Builder on crest of wave plans return to market

The builder said it plans an initial public offering (IPO) of its shares to capitalise on a “gradual” recovery in the housing market.

The 50-year-old company said the offer would comprise new and existing shares and the main proceeds from the offer, around £50m, would be used to pay outstanding debt.

“Crest Nicholson has a long and successful history as a public company and today we have announced our intention to return to the stock market,” said chief executive Stephen Stone.

“The housing market is entering a period of gradual recovery and with our emphasis on the South of England, including London, and the continued support for the new homes market from Government, we are well positioned to generate value for shareholders.”

Crest was taken private by Scottish entrepreneur Tom Hunter and mortgage lender Halifax Bank of Scotland in 2007 and is now majority owned by US distressed investment fund Varde Partners.

The 2007 takeover valued Crest at around £715m. The flotation is expected to value the builder at more than £500m.

Listed housebuilders including Persimmon, Barratt Developments and Bovis Homes have been reporting improved profits and increased output in recent months, aided by building on land acquired cheaply during the downturn, plus Government stimulus schemes.

Crest said it had a short-term land bank with 16,959 plots on 72 sites as of October, of which more than 95 per cent was in the South of England. Its land bank had an estimated gross development value of £3.9bn.

It also has a “strategic” land bank with 12,623 plots on 26 sites – worth an estimated £2.9bn.

The builder sold 23.8 per cent more homes in the year to the end of October 2012 at 1,882 completions.

It aims to increase annual volumes to 2,500 homes within three to four years, but plans to keep its London and South-East focus. It said this will be possible without significant extra overheads or structural changes.

Its average selling price increased 2.7 per cent to £230,000 and operating margins were up to 18 per cent from 17.7 per cent a year earlier.

It swung to a £62.1m pre-tax profit from £27m loss a year earlier.

“This has been a very good year for Crest Nicholson, driven by a 24 per cent increase in housing legal completions in the year,” said Mr Stone. “This growth reflects both stronger rates of sale and our rising number of sales outlets.

“Recently we have seen an encouraging pick-up in mortgage lending although lending volumes do still remain constrained.”