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Vistry shares plunged by nearly a quarter on Tuesday after the housebuilder warned its full-year profits would be almost a fifth lower than expected because of an underestimation of building costs.
The FTSE 100 group, one of the UK’s largest housebuilders, said the error would reduce its 2024 adjusted pre-tax profit by £80mn to £350mn, and cost a further £35mn over the next two years.
It said the underestimates affected nine developments in its southern division, of 300 sites in total.
“We believe the issues are confined to the south division and changes to the management team in the division are under way,” Vistry said.
Shares closed 22 per cent lower at around 981p, even as chief executive Greg Fitzgerald tried to signal confidence in his company by buying nearly £200,000 of stock.
The profit warning is a setback for one of the UK’s most buoyant housebuilders, which operates the Bovis Homes brand, following its takeover of Countryside in late 2022.
Vistry builds the majority of its homes for “partners” such as rental and social housing providers, making it less reliant on open-market sales than other large housebuilders. Rivals have been hit hard by the downturn in the housing market over the past two years.
Unlike other large developers, which have slashed their output as sales declined, Vistry increased completions by 9 per cent to 7,792 in the first six months of 2024.
It struck two major deals to build homes for US private equity group Blackstone’s UK housing businesses in the past year, totalling £1.4bn.
On Tuesday, Vistry said it still expected to complete at least 18,000 homes by the end of the year.
The hit to profits and the possibility of further bad news at the group will rattle investors, although the company said it was confident the problem was isolated.
It could also raise questions over the pace of growth being pursued under Fitzgerald, who recently became executive chair. He has set a “medium-term target” of roughly doubling adjusted profits to £800mn.
“The key issue is whether these are isolated and ‘one-off’ in nature, with the worry being that they are more systemic, and reflective of inherent risk within the group’s partnership model that could recur in the future,” said Investec analyst Aynsley Lammin.
Vistry said the “total full-life cost projections” for the cost of nine of the 46 developments in the southern region, which covers Kent, Sussex, Hampshire and the Thames Valley west of London, had been underestimated by 10 per cent, including for some “large-scale schemes”.
“We are commencing an independent review to fully ascertain the causes,” Vistry said.
The group added that it “continues to target a net cash position” at the end of the year, and will maintain a £130mn share buyback announced in September.
