Connect with us

Hi, what are you looking for?

Alive Business PlanAlive Business Plan

Stock

Vistry shares plunge 14% after profit cut, Southern Region issues weigh on outlook

Investing.com — Shares of UK homebuilder Vistry Group (LON:VTYV) dropped more than 14% on Friday after the company cut its 2024 profit guidance by nearly 15%, following an extensive review that flagged issues within its Southern Region house building division.

Vistry now expects profit before tax for the fiscal year to reach £300 million, down from a previous £350 million estimate.

The revised outlook comes as Vistry reported discovering deeper-than-expected operational problems in its Southern Region, revealing structural weaknesses that included poor divisional management, forecasting inaccuracies, and an unsustainable work culture.

These issues, concentrated in five major, multi-phase projects, have created a ripple effect that led Vistry to reduce its projected completions for the year from over 18,000 to approximately 17,500 units.

Most of the challenges are tied to Vistry’s housebuilding operations rather than its partnership sites, though recent softness in the partnership market further contributed to the guidance cut, with volumes tapering off in September and October.

Vistry said that while there were no systemic issues found outside the Southern Region, the organization’s shift toward a partnership-focused business model appears to have compounded pressures across the board.

The impact of the company’s operational issues will extend beyond this fiscal year, with a projected £25 million hit in 2024, followed by £20 million in 2025, and a remaining £5 million in 2026.

The total estimated cost of addressing these issues now stands at £165 million, largely driven by unanticipated full-life costs on those Southern Region projects.

The company also issued cautious updates on its capital and cost expectations. While it had aimed to achieve a net cash position by year-end, it now anticipates net debt to be below last year’s £88.8 million, but well short of reaching positive net cash.

Furthermore, while Vistry has reiterated its intention to return £1 billion to shareholders, it has hinted at a possible delay in the previously projected three-year timeline, given the current operational setbacks.

The ongoing £130 million share buyback remains on track to be completed by Vistry’s annual meeting in May, but the longer-term capital returns strategy will be under review.

Looking at building safety provisions, Vistry is conducting a fresh review to assess potential added liabilities related to new building safety regulations, including the impact of second staircase requirements on some projects.

Although this review is not expected to materially impact cash flow, the additional building safety considerations represent another headwind for the group in the coming months.

In terms of recent market activity, the group reported a 42% increase in weekly sales rates year-to-date, with consumer demand showing some resilience, though tempered by ongoing mortgage affordability challenges.

The open market has seen increased buyer incentives, with Vistry offering up to 5% of home prices in incentives to spur sales.

However, demand from Registered Providers has been patchy, with strength in the Midlands and North but subdued interest in London and the South East.

On the cost front, Vistry is forecasting modest pressure on build costs for 2025. The recent Budget’s increase in National Insurance contributions will impact the company’s bottom line by about £5 million, adding further pressure as it navigates a challenging operational landscape.

This post appeared first on investing.com
Become a VIP member by signing up for our newsletter. Enjoy exclusive content, early access to sales, and special offers just for you! As a VIP, you'll receive personalized updates, loyalty rewards, and invitations to private events. Elevate your experience and join our exclusive community today!

    By opting in you agree to receive emails from us and our affiliates. Your information is secure and your privacy is protected.

    You May Also Like

    Latest News

    The Gateway Pundit, a far-right website, published a note from its editor on Saturday acknowledging that two election workers in Georgia did not engage...

    Latest News

    New majorities in Congress, particularly when the incoming party has a new leader, offer the rare chance for the institution to take a breath...

    Latest News

    Sister Stephanie Schmidt had a hunch about what her fellow nuns would discuss over dinner at their Erie, Pennsylvania, monastery on Wednesday night. The...

    Investing

    JAKARTA (Reuters) -Indonesia has asked Alphabet (NASDAQ:GOOGL)’s Google and Apple (NASDAQ:AAPL) to block Chinese fast fashion e-commerce firm Temu in their application stores in...



    Disclaimer: alivebusinessplan.com, its managers, its employees, and assigns (collectively “The Company”) do not make any guarantee or warranty about what is advertised above. Information provided by this website is for research purposes only and should not be considered as personalized financial advice. The Company is not affiliated with, nor does it receive compensation from, any specific security. The Company is not registered or licensed by any governing body in any jurisdiction to give investing advice or provide investment recommendation. Any investments recommended here should be taken into consideration only after consulting with your investment advisor and after reviewing the prospectus or financial statements of the company.


    Copyright © 2024 alivebusinessplan.com