Crest Nicholson has “paused growth” to unlock value from land and joint ventures as sales dip 4%, according to a trading statement.
Highlights
- Sales per outlet week (“SPOW”) of 0.78 has proven resilient (HY18: 0.78);
- Total sales value achieved to date and forward sold for FY19 including land and commercial of £792m, up 4.2% (HY18: £760m);
- Good progress on increased partnership sales and JV opportunities;
- Net debt and land creditors reduced by £40.9m.
For the first six months of the year, Crest Nicholson has focused on shareholder returns by prioritising cashflow and dividends and unlocking value in the land portfolio through partnerships and joint venture (JV) opportunities. It said that the first half of the year had been a time of “extreme uncertainty.”
Whilst residential sales achieved to date and forward sold for FY19 at £715m are 4.0% below FY18 (£745m), the total sales achieved and forward sold turnover for FY19 including commercial and land sales/JV’s at £792m are up 4.2% on last year (HY18: £760m), demonstrating the benefits of our revised strategy.
Total residential forward sales at £500.5m are 11.0% ahead of the same period last year (HY18: £450.8m).
Build cost inflation during FY19 is expected to lie within the range of 3-4%. Lower half-year net debt of £68.2m (HY18: £78.5m) and lower land creditors of £192.6m (HY18: £223.2m) represent a £40.9m reduction on last half year.
Strong levels of employment and low interest rates, combined with good mortgage access and the Help to Buy scheme, continue to support many purchasers into new homes and together set a robust environment for the housing market.
This is supplemented by the increased funding from Homes England to Registered Providers to increase the supply of intermediate homes beyond traditional affordable housing.
Despite the wider positive macro-economic backdrop, as previously noted, with the ongoing political turbulence the demand outlook in the short term remains uncertain. However, our earnings guidance and outlook for the full year remains unchanged.
Commenting on today’s statement, Chris Tinker, Interim Chief Executive said: “The group has made good progress in implementing its strategy in the first half of the year. Improved forward sales in residential, commercial and land, and increased outlet breadth, provide a good platform as we enter into the second half of 2019.
“We welcome the government’s increased grant funding and focus on delivering a broader tenure mix. As a consequence, we will continue to grow our partnerships with Registered Providers who are playing an increasingly important role in the diversification of tenures. This strategy trades an element of margin for reduced risk and improved cash flows. Overall, we remain confident in our ability to deliver returns in line with Board expectations.
“We maintain a strong balance sheet and operate a disciplined business model, generating good returns on our chosen investments. We have reduced debt in the half year and expect to be cash positive by the end of the year after paying ordinary dividends of 33 pence per share.”
