Vistry (VTY.L) shares plummeted on Tuesday morning on the back of a profit warning issued after it discovered costs in one division of its business had been understated.

Shares were down more than 30% earlier in the trading session, taking more than ￡1bn off the company's market capitalisation.

The stock had recovered some ground by midday but was still down more than 24%, with a market capitalisation of ￡3.2bn ($4.19bn).

The stock was the worst performer on the FTSE 100 (^FTSE) index on Tuesday, weighing on the blue-chip index, which was down 1% in early afternoon trading.

Vistry said in a trading update on Tuesday that it had discovered that cost projections to complete nine of its 46 developments in its south division had been "understated" by around 10% of the total build costs.

To put this into context, Vistry said the group as a whole has around 300 developments on its books.

As a result, the housebuilder estimated a "one-off impact" for revising development cost assumptions and now expected adjusted profits before tax for the 2024 fiscal year to be around ￡80m lower than previous forecast, at ￡350m. Vistry then expected adjusted pre-tax profits to be around ￡30m lower in 2025 and ￡5m down in 2026.

"We believe the issues are confined to the South Division and changes to the management team in the division are underway," Vistry said. "We are commencing an independent review to fully ascertain the causes."

Despite the impact of this discovery, Vistry said it continued to expect to deliver more than 18,000 units in total completions in its 2024 full-year. The company also said it continued to target a net position by 31 December, having reported net debt of ￡88.8m at the end of last year.

In addition, Vistry said it remained committed to the ￡130m share buyback programme it announced at the beginning of September.

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The company also maintained medium-term targets of generating ￡800m in adjusted operating profit and returning ￡1bn in capital distributions to shareholders.

Vistry said it is scheduled to publish another trading update on 8 November.

Russ Mould, investment director at AJ Bell, said: “Vistry had been quietly eking out a strong reputation with the market over recent years but today’s news has done a lot of damage to its credibility with investors.

“The scale of the understatement of build costs in its South division is jaw-dropping and it’s not a surprise to see that changes in the management of that division are underway."