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Crest Nicholson impairs stock as price outlook worsens

The housebuilder's weaker margins have left it more vulnerable to a decline in sales prices
June 24, 2020

Crest Nicholson (CRST) has taken a £43m impairment charge against the value of its inventory, anticipating a fall in UK house prices. The housebuilder’s weaker gross margin comparable to the broader sector have made it more susceptible to a fall in sales prices, said chief financial officer Duncan Cooper. “We probably have historically a higher proportion of our portfolio more likely to fall into the jaws of needing that adjustment,” said Mr Cooper.

IC TIP: Hold at 224p

Completions declined by more than a third during the first-half and unlike many other housebuilders, the group’s forward sales position was also around a tenth lower in value. Attention has turned to cutting costs, with plans to launch a southern counties division now shelved and the partnerships and regeneration and the strategic projects businesses due to merge. Build cost savings of £30m are being targeted this year as the group seeks to improve margins and a further £5m will be saved by reducing staff numbers. 

The consensus NAV forecast is 335p a share at the end of October, rising to 344p the same time the following year.

CREST NICHOLSON (CRST)   
ORD PRICE:224pMARKET VALUE:£ 576m
TOUCH:223.4-224.4p12-MONTH HIGH:524pLOW: 160p
DIVIDEND YIELD:9.7%PE RATIO:NA
NET ASSET VALUE: 314pNET DEBT:13%*
Half-year to 30 AprTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201950264.420.211.2
2020240-51.2-15.80.0
% change-52---
Ex-div:na   
Payment:na   
*Includes lease liabilities of £8.2m