Crest Nicholson margins fall to 14%

Aaron Morby 12 months ago
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House builder Crest Nicholson saw operating margins drop from nearly 17% to 14% in the first half of the year as part of a plan to de-risk the business.

Interim CEO Chris Tinker is de-risking the business away from open market private sale homes
Interim CEO Chris Tinker is de-risking the business away from open market private sale homes

The south east builder aims to reduce the proportion of open market homes it builds as it targets pre-sold and pre-funded housing for housing associations and private rental investors.

It said margins had also come under pressure from build cost inflation running at 3-4%.

In the first half of the year to April 2019, revenue rose to £502m with pre-tax profits down 11% to £64m.

Now around 45% of Crest’s homes, including affordable housing, is pre-sold and pre-funded helping to raise forward sales for the year 3% to £870m.

It said that open-market average selling prices including PRS and partnership intermediate housing sales had increased by 8% to £413,000, largely due to changes in product and location mix.

But it warned this was now forecast to reduce as the proportion of higher value homes in higher price locations falls and new outlets with lower average selling prices sites open.

Chris Tinker, interim chief executive, said: “The group has made good progress on delivering its revised strategy during this period of heightened political uncertainty.

“Having paused growth and de-risked our open market sales programme through increased pre-sales and partnership working, it is pleasing to report our first half revenues up 7% from this time last year.”

He added the strategy to reduce forward sales risk had traded an element of operating margin, which together with generally flat pricing and continuing build cost inflation,  contributed to a reduced operating margin.

“We enter the second half of the year with encouraging forward sales, a growing outlet base and an increased proportion of homes for sale at more affordable price points,” said Tinker.

“While we continue to work our short-term land bank harder, we are pleased that our excellent place-making track record has enabled us to secure four more sites into our strategic and partnership land portfolio, further increasing the medium and long term store of embedded value in our land portfolio.”

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