Crest Nicholson Holdings PLC (LON:CRST) shares sank on Wednesday after the housebuilder saw its profits hit hard as the coronavirus lockdown forced the closure of building sites and put a brake on the housing market.
For the six months ended April 30, 2020, the FTSE 250 group crashed to a pre-tax loss of £51.2mln compared to a £64.4mln profit a year ago, while its revenues also plunged 52% to £240mln.
READ: House price uncertainty is big worry for housebuilders, says JPMorgan
The slump followed a 34.7% drop in completed homes in the period to 775, while forward sales dropped to £575.1mln from £636.9mln. The company also booked a £43.2mln impairment charge due to the uncertainty caused by the pandemic.
Despite the steep decline in profit and revenues, Crest said build activity on its sites had resumed on May 18, and that provided the UK’s lockdown continued to be relaxed it expected that profits in the second half of the year will be “significantly higher than the first”.
As a result, the company said it now expects adjusted pre-tax profits for the full year to be between £35-45mln, adding that it will reinstate its dividend “when appropriate”.
"Despite a difficult first half performance we have made excellent progress implementing our updated strategy. We are ahead of our own expectations in a number of our strategic priorities and that has been delivered against the backdrop of [coronavirus]”, said Crest Nicholson chief executive Peter Truscott.
“We cannot ignore the risks that [coronavirus] presents to the UK housing market even if we cannot predict with certainty what the impact of those risks will be. Therefore, we have adapted our strategy by deferring the planned opening of an additional division and targeting further reductions in overheads. Taking decisive action now will ensure Crest Nicholson is able to flourish in whatever market conditions may emerge in the future including if the market quickly returns to growth", he added.
In a note on Wednesday, analysts at Peel Hunt retained their ‘hold’ rating and 455p target price on the group, saying while they though the company’s balance sheet was “in reasonable shape”, as Crest had “entered lockdown in the weakest position of the major homebuilders” and that it will “continue to lag sector returns for some time” and it was “too early to be drawn to the business”.
The company’s shares sank 12% to 220p in mid-morning trading.