Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Crest Nicholson announced the exit of its chief executive on Tuesday as it reported a 70 per cent slump in annual profits amid soaring mortgage rates and high build costs last year.
The FTSE 250 housebuilder said adjusted pre-tax profits had fallen by 70 per cent in the year to the end of October, to £41.4mn, following a “disappointing” year marked by strained buyer affordability and rising costs related to some of its sites.
The company said its annual performance had been “more disappointing than anticipated”, reporting a 28 per cent drop in revenue to £657.5mn due to “weakness in the housing market”. Home completions dropped 26 per cent year on year, to 2,020.
Tuesday’s update followed a profit warning last week, in which Crest Nicholson scaled back its annual profit forecast to £41mn, down from £50mn. following climbing costs associated with developments including its Brightwells Yard site in Farnham.
The company’s hares were broadly flat on Tuesday. AJ Bell investment director Russ Mould said the share price had “hardly flinched in the face of a sharp drop in completions, sales and profits” because “last week’s profit warning had already lowered expectations”.
In a separate update on Tuesday Crest Nicholson said chief executive Peter Truscott was stepping down after five years in the job, to be replaced by rival Persimmon’s chief commercial officer Martyn Clark later this year.
The housebuilder’s woes have been compounded by a legal claim from UK asset manager M&G, which Crest Nicholson said on Tuesday it would aim to settle in order to avoid a protracted legal fight.
The FTSE 250 developer last week announced it had set aside £13mn after receiving a legal claim over a 2021 fire that caused extensive damage to a block of flats built by the housebuilder and owned by M&G.
The fire broke out at a low-rise apartment complex outside Reading in April 2021, with news reports at the time describing a blaze sweeping across the roof and upper level of the building.
Crest Nicholson on Tuesday said it had received a letter of claim alleging “fire safety defects and claiming compensation for the rebuild and other associated costs”. The company separately confirmed the claim was filed by M&G. M&G Real Estate declined to comment on Tuesday.
Truscott said the company would “always seek to find a settlement if one is available on sensible terms, compared to a long legal process”.
Fire safety in UK residential buildings has been under intense scrutiny since 72 people died in the fire at Grenfell Tower in London in 2017. Crest Nicholson’s provision for the legal claim is separate from the £144.8mn it has set aside for other fire safety remediation works. Dozens of major builders have commitment remediation funds under agreements with the government.
Truscott said a “combination of challenging trading conditions” and incremental rises in costs associated with some of its sites had weighed on its annual results. But he said the housebuilder was “starting to see the early signs of improvement in 2024”, adding that “recently there has been some positive macro trends with inflation and mortgage rates falling, which bode well for the housing sector”.
“I think people understand that it is now unlikely that there will be a significant [house] price correction,” he added.
Commenting on his exit, he said “despite challenging market conditions in recent years, [Crest Nicholson] has made good progress”.
Read the full article here