Release Date: September 05, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Strong first-half performance with a 9% increase in completions to 7,792 units.
- Adjusted operating margin maintained at 11.5%, outperforming the traditional housebuilding market.
- Encouraging sales performance with a 10% increase in sales during the typically quieter summer period.
- On track to deliver over 18,000 units this year, making Vistry Group PLC (BVHMF, Financial) the largest housebuilder in the country.
- Announced GBP130 million worth of share buybacks, including a special distribution of GBP75 million.
Negative Points
- Higher average net debt in the first half of the year at GBP489 million compared to GBP360 million last year.
- Finance costs have increased due to higher average net debt and higher discount rates from land creditors.
- The effective tax rate has increased from 24.1% last year to 28.8% this year.
- Challenges in the housing market persist, with a downturn in both private housing and partnerships markets.
- Concerns about the building safety regulator's capacity to sign off work, potentially causing delays in remediation efforts.
Q & A Highlights
Q: Clyde Lewis, Peel Hunt, Swansea. I've got a follow-up on your final comments there about the 30,000 to 40,000. That'd be great, obviously, in terms of numbers. But does that have obviously implications for the capital return, the GBP1 billion? Is that -- does that become a bit mutually exclusive?
A: Greg Fitzgerald, Chief Executive Officer. On that, I would say from buying the land, we will continue to buy land as we have been over the last 12 months, predominantly on deferred terms and predominantly using our partners' money. But what I think will happen, and this is early stages, that's all I'm going to say. 30,000 to 40,000 houses would mean that we would amend our model from, hopefully, 65%, 35%, 65 partner funding, which were -- we're well down on that in the first six months. 65-35 to probably something like 80-20 in our model. So we would do less private units, but it would still be more than we're doing now by far 20%, 35,000 is still an awful lot. It will be more partner funded than private.
Q: Aynsley Lammin, Investec Securities UK. Just two -- or actually three. First of all, just on the pricing and in the open market, I guess, particularly, you're kind of -- with incentives going in towards selling season, how quickly do you think those incentives could be reduced if confidence and sales rates continue to improve?
A: Greg Fitzgerald, Chief Executive Officer. So on that, I would say that we have seen asking prices hold up, and we're probably about 4% on average with incentives, and that's easing a little bit as we go through the summer. We are -- at the early stages, we're looking at a price increase across the board as we go into October, and that's -- and we'll see how we go through in September and the first part of October with sales on that. But we are seeing units that we're selling for next year. Price is actually up about 2.5% in certain areas. The worst market in the country at the moment that we're finding is London from a selling perspective.
Q: Chris Millington, Deutsche Numis. Can you just talk quickly about London exposure and high-rise exposure? A lot of the hospitals have moved out of there. I presume you still got quite a decent operation there.
A: Earl Sibley, Chief Operating Officer, Executive Director. Yes, we are a huge developer in London, very important to us, and I think we're about one in 17 of the new homes in London. That said, the level of private market exposure is limited. So in terms of the model and what we are doing, working with our partners. So that exposure to the open market is limited, and we continue to look at additionality deals across London. And we are, in terms of our setup of a new development, that's where it's most important in terms of we got those partners on board before we even start. But as we've said, London is the toughest market at the moment.
Q: Alastair Stewart, Progressive Equity Research. A couple of questions. First of all, you've reiterated the full-year guidance for completions, 18,000-plus. Should we be thinking about a range at this time? What's the maximum, 18,000 to 18,500? And if you've been quietly thinking of your range, has that changed since July?
A: Timothy Lawlor, Chief Financial Officer. Well, the answer to the first one is that it could be as high as 18,500. I think the reason why we wouldn't want to necessarily go out with that range though more formally is that there is some lumpiness still in our units. And some of the -- with partner funded work, there was some lumpiness that goes into November and December. So there's some chance that there's some timing delays. I think we are very confident for our full year. One of the points of uncertainty that's still between us and December 31 is the October budget, for example. And we don't really know what they're going to say there, but a lot of our partners will be looking very closely at that, and that may have impact on timing. So 18,500 is possible, but behold to just say 18,000 plus.
Q: Will Jones, Redburn Atlantic. I have three as well, please. The first, lots of detail today around all the build and construction initiatives. But just wondering what you think your production capability is running at on an annualized basis or what it could potentially be in '25?
A: Earl Sibley, Chief Operating Officer, Executive Director. Well, so I mean if you take our build outlets, we're about 370 build outlets. That's seen growth of about 20, so about 8% in growth year on year. We are absolutely bringing in more and more of the larger sites that Tim talked about in terms of our competitive advantage coming through. So we are looking to go at a pace multiple outlets on each of those. We can definitely do the 90-plus per build team and construction outlets. So look, we've put out numbers of growth kind of 8% to 10%. Those are well within our grasp and all the existing capacity of the business. And that's before you start thinking about what Greg started putting out there as to the opportunity. We clearly need the land with planning to come through in order to deliver, but we are not governed by the private sales market. But we could be governed by the funding that Stephen is talking about. But to be honest, the capacity to grow from a construction point of view is absolutely there.
Q: Sam Cullen, Peel Hunt. I've just got one follow-up really on your manufacturing capacity. If you did get up to 30,000, 40,000 units, would you want to add more factories? Are you kind of agnostic, would you own it or take it from a third party?
A: Greg Fitzgerald, Chief Executive Officer. We've already -- we were always going to open a fourth factory. But Michael is -- we're pretty much down to three places now. And by the way, the labor MPs in all those three places are basically very, very happy with that and are really going to make that and push that to make it happen just as an aside. But we would -- we look -- we're already committed to opening, up and running a fourth factory at the start of January 2026, which means we probably have to have it located and bought or leased more likely in the first half of next year, very early first half, and then we will be ordering all of the kit. So I think it could be a fifth one as well. But for the minute, a fourth one will take us up to the numbers we require.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
