Crest Nicholson has lowered its housebuilding and earnings targets as crunch negotiations with its lenders continue to drag on.

The London-listed housebuilder now expects to build up to 1,400 homes this year, down from earlier forecasts of as many as 1,500. It also expects to post an earnings loss of £10m, having previously guided to a profit of between £5m and £10m.

In an update to investors on Thursday, the company's board said the housing market has been "more subdued than expected," with rivals' use of competitive pricing slowing its sales.

Rising building costs and higher mortgage rates caused by the Iran war have forced many of the UK's largest listed housebuilders to slow landbuying and warn on profits. Crest Nicholson, one of the smaller FTSE-listed players, has been among the hardest hit as thinner margins leave less cushion against a downturn.

Crest Nicholson has been locked in emergency talks with its lenders for months as it seeks permission to loosen the terms of its debt. Covenant amendments of this kind typically require lenders to agree to relax borrowing limits tied to measures such as earnings or debt levels, and prolonged negotiations can signal the difficulty of bridging those terms. The housebuilder delayed publishing its results in a bid to push those negotiations over the line, but ultimately posted a £35m loss in July while admitting the talks had still not concluded.

On Thursday, Crest Nicholson said the discussions remain ongoing and are now expected to take even longer, meaning investors will be watching the promised further market update for details of the amended terms and the group's funding position.

"The group remains in constructive discussions with its lenders to amend its covenants and ensure that it has an appropriate level of funding and liquidity going forwards," the board said. "Although the group now anticipates some slippage in the current timetable and will provide a further market update in due course."

Housebuilder shifts to premium homes

Martyn Clark, the housebuilder's chief executive, said the group is making "tangible" progress, though he conceded that "the trading backdrop has remained difficult through the summer".

Crest Nicholson is ensuring "tighter control" of its costs and is eyeing a return to the mid-premium segment of the housing market in a bid to secure more predictable sales rates. The move marks a strategic repositioning for a group that has historically operated in the southern England mid-market, where buyers have been particularly sensitive to mortgage costs.

"Although the timing of a broader market recovery remains uncertain, the Group is taking the right actions to protect liquidity and improve operational execution, while positioning the business for recovery when market conditions normalise," Clark said.

The housebuilder said it managed to reduce its debt by about £30m by selling off additional land in the first half of the year, and expects to end the year with net debt of between £70m and £90m.