Overview
Crest Nicholson has scaled back expectations after flagging softer demand signals and pressure on margins in an unscheduled trading update. The housebuilder said reservation rates have so far held up in the wake of the Middle East war, but recorded early weakness in visitor and enquiry volumes alongside a sharp deterioration in land market prospects.
Analyst response
In response to the trading notice, Deutsche Bank lowered its recommendation on Crest Nicholson from "buy" to "hold" on Wednesday and cut its target price to 79p from 228p. The bank's revised valuation equates to approximately 0.3x price to net tangible assets (P/NTA). The stock last closed at 70p.
Revised company guidance
Management has reduced its FY26 volume forecast by around 11% and halved its expected land sale revenue, trimming that line by about 50%. On margins, guidance now points to EBIT in the 1-3% range for FY26, a notable step down from 6% in FY25. The group also indicated it expects to be loss-making at the pre-tax level in the period and is seeking a temporary relaxation of its banking covenants.
Commentary from Deutsche Bank
Deutsche Bank analyst Chris Millington noted that "whilst reservation rates have so far been largely unaffected by the Middle East war, they are starting to see weakness emerge in visitor/enquiry levels, and prospects in the land market have deteriorated sharply." Millington added that the updated assumptions reflect "ongoing trading uncertainty," and that returns are expected to remain below the companys cost of equity in the near term.
Financial implications
The combination of softer demand indicators, weaker land market prospects and the cut in volume and land-sale expectations underpin the bank's decision to reduce both its rating and its target price. With guidance pointing to substantially lower margins and an anticipated pre-tax loss, Crest Nicholson has also sought temporary covenant relief from its lenders as it navigates the near-term trading environment.
Note: The article reflects the companys own trading update and the subsequent analyst reaction; it does not add information beyond those statements.