Berenberg slashes Vistry targets after 'horrible Q4'

"Vistry's third profit warning in three months capped a horrible Q4 for the company and its shareholders, with the share price now down over 50% from its mid-year high," Berenberg said in a research note on Friday.

Vistry revealed last week that its adjusted pre-tax profit guidance has been scaled back to £250m from £300m, representing a 47% reduction from before its first profit warning in October. Net debt forecasts were also lifted to £200m from earlier guidance of <£89bn.

The company cited three main reasons for the gloomy forecasts: delays to partnership agreements, delays to private completions and the decision not to proceed with certain transactions as commercial terms weren't up to scratch.

"Most concerning, in our view, is that what the company had originally cited as a localised cost problem in its first (October) warning has now spread to incorporate a raft of differing challenges, such as the funding capacity of its social housing customers and the discount expectations of large-scale customers. These are posing a very real challenge to the ambitious multi-year financial growth and profit ambitions of Vistry's management," Berenberg said.

The broker lowered its earnings per share forecasts for 2024 to 2026 by 19% on average and cut its target price for the shares from 750p to 650p, keeping a 'hold' rating on the stock.

"As we have written before, we do not believe that the partnership model is broken, but we do think that the financial ambitions (such as margin and ROCE) that Vistry targeted within this model need to be reconsidered in order to achieve more sustainable and consistent mid-term outcomes," Berenberg said.

The stock was down 1.6% at 556p by 1053 GMT, having now fallen 15% since last week's update.