21st Aug 2023 11:40
(Alliance News) - Crest Nicholson Holdings PLC on Monday slashed its annual profit guidance, as the housebuilder grapples with a sector slowdown which only got worse over the course of the summer.
Crest Nicholson shares slipped 6.1% to 182.20 pence each in London on Monday morning.
The Surrey-based firm said "persistently high inflation and rising interest rates" have crippled the housing market, deterring would-be buyers. Mortgage borrowing has also been pricier, and the end of government support schemes, such as help to buy, has failed to "cushion this impact".
The company now expects to achieve annual adjusted pretax profit of GBP50.0 million for the year ending October 31, which would represent a 64% decline from the GBP137.8 million achieved in the prior year. It had previously expected a profit outcome of GBP73.7 million, the company said in June, which would have been in line with published consensus at the time.
The company said it is "responding proactively" to the difficult trading conditions and will expects to keep a lid on future land activity after adding "several high-quality sites" to its portfolio in the first-half.
"Management will also be reducing the group's overhead position in the next financial year and will be incorporating the newly created East Anglia division into its existing Eastern division with revised boundaries. Yorkshire will remain unaffected given it is now a fully operational division, but the pace of growth and onboarding of further resources expected in this region will be revised to reflect the market conditions," it added.
The dividend will be spared, however, Crest said. It "remains committed" to a total full-year dividend of 17.0 pence per share, in line with the prior year.
"Crest Nicholson's profit warning has laid bare the scale of the impact of a housing slowdown on the housebuilding sector. Sales of new homes have plunged alarmingly and, while not all developers in the space are created equal, the news, allied to Rightmove's latest reading on the property market, has had a knock-on effect on share prices in the rest of the sector this morning," AJ Bell analyst Russ Mould commented.
It had forecast a sales per outlet week rate of 0.50 for the second half back in June, though the figure for the seven weeks to August 18 as so far fallen well sort of that, sitting at just 0.25.
Hargreaves Lansdown analyst Susannah Streeter commented: "Sales are deteriorating at a rapid click, which is not surprising given that potential home buyers will be running scared from sky-high mortgages. The update has sent a shiver through the rest of the market amid expectations that more people will be opting to stay put in current homes or rented accommodation rather than taking on a huge debt burden at such an uncertain time."
Taylor Wimpey PLC shares were 3.1% lower, the worst FTSE 100 performer. Persimmon PLC lost 2.8% and Berkeley Group Holdings PLC slipped 2.4%.
By Eric Cunha, Alliance News news editor
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Crest NicholsonTaylor WimpeyBerkeley GroupPersimmon