CRST is in stronger position now 16 Jun 2014 14:54
Crest Nicholson is building strength
Given the rude health of the UK housing sector, it's not surprising that Crest Nicholson (CRST) ticked all the right boxes in the year since its partial flotation last February. The housebuilder returned to the public market after a seven-year absence, having been taken private by HBOS and entrepreneur Sir Tom Hunter in March 2007.
Progress since last February has been impressive, with legal completions up 15 per cent in the year to 31 October to 2,172 - of which around 15 per cent were assisted by government incentives, mainly the Help to Buy scheme. Trading in the current year is showing equal promise, with forward sales in mid-January up 51 per cent from a year earlier. Indeed, over half the year's projected output has already been secured.
Average selling prices were ahead by 9 per cent at £250,000 last year, with much of the price increase reflecting a change in the product mix, with fewer apartments and more family homes being built. However, finance director Patrick Bergin admitted that some of the increase was pushed through to reflect a rise in costs. These have grown as companies in the supply chain struggle to increase output to meet demand, but the pressures are expected to ease as production increases. Competition for skilled labour has also risen, although Mr Bergin believes that spare capacity in Europe could encourage skilled labour into the UK to fill the gap.
Crest's financial performance marks it out as one of the top-performing housebuilders, with underlying operating margins rising from 18 per cent to 18.5 per cent and the return on capital employed up from 20.7 per cent to 24.1 per cent last year. The land bank has also been refreshed, with 1,895 plots added to the short-term land bank and 1,700 plots to the strategic land bank. That brings the total to 30,713 plots, with a gross development value of £7.67bn. And, while earnings per share are down, this merely reflects a higher tax charge - there being no repeat of the previous year's exceptional tax credit - and an increase in the number of shares following last year's 40 per cent flotation.
Numis is forecasting current year pre-tax profits of £105m and EPS of 32.2p.
CREST NICHOLSON (CRST)
ORD PRICE: 358p MARKET VALUE: £900m
TOUCH: 357-358p 12-MONTH HIGH: 400p LOW: 220p
DIVIDEND YIELD: 1.8% PE RATIO: 13
NET ASSET VALUE: 187p NET CASH: £42.5m
Year to 31 Oct Turnover (£m) Pre-tax profit (£m) Earnings per share (p) Dividend per share (p)
2010* 284 -27.4 na nil
2011* 319 -27.0 na nil
2012* 408 62.1 28.5 nil
2013 526 80.9 27.1 6.50
% change +29 +30 -5 -
Ex-div: 12 Mar
Payment: 9 Apr
*Prior to flotation
IC VIEW:
Shares in Crest Nicholson are up by nearly two-thirds over last year's flotation price, yet still trade in line with the sector average on 1.7 times forecast net tangible assets. Given the impressive forward order book, net cash and huge land bank, we feel the shares have furthe