Housebuilder says cost savings will allow it to keep on building
Vistry is renegotiating contracts with its subcontractors and materials suppliers following a steady fall in prices for construction products over the past few months.
The housebuilder said it has been speaking to subcontractors about cutting costs in order to keep on building new homes.
Vistry chief operating officer Earl Sibley said: “There is more pressure in the market so we have gone back to our subcontract base and what we are doing is we are getting reductions in the cost base certainly for long-tail sites and newer sites. Basically, if we get a cost saving from our subcontractors, that means we can keep selling, that means we can keep building, and they get surety of their work going forward.”
The firm also said it was taking advantage of softening demand in the products sector to renegotiate 140 materials supply deals as part of a cost-cutting drive.
Vistry, which in November last year completed a £1.1bn takeover of rival Countryside, said cost savings it can get from its supplier would help it achieve its goal to build 5,000 more homes this year than it did in 2022.
Prices for new build housing materials fell by 0.7% in the first month of 2023, according to the latest government figures, while prices for all construction sectors fell by 0.5% in January and 0.8% in December 2022.
It follows extreme price rises across the construction sector from early 2021 which were caused by global supply chain issues and a much larger than expected surge in demand following the end of covid lockdown restrictions.
Sibley said the firm had pushed back contract renewal talks with its materials suppliers after seeing that prices were starting to fall.
“The reality is many of our contracts come up for renewal on the first of January and the first thing we did was kind of highlight that we’ve just done a major acquisition and we’re not really in a position to have those discussions and push them back.
“So we basically pushed those negotiations back three months to the end of March. But the truth is we saw the demand falling off in quarter four, so we knew it would be the right thing to delay those discussions.
“And what we’ve seen recently from some of our competitors reinforces that with our material supply, the demand is lower, and therefore now is the best time to be having those discussions in terms of going forward.”
Sibley added that the group’s heft following its acquisition of Countryside put it in a “unique position” in the market.
“Materials suppliers really want to be working with Vistry just at a period where demand is going down elsewhere in the sector.
“So where there is cost pressure in the materials chain, we are looking to at least negate that in terms of renegotiating what is 140 materials supply deals for the for the group as a whole,” he said.
Last week Vistry said it is looking to grow its business to build 20,000 homes a year, a goal which would make it the UK’s biggest housebuilder by volume.
The firm’s chief executive Stephen Teagle said the ambition would be enabled by Vistry’s procurement partnerships along with its strategic land banks, its partnerships with housing associations and its MMC factory.
The comments came after the firm published its full year results, revealing pre-tax profit of £248m for the 2022 calendar year on turnover of £2.73bn, up by 13.4%.
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