Shares in the FTSE 100 housebuilder Vistry have plunged after it issued a second profit warning in as many months and said cost overruns on building projects were worse than previously thought.
Vistry was the top faller on the blue chip index of stocks on Friday morning. The builder’s shares were down 18%, wiping about £500m off the value of the company.
Last month, Vestry launched an independent review of operations in its south division after revealing it had “understated” total build costs by about 10%. The company said at the time that this would probably reduce profits by £115m over the next two years. The news sent its shares plummeting, wiping £1bn off the company’s value.
On Friday, Vistry said it now expected the total profit hit to be £165m in total.
The company predicted annual profits of about £300m this year, “reflecting the additional impact from issues in the south division and reduced expectations of completions”.
It added that it was also expecting some “overall pressure” on build cost inflation next year.
Vistry said it was assessing the impact of last month’s budget but had already estimated that the increase in employer national insurance contributions (Nics) from next April would cost it an additional £5m next year, with the rate rise “also impacting our supply chain”.
In a trading update, the company said: “In the open market, we saw some improvement in consumer interest and an uptick in our sales rates following the general election and interest rate cut at the start of August. However, the open market has remained constrained by mortgage affordability and the expectation of future interest rate cuts, in particular for first-time buyers in London and the south-east.”
On Wednesday, rival Persimmon warned of the return of building cost inflation and the impact of the increase to employer Nics announced in Labour’s budget.
Vistry’s independent review found that the issues in the south division stemmed from insufficient management capability, noncompliant forecasting processes and a poor divisional culture.
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“The independent review process has found little evidence of similar issues to those identified in the south division in other divisions,” the company said on Friday. “The review findings have suggested that the group does have key controls in place and operates them effectively. Some areas of regional cultural and process inconsistencies have been noted.”
The company said it now expected to complete 17,500 homes this year, 500 fewer than it had previously forecasted.