TIDMCRST
RNS Number : 0169E
Crest Nicholson Holdings PLC
03 November 2020
The information contained in this announcement is deemed by the
Company to constitute inside information for the purposes of
Article 7 of the Market Abuse Regulation (EU) No. 596/2014
Crest Nicholson Holdings plc
(the "Company", the "Group" or "Crest Nicholson")
RESULTS AHEAD OF EXPECTATIONS
STRONG PROGRESS AGAINST STRATEGY
EXCELLENT CASH GENERATION AND ROBUST BALANCE SHEET
Crest Nicholson today provides an update on trading for the
12-month period ending 31 October 2020 and upgrades profit
expectations for FY20.
Financial highlights
-- FY20 Adjusted Profit Before Tax expected to be significantly
ahead of consensus of GBP37.9m(1) and at the upper end of the
previously guided range of GBP35m - GBP45m
-- Excellent progress on strengthening the balance sheet with
FY20 net cash in excess of GBP135m, up from GBP37.2m at FY19. Land
creditors at a similar level to FY19
-- Good sales performance through the second half of the
financial year with current sales rates remaining robust and
slightly ahead of the pre-Spring lockdown level
-- Forward sales as at 31 October 2020 were 2,289 units and
GBP480.5m Gross Development Value (GDV) (31 October 2019: 2,013
units and GBP378.0m GDV)
-- FY20 average outlets at 63, up from 59 at FY19, in line with our strategy
-- Reinstatement of dividend on two and a half times cover
basis, effective from interim results 2021
-- Board is confident in the outlook for the business,
underpinned by the strong progress implementing the updated
strategy, current trading and excellent cash generation in the
year
(1) As reported on 3 November 2020 at
https://www.crestnicholson.com/investor-relations/consensus-estimates
Progress against strategy
The Group has made strong progress against all strategic
priorities, creating a business well placed and sufficiently
capitalised to take advantage of the long-term growth opportunities
in the Southern England housing market.
Highlights include:
-- Internal reorganisation completed, delivering annualised
overhead savings in excess of GBP15m (c. 23%) compared to FY19,
creating a more effective operational platform
-- Continued good progress in respect of the GBP30m identified
specification savings now embedded in our short-term land portfolio
and margin delivery
-- Approximately GBP40m of gross margin improvements identified
and being delivered through better design of existing and future
schemes through our new house type range and plotting efficiency
programme
-- Over 5,500 future units in our short-term land portfolio have
now been planned with the new house type range. This is up from
3,300 units in June 2020
-- Continued focus on the customer experience is increasing
satisfaction scores and feedback, building on the five-star rating
achieved this year
-- 1,812 plots approved for purchase at an average gross margin of 28.7%
-- Building a strong network of multi-channel partners
generating good sales performance in the second half
Business overview
Due to a positive trading environment since the Spring lockdown,
and strong progress implementing our updated strategy, the Group is
pleased to report that it expects Adjusted Profit Before Tax for
FY20 to be significantly ahead of consensus of GBP37.9m and at the
upper end of the previously guided range of GBP35m - GBP45m.
During the summer we have seen good trading across all of our
divisions. Reservation rates are now slightly ahead of the
pre-Spring lockdown level. The release of pent-up demand, whether
due to customers putting off moving because of Brexit uncertainty
or subsequent COVID-19 disruption, and the benefits of the Stamp
Duty holiday, have supported near-term confidence levels in the
housing market. Our private SPOW rate over the July to September
period was 0.54, representing a good improvement from our first
half performance of 0.37.
We are also seeing evidence of changing customer attitudes and
requirements as a result of the pandemic. Expectations that
COVID-19 has driven a structural change to the balance of office
and home working has featured strongly in customers' reasons for
considering a Crest Nicholson home. Our land portfolio and
developments are concentrated in Southern England and the commuter
belt to major towns and cities, especially London.
However, we have not simply benefitted from a better than
anticipated market backdrop. We have made strong progress
implementing the updated strategy we outlined in January 2020. We
have completed our internal reorganisation across our operating
divisions and Head Office. These changes will result in an overhead
base that is over GBP15m lower on an annualised basis than in FY19
and will result in a more effective operating platform. These
changes have also enabled us both to develop and promote our
existing talent but also look outside of the Group as we bring in
new skills and knowledge. We have now assembled an experienced
group of Managing Directors from across the sector who are focused
on restoring the Group to being one of the UK's leading
housebuilders.
We have also made strong progress in our operational delivery.
We have continued to make improvements to our customer experience
leading to higher customer satisfaction scores and building on the
five-star rating achieved this year. Our operational efficiency
programme has identified GBP30m of specification savings through
better discipline in procurement. This focus has also enabled us to
improve the quality of materials, improve service levels and
develop closer, more strategic relationships with trusted
suppliers.
In line with best practice in the sector, we have instilled a
culture of continually reviewing the profitability of our schemes
and making changes where appropriate. We have identified
approximately GBP40m of gross margin improvements to be delivered
in our existing and future schemes through re-plotting the layout
and types of units on those schemes. In addition, we have raised
our hurdle rate on new site acquisitions to ensure we drive maximum
value from the selective and disciplined investments we make.
Finally, the introduction of our new standard house type range will
drive further benefits by way of significantly lower build costs,
shorter build times and reduction in complexity. We currently have
over 5,500 future units planned with this range and we expect over
80% of our open market houses will be delivered using this range in
2022.
Our multi-channel open market capability continues to develop in
line with our expectations with 811 units reserved by partners in
the year, of which 729 were apartments. We are building an enlarged
network of partners interested in working with us in the future and
our organisational restructure is enabling us to better respond to
clients' needs and objectives.
Strengthened balance sheet
The Group is well capitalised with adequate facilities to
support both its operational requirements and future investment
plans. Our disciplined focus on cash generation and capital
allocation has delivered a robust balance sheet. At 31 October 2020
our net cash was in excess of GBP135m, up from GBP37.2m at 31
October 2019. Land creditors were at a similar level to FY19. At
the same time we have approved the purchase of 1,812 plots during
the year at an average gross margin of 28.7%, to support our future
growth ambitions. We expect the Group's GBP300m CCFF facility to
remain undrawn.
Reinstatement of dividend
We recognise the importance of a sustainable dividend policy to
our shareholders. In recognition of the excellent progress we have
made in strengthening our balance sheet, the further opportunities
we have in this area and our confidence in future trading
forecasts, the Board is pleased to announce it expects to reinstate
a dividend effective from the interim 2021 results, on a two and a
half times cover basis.
Peter Truscott, Chief Executive, commented:
'This has been a challenging year for everyone involved with
housebuilding. For Crest Nicholson, in the early stages of
implementing an updated strategy, the arrival of COVID-19 could not
have come at a worse time. We saw a significant impact to earnings
in our first half and had to adapt our strategy quickly to reflect
a more challenging economic and market outlook. I would like to
thank all of our colleagues for their professionalism and
resilience during this time.
Despite the disruption caused by COVID-19 the Group has
maintained a rigorous focus on delivering the plan we laid out in
January 2020. We are pleased to report that we are now seeing this
take effect. We are also appreciative of the Government moving
quickly to reopen the sector and taking the decision to temporarily
suspend Stamp Duty. Confidence in moving home and stability of
house prices will be a critical part of a successful economic
recovery from this pandemic.
Since the Spring lockdown we have traded well and as a result
are pleased to announce an upgrade to earnings for the year. We
also enter next year with a strong forward order book. Our
disciplined focus on cash generation and capital allocation has
ensured we close the year with an excellent cash position and a
robust balance sheet. Accordingly, we are pleased to be reinstating
our dividend in the next financial year.
The introduction of another national lockdown will undoubtedly
bring fresh challenges, but we welcome the Government's support to
maintain construction activity and for the housing market to remain
open for business. We will continue to ensure our colleagues,
suppliers and customers' health and safety on site, and in our
offices, is our number one priority as we trade through this
ongoing situation.
Although the macro-economic outlook is uncertain our strategy
will remain unchanged. We will maintain our strong focus on
delivering operational efficiencies and if our trading becomes
significantly disrupted we will act decisively again to protect our
enhanced balance sheet. However, we expect the housing market to
remain resilient to the impacts of COVID-19 and as such we are well
positioned to capitalise on that demand, particularly considering
our product range and focus in Southern England.'
For further information, please contact:
Crest Nicholson
Jenny Matthews, Head of Investor Relations +44 (0) 7557 842720
Tulchan Communications +44 (0) 20 7353 4200
James Macey White
The person responsible for arranging the release of this
announcement on behalf of the Company is Kevin Maguire, General
Counsel and Company Secretary.
3 November 2020
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END
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