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Crest Nicholson issues profit warning as Southern seasonal pick up never arrives

  • 17/10/2018
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Residential developer Crest Nicholson has issued a profit warning two weeks ahead of its annual results, which it attributed to the lack of a seasonal pick up in the Southern housing market.

Stephen Stone, executive chairman, said: “The usual Autumn pick up in sales volumes has not been evident during September and October, with many customers putting off decisions to buy whilst current political and economic uncertainties persist.

“Mindful of the current uncertain market environment, our new strategy will focus on shareholder returns by prioritising cash flow and dividends, maximising the value in our portfolio, and improving operational efficiency.”

The company now expects profit before tax for the year to 31 October 2018 to be in the range of £170m to £190m.

Robert Allen, chief financial officer, is stepping down from the board and will leave the company after a short handover period and the board has asked Stephen Stone, executive chairman to lead the new strategy and company.

The statement said the first half was characterised by strong trading volumes, but that sales
volumes reduced in July and August, as potential purchasers were subject to traditional seasonal distractions.

“The business expected activity to increase as it entered the traditionally stronger early Autumn selling season, but in a number of locations and at higher price-points, sales have remained subdued.

“Product which addresses a more aspirational market has suffered from a lack of confidence among discretionary buyers, who cite economic and political uncertainty as a disincentive to transact,” it said.

It added reservation levels at London sites have slowed significantly and transaction levels of more expensive properties in the second-hand market have also slowed making property chains more fragile.

To mitigate the drop in sales volumes, the builder is accelerating bulk sales to registered providers and private rental sector investors, selected land sales on long tail sites, and slowing build programmes to reflect current sales rates.

It said: “We are working on implementing a number of strategic initiatives to improve both the resilience of the business and our returns.”

These include offsite methods of construction (OSM) trials, closure of the London division and adding senior operational ‘resource.’

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