Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
One of the UK’s largest housebuilders has issued its second profit warning since October after an external review found that cost overruns were more widespread than previously estimated, sending shares in the group down 15 per cent.
Vistry, which builds more than 17,000 homes a year under brands including Bovis Homes, on Friday cut its profit guidance for the current financial year by a further £50mn.
The FTSE 100 group’s shares dropped nearly a quarter last month when it announced a £115mn hit to profits over three years from undercounted building costs in one of its divisions. After a full review by an external accounting firm, it said the total reduction in profits would actually be £165mn.
Vistry said its full-year adjusted pre-tax profit would be about £300mn, reflecting a £105mn hit from cost issues as well as slower than expected sales. Shares plunged 15 per cent in early trading on Friday, taking them down by more than 40 per cent since the group first announced the cost overruns.
“The significant issues have been found to be confined to the South Division and can be attributed to insufficient management capability, non-compliant commercial forecasting processes and poor divisional culture,” the company said.
Peel Hunt analyst Clyde Lewis said the update was a “major setback” for Vistry, which had been one of the UK’s most successful housebuilders, with a particular focus on building affordable housing. It comes at a time when the new Labour government is trying to urgently boost housing supply.
Vistry, which took over rival Countryside Partnerships in 2022, has embraced a “partnership model” in which it builds the majority of its homes for rental and social housing providers. It has two large deals, totalling £1.4bn, to build homes for US investor Blackstone’s UK housing businesses.
Chief executive Greg Fitzgerald had set steep targets to double profits in the “medium term”.
The pressure to grow and transform the business is now under scrutiny. “The independent review has highlighted the pressure being felt from organisational change as a fundamental driver underlying the issues in the South Division,” Vistry said.
It said the understated build costs were “symptomatic of general control issues” in the division, which covers Kent, Sussex, Hampshire and the Thames Valley west of London.
The review identified 18 sites where costs were off by more than £1mn — an increase from the nine problematic sites it previously announced. It said five large sites accounted for 60 per cent of the cost adjustments.
Vistry’s full review of cost estimates found small issues outside the South Division, totalling £8mn in 2024.
The management of the South Division had “stepped away from the business pending completion of formal processes” and an HR investigation, it said.
The group also cut the number of homes it expects to build this year from 18,000 to 17,500, partly blaming uncertainty ahead of the UK Budget for slower than expected sales in September and October.
Vistry said the increase in employers’ national insurance announced in the Budget would cost £5mn in 2025 and that it expected build cost inflation, which had been neutral in 2024, to re-emerge next year.
The group will keep its share buyback programme, totalling £130mn by May.