Crest Nicholson H2 Earnings Call Highlights

Crest Nicholson (LON:CRST) said its FY25 results were in line with expectations set out in its November trading update, as management pointed to early signs of improving demand since the start of the calendar year and detailed progress on its Project Elevate transformation plan.

FY25 results, restatement, and dividend

Finance Director Bill explained that FY24 was restated after the company identified a margin issue on one site in the Eastern Division where profit had been overstated between FY22 and FY24. The cumulative impact on adjusted profit before tax and inventory was £8.3 million, with £2.1 million of that in FY24. Management said it reviewed the rest of the portfolio and was satisfied there were no similar issues elsewhere.

For FY25, Crest Nicholson reported revenue of £610.8 million, broadly in line with FY24. Adjusted gross margin increased by 30 basis points, with the benefit coming from land sales, while housing margin was said to be in line with 2024. Overheads fell by £5.7 million, though this was partly offset by lower profit in other income, largely due to lower rents.

The board proposed a final dividend of 1.8p per share, bringing the total dividend for the year to 3.1p per share. Bill said this aligned with the company’s policy of dividend cover of 2.5x adjusted earnings. Adjusted basic EPS was 7.8p, up 56%.

Sales trends and reservations

Operationally, average outlets were 40, down from 44 in FY24, which management attributed to planning delays affecting the pace of new outlet openings. The open market sales rate averaged 0.51 for the year. Management described a stronger first half (0.53) but said the rate slipped to 0.49 in the second half amid broader economic uncertainty.

Completions totaled 1,691, including 164 at joint venture sites. Bill said Project Elevate sales improvements supported a 5% increase in open market completions despite fewer outlets, while bulk completions were intentionally scaled back.

After the seasonal slowdown around Christmas and New Year, management said it was encouraged by recent inquiry and reservation trends. The company cited improved conversion following the launch of a new website, with the sales rate over the last three weeks running at over 0.6. In Q&A, management said that three-week sales rate was “about the same” as the equivalent period last year.

Sales for FY26 as of the end of the prior week stood at 848 units across all categories. Management said this reflected reduced expectations for affordable and bulk volumes and a subdued market in the last calendar quarter of 2025. Bill also said a reduction in open market average selling price in FY25 was driven by a mix shift toward apartments, which he expected to normalize as those sites complete.

Land bank actions, disposals, and outlets

As part of a strategy to realign its short-term land bank, Crest Nicholson completed five disposal transactions totaling 1,119 plots, generating £81.4 million of revenue at a 21% margin. Bill said these parcels were from sites the company would not have been able to access for several years, improving balance sheet efficiency and helping protect near-term outlet positioning.

Management said it received around £30 million of cash from land sales in FY25, with around £50 million expected to be received in FY26. On acquisitions, the company completed four transactions for smaller sites aligned with its “mid-premium” strategy and described as less capital intensive.

After the year’s realignment actions, the overall land bank position decreased by just over 2,000 units. The short-term land bank stood at 6.5 years based on current volume, above the company’s medium-term target of 4-5 years. Bill said Crest expected nine site openings in FY26 to lift average outlets, and in Q&A noted the company aims to add “a net 2 or 3 sites each year,” with the current spot outlets still around 40.

In Q&A, management added that land sales are expected to remain “a feature of the P&L for a reasonable amount of time,” especially as large strategic sites come through planning and require decisions on how best to monetize them.

Fire remediation progress and exceptional items

Management said it made “substantial progress” on its fire remediation program, including meeting the survey completion date agreed with government. Bill said all but two buildings had been surveyed, with those two expected to be surveyed by March with MHCLG assistance to gain access.

Among exceptional items, the company recorded a net £4.1 million increase related to the Combustible Materials Charge, reflecting a projected cost increase of £16.5 million offset by £12.4 million of cash recoveries. Bill said the key cost risk remains external wall work, noting that 82 buildings require no external work, while 215 buildings require work across three broadly equal categories: already completed/on site, surveyed with quotes and ready to commence, and surveyed with provisions updated based on experience from the rest of the portfolio.

Other exceptional items included £4.3 million of restructuring costs linked to Project Elevate (with a similar charge expected in FY26), and £2.2 million relating to a defined benefit pension scheme review and GMP equalisation. The company said the pension scheme remains in surplus and it does not anticipate a cash outflow for that item. It also referenced a December settlement of a legal claim relating to an apartment scheme damaged by a 2021 fire, with FY25 costs mainly legal and professional fees.

Balance sheet, FY26 guidance, and Project Elevate targets

Crest Nicholson said it ended the year with net debt of £38.2 million, “again beat[ing]” its guidance, supported by inventory reduction and funding of fire remediation costs incurred during the year. Inventory fell by £73 million, driven by the land disposal program and improved management of finished stock and part exchange homes, partly offset by a smaller increase in work-in-progress due to the second-half sales slowdown.

The company also reduced the fire remediation provision by £46.5 million and land creditors by £58.4 million. Bill said the company recently extended its revolving credit facility to October 2029. The group also has £65 million remaining from its original £100 million private placement, with the next repayment date in August 2027.

For FY26, Crest Nicholson guided to adjusted PBT of £32 million to £40 million, with an interest charge expected to rise to £10 million to £12 million as the group expects to be in net debt throughout the year. It expects a further uptick in open market sales volumes supported by Project Elevate sales initiatives, specification upgrades, more outlets, and a “modest improvement” in the market as mortgage rates gradually reduce. ASP is expected to return to at least FY24 levels, and the company expects improved discounting. The company also said bulk and affordable volumes would reduce further in line with its strategy, with management confirming in Q&A that bulk would be about half of the prior year.

On cash, Bill said Crest is targeting a similar year-end net debt level to FY25, with a range of plus or minus £25 million. He also outlined expected FY26 cash items including £85 million to £100 million for remediation spending (timing dependent), around £100 million land spend, and around £25 million combined cash outflow for interest, tax, and dividends.

Project Elevate remains centered on shifting Crest Nicholson toward the “mid-premium” market. Management reiterated four strategic pillars—quality and efficiency, customer service, operational and commercial excellence, and optimizing the land portfolio—and set out medium-term ambitions for FY29 including completions of over 2,300, gross margins above 20%, overheads around 7%, and return on capital above 13%.

About Crest Nicholson (LON:CRST)

Crest Nicholson Holdings plc engages in building residential homes in the United Kingdom. It develops and sells apartments, houses, and commercial properties. The company was founded in 1963 and is headquartered in Addlestone, the United Kingdom.