Crest Nicholson has slashed its outlook for sales and profits, warning that rising costs and weakening buyer confidence linked to the war in Iran are weighing heavily on the housing market.
The housebuilder said it now expects underlying earnings of just £5 million to £15 million, well below market expectations, after a sharp deterioration in trading conditions.
Shares in the group plunged by as much as 45% at one stage following the update, as investors reacted to a significantly weaker financial outlook and rising debt levels.
The company also warned that net debt is set to rise sharply to between £100 million and £120 million, up from £38.2 million in the year to October 31, and far above earlier forecasts of £15 million to £65 million. It is now seeking a temporary relaxation of lending covenants as it moves to shore up its balance sheet.
Crest said it had experienced a “marked” softening in sentiment since March, with fewer customer enquiries, lower visitor numbers to developments, and growing caution among land buyers facing an uncertain economic backdrop.
It attributed part of the pressure to broader global instability, with energy and construction costs rising amid the ongoing conflict in the Middle East, which has fed through into higher input prices and reduced consumer confidence.
The group has also cut its expectations for housing completions this year to between 1,400 and 1,500 homes, down from an earlier forecast of 1,550 to 1,700. Land sales expectations have been reduced to around £40 million, from a previous range of £75 million to £100 million.
Despite the downgrade, the company said it was acting “quickly and decisively” to prioritise cash generation and strengthen its financial position in response to tougher trading conditions.
The warning adds to concerns over the health of the UK housing market, where higher borrowing costs and geopolitical uncertainty are increasingly weighing on demand and investment decisions.
Chief executive Martyn Clark said: “It is increasingly clear that the current macroeconomic uncertainty is contributing to the prospect of a more prolonged higher interest rate environment, renewed cost pressures and a deterioration in consumer confidence.
“Therefore, in the near term the right and prudent course of action is to adapt quickly to the challenges presented by the current trading environment and focus on prioritising cash generation and optimising our balance sheet position.
“We are doing what needs to be done to navigate this uncertainty to best position the business to deliver the attractive medium-term opportunity.”
Victoria Scholar at Interactive Investor said: “This is a very bleak update from Crest Nicholson, underscoring how the Iran war and the energy crisis have created painful headwinds for the housebuilder sector.
“Interest rate sensitivity among housebuilders means that the conflict’s inflationary impulse not only adds to significant build cost pressures from higher energy but also threatens the demand outlook as the higher-for-longer outlook for interest rates dampens mortgage affordability and softens demand for borrowing.”
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