Key facts
- Crest Nicholson reported a £35m pre-tax loss for the six months to April.
- The company's gross margin fell to 7% from 14%.
- Shares dropped nearly 10% to 66p, down over 50% year-to-date.
- Crest Nicholson is in ongoing talks with lenders for new debt terms, with a deadline of end-September.
- The housebuilder expects to complete fewer homes this year, between 1,400 and 1,500.
Crest Nicholson shares fell sharply after the company reported a £35 million pre-tax loss for the first half of its financial year and confirmed ongoing, yet unresolved, talks with lenders regarding its debt covenants. The housebuilder had previously delayed its results publication in anticipation of securing revised terms from creditors, but as of Thursday, no agreement had been reached.
The company stated that discussions are "well-progressed" but remain ongoing, necessitating temporary waivers from lenders to allow time for finalising a covenant amendment. Crest Nicholson now has until the end of September to secure new terms.
The financial results revealed a significant downturn, with the pre-tax loss contrasting sharply with a £9 million profit in the same period last year. The firm's gross margin also narrowed considerably, from 14% to 7%, reflecting the impact of high interest rates, increased costs, and diminished consumer confidence, exacerbated by recent geopolitical conflicts.
In response to the challenging market conditions, Crest Nicholson is implementing measures to conserve cash, including reducing land purchases, slowing development starts, and divesting non-core land assets. The company anticipates completing between 1,400 and 1,500 homes this year, a decrease from the 1,691 homes completed in the previous year. Earnings guidance has been revised to the lower end of the previously stated £5 million to £15 million forecast.
Despite the current headwinds, Crest Nicholson maintains that the fundamental drivers of the UK housing market remain robust, citing an undersupply of homes and supportive government planning reforms. The company noted a softening in customer enquiries and visitor levels since April, but pricing has generally remained resilient.
Industry peers, including FTSE 100-listed Barratt and Redrow, and FTSE 250-listed Berkeley, have publicly urged the incoming Prime Minister, Andy Burnham, to provide stronger political leadership and implement policies such as abolishing stamp duty for first-time buyers to stimulate housebuilding.