Crest Nicholson's (CRST) maiden results bear witness to the riding tide of optimism in the housing market. Strip out costs associated with the February flotation and pre-tax profits rose 76 per cent to £28.1m. That's entirely down to higher volumes - the group sold 699 private homes, up from 537 units in the first half of 2012. Chief executive Stephen Stone says the lower mortgage rates made possible by the Bank of England's Funding for Lending Scheme started having a noticeable impact on demand in January.
Selling prices were 3.4 per cent higher, but so were the associated land and construction costs, leaving gross margins half a percentage point down, at 27.8 per cent. Yet administration expenses were up only 6 per cent, so the ramp-up in output still had a geared impact on profits. Mr Stone expects this gearing effect to continue to offset falling gross margins, so that the operating margin can be maintained at roughly 18 per cent - one of the highest in the sector.
The group promised investors on flotation that it would expand production to 2,500 homes within three to four years (it built 1,882 homes last year). With the recovering mortgage market and Help to Buy stimulus unveiled in the Budget, Mr Stone expects the target to be hit "sooner rather than later".
Broker Numis expects full-year pre-tax profits of £80.2m (up from £62.1m in 2012) giving EPS of 24.3p. The company will start paying dividends based on these results.
CREST NICHOLSON HOLDINGS (CRST) | ||||
|---|---|---|---|---|
| ORD PRICE: | 341p | MARKET VALUE: | £855m | |
| TOUCH: | 340-342p | 12-MONTHHIGH: | 357p | LOW: 220p |
| DIVIDEND YIELD: | nil | PE RATIO: | 11 | |
| NET ASSET VALUE: | 165p | NET DEBT: | 2% | |
| Half-year to 30 Apr | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2011 | 139 | 16.0 | 5.6 | nil |
| 2012 | 192 | 22.2 | 6.8 | nil |
| % change | +39 | +39 | +21 | - |
