Vistry takes £500m hit as new boss downsizes housebuilder
Vistry has taken a nearly £500m hit to its value, as the beleaguered housebuilder’s new chief executive sets out drastic plans to downsize the firm to ensure its survival.
Adam Daniels, the new boss of the FTSE 250 housebuilder, told shareholders on Thursday that his review into the group revealed that its assets were worth £475m less than previously thought.
This write-down – along with delays to housebuilding projects and the cost of a building safety tax – pushed Vistry to a £661m pre-tax loss in the six months to June, a significant reversal from last year’s £41m profit.
Vistry, once dubbed the nation’s “favourite housebuilder,” has seen its share price slip by nearly 60 per cent so far this year. In March, the group’s much-loved chief executive Greg Fitzgerald shocked investors by announcing his immediate retirement.
Daniels, a former regional manager at the group, told shareholders that the housebuilder must immediately change course by drastically reducing its output and simplifying its operations.
Fitzgerald had overseen Vistry’s pivot towards a partner model, in which most of its projects were carried out with third-party groups like institutional landlords or local authorities.
But the housebuilder’s new chief executive said the business must be “resized, simplified and repositioned to deliver lower leverage, stronger cash conversion and more sustainable returns”.
Alongside the hit to asset value, Vistry said its huge £661m pre-tax loss was fuelled by significant discounting to its open-market homes in a bid to shift stock.
The group was also forced to set aside £73m more for the building safety levy, which was set up in the wake of the Grenfell Tower fire and raises funds from developers to repair unsafe cladding on existing buildings.
The housebuilder’s reset was met with a market sell-off, as its shares dipped by seven per cent to 248p in early trading. Adam Vettese, a market analyst at eToro, said Daniels’ approach is “the right diagnosis, [but] it does not make the next 12 months any cleaner”.
“This morning’s sell off is the market calling time on another year of moving goalposts,” he added.
New boss blames ‘headwinds’
Vistry built 6,304 homes in the six months to June, eight per cent fewer than last year, as its revenue slipped by nine per cent year on year to £1.7bn.
Daniels said the housebuilder will take a more careful approach to buying land in the future, after identifying a “proportion” of its land bank which it would not have bought again today.
Other top housebuilders, including Berkeley and MJ Gleeson, have cut back on landbuying in recent months, warning that the Iran war is pushing up costs and softening consumer demand for homes.
A revaluation of Vistry’s landbank is set to dent full-year profits by £250m, the group said. The firm slashed its target for full-year adjusted profit by £40m to £165m.
Daniels told shareholders: “Whilst the challenges we have experienced in the last couple of years have been exacerbated by market headwinds, the review has also made clear that our execution, regional discipline and capital allocation have not been consistent enough.
“These issues can be fixed, and we are taking the necessary steps to ensure the strong performance we have seen across many of our sites is replicated across the group as a whole.”
Daniels pointed to a £350m affordable housing grant from the government as a reason to be hopeful, adding that work has already begun on these 3,000 homes.