Crest Nicholson Profit Falls 4.2% on Increased Costs

Crest Nicholson Plc, a U.K. homebuilder, said fiscal full-year profit declined 4.2 percent after building costs rose and it incurred extra expenses rejecting a 479 million-pound ($854 million) approach by Heron Corp.

Net income through October fell to 52.6 million pounds from 54.9 million pounds, the Weybridge, southern England-based company said today. Revenue rose 11 percent to 714.3 million pounds, though the cost of achieving those sales advanced 13.5 percent.

Crest is focusing on lower-cost housing where demand is holding up best in a tougher U.K. property market. It's targeting savings of 10 million pounds a year by 2008, a program that will help counter rising production costs and increased use of financial incentives to secure home sales. Fending off Heron cost 2.1 million pounds in professional expenses.

``The group is in a strong position,'' Teather & Greenwood analyst Kate Moy said in a report. ``Forward sales into the new financial year together with completions taken to date account for 50 percent of budgeted units for the year.''

Shares of Crest rose 11 pence, or 2.4 percent, to 473 pence. The stock is little changed this year, giving the company a market value of 527 million pounds.

`Improving Market'

Crest sold 3 percent more homes at prices 5 percent higher.

``It's too early to predict the outcome for 2006, but early signs of an improving market, particularly in the southeast, make us cautiously optimistic,'' Chief Executive Officer Stephen Stone, who took up the post in November, told reporters on a call. ``We've started a program of targeted savings to maximize returns.''

The average price of a Crest home advanced to 220,000 pounds after it secured higher prices for apartment blocks sold to housing associations, which then rent out the units. Prices in that market, which accounts for a fifth of sales, gained 15 percent, while for homes sold to individual customers the figure was little changed at 245,000 pounds.

The average selling price will probably fall about 10 percent this year as the builder increases the proportion of social housing to 30 percent, based on a sales target of between 2,900 and 3,000 units, Stone said on the call.

Heron, the biggest investor in the builder with a 23.4 percent stake, has made no further contact with the company since it pulled its bid, Stone said.

``We think we've got a pretty clear strategy and we're pursuing that,'' he said. ``The fundamentals of the housing market are good.''

Profit at Crest, which published its figures under U.K. General Accepted Accounting Standards, equated to 46.7 pence a share, compared with 49 pence. The company said it will update investors next month on its performance under International Financial Reporting Standards.

More than 7,000 European companies are adopting IFRS to help align rules across countries and raise transparency.

To contact the reporters on this story: Brian McGee in London at

To contact the editor responsible for this story: Chris Jasper

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