how big are the holes u drilled and at what centers and at what level?
Small holes will get stuffed easily so I would be looking at 75 mm at 1 to 1.5m centers along the bottom.
You will then need to cater for this water flowing away.
The plaster is popping off in part due to the water pressure, also in part perhaps due to shoddy workmanship: eg using fairy liquid as the plasticizer or using 2 much plasticizer.
To build on what alser has suggested, if u are going to face it with timber, fix the first layer of battens in the vertical to aid drainage down the wall and facilitate air flow behind what ever you sheet it with.
40 mm by 30 mm or so pressure treated battens fixed vertically at 400 centers with 100 mm by 5 mm or 6 mm screws [stainless steel or galvo'ed as a base will last a long long time. I know this will take time over someone using a hilto gun to fix them rapido but u dont get get what you dont pay for
Pressure treated timber that is continually wet in the ground will only last 5- 7 years but if u ventilate it and keep the end up off the bottom then happy days.