British housebuilder Crest Nicholson issues profit warning as sales fall

It reported adjusted pre-tax profit of £2.6m for the six months ended April 30, compared with £21m a year ago.

Homebuilder Crest Nicholson warned that its annual profit would fall at least by a third and reported an 88% slump in half-year earnings, as the British housing sector faced slowing demand, sending its shares sharply lower in early trade.

Shares in the company, which have lagged the FTSE All-Share index over the past year, were trading about 12% lower at 212.40 pence. Sticky inflation has clouded the UK's monetary policy easing outlook, tempering expectations of a swift recovery in the housing market.

The company, which also cut its dividend payout, said trading momentum had "softened slightly" since Easter due to a delay in Bank of England's rate cuts, while the imminent general election in the UK was creating "short-term uncertainty".

Crest Nicholson had forecast annual adjusted pre-tax profit in the range of £22m (€26m) to £29m hurt by working through lower-margin sites and hit by a one-off cost. Analysts on average had expected a profit of £39m for the current financial year, according to LSEG data.

"Clearly, full year PBT is being guided lower on a softer market and the extra costs, but the valuation discount looks too wide assuming the risk of further provisions is now materially lower," analysts at Investec said.

The company, which has struggled with its operational problems and low operating margins, said exceptional charges increased to £30.3m from the previously disclosed £15m.

Crest cut its interim dividend pay to 1 pence per share from 5.5 pence last year, and scaled down the top end of its annual home-build forecast range by 1,000 units.

It reported adjusted pre-tax profit of £2.6m for the six months ended April 30, compared with £21m a year ago.

Meanwhile, other British homebuilders expect more headwinds this year despite an improving inflationary environment and stabilising interest rates, outlooks from Henry Boot and Watkin Jones from earlier this year showed.

Henry Boot expects profitability for 2024 to be significantly below current market consensus of £37m as it anticipates another difficult year ahead, it said in a statement.

“The group is well positioned to benefit when our end markets recover, however we expect there will be a lag in performance due to the time it takes for projects and sales to complete,” the company said.

The homebuilder expects sales rates at its premium division, Stonebridge Homes, to continue improving, though it’s conservative with estimates of completions for 2024 and predicts that a recovery in residential sales will be more weighted to 2025.

- Reuters and Bloomberg