Housebuilder revises expected profit down by £80m due to “understated” full-life cost projections on nine schemes
Vistry Group has revised down its expected profit for 2024 by 19% after saying build costs on nine schemes will be higher than projected.
The housebuilder, in a trading update this morning, said it had recently became aware that cost projections to complete nine of its 46 developments have been understated by 10%.
Vistry estimates the one-off impact of adjusting for the revised development costs will reduce the housebuilder’s adjusted pre-tax profit by £80m this year to £350m. The change will also reduce its adjusted pre-tax profit by £30m in 2025 and £5m in 2026.
The nine developments, out of around 300 in total, are all in its southern division.
A spokesperson for Vistry said: “We believe the issues are confined to the South Division and changes to the management team in the division are under way. We are commencing an independent review to fully ascertain the causes.”
Vistry said it still expects to deliver more than 18,000 homes this year. This would make it Britain’s biggest housebuilder as Barratt said it is likely to build 13,000 to 13,500 in its current year, while Barratt’s merger partner Redrow completed 1,894 homes in its half-year.
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Vistry added: “The group is confident in its unique partnerships strategy. Notwithstanding the one-off adjustment announced today, we remain committed to delivering a strong increase in high quality mixed tenure housing, our medium-term target of £800m adjusted operating profit, and £1bn of capital distributions to shareholders.”
Reacting to the 19% reduction in expected adjusted pre-tax profit, Anthony Codling, managing director at RBC Capital Markets, said: “This is a big cut, and we expect the price of the shares to fall significantly today. Investors will be looking to understand how the issue arose, how it is being dealt with and why and how Vistry is confident that the issue is confined to one division.”
Stephen Teagle, chief executive of partnerships at Vistry, last month told Building’s sister title Housing Today the housebuilder could build 40,000 homes a year if the government follows through on its plans for housing and planning reform.
Vistry also confirmed this morning it remains committed to its £130m share buyback programme announced last month.
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