Crest Nicholson have reported good sales performances, but due to continuing build cost inflation during their half year have also experienced dented margins.
During the six months to the end of April 2018, operating profit margin fell to 17.2% against the 19.1% declared for the same period the previous year. Crest added that “given [the] generally flat pricing environment”, their full year margins were likely to be around 18% compared to the 20.3% of their last financial year
Pre-tax profit also dipped 2% to £74.8 million, which Crest claimed was governed by higher financing costs “due to investment in new sites and the timing of joint venture performance”.
In the same period, housing units rose 18% to 1,251, with open-market average selling prices (excluding PRS) rising 5% to £439,000 and open market housing sales revenue increasing 16%.
Sales per outlet per week (excluding PRS and a bulk sale) averaged 0.72 compared to 2017’s 0.81, which the housebuilder said reflected the change in product and location mix, whilst forward sales at mid-June 2018 were 5% ahead of the previous year at £568.2 million.
“The group has delivered a good sales performance in the first half of the year,” said Patrick Bergin, Crest’s CEO. “Our experience of generally flat pricing against a backdrop of continuing build cost inflation has, however, had an adverse impact on our margins and we have taken a number of actions to seek to offset build cost pressures and invest in areas of greater housing affordability.”
Bellway have recently reported that they expect volume growth, for the whole year, of around 600 homes; this “should enable the group to complete the sale of in excess of 10,000 homes for the first time in its history”.
The company also experienced a 5.4% rise in their reservation rate to 233 per week during the period from February 1st to June 3rd 2018, against the comparable dates in 2017, with market conditions remaining “favourable”.
The value of Bellway’s order book increased 7.8%, at £1,703 million, as of June 3rd 2018, comprising 6,144 homes against 5,819 reported in the equivalent period last year.
Bellway stated: “An expected average selling price in excess of £280,000 and an anticipated operating margin of around 22% should contribute to another year of substantial earnings growth”.
Kier Living, Homes England and Cross Keys Homes have combined forces to deliver up to 5,400 new homes in “areas of the country with the greatest need”.
Over the next decade, this joint venture partnership will provide mixed tenure housing in key locations across England and has already declared their first four sites: The Laurels in Tipton; Meadowbank, Newcastle-under-Lyme; The Orchards in Rushwick and Chelmsley Lane, Marston Green.
The partnership has also said that its pipeline for additional sites was expected to expand, by mid-2020, to 18 active sites to cover “the breadth of the country”.
The venture intends to concentrate on skills and new innovations, with over 50% of labour sourced locally, a minimum of 3 new apprenticeships at each site, and using modern methods of construction (MMC) on at least 20% of the homes built
Homes England is providing up to £27 million in mezzanine funding from its £3 billion Home Building Fund and is taking a 26% equity stake.
Kier Living has already worked with both Homes England and Cross Keys Homes; on Homes England’s £8 billion Delivery Partner Panel framework, and a previous joint venture with Cross Keys Homes which so far has completed 357 units across the east of England.
“This joint venture is an important new milestone, bringing Homes England, Kier and Cross Keys together in an innovative industry model” said John Anderson, Executive Director of Kier Living. “It is fuelled by the shared ambition of three like-minded organisations to bring forward development activity and get more homes built, against a backdrop of housing demand continuing to outstrip supply.”