Housebuilder Crest Nicholson's profits down by 11% as build inflation bites

Crest Nicholson has reported an 11% drop in pre-tax profits to £64.4m for the six months to April 30 as the housebuilder came faced stagnant prices and rising build costs.

The group said revenues rose 7% to £501.9m, but profit margins were squeezed by build cost inflation at between 3% and 4%.

Crest said it has put its growth strategy on hold due to Brexit uncertainty, and shifted away from London's private sales market towards partnerships and joint ventures.

Crest said trading had been "encouraging" despite political uncertainty, as forward sales rose 15% to £625.2m from £544.4m a year ago.

Shares in the FTSE 250-listed firm rose 2% initially before closing 0.3% lower.

Interim chief executive Chris Tinker said: "The group has made good progress on delivering its revised strategy during this period of heightened political uncertainty.

"Having paused growth and de-risked our open market sales programme through increased pre-sales and partnership working, it is pleasing to report our first-half revenues up 7% from this time last year."

Crest said average selling prices were up 8% to £413,000, but the housebuilder warned that this would mark the high point for growth as it moves away from higher value homes and areas, such as London.

In January, Crest reported a 15% drop in annual profits to £176.4m, blaming Brexit uncertainties for putting off buyers and "breeding unease", as the company contended with an already sluggish London market.

Crest issued a profit warning in October after sluggish trading in the traditionally strong autumn selling season and was forced to revise pre-tax profits expectations to between £170m and 190m for the year, below market expectations of £205m.

It announced that chairman Stephen Stone is leading a new strategy which aims to stem the decline in profits, while new chief executive Peter Truscott is set to join from rival Galliford Try in September.

Analysts at Liberum said the revenues rise signalled that Crest's strategy rethink was beginning to pay off, despite the half-year profits fall.

They said: "Crest Nicholson is starting to see the fruits of its revised strategy more quickly than we or management originally expected."