I don’t usually decide to buy stocks when they’ve just warned about losing money. But every rule has exceptions.
In a week where hot weather led to UK train cancellations, Vistry (LSE:VTY) delivered its own scorcher – a £30m loss in H1. The stock fell 12% on the news – and I added to my investment.
Losing money?!
What caused the loss? Completions fell to approximately 6,100 from 6,889, discounts on private sales grew from 1.4% to 7.1%, and roughly £50m of profit was sacrificed to “cash generation actions“.
That, however, is kind of the point. New CEO Adam Daniels has taken over the company during a tough situation and is plotting a route out.
The issue is the firm’s balance sheet. A cyclical downturn isn’t a problem by itself, but it matters for Vistry because of the amount of debt it has.
As a result, the new CEO is focusing on strengthening the firm’s financial position. And that involves trading H1 profit for near-term cash.
I think it’s the right move. And there are signs of genuine progress being made.
2026: a transition year
It looks as though 2026 is set to be a(nother) transition year for Vistry. But in terms of the balance sheet, the first half of the year had some encouraging signs.
- Unsold private work-in-progress halved from about £600m to under £300m, with £190m of that arriving as cash on H2 completions.
- Land creditors were reduced by over £150m.
- Part Exchange — which has quietly tied up an average of £50m of debt for years — has been substantially exited.
- The Voluntary Exit Scheme should deliver around £25m of annual overhead savings, with the full benefit in 2027.
Average daily net debt for H1 was £799m. But by the end of the period, it had fallen to £470m.
More than that, the firm is aiming for average daily net debt to be below £650m in H2. And – crucially – it’s aiming for a net cash position of over £100m by the end of the year.
If it can get there, that would mark a huge improvement in the business. But I haven’t just been buying the stock because I think the company is going from bad to average.
The SAHP catalyst
Vistry’s partner-funded sales were weak in H1. That’s because of a gap between government funding programmes.
Grant allocations under the Strategic Affordable Housing Programme (SAHP) are expected in September. And I think the firm is in a unique position to benefit.
The majority of Vistry’s H1 completions were affordable homes. And its existing relationships should put it in a very strong position for the £39bn SAHP programme.
Unlike other publicly listed builders, Vistry is listed as a Strategic Partner of Homes England. I think that means there are opportunities coming – the only question is when.
The government has put housebuilding at the front of its plans for this Parliament. And despite its recent challenges, I think the company is still in a hugely advantageous position.
The squeeze potential
Vistry is the UK’s most heavily shorted stock. That’s not a long-term view and the bears have been proved right so far.
That, however, could turn around quickly. If the SAHP allocations land in September and the firm hits its cash targets, it could be those betting against the company that start to feel the heat.
Should you invest £5,000 in Vistry Group Plc right now?
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Stephen Wright owns shares in Vistry.
