Vistry Group (LON: VTY) shares plunged over 12% on Wednesday this week after the UK housebuilder issued a sharp profit warning and suspended its share buyback programme to focus on cash generation and debt reduction.
First-half profits are now expected to be significantly lower than the prior year as the company resorts to increased discounting and incentives to shift inventory and maintain sales momentum.
The housebuilder has slashed its fiscal 2026 adjusted pre-tax profit guidance to a mid-range of £200-225 million, representing a cut of up to 20% from previous expectations. The reduction reflects the heightened use of incentives and discounted home sales, particularly on low-margin sites and developments nearing completion, which has resulted in an earlier recognition of profit impacts in the first half than previously anticipated.
Vistry, which owns Bovis Homes, Countryside and Linden Homes, said conditions have become increasingly volatile since the Middle East conflict erupted at the end of March. The war has created upward pressure on building materials costs and worker wages, which are likely to continue into the second half of the year, though the company is seeking to mitigate these through supplier negotiations and sub-contractor engagement.
The company’s year-to-date sales rate jumped 32% to 1.20 sales per site per week, driven by a 30% surge in open market sales rates despite recent moderation reflecting Middle East-related uncertainty.
However, the push to clear inventory has forced the board to adopt higher hurdles for land buying and slow construction on some sites to ensure alignment between build rates and sales velocity.
Despite the near-term headwinds, Vistry expects the second half to be more resilient, driven by a step up in demand for affordable housing as the new Social and Affordable Housing Programme 2026-2036 progresses. The company’s forward order book stood at £4.5 billion, of which £2.3 billion is for delivery in the current year, providing support for revenues despite the profit pressure.
New CEO Adam Daniels, who recently took charge following Greg Fitzgerald’s departure, is prioritising cash generation over short-term earnings to strengthen the balance sheet. The decision to pause buybacks signals a shift in capital allocation as the sector faces demand weakness and affordability challenges that show no sign of abating in the near term.