17th Oct 2018 08:57
LONDON (Alliance News) - Crest Nicholson Holdings PLC on Wednesday said Chief Financial Officer Robert Allen will step down after a short handover period as profit fell significantly in the company's current financial year.
While Crest Nicholson is recruiting a replacement, Chief Executive Officer Patrick Bergin will take on the responsibilities of the finance function.
The housebuilder said it now expects pretax profit for the year to the end of October to come in between GBP170 million to GBP190 million. In the prior year Crest Nicholson posted pretax profit of GBP207.0 million.
In response to the profit warning, broker Liberum cut Crest Nicholson to Hold from Buy, slashing its price target to 331p from 528p. Shares in Crest Nicholson were down 4.2% early on Wednesday at 309.60 pence each, among the worst performers in the FTSE 250.
The company explained that the market environment for new homes in London as well as for higher-end properties in the south of England were more difficult than previously expected, amid the UK's impending exit from the European Union.
Moreover, sales have not picked up during the traditionally stronger early Autumn selling season, after volumes reduced in July and August, Crest added.
"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," said Executive Chairman Stephen Stone.
The company said its reservation levels at London sites have slowed significantly, while it also experienced some downward pressure on pricing in areas where affordability among buyers is most stretched.
In addition, Crest Nicholson said its margin was hurt by sales volume reductions and it now expects it to be lower than 18% guided earlier.
Looking ahead, the company introduced a new strategy, which will focus on shareholder returns. Crest Nicholson aims to pay a dividend of 33p for its financial 2018, unchanged year-on-year, and generate a cash reserve.
The housebuilder also said it intends to pause its growth ambitions to align with current market conditions, slowing down build rates and reducing land expenditure. It intends to maintain profitability in financial 2019 at financial 2018 levels, despite market uncertainty.
"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," added Stone.
In comparison, on Tuesday, FTSE 250-listed peer Bellway hiked its total payout by 17% after profit increased in its recently ended financial year to the end of July. Bellway also reported it sold a record number of houses at a higher price.
While Crest Nicholson focuses on London and the South of England, Bellway said its success was helped by geographical spread, as it now operates across nineteen regions in the UK.
Bellway said on Tuesday that London "has become a less substantial component of the business compared to several years ago", due to slower trading conditions and fewer compelling land opportunities.
Related Shares:
Crest NicholsonBellway