associations and arms had a combined order book totaling £4.3bn and were still closing deals with local authorities and housing associations.
Mark Crouch, analyst at investment platform eToro, said: “Vistry’s decision to double down on its partnerships business is not surprising given its recent purchase of Countryside and a general slowdown in the broader housebuilding market.
“Demand for mixed tenure housing tends to be more resilient, even in a weaker market, particularly when MPs are keen to increase the social housing stock in this country.”
