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Crest Nicholson shares slump on profit guidance cuts

On Monday, Crest Nicholson’s shares slumped on the news of the UK housebuilder slashing the company’s yearly profit forecast for the third time in six months.

This estimate has now been revised to £41 million.

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The downward adjustment is attributed to increased costs linked to specific legacy projects and an extraordinary charge of £13 million related to a legal claim.

The new projection anticipates a full-year adjusted profit before tax of £41 million ($52.30 million), marking a deviation from the earlier expected range of £45 million to £50 million.

Crest Nicholson’s shares were down by almost 5% at the time of writing on Monday.

“While there may have been a break in the clouds looming over the housebuilding sector, the latest update from Crest Nicholson shows life remains tough,” said AJ Bell investment director Russ Mould.

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Last October, Crest cautioned that a decline in sales and unresolved contract issues would result in 2023 profits at £50 million, a downgrade from the initial forecast of £74 million at the half-year mark.

And now, “higher costs on a delayed project in Surrey and a legal claim linked to a fire at an apartment building in 2021 contribute to the company’s warning on profit for 2023. Helping to salve the pain for shareholders is a more encouraging outlook, which is lent credibility by a Rightmove survey showing an increase in asking prices at the start of the year,” said Mould.

Following a challenging 2023 characterised by soaring inflation and increased interest rates, the UK housing market can be said to be set for a resurgence as mortgage rates begin to decline.

Nevertheless, concerns about the overall economic landscape may restrain any potential recovery.

Furthermore, although “the company is seeing some encouraging signs in terms of inquiries, that is yet to translate to customer behaviour, and the property market remains a fragile beast. There is hope, but as yet no guarantee, that the coming months will bring further reductions in mortgage costs as the Bank of England cuts rates,” said Russ Mould.

“If it is to be a beneficiary of any improvement in the outlook, Crest Nicholson must put operational issues behind it,” he added.

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