(Bloomberg) -- Vistry Group Plc fell by the most in eight years after the homebuilder said adjusted profit would be £80 million ($105 million) lower than previously forecast for the full year.
The warning came after the company found that costs had been understated in one of its divisions, according to a statement Tuesday. The homebuilder said it has initiated an independent review of the business and made changes to the management team.
Vistry’s shares plunged by as much as 36% in London trading, the most on an intraday basis since the day after Britain voted to leave the European Union in 2016 when UK homebuilder shares tumbled across the board. The company said full-year adjusted profit in 2025 would also be reduced by around £30 million and by £5 million the year after.
Total cost projections to complete nine of its 46 developments in the Southern division, which include large-scale projects, were understated by around 10% of build costs. The company is currently working on around 300 sites.
Stubbornly high interest rates and construction costs have limited the amount of homes built by the UK’s biggest developers in recent years. The sector has shown signs of rebounding as mortgage rates ease following central bank rate cuts. The Bloomberg UK Homebuilder Index is now priced at about 1.2 times book value, having traded below book value for much of the past few years.
“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,” said Anthony Codling, an analyst at RBC Capital Markets.
Vistry endured a tough 2023 as high interest rates and a cost-of-living squeeze sapped demand for new homes. The company said last year it planned to slash hundreds of jobs as part of a strategy to focus solely on building homes for affordable housing providers.
However, Vistry said last month the UK’s plan to reintroduce housing targets will help it to ramp up development. The company said it was on track to deliver more than 18,000 homes in 2024, compared with around 16,000 a year earlier.
--With assistance from Paul Jarvis.
(Updates with details of the profit warning from the fourth paragraph)
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