Crest Nicholson: Housebuilder pivots away from low-margin affordable homes
Housebuilder Crest Nicholson has said it will trade away from low-margin sites – like affordable homes – as it looks to shore up its balance sheet after a tough year.
Crest told markets this morning, it built 1,873 homes in the year ended October 31, of which 45 per cent were affordable – just under the Government’s target of 50 per cent.
The company expected adjusted profit before tax to be at the lower end of the guidance range of £22m – £29m, due to a “higher proportion of both affordable homes delivered in the year and as we continue to trade out of low-margin sites”.
Chief executive Martyn Clark said 2025 will be a “year of transition” for Crest Nicholson.
“We are well-positioned with sufficient land with full planning permission to support our planned outlets and volumes. We will focus more on private sales and prioritise value over volume to enhance returns and margins,” he said.
The low economic viability – or profit – to be made on affordable homes has been a key contributor to their low supply, with firms often choosing to focus on higher-end homes with better margins.
However the government has set a target to enhance supply of affordable, with planning reform meant to reduce the high bureaucratic costs of housebuilding and grant funding to support development.
Chief executive Martyn Clark was optimistic about the future of housing in the UK, although he said that 2024 has been a “challenging year” for the sector due to “both internal and external factors”, with private open market sales volumes continuing to be impacted by ongoing affordability concerns.
Crest had been set for a takeover by Bellway earlier this year, but the larger housebuilder walked away at the last minute, causing Crest’s share price to slip. Its share price has fallen 28 per cent in the year to date.
“Encouragingly, the broader economic landscape is becoming more favourable, with a more benign interest rate environment and increased government support to improve the planning process to deliver their ambition of increasing supply of much needed homes in the UK,” he said.
Crest added that cost inflation for wages and materials had stabilized.