Source: Sharecast
The company said it now expects FY24 adjusted pre-tax profit to be £80m lower, while profit for FY25 will take a hit of around £30m and £5m for FY26.
The revisions mean that adjusted pre-tax profit for FY24 is now expected to be around £350m.
Vistry said it had recently become aware that within the South Division - which is one of six - the total full-life cost projections to complete nine out of its 46 developments, including some large-scale schemes, have been understated by around 10% of the total build costs.
"To add further context to the 9 developments in question, it is important to note that the group as a whole has around 300 developments," it said.
Vistry said it believes the issues are confined to the South Division and that changes to the management team there are underway. "We are commencing an independent review to fully ascertain the causes," it said.
The housebuilder, which is due to release a trading update on 8 November, continues to expect to deliver total completions in excess of 18,000 units in FY24 and to target a net cash position as at 31 December 2024, versus net debt of £88.8m at the endo f December 2023.
"The group is confident in its unique Partnerships strategy," it said.
"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 £1 billion of capital distributions to shareholders."
At 0840 BST, the shares were down 29% at 897p.
Aarin Chiekrie, equity analyst at Hargreaves Lansdown, said: "Vistry announced its first major misstep this morning since changing its strategy away from traditional housebuilding. Its new Partnerships model focuses on teaming up with local authorities to provide affordable housing, which has seen the group buck the trend of a housing market slowdown in recent times.
"But it’s come to light that total costs at 9 of its roughly 300 developments have been understated by around 10%. That may not sound like much, but as a result, Vistry’s underlying pre-tax profit expectations have been wound back by £80mn, £30mn and £5mn for the current and following two years respectively. That marks a nearly 20% hit to what market forecasts had pencilled in for this year, and Vistry now expects underlying pre-tax profits of around £350mn for the full year.
"Despite the bad news on the profit front, the volume of new home completions remains on track, with management still expecting to build more than 18,000 new homes. Continued share buybacks and finishing the year in a net cash position remain the targets, but that may now prove stretching with the expected shortfall in profits."
