Vistry Group Plc announced a plan to solely focus on building homes for affordable housing providers and rental landlords in the UK as private sales struggle in the face of higher borrowing costs. Its shares surged.
(Bloomberg) — Vistry Group Plc announced a plan to solely focus on building homes for affordable housing providers and rental landlords in the UK as private sales struggle in the face of higher borrowing costs. Its shares surged.
The homebuilder will merge its private homebuilding operations with its partnerships business which has expanded significantly following the acquisition of Countryside in November 2022. The developer expects to return as much as £1 billion ($1.3 billion) of surplus capital to shareholders as a result of the strategic shift, which will include reducing the number of regional offices it operates and cutting headcount, according to a statement Monday.
“Our housebuilding business has faced more challenging market conditions with the higher mortgage rate environment and broader macro-economic challenges, particularly impacting first time buyers,” Chief Executive Officer Greg Fitzgerald said in the statement.
Vistry’s partnerships unit builds homes for affordable housing providers and major rental investors, typically pre-selling most units. The company’s private homebuilding arm has increasingly been bulk selling units to investors as private sales slow, disposing of 1,172 properties over the past year.
Vistry surged in early London trading, rising as much as 15%. The stock was up 14.5% as of 8:18 a.m.
Vistry has about 30,200 owned and controlled plots in its land bank for private housebuilding. It will now develop these out under its partnerships model, which includes pre-selling at least half of the units. It has already pre-sold 1,000 of the plots and expects to sell a further 8,500 over the next two years to three years.
The shift comes as Vistry’s weekly sales rate — excluding bulk sales — dropped to 0.67 in the first half, down from 0.82 for the same period a year earlier. Adjusted revenues from the group’s private housebuilding arm dropped 28.3%, outweighing the impact of a 7.1% increase in partnerships revenues.
The strategy shift will allow Vistry to “deliver maximum value and long term returns for shareholders,” Fitzgerald said.
(Updates with share price moves in the fifth paragraph, current trading from the sixth paragraph)
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