Vistry Group PLC (LON:VTY) said underlying profits for calendar year 2019 would be “slightly ahead” of market forecasts and that the integration of Linden Homes was “well underway”.
Vistry, which is the new name for Bovis Homes, acquired Galliford Try PLC’s (LON:GFRD) housebuilding arm and housing association partnerships arms for £1.1bn on 3 January. Galliford shareholders were left holding 29% of the enlarged group.
READ: Vistry upgraded by Citi as analysts “continue to see value” in UK housebuilders
Chief executive Greg Fitzgerald said Vistry was “fully focused on delivering the clear and significant benefits from this exciting combination as quickly as possible”.
“Whilst it is early in the year to comment on 2020 trading, we have a strong forward sales position and trading to date has been very positive, with consumer confidence returning and industry fundamentals remaining strong,” he added.
The past year saw the group complete 3,867 new homes, up 3% on the year before, with the average selling price at £279,000, up 2%, while private sales prices rose 1% to £341,000.
While market uncertainty led to a 1%-2% reduction in underlying prices in the second half of the year, the group said it increased operating profit margins as its build cost savings were helped by a lack of cost inflation.
Profit before tax (PBT) and exceptional items is therefore expected to be a little above the £181.6mln analyst consensus, although £15mln of costs associated with the acquisition will hit the reported PBT number.
The year finished with £362mln of cash in the bank, including £150mln raised to fund the £300mln cash element of the acquisition. Vistry has promised to pay a second interim dividend of 41p per share on 29 May.
Market reaction
The shares, which broke new ground in December with new all-time highs above 1,360p, were down 1% to 1,331p on Wednesday morning.
Analysts at UBS felt the outlook was rather vague but noted that volumes are intended to be flat for the group, with no comments on margin.
Broker Peel Hunt said it expects to see a "modest increase to market estimates, which will inevitably feed into FY20-21 estimates as well" as activity is expected to have picked up post election.
"If there has been a ‘Boris bounce’ in consumer confidence, the debate will be how high and for how long. We should get a pretty good idea by the end of February."
Peel Hunt's analysts see Vistry as "one of our key housing picks" for 2020, with the merger and related synergies "driving a lot of growth" and the market "not fully valuing the Partnerships business, which has the scope to post very strong growth over the next 3 -5 years"
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