Crest Nicholson has cut its annual profit outlook for the third time in six months as costs associated with its Brightwells Yard regeneration scheme in Farnham continue to climb.
The Surrey-based housebuilder also told shareholders on Monday it is set to recognise an unexpected legal claim worth £13million after a 2021 fire damaged a low rise apartment scheme built by the group.
Crest Nicholson now expects full-year adjusted profit before tax to be £41 million, down from the previous forecast of £45million to £50million.
The Surrey-based housebuilder also added that it filed an unexpected legal claim of £13million after a fire damaged one of its sites back
In a statement, Crest Nicholson, said: ‘Brightwells Yard, Farnham recorded an incremental cost movement of approximately £11million in the second half of FY23 as the group continued to work on completing certain legacy sites.
‘The group has subsequently conducted a comprehensive review of the costs associated with the work required on this project as well as our other legacy sites.
‘Consequently, further additional costs have been identified which will impact FY23 and the group now expects the adjusted profit before tax to be £41million for FY23.
‘Although it is too early to gauge customer behaviour, we have been encouraged by an increase in customer interest levels and inquiries this calendar year.’
Crest Nicholson shares were down 5.08 per cent to 205.60p in Monday morning trading.
Anthony Codling, head of European housing and building materials at RBC Capital Markets, warned the latest profit downgrade and further share price weakness ‘increases the chances that Crest may be viewed as an attractive acquisition for another housebuilder’.
He added: ‘Further challenges for Crest as its legacy sites continue to negatively impact the Group’s financial performance, and it releases yet another unscheduled trading update this morning.
‘It has been a tough year for Crest and unfortunately for the Group and its investors the bad news continues.’
Builders suffered a slowdown in demand for homes in 2023 as high mortgage costs put buyers off, while firms have also been hit by a rising cost of materials and wages.
Consequently, last year saw a significant drop in the number of new homes built and sold.
Contracts awarded for construction projects in the UK fell by £11.1billion to £69.2billionn in 2023 after a record prior year, with residential housebuilding deals slumping by 13 per cent, according to industry analysts Barbour ABI.
Easing mortgage rates amid expectations that the Bank of England might cut interest rates sooner than expected and could provide some relief for the housing sector but wider economic challenges including recession fears have dented hopes of a robust recovery.
Rival Taylor Wimpey warned the UK housing market outlook remains uncertain in the near term amid an ‘extremely challenging’ planning approval environment.
Meanwhile, York-based Persimmon built 9,922 new homes in 2023, ahead of its previous forecast of 9,500 homes.
In contrast to peers, Vistry’s forward sales position was up 12.4 per cent year-on-year to £4.5billion at the end of 2023.
The FTSE 250 group added it had enjoyed ‘good levels’ of demand for affordable homes, which it specialises in, from local authorities as well as renewed strength in the private rented sector in the final quarter of 2023.
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