Crest Nicholson warns of lower profits for next 2 years

Crest Nicholson, the housebuilder focused on London and the south-east, warned of lower than expected profits for the next two years after Brexit uncertainty hit sales.

The FTSE 250 housebuilder predicted that profit before tax would fall to £120m-£130m for the 2019 financial year and to £110m-£120m the year after, about 20 per cent below analysts’ consensus forecasts, according to Jefferies.

Crest Nicholson’s share price fell more than 8 per cent to 375p in early morning trading on Thursday, pushing prices close to year-to-date lows.

Duncan Cooper, chief financial officer, said in an interview that the company had suffered from the uncertainty surrounding Brexit in the run-up to the previous deadline for leaving the EU of October 31.

“We've seen a fairly uncertain environment over the course of the summer, with fears over no deal,” he said. “It’s got us to a point where we took a decision where we had to communicate to the market a new set of numbers.”

Crest Nicholson said a “volatile sales environment” had been “felt most acutely in some of the legacy London sites”. It revealed it would write down the value of its developments in London by £10m.

The company is also targeting cost-reduction initiatives, although it declined to say whether these would involve job cuts. A full update and annual results are scheduled for January.

The group expected a return to “strong profit growth” from the 2021 financial year.

Thursday’s statement followed the appointment of a new leadership team, including Peter Truscott, chief executive, who joined last September from Galliford Try, where he was at the helm for over three years.

“We are taking decisive action to ensure the business moves further and faster to make the most of the opportunities in front of it,” said Mr Truscott on Thursday. “While current market conditions remain uncertain, the prospects for Crest Nicholson over the medium term remain highly attractive.”

Market observers said they expected further profit warnings, especially among midsized companies more exposed to the weaker south-east and London markets.

Separately on Thursday, estate agent Foxtons said its sales in London fell 15 per cent in the third quarter on an overall revenue decrease of 7 per cent, highlighting concerns surrounding the downturn in the capital. Foxtons said it believed its sales performance was “resilient” given the current backdrop. Its shares lost around 2 per cent.

The housebuilding sector is bracing for a triple whammy of factors, including Brexit, that will test their finances. However, analysts have agreed that balance sheets are now healthier than they were before the downturn 10 years ago.

Crest Nicholson recorded an exceptional charge of £17m relating to post-Grenfell fire compliance measures issued by the government. It said it would pay a dividend of 33p a share for the 2020 financial year unless trading conditions worsened significantly.