Crest Nicholson's share price dropped 13 per cent on early trading this morning after the housebuilder revealed that its full-year operating margin would be at the lower end of its previous forecast.
The company said that rising costs of construction would mean that operating margins for the full year were expected to be at around 18 per cent, at the bottom end of its 18-20 per cent forecast.
The company also saw it’s half-year debt more than double, up to £77.5m from £34.5m in the previous year due to its increased investment in a new Midlands division, which has acquired seven sites to date.
The company did see strong growth in revenue in the first six months of 2018, and an increase in unit completions of over 17 per cent.
Forward sales for 2018 year also look to be 11 per cent higher than the same period last year. The housebuilder said it anticipates growth in revenue to be over 15 per cent.
Patrick Bergin, the company’s chief executive said: “Flat pricing has had a negative impact on margins, but volumes in the new build housing market continue to be robust and Crest Nicholson remains well positioned to grow volumes and deliver the homes that the UK needs, while continuing to focus on delivering strong returns for shareholders."
The group’s average selling prices increased by five per cent to £439k, however, the company said it expected this to represent a peak level for the business.
Mike van Dulken, head of research at Accendo Markets said: "Crest Nicholson has dealt a blow to UK Housebuilders this morning with a profits warnings attributable to flat pricing and higher building costs.
"With half the year still to go, the risk is that, even downwardly revised guidance proves wishful thinking, should the second half prove even tougher for both pricing and costs. Especially with official property price growth data suggesting continued softening of the market amid uncertainty about Brexit, weak UK growth/inflation and muddled messages on interest rates from the Bank of England."