Crest Nicholson PLC’s (LON:CRST) full-year profit before tax came in at the bottom of the previously guided range as the number of completed homes declining 4% and average selling prices down 2%.
The housebuilder said trading in early 2020 has been “encouraging”, with vague talk of increased visits and higher website traffic accompanied by no hard numbers apart from a reiteration of guidance for adjusted profit before tax of £110-120mln for 2020.
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Adjusted PBT for 2019 fell 28% to £121.1mln, with reports PBT tumbling 39% to £102.7mln but the net cash position more than doubling to £37.2mln.
New chief executive Peter Truscott, whose first public act in the role was to unveil a profit warning in October, set some strategic targets for the 2022 financial year, now that he’s been at the FTSE 250 company for five months now.
These included increasing the operating profit margin by at least 250 basis points and maintaining the dividend at the 33p declared for this past year and increasing it by RPI in the next two years.
After home completions fell to 2,912 last year, the aim is to increase them to 3,500 by 2022, while the high-end operator looks to broaden the tenures of its developments with more affordable homes, and keep administrative expenses around 5% of sales compared to the 6% seen in 2019.
“We have already taken decisive action in reducing our sales-related costs and overheads,” Truscott said, also highlighting the launch of a range of “enhanced house types” as well as organisational changes to ramp up its partnerships division.
CRST shares were up 2.5% at 451.27p on Tuesday morning.
Analysts at UBS said the medium-term margin target was “disappointing” as it “implies a much slower pace of improvement compared to our estimates”, but net cash was better than expected.
Broker Liberum was in agreement on the profit margin guidance, with analysts saying their disappointment was because “Crest’s margins are almost 1000bp behind the sector average”.
"However, we remain positive on the stock as there is significant scope for recovery and Crest has exposure to markets which could benefit from a pick-up in transaction levels.”
Russ Mould at AJ Bell said Truscott had missed a trick on maintaining the dividend as he “probably would have had the room to reduce the payout in order to boost investment in a turnaround of the group”.