House builder Vistry has reported some signs of material shortages easing in its supply chain.
But the firm warned that labour inflation looked set to continue into next year as the industry faced ongoing skills shortages.
In an upbeat trading statement for 2021 this morning, chief executive Greg Fitzgerald, said: “We continue to see some pressure across the building materials supply chain resulting in extended lead times and inflationary price increases on certain products, although there are now some signs of improvement.
“Working in close partnership with our suppliers we are actively managing this and have full visibility on our material requirements for FY21 completions.”
He said Vistry expected construction output in the first half of 2022 to be similar to that achieved in the first half of 2021.
“The supply agreements entered into on the formation of Vistry Group are delivering an enhanced service and have provided some protection in respect of cost inflation.
“We currently expect our build cost inflation to run at around 4-5% for the next 12 months with materials pressure reducing and labour inflation continuing.
“Overall, we have seen the benefit from sales price increases more than offset cost inflation.
“As a result, we are firmly on track to deliver a significant improvement in profits this year.”
Looking to next financial year, Fitzgerald said the house building business was in great shape to deliver increased returns driven by controlled volume growth and a further improvement in gross margin to around 23%.
He said that the Vistry Partnerships operation was making good progress with its strategy of rapidly growing higher-margin mixed tenure revenues and expected to deliver at least £1bn revenue, a 10% plus operating margin, and a return on capital employed in excess of 40%.
Over the medium term, the partnerships business was placed to deliver revenues of £1.6bn and an operating margin in excess of 12%, predicted Fitgerald.
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