By Samuel Indyk
Investing.com – Homebuilder Vistry group has raised its profit guidance after saying it has had a “very positive” start to the year.
The company said its weekly private sales rate increased to 0.75, up 21% on 2019.
The FTSE 250 company said housebuilding is on track to deliver a significant step up in completions in FY21 to around 6,500 units, ahead of previous expectations and an improvement in gross margin.
With that in mind, the company has lifted its profit forecast and now expects adjusted profit before tax for FY21 to be circa £325mln, above the previous guidance of at least £310mln.
Vistry (LON:VTYV) has maintained its expectations for FY22.
“It has been a very positive start to the year with strong demand across all areas of our business and our private sales rate increasing to 0.75,” said Vistry Group CEO Greg Fitzgerald. “As we approach the end of our first half, we anticipate results for the six months will be well ahead of our previous expectations.”
Vistry has clearly benefitted from measures introduced by the UK government to prop up the housing market amid the pandemic and Hargreaves Lansdown equity analyst Laura Hoy says the the company is well positioned for that to continue.
“Suggestions that the housing market would see a drop-off in demand amid changing policies, were clearly overblown,” Hoy said. “Vistry’s update confirmed that the housebuilder is in a strong position to capitalise on a housing market that’s on fire in the UK, helped by strong demand following a transition to the new Help to Buy scheme.”
Building costs
As seen across multiple industries, costs are going up. Housebuilding is no different. Vistry said they are seeing modest levels of build cost inflation across both labour and material supplies, however, pre-arranged agreements are providing some protection in respect of material procurement.
“Inflation and the global economic recovery remain the largest risk to housebuilders like Vistry,” Hoy added.
“The average asking price for a house in the UK increased by 6.7% since the start of the pandemic. Compare that to wage growth of roughly 5.4% over the past year, and it’s reasonable to expect that at some stage, affordability could come into question, especially if the government starts to pare down its financial support.”
At 10:41BST, shares in Vistry Group were trading higher by 1.6% at 1,316.50 pence per share.