Shares in housebuilder Crest Nicholson (LON:CRST) hit a lifetime low after the latest cut to earnings guidance. The news also triggered selling in the shares of larger rivals Barratt Redrow (LON:BTRW) and Taylor Wimpey (LON:TW.).
Another cut to earnings guidance
In a trading update ahead of its financial year-end next month, Crest Nicholson lowered its completions target and EBIT guidance. The firm put the reduction down to weaker open-market demand, continued competitive pricing and continued build cost inflation.
Completions are now expected to be between 1,350 and 1,400 against a previous target of 1,400 to 1,500 units. Meanwhile, EBIT is expected to swing to a £10 million loss compared with a previous target of £5 million to £10 million of profit.
The company said market conditions were ‘more subdued than expected’ over the summer. Affordability constraints and competitive pricing continued to weigh on open market sales rates, the firm added.
In the last six weeks, Crest Nicholson’s open market sales rate was just 0.35 units per outlet per week. This was significantly lower than the H1 2026 sales rate of 0.48 units and the H2 2025 rate of 0.55 units.
Lender update
CEO Martyn Clark said the firm had made ‘tangible progress’ on actions within its control despite the difficult trading backdrop. The cash optimisation programme made good progress, and along with asset sales means year-end net debt will be below previous guidance.
The group said it was in ‘constructive discussions’ with its lenders to amend its covenants so it had an appropriate level of funding and liquidity going forwards. However, it admitted there was some ‘slippage’ in the current timetable and it would provide a further update in due course.
We’re sorry to say we aren’t surprised to see Crest lowering guidance again. The housing market remains incredibly tough, and smaller players are suffering the most.
Until interest rates – and by extension mortgage rates – come down, lack of affordability will continue to be an issue in the open market. All Crest and the other housebuilders can do in the meantime is restrict work in progress to conserve cash.
Last week’s warning from build-to-rent developer Watkin Jones (LON:WJG) suggested institutional buyers were sitting on their hands. Today, Crest revealed buyers were pushing it to cut prices on bulk transactions.
We must sound like a broken record but we don’t see the point in trying to call the turn in the homebuilders. The companies don’t know when it’s coming, nor do the portals, nor the lenders.
Contrast that with the booming infrastructure sector, where today Galliford Try (LON:GFRD) won a juicy £110 million contract. Ironically, Galliford sold its housebuilding business to Vistry (LON:VTY) in January 2020, right at the top of the market. That has to go down as one of the best business decisions in UK corporate history.
