Crest Nicholson now expects higher debt as Iran chaos continues to drive up prices and quell demand
Another major homebuilder has sounded a dire warning on the UK’s construction outlook, with Crest Nicholson indicating it’s expecting its interest costs and debt to jump amid ongoing global and national economic turmoil.
Crest Nicholson is forecasting net debt to climb as high as £120 million for this financial year, while interest costs are expected to soar to £15 million compared with pre-interest and tax earnings of just £5 million to £15 million.
The builder is also expecting a drop in land sales to £40 million for the year to October – a steep drop from its prior prediction of £75 million to £100 million.
A slower pace of buyer activity, according to chief executive Martyn Clark, is due mainly to “a more prolonged higher-interest-rate environment, renewed cost pressures and a deterioration in consumer confidence.” Sales volumes for the year are now predicted to total between 1,400 and 1,500, down from previous expectations of 1,700.
The announcement, which sees Crest Nicholson become the latest homebuilder to slash forecasts amid supply chain snarls and rising costs as the US-Iran war continues, saw shares slide by more than 40% on Tuesday morning as traders gave a firm thumbs-down to the company.
Other major builders including Barratt Redrow, Vistry Group, Bellway, and Taylor Wimpey have also seen steep recent share price drops.
Last week, Barratt Redrow announced it was reining in land buying plans due in part to the sudden energy price uptick caused by the Iran war, although the company said trading remained steady in the third quarter and that it was still on course to meet market expectations for the year ending in June.
Crest Nicholson has reportedly now started early discussions with lenders to temporarily ease its banking covenants and shore up cash.
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