ii view: Crest Nicholson begins building new strategy

First-half results to 30 April

• Revenue down 3% to £249.5 million
• Adjusted pre-tax profit of £7.9 million, up from £2.6 million in H1 last year
• Interim dividend of 1.3p, up from 1p last year
• Net debt of £71.5 million, up from £9.4 million a year ago

Guidance:

• Expects full-year adjusted pre-tax profit of between £28 million and £38 million compared with last year’s £22.4 million

Chief executive Martyn Clark said:

"I am pleased to report that Crest Nicholson has delivered trading in line with expectations in the first half and is on track to meet its FY25 guidance.

“Customer appetite for the mid premium segment of the market, which is characterised by high-quality, well-designed homes in sought-after locations, and which is our focus segment remains robust.”

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ii round-up:

Crest Nicholson Holdings (LSE:CRST) today detailed an increase in half-year profit, with the mid-sized housebuilder reiterating its guidance for growth in annual earnings, supported by expected cuts to borrowing costs. 

Adjusted first-half profit to late March tripled from a year ago to £7.9 million, helped by increased sales per building site and a focus on costs including a merger of its Midlands and Yorkshire divisions. Full-year adjusted profit is still expected to come in at between £28 million and £38 million compared with last year’s £22.4 million. 

Shares in the FTSE 250 company rose 2% in UK trading having come into these latest results up by just over a tenth so far in 2025. That’s similar to sector giant Barratt Redrow (LSE:BTRW). The FTSE 250 index is up almost 4% year-to-date. 

Previously constructing a broad range of houses, flats and some commercial premises, Crest has moved its focus towards open market homes in the mid-premium segment under a strategy to assist profits. Build completions for the half-year fell 6% from a year ago to 739, taking revenues down 3% to £249.5 million. 

Under former Persimmon (LSE:PSN) executive Martyn Clark, Crest is targeting build completions in excess of 2,300 by the fiscal year 2029, with a gross profit margin of 20% or more. That’s potentially up from 1,873 builds last year and a margin of 14.1% this latest half. Company focuses now include increased efficiency and improved customer service. 

A statutory pre-tax profit for this six months of £9.1 million is up from a loss of £30.9 million last year when legacy build issues and fire safety provisions impacted the business. 

The group’s next scheduled trading update is planned for 18 November. 

ii view:

Began in 1963, Crest today operates primarily in the South of England and the Midlands. Build completions of 1,873 homes during 2024 were down from 2,020 in 2023 and 2,734 in 2022. Other group focuses now including build quality and optimising the value of its land portfolio.  

For investors, the uncertain economic outlook including a recent rise in UK unemployment should not be overlooked. US trade tariffs could yet increase global inflation broadly, hindering predicted interest rate cuts. Group net debt has risen, while the forecast dividend yield is a modest 1.9% having previously been cut sharply.  

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More favourably, the relatively new chief executive brings nine years of senior experience from rival Persimmon. The government is targeting an easing in planning regulations. House prices have broadly remained robust, with possible cuts in UK interest rates still to come, while potential for a takeover looks to exist.

In all, other housebuilders may offer more appeal to lower risk investors in what is a tough and highly cyclical sector. That said, a consensus analyst fair value estimate at around 210p per share implies some in the City believe there's modest upside here. 

Positives: 

• Former takeover approach
• Hopes for reduced interest rates

Negatives:

• Build completions falling
• Dividend payment previously cut

The average rating of stock market analysts:

Buy