New chief executive Adam Daniels says firm will be more geographically focused and plans to cut output to around 12,000 homes
Vistry is set to become a smaller business after falling to a £660m pre-tax loss for the six months to the end of June.
The housebuilder, which is now set to be restructured under new chief executive Adam Daniels (see box), reported the figure in its half-year results this morning and include a £475m accounting write-down of value attributed to acquired businesses plus a £73m building safety provision.
Excluding these items, the firm said it made a loss of £83.3m on an adjusted basis, down from an £80m profit last time.
The drop in profitability in part reflected its decision to discount homes earlier this year to generate cash, it added.
It said at the start of the year it had £600m of unsold private homes in build, reducing this to under £300m by June and by a further £80m since then. Its average selling price on open market homes fell from £389,000 to £383,000 as a result.
The firm’s discounting, along with work in progress controls and “deals executed to accelerate cash at the expense of profit”, reduced its profit by £50m.
Profit was also hiy by £50m of costs relating to Daniels’ review of the business, including £40m of costs to reshape its land bank and £6m of losses exiting its part exchange portfolio.
The group’s overall half-year completions fell 8%, from 6,889 to 6,304, while revenue fell 13% from £1.6bn to £1.4bn.
Its net debt was at £469m at 30 June, compared to £293m a year earlier, while its average daily net debt in the half year rose from £695m to £799m.
Vistry said this higher level of debt was expected to “pay down of land creditors, improved payment timescales to our suppliers and subcontractors and a lower volume of partner transactions”.
The group recognised other exceptional items totalling £10.3m relating to costs linked to the voluntary exit scheme – under which it has offered staff incentives to leave the business – the CEO succession, which saw Daniels take over from Greg Fitzgerald, office closures and other one-off restructuring expenses.
Vistry was last month allocated £350m under the first phase of the £39bn Social and Affordable Homes Programme.
What the review found and what happens next
Vistry today published the findings of chief executive Adam Daniels’ review of the business.
It found that the pace of the group’s shift to a partnerships model – under which it forward sells homes to partners such as housing associations, councils or investors – “meant that the operating model, controls and culture did not scale consistently with the group’s volumes”.
It said that as Vistry focused on growth “there had been operational execution issues in certain regions and on specific sites”.
It added: “Against a difficult market backdrop given elevated mortgage rates and weak consumer confidence, Vistry has underperformed as the group has struggled with challenges of inconsistent operational delivery, weakening gross profit, overheads out of sync with volume delivery and locked up capital. Historical performance also indicates a significant variance in profitability and return on capital by region.
“The review identified inconsistent regional application of the mixed-tenure model, variable commercial terms and excessive capital tied up in land and work in progress.”
The group will now be restructured to make it smaller and simpler, with 12 regions instead of 25 and delivering around 12,000 homes a year instead of the 15,000 it delivered last year. It is aiming for around six in 10 of homes to be partner-funded, down from around seven in 10 previously.
It will focus more on regions where the mixed-tenure model works best, with increased exposure in the North, Midlands and West.
In the South east it will move to a fully partner-funded model to reduce open market exposure.. It will reduce its land bank from 51,000 to 36,000 plots and pledges to ensure “more selective approach to new land acquisition; increased discipline around capital allocation; and a sustainable management of margins”.
The group said it has identified overhead cost savings of £50m per year as a result of fewer regions, flatter structures and lower volumes, in addition to £25m of annual savings from its voluntary exit scheme – under which it has offered staff incentives to leave the business – and a recruitment freeze.
What analysts are saying
Julie Palmer, managing partner at financial and real estate advisory group BTG, said: “Efforts to improve its cashflow alongside a government announcement of £350m to support building affordable housing may have seen Vistry Group begin navigate away from deep water and back towards dry land.
“However it is by no means out of the woods yet and cannot afford to rest on its laurels. Vistry must be focused on making sales and generating cash to prove to shareholders, suppliers and partners that it is back on solid foundations.”
In a note, broker Peel Hunt said: “While market conditions remain challenging, the new chief executive is resetting the business at a more sensible, lower level. Fewer regions, a tweak to the tenure mix, and further reductions and reshaping of the land bank mean there is still lots of work ahead. We are cutting our profit before tax forecasts from £210m to £110m in 2026, and from £245m to £165m in 2027.”
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