UK builder Vistry expects CEO-led overhaul to deliver recovery after first-half loss
Vistry's Strategic Response to First-Half Loss and Future Outlook
By Raechel Thankam Job
July 8 (Reuters) - Britain's largest affordable housing builder Vistry warned of a first-half pre-tax loss of £30 million ($40 million) on Wednesday, but said cuts to costs, inventory and land purchases would deliver profits for the second half.
The warning sent its shares down by as much as 12%, making Vistry the biggest faller on the FTSE mid-cap index, which fell over 2% as of 0942 GMT.
The cost-cutting measures are part of a strategic overhaul being delivered by CEO Adam Daniels, who took over three months ago.
Strategy Overhaul and Debt Reduction
Measures to Reduce Debt and Adapt to Market Conditions
STRATEGY OVERHAUL TO BRING DOWN DEBT
To bring down debt levels and adapt to current levels of demand, Daniels said on Wednesday he would reduce Vistry's regional footprint, land bank and work in progress. The company would also cease part exchange operations, which entail buying a home-owner's existing property as part payment.
Impact of Economic Factors and Market Demand
In May, the builder warned of significantly lower interim and full-year profits, without providing exact figures, citing the economic impact of the Iran war on material and labor costs, which will squeeze margins, and on consumer confidence, which could reduce housing demand.
On Wednesday, it said it completed about 6,100 homes in the first half, down from 6,889 a year earlier, as delays in partner-funded deals were renegotiated after failing to meet commercial requirements. Several are expected to be completed in the third quarter.
Profit Targets and Financial Outlook
Annual Profit Target and Analyst Reactions
ANNUAL PROFIT TARGET IS UNCHANGED
For the full year ending in December, Vistry said it expects to report adjusted profits of £200 million, in line with analyst estimates.
The outlook implies a stronger second half than the market expects, RBC Europe analyst Anthony Codling said, calling it "a tall order" given internal restructuring and Britain's political landscape.
Debt Position and Anticipated Cash Flow
Although net debt was £470 million on June 30, the company expects to end the year with net cash exceeding £100 million.
Government Grants and Second-Half Boost
Affordable Housing Grants and Market Sales
Vistry also expects to benefit in September from the confirmation of government affordable housing grants. It said second-half results should also be boosted by higher sales on the open market and homes built with investment partners, as well as the impact of its strategic overhaul.
Vistry is scheduled to report its half-year results in September.
Leadership Changes
Chief Financial Officer Transition
Also on Wednesday, the company said Chief Financial Officer Tim Lawlor, who had held the role since 2022, will leave for a position elsewhere. He will remain until October after the CEO review is completed and half-year results are published.
Additional Information
($1 = £0.7488)
(Reporting by Raechel Thankam Job in Bengaluru; Editing by Nivedita Bhattacharjee and Barbara Lewis)
