Crest Nicholson full-year profit drops amid Brexit uncertainty

Housebuilder Crest Nicholson posted a drop in full-year profit on Tuesday amid Brexit uncertainty, as it said it expects a "difficult" first half of 2019, but also highlighted strong forward sales and a moderation in costs.

In the year to 31 October 2018, pre-tax profit fell 15% to £176.4m, even as revenue rose 9% to £1.14bn and volumes edged up 3% to 3,020 homes. The company had guided to a range of £170m-£190m for pre-tax profit after its profit warning in October.

Crest said that while it achieved generally strong trading volumes and revenues in the first half, this was set against a backdrop of flat pricing and increasing build cost inflation, which dented margins and return on capital.

Operating profits fell 10.3% on the previous year to £189.8m, while operating margins declined to 16.7% from 20.3% in 2017.

Forward sales at mid-January were £639.4m, up 11% from the previous year and the company maintained its total dividend at 33p a share.

Crest said that in some locations, including London, sales volumes were more subdued than others, particularly at higher price points, with weakening consumer confidence and the impact of a slowed second-hand market on housing chains unhelpful.

It said the exceptionally hot summer accentuated the traditional seasonal slowdown and sales volumes did not pick up in the traditionally stronger Autumn selling season.

Outside of London, this reduction in sales continued to be at higher price points, where the purchasing decision is typically more discretionary.

Crest said it appeared that many discretionary purchasers were refraining from making a buying commitment amid persisting uncertainty about the political and economic direction of the country, largely due to Brexit.

Chief executive Patrick Bergin said: "The business has had a good year operationally, with an increase in the number of new homes delivered. However, we have faced some challenges in London and with sales at higher price points where political and economic uncertainty has adversely impacted customer demand and this is likely to continue pending Brexit resolution.

"Our forward sales are strong, boosted by our strategic partnerships and our new channels to market. Pricing is stable, build cost inflation has moderated and we have implemented plans to mitigate margin pressure, which will take effect progressively over the next few years.

"Our revised business strategy and focus on cash generation underpins our confidence in generating sustainable shareholder returns."

At 1015 GMT, the shares were up 6.6% to 364p.