Shares in house and appartment builder Crest Nicholson (CRST) leapt 19% to 259p after the firm revealed that trading for the year to October had been better than expected and raised its earnings guidance.
The company, whose developments and land portfolio are concentrated in southern England and the commuter belt to major towns and cities, especially London, has benefitted from changing customer preferences due to Covid including a ‘structural change to the balance of office and home working’.
BETTER SALES AND MARGINS
The average number of sales outlets open during the year increased to 63, while forward sales at the end of October were 2,289 units with a gross development value of £480.5 million against 2,013 units and £378 million the previous year.
Together with a strong top line, the firm delivered £15 million of annual savings in operating expenses - a 23% reduction on its 2019 cost base - and is looking to cut £30 million of costs ‘embedded’ in its short-term land portfolio and margin delivery.
As a result, pre-tax profits for the year ended in October are expected to be ‘significantly ahead’ of consensus estimates of around £38 million and ‘at the upper end’ of the firm’s previous guidance range of £35 million-to-£45 million.
RESTARTING DIVIDENDS
The improvement in profitability and the strength of its balance sheet means the company can reinstate its dividend from its next half-year results with a coverage level of around two and a half times.
The firm has a strong order book for the current year and reservations are slightly ahead of the pre-Spring lockdown level as confidence has returned to the housing market, helped by pent-up demand and the Stamp Duty holiday.
Chief executive Peter Truscott acknowledged that the introduction of another national lockdown would bring ‘fresh challenges’ but said the firm would stick to its strategy of operational cost improvements ‘and if trading becomes significantly disrupted we will act decisively again to protect our enhanced balance sheet.’
