Crest profits are down

Housebuilder, Crest Nicholson, has revealed that it has seen its revenue rise 7% during its half year, but with its operating margin and profits decreasing as it carries out its strategy to “de-risk” the business.

During the six months to April 30 2019, the housebuilder’s revenue rose to £501.9m against the equivalent period in 2018, which Crest said was “an encouraging result, given the uncertain political and Brexit backdrop”.

Crest also said it had successfully switched to a new sales profile involving around 45% of its homes, including affordable housing – being pre-sold and pre-funded. This has led to current and forward sales for FY 19 increasing from £848.8m in 2018 to £870.1m.

The company’s open market average selling prices (ASP) rose 8% to £413,000. Crest said this represented its highest price point, with its ASP forecast to drop as it reduces the proportion of higher value homes in pricier locations and moves its focus to sites with lower ASPs.

Crest’s operating margin reduced to 14.1% from HY 18’s 16.8%, due to a combination of increasing forward sales to PRS and registered providers, and build cost inflation remaining at 3-4%.

Operating profits fell 10% to £78.6m, with pre-tax profit reducing 11% to £64.4m.

Sales per outlet per week matched HY 18 at an average of 0.78. During the six months, the business increased its average sales outlets by 12% to 58.

Chris Tinker, Crest’s interim CEO said, “The group has made good progress on delivering its revised strategy during this period of heightened political uncertainty.

“Our strategy to reduce forward sales risk through an increased proportion of pre-funded, pre-sold homes has also realised a 15% increase in our total forward sales position. 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.”

Bellway also updated the city, stating that it had experienced “strong sales demand” from February 1 to June 2 2019, with a 4.7% increase in the reservation rate to 244 per week against the equivalent period in 2018.

The housebuilder’s forward order book rose 2.7% to 6,312 homes (3 June 2018 – 6,144 homes), with its value “modestly lower” at £1,643m (2018 – £1,703m), which Bellway said reflected its planned growth in lower value social completions this year, in line with previous guidance.