Shares in Crest Nicholson tumbled after the housebuilder said flat property prices and higher costs are putting the squeeze on margins.
The group said in a trading update covering the six months to April that it is experiencing a “generally flat pricing against a backdrop of continuing build cost inflation at 3-4%”.
This will result in operating margins for the full year to come in at around 18%, at the bottom end of the 18-20% guided range and below last year’s 20.3%.
Shares collapsed over 12% following the news.
As part of measures to protect margins, Crest said that it will continue to address its cost base and the “overall efficiency of its operations”.
Despite average selling prices growing 5% to £439,000 in the period, this is expected to represent a “peak level for the business”, the firm added.
“Whilst most of our sales outlets have been performing well, sales at higher price points have proved to be more difficult to achieve.
“This in part reflects the greater interdependency of higher-value sales with transactions in the second-hand market, where activity has been more subdued and property chains have been taking longer to complete,” the firm said.
Earlier this year, Crest reduced its exposure to Central London, where property sales have seen a marked slowdown.
It is instead focusing on land in “more affordable outer zones”.
The trading update also showed that forward sales for the full year are 11% ahead of the same period last year.
In the six-month period, forward sales increased 6.3% to £441.7 million.