Crest Nicholson warns on profit, shares crumble

Crest Nicholson shares crumbled on Thursday after the group warned on profits and cut its dividend following a poor period of trading.

Crest Nicholson delivered a gloomy set of interim results, slashing its profit outlook for fiscal 2024 and taking a hefty one-off charge related to completed site costs. Digging into the number, it’s clear why investors are disappointed.

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The homebuilder saw revenue slump 9% to £257.5 million in the six months ended April 30, as home completions fell 12% to 788 units. The average private selling price remained stable year-over-year.

Crest Nicholson shares were down 11% at the time of writing.

A review of completed site costs prompted a one-off £31.4m charge, higher than the £15m previously estimated. This exceptional charge, along with lower volumes and a higher mix of low-margin properties, caused adjusted operating profit to plunge 72% to £6.2m.

As a result, Crest Nicholson now expects full-year adjusted pre-tax profit of just £22-£29m, down from previous expectations. The company cited mortgage rate volatility and uncertainty ahead of the imminent general election as headwinds.

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The disappointing results translated to a statutory loss after tax of £23.4m, compared to a £21.1m profit a year ago. The interim dividend was slashed to 1p from 5.5p

“Investors may no longer be riding the crest of a wave this morning after the housebuilder issued a profit warning and slashed its forecast by a third,” said Adam Vettese, analyst at investment platform eToro.

“The shares had been up over 30% since the end of April but with this morning’s update also including a dividend cut, the outlook will have notably differed.”

“Inflation has been the bane of the housebuilding sector for sometime and although easing up, there is still significant pressure on the firm to keep costs under control. There is also the added uncertainty of the upcoming general election next month and what implications this could have for the firm and builders in general. Homebuyers may also be seeing the mortgage market and holding off for a rate cut before making a commitment. Crest Nicholson will hope that these factors are alleviated and the firm can get back on track in H2.”

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