Shares in housebuilder Crest Nicholson (CRST) collapsed 35% after the firm lowered its outlook for FY26 revenue and earnings. Today’s update comes less than a month after the company issued positive guidance at its AGM on 25 March.
The firm blamed soft land prices, cost pressures, high interest rates and weak consumer confidence due to the Iran conflict.
Eating its words
The group, which builds mid-premium homes across the Midlands and Southern England, issued a positive trading statement four weeks ago. It hailed a ‘sustained improvement’ in the sales rate since mid-January helped by ‘encouraging levels of customer enquiries’.
Moreover, it added it had ‘yet to see any material impact from the wider macroeconomic shock of recent weeks’. It also reaffiremd its financial guidance for the year to October supported by improving open market sales.
Today, in contrast, the firm said there had been a reduction in new enquiries and visitor levels to its sites. It also flagged a ‘marked softening in sentiment’ among land purchasers and ‘an increased reluctance to transact at market values’.
In response, the firm has lowered its FY land sales target to £40 million from £75 million to £100 million. It has also cut its completions target to 1,500 units from 1,550 to 1,700 previously, while the order book stands at 1,106 units.
In talks with lenders
Adding to this a higher level of build costs, FY EBIT is now seen between £5 million and £15 million. That compares with around £35 million last year and previous guidance of £32 million to £40 million.
Meanwhile, interest costs will be above estimates and net debt will be £100 million to £120 million against previous guidance of £15 million to £65 million.
The group insisted it was ‘well positioned to navigate the economic uncertainty’. However, due to lower expected profitability it is ‘in the early stages of seeking temporary banking covenant relaxation’.
Just as Crest Nicholson was emerging from its restructuring and talking up the outlook, along comes the Iran war. As well as the impact on consumer confidence and houseing sales, it appears the land market is softening too.
Like Berkeley Group (BKG) and Barrratt Redrow (BTRW), all the firm can do is cut its cloth to suit the market. That means fewer completions, a lower level of land sales and doing what it can to conserve cash.
However, we sense there will a huge amount of frustration among shareholders that management apparently didn’t see this coming. Less than a month ago the company said it saw ‘no material impact’ from the Middle East and now it has slashed its forecasts.
The fact it is in talks with lenders about relaxing its banking covenants isn’t very encouraging either. FY net debt could be almost double the previous forecast, which wasn’t in the script.
Read the press release here: https://corporate.crestnicholson.com/investors/
