Crest Nicholson (CRST) Shares Plunged 14.3% on a Trading Update

The Crest Nicholson Holdings PLC (LON: CRST) share price plunged 14.3% after issuing a profit warning regarding its current fiscal year that ends on 31 October 2023. The company was experiencing a challenging trading environment driven by persistently high inflation and rising interest rates.

The company noted that trading conditions for the housing market had worsened during the summer months. However, pricing remained resilient, although demand had weakened as potential home buyers were deterred by the economic uncertainty in the UK and globally.

Crest Nicholson lowered its adjusted profit target for the year to £50.0 million due to the factors outlined in this article. Investors reacted negatively to the profit warning and lower adjusted profit target, as evidenced by the company’s share price decline. 

The company attributed the challenging operating environment to the end of the government’s Help to Buy, which had cushioned first-time homebuyers in the past. Buyers now have to contend with higher mortgage borrowing costs, especially those with low equity levels and those looking to upgrade. 

Crest Nicholson noted that transaction levels in recent weeks had weakened across the entire industry. However, the company pointed out that headline inflation is starting to fall even though core and wage inflation remains high. 

The home builder noted that it expects the current situation to remain the same by the end of October when its financial year ends and painted a bleak picture of its future. Due to the challenging market environment, the company is negotiating several bulk deals, which should support volume delivery in future years. 

The firm noted that it had expected a SPOW rate of 0.50 for the second half and the seven weeks to 18 August 2023. However, the figure was 0.25, representing a progressively deteriorating trend.

Crest Nicholson also updated its legacy projects, which incurred a £4.0 million cost movement in the second half at Brightwells Yard, Farnham. This site is a highly complex urban regeneration and mixed-use development scheme.

The company’s management is also taking measures to act proactively in the middle of the current conditions. The Group added several high-quality sites to the land portfolio in the first half. 

Crest Nicholson (CRST) share price. 

The Crest Nicholson share price has fallen 14.27% to trade at 165.85p, from Friday’s closing price of 193.45p.