Crest Nicholson suffers fall in half year profits
Housebuilder Crest Nicholson has revealed falling half-year profits and warned the squeeze from stalling house prices and rising building costs will continue into next year.
The group reported a 2% fall in pre-tax profits to £74.8 million for the six months to April 30.
It confirmed a drop in its operating margin, to 17.2% in the first half from 19.1% a year earlier and reiterated its recent forecast for a full-year drop to around 18% - at the bottom end of the 18-20% guided range and below last year’s 20.3%.
The group said margins would also remain under pressure next year, staying at around 18% in 2018-19 as sales of higher priced properties are set to continue falling.
Crest saw shares tumble earlier this month after it first warned over the margin hit, with the stock down by another 4% after its interim results.
Patrick Bergin, chief executive of Crest, said: “The business continues to increase the number of homes built and carries positive momentum into the second half of 2018, with steady outlet growth and higher forward sales.
“Our experience of generally flat pricing against a back-drop of continuing build-cost inflation has, however, had an adverse impact on our margins and we have taken a number of actions to seek to offset build cost pressures and invest in areas of greater housing affordability.”
He added that sales of higher value homes “will continue to be impacted by a slow second-hand market and this is likely to restrain volume growth in this segment of the market in the near term, as well as impacting on overall pricing gains”.
Activity has been more subdued in the second-hand homes market, with Crest recently saying property chains have been taking longer to complete.
The margin woes overshadowed an otherwise robust rise in revenues, up 13% at £473.8 million, with the number of private homes delivered ahead by 11% and average prices 5% higher at £439,000.
Crest said forward sales were 5% ahead at £568.2 million as at mid-June and were running 12% higher for the full year.
Earlier this year, Crest reduced its exposure to central London, where property sales have seen a marked slowdown.
It is instead focusing on land in “more affordable outer zones”.