Crest Nicholson - From bad to worse

Wednesday, 17th October 2018 09:38 - by Rajan Dhall

Homebuilder Crest Nicholson have been struggling in recent times and the Co. have developed a new strategy to address the poor performance. Here are some of the highlight from the current report.

·      The market environment for new homes in London and at higher price points in the South of England is more difficult than previously anticipated, where sales have not picked up during the traditionally stronger early Autumn selling season

·      The Company now expects that Profit Before Tax for the year to 31st October 2018 to be in the range of £170m to £190m, subject to the timing of completion of some individually significant transactions

·      During the second half of the year, management actions to mitigate sales volume reductions underpinned revenue and receipts, but impacted margin; now expected to be lower than the previous guidance of 18%

·      Our ambition is to maintain profitability for 2019 at FY18 levels, despite market uncertainty.

·      We are committed to paying an ordinary dividend of 33p per share for FY18 and, subject to no material deterioration in current market conditions, FY19.

From the weekly chart perspective, it's clear to see we are in oversold territory. With the comments today, its hard to see how 291p will hold but the historical lows of 220p seem slightly far from reach. I think the whole sector looks like it's in trouble at the moment with higher margins and falling house prices in London. Although a break back into the channel looks unlikely I think we may have deviated too far. All in all, I think we will move lower today but it all depends on how the market takes the new strategy changes for long-term guidance.