Vistry to keep Countryside brand if £1.2bn merger goes ahead

Vistry chief executive Greg Fitzgerald has pledged to retain the Countryside brand if the £1.2bn merger between the two housebuilders, announced on Monday, is approved by shareholders.

Fitzgerald said the purchase of Countryside will transform Vistry into a business 50-50 split between traditional private housebuilding - through the Bovis, Linden and now Countryside brands - and partnerships housebuilding through Countryside and Vistry’s extensive partnerships operations.

Fitzgerald, speaking as Vistry released results for the half year to 30 June, said that senior Countryside execs, including chief finance officer Tim Lawlor, will be coming across with the deal.

He said: “Don’t underestimate the power of Countryside brand, it is still a five-star housebuilder with a very good reputation.

“Countryside is still a very well thought of organization. Hence, we’re keeping the brand and [are] delighted that we’ve got some great leaders coming over from Countryside to join the business.”

Vistry said in a presentation that combining with Countryside will allow it to increase operating profit in its housebuilding division from £305m annually to in excess of £400m, and from £80m in partnerships to more than £400m each year.

Vistry expects to generate £50m in annual “synergy” cost savings from the deal, and Fitzgerald said he was “delighted” with the quality of the strategic land bank within Countryside that had emerged during due diligence between the firms.

Fitzgerald himself bought £200,000 of shares in Vistry this morning and said in the results call this was on the basis of his confidence in the success of the Vistry Countryside tie up.

He said: “This combination is going to be absolutely terrific. It’s going to absolutely fly. It’s going to be just like the Galliford Try one [Bovis’ purchase of Linden Homes to form Vistry]. It’s going to be great because of the great people we’ve got.”

Fitzgerald repeated the point, made in the announcement on Monday, that the merged operation would retain the option to split into separate standalone private housebuilding and partnerships housebuilding operations at some point in future.

But he made clear that it was not his preferred outcome. “Hopefully [this will] not [happen]. I do believe in the model. I think partnerships and housebuilding works very well together.”

Countryside’s shareholders are understood to have pushed for a takeover from Vistry because of Fitzgerald’s strong reputation for delivering growth in housebuilding businesses at Linden, Bovis and Vistry. However, they have also previously pushed for housebuilding and partnerships operations to be separated.

Usman Nabi, founder and chief investment officer of major Countryside shareholder Browning West, said on Tuesday the deal would “unlock significant long-term value for Countryside’s shareholders”, and that “Greg Fitzgerald has one of the best track records of operating performance and value creation in the UK housebuilding sector, and we have great confidence in his ability to successfully integrate Countryside and lead the combined company as it continues to grow”.

However, Nabi also hailed “the option to separate each division in the future.”

Fitzgerald’s comments on the Countryside deal came as Vistry reported half year revenue up 3% to £1.16bn on completions up 5% to 5,409.

But Vistry saw interim pre-tax profit fall back sharply as it made a £71.4m provision for repairs to legacy buildings following on from the signing of the cladding pledge with government, under which it promised to repair all buildings with fire safety issues going back 30 years without recourse to public funds. Interim pre-tax profit fell 29% to £111m.

The business said that “adjusted” pre-tax profit, not including the provision, was up 14.3% on the previous year to £190m.

Fitzgerald said that the business had been close to signing a finalised legal agreement with the government over the cladding pledge at the point at which the former housing secretary, Greg Clark, resigned on Tuesday. If the deal is ultimately resolved on those terms, he said, it will likely result in a further £10m-15m provision in Vistry’s accounts, Fitzgerald added.

He said the sales market had moved in to a more normal “seasonal trend”, with sales per site per week running at about 0.60 since July, having recently lost the “fizz” of the last couple of years, but that this change was welcome, with some signs the land market was “settling”.

Fitzgerald added: “The Group has delivered an excellent performance in the first half, significantly exceeding our expectations at the start of the year. Operationally we are in great shape, and with our leading capability across all housing tenures, are very well positioned to maximise the broader market opportunity in the coming period.”