Crest Nicholson share price: 3 things we learnt from its half-year results

The British homebuilder delivered a strong performance as the sector continues to struggle against the political uncertainty created by Brexit.

Crest Nicholson Source: Bloomberg

Crest Nicholson has recorded a strong first six months of trading in what has been a challenging period for British homebuilders, which has forced many in the sector to revise their strategies by pausing growth and focusing on pre-sales and partnerships.

Crest Nicholson revised strategy reaps results

In its half-year results for the six months ending in April, Crest Nicholson saw its revenues increase 7% to £501.9 million, driven by a focus on forward looking sales which grew by 15% to £625.2 million.

However, the homebuilder has had to contend with downward pressure on margins, which have fallen by 270 basis points to 14.1%, with pre-tax profit down 11% to £64.4 million.

‘Our strategy to reduce forward sales risk through an increased proportion of pre-funded, presold homes has also realised a 15% increase in our total forward sales position,’ Crest Nicholson Interim CEO Chris Tinker said.

‘This increased certainty has traded an element of operating margin, which together with generally flat pricing and continuing build cost inflation, has contributed to a reduction in the operating margin,’ he added.

Dividend maintained despite slide in earnings

Basic earnings per ordinary share (EPS) for the company’s first six months stands at 20.2p, 12% lower than the same period a year ago.

Net cash used by operating activities in the first half of the year hit £25.6 million, down from £58.2 million, reflecting continued investment in Crest Nicholson’s investment in Chiltern and the Midlands.

However, despite the downward pressure on earnings, Crest Nicholson declared an interim dividend of 11.2p a share and remains committed to maintaining its full-year pay-out to shareholders.

Crest Nicholson expects strong second-half performance

The British homebuilder is confident about its performance in the latter half of the financial year, with the company boasting ‘encouraging forward sales’ due to an increased proportion of affordable homes coming to market in the months ahead.

‘Trading performance has been encouraging in the first half set against the uncertain and politically turbulent backdrop,’ Tinker said.

‘Business operations are proving resilient and operational efficiency initiatives are making planned progress.’


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