Vistry sees margins ahead of target as demand soars

The company added that it continued to expect adjusted annual pre-tax profit to be at the top end of market forecasts of £417m.

Completions for the first six months of the year rose to 3,219 up from 3,126. Forward sales increased to £2.9bn from £2.7bn.

“Wider industry cost pressures, including rising energy costs and increasing wages, are resulting in higher costs for certain materials,” Vistry said in a trading update on Friday.

“Overall, we continue to expect to see build cost inflation for FY 22 in the region of 6%. Our focused commercial controls and strong client relationships have enabled us to effectively manage input-cost pressures in respect of our pre sold volume.”

The statement follows rival developer Persimmon which on Thursday also issued a positive trading update said demand was unaffected by issues in the wider economy, and that it expected profits for the year to be “modestly above our expectations”.

However, it also warned that developments were being hampered by delays in the planning system and issues navigating new guidance from Natural England, which regulates the environmental impact of new homes

Hargreaves Lansdown analyst Matt Britzman said Vistry was the latest housebuilder to "shrug off concerns that the housing market is due an imminent slowdown".

"A solid set of first half results was backed up by higher private sales prices that are more than offsetting the impact of rising costs, and a forward order book that shows the private buyer is defiant in the wake of a cost-of-living crisis and lower spending power," he said..

"Looking beyond the headline figures though, it’s the partnerships business that’s the shining light. Councils and local authorities are biting at the bit to get developments underway, and that’s great news for Vistry given these attract higher margins."

However, he added that higher operating costs would keep a lid on operating margin therefore profit growth at the housebuilding division.

"Though the group’s still expecting to hit the top end of guidance on underlying profit before tax at the group level. Planning permission, given a lack of capacity at local authorities was also called out – not for the first time this week as Persimmon suggested similar issues," Britzman added.