Vistry Group Posts Record Loss, Halves UK South East Operations

Vistry Group has reported its largest-ever loss, amounting to £661.3 million for the six months ending June 30, as the company enacts a significant strategic pivot. The housebuilder plans to cease operations in south-east England and reduce its annual housing completion target to approximately 12,000 homes from a previous goal of 16,000.

This move follows a review by new chief executive Adam Daniels, who aims to concentrate Vistry's efforts on the stronger housing market in northern England. The company's regional office network will be halved from 25 to 12 locations as part of this restructuring.

The substantial loss was attributed to a £475 million writedown of goodwill and an additional £73 million set aside for building-safety repairs, likely related to acquisitions made prior to the current leadership's strategy. Vistry also posted an adjusted loss before tax of £83.3 million in the first half of the year, a sharp contrast to the £80.6 million profit recorded in the same period last year.

Daniels stated that the group is being repositioned as a "specialist mixed-tenure housebuilder" focused on delivering consistent, cash-backed growth and attractive returns on capital. This will necessitate a smaller, more geographically focused business with enhanced operational discipline.

Vistry now forecasts an adjusted profit before tax of £165 million for the full year. The company's net debt increased to £468.8 million, up from £293.1 million a year prior. Shares in the FTSE 250-listed company have fallen approximately 60% over the past year.

The housing market in London and the south-east has experienced a downturn, with average flat prices in the capital decreasing significantly over the last four years. Conversely, house prices in the North West saw an increase of nearly 5% last year.

The company reported disappointing sales of private homes during the summer and experienced withdrawals or renegotiations of deals for affordable housing. While the total average selling price rose by 3% to £292,000, Vistry plans to reduce prices on some properties to generate cash, sell assets, and slow construction in weaker sales areas.

In terms of workforce reduction, Vistry has initiated a voluntary redundancy scheme and aims to achieve £25 million in savings through staff exits and a hiring freeze, in addition to the £50 million in annual savings targeted by the restructuring. The company's workforce stood at 4,150 at the end of July, with 350 employees having left since the summer.

Analysts suggest that the construction industry is facing significant headwinds, including rising costs due to energy shocks, reduced affordability, and lower consumer confidence amid prolonged high interest rates. The challenges faced by Vistry highlight the need for a significant turnaround strategy.