Crest Nicholson Profit Slips as House Prices Falter

Crest Nicholson Plc, the U.K. homebuilder that rejected a 479 million-pound ($872 million) takeover approach from Heron Corp., said fiscal first-half profit slipped 0.8 percent as house prices faltered.

Net income for the six months through April was 24 million pounds, or 21.3 pence a share, compared with 24.2 million pounds, or 21.6 pence, a year earlier, Weybridge, southeast England-based Crest said today. Sales added 11 percent to 315 million pounds.

``A reasonable set of results, but the slower conditions are already showing through,'' Chris Millington, an analyst at Bridgewell Securities in London, wrote in a note to investors. He has an ``underweight'' recommendation on the stock.

U.K. house-price inflation slowed to the lowest in nine years in the month through June 13 as the highest interest rates since August 2001 prompted Britons to shun purchases, property Web site Rightmove said this week. Crest and Berkeley Group Holdings Plc, which publishes results tomorrow, are first to report earnings.

Shares of Crest fell as much as 5 pence, or 1.3 percent, to 388 pence and were trading at that price as of 10:04 a.m. in London. The stock has gained 5.9 percent this year for a market value of 432 million pounds.

``We have to work hard in this market,'' Chief Executive John Calcutt, 58, said on a conference call. ``We're in a more challenging market but we're in areas of demand. We're very confident for the future.''

Analysts expected net income of 23.85 million pounds and sales of 285.55 million pounds, according to a Bloomberg survey.

Selling Price

The average selling price of a Crest home rose 2 percent in the half to 220,000 pounds. The company also incurred 2.1 million pounds of costs from the takeover bid by Heron.

Crest, which focuses on low-cost housing and urban regeneration, said operating profit as a proportion of sales ``is likely to come under further pressure'' in the next six months, falling as much as 1 percent in 2005 compared with 2004, as lower price gains crimp profitability.

``I think Crest will hold up better than most because their business model is more sustainable,'' said Mark Hughes, an analyst at Numis Securities in Liverpool, northwest England, who has a ``hold'' recommendation on the stock.

The Bloomberg Europe Home Builders Index, whose nine members are all British, yesterday rose 3.1 percent after Bank of England minutes showed two of nine policy makers argued for rates to be cut on June 9, the first such votes since July 2003. The central bank has kept interest rates at 4.75 percent for 10 months.

``I want a cut,'' Calcutt said on the call. ``I think an interest rate cut will provide a much needed stimulus.''

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