Crest Nicholson targets £50m fundraising as it eyes return to the stock market

Housebuilder Crest Nicholson has returned to profit and unveiled plans to float on the London Stock Exchange, more than five years after it was taken private at the height of the property boom.

The move follows signs of improving conditions in the construction sector, with listed rivals Barratt and Taylor Wimpey last week predicting strong profits growth for 2012.

Surrey-based Crest, which spent 39 years on the London market before being taken private by Scottish entrepreneur Sir Tom Hunter and HBOS in a £715 million deal in 2007, hopes to raise about £50m through its initial public offering (IPO), which is expected to complete next month. At least 35 per cent of its shares will be free float, or available to private investors, following the offer.

Hunter no longer has a stake in the business, which is now controlled by Deutsche Bank and US investment fund Varde Partners, after the downturn in the property market led to two debt restructurings in 2009 and 2011.

News of the planned flotation, which could give Crest a market valuation of at least £500m, came as the builder posted a pre-tax profit of £62.1m for the year to 31 October, compared with a loss of £89.1m a year earlier. Revenues rose

27.9 per cent to £408m.

The number of legal completions rose 24 per cent to 1,882, and the open-market average selling price edged up 3 per cent to £230,000. Crest believes it can build up to 2,500 homes a year without making significant changes to its business model or “materially reducing the extent of management’s hands-on involvement”. Chief executive Stephen Stone said: “Crest Nicholson has a long and successful history as a public company.

“The housing market is entering a period of gradual recovery and with our emphasis on the south of England, including London, and the continued support for the new-homes market from government, we are well-positioned to generate value for shareholders.”

Stone, who joined the firm in 1995 and became chief executive in 2005, said the £50m proceeds from the flotation would be used to pay down the group’s borrowings. Its net debt stood at £30.3m at the end of October, down from £42.8m a year earlier. It also hopes to use some cash to buy more land, adding to its short-term land bank of almost 17,000 plots, of which 95 per cent are in the south of England, and a “strategic” land bank of more than 12,600 plots. Taken together, the firm is sitting on land with an estimated gross development value of £6.8 billion.

Crest’s offer to list will incorporate a sale of existing shares by some institutional shareholders, including Deutsche Bank and Varde, while directors, senior managers and staff will be able to achieve a “partial realisation of their investment in the company”.

However, it said management and employees will retain at least 75 per cent of their existing interest in the builder, which was founded in 1963 and floated five years later. The company employs almost 600 people.

Sentiment towards the construction sector is rising following a recent run of upbeat trading statements, and Stone said he hoped firms such as Fidelity and Standard Life, which were shareholders in Crest before it was taken private, would participate in the IPO. Standard Life declined to comment on its intentions.