Crest Nicholson warns on profit

Shares in Crest Nicholson tumbled by 8% this morning after the housebuilder warned pre-tax profit for the current year would be down by up to 22%.

The housebuilder said its pre-tax profit for the 2018/19 financial year was expected to be between £120m and £130m, versus previous expectations of £153m, as it bore the brunt of tough trading conditions and write downs on a number of developments in London.

The second half of 2019 had seen what it called a “volatile sales environment” in some of its regional businesses, “driven largely by ongoing customer uncertainty relating to Brexit and the economic outlook in the UK”.

The group said consumer confidence was likely to remain subdued next year as well, when it estimated pre-tax profit would be between £110m and £120m, against previous consensus forecasts of £154m.

Crest Nicholson said it would respond to the downturn in profitability by slash overhead and sales-related costs and take what it called “a more selective approach to land sales going forward”.

Sales would only come from sites where it had enough outlets already in place, the firm said.

And it wanted to increase the number of sales outlets, as well as developing more mixed-tenure schemes.

The shifts followed an extensive business review, led by new chief executive Peter Truscott, who joined the firm from Galliford Try last month.

Truscott said: “We are taking decisive action to ensure the business moves further and faster to make the most of the opportunities in front of it.”

In June Crest Nicholson had said a dip in its first half operating margin had been the trade-off around its strategy to create “certainty” in the business by reducing its forward sales risk.

The housebuilder’s operating margin fell to 14.1% in the six months to 30 April 2019, down from 16.8% in the same period last year.

Crest Nicholson’s shares were trading at 378p, down by 31p.

The firm is due to unveils its results for the year to 31 October on 28 January next year.