UK housebuilder Vistry Group has reported a profit drop of over a third, calling it a “disappointing year.” The company is now banking on the government’s recent £2bn pledge to boost affordable housing for a potential turnaround. Following three profit warnings last year, Vistry announced on Wednesday that it would suspend dividend payments to shareholders. Its shares took a hit, closing down by more than 7%—the biggest drop on the FTSE 250 index that day. Will the Vistry Group profits drop continue?
Government’s £2bn Affordable Housing Offers Hope for Recovery
Vistry’s chief executive, Greg Fitzgerald, acknowledged that 2024 had been a tough year but expressed optimism about the government’s commitment to affordable housing. He stated that the company would “work quickly with our partners to deliver quality new homes across the country.”
In her spring statement on Wednesday, Rachel Reeves announced that the Treasury would allocate funds to build 18,000 affordable and social homes as part of its push to boost housebuilding
Rachel Reeves stated, “Reforms to the national planning policy framework alone will enable the construction of over 1.3 million homes in the UK over the next five years, bringing us closer to fulfilling our manifesto pledge of 1.5 million homes in England during this parliament.”
Vistry, created in 2020 through the merger of Bovis Homes and Galliford Try’s housebuilding division, has shifted its focus in recent years to building affordable homes in collaboration with housing associations.
Investec analyst Aynsley Lammin noted, “Demand for partnership homes has been weaker recently, partly due to limited funding. However, the government’s £2bn funding boost should provide support later this year.”
Vistry announced that, starting in 2025, it would require staff to return to the office full-time, moving away from hybrid working. Depending on their role, employees previously worked from home one to two days a week. The company stated, “Working in the office five days a week brings real benefits, including better collaboration, idea-sharing, improved communication, and fostering a sense of unity.”
Continued Bad News
Last year, Vistry’s adjusted pre-tax profit dropped by 35% to £263.5m, despite a 7% increase in completed properties, totaling 17,225. The start of this year has been challenging, with the builder’s sales rate declining to 0.59 per site per week, down from 0.81 in 2024.
Vistry is working to move past a damaging accounting scandal after revealing in November that cost overruns on construction projects in its south division were more severe than initially reported.
As a result, Vistry is facing a £165m financial hit, with £91.5m impacting 2024 profits and the rest affecting future years. The company also experienced delays in finalising agreements with its partners at the end of the year.
In response, Vistry conducted a comprehensive review of its processes and replaced senior executives in its south division. The company further reduced its workforce in the first quarter, following 200 job cuts during a business overhaul in late 2023. Bonus payouts were also scaled back last year after falling short of profit targets.
Hargreaves Lansdown analyst Aarin Chiekrie described 2024 as “a year Vistry investors would rather forget,” noting that the company’s share price has plummeted by over 50% in the past year. it is unclear if the affordable housing project will be enough to stop Vistry Group profits drop.
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