Vistry Group PLC (LSE:VTY) shares plummeted 34% after it warned that profits would be lower than expected for three years because build costs were "understated" by around £115 million across nine housing developments at its South division, a 10% underestimate.
The FTSE 100-listed housebuilder said the cost overruns would reduce profits by roughly £80 million this year, plus £30 million for next year and £5 million for 2026.
Directors said they now expect total group adjusted profit before tax of £350 million for the full year, well below the £419.1 million from last year, and when the outlook in last month's results had been for profit to increase.
The board reiterated its target to move to a net cash position this year, from a net debt of £88.8 million in 2023, and also recommitted to the £130 million share buyback announced at the interim results.
The incorrect cost projections were for nine out of its 46 developments in the South division, including some large-scale schemes, out of around 300 developments across all group divisions.
"We believe the issues are confined to the South division and changes to the management team in the division are underway. We are commencing an independent review to fully ascertain the causes," Vistry said.
Analysts at Stifel called the issue "cost overruns".
They said the £80 million reduction for the full year represented around 20% of the consensus City forecast, with the £30 million hit in 2025 around 6%.
** Update: Adds share price, analyst comment **