UBS has lowered its price target for Vistry Group PLC (LSE:VTY) to 495p from 605p, maintaining a sell rating after the company issued its third profit warning in as many months.
The cut reflects concerns about Vistry’s financial outlook and its ability to recover amid rapidly falling profits and rising debt levels.
The December profit warning revealed that 2024 pre-tax profits are now expected to be £250m, down from £300m.
Vistry attributed the decline to weaker market conditions, delays in transactions, and a decision to avoid offering steep discounts to secure bulk sales.
UBS sees these issues as troubling signs of deteriorating trading conditions and reduced customer demand, particularly as they surfaced with little time left in the financial year.
The state of Vistry’s balance sheet has also raised some alarm with the Swiss bank.
Net debt at year-end is now expected to reach £200m, significantly higher than the previous forecast of £50-60m.
UBS estimates average monthly net debt for 2024 could climb to £550m, with total adjusted debt, including provisions and joint venture obligations, reaching £1.8bn.
This would represent leverage of 5.3 times earnings before interest, taxes, depreciation, and amortisation—a level UBS believes could force Vistry to prioritise debt reduction at the expense of profitability.
UBS highlights several key risks, including whether the balance sheet is adequately funded given the steep profit decline, what a realistic profit trajectory for 2025 might look like, and how quickly the company can recover.
While the upcoming trading update on January 15 may offer some clarity, the outlook remains uncertain.
The new price target reflects UBS’s lowered expectations for earnings per share, with the valuation based on discounted cash flow analysis.
The bank has revised its assumptions, reducing the expected long-term return on capital employed from 17% to 15.5%, reflecting diminished confidence in Vistry’s ability to rebound.
In late morning trading, the stock was down 2.4% at 558.5p.