Crest Nicholson beats forecast as it builds towards big target

Pre-tax profits rose 32% to £154m in the year to 31 October as gross margins, hitherto a concern for some analysts, slipped only slightly to 27.5% from the previous year's 28.6% due to a lower contribution from higher-margin projects.

Profits were supported by net inflation gains and the benefits of increased acquisition margins and a growing proportion of units sourced from strategic land, while average selling prices were slightly higher than forecast, up 10% to £309,000.

Earnings per share were up 25% on the prior year to 49.3p, while the board has hiked the dividend 38% to 19.7p.

New home sale volumes, as revealed last year, were up 8% to 2,725.

"We remain on track to deliver on our targets of 4,000 homes and £1.4bn of revenue by 2019, which would represent a record level of delivery for the business and a more than 150% increase over our 2011 housing numbers," said chief executive Stephen Stone.

"The housing market is now more sustainable, underpinned by strong demand dynamics, a benign land market and government policies to improve access to home ownership."

Crest Nicholson sees an encouraging five-year outlook, with good sales rates and access to mortgage finance for first-time buyers, no shortage of land-buying opportunities despite ongoing constraints in the planning system, and sales price inflation currently covering build cost inflation as demand outstrips supply.

The gross development values of both its short and long-term land pipelines continue to grow, with the total gross development value up 12% to £10.5bn, while forward sales at mid-January were at £511.8m, 28% ahead of prior year with 37% of this year's forecast secured.

Broker Shore Capital said, as a smaller business it sees growth as being easier to deliver than for the large, national builders.

"A core part of this expansion is the new operation to sell bespoke product to the institutional private rentals sector, and Crest remains the only business where this is a core rather than ad-hoc source of sales."

It added: "Overall, still a very solid growth story with all of the key elements in place to see that additional volume delivered across the next 4 financial years."