Vistry Group shares outlook for FY24 and FY25 and Impact from South Division Issues

Highlights

• Vistry expects to deliver FY24 completions of approximately 17,500 units, with adjusted profit before tax of around £300 million.
• The company’s net debt is expected to significantly reduce by year-end, with a £130 million share buyback programme set to complete by May 2025.
• Vistry remains confident in its capital-light Partnerships model and sees substantial growth opportunities, particularly in affordable housing, despite challenges in the South Division.

Vistry Group PLC (LSE:VTY) has released its trading update for the period from July 1 to November 7, 2024, providing insights into its performance, the impact of ongoing issues within its South Division, and the company's outlook for the full year. The update highlights the financial implications of challenges faced in the South Division, which stem from the former Housebuilding business, and outlines expectations for 2024.

Key Findings on South Division Issues

• Independent and Internal Reviews: The findings of comprehensive reviews, which covered all six divisions and 26 regional business units, were shared with the Board.
• The additional profit impact of the issues in the South Division is expected to total £165 million across three years: £25 million in FY24, £20 million in FY25, and £5 million in FY26.
• These issues primarily relate to sites from the former Housebuilding business, and no systemic issues were found outside the South Division.

Year-to-Date Sales and Profit Expectations

• Sales Growth: The Group reported a significant increase in its year-to-date sales rate, with a figure of 1.02 (up from 0.72 in 2023), although market conditions slowed during September and October.
• Profit Before Tax: Due to the impact of issues in the South Division and reduced expectations for completions, Vistry expects to deliver an adjusted profit before tax for FY24 of approximately £300 million.

FY24 Completions and Financial Position

• Completions: The Group now expects total completions in FY24 to be around 17,500 units, with the average selling price remaining similar to the previous year.
• Debt and Cash Flow: Vistry expects to be cash generative in the second half of FY24, with a significant reduction in net debt. Net debt as of December 31 is expected to be lower than the prior year’s £88.8 million, with a reduction from the half-year position of £322 million.
• Share Buyback Programme: The company remains on track to complete its £130 million share buyback programme by May 2025.

Building Safety Provision Review

Vistry is reviewing its Building Safety provision, considering potential additions to the scope of buildings requiring upgrades and adjustments to schemes affected by second staircase regulations. While this may increase the provision, the annual net cash impact is expected to be manageable due to anticipated recoveries and a reduced tax charge. The company plans to update investors on this review in its FY24 results.

Outlook for FY25 and Future Growth

• Forward Sales: Vistry reported a strong forward sales position, up 12% from the prior year, totaling £4.8 billion (compared to £4.3 billion in 2023). This supports the company’s expectations for FY25 and beyond.
• Build Cost Inflation: The Group anticipates some pressure on build costs in FY25, though it plans to mitigate these costs through economies of scale, revenue visibility, and efficiency gains. The impact of the Autumn Budget, particularly the increase in Employer National Insurance contributions in April 2025, is expected to be around £5 million for FY25.
• Affordable Housing: Vistry remains confident in its role in delivering affordable housing, with the Government committed to increasing the delivery of affordable homes over the next five years. The Group is well-positioned to support this growth through its capital-light Partnerships model.