- Build costs miscalculated by 10%
- Profit cut by £80 million this year
- Shares fall 35% as market opens
Shareholders in housebuilder Vistry (VTY) could be forgiven for thinking they were having a nightmare after the firm unexpectedly took the axe to its profit forecasts for this year, next year and the year after due to understated build costs on a small number of its developments.
The shares, which had been trading quietly in and around the £13 to £14 range over the summer, crashed through the £10 barrier at the open and traded as low as 810p, a fall of more than 35%, before steadying around 907p for a loss of 29% in mid-morning dealing.
DEEP IMPACT
The firm revealed it had ‘recently become aware’ that within the South Division the total full-life cost of around a fifth of its developments had been understated by some 10% meaning it would have to take a series of one-off charges to earnings over the next couple of years.
To put the news into perspective, the understatement applies to nine schemes out of 300 nationwide and is limited to one division, although the company admits it does involve some large-scale schemes.
As a result, Vistry will take an £80 million pre-tax charge for the increased costs in its full-year 2024 results, reducing the forecast to £350 million, followed by a £30 million charge in 2025 and a £5 million charge in 2026.
Putting the issue to one side, the company still expects to deliver total completions this year in excess of 18,000 new homes compared with around 16,000 last year and to finish 2024 with a net cash position despite its £130 million share buyback programme.
