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Crest Nicholson tumbles on profit warning
31st Oct 2019 09:18
(Sharecast News) - Housebuilder Crest Nicholson was under the cosh on Thursday as it warned over full-year profits, pointing to a "volatile" sales environment in some of its regional businesses amid Brexit uncertainty.
The company said in a trading update that it now expects pre-tax profit for FY2019 to be between £120m and £130m, down from £176m last year. Crest said it had experienced a volatile sales environment in the second half, driven largely by uncertainty about Brexit and the economic outlook in the UK. This was felt most acutely in some of the London legacy sites.
It also expects to take a £17m charge this year to comply with the government's guidance in respect of combustible materials following the Grenfell Tower disaster.
"Whilst the political and economic backdrop remains uncertain, Crest Nicholson expects consumer confidence and open market sales rates to continue to be impacted," it said.
"Given this trading outlook, coupled with a lower level of land sale contribution in the year, the company anticipates FY2020 profit before tax excluding exceptional charges to be in the range of £110m-£120m. Thereafter it expects strong profit growth in FY2021 and beyond as the updated strategy starts to take full effect."
The warning came alongside an update on the strategic review launched by new chief executive officer peter Truscott.
He said: "The company's high-quality land portfolio with a strong South-East presence offers significant opportunity to generate value for shareholders and we have identified a number of opportunities that will enable us to strengthen shareholder returns over the medium term.
"We are taking decisive action to ensure the business moves further and faster to make the most of the opportunities in front of it. While current market conditions remain uncertain, the prospects for Crest Nicholson over the medium term remain highly attractive."
At 0915 GMT, the shares were down 8.1% at 376.40p.
Russ Mould, investment director at AJ Bell, said the fact that new boss Peter Truscott has laid out numerous strategic changes in less than two months of joining the business would suggest the housebuilder isn't firing on all cylinders.
"Profit warnings often come in the early stages of a new chief executive's tenure if they have done a review of the business and found unsatisfactory practices. You often have to wait up to six months for a review to be completed, so to have a profit warning from Crest Nicholson only seven weeks after Mr Truscott joined would imply that the strategic challenges were glaringly obvious and needed addressing immediately.
"Admittedly part of the profit warning also relates to weak market conditions and a large charge linked to checking and replacing combustible cladding on its developments. The former is perhaps unsurprising given the gloomy property market data this year.
"Analysts were forecasting £153 million pre-tax profit for the current financial year so the new guidance of £120 million to £130 million is a big step back for the business."
The company said in a trading update that it now expects pre-tax profit for FY2019 to be between £120m and £130m, down from £176m last year. Crest said it had experienced a volatile sales environment in the second half, driven largely by uncertainty about Brexit and the economic outlook in the UK. This was felt most acutely in some of the London legacy sites.
It also expects to take a £17m charge this year to comply with the government's guidance in respect of combustible materials following the Grenfell Tower disaster.
"Whilst the political and economic backdrop remains uncertain, Crest Nicholson expects consumer confidence and open market sales rates to continue to be impacted," it said.
"Given this trading outlook, coupled with a lower level of land sale contribution in the year, the company anticipates FY2020 profit before tax excluding exceptional charges to be in the range of £110m-£120m. Thereafter it expects strong profit growth in FY2021 and beyond as the updated strategy starts to take full effect."
The warning came alongside an update on the strategic review launched by new chief executive officer peter Truscott.
He said: "The company's high-quality land portfolio with a strong South-East presence offers significant opportunity to generate value for shareholders and we have identified a number of opportunities that will enable us to strengthen shareholder returns over the medium term.
"We are taking decisive action to ensure the business moves further and faster to make the most of the opportunities in front of it. While current market conditions remain uncertain, the prospects for Crest Nicholson over the medium term remain highly attractive."
At 0915 GMT, the shares were down 8.1% at 376.40p.
Russ Mould, investment director at AJ Bell, said the fact that new boss Peter Truscott has laid out numerous strategic changes in less than two months of joining the business would suggest the housebuilder isn't firing on all cylinders.
"Profit warnings often come in the early stages of a new chief executive's tenure if they have done a review of the business and found unsatisfactory practices. You often have to wait up to six months for a review to be completed, so to have a profit warning from Crest Nicholson only seven weeks after Mr Truscott joined would imply that the strategic challenges were glaringly obvious and needed addressing immediately.
"Admittedly part of the profit warning also relates to weak market conditions and a large charge linked to checking and replacing combustible cladding on its developments. The former is perhaps unsurprising given the gloomy property market data this year.
"Analysts were forecasting £153 million pre-tax profit for the current financial year so the new guidance of £120 million to £130 million is a big step back for the business."