- Firm slices outlook for 2024 to 2026
- Total costs now seen at £165 million
- Shares down over 45% since September
For investors in housebuilder Vistry (VTY), October and November have been months to forget as the firm has now cut its full-year 2024, 2025 and 2026 outlook twice in the space of a few weeks.
The shares dropped 165p or 19% to 705p, taking them to the bottom of the pile in the FTSE 250 and bringing losses to more than 45% since the start of September.
FURTHER CUT TO FORECASTS
On 8 October, Vistry warned earnings for this year and next year would be lower than expected due to an understatement of build costs on nine developments in its South Division including some large-scale schemes.
The company reduced its 2024 pre-tax profit forecast from £430 million to £350 million while shaving £30 million off its 2025 forecast and £5 million off its 2026 forecast for a total cost of £115 million.
Today, exactly a month on, the firm has cut its current-year forecast by another £25 million and lowered its 2025 and 2026 forecasts by £20 million and £5 million respectively taking the total hit to £165 million.
Combined with a cut in expectations for full-year completions, pre-tax profit for 2024 is now seen around £300 million compared with £430 million a month ago when the cost understatement was first revealed.
The good news is, following a review of all six divisions and 26 regional business units, the errors appear to be contained in the South Division and no systemic issues have been found elsewhere.
EXPERT VIEW
‘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’, commented AJ Bell’s investment director Russ Mould.
‘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.’
DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (Ian Conway) and the editor (James Crux) own shares in AJ Bell.
