Crest Nicholson shares fall on profit warning
British homebuilder Crest Nicholson cut its profit outlook once more as costs and an exceptional charge weighed on its bottom line. IGTV's Angeline Ong looks at the share impact and the implications for the industry.
(Video summary)
UK housing market struggles: Crest Nicholson forecasts lower profits
British housebuilder Crest Nicholson recently experienced a decline in its shares, dropping by 4.2%. This drop occurred after the company reduced its annual profit forecast for the third time in the past six months.
Crest Nicholson attributed this downward revision to higher costs associated with older properties and a significant legal charge of £13 million. It is worth noting that this decline is part of a wider trend affecting the UK housing market.
Due to the Bank of England's efforts to tackle inflation and a cost of living crisis, mortgage rates have remained high. As a result, other housebuilders, such as Taylor Wimpey and Barrett Developments, have also been impacted to varying degrees. Taylor Wimpey saw a marginal increase of one-third of a percent, while Barrett Developments' performance remained relatively stable.
The revised outlook provided by Crest Nicholson indicates potential challenges ahead for the UK housing market. However, there are signs that things may improve as the cost of living crisis eases and inflation begins to decrease. There is an expectation that if the Federal Reserve lowers interest rates, the Bank of England will follow suit.
It's worth mentioning that the Bank of England has maintained comparatively higher interest rates for a longer duration compared to other central banks. Until investors and consumers regain more confidence in the UK economy, the growth prospects for housebuilders are limited.
At present, Persimmon and Taylor Wimpey retain a cautiously optimistic stance about the near-term future. However, they share the same cautious outlook as Crest Nicholson for the remainder of the year.
Cost of living crisis
Overall, Crest Nicholson's shares have declined due to concerns about its future profitability. These concerns are rooted in higher costs and a substantial legal charge. The UK housing market as a whole is facing challenges caused by high mortgage rates and a cost of living crisis. Other housebuilders have also experienced difficulties, but there are hopes that the situation may improve as inflation decreases.
For now, the outlook for the UK economy remains uncertain, and housebuilders are unlikely to experience significant growth until both investors and consumers regain confidence. Despite some cautious optimism from Persimmon and Taylor Wimpey for the near-term, the rest of the year is expected to be challenging for the industry.
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