Vistry has issued its second profit warning in a month as the findings of a review into issues within its south division are released.
The housebuilder had initially reduced its profit by £115million in October when the issues first came to light. Now, following the independent review, this figure has been increased to £165million.
The company will take a hit of £105million this year, up from the previously forecast £80million, £50million in 2023 (up from £30million), and £10million in 2026 (up from £4million).
Factoring in the additional £25million, Vistry’s trading update said that it now expects its adjusted pre-tax profit to reach £300million, a significant decrease from the £430million initially forecast before the issues in the south division were uncovered.
The independent review had looked into the cost reporting process at Vistry’s south division, along with its culture and management, as well as a wider review of the whole group to see if the issues were replicated elsewhere.
The review found that it was only the south division that had seen these issues it put down to “insufficient management capability, non-compliant commercial forecasting processes and poor divisional culture”.
The review also highlighted that the managing directors in the south division were all from the housebuilding aspect of the company, which had changed its focus to purely partnerships work in the last couple of years.
The report said: “None of the group’s other divisions are managed exclusively by former housebuilding management. The independent review has highlighted the pressure being felt from organisational change as a fundamental driver underlying the issues in the south division.”
Vistry said that the reduced profit total was due to a number of developments having understated full-life cost projections as well as a “reduced expectation of FY24 activity” in its south division.
It said that the understated costs were varied and demonstrated general control issues, with 18 sites having adjusted full-life costs of more than £1million and five larger sites accounting for roughly 60% of the cost adjustments.
Vistry said the management team from the south division had “stepped away from the business pending completion of formal processes” while the group is also “considering new appointments improving transparency, enhancing management capability, reducing the length of reporting lines and ensuring closer proximity of the CEO to the business”.
The developer will also look to implement new processes and controls across the group while improving its training and support to regional teams.
