Vistry warns on profits again, shares tumble

Vistry tumbled on Thursday as it warned on full-year profits again, cutting its forecast for completions and highlighting issues at its South Division.

The housebuilder now expects FY24 adjusted pre-tax profit of around £300m, down from a forecast of £350m last month.

The company already warned on profits in October, saying it was expecting FY24 profit to be £80m lower, FY25 profit to be around £30m lower and profit for FY25 to be down by £5m.

Vistry put this down to having underestimated build costs on nine schemes in its Southern Division.

The housebuilder also downgraded its guidance on FY24 completions on Thursday, saying it now expects to deliver around 17,500 units, down from a previous forecast of 18,000.

"Reflecting this reduced expectation for completions in the year, the additional impact on profit from issues in the South Division and adjustments in other regions, the group expects to deliver adjusted profit before tax in FY24 of circa £300m," it said.

Following the cost issues identified in the South division and reported on 8 October, Vistry initiated a programme of independent and internal reviews "to verify the nature and scope of the issues, confirm the impact, and determine any resultant actions required".

The scope of the review focused mainly on the cost reporting process, culture and management in the South Division, it said, and also included a wider review across the group "to ascertain if similar issues to those identified in the South Division existed in other parts of the business".

It said the findings of the review process have been broadly consistent with the initial findings reported in October.

However, as a result of the in-depth review work, it now expects the impact to adjusted pre-tax profit of the issues in the South Division to be greater than that announced last month, and to total £105m in FY24, £50m in FY25 and £10m beyond FY25.

"The increase reflects additional developments where the total full-life cost projections to complete the development were understated, and a reduced expectation of FY24 activity across the South Division," it said.

Vistry also said it was assessing the implications of last month's Budget and that the direct impact of the April 2025 increase in Employer National Insurance contributions will be around £5m in FY25. The rate increase will also affect its supply chain.

At 0920 GMT, the shares were down 16.6% at 728.62p.

Russ Mould, investment director at AJ Bell, said: "Vistry’s latest update offered further evidence that build cost inflation is back with a vengeance for the construction sector.

"Where the situation is rather worse for the company though is its South Division, which has been systematically underestimating costs across multiple sites over an extended period, and the problems first identified in October have been revealed to be worse than previously thought when subject to a review. This has led to another profit warning and the shares are now trading at around half their 52-week highs.

"It seems Vistry’s big pivot into affordable housing and regeneration over recent years caused some ruptures and the management in place for this problem child of the business, exclusively drawn from the traditional housebuilding operations, have dropped the ball in a big way. There is a modicum of reassurance to be taken from the fact the review didn’t find similar problems elsewhere.

"However, while some of the individuals involved have stepped away from the business, there are still questions to answer for those at the top of the wider group over how they allowed this situation to develop. Vistry will have to work hard to rebuild market confidence and unfortunately it seems to be doing so at time when the foundations underpinning the industry as a whole look a bit more shaky."