Housebuilder Crest Nicholson warns of annual loss in ‘subdued’ property market

Crest Nicholson, a British housebuilder, has forecast a surprise loss for the year ending 31 October due to difficulties in a "subdued" property market. The company adjusted its estimate of homes completed to between 1,350 and 1,400, down from the previous range of 1,400 to 1,500. The subdued property market conditions have resulted in a slower sales rate in the past six weeks compared to the first half of the year, attributed to affordability constraints and competitive pricing.

Crest expects to slide into a £10m operating loss, reversing an earlier profit forecast of £5m to £10m. This is the third profit warning since April, pushing the share price down more than 10% on Thursday. Building material prices remain about 3% to 4% higher on average. The company has also cut costs, closing one divisional office and eliminating 50 jobs in recent months.

Crest's borrowing is being reduced faster than expected, with net debt expected to be £70 to £90m at the end of October, down from the previously forecasted £100m to £120m. The company is renegotiating its banking covenants with lenders to ensure future funding, but the talks are taking longer than anticipated. CEO Martyn Clark acknowledged the difficult trading environment but emphasized the company's progress in controlling costs and improving operations.

Clark stated that while a broader market recovery remains uncertain, the group is taking steps to protect liquidity and prepare for recovery when market conditions improve. The property market outlook has been further clouded by the impact of the US-Israel war on Iran, causing oil prices to rise and leading to turmoil in global bond markets.

UK swap rates, used to price mortgages, have reached a three-year high, reflecting the ongoing economic impact.