Release Date: February 04, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Crest Nicholson Holdings PLC (FRA:C38, Financial) reported an improved cash position, reflecting better management of work in progress and deferred land payments.
- The company is on track to achieve a five-star customer satisfaction rating, indicating a strong focus on customer experience.
- There has been a reduction in build cost inflation to near zero, providing better visibility of the cost base.
- Crest Nicholson Holdings PLC (FRA:C38) has made significant progress in reducing greenhouse gas emissions, with an 18% reduction in Scope 1 and 2 emissions compared to 2023.
- The company has a strong land portfolio that is well-aligned to support medium-term growth.
Negative Points
- Revenue for the year decreased by 6% to GBP618.2 million, reflecting a challenging macro environment.
- Gross margin fell from 16.1% to 14%, impacted by completed site charges and flat sales prices.
- The company faced exceptional items totaling GBP166.1 million, including a significant charge for combustible materials.
- Legacy issues, such as fire provisions, have weighed heavily on performance, requiring substantial provisions and remediation efforts.
- There are still a number of low-margin sites in the portfolio that need to be traded through, affecting overall profitability.
Q & A Highlights
Q: Can you elaborate on recent trading and how sales rates and pricing have evolved at the start of the year?
A: William Floydd, CFO: Recent trading over the last four weeks shows a sales rate of 0.63, with sales prices better than budgeted. We've made specification changes and trained our sales team, which has helped, but it's hard to determine how much is due to market conditions versus our efforts. We expect the average selling price (ASP) to increase as we focus more on open market private homes.
Q: Regarding the planned margins and delivery, is the issue more about controlling build costs or the land bank itself?
A: Martyn Clark, CEO: The issue isn't with the embedded margin in the land bank. It's more about starting sites too early and appointing contractors without fully resolving issues, leading to claims and repeated work. We need to tender correctly and build right the first time to maintain margins.
Q: How many of the low-margin completions in 2025 are apartments, and what is the plan for bulk selling?
A: William Floydd, CFO: The low-margin site revenue will decrease, with a significant portion being apartments. We plan to be more thoughtful about bulk selling, focusing on generating cash and profit rather than rushing sales.
Q: What is the expected net debt position, and how does it relate to land value and site size?
A: William Floydd, CFO: We expect net debt to be in the range of plus 50 to minus 50 million GBP in the medium term. Our land value is relatively low given our southern exposure, and we are reviewing site sizes to ensure they fit our strategy.
Q: What is the timeline for executing the strategic initiatives, and what is the capacity per division?
A: Martyn Clark, CEO: Execution timelines vary; some initiatives may take six months, others up to three years. Division capacity can range from 300 to 700 units, depending on product and location. Our focus is on aligning land acquisition with our strategic goals.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
