Housebuilder Vistry has unveiled plans to merge its housebuilding division with its affordable homes business Partnerships as it posted a fall in half-year profits.
The firm said it wants to refocus the group’s operations on its “high return” and Partnerships arm by the end of the year, through which it works with local government authorities and housing associations to build affordable homes.
The move will see it cut the number of regional businesses from 32 to 27 and reduce costs by around £25 million, on top of cost savings from its takeover of Countryside Partnerships in 2022.
Its three housebuilding brands, Bovis Homes, Linden Homes and Countryside Homes, will be retained, as will the Countryside Partnerships brand.
Details of the plans came as it reported an 8.4% plunge in underlying pre-tax profits to £174 million for the first half of 2023.
It revealed the toll taken on its housebuilding arm as the sector suffers from waning demand in the face of 14 interest rate rises in a row.
It saw housebuilding revenues slump 28.3% to £823.5 million on a pro forma basis, while completions tumbled 22.4% on a pro forma basis to 2,847.
Vistry said it has stepped up incentives in an effort to help prices hold up.
The group added that house sales have slowed further since the end of the first half, hit by the quieter summer season and soaring mortgage costs.
But its Partnerships division has fared better in the difficult conditions, with interim underlying revenues up 7.1% at £953.6 million.
Vistry chief executive Greg Fitzgerald said: “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.
“In this context, and 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 housebuilding 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.”
The group kept its guidance for full-year underlying earnings of more than £450 million, as Vistry said half-year revenues jumped 31% higher to £1.78 billion on an underlying basis.
It added that it will launch a share buyback programme of £55 million in November.
Shares in Vistry leaped 13% higher in morning trading on Monday as investors cheered details of the restructuring plans and a robust performance against wider market woes.
Aarin Chiekrie, equity analyst at Hargreaves Lansdown, said Vistry’s first half performance was “impressive given the challenging environment for UK housebuilders”.
On the refocus towards affordable housing, he added: “It’s fair to say the Housebuilding division’s been stuttering lately.
“Recent interest rate rises have reduced affordability for buyers, causing private sales rates to decline and completions to be wound lower as a result.
“That’s no surprise though, given housebuilding’s a notoriously cyclical sector.
“In contrast, Partnerships’ revenues tend to be more robust – the need for more affordable housing doesn’t go away because economic conditions look tough. This provides large fixed-volume projects which should hold up better in a downturn.”
Vistry was formed in 2020 from a merger of Bovis Homes and Linden Homes.
It then bought Countryside Partnerships for £1.27 billion, merging it with its Linden Partnerships business.