Crest Nicholson issues profit warning due to worsening market conditions

House-building firm Crest Nicholson has issued a cautionary statement in its latest trading update, revealing that sluggish summer sales have adversely impacted its profit projections for the fiscal year. The company has noted a worsening trend in the market, with no signs of improvement on the horizon.

A mere two months ago, Crest Nicholson had anticipated a sales-per-outlet-per-week (SPOW) rate of 0.5 until the end of the financial year on October 31. However, over the last seven weeks, this rate has plummeted to just 0.25, signifying a continuous deterioration.

Citing a backdrop of persistent high inflation and escalating interest rates, Crest Nicholson has attributed the declining conditions to the current summer period. While pricing has displayed resilience within a market characterized by limited supply and a shortage of distressed sellers, economic uncertainties have dissuaded potential homebuyers.

The company highlighted that increased mortgage borrowing costs, particularly affecting those seeking upgrades and individuals with low equity levels, notably first-time buyers, lack governmental support following the cessation of the Help to Buy program.

As a result, industry-wide transaction levels have experienced further weakening, particularly in recent weeks. Despite an encouraging reduction in overall inflation, core inflation and wage inflation remain high, and additional interest rate hikes are predicted in the upcoming months. Consequently, Crest Nicholson does not anticipate a significant improvement in trading conditions prior to the conclusion of its fiscal year on October 31, 2023.

Having initially projected an adjusted pre-tax profit of approximately £74 million for the full year (compared to £137.8 million in 2022), the company now revises this estimate down to £50 million due to the slowdown.

In response to these market conditions, the newly established East Anglia division will be reintegrated into the Eastern division with adjusted boundaries. While Yorkshire remains unaffected as a fully operational division, investments will be reevaluated to align with the prevailing market circumstances.