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Hi Peakdread Sorry for the late reply and thanks for raising these interesting points regarding Vistry and a potential Labour government's impact on the housing market.
Here's a breakdown of your questions:
Vistry's Gearing Up Potential:
There's a valid concern about Vistry's ability to rapidly scale up for a significant increase in building. While they haven't explicitly addressed this, it's worth considering their recent merger and ongoing efficiency initiatives. These could position them well for growth. However, further analysis of their land bank capacity and supply chain resilience would be prudent.
Competition from Other Housebuilders:
You're right. Other housebuilders are likely to adjust their strategies. We might see established players create dedicated lower-cost housing divisions or partnerships. This could put some pressure on Vistry's market share, particularly in affordable housing segments.
Market Anticipation and Share Price:
The current share price (SP) likely reflects some anticipation of a housing boom, but it's difficult to quantify how much. It's also possible the market is cautious due to Vistry's potential growth limitations. Monitoring future announcements and how the broader market reacts to Labour's housing policies will be crucial.
Overall, a Labour victory presents both opportunities and challenges for Vistry. Their success will depend on their ability to adapt to a potentially more competitive landscape and optimize their growth strategy.
I think w will need to wait until Labour get into power, go from manifesto promises to policies being implemented to see further rises, but the outlook is promising!
You'd think a labour win would be very good for Vistry - They're pledging to build many, many more homes than the tories have managed to.... However 1) Is Vistry capable of gearing up its model to capitalise on this building boom? and 2) Surely the other housebuilders will be able to copy Vistry's model and at the very least set up a division dedicated to lower cost social housing?? and 3) how much of this potential housing bonanza is baked into the SP (or is it purposefully not baked in due to the limitations surrounding Vistry's growth potential??).
Hi PEAKDRED Yes momentum seems to favour a large move due north following the building of the handle of the CUP with handle formation on the weekly tea leaves expecting a major takeoff event i.e. catalyst if/when BOE reduces interest rates. IMO DYOR
Nice to see some positive movement... It seems to have been in a holding pattern of late....
Stargate I agree the price is heading towards the COVID pre-highs at £1491 and forming a mega cup with handle formation. The next potential hurdle is the June 2021 high @1351 DYOR etc
Price target is 1414 arrived from symmetry of recent retracement added to recent sp peak. Target is separately supported by extension of the line connecting previous price peaks. Underlying sector is bullish, and VTY, was leading equity riser in the sector on Friday. RSI(relative strength index), is above 50, confirming the current uptrend in sp. Volatility based Bollinger bands are separating, indicating increased volatility and speed of price movement. Fundamental page on lse website has broad positive fundamentals. DYOR.
Yesondoner7, tha k you for your excellent posts. I agree. Whilst affordable may be lower margin, it brings secure up front cash (quasi govt funding/grants), so a more capital light business, and allows an anchoring/certainty leveraging into economies for the private (more speculative) sales. Continuity and certainty bring value, and that's what 'affordable' brings to Vistry
Londoner7 you have good insight. Thanks a lot for your comments.
As local authorities can't afford to build affordable housing there is a reliance on the private sector to provide a proportion of new build. Vistry is building on behalf of housing associations, grant -aided by Homes England, who then rent out or use the shared ownership model which can qualify as affordable. It's an interesting model whch seems to be working.
A recent report by Savills illustrates the growth in the Build to Rent market in 2023, “BtR Houses, otherwise known as Single Family Housing, saw £1.9 billion worth of investment, up significantly from £360 million in 2022. This represented 42% of total BtR investment, shattering the previous record of 8% in 2022.”
This statistic represents a significant movement to new development, rather than acquiring existing housing stock for the rental market.
The latest ONS construction report for Jan 2024 shows, latest 3 months on year earlier, public new housing up 5% versus private new housing down -20%. (Currently, public only represents 15% of all new housing)
Perhaps the Vistry CEO is correct in saying the time is right for the partnerships model.
I’ve been following Vistry’s progress towards the partnership model for a few years. I was invested in Galiford when Vistry (formally Bovis) acquired their partnership subsidiary. While I’ve been attracted to the partnership model as key to getting more homes built, addressing the societal need, from an investment perspective I’ve struggled to understand the barriers to the traditional builders moving to the model and negating any Vistry advantage.
I watched the recent results presentation by Persimmon.
I was surprised to see that partnerships accounted for 23% of Persimmon’s sales in 2023, up from 18% in 2022, but partnership volumes were still down 17%. The CEO acknowledged the need and likely trend towards an increase in the supply of affordable housing, particularly if Labour wins the next election. But I interpreted his comment as favouring the status quo with the return of a coalition if not Conservative government. Perhaps I over interpret the comments, but it encouraged me to believe that Vistry will get a clear head start in the partnerships sector, and that creates a moat over the traditional builders, albeit for a few years.
I see this as important because I expect the future housing market to be quite different from the market that has operated for the last 30 plus years. I think a potential reversal is illustrated in the house price to earnings ratio, which peaked in 1989 (5x), 2007 (6.3x) and most recently in 2020 (7.0x). Each push higher has its own stimulus and, in my view, the latest was due to:
Planning restrictions, supported by the emergence of the Nimby, which favoured the large builders over the small and medium builders which struggled after the 2008 financial crisis.
Low interest rates, which made higher house prices affordable to buyers.
A diminished desire for flats, following the cladding and lease issues, and Covid lockdown.
(and I’ll add, with lower conviction) A more constrained construction labour force following Brexit.
Today, because of the cost of housing, the marginal first time buyer remains in the private rental sector, and the marginal private sector renter has fallen back to local authorities for social housing. Key is that local authorities have a statutory requirement to support the lower tier, and it then becomes a government problem, which can no longer be ignored.
Assuming Labour form the next government, I’m doubtful it will achieve a substantial increase in the number of houses built, particularly given a continuing constraint on construction labour, but I’ve no doubt that tax funds will be directed towards the affordable housing market. The current CMA investigation should provide evidence of the impact of planning restrictions and Labour might implement a policy solution, which I doubt strengthens the hand of the dominant large private house builders over the affordable market or the small and medium sized builders.
Ghgo; think you've rather nailed the reason!
Dividends or buy backs both have their benefits but I suppose Buy backs make the Earnings per share look better and if the Directors bonus is linked to the increasing share price then.....
What is it with this current vogue to do buybacks instead of dividends. Another buyback in lieu of the dividend.
Show me the money. The dividend money
Vistry Group posted impressive FY23 finals this morning confirming that the Group has established itself as the country’s leading Partnerships business. The resilience of the Group's unique Partnerships model was clearly demonstrated delivering a total of 16,118 new homes in 2023, down only 5.4% on the proforma prior year and highlighting the outperformance of VTY relative to the other UK homebuilders. Revenue was up 29.8% to £4,042.1m on an adjusted basis or up 28.6% to £3,564.2m on a reported basis. Reported PBT was up 23.2% to £304.8m while basic EPS dipped 25.3% to 64.6p. The outlook provided for FY24 was also solid with the Group on track to deliver strong growth in completions in 2024, targeting in excess of 17,500 units. This solid expansion is underpinned by a forward sales position totalling £4.6bn, of which £2.1bn is for delivery this year. Valuation is decent with forward PE ratio at 12.4x average for the sector. The balance sheet is solid with net debt at just £88.8m and the share price has positive momentum. BUY....
...from WealthOracle
wealthoracle.co.uk/detailed-result-full/VTY/831
I've been in touch with Adam Patinkin (he gives his emal address at the end of the video and I thought it would be rude not to :-)) - He's a thoroughly nice chap who most definitely knows his onions.
👍My favourite British housebuilder 100 % Paul's video hit the nail on the head and Greg's solid 42 years of experience is very sound indeed onward and upwards
I'm only in this because of you Svend (and because of a video Paul posted which explained Vistry's cunning plan to dominate the affordable housing market :-)) - A very nice rise! Onwards and upwards.....
Nice capital appreciation heading into the mid-teens following another £100 million BB commencing in April
I wasn't expecting the s/p to be up over 6% - but I'm not complaining!
Thanks Svend.
Hopefully, we shall see an update & confirmation they remain on schedule to return £1B to shareholders within 3 years i.e. by 2026.
I contacted someone with far more knowledge on Vistry than myself and they said the following:
" I do not expect any fireworks. Hoping to see FY24 guidance of at least $420M pre-tax profit (i.e., at least $500M Operating Profit) and an announcement of the next tranche of the share buyback program, along with some positive commentary regarding market conditions."
Anyone got anything to add to this?
Loved the video SimonPH - Gave me a much better insight into what they do and how they do it - much appreciated.
Thanks SimonPH
An hour and a half....wish me luck...I'm going in.