New boss Martyn Clark carries out review of business as firm warns of scenario in which it could breach its lending agreements
Crest Nicholson has reported a £144m loss amid increased building safety costs and falling completions.
The housebuilder, in its results for the year to 31 October, reported the pre-tax loss, which compares to a £23.1m profit the previous year.
Crest Nicholson’s exceptional charges totalled £166m, including £132m to replace combustible materials and £25m for other remedial work at completed sites. It brings Crest’s total provision so far for safety remediation works to £249m.
The group said that it has signed up to a plan to accelerate remediation of its blocks under the developer remediation contract agreed with the government to start work on all affected buildings by July 2027.
“As a consequence of additional and better information, we are now in a position to account for the expected costs for known buildings within scope,” it said.
The group’s revenue and profit would still have fallen without the building safety costs.
The housebuilder’s adjusted pre-tax profit, excluding the one-off items, more than halved from £48m to £22.4m while its turnover fell 6% from £657.5m to £618.2m.
Crest Nicholson also said it has identified a ‘severe but plausible’ scenario under which it would not meet its interest cover conditions in lending agreements under a combination of “downside conditions”, including macro-economic scenarios experienced by the UK, along with ”industry-wide dynamics” and ”group-specific risks”. Although it stressed it would meet covenants under its “base case scenario”.
It said: “The assessment also evaluated the anticipated effectiveness of proposed mitigating actions that are within the group’s control.
“While the group forecasts to meet all its covenants in the base case scenario, the cumulative impact of the assumptions and mitigations in the SBP downside case indicates that the group would not meet its interest cover covenant during the going concern period, with the first measurement date in April 2025.”
Crest Nicholson stressed that it is confident an amendment could be secured to its covenants from its lenders if necessary.
It said: “However, this is not guaranteed and therefore this represents a material uncertainty related to going concern.”
Martyn Clark, who took over as chief executive of Crest Nicholson in June, said the group’s results were in line with guidance issued at the start of his tenure.
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He said: “Nevertheless, this has been a very tough and disappointing year for the business. Despite this, there must be acknowledgement of the hard work and dedication of our colleagues at Crest Nicholson, and I extend my heartfelt thanks to them for their continued commitment to the Group.”
Clark said he has undertaken a comprehensive review of the business and shall report his findings next month.
He said: “This has allowed me to identify the market opportunity and craft a strategy that will allow us to maximise that opportunity and optimise the company for sustainable growth with an appropriately scaled cost base that will enhance profitability and consistent shareholder value creation.”
Clark said since June Crest Nicholson has improved governance, upgraded management information and improved its “operational rigour and cost control”.
The group’s total home completions fell 7.3%, from 2,020 to 1,873, which the firm said reflected its “weak order book at the start of the year as a consequence of low levels of confidence in the housing market”. Open market sales per outlet per week dropped from 0.52 to 0.48 year-on-year.
It said: “The housing market remained sluggish throughout 2024 compared with much of the previous decade, with comparatively high mortgage rates, low consumer confidence and an absence of meaningful government support all contributing to the suppressed levels of demand.
“As the year progressed, a commencement of loosening monetary policy and a new government with more expansive housing aspirations provided some level of improvement in the overall sales environment.”
Crest Nicholson’s average number of sales outlets from 47 to 44, it said it expects a further minor reduction in 2025, which it puts down to sites taking longer to progress to operational development due to planning matters and “associated environmental impacts such as water and nutrient neutrality”. The group’s housing revenue fell 10.3% to £572.5m.
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