Housebuilding giant Vistry has issued a warning about its profits following the revelation of higher-than-anticipated build costs for nine housing developments in its southern division. The group stated that costs for nine out of 46 developments in the division were understated by approximately 10%.
This discrepancy is expected to result in a reduction of around £80 million in this year’s underlying pre-tax profits, bringing it down to about £350 million. This represents a significant 16% decrease from the £419.1 million reported for 2023. Furthermore, the impact on profits is projected to extend over the next two years, with an estimated hit of about £30 million in 2025 and £5 million in 2026.
Vistry, formerly known as Bovis Homes, has initiated an independent review to thoroughly examine the underlying causes of the issue. Management changes within its southern division are also underway as a response to the situation. The company assured stakeholders that they believe the issues are specific to the southern division and that steps are being taken to address the situation.
The group currently oversees approximately 300 developments spread across its six regional divisions in the UK. Despite this setback, Vistry recently reported a 7% increase in half-year pre-tax profits to £186 million. It remains optimistic about posting higher profits for the full year, with expectations to complete more than 18,000 homes.
The repercussions of the understated build costs for Vistry serve as a reminder of the challenges faced by companies in the construction industry, highlighting the importance of accurate financial forecasting and cost management strategies to maintain profitability and sustain growth.