Crest Nicholson (CRST) warned on profits in May, with margins contracting from 19.1 per cent to 17.2 per cent reflecting the housebuilder’s exposure to the higher end of the new homes market. House price inflation at the top end of the market has slowed, whereas build cost inflation remains at 3-4 per cent. However, with some signs of cost inflation moderating, margins for the full year are expected to be at the lower end of an 18-20 per cent target range. The emphasis now is to focus land investment on lower-priced areas, but this is likely to take time, which suggests that the growth outlook for the next year or two will be at the lower end of the sector.
Output in the six months to April rose by 18 per cent to 1,251 units, while open-market average selling prices edged up 5 per cent to £439,000. As well as cost inflation, profit was also held back by higher financing costs associated with investment in new sites, as well as the timing of joint ventures. Whereas last year saw the completion of a joint venture, the company is only at the planning stage on two current ventures, so is still shouldering the development costs.
Sales, as measured by sales per outlet per week, slipped back from 0.81 a year earlier to 0.72, reflecting a slowdown in higher-end sales. However, when a bulk sale of 69 units is included, the rate decline was relatively modest at 0.78. Crest Nicholson expects to meet its revenue target for the full year thanks to a steady increase in sales outlets, which averaged 52 in the first half, a 6 per cent improvement from a year earlier. Steps have been taken to reduce costs and this included closure of the central London division and the reopening of the south-east division.
Analysts at Peel Hunt are forecasting adjusted pre-tax profits for the year to October 2018 of £205m, giving EPS of 64.1p, up from £207m and 65.1p in 2017.
| CREST NICHOLSON (CRST) | ||||
| ORD PRICE: | 415.2p | MARKET VALUE: | £1.7bn | |
| TOUCH: | 415.2-416.2p | 12-MONTH HIGH: | 597p | LOW: 411p |
| DIVIDEND YIELD: | 7.9% | PE RATIO: | 6 | |
| NET ASSET VALUE: | 320p | NET DEBT: | 10% | |
| 30-Apr | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2017 | 420 | 76.2 | 24.4 | 11.2 |
| 2018 | 474 | 74.8 | 23.8 | 11.2 |
| % change | +13 | -2 | -2 | - |
| Ex-div: | 20 Sep | |||
| Payment: | 5 Oct |
