(Bloomberg) -- Vistry Group Plc shares plunged as much as 15% after a review into cost errors at one of its divisions wiped around another £50 million ($64.9 million) off its profit expectations for the year.
The firm said the impact of costs being understated in its South Division will impact profit by an extra £25 million for 2024, £20 million in 2025 and £5 million the following year, taking the total impact to £165 million, according to a statement Friday. It now expects to deliver adjusted profit before tax of about £300 million this year, roughly £50 million lower than the previously downgraded forecast made in October.
Vistry’s shares plunged by as much as 15.7% in London trading. That’s the most on an intraday basis since its initial profit warning last month, when shares fell as much as 36% and closed 24% lower.
“Today’s update reads very poorly,” said Aynsley Lammin, a building and construction analyst at Investec. “The confidence of the market is now likely to take longer to regain.”
The issues “can be attributed to insufficient management capability, non-compliant commercial forecasting processes and poor divisional culture,” the company said in the statement. The review “highlighted the pressure being felt from organisational change as a fundamental driver,” it added.
“The true impact on the business, and its future plans, is unlikely to be revealed until the new year,” said Anthony Codling, an analyst at RBC Capital Markets.
Vistry and other UK housebuilders endured a tough two years as high interest rates and a cost-of-living squeeze sapped demand for new homes. However, optimism had started to increase after home loan costs tipped lower in recent months and amid political promises to boost housebuilding.
Vistry also revised its expectations for total completions to 17,500 units for the year, down from a previous forecast of 18,000 made in October, according to the statement. The developer said it expects build costs next year to remain under pressure, mirroring comments made by rival Persimmon Plc earlier this week.
Still, the developer’s year-to-date average weekly sales rate rose to 1.02, compared with 0.72 in the same period a year earlier.
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