Vistry shares dive 22% with housebuilder declaring a profit warning
- Vistry expects pre-tax profits to be £80m lower than forecast
Vistry Group shares plummeted on Tuesday and the firm warned of a £115million hit to profits due to higher-than-projected build costs.
One of Britain's biggest housebuilders saw its shares plunge 22.6 per cent to 985.5p by early afternoon, making them the FTSE 250 Index's biggest faller, although they remain just above their value at the start of January.
It revealed it had 'recently become aware' that total full-life cost estimates for nine developments in its south division, including a few large-scale schemes, had been understated by around 10 per cent.
Vistry: The housebuilder was the biggest FTSE 250 faller on Tuesday morning
As a result, the company expects its adjusted pre-tax profits for the current financial year to be around £80million lower than forecast at £350million.
And in the following two years, it predicts profits will be impacted by £20million and £5million, respectively.
Vistry said it had overhauled its management team and launched an independent review to 'fully ascertain the causes' behind the issue, which it thinks is limited to the south division.
The Kent-based group - formerly known as Bovis Homes - has 300 developments in total and still anticipates building over 18,000 units this year, compared to just over 16,100 in 2023.
During the first six months of 2024, Vistry completed around 7,750 homes, 8 per cent up year-on-year, thanks to good demand across its partner-funded markets.
Adjusted revenue also jumped by nearly £200million to around £2billion, while reported operating profits climbed by 38 per cent to £167.2million.
Following the performance, the firm unveiled a £130million share buyback scheme, which it expects to conclude before May next year.
Vistry announced the merger of its housebuilding and partnerships divisions in October last year, saying the move would help it focus on meeting the UK's shortage of mixed-tenure, affordable properties.
Two months later, it struck an £819million deal with housing providers Sage Homes and Leaf Living to deliver almost 3,000 new homes.
Further agreements have since been made with private equity giant Blackstone and investment partner Regis Group to build 1,750 properties.
Vistry told investors on Tuesday that it was 'committed to delivering a strong increase in high quality mixed tenure housing,' alongside its medium-term goals of £800million in adjusted operating profits and £1billion of shareholder distributions.
Britain's housing sector is showing significant signs of recovery amid expectations of further interest rate cuts by the Bank of England and loosening planning restrictions.
UK property prices tipped up 0.3 per cent to £293,399 in September, the third successive month of growth and only £108 below the record reached in June 2022, according to the latest Halifax House Price Index.
Anthony Codling of RBC Capital Markets said: 'Investors will be looking to understand how the issue arose, how it is being dealt with and why and how Vistry is confident that the issue is confined to one division.'
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