Crest Nicholson Cuts FY Guidance as Buyer Inquiries Fade and Land Market Sentiment Weakens

Key Points

• Crest Nicholson has cut full-year guidance after a slowdown in buyer inquiries and weakening land-market sentiment linked to the Middle East conflict, now targeting 1,400–1,500 home completions (down from 1,550–1,700), revised land sale revenue of ~£40m (previously £75–£100m) and a downgraded EBIT of £5–£15m.
• The group expects year-end net debt of £100m–£120m with interest costs around £15m, is in early discussions with lenders for temporary covenant relief (interest-cover of 3x is the focus), and management does not currently expect an equity raise.
• Management is prioritizing cash generation by reducing finished-plot and apartment inventory, assumes higher build-cost inflation of 4–5% (driven by materials), and plans only modest additional incentives rather than deeper discounting.

Crest Nicholson LON: CRST said it has revised its full-year guidance after seeing early signs of a slowdown in customer activity and weakening sentiment in the land market, citing rising macro uncertainty linked to the ongoing conflict in the Middle East.

Chief Executive Officer Martyn Clark told investors on a trading update call that open market reservations have “continued in line with the improved levels seen since mid-January of around 0.6,” including through the Easter period. He added that selling prices have been “in line with our expectations” and that the group has not seen “higher levels of discounting, an increase in the use of incentives or a higher level of cancellations” to date.

Early indicators soften despite steady reservations

While current reservation performance has held up, Clark said forward-looking indicators have weakened. “There has recently been a reduction in both new inquiries and visitor levels, and sales levels for the last week started to show a similar slowdown,” he said.

Asked about the scale of the decline in visitor levels, Clark said it has been “over the last three or four weeks, gradually reducing,” though he declined to quantify it. Chief Financial Officer Bill Floydd noted that comparisons with prior years are complicated by the timing of Easter.

Floydd also addressed potential asset write-down concerns given the reduced profit outlook. He said he was “not expecting any material new NRV provisions,” adding that the company keeps a close eye on sites with margins below 10% but does not expect anything significant.

Guidance cut: volumes, land sales, and profit outlook

The company reduced its expected home completions to 1,400–1,500 units, from prior guidance of 1,550–1,700 units. Crest Nicholson’s current order book for the year stands at 1,106 units, Clark said.

Clark said the company is shifting its near-term focus toward cash generation, including efforts to reduce finished plots inventory, “particularly on completed apartment schemes,” and maintaining “real discipline around work in progress across our developments.”

Land sales expectations were also cut materially. Clark said year-to-date progress has been slower than plan, with the company having completed one land sale so far. He described “a marked softening in sentiment among prospective land purchasers,” including “reduced engagement in bidding processes and an increased reluctance to transact at market values.”

Under revised assumptions, Crest Nicholson now expects land sale revenue of around £40 million, down from its prior £75 million–£100 million view. Floydd told analysts that last year the company achieved a 21% margin on land transactions and that the earlier expectation had been for a similar margin level. Now, he said, the company has completed roughly £10 million of land sales at about a 20% margin and is assuming “no margin” on the remaining £30 million of planned disposals. He said this is “a very significant part of the overall EBIT downgrade.”

Reflecting the revised assumptions, the group now expects full-year EBIT of £5 million–£15 million and interest costs of approximately £15 million, Clark said.

Costs, incentives, and apartments

Clark said the company has incorporated higher build costs for the balance of the year, citing increased energy costs tied to the Middle East conflict. He said the group’s prior assumption was “very low single digits,” but it is now assuming build cost inflation of between 4% and 5%.

On the composition of those increases, Clark said a typical cost split is roughly 40% labor and 60% materials, though it varies by region. Floydd added that the company has not seen labor increases so far and that the updated assumption is being driven by “material prices as delivered.”

On incentives and pricing, Floydd said the company has made some allowance for additional incentives “in the couple of percent type territory,” and does not believe there is reason to go higher. Clark said he does not foresee “any marked change” in incentives for the majority of properties and reiterated that cancellation rates have not changed since January.

The company also highlighted an effort to reduce apartment inventory. Floydd told analysts Crest Nicholson has “no apartment blocks to start,” but has “a couple, two, three” schemes either completed or nearing completion. He said those schemes involve about 60 units and should be finished by year-end, with a “reasonable expectation of Q3.”

Net debt and banking covenants

Crest Nicholson’s revised year-end net debt position is expected to be £100 million–£120 million. Clark said the company is in the early stages of seeking a temporary relaxation of banking covenants due to the lower profit outlook, with lender discussions underway.

Floydd detailed three covenants: tangible net worth of £500 million and gearing of 70%, both of which he said the group is “comfortably” within, and an interest cover covenant of 3x, which he said is the area of focus in discussions with lenders. Asked about the potential need for equity, Floydd said management is “comfortable and confident” that “self-help measures” mean an equity raise is not expected “at this point.”

Investec’s Aynsley Lammin asked about the higher interest cost guidance; Floydd said the increase reflects both the higher debt-related expense and an allowance for outcomes from lender discussions. He declined to provide guidance for FY27 interest costs, saying it is too early.

Fire remediation provision unchanged

Clark said ongoing work on fire remediation has not identified any need for a material change to the current provision. He added the group remains on track to meet the government target of starting 80% of affected sites by the end of July. Expected cash expenditure this financial year is now slightly lower than previously planned at £75 million–£80 million.

Clark said the company remains determined to recover proportionate costs from responsible contractors.

Closing the call, Clark said the revised expectations were “deeply frustrating,” but added that the company believes it is taking the right near-term steps to protect the business while positioning for what he described as an “attractive medium-term opportunity.”

About Crest Nicholson LON: CRST

Crest Nicholson Holdings plc engages in building residential homes in the United Kingdom. It develops and sells apartments, houses, and commercial properties. The company was founded in 1963 and is headquartered in Addlestone, the United Kingdom.

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