(Sharecast News) - Shares in Vistry surged on Monday as the company said it planned to merge its housebuilding operations with the partnerships business by the end of the year as it also set new medium-term earnings targets.
The UK home builder on Monday said it was now aiming for return on capital employed of 40%, revenue growth of 5 - 8% a year and operating profit of £800m with an operating margin of at least 12%.
"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," said chief executive Greg Fitzgerald.
Vistry posted an 8.4% fall in adjusted half-year pre-tax profits to £174m amid a tough housing market where prices have been falling in response to higher mortgage costs.
Half-year underlying revenue rose 31.4% to £1.8bn, while underlying operating profit was £206.7m, up 4.3%. Meanwhile Vistry's net debt position was £328.7m, compared to net cash of £118.2 at the end of last year, and the company maintained underlying pre-tax profit guidance for the full year of more than £450m.
"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," said Aarin Chiekrie, equity analyst at Hargreaves Lansdown.
"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."
Reporting by Frank Prenesti for Sharecast.com
Vistry Grp (VTY)