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Investing.com -- Crest Nicholson Holdings (LON:CRST) saw its shares surge over 10% on Thursday after reporting a strong start to the year, buoyed by improved sales rates and a sharp rise in customer satisfaction.
In the first ten weeks leading up to March 14, the company recorded an open market sales rate of 0.61, compared to 0.50 in the prior fiscal year.
This improvement has been attributed to internal initiatives, including enhanced training for the sales team, revised incentive programs, and a refined product offering.
The company has also made strides in customer satisfaction, posting a score of 95% in the 2024 survey year, an increase from 87.3% in 2023.
Despite economic uncertainty and a cautious market outlook, Crest Nicholson reaffirmed its expectation to meet financial guidance for the year.
Cash performance has exceeded internal projections in the first four months of the fiscal period.
Mortgage rates have shown slight improvements, but the company acknowledges the potential headwinds from persistent inflation and the delayed timeline for anticipated interest rate cuts, which could continue to weigh on the broader housing market.
RBC Capital Markets analysts view Crest Nicholson’s medium-term targets as challenging but achievable, stating that the company appears to be on a stronger footing compared to previous years.
They note that Crest is on track to meet FY2025 guidance, with its cash performance exceeding expectations.
The 22% year-over-year increase in sales rates is credited to the company’s internal improvements.
RBC also flags that if external market conditions improve, Crest may even exceed its targets. However, consistent execution will be key to sustaining this momentum.
Crest Nicholson has also laid out its medium-term strategy, covering the period from fiscal year 2024 to 2029.
The company aims for mid-single-digit annual growth in home completions, targeting more than 2,300 units per year.
Gross margins are projected to improve by approximately 100 to 150 basis points annually, reaching over 20%.
Additionally, the company plans to reduce overhead costs to around 7% of revenue by fiscal year 2027, alongside an expected annual increase of 200 basis points in return on capital employed, aiming for 13%.
Chief executive Martyn Clark in a statement said that initial operational changes are beginning to yield results.
Clark stated that his primary focus upon joining the company was to address inefficiencies and reposition Crest Nicholson for long-term success.
He emphasized that the company’s strategic direction centers on strengthening its foothold in the mid-premium housing market by prioritizing customer-centric initiatives, operational efficiency, and land portfolio optimization.
RBC Capital Markets also pointed out that Crest is currently trading at a 45% discount to the sector on a price-to-book basis.
Analysts suggest that any demand-side stimulus could provide a further boost to the company’s performance and valuation, with a price target of 180 GBp assigned to the stock.