Builder Crest issues another profit warning

CREST nicholson has cut its profit forecast for the third time in six months amid a slowdown in the property market. Shares fell sharply in early trading after an unscheduled update saw the housebuilder slash full-year profit expectations again.

it eventually closed down just 0.8pc, or 1.8p, at 214.8p. But analysts said the weakness of the share price – it is down around 60pc from prepandemic levels – could see the FTSE 250 business become a takeover target.

Full-year profit before tax is expected to be £41m, compared to a previous forecast of between £45m and £50m.

The company revised down its profit expectations several times in 2023. as recently as June it was forecasting fullyear profit of almost £74m.

Developers have struggled with a drop off in demand for new homes due to rising borrowing costs, with interest rates hitting a 15-year high of 5.25pc in 2023. They built fewer properties as high mortgage rates have deterred potential buyers.

Crest’s rivals Taylor Wimpey and Persimmon last week said they built 3,335 and 5,000 fewer homes respectively compared to the previous year.

alongside housing market troubles, Crest has struggled with operational issues including spiralling development and legal costs. Rising costs at a development in Farnham, Surrey, and other ‘legacy sites’ added up to a hit of more than £11m.

Crest also revealed a £13m charge in relation to a legal claim over a fire at a low-rise apartment block in 2021.

RBC Capital Markets analyst anthony Codling said: ‘The latest review has identified additional costs which will reduce profits once again. it has been a tough year for Crest and unfortunately for the group and its investors the bad news continues.

‘in our view, if today’s trading update leads to further share price weakness, it increases the chances that Crest may be viewed as an attractive acquisition for another housebuilder.’

Crest said it has received more interest and inquiries from buyers so far in 2024. lenders have cut mortgage costs on expectations that the Bank of England is preparing to lower interest rates.

‘ The recent reduction in mortgage rates has provided a more constructive backdrop for house buyers and the wider housing market,’ a Crest spokesman said.

Russ Mould, investment director at aJ Bell, said: ‘The company is seeing some encouraging signs in terms of enquiries but that is yet to translate to customer behaviour and the property market remains a fragile beast.’

‘Market remains a fragile beast’