Facing a decline in private market sales, house builder Vistry is changing its business strategy dramatically to focus only on partnerships housing business.
The firm revealed the change in business direction as it reported a 3% increase in pre-tax profits to £114m in the first half, with revenue rising by a third to £1.57bn.
Partnerships experienced strong demand, with adjusted revenues growing by 7.1% to £953.6m compared to pro forma H1 22 (£890.4m) and adjusted operating margin improving to 11.5% (H1 22: 10.2%)
House building saw a 28% drop in adjusted revenues to £823m, compared to pro forma H1 22 (£1,149.2m) and gross margin of 19.8% (H1 22: 22.4%)
The new strategy was announced this morning by chief executive Greg Fitzgerald, who promised to give back £1bn to shareholders over three years as the traditional house building division frees up assets.
The housing business will be ‘merged out’ as part of the decision, which will lead to a major reorganisation, reducing regional business units from 32 to 27.
The group will operate under six new regions, each with a divisional chair, which will save £25m in costs, according to Fitzgerald.
This is in addition to the expected £60m of savings from the purchase of Countryside last year.
Fizgerald said: “We expect this strategy to create a business capable of delivering a 40% return on capital employed, 5 to 8% revenue growth, £800m of operating profit and 12%+ operating margin in the medium term.
He said that in future all new developments across Vistry will require a minimum of 50% units to be pre-sold.
“Following our annual review of the group’s strategy, the board has concluded that focusing the group’s operations fully on partnerships by merging our house building operations with our Partnerships business, best enables sustained growth in housing output, provides greater benefits to our partners, while maximising value and long term returns for shareholders with the group targeting a 40% ROCE and the distribution of £1bn to shareholder over the next three years.”
“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.”