Crest Nicholson sees FY profit 'significantly' ahead of consensus
Housebuilder Crest Nicholson said on Tuesday that full-year profit is set to be ahead of market expectations thanks to positive trading since the end of the Spring lockdown, as it announced the reinstatement of its dividend.
Crest said 2020 adjusted pre-tax profit will be "significantly" ahead of consensus of £37.9m and at the upper end of its previously-guided range of between £35m and £45m. The company hailed a good sales performance through the second half, with current sales rates remaining robust and slightly ahead of pre-lockdown levels.
"The release of pent-up demand, whether due to customers putting off moving because of Brexit uncertainty or subsequent Covid-19 disruption, and the benefits of the Stamp Duty holiday, have supported near-term confidence levels in the housing market," it said.
"We are also seeing evidence of changing customer attitudes and requirements as a result of the pandemic. Expectations that Covid-19 has driven a structural change to the balance of office and home working has featured strongly in customers' reasons for considering a Crest Nicholson home. Our land portfolio and developments are concentrated in Southern England and the commuter belt to major towns and cities, especially London."
The company also said it was benefiting from strong progress implementing the updated strategy outlined in January 2020. It has completed the internal reorganisation across its operating divisions and head office and the changes will result in an overhead base that is more than £15m lower on an annualised basis than last year.
Crest also announced the reinstatement of its dividend on a two and a half times cover basis, effective from next year's interim results.
Chief executive Peter Truscott said: "The introduction of another national lockdown will undoubtedly bring fresh challenges, but we welcome the government's support to maintain construction activity and for the housing market to remain open for business."
At 0945 GMT, the shares were up 20% at 260.35p.
Russ Mould, investment director at AJ Bell, said "The latest update from housebuilder Crest Nicholson suggests that in the commuter belt, conditions for selling homes are very healthy.
"The company’s footprint is largest in the south of England and particularly in the towns and suburbs around London. The strength of its recent trading could reflect people moving out of central London in pursuit of more spacious accommodation and a decent garden.
"The momentum, with sales actually running ahead of pre-Covid levels, also reflects the pent-up demand from the first UK lockdown as well as the impact of the current stamp duty holiday.
"While lockdown 2.0 won’t involve shutting down the construction sector, the housing market could still be hurt by the growing levels of joblessness as Covid-19 and its associated restrictions leave scars on the economy.
"Crest does have a strong order book - providing some visibility on medium-term demand - and there is hope that the Government will do what it can to support the property market. At least in preparing for the worst, the company has ended up in a strong balance sheet position - strong enough that it becomes the latest name in the sector to announce a return to the dividend list."
Canaccord Genuity said the trading update was "reassuringly positive".
"The promised reinstatement of the dividend is also welcome news for investors and reflects the stronger balance sheet and management confidence. Clearly, macro risks remain going into 2021 but the shares sit at a significant valuation discount to the sector and this update should reassure investors that the team is making good progress despite the impact of the pandemic," it said.
Canaccord retained its 'buy' rating on the shares and lifted its price target to 290p from260p.