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Crest Nicholson upgrades FY forecasts! Here’s why I’d buy the UK share today

·3-min read
Private investor buying UK shares at home

The Crest Nicholson Holdings (LSE: CRST) share price was having no problems moving northwards on a quiet trading day Thursday. The UK housebuilding share rose 3% on the day to 444p per share. It is now 102% more expensive than it was at this time last year.

Sales leap at Crest Nicholson

Crest Nicholson’s share price has risen following the release of sunny trading numbers. The FTSE 250 firm saw sales 35% higher during the six months to April, it said, to £324.5m. This was driven by a sharp increase in home completions, to 1,017 units from 775 in the same period in financial 2020.

Crest Nichsolson has also seen an impressive improvement in its forward order book. As of 18 June, forward sales stood at 2,771 units with a gross development value of £691.8m. This compares with readings of 2,715 units and £575.1m in the first six months of last year.

Strong trading up to April meant that Crest Nicholson swung to a £36.3m pre-tax profit from a £51.2m loss a year previously.

Profits forecasts upgraded

Chief executive Peter Truscott said that “market conditions have been favourable and consistent” thanks to the government’s stamp duty holiday and rules that have allowed the sector to remain open despite Covid-19 restrictions.

Encouragingly Truscott noted that Crest Nichsolson is witnessing strong demand for homes that are due to complete after the 30 September 2021 stamp duty deadline. He said that this provides confidence that trading should remain solid when the tax holiday is rolled back.

Truscott added that “consumer confidence in the stability of the housing market, coupled with changing working patterns and lifestyle choices, have underpinned demand, and meant both sales rates and prices have exceeded the pre-pandemic level.”

Business at the UK share has been so solid, in fact that Crest Nicholson has lifted its full-year forecasts. It now expects to record adjusted pre-tax profit of at least £100m in the 12 months to October 2021. This is up from the £85m the company had predicted just three months ago.

Why I’d buy this UK share

There simply aren’t enough homes to go around in the UK. The sharp economic rebound on the back of the successful Covid-19 vaccination drive has helped lift homebuyer confidence, sure. But trading at Crest Nicholson and its peers was robust even during the depth of the public health emergency in 2020.

Newbuild sales have remained strong for a number of reasons. Massive government support through the Help to Buy equity loan scheme and the stamp duty holiday has driven demand. So have ultra-low interest rates that have brought down borrowing costs. Intense competition between the mortgage lenders has also encouraged people to jump on the property ladder.

And these factors look set to persist long into the future, too, meaning that demand should continue outstripping supply. Okay, housebuilders like Crest Nicholson face the threat of building product shortages that could push up costs and delay build rates. But all things considered, I think UK shares such as this are in great shape to deliver exceptional long-term returns.

The post Crest Nicholson upgrades FY forecasts! Here’s why I’d buy the UK share today appeared first on The Motley Fool UK.

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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Motley Fool UK 2021

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