Crest Nicholson says 2020 profit to beat expectations

Shares in housebuilder Crest Nicholson jumped 20% today after it reported that profit for the year will be higher than expected.

The housebuilder said its results had been buoyed both by a strong housing market since the end of the first lockdown, and the successful implementation of its turnaround strategy announced in January.

In an end-of-year trading update it said that it expected pre-tax profit for the year to October 31 to be at the upper end of the range of £35-45m, ahead of the consensus expectation of £37.9m.

The firm, which turned over just under £1.1bn last year, did not say what it expected revenue to be, but said that it had achieved 0.54 sales per site per week between July and September, well above the first half figure of 0.37. It said sales in recent weeks were now “slightly ahead” of the rate seen just prior to the  lockdown in March.

The announcement buoyed share price across the sector, with all listed housebuilders rising strongly in early trading. Taylor Wimpey saw its price rise by nearly 6%.

Crest Nicholson chief executive Peter Truscott, who joined the firm in September 2019 after it had issued a series of profit warnings, said the firm had maintained a “rigorous focus” on delivering the plan laid out in January 2020, and will look to reinstate the payment of dividends in the next financial year.

He said: “Since the spring lockdown we have traded well and as a result are pleased to announce an upgrade to earnings for the year. Although the macro-economic outlook is uncertain, our strategy will remain unchanged.”

Crest Nicholson, which announced 130 redundancies in June as part of its restructuring plan, said that its restructuring had delivered annual savings of £15m, and that it had also made £30m of procurement savings and a further £40m savings from re-planning developments to suit its new range of house types.

The firm said net cash had grown threefold during the financial year to the end of October at £135m, up from £37m at the same time in 2019.

Truscott said that, while the announcement of a further lockdown would bring “fresh challenges”, he welcomed the government’s support to maintain construction activity and for the housing market to remain open for business. He said: “If our trading becomes significantly disrupted we will act decisively again to protect our enhanced balance sheet.”

Housebuilder share prices have now more than compensated for initial falls yesterday following the re-opening of markets after the announcement of a second lockdown.

Kevin Cammack, analyst at Cenkos, said: “It is difficult to see what the market cannot like about this update from Crest especially given the depressed base of underperformance the stock is coming from and the low levels of expectation build in. Of course these are baby steps, but the trajectory is in the right direction.”