Vistry share price tumbles after profit warning

Shares in Vistry, one of the country’s biggest developers, collapsed on Tuesday as it warned it had underestimated how much it was going to cost to build hundreds of homes in the south of England.
As a result, the FTSE 100 builder expects to make a pre-tax profit of about £350 million this year – £80 million below what it had previously hoped. There will also be a £30 million hit to profits in 2025, followed by another £5 million in 2026.
In total, Vistry cautioned that its profits over the next three years would likely be £115 million less than what it had been targeting. In reaction, stock market investors punished the company’s shares, which were down 349½p, or 27.5 per cent, to a nine-month low of 923½p shortly before lunch. At one point, they had been down as much as 35 per cent.
“Clearly this news comes as a disappointment and shock to investors and may shake confidence about the partnerships model,” Clyde Lewis, a housebuilding industry analyst at Peel Hunt, said.
Although it can trace its roots back to the 1800s, Vistry as it is today was formed by the merger of Bovis Homes and the housebuilding division of Galliford Try back in 2020.
While it still builds some houses to sell on the open market, the bulk of its work these days is building flats and houses for “partners” such as local authorities, housing associations and institutional landlords.
It made that pivot this time last year. In theory, partnerships is a more stable business because the partners buy the homes in advance, giving Vistry more certainty. That is why, in contrast to rivals who have dramatically slowed their output during the housing market’s two-year downturn, Vistry has been building more homes and making more money. This year it will build 18,000-plus homes, which is more than any other developer, excluding Barratt and Redrow, which recently merged.
However, on Friday it became aware of some issues in its southern division, which covers counties including Kent, Sussex and Hampshire. Of the 46 sites Vistry has in that region, local bosses had understated how much it was going to cost to complete nine of them by about 10 per cent.
Around the country, the group has 300 developments, which it spent the weekend assessing to check if the issues spread beyond the south of England. “We believe the issues are confined to the south division,” Vistry insisted in a stock exchange announcement.
Despite that reassurance, the stock market reaction suggests that investors still need convincing. “The key issue is whether these are isolated and ‘one-off’ in nature, with the worry being that they are more systemic, and reflective of inherent risk within the group’s partnership model that could recur in the future,” Aynsley Lammin, an industry analyst at Investec, said.
Vistry confirmed that it has already started an independent review “to fully ascertain the causes”, while it has moved quickly to make “changes to the management team” in the southern division.
Greg Fitzgerald, Vistry’s chief executive and executive chairman, has set ambitious targets for his company which he is standing by despite Tuesday’s profit warning. He still believes that Vistry can roughly double its operating profits to £800 million over the “medium term”, during which it will also return £1 billion to shareholders. Vistry said it “remains committed” to the £130 million share buyback announced only a few weeks ago.