Housebuilder Crest Nicholson issues profit warning amid Brexit uncertainty

(c) Sky News 2018: <a href="">Housebuilder Crest Nicholson issues profit warning amid Brexit uncertainty</a>

Housebuilder Crest Nicholson has warned that profits will be lower than expected after buyers were put off by "political and economic uncertainties" as Brexit looms.

It came as official figures showed annual house price growth in August slipped to a five-year low of 3.2%, with London the worst-performing region as prices fell by 0.2% year-on-year.

Crest Nicholson (Frankfurt: A1KCZN - news) said the market environment for new homes in the capital and for higher-end properties in the south of England had been tougher than anticipated.

It now expects pre-tax profits of £170-190m for the year to 31 October, below market expectations of £205m. Shares (Berlin: DI6.BE - news) fell by as much as 14% in early trading but closed 8.2% lower.

Fellow housebuilders were also hit, with Berkeley and Persimmon (Frankfurt: 882058 - news) both down by 2.7%.

Stephen Stone, Crest Nicholson's executive chairman, said: "The usual autumn pick up in sales volumes has not been evident during September and October, with many customers put off decisions to buy whilst current political and economic uncertainties persist."

The "uncertainties" are understood to refer to Brexit, with the UK and EU still yet to reach a deal with the date for Britain's departure from the bloc less than six months away.

Crest Nicholson said action to mitigate lower sales volumes had hit its profit margins, which were now set to be lower than previously expected.

The company said that in the first half of the financial year it had seen generally strong trading, though earnings were squeezed with little growth in house prices at a time when costs continued to grow.

Sales volumes reduced in July and August amid "traditional seasonal distractions" but going into autumn "in a number of locations and at higher price-points, sales have remained subdued".

Demand for homes targeted at "aspirational" buyers had "suffered from a lack of confidence among discretionary buyers, who cite economic and political uncertainty as a disincentive to transact".

Crest Nicholson said its board had asked Mr Stone to lead a new strategy which would "focus on shareholder returns by prioritising cash flow and dividends, maximising value in the land and development portfolio and improving operational efficiencies".

It added that finance director Robert Allen was to leave the company.

The profit warning comes a day after rival Bellway (Frankfurt: 869646 - news) posted a 14% rise in full-year profits and said it had a strong order book in place but added that there was a "risk to consumer confidence posed by the forthcoming exit from the EU".

Bellway had also acknowledged in Tuesday's statement that the boost to profits from years of strong house price growth was "beginning to abate".

Lender Nationwide says it expects house price growth to slow to 1% this year, down from 2.6% in 2017 and 4.5% the year before that, amid subdued economic activity and pressure on household budgets.