House builder in talks with lenders to relax covenants due to economic uncertainty

The house builder has revised its guidance based on the assumption that the current economic uncertainty is likely to continue for at least the remainder of its financial year, until the end of October.

It has reduced its sales volume expectations to 1,400-1,500 units, down from 1,550-1,700 units.

As a result of the higher energy costs, the FTSE 250 firm has also “built in an expectation of higher build costs in the balance of the financial year”.

The trading update continued: “The group remains confident that it is well positioned to navigate the economic uncertainty. However, as a consequence of lower expected profitability, it is in the early stages of seeking temporary banking covenant relaxation.

“Discussions with the group’s lenders have commenced and a further update will be provided in due course.”

Earlier this year, the house builder confirmed the closure of a divisional office, triggering around 50 redundancies, as it revealed plans to target the “mid-premium market”.

Martyn Clark, Crest Nicholson chief executive officer, said the firm remains committed to its strategy of becoming a “leading player in the mid-premium housing market”.

He added: “However, it is increasingly clear that the current macroeconomic uncertainty is contributing to the prospect of a more prolonged higher interest rate environment, renewed cost pressures and a deterioration in consumer confidence.

“Therefore, in the near term the right and prudent course of action is to adapt quickly to the challenges presented by the current trading environment and focus on prioritising cash generation and optimising our balance sheet position.

“We are doing what needs to be done to navigate this uncertainty to best position the business to deliver the attractive medium-term opportunity.”