Crest Nicholson Holdings today warned that full-year adjusted profit before tax is now expected to be around £50.0m, a significant downgrade from previous guidance.

Crest Nicholson shares were down 10% at the time of writing on Monday.

The housebuilder cited a “poor trading environment” and further legacy costs at its Brightwells Yard development as negatively impacting performance.

The profit warning comes amidst a backdrop of high inflation, rising interest rates, and weakening housing market activity. Transaction levels have deteriorated in recent weeks, with the sales rate per outlet per week falling to just 0.25 in the 7 weeks to August 18, down from 0.50 in the first half.

First-time buyers and those looking to upgrade are being deterred by the rising cost of mortgages and lack of government support schemes. The company does not expect trading conditions to improve materially before year-end on 31st October.

Crest Nicholson revealed it is negotiating several bulk land deals to support future delivery volumes. However, management is taking action to reduce overheads and scale back divisional growth plans to reflect the tougher market.

The company remains committed to its full-year dividend but warned that land investment will be “significantly” lower going forward.

Despite the near-term challenges, Crest Nicholson stated it has a strong financial position and experienced leadership to navigate the downturn. It believes inflation will eventually abate and mortgage rates reduce.

The profit warning indicates the UK housing market continues to face major headwinds. While Crest Nicholson retains a positive medium-term outlook, investors should brace for further downgrades if conditions do not improve.

“Today’s profit warning from Crest Nicholson suggests rising interest rates and higher mortgage costs are really starting to bite,” said Charlie Huggins, Manager of the Quality Shares Portfolio at Wealth Club.

“Crest Nicholson has seen trading conditions worsen significantly over the summer months. This means group pre-tax profit for the year is expected to come in around a third lower than previous expectations.

“The cost of borrowing has rocketed, and this has led to fewer homebuyers upsizing and to fewer first-time buyers. The end of the Help to Buy scheme has compounded these pressures, making it even harder for first-time buyers to get onto the housing ladder.

“The housing market is on very shaky foundations. Although inflation appears to be moderating, the Bank of England is expected to tighten the screw further in the coming months. As such, it seems unlikely that trading conditions for Crest Nicholson or its peers will improve any time soon.”

Power Metal Resources shares are trading near the lowest levels since the beginning of the pandemic after a disappointing run in the stock.

Power Metal Resources is a highly diversified minerals exploration vehicle with exposure to nickel, lithium, tungsten, uranium, gold, and PGEs.

There is a lot for junior mining investors to get excited about. For example, Power Metals have just begun lithium exploration activities in North America and directors have been buying shares recently.

Unfortunately, since the new CEO Sean Wade took the reins in March the Power Metal Resources share price is down circa 25%. The 1p mark is now only obtainable by a 50% rally. 

The drop may be symptomatic of a challenging macro environment but a recent trip to the US by the POW team has failed to materialise in any noticeable buying pressure.

This will be a major disappointment for long-term holders of the stock – but it may well be just the opportunity those sitting patiently on the sidelines have been waiting for.

With a market cap of just £14m, there is strong evidence for the argument Power Metal Resources is undervalued. Not enough is written about the strength of the Power Metal Resources portfolio.

Former CEO Paul Johnson was a staunch believer that the junior natural exploration sector could explode higher with an improvement in sentiment. This is supported by historical price action in junior explorers.

However, the question still remains for Power Metals Resources – how low will the POW share price go before turning a corner?

The FTSE 100 sank again on Friday as US bond yields soared and a major Chinese real estate company filed for bankruptcy.

Anyone waiting for lower prices to start buying may soon take a genuine interest in London’s Bluechips.

The FTSE 100 was trading down 0.8% to 7,248 at the time of writing on Friday and is now down 4% year-to-date.

“Whether it’s the brewing crisis in the Chinese property market, the surge in US bond yields on fears rates will stay higher for longer, or the big drop in UK retail sales, things are starting to look a bit ugly out there,” said AJ Bell investment director Russ Mould.

“News China real estate giant Evergrande has filed for bankruptcy protection in the US would have prompted some alarm in isolation, but when you combine it with its peer Country Garden’s decision to suspend payments on some of its bonds and the words ‘dominos’ and ‘falling’ start to come to mind.

“China-exposed stocks on the FTSE 100 like Prudential and the miners are taking heat on Friday morning, helping to put the index on course for yet another down day. The FTSE is currently demonstrating all the pep and get up and go of a teenager at 8am on a school day.”

The selling wasn’t extreme, but it was broad, with 90 of the FTSE 100’s constituents trading negatively shortly after midday on Friday.

Miners such as Antofagasta – down 3% – were weaker but not catastrophically. The Chinese property crisis isn’t anything new, and the sector has been ins steady decline for a couple of weeks.

Airtel Africa was the biggest faller giving up 3%.

Defensive names, including British American Tobacco, National Grid and Imperial Brands, provided minor support, but the gains were nothing to write home about.