Bailout For Embattled Builder

‘Too big to fail’ housebuilder Vistry has been handed a massive government bailout in the initial sum of £350 million from the Social and Affordable Homes Programme.

Although the company was still building to a successful model, land prices, construction energy costs, higher build costs and a lack of consumer demand for new houses had seen the company slide from last year’s £80 million pre-tax profit to expected losses of £30 million in 2026.

In early August, the Financial Times reported that Allianz Trade, in particular, along with other insurers had reduced trade credit cover by as much as 70% meaning that contractors and manufacturers of construction products would be reluctant to supply without upfront payment.

Potential collapse

A cycle of cashflow problems for the embattled firm was predicted. The company could have gone to the wall.

That scenario would have been devastating. Vistry is seen as one of those housebuilders that fall into the ‘too big to fail’ category as its work is vital to the UK’s push to unravel a housebuilding crisis. The company’s model is to often work with government and local authority partners and of course, Homes England. These organisations put up most of the build money and so Vistry generally stays unexposed.

However, Vistry also has a big portfolio in private housing provision…this is the catalyst for its problems. It grew too fast in this sector. The company amassed £half-a-billion in net debt.

£350 million

Now the company has been appointed as a strategic partner to Homes England and awarded a grant of £350 million to get going and to support building up to 3,000 affordable homes. This is actually quite a small proportion of the initial £10 billion of an overall proposed £39 billion funds to be made available to the Social and Affordable Homes Programme, although £350 million is the max for any one partner whether they be partnering Homes England or any of the Mayoral partners and other organisations taking part in the scheme.

Vistry’s share price which had plummeted in early August took a massive leap once the announcement was received on 25 August.

Offloading

The company had also engaged in an aggressive campaign of selling-off its private housing developments and land. Fortunately, Vistry was also able to complete on a number of projects and deliver them to ease cashflow. The grant and these actions appear to have stabilised the firm’s finances and restored confidence. Trade credit insurers have not yet announced if they will restore the company’s rating.

Appointed in late April as CEO, Adam Daniels has also embarked on a cost cutting exercise with the aim of transforming net debt into a net surplus. Land purchases will be viewed with caution, existing land will be sold off if there is too long a gestation period to develop it, contracts will be renegotiated an of course, office space and headcount is ‘under review’. The size of the company still means it can leverage buying power – construction product suppliers will know that it will be difficult to raise prices despite their own added costs fuelled by the economy and more stringent building materials standards.

Picture: Vistry recently completed the handover of 84 affordable homes at Hounsome Fields, Basingstoke, and the forward sale of 81 affordable homes at Holme Meadows, South Wokingham.

www.vistry.co.uk