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Crest Nicholson profits fall but shares gain as it maintains guidance

Last updated: 13:25 11 Jun 2019 BST, First published: 09:45 11 Jun 2019 BST

Crest
Crest Nicholson maintained its interim dividend at 11.2p per share

Crest Nicholson Holdings PLC (LON:CRST) reported an 11% decline in first-half profit but shares edged higher as the housebuilder said it still expects full-year earnings to meet analysts’ expectations.

Pre-tax profit in the six months to April 30 came to £64.4mln, compared to £72.0mln a year ago, as the shift away from London’s private sales market dragged on margins.

READ: Crest Nicholson maintains full-year guidance after 'resilient' first-half

Following a slowdown in London and the south east, the group been focusing more on partnerships and joint ventures. This has removed risk from the balance sheet by ensuring that a number of homes are sold before being completed but has come at the expense of some profit on each sale.

Crest now sells about 45% of its homes before completion through partnerships with housing associations and operators of private rental accommodation.

The new strategy helped revenue grow by 7% in the first half to £501.9mln and led to a 15% rise in forward sales to £625.2mln. However, operating margins decreased by 270 basis points to 14.1%.

Dividend and full-year guidance maintained

Crest maintained its interim dividend at 11.2p per share. The group said it remains “confident in the prospects for the rest of the year and in achieving earnings in line with consensus”.

“We enter the second half of the year with encouraging forward sales, a growing outlet base and an increased proportion of homes for sale at more affordable price points,” said interim chief executive Chris Tinker.

In March, Crest poached the chief executive of Galliford Try, Peter Truscott, to take over as boss in September following the departure of Patrick Bergin. In the interim, Tinker, who is chairman of major projects and strategic partnerships, is serving as chief executive.

Fruits of revised strategy

In a note to clients, analysts at ‘house’ broker Liberum Capital commented: “Crest Nicholson is starting to see the fruits of its revised strategy more quickly than we or management originally expected.”

They added: “We leave our estimates unchanged and still see good upside to our unchanged target price of 405p. We see the shares underpinned by the 350p Dec19E NAV and a 33p dividend.

“The shares could re-rate from current levels if the new CEO is able to set out and deliver margin improvement, or sales rates improve in the South East if UK political risks reduce.”

In afternoon trading, Crest Nicholson shares were 0.3% to 358.80p.

 -- Adds analyst comment, updates share price --

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