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Countryside unnerves investors with warning over cautious house buyers

Jack Torrance
Homebuilder Countryside saw its shares drop despite an upbeat trading update  - © 2015 Bloomberg Finance LP.

The boss of property developer Countryside played down concerns about the company’s prospects after a warning of weaker confidence among some home buyers knocked a tenth off its market value.

In an otherwise upbeat full-year trading update the FTSE 250 company said it had seen signs of “a more subdued tone” among so-called discretionary buyers - those who already own a home - after a slowdown in the second-hand market.  

While most of its private home sales are to first-time buyers and the company also has a large affordable housing division that sells to local councils, the warning came as a red flag to investors, who sent its shares down as much as 11pc in morning trade.

Ian Sutcliffe, chief executive, said he was “perplexed” by the reaction, adding: “We think we had a really great set of results.”

He added: “The second-hand market has clearly been slowing, so where people are trading up or trading down, it’s made that process slower and in some cases made buyers more cautious.

“But I don’t want to oversell that - I just want to make the point that if the wider economy does get into difficulties over the next six or 12 months, that area of the business will be impacted like everybody else.”

Countryside built 4,295 homes in the 12 months to September, up 27pc on the previous year, and it ended the year with net cash of £45m, well ahead of management’s expectations.

While forward private sales were down 11pc at £215m, the value of its overall order book soared 40pc compared to last year to £900m as it picked up more work in its partnerships division.

Its average sales price in the year fell 7pc to £402,000 but rose 2pc on an underlying basis.

Mr Sutcliffe said the discrepancy was due to the company’s acquisition of Leicester-based competitor Westleigh and a new office in the West Midlands, which meant that pricier homes in the south accounted for a smaller proportion of those sold.

The warning prompted analysts at Peel Hunt to cut their full-year profit forecast by 10pc to £215m.

But they added: “We continue to think there is good value in Countryside and expect the group to grow comfortably faster than the peer group over the medium term”.