So much for as safe as houses. A shocker of a profit warning from UK housebuilder Vistry, triggered by a newly-unearthed £115mn of costs, will dent this year’s full profits by 20 per cent and lopped as much as a third off the company’s share price early on Tuesday.
Investors’ apparent overreaction was understandable on two scores. While it is in a company’s interest to be conservative on these warnings (and Vistry says the problem only affects its South of England division) the discrepancy only came to light a few days ago. Numbers cannot at this stage be conclusive. These problems tend to be like cockroaches: spot one and you need to get the roach motel out.
Second, Vistry shares have been on a tear. Investors liked its ambitions, building 18,000 homes this year, with £1bn of shareholder returns earmarked over three years. Until today, shares were up 63 per cent in the past year, almost double the sector. Vistry was trading on 2 times book value, on S&P Capital IQ numbers, compared with 1.1-1.4 times for peers.