Vistry shares fell sharply on Monday morning after speculation over its insurance arrangements sparked fresh fears about the FTSE 250 housebuilder’s financial position.
The company’s stock slid by nearly eight per cent to 261p in early trading, meaning Vistry has shed more than half of its market value in the year to date.
The sell-off followed a Financial Times report that leading credit insurer Allianz Trade has cut the level of cover it extends to Vistry’s suppliers.
According to the Financial Times, Allianz could reduce Vistry’s cover by up to 70 per cent, a move that analysts warn could threaten the housebuilder’s cash flow.
Vistry’s suppliers claim insurance from Allianz to protect themselves in the event the housebuilder fails to pay for goods or services, and withdrawn cover could prompt demands for upfront payment.
The group had already resorted to selling off land to boost its balance sheet, underscoring the mounting financial pressures it faces in a slowing housing market with rising building costs.
The latest blow came after Duncan Cooper, the boss of building materials supplier Travis Perkins, prompted speculation over Vistry’s credit situation last week when he claimed cover had been pulled from a “fairly significant national housebuilder” during a results call.
Vistry’s shares fell around 10 per cent following Cooper’s comments and have dipped even lower at the start of this week, compounding a torrid run for the business.
The housebuilder denied that any suppliers have pulled trade following the report, with a spokesperson stating: “Credit insurers continue to provide substantial cover for our supply chain which more than meets the Group’s requirements on an ongoing basis.”
The spokesperson added: “We are not aware of any supplier withdrawing trade from Vistry due to credit insurance changes and we have seen no interruptions to our supply chain.”
Vistry further stated: “We maintain positive relationships with our suppliers as we continue to build at scale and pace, delivering the high-quality homes this country needs.”
The housebuilder’s struggles have attracted the attention of short-sellers in recent weeks as it attempts to regain direction following the surprise retirement of much-loved chief executive Greg Fitzgerald.
New boss Adam Daniels, a former regional manager at the housebuilder, sought to give investors advance sight of his upcoming strategic review in an unscheduled trading update last month.
That update revealed Vistry was forecasting a £30m pre-tax loss for the first half of the year, triggering a significant share price sell-off among nervous investors.
The housebuilder also confirmed on the same day that its finance chief, Tim Lawlor, will quit after being poached by a private firm, adding further instability to the leadership structure.
Russ Mould, AJ Bell’s investment director, said Daniels “must be wondering what he has walked into, having taken over the helm a little less than four months ago.”
Mould added: “The share price reaction shows investors are concerned and this will only ramp up the pressure on the company to pay down debt as it looks to weather a tricky period for the property market.”
Vistry’s spokesperson said that Daniels’s strategic review is “progressing well,” with the housebuilder expecting to hold around £100m in net cash by the end of this year.