Crest builds on recovery: Revitalised group kicks off growth strategy with cash call

THE MARKET gave Crest Nicholson its seal of approval yesterday, pushing the shares 6p higher to 114p after the South of England housebuilder returned to the black and launched a rights issue.

John Callcutt, chief executive, said: 'Since 1991 we have cut overheads, sold peripheral businesses and restored profits. We now believe the time has come to change from a strategy for recovery to one for profits growth.'

He said the one-for-four cash call, priced at 88p a share, would raise pounds 19.1m to buy housing land and spread out of the company's southern heartland.

The decision to tap the market follows a sharp rise in the company's shares, which fell to a low of 24p in September 1992 after write- downs of land and development values pushed Crest pounds 59m into the red in the year to October 1991.

A return to profits of pounds 2.1m last year after a pounds 1m deficit in 1992 confirmed the upturn in the housing market, but the company warned that its construction division would be loss-making this year.

Turnover rose 13 per cent to pounds 273m ( pounds 241m), reflecting higher house sales and continuing disposals from the property division, which offset lower sales from the construction arm.

Earnings per share emerged at 0.01p (3.96p loss), but Mr Callcutt said a 1p uncovered dividend would be paid to reflect the group's confidence in its prospects. The last payout was in 1990.

The residential division improved its profit margin slightly despite a small fall in the average selling price to pounds 75,500 ( pounds 76,200). Profits rose from pounds 4.8m to pounds 7.7m. Property bounced back to a pounds 1.1m profit after last year's pounds 2.3m loss, but Mr Callcutt said Crest would not return to large speculative developments.

Construction fell to a pounds 2.4m loss after a pounds 1.9m profit. The level of orders remains disappointing and the division will fail to cover its overheads again this year, with a 'somewhat worse' loss expected.

Following the rights issue pro forma gearing will fall to 17 per cent. Borrowings have been reduced from a high of pounds 118m to pounds 21m.

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