Investing.com -- Vistry Group Plc (LON:VTYV) on Wednesday reported that its full year for 2024 fell short of expectations, as cost forecasting issues in its South Division weighed on profits, leading to a 35% drop in adjusted profit before tax to £263.5 million.
Chief executive Greg Fitzgerald acknowledged the difficulties, in a statement said, “2024 was a challenging year for the Group resulting in a disappointing financial performance in completions and revenue.”
The British home construction company identified issues in the South Division, which had a total impact of £165 million, including £91.5 million affecting its 2024 results.
An independent review determined that these challenges stemmed from inadequate management oversight and non-compliant commercial forecasting processes.
In response, Vistry restructured its operations, consolidating six divisions into three to enhance oversight and financial controls.
Revenue on an adjusted basis rose 7% to £4.33 billion, supported by a 7% increase in total completions to 17,225 units.
Partner Funded completions rose by 18% to 12,633 units, while Open Market completions fell by 15% to 4,592 units.
The average selling price for Partner Funded homes increased to £236,000 from £222,000, while the Open Market average selling price remained stable at £385,000.
Despite overall growth in completions, Fitzgerald reaffirmed the company’s commitment to its long-term approach, stating, “Our focus is now firmly on the future and executing our differentiated partnerships strategy.”
Vistry’s net debt stood at £180.7 million at the end of 2024, widening from £88.8 million a year earlier.
The company attributed this increase to working capital requirements, including a buildup of stock due to a lower-than-expected Open Market sales rate and cash outflows linked to land and construction costs.
To address this, Vistry is targeting a £200 million reduction in excess working capital in 2025 and plans to accelerate cash release from its former housebuilding landbank through bulk sales and discounting measures.
“Delivering improved cash generation and reducing net debt through the year remains a priority,” the company said.
The company confirmed that no final ordinary dividend would be proposed for 2024. Instead, it will continue with a share buyback program, with £92 million in repurchases expected to be completed in the first half of 2026. A total of £130 million was distributed in 2024, including a £75 million special distribution.
Vistry emphasized its reliance on government-backed funding for future growth, stating, “The recent announcement of a £2 billion injection of new affordable homes grant, alongside the £800m of top-up funding previously announced, will drive investment momentum.”
The company expects Partner Funded activity to increase in the latter half of 2025 as this funding becomes available. The forward order book stood at £4.4 billion as of March 14, 2025, with 65% of revenue for the year secured.
As part of Vistry’s commitment to building safety, it will increase its provision for related costs by £117.1 million in 2024 to a total of £324.4 million. The increase in costs reflects the rise in third-party claims and the tightening of regulatory requirements.
During the year, the company completed work on 28 buildings and continues to remediate 240 others.
Vistry expects to make year-on-year progress in profit in 2025, though margins in the first half will remain under pressure due to the phasing of projects.
The company is forecasting a recovery in the second half as higher-margin developments come online. It remains focused on achieving a 40% return on capital employed and an operating margin of at least 12% in the medium term.
It is also aiming for an annual growth rate of at least 8%, supported by a recovery in the Open Market segment and continued demand for its Partner Funded model.