Crest Nicholson Share Discussion Threads

[creative_accountant] 24/3/2017 11:19

I’m not happy about the situation and I am now contemplating selling my entire CRST stake and buying Redrow and TEF instead. TEF is better value on all metrics and RDW very similar value but with a more bullish management team.

I don’t like the fact that CRSTS LTIP target of 6-8% growth in PBIT doesn’t tie up with its revenue target of 1.4bn; how are they going to grow revenue by 40% and pbit by a compounded rate of 6-8% per annum until 2019 or 19-25% compounded. That implies an erosion of margins with current pre tax profit margin of 19.5% their figures imply that Profit before tax will grow to 195*1.06^3 =232mn but with revenue of 1400mn = 16.5 pre tax profit margin. Or at 8% which is the full vesting target of 195*1.08^3 = 245mn/1400 = 17.5%

This is well below broker forecasts, even the downgraded ones now out on 4-traders.com. This pales in contrast to RDW’s significantly uprated figures and for that reason I think it’s time shareholders dump this stock. The LTIP target does not tie up with the revenue growth target.

[1gw] 24/3/2017 09:49

And perhaps worth commenting that 6% pa PBT-per-share growth over the next 3 years for a business with good top line growth expected and a trailing PE of about 9 seems pretty good to me.

[1gw] 24/3/2017 09:31

This was a major part of the formal AGM session. Crest knew which way the wind was blowing, from conversations with shareholders ahead of the meeting, and gave a rather odd presentation on the matter - basically arguing that it was a particular part of the 2017 long-term performance plan that was the problem and that "in the round" shareholders were happy with the [edit] remuneration policy. You can see from the voting that the "remuneration policy" was comfortably approved, but the "remuneration report" was not approved.

The part that caused the problem apparently was the 2017 LTIP Profit before tax metric. Here the threshold is 5% (25% vesting if cumulative annual nominal growth in PBT per share over 3 years is at least 5%), target is 6% and maximum is 8%.

The objection is that the targets were much higher in the previous year's plan (16% threshold, 18% target, 20% maximum in the 2016 LTIP covering the 3 years to 2018.).

The Crest argument is given in the annual report:
"With regard to the PBT element, following a period of very strong growth up to the end of 2016, we anticipate a temporary slowdown in profit growth during the next three-year performance period as we invest in the business towards medium-term targets of £1.4bn sales and 4,000 units in 2019....The threshold of 5% p.a. is in line with the typical threshold growth targets at FTSE 250 companies, while the target of 6% is in line with our internal long-term plan."

I hadn't noticed this section before, but the disclosure of the 6% number in their internal plan is interesting in the context of investors building their own spreadsheets with profit estimates.

The average growth in the PBT metric over the 3 years 2014-2016 was 36.0% p.a. according to my reading of the annual report.

While the pay controversy is interesting, the insight it gives into expected underlying profitability is perhaps more relevant to investors. It would suggest that Crest management believe that after a period of staggering outperformance as they recovered from the mess of the financial crisis the business is now headed for a period of more pedestrian profit growth.

[speedsgh] 24/3/2017 07:10

Investors claim first scalp as pay revolt gathers pace -

The backlash against excessive pay and bonuses heated up yesterday after investors voted against generous awards to Crest Nicholson directors in a new wave of shareholder revolt...

[1gw] 23/3/2017 08:55

Agree. I was expecting to come across a "however" as I read through it. But perhaps they're emphasising the "stretching" nature of the targets to try to head off shareholder discontent with the remuneration package.

Something to ask about at the AGM today perhaps.

[gbh2] 23/3/2017 08:14

Appears to lack enthusiasm to me.

[1gw] 23/3/2017 08:11

Steady as she goes seems to be the message from the statement.

[1gw] 22/3/2017 12:09

BKG, BWY and RDW all saying good things about current trading. Let's hope CRST continues the trend with an AGM statement tomorrow.

[pillion] 21/3/2017 10:46

Good report from

[1gw] 17/3/2017 09:39

Crst share price benefitting from the BKG statement this morning I think:

"The housing market in London and the South East has now stabilised. Overall, underlying reservations in the seven months since the immediate Brexit referendum effect (August to February) are down 16% on the comparable period last year, with the last two months ahead of last year. Enquiry levels remain robust, cancellation rates are at normal levels and pricing continues to be resilient and above business plan levels."

[pillion] 16/3/2017 12:59

Price drop today on account of it going ex-dividend

edit
to the tune of 18.5 pence

[pillion] 15/3/2017 15:15

They don't always give a Trade Update at AGMs
Meanwhile I take holding comfort from this

[1gw] 15/3/2017 15:05

I'm trying hard not to take more profit at the moment. In fact I've been buying BKG and taken a smaller position in BVS as well.

There's a BKG TU on Friday, the CRST AGM (and presumably TU) on 23rd March and the takeover code deadline for Bovis on 9th April. On the other hand you've got today's Fed decision & press conference plus the formal triggering of Brexit.

I'm hoping for continued positive sentiment from BKG and CRST management on the outlook for the housing market (after all the spring selling season must be in full force now mustn't it?) and some competition between Redrow, Galliford Try (and someone else?) for Bovis. I think this could scare out a lot of the short positions in the UK housebuilders and cause a decent squeeze higher in the prices.

But of course, if RDW and GFRD walk away from BVS, the market reacts badly to the Fed dot plot and people start getting worried about the realities of brexit again then it could all head south.

[pillion] 15/3/2017 14:57

Salpara, interesting !
Myself, I'm keeping a close watch on this chart

[salpara111] 15/3/2017 14:42

Hmm,
Near all time high.
I have been in for over 2 years and have to say that I am tempted to take my money off the table.

[1gw] 13/3/2017 14:47

And they've got a short position in AMEC.

A really bad Monday for them by the look of things.

[1gw] 13/3/2017 10:47

Yes, Millennium also holding a 0.52% short position in Bovis as of their latest announced change (21st February).

[junior21] 12/3/2017 12:34

Telegraph also mentions Galliford Try interested in Bovis. Whole sector should be perky tomorrow morning. Won't be a great start to the week for Millennium

[1gw] 12/3/2017 10:12

Good news and bad news on the front page of the Sunday Times Business section today:

Good News
A story that Redrow has approached Bovis Homes about a merger (and the approach has been rejected).
It must be good news for share prices in the sector I would have thought if the market starts to believe that consolidation is on the cards and if some actual values are put on the table showing an interesting premium to market cap.

Bad News
Crest has lost a tax tribunal case on stamp duty avoidance related to land purchase. Doesn't sound particularly material in isolation but potentially bigger impact as a precedent for other transactions.

[1gw] 10/3/2017 08:01

0.84% 7th March (Millennium short position).

[1gw] 06/3/2017 16:14

Millennium reduced their short position a touch on 2nd March:

0.63% 1st Feb
0.70% 2nd Feb
0.84% 6th Feb
0.90% 8th Feb
1.00% 13th Feb
0.97% 21st Feb
1.03% 23rd Feb
0.99% 2nd March

[1gw] 02/3/2017 09:45

Just had a look through the history of Millennium's UK short positions. It doesn't seem your typical deep conviction shorter holding positions for a long time. Instead it seems to chop and change quite frequently. It has had fairly recent short positions in Bellway, Bovis and Taylor Wimpey as well as Crest Nicholson. But if you look at its history in any one stock (not just the housebuilders) you'll see it making a lot of changes to its positions, both up and down.

So I think it is credible that it might start to reduce in the near term if the Crest position continues to move against it, unless of course it is paired with something that is making them more money than they're losing on the Crest side.

[1gw] 01/3/2017 14:09

This has got to be causing a bit of stress in Millennium. While I stand by my earlier comment that institutional shorters generally seem to have strong convictions and deep pockets, I noticed Millennium did take a bit off the table on 21st Feb (taking advantage of a dip) before adding to their short again on 23rd. It would be wonderful to see them reducing and chasing the shareprice higher today rather than adding.