Vistry Group, formerly Bovis Homes, has this morning issued a positive trading update for the year’s end.
Vistry share price rises on positive outlook
Vistry's full-year figures will be published next month. In today's Q4 update, the number of house completions increased by 2.89% to 3,867. Recently the group competed the acquisition of Liden Homes for more than £1 billion, and today Vistry said that costs related to the takeover will be more than £15 million.
Vistry has set the tone for the next month’s annual figures as pre-exceptional profit-before-tax is expected to be slightly ahead of market consensus, in addition to a further improvement in operating margin. Vistry confirmed that forward sales for 2020 are "strong". All in all, it was a short but sweet update from the homebuilder, and the Vistry share price is slightly higher shortly after the open, at 1,342.25p. There have been a lot of downbeat stories about the health of the UK property market in recent months, but the company formerly known as called Bovis Homes continues to be in good shape.
Persimmon expects results in line with expectations
Fellow housebuilder, Persimmon, also revealed its fourth-quarter trading update this morning. The FTSE 100 stock will reveal its full-year numbers in late February. Persimmon revealed that annual legal completions slipped by 3.6%, while new housing revenue dipped by 3.5%. Persimmon said that annual pre-tax profit will be in line with "our market consensuses", and that it is in a "strong position" for 2020. The update should install a reasonable amount of confidence in the stock as business appears to be ticking along, and so far this morning the Persimmon share price is up 16p (0.50%) to 2,810p.
In 2019 some of the steam was let out of the UK housing market, as some regions of the country saw the growth rate of house prices cool, while certain pockets of the country witnessed prices fall. Political uncertainty was a factor as the UK was supposed to have left the EU twice, before an extension was requested and granted on both occasions. This encouraged some potential buyers to hold off on making potential purchases. Yet the tapering off of house prices didn't hold back the share price performance of the major housebuilders. For example, the Bovis Homes share price rallied by more than 60%, while Persimmon's share price rallied roughly 38%.
Will UK interest rates be cut?
This week there has been increased chatter about the Bank of England potentially cutting interest rates. Monetary policy committee member Gertjan Vlieghe was the latest policymaker to suggest he would vote to lower interest rates, while Jonathan Haskell and Michael Saunders have voted to lower rates recently. Some traders believe the UK central bank will keep policy on hold until the Brexit situation has become clearer. A looser monetary policy from the Bank should give support to the UK housing market, and in turn give assistance to housebuilders.
UK politics was given some clarity in light of the major victory by the pro-business Conservative party last month. There is chatter of an increase in government spending to try and boost the economy, and that has been a factor in the broadly positive start that homebuilders have had so far in 2020.
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