Is it worth investing in Vistry now? What to buy, sell or avoid

Vistry was enjoying a remarkable rally until this month. Its shares had gained more than 40 per cent this year, as investors lapped up its ambitious growth targets and unique housebuilder model. But then the FTSE 100 group admitted to an error that is expected to knock £115 million from its profits over the next three years.
Britain’s second biggest housebuilder told the market last week that it had underestimated how much it was going to cost to build hundreds of homes. As such, it now expects to make a pre-tax profit of around £350 million this year, £80 million below previous guidance. Next year’s profits are now expected to be £30 million lower, followed by a £5 million hit in 2026.
It did not explain exactly how the error was made, but the company has insisted that the problems are confined to nine out of 46 sites in its south division, and that it has checked its roughly 290 other developments across the country. But investors still wiped £1 billion off its market value, and it has started to raise questions about the reliability of its partnership model.
Vistry, which was born from the merger of Bovis Homes and the housebuilding division of Galliford Try in 2020, has started an independent review into the mistake. One theory is that the collapse of a groundworks subcontractor meant Vistry paid more than expected to find a replacement. Others have suggested that the company has not been factoring in build cost inflation over recent years.
But costs were “understated” by 10 per cent in just one of its six divisions, and Vistry has told shareholders that “changes to the management team” are under way. So has this error kicked its investment case off course?
Before the shock update last week, investors had been attracted by Vistry’s ambitious targets of building 18,000 homes this year, with £1 billion of shareholder returns over the medium term. Prior to the sell-off, the company was trading at 1.3 times book value, at the higher end of housebuilders listed in London, partly thanks to its concentration on affordable housing, which is viewed as a key area for growth by the new Labour government, as well as its partnership set up.
The error has exposed a flaw in this model. Partners pay in advance for Vistry’s homes, which means there is no risk around finding a seller. This work is lower-margin but generates higher returns on capital, since local authorities and housing associations help fund the developments.
While many of Vistry’s rivals have been hit hard by a weaker housing market in the past couple of years and have had to lower their output, Vistry increased completions by 9 per cent to 7,792 in the first half of its financial year. However, the model also means that Vistry has to swallow any unexpected costs, such as its recent error. A more traditional developer could pass higher costs on to customers, or rising house prices might counter the effect.
For now the problem does not look like it is company wide. But the risk was certainly foreseeable, and there should be tighter protections in place for this sort of error — at least enough to protect from such profit downgrades and the shares from such a steep plunge. It could signal overconfidence in the new business model by Greg Fitzgerald, who is both executive chair and chief executive. Prospective investors should note that his dual role is at odds with typical corporate governance standards.
So are the shares now a bargain? The partnership model is not broken and Vistry still looks well-placed to benefit from structural growth in more affordable housebuilding, especially with its capital light approach. But it may be a bumpy road ahead as it works to rebuild trust with some of its shareholders, and anyone eyeing up the shares should proceed with caution.
Advice HoldWhy Good growth story but must rebuild trust with shareholders
The FTSE 100 property developer Land Securities built its success on its huge portfolio of City offices – but years after the Covid pandemic first struck, the combination of hybrid working practices and high inflation has left the company exposed to underutilised office space. So as it reinvents its £10 billion portfolio, is it worth buying in?
Landsec has three areas of focus: £6.2 billion in central London, £1.8 billion in retail destinations and £0.7 billion in “mixed-use urban neighbourhoods” – in other words, urban areas where there are spaces for growth in living, work and leisure spaces.
The group has shed more than £2 billion of office space since 2020, but has been selling in a weak market.
It said that City office prices dropped nearly 14 per cent in the year to March, while West End offices fell 3.6 per cent.
Mark Allan, who took over as chief executive in 2020, has focused on destination shopping centres for growth, including Bluewater in north Kent, where Landsec increased its ownership stake by 17.5 percentage points to 66.25 per cent this summer for £120 million.
The shares trade at a forward yield of 6.3 per cent, which may tempt some income investors given that the wider FTSE 100 is expected to yield 3.8 per cent.
But over the past decade the stock has failed to deliver any shareholder returns whatsoever – indeed both LandSec and rival British Land have both lost investors’ funds, with a return of negative 9.7 per cent and negative 8.5 per cent respectively.
Landsec was slow to react to the growth of online shopping, a trend which has delivered handsome returns for property groups that invested early in warehouses.
There is still much uncertainty over the value of Landsec’s offices, and the company now finds itself as a seller around the bottom of the market.
The company traded at around a 20 per cent discount to their net asset value at the end of its last financial year. This may seem cheap, but for a portfolio grappling with a difficult strategic shift, it does not appear good value.
Advice Avoid
Why Portfolio is in a difficult transition