By Aby Jose Koilparambil
(Reuters) -British homebuilder Vistry on Friday forecast further cost pressures in 2025 after issuing its second annual profit warning in a month, sending shares up to 21% lower.
Shares of Britain’s largest homebuilder by yearly output slumped to a near 13-month low of 691 pence to be the top percentage loser on the FTSE 100 index after it flagged cost overruns in one of its divisions.
Vistry’s concerns come at a time British homebuilders’ hopes of a near-term recovery are dampened by fears that the Bank of England rate cut cycle might turn slower due to rising inflation, fuelled by the UK’s ambitious new budget plans.
The Kent, England-based company, which makes most of its sales through partnerships with local authorities, housing associations and government providers, said it expects an adjusted profit before tax for the year ending Dec. 31 of about 300 million pounds ($389 million), lower than the 350 million pounds it forecast last month.
Investec analyst Aynsley Lammin said that besides the company-specific issues of cost overruns, Vistry’s outlook was more cautious for the next year, providing clues for the broader sector’s outlook.
“The bigger issue is more macro with the fears that interest rates might not be cut as quickly as people had hoped, and the inflationary pressures might be a little bit higher than what people could have expected before the UK budget,” said Lammin.
Shares in FTSE 100 builders Barratt Redrow, Persimmon and Taylor Wimpey fell about 2% each.
Vistry, which has about 300 developments across six divisions, also slashed its annual construction targets by 500 units to 17,500 homes.
Vistry said a review found that the costs related to nine of the 46 developments in its South Division, which covers parts of southern England, were greater than previously disclosed. The company expects the impact of the additional costs on its 2024 profit to rise to 105 million pounds from 80 million pounds.
The company also said the direct impact to the group from the increase in Employer National Insurance contributions will be about 5 million pounds in fiscal year 2025.
British finance minister Rachel Reeves, in her first budget since the Labour government took office, raised employers’ social security contributions by 1.2 percentage points to 15% from April to raise revenue.
Earlier this week, Persimmon flagged concerns about higher costs emerging in price negotiations for 2025, partly due to increased employee insurance benefits.
($1 = 0.7711 pounds)
(Reporting by Aby Jose Koilparambil in Bengaluru; Editing by Abinaya Vijayaraghavan, Jane Merriman and Louise Heavens)
