Crest Nicholson has cut back its housebuilding and earnings targets as crunch talks with lenders drag on.
The London-listed builder now expects to build up to 1,400 homes this year, compared to earlier forecasts of as many as 1,500. It expects to make an earnings loss of £10m, having previously guided to a profit of between £5m and £10m.
The firm’s board told investors on Thursday that the housing market has been “more subdued than expected,” as its rivals’ use of competitive pricing slowed sales.
Rising building costs and higher mortgage rates caused by the Iran war have forced many of the UK’s biggest listed housebuilders to slow landbuying and warn on profits.
Crest Nicholson has been locked in emergency talks with its lenders for months, as it seeks permission to loosen the terms of its debt.
The housebuilder had delayed publishing its results in a bid to push these negotiations over the line, but ended up posting a £35m loss in July while admitting that the talks had still not concluded.
On Thursday, Crest Nicholson said these talks are still ongoing and are expected to drag on even longer.
“The group remains in constructive discussions with its lenders to amend its covenants and ensure that it has an appropriate level of funding and liquidity going forwards,” its board said.
“Although the group now anticipates some slippage in the current timetable and will provide a further market update in due course.”
Housebuilder shifts to premium homes
Martyn Clark, the housebuilder’s chief executive, said the group is making “tangible” progress, though he conceded that “the trading backdrop has remained difficult through the summer”.
Crest Nicholson is ensuring “tighter control” of its costs and eyeing a return to the mid-premium segment of the housing market to secure more predictable sales rates.
“Although the timing of a broader market recovery remains uncertain, the Group is taking the right actions to protect liquidity and improve operational execution, while positioning the business for recovery when market conditions normalise,” Clark said.
The housebuilder said it managed to cut its debt by about £30m by selling off extra land in the first half of the year. It expects to end the year with net debt of between £70m and £90m.