Crest Nicholson’s revenue halves in the first half of 2020

June 25, 2020 / Isla MacFarlane
Crest Nicholson’s revenue halves in the first half of 2020

Crest Nicholson celebrated its best sales week for a year before the UK went into lockdown, before its revenue was slashed in the wake of the Coronavirus outbreak.

Holdings plc (Crest Nicholson, the Group, or the Company announces its interim results for the six months ended 30 April 2020.

Key Financials

 

£m (unless otherwise stated)

HY20 HY19 % change
Revenue 240.0 501.9 (52.2)%
Adjusted gross profit 35.9 100.3 (64.2)%
Adjusted gross profit margin % 15.0% 20.0%
Adjusted administrative expenses (24.8) (29.5) (15.9)%
Adjusted operating profit 11.1 70.8 (84.3)%
Adjusted operating profit margin % 4.6% 14.1%
Adjusted profit before tax 4.5 64.4 (93.0)%
Exceptional items net of income tax (44.1)
Adjusted basic earnings per share 1.4 20.2 (93.1)%
Gross (loss)/profit (7.3) 100.3 (107.3)%
Gross (loss)/profit margin % (3.0)% 20.0%
Operating (loss)/profit (44.0) 70.8 (162.1)%
Operating (loss)/profit margin % (18.3)% 14.1%
(Loss)/profit before tax (51.2) 64.4 (179.5)%
Basic (loss)/earnings per share (15.8) 20.2 (178.2)%
Dividend per share (p) 11.2
 

Net debt

93.3 68.3 36.6%

Peter Truscott, Chief Executive of Crest Nicholson, said: “Despite a difficult first half performance we have made excellent progress implementing our updated strategy. We are ahead of our own expectations in a number of our strategic priorities and that has been delivered against the backdrop of COVID-19.

“The health and safety of our customers, employees and extended supply chain will always be our number one priority and as you would expect we continue to focus closely on ensuring the safe return of these groups to our sites and sales and management offices. I am hugely grateful to all Crest Nicholson employees who have quickly pulled together to make this happen.

“Before lockdown the business was performing well and trading in line with our expectations. We were continuing to recognise further improvements to margin in our current developments and short-term land portfolio. We were also delighted to be awarded five-star status by the HBF customer satisfaction scheme in March this year.

“However, we cannot ignore the risks that COVID-19 presents to the UK housing market even if we cannot predict with certainty what the impact of those risks will be. Therefore, we have adapted our strategy by deferring the planned opening of an additional division and targeting further reductions in overheads. Taking decisive action now will ensure Crest Nicholson is able to flourish in whatever market conditions may emerge in the future including if the market quickly returns to growth.”

From 18 May 2020, Crest Nicholson started to resume build activity on its sites and started to reopen its sales offices.

Given the economic and operational uncertainty resulting from COVID-19 the group announced on 19 March 2020 that it was suspending financial guidance. “While we have been encouraged by the improvement in the trading environment in recent weeks, with increasing levels of web traffic and footfall being converted into reservation rates similar to those seen prior to the lockdown, it remains a highly uncertain operating environment,” the housebuilder said. “However, in order to contextualise the Group’s half year results, and to give some visibility around the likely outturn for the full year, we are providing some additional market commentary and reinstating FY20 APBT guidance.”

In the first two months of the period the group experienced significant volatility and uncertainty associated with the run up to the General Election on 12 December 2019. Following the decisive political outcome our sales performance gained strong momentum in the run up to the spring selling season before the UK lockdown was introduced.

The combined impact of the political uncertainty, and the sales deferrals associated with COVID-19, significantly reduced profitability in the first half. Assuming that the lockdown continues to carefully unwind with supportive measures in place to facilitate building and selling homes, the group expects profit in the second half of the year to be significantly higher than the first. On this basis the group expects FY20 APBT to be in the range of £35m-£45m.

While the group remains cautious in its assessment of the prospects for the UK housing market over the medium term it remains confident in its ability to successfully manage through further periods of instability.

Accordingly, the group has recently announced plans to defer its planned creation of another division and further reduce its overheads. The group remains focused on improving its margins and increasing its cash reserves and is committed to returning to a sustainable dividend policy as soon as it is appropriate to do so.

The group has a £250m revolving credit facility (RCF) provided by four of the UK’s largest banks, expiring June 2024. It also benefits from £100m of senior loan notes which mature between 2024 and 2029. In addition, the availability of a further £300m of liquidity has been finalised through the CCFF commercial paper programme should the Group require it. At present this facility is undrawn. Accordingly, the group believes it has sufficient and diverse sources of financing to operate in potentially more challenging market conditions.

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