UK house builder Crest Nicholson has reported a major reduction in profits, with adjusted pre-tax profit £41.4m in the year to the end of October, down from £137.8m a year earlier.
Crest Nicholson’s revenue plummeted by more than a quarter (28%) to £657.5m, which the firm said reflected “weakness in the housing market”.
Home completions plunged to 2,020 from 2,734 the previous year.
Outgoing chief executive Peter Truscott said that recently there had been some positive macro trends with inflation and mortgage rates falling, which boded well for the housing sector.
“Although it is too early to gauge customer behaviour, we have been encouraged by an increase in customer interest levels and inquiries this calendar year. However, we remain mindful of ongoing uncertainties within the broader economy.”
Commenting on the latest figures, AJ Bell investment director Russ Mould, insisted Crest Nicholson’s results for the year to October 2023 contained no new, nasty surprises as last week’s profit warning had already lowered expectations.
“A net cash balance sheet should see the builder through the current downturn and, relative to the value the company’s assets, Crest Nicholson’s shares are the cheapest of any of the big, quoted housebuilders”
Mould added that a list of set-backs suffered by the firm, some beyond its control (notably pandemic lockdowns and higher mortgage rates) which hit demand at all UK quoted building firms, who have also had to wrestle with increased staff and raw material costs. But Crest Nicholson’s profit margins peaked in 2016 and profits hit a high in 2017, a good year or two before other builders began to feel wider pressures.
He added: “A more helpful macroeconomic environment would provide a helpful tailwind, but Crest Nicholson’s shares are clearly cheaper than all of its quoted peers. This reflects the poor relative profitability and the company’s apparent inability to sometimes get out of its own way.
“Equally, this offers upside potential for Mr Clarke (the new chief executive) and shareholders if Crest Nicholson can shake off this reputation and ride the next upward leg in the housing cycle, which may get a lift if, as and when the Bank of England starts to cut interest rates”.
