Vistry Group PLC (LSE:VTY) soared 16.5% to 932.52p after it announced a shift in strategy and plans for bumper returns to shareholders.
The firm said it plans to focus its operations on partnerships by merging its housebuilding arm with its partnerships business and distributing £1 billion to shareholders over the next three years.
Chief Executive Greg Fitzgerald said the move, “best enables sustained growth in housing output, provides greater benefits to our partners, while maximising value and long term returns for shareholders.”
Vistry is targeting a 40% return on capital employed and expects a significant release of capital as assets from the housebuilding division are redeployed into partnerships.
It is also aiming for revenue growth of 5% to 8% per annum, operating profit of £800 million with a 12%+ operating margin.
Vistry said the £1 billion returns to shareholders would be made via dividends or buybacks starting with a £55 million buyback, expected to commence in November.
It said the buyback would replace a dividend this year given it feels the current share price significantly undervalues the group.
Vistry intends to pursue a two times adjusted earnings ordinary distribution cover in respect of a full financial year, with distributions made through either dividends or share buybacks.
The news came alongside half-year results which saw guidance of in excess of £450 million for adjusted pre-tax profit for 2023 reiterated, as the firm reported adjusted pre-tax profit fell 8.4% to £174.0 million from £189.9 million while EPS slumped 43.2% to 38.3p from 67.4p.
Cost savings from the integration of Countryside are expected to reach at least £35 million in the full year, ahead of the targeted £25 million.