Crest Nicholson Halts Profit Guidance Amid First-Half Loss and Market Downturn
The struggling housebuilder is in talks with lenders for covenant relief as it faces reduced completions and a near-doubled net debt.
Crest Nicholson has significantly lowered its profit expectations for the year after reporting a loss for the first half of its fiscal year. The housebuilder's delayed financial results revealed an operating loss of £26.2 million, a stark contrast to the £18.8 million profit recorded in the same period last year. This downturn is attributed to a slowdown in the housing market, with the company flagging lower completion numbers, sluggish demand, and increased provisions.
The company has sought to mitigate the impact by requesting its creditors to relax its banking commitments. While Crest Nicholson stated that these discussions are "well-progressed" and lenders "remain supportive," new terms have not yet been secured. Temporary waivers have been agreed to allow time for the documentation and completion of a covenant amendment.
In the six months leading up to April 30, Crest Nicholson completed 584 homes, a 20% decrease from the previous year. The company now anticipates completing between 1,400 and 1,500 homes this year, down from 1,691 in the prior year. Revenue for the period fell by 21% to £197.6 million, compared to £259.4 million a year prior. Concurrently, net debt nearly doubled to £141.8 million by the end of the reporting period, up from £71.5 million at the same point last year.
Crest Nicholson's shares experienced a significant drop, falling 8.84% or 6.50p to 67.00p on Thursday. Over the past year, the company's stock value has declined by more than 63%.
Martyn Clark, chief executive of Crest Nicholson, acknowledged the challenging market conditions and acknowledged that the financial performance in the first half was below the prior year. He highlighted that the Group has taken "decisive actions to preserve liquidity, reduce capital intensity and strengthen operational discipline."
Analysts at Peel Hunt noted that the company has faced difficulties from both macroeconomic and microeconomic perspectives in recent years. They suggested that while the pace of macro improvement remains debated, there are clear indications that the business is in a stronger position following operational enhancements.