Crest Nicholson’s shares sink after profits halve

This time last year, housebuilder Crest Nicholson (CRST) told a positive story in its adjusted figures but a downbeat story in its statutory figures thanks to a hefty cladding remediation bill. This time, it’s the reverse. On an IFRS basis, the company swung from a pre-tax loss to a pre-tax profit. However, when you strip the effect of last year's bill, its pre-tax profit more than halved – from £52.5mn to £20.9mn.

The company was not bullish in its explanation of this performance, either. “We started our first half amidst the worst of the economic uncertainty arising from the September 2022 mini-budget,” said chief executive Peter Truscott. He went on to say note that demand and confidence could be hit again "if interest rates continue to rise and remain elevated". That's a very plausible scenario, and Crest shares fell 9 per cent on these results.

It’s not just interest rates that are hitting the company. The housebuilder also doubled-down on its call for the government to “provide further support” for first-time buyers after the controversial Help to Buy policy ended on 31 March. We have raised concerns before that housebuilders have become too dependent on the scheme for their revenue, so the fact Crest Nicholson wants it back should come as no surprise.

There are some hints as to how things might get better. Sales per outlet week for the six-month period are still down on this time last year at 0.54 but up on the 11-week period from 1 November last year when the figure was 0.35. Some investors, therefore, might see an opportunity in a recovery play considering its low price-to-earnings ratio, but we remain bearish. The macro-environment that has hit Crest shows little sign of improving in the medium-term. Sell.

Last IC view: Sell, 267p, 17 Jan 2023