(Alliance News) - Crest Nicholson Holdings PLC on Monday lowered profit guidance after warning that conditions in the housing market worsened over the course of the summer.
Crest Nicholson said it does not expect conditions to improve before the Surrey-based housebuilder's financial year-end on October 31.
The company now expects to achieve annual adjusted pretax profit of GBP50.0 million, 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.
"Against a backdrop of persistently high inflation and rising interest rates, trading conditions for the housing market have worsened during the summer of this year. While pricing has remained resilient in a market with limited supply and few distressed sellers, the economic uncertainty is deterring prospective home movers," Crest Nicholson cautioned.
Mortgage borrowing has also been pricier, and the end of government support schemes, such as help to buy, has failed to "cushion this impact".
"Transaction levels across the industry have therefore weakened further, particularly in recent weeks. Although overall inflation is encouragingly starting to fall, core inflation and wage inflation both remain high with further interest rate rises forecast over the coming months," Crest added.
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.
"Given this market backdrop, the group is also currently negotiating several bulk deals on appropriate commercial terms with partners where it has developed strong relationships over recent years. These transactions will provide support to volume delivery in future years," Crest added.
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.
Looking ahead, it said: "While the current trading conditions are challenging, over the medium term it expects inflation to abate and mortgage rates start to reduce."
By Eric Cunha, Alliance News news editor
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Crest Nicholson (CRST)