April 21 (Reuters) - British homebuilder Crest Nicholson said on Tuesday it was in the early stages of seeking a relaxation of its banking commitments as the housing market is under stress due to the
UK homebuilder Crest Nicholson slashes forecasts as Iran war bites, shares tumble
Crest Nicholson Faces Financial Pressure Amid Geopolitical Tensions
By Prerna Bedi
April 21 (Reuters) - Crest Nicholson cut its annual forecasts for land and home sales on Tuesday, sending the British homebuilder's shares down over 40%, as the fallout from the Iran war pushes up interest rates and further depresses sentiment in an already weak housing market.
Impact of Iran War on UK Homebuilders
Bigger British rivals including Berkeley and Vistry have already warned that the conflict will lead to higher building costs and risk keeping interest rates elevated, hurting demand and profit.
Market Sentiment and Buyer Behavior
"Buyers have become more cautious in the face of the uncertain outlook, resulting in reduced engagement in bidding processes and an increased reluctance to transact at market values," Crest said.
Profit Forecasts and Analyst Reactions
It forecast annual adjusted operating profit of between 5 million pounds and 15 million pounds ($6.8 million-$20.3 million), which analysts at JPMorgan and Jefferies said equates to between breakeven and a loss of 10 million pounds at the pretax level.
Crest in January had forecast an annual pretax profit of between 32 million and 40 million pounds, while analysts in a company compiled consensus expected 34.8 million pounds.
Shares fell as much as 44.4% to a record low of 60 pence and were 38% lower by 0915 GMT.
Funding Bargains and Debt Management
Banking Commitments and Lender Negotiations
Without giving further details Crest said it was in early talks with its lenders to relax its banking commitments, having warned in January that it may breach its interest-cover covenant as early as April in a severe downturn.
Equity and Balance Sheet Strategy
On a call with investors and analysts, Crest ruled out the need to raise further equity at the current time, while it prioritises cash and balance sheet strength.
Debt Outlook and Interest Rates
RBC Capital Markets analysts said while they don't expect lenders to withdraw funds, the company would likely have to pay higher interest rates on its debt.
Crest expects net debt to rise to between 100 million and 120 million pounds by the end of its financial year on October 31, much higher than the 15 million to 65 million pounds it previously forecast.
Sales Forecasts and Revenue Impact
Home sales volumes for the financial year are expected to be 1,400 to 1,500 units, with land sales revenue of about 40 million pounds, down from its previous forecast of 1,550 to 1,700 units and 75 million to 100 million pounds, respectively.
($1 = 0.7396 pounds)
(Reporting by Prerna Bedi in Bengaluru; Writing by Pushkala Aripaka; Editing by Mrigank Dhaniwala, Kirsten Donovan)
