Shares in Vistry Group soared on Monday after it revealed plans to combine its housebuilding and partnerships divisions alongside a resilient set of half-year results.
The Kent-based property developer said the merger would help it focus on meeting the UK’s severe shortage of mixed-tenure, affordable homes.
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 housebuilding land bank will be transitioned to the Partnerships model.
Good result: Vistry said the merger of its housebuilding and partnerships divisions would help it focus on meeting the UK’s severe shortage of mixed-tenure, affordable homes
Its Countryside Partnerships brand will be unchanged, as will all three housebuilding brands, Bovis Homes, Linden Homes and Countryside Homes.
Vistry expects to save about £25million in costs from the integration, on top of the £60million in annualised synergies from last year’s acquisition of Countryside.
Following the update, 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.
They have expanded by around 43 per cent since the start of this year.
Greg Fitzgerald, chief executive of Vistry, said: ‘The scale of the social need for affordable mixed tenure housing across the country continues to increase, and it is clear that Vistry is uniquely positioned as the leader in partnerships housing.’
He added that a tie-up ‘best enables sustained growth in housing output, provides greater benefits to our partners, while maximising value and long term returns for shareholders’.
Vistry also announced on Monday that it was upholding its guidance for £450million in adjusted pre-tax profits following a resilient first-half performance against a more challenging backdrop for the British housing market.
Legal unit completions climbed by 40 per cent over the opening half of 2023, which helped boost revenues by approximately a third to £1.58billion.
Yet profits still dropped by 8.4 per cent to £174million due to higher finance costs resulting from rising debts and interest rates.
Successive base rate hikes by the Bank of England have pushed up borrowing costs over the last two years, causing a sharp fall in mortgage approvals.
An average two-year fixed-rate mortgage deal now stands at 6.2 per cent, according to Better.co.uk, while the equivalent five-year deal is at 5.57 per cent.
Vistry has noted that open market private sales have continued to slow since July, although it said this partly reflected the traditionally quieter summer period.
However, the firm noted its partnerships and housebuilding arms have a combined forward order book totalling £4.3billion and were still striking deals with local authorities and housing associations.
Mark Crouch, an analyst at investment platform eToro, said: ‘Vistry’s decision to double down on its partnerships business is unsurprising given its recent purchase of Countryside and a general slowdown in the wider housebuilding market.
‘Mixed-tenure housing demand tends to be more resilient, even in a weaker market, particularly with MPs keen to boost social housing stock in this country.’
