To put it mildly, shareholders in this FTSE 250 housebuilder have endured a difficult period. But after a serious of profit warnings and with a new boss in charge, could a recovery be on the cards?
Let’s take a closer look.
What’s the story?
In September 2024, Vistry Group (LSE:VTY) was very bullish. It said it was expecting a “year-on-year increase in profits”. Unfortunately, in October 2024, the company had to disclose that one of its divisions had underestimated total build costs by around 10%. The impact? A hit of £80m to its expected 2024 adjusted profit before tax (PBT), which was revised downwards to £350m.
Worse still, a month later, following an internal review the group said it had got its sums wrong again. Another £25m was knocked-off forecast earnings.
And then, on Christmas Eve, the group announced “delays to expected year-end transactions and completions”. It said net debt was now going to be around £200m, compared to a neutral position previously forecast.
The same month, it was relegated from the FTSE 100.
Fast forward to 2026. In April, the group’s new chief executive took up his role. As they say, a new broom sweeps clean.
What now?
Indeed, last month (13 May), the group announced an increase in its sales rate and reported “excellent progress” in meetings its financial objectives. However, it also said “the use of increased incentives and discounts” had been higher than anticipated. It cautioned that it now expects its 2026 adjusted PBT to be in the mid-range of analysts’ forecasts (£168m-£283m).
This is disappointing for shareholders in a group that, I believe, should be doing so much better due to its emphasis on affordable homes. Unlike its rivals that focus more on private housing, Vistry partners with local authorities, housing associations, and private rented sector bodies, to build affordable properties (around two-thirds of its completions). These third parties often provide stage payments to help fund the build, meaning the group has less working capital requirements. And its partners usually own the land.
However, the group said activity is “relatively subdued” as the industry transitions between different phases of the government’s Social Affordable Housing Programme (SAHP). But this should be a temporary blip.
The outcome of bids for money from the 2026-2036 scheme will be known shortly. The group’s expecting a “step up in demand… towards the end of 2026 and into 2027”. This means it could be a good time to consider the stock.
After all, how much more bad news could there be?
My view
Admittedly, the full inflationary impact of the four-month-long closure of the Strait of Hormuz is not yet known. And the housing market is notoriously cyclical with borrowing costs being the biggest factor influencing demand.
However, I suspect the worst is behind the group. I bet those spreadsheets have been triple-checked by Vistry’s new management team. And if I was a director of the company, I would err on the side of caution when issuing any forecasts.
At a macro level, politicians are always taking about building more affordable housing. That’s what the SAHP is all about. Everybody seems to agree there’s a shortage in the country.
On balance, despite the obvious risks surrounding the housing market, I think it’s a long-term stock to consider.
Should you invest £5,000 in Vistry Group Plc right now?
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James Beard does not own shares in any of the companies mentioned.
