Vistry Group PLC (LSE:VTY) shares fell 11.4% to 288.8p after analysts cut earnings forecasts after a warning that heavier discounting and rising build costs will hit first-half profits harder than expected.
However, analysts said the housebuilder’s focus on cash generation should strengthen the balance sheet by year-end.
Broker forecasts for 2026 profits are now expected to fall sharply, even though Vistry said adjusted pre-tax profit would land around the middle of the £168-283 million range of analyst estimates, having previously guided towards more than £269 million.
Jefferies said consensus forecasts of around £250 million were likely to move closer to £200-225 million, implying cuts of 10-20%, as the builder increases incentives on lower-margin developments and higher-priced homes in the South East to accelerate sales.
The pressure would be heavily weighted towards the first half, with Vistry implying a roughly 20:80 split between first-half and second-half profits, versus previous expectations of 30:70.
Stifel similarly said consensus estimates could fall to around £225 million as slower completions and weaker margins offset resilient reservation rates.
However, analysts pointed to signs that cash generation was improving after Vistry paused its share buyback programme and tightened spending controls.
Jefferies noted year-end net cash guidance had improved to "more than" £100 million, while Peel Hunt said management’s stronger focus on debt reduction was a positive despite near-term earnings pressure.
Peel Hunt added that the transition between government affordable housing funding programmes had temporarily subdued partnership activity, though grant announcements expected in the third quarter should support a recovery later in 2026 or early 2027.
The house broker cut its 2026 pre-tax profit forecast by £15 million to £210 million.
Stifel said its 'buy' upgrade in March was contrarian and made "too early".
"We took the view that although stretched, Vistry's balance sheet is manageable and that although challenged, its operating model will deliver expected returns in due course," the American broker added.
"Its low valuation of 0.4x book offers support, but the message of a weak H1 and higher debt in the short term means more short-term pain."