Higher costs hit Crest Nicholson's interim profits

The housebuilder reported pre-tax profits of £64.4m, down 11% compared to the same period last year, as it maintained its full year forecast.

A 12% increase in cost of sales to £401.6m offset a 7% jump in revenues to £501.9m as build cost inflation continued to negatively impact operating margins.

Operating margin slipped from 16.8% to 14.1%, with its decline also aided by a 15% increase in total forward sales to £625.2m as part of the FTSE 250-traded company's strategy to increase certainty.

Revenue and forward sales rose 4% to £870.1m, while sales per outlet week remained steady at 0.78

The interim dividend was maintained at 11.2p a share.

Chief executive Chris Tinkler said higher forward sales had been offset by slightly lower margins.

“Together with generally flat pricing and continuing build cost inflation, (that) has contributed to a reduction in the operating margin,” he said.

Crest Nicholson said that its operations are proving resilient despite an "uncertain and politically turbulent backdrop".

A note from Liberum said the company is starting to see the fruits of its revised strategy more quickly than analysts or management originally expected.

"This has been at the expense of some margin, but management is confident of achieving full year estimates in line with consensus, with confidence underpinned by strong forward sales, and reducing exposure to houses at higher price points. We leave our estimates unchanged and still see good upside to our unchanged target price of 405p."

Crest Nicholson's shares were up 0.61% at 360.00p at 0828 BST.