Vistry sets out ambitious post-merger growth plan

The boss of Vistry’s partnerships business – which will be re-branded as Countryside Partnerships following Friday’s £1.1bn takeover – has said the deal will see the firms “amplify” their growth plans despite the deepening economic gloom.

Stephen Teagle, chief executive of Vistry Partnerships, also told Housing Today the merger was likely to allow Vistry to reverse Countryside’s decision to mothball and sell its brand new modular housing factory, in order to produce homes for the combined group.

Friday’s takeover of Countryside Partnerships by Vistry for £300m in cash and more than 128 million Vistry shares has created a housebuilding and partnerships housing giant boasting a pro-forma 2021 turnover of £4bn from more than 14,000 housing completions – making the firm virtually equal in scale to Taylor Wimpey and Persimmon.

The deal is particularly significant for Vistry’s partnerships business, combining Countryside’s 4,400 homes-a-year partnerships business with Vistry’s smaller 2,000 homes-a-year operation to form the biggest partnerships housing firm in the UK, with pro-forma 2021 revenue of £1.9bn.

Partnerships housing businesses build homes under a variety of different business models for clients including housing associations, local authorities and build to rent developers.

Vistry had already set out plans to grow its partnerships business to 5,000 homes a year at a compound rate of 12% annual growth. Speaking exclusively to Housing Today, Teagle said the combination would allow the business bring forward its plans for growth by seven years, and keep expanding beyond that. Countryside has set out similar plans for between 10-15% annual profit growth from its business.

Talking exclusively to Housing Today, Teagle said: “We expect the delivering as a business to be well in excess of 15,000 homes a year. So, when you look forward to what our capacity is as a business, we’re going to be a very significant provider of new homes.

“By aligning and combining the two businesses, it accelerates [our growth] plan, which allows us to deliver more homes more quickly. This merger does not dilute our output. Quite the opposite. We’re amplifying it by using the strategic assets we’ve got, the people and the manufacturing base, and the supply chain relationships and the relationships with housing providers to deliver even more.

 “We expect the delivering as a business to be well in excess of 15,000 homes a year.” 

“And I think that’s an important point to be seen from the perspective of anybody who’s interested in increasing the amount of delivery in the UK.”

Housing Today understands the combined partnerships business will now continue to target annual compound growth of around 12%, with Vistry on Friday declaring a medium-term turnover target for the business of £3bn.

Teagle said he recognised the negative impact that fears of the impact of the rent cap in the affordable housing sector, and mortgage interest rate rises and the recession were having in the private sector on market sentiment. But he said that given underlying demand for housing, the likelihood of government support for new housing supply, and existing forward sales, the growth plans were justifiable. “I don’t think that’s unrealistic, in the context of the fact that we’re delivering multiple tenures across multiple brands and different housing markets,” he said.

In particular he said the cash cost of the Countryside buyout, at £300m, was “modest” given the scale of the combined business and would not impact upon Vistry’s ability to invest in growth.

Teagle added that Vistry’s aim was that it will retain Countryside’s brand new £20m timber frame modular housing factory in Bardon, rather than sell it off, as Countryside had previously proposed. Countryside in July said it would “exit” the modular business, which lost £3m in the first six month of the financial year, after a change of corporate strategy following a surprise profit warning at the start of this year.

But Teagle said Countryside’s three manufacturing facilities, including the Bardon plant, were “strategic assets” that Vistry intended to keep. He said: “We’re reviewing it. They have three factories across the country that are below capacity. They are not delivering the homes that the factories have the capacity to deliver, and what we would like to do is invest in those factories, with our partners to allow us to deliver more homes that are based on MMC.

“And again, that broadens our supply chain, which again, delivers more homes, because you’re not just relying upon building traditional brick homes. There’s a clear opportunity to align the investment plans of our partners’ with that production capacity given the scale we will have.

“We are undertaking a thorough review, [but] that’s our intention to utilize those factories to allow us to deliver even more homes.”

Teagle described the combined Vistry business as a “21st century housing business model, which is that ability to work across tenures and work with partners on long term planning for supply”, and said the merger had so far received unanimous support in conversations with clients. “It’s not about the size of the business, but about the quality of people and quality of the culture and the way we can work with our clients,” he said.

Shares in Countryside were cancelled on the London Stock Exchange this morning following the deal going through on Friday morning.

>>See also: What are housebuilding’s prospects in the wake of the mini-budget?

>>See also: Countryside to shut brand new modular factory

Vistry group chief executive Greg Fitzgerald (pictured, right), who has promised to deliver £50m of “synergy” savings from the deal, said in a statement that it was a “historic” day for Vistry. He said: “With our resilient business model of sustainable private and affordable delivery, we stand ready to build thousands of new homes, which is obviously great news for home hunters but also for our clients, contractors and local communities, where we will be bringing a much-needed economic boost.

“In developing this unique, enlarged group we are bringing together the very best of both businesses. We will integrate the two groups quickly, and in line with our values of integrity, caring and quality, bringing together our talented people to power us to further success.”