Morning Note: Market news and results from housebuilder Vistry Group.

Market News

US equities closed in positive territory last night – S&P 500 (+0.2%); Nasdaq (+0.5%) – as investors searched for a clear direction amid weaker US consumer confidence and uncertainty about President Donald Trump’s upcoming tariffs. March Consumer Confidence plunged to a 4-year low, while Philadelphia Fed non-manufacturing posted its lowest reading since May 2020.

Copper futures soared past $5.20 per pound on Wednesday, reaching a fresh all-time high amid reports Trump will impose copper import tariffs within weeks, significantly accelerating the original timeline.

Russia and Ukraine agreed to a ceasefire in the Black Sea, the US said, even as the Kremlin emphasised the deal depends on some sanctions relief. Russia and Ukraine may both be incentivised to choose a longer war over an unsatisfying settlement, the US Director of National Intelligence said.

In Asia this morning, markets were also generally higher: Nikkei 225 (+0.7%); Hang Seng (+0.6%). The FTSE 100 is currently 0.2% lower at 8,664, while Sterling slipped to $1.2890 and €1.1940. UK inflation cooled to 2.8% in February vs. 3.0% expected, strengthening the case for the Bank of England to cut rates. Rachel Reeves delivers her Spring Statement – the Chancellor is expected to include billions of pounds of planned spending cuts and extra borrowing.

The Federal Reserve’s Austan Goolsbee said the next rate cut may take longer than anticipated. The 10-year US Treasury yield edged up to 4.33%, while gold trades at $3,025 an ounce.

Source: Bloomberg

Company News

Vistry Group has today released its 2024 full-year results. As expected, the group’s profits fell sharply because of several internal issues. In response, the shares have been marked down by a further 5% in early trading this morning.

Vistry is a UK-based housebuilder formed following the 2020 merger of Bovis Homes Group and Galliford Try. The company is the UK’s leading provider of affordable mixed tenure homes, operating across 26 regions, through three brands: Bovis Homes, Linden Homes, and Countryside Homes.

The company employs a capital-light model – over the medium term, it is targetting 40% return on capital employed, a 12%+ operating margin, and revenue growth of 5% to 8% p.a.

However, 2024 was a very challenging year for the group resulting in a disappointing financial performance and three profit warnings. The issues relating to the forecasting of costs in the South Division were identified during the year, while performance was also impacted by delays in concluding agreements with partners and other commercial transactions at the end of the year. The company has concluded a rigorous set of reviews and year-end procedures with no further issues being identified, and much work has been done to improve the group’s structure, systems, and controls.

During the year, Housebuilding completions increased by 7% to 17,225, with Partner Funded completions up by 18% to 12,633 units and Open Market completions down by 15% to 4,592 units. Average selling prices remained broadly consistent with the previous year at £275k. Adjusted revenue grew by 7% to £4,329m.

The group managed to mitigate underlying build cost inflation in the year through its benefits of scale, visibility of revenue and efficiency gains, resulting in neutral build cost inflation for the group in the year. 

However, the margin fell from 11.8% to 8.3% as the group continued to transition the higher margin, capital intensive landbank from its former Housebuilding business to the lower margin, capital light Partnerships model. Operating profit fell by 25% to £358m. Return on capital employed declined from 20.9% to 14.6%, well below the medium-term target.

In 2024, net debt rose from £89m to £181m, although the average daily net debt was £698m. During this year, the group expects to deliver improved cash generation resulting in a steady reduction in average net borrowing. Tighter cash controls have been introduced at a site level, and there is weekly monitoring at an executive level. The group is also looking at ways to accelerate the cash release from its former Housebuilding landbank with options including bulk sales and discounting under consideration.

In September 2024, the group announced a total capital distribution of £130m comprising a £55m ordinary distribution in respect of the H1 2024 earnings and a £75m special distribution. The group has completed £38m to date and expects to complete the remaining £92m via share buyback, to be concluded in H1 2026. Reflecting the performance in 2024, the group is not proposing any final ordinary distribution in respect of the 2024 adjusted earnings.

Vistry continued to secure attractive new land and development opportunities throughout the year, totalling 16,508 mixed tenure plots. The company is pleased to see the Government bring forward a further £2bn of much-needed funding for affordable homes and will be seeking to progress as quickly as possible with its partners to deliver quality new homes across the country.

The forward order book totals £4.4bn, with 65% of forecast 2025 units secured. The group sales rate of 0.59 sales per site per week for the year to date is down on the prior year (0.81), reflecting a low volume of Partner Funded transactions in the first quarter. The company is seeing some upward pressure on build costs and is expecting low single-digit build cost inflation in 2025. Overall, the group continues to expect to make year on year progress in profit in 2025, with profits being more H2 weighted than in prior years.

Source: Bloomberg