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Crest Nicholson swings to interim profit, upgrades FY guidance
24th Jun 2021 07:39
(Sharecast News) - Housebuilder Crest Nicholson said on Thursday that it swung to a first-half profit as it upgraded its full-year profit guidance amid solid demand.
In the six months to 30 April, the company swung to a pre-tax profit of £36.3m from a loss of £51.2m in the same period a year ago, with revenue up 35.2% to £324.5m. Meanwhile, completions rose to 1,017 from 775.
Crest said market conditions have been favourable and consistent, supported by the government's decision to suspend stamp duty and to allow the sector to remain open despite the pandemic.
"Consumer confidence in the stability of the housing market, coupled with changing working patterns and lifestyle choices, have underpinned demand, and meant both sales rates and prices have exceeded the pre-pandemic level," the company said.
"Since January 2021 demand has steadily increased with sales rates at their strongest in March and April."
As a result of the strong first half, Crest said it now expects adjusted pre-tax profit for 2021 to be "at least" £100m. At its annual general meeting in March, the company had guided to pre-tax profit of around £85m.
The company declared an interim dividend of 4.1p a share, having not paid one the year before.
Chief executive Peter Truscott said: "We are making good progress in all five of our strategic priorities. Our balance sheet has been transformed and positions us strongly to grow in the future. Having completed the first part of our turnaround strategy, and implemented our operational efficiency programme, our focus now moves to rebuilding operating margins and delivering sustainable growth."
At 1055 BST, the shares were up 2.6% at 441.40p.
Russ Mould, investment director at AJ Bell, said: "The same trends which have benefited Crest Nicholson's peers in recent months are in evidence in its first half results.
"Not only are state-backed incentives boosting demand but the pandemic-led work from home trend is pushing those purchasers who can afford it to larger, more expensive properties with more space to accommodate home offices.
"These catalysts are boosting volumes and profitability and helping to support the company's ongoing turnaround strategy, launched by CEO Peter Truscott when he took the helm in September 2019.
"With pandemic disruption out of the way, and the wider market backdrop highly favourable, Truscott has fewer excuses when it comes to delivering on the targeted improvements in margins which have lagged those achieved by its rivals for some time.
"One obstacle to achieving this goal will be rising raw material costs and wage inflation driven by a shortage of quality labour.
"The reinstatement of a first half dividend, while not a surprise, is still another show of confidence in Crest Nicholson's future prospects. Traditionally Crest Nicholson has been focused on the south of England and on high end properties but with other parts of the UK housing market looking buoyant it should come as little surprise that Crest is targeting a move into new geographies."
Broker Liberum, which rates the stock at 'hold', said it: "The shares have been strong, beating the sector by 12% over the last three months, suggesting that the market had got to this upgrade a long way ahead of consensus.
"The shares trade at 1.25x Dec21E book, which is cheap compared to the sector (1.74x book), but we prefer Bellway (Buy, 4100p) and Redrow (Buy, TP 815p) on 1.21x and 1.16x book respectively, as they are making higher returns and with good estimate momentum themselves."
In the six months to 30 April, the company swung to a pre-tax profit of £36.3m from a loss of £51.2m in the same period a year ago, with revenue up 35.2% to £324.5m. Meanwhile, completions rose to 1,017 from 775.
Crest said market conditions have been favourable and consistent, supported by the government's decision to suspend stamp duty and to allow the sector to remain open despite the pandemic.
"Consumer confidence in the stability of the housing market, coupled with changing working patterns and lifestyle choices, have underpinned demand, and meant both sales rates and prices have exceeded the pre-pandemic level," the company said.
"Since January 2021 demand has steadily increased with sales rates at their strongest in March and April."
As a result of the strong first half, Crest said it now expects adjusted pre-tax profit for 2021 to be "at least" £100m. At its annual general meeting in March, the company had guided to pre-tax profit of around £85m.
The company declared an interim dividend of 4.1p a share, having not paid one the year before.
Chief executive Peter Truscott said: "We are making good progress in all five of our strategic priorities. Our balance sheet has been transformed and positions us strongly to grow in the future. Having completed the first part of our turnaround strategy, and implemented our operational efficiency programme, our focus now moves to rebuilding operating margins and delivering sustainable growth."
At 1055 BST, the shares were up 2.6% at 441.40p.
Russ Mould, investment director at AJ Bell, said: "The same trends which have benefited Crest Nicholson's peers in recent months are in evidence in its first half results.
"Not only are state-backed incentives boosting demand but the pandemic-led work from home trend is pushing those purchasers who can afford it to larger, more expensive properties with more space to accommodate home offices.
"These catalysts are boosting volumes and profitability and helping to support the company's ongoing turnaround strategy, launched by CEO Peter Truscott when he took the helm in September 2019.
"With pandemic disruption out of the way, and the wider market backdrop highly favourable, Truscott has fewer excuses when it comes to delivering on the targeted improvements in margins which have lagged those achieved by its rivals for some time.
"One obstacle to achieving this goal will be rising raw material costs and wage inflation driven by a shortage of quality labour.
"The reinstatement of a first half dividend, while not a surprise, is still another show of confidence in Crest Nicholson's future prospects. Traditionally Crest Nicholson has been focused on the south of England and on high end properties but with other parts of the UK housing market looking buoyant it should come as little surprise that Crest is targeting a move into new geographies."
Broker Liberum, which rates the stock at 'hold', said it: "The shares have been strong, beating the sector by 12% over the last three months, suggesting that the market had got to this upgrade a long way ahead of consensus.
"The shares trade at 1.25x Dec21E book, which is cheap compared to the sector (1.74x book), but we prefer Bellway (Buy, 4100p) and Redrow (Buy, TP 815p) on 1.21x and 1.16x book respectively, as they are making higher returns and with good estimate momentum themselves."