Five years after Crest Nicholson was taken private at the peak of the property cycle, the upmarket housebuilder has made a successful start to life back on the stock market.
In the biggest flotation so far this year and the largest since Direct Line, the company priced its shares at 220p, the top end of its last indicated range. That values the business at £553m. As part of the float, Crest is raising £224.9m, with existing shareholders Varde Investment Partners and Deutsche Bank selling some of their stakes.
Since being taken private by HBOS and Scottish entrepreneur Tom Hunter in 2007, Crest has had a torrid time. Saddled with huge debts, it struggled when the property market turned down as the global financial crisis took hold. In 2009 it completed a debt for equity swap, and is now majority owned by Varde.
Crest's shares have climbed to 248p in conditional dealings which began this morning. Chief executive Stephen Stone said:
Having spent 39 of our 50 years as a listed company, we look forward to re-joining the public markets.
Analyst Robin Hardy of Peel Hunt said the company looked cheap compared to the rest of the housebuilding sector:
There are many things to like about Crest Nicholson: a heavy bias towards the true south east/home counties markets; it is closely aligned with government, which is rainmaker in this cycle; there is a drive for productivity gains, unheard of in this sector; it benefits from higher design standards; it has a long (nine-year) landbank without damaging its return on invested capital.
We have long said that small is beautiful in this cycle, as it allows a business to post real growth rather than a cyclical rebound in margins. Crest aims to grow unit sales by 12%-15% through the cycle and, while this may give smaller earnings per share increases than seen elsewhere, we believe growing in this way produces a far superior quality of earnings
Chris Searle, capital markets partner at accountants BDO, said:
Whether the success of the Crest Nicholson [flotation] heralds a general upturn in the fortunes of the London IPO market remains to be seen but, together with the general improvement in sentiment since the start of the year, this is an encouraging early sign.
