Crest dives into the red due to weak house sales, cladding and repair costs
House builder Crest Nicholson has warned that its annual profits are set to tumble after slumping nearly £31million into the red at the halfway stage.
House builder Crest Nicholson has warned that its annual profits are set to tumble after slumping nearly £31million into the red at the halfway stage.
It said that for the six months to the end of April, its revenues declined 8.9 percent to £257.5million, while home completions dropped to 788, versus 894 for the same period last year. Its sales rate per outlet, per week dropped from 0.54 to 0.47 and its £66.2million cash surplus had evaporated into net debt of £9.4million.
Due to the slow housing market, a £8.9million hit from replacing combustible cladding, and the £31.4million cost of rectifying building defects at four sites completed by its former regeneration division, Crest said that it had fallen to a pre-tax loss of £30.9million. Last year, it made a £28.4million profit.
The builder also slashed its dividend, from 5.5p per share to just 1p and outgoing chief executive Peter Truscott warned that its full year profits will be lower than it had originally expected.
Crest had previously forecast profits minus one-off costs of around £39milliion for the 12 months to the end of October. It now believes they will come in between £22 to £29million. Additionally, it said that its net debt is set to rocket to up to £60million.
However, Truscott said that he expects Crest to return to growth under the leadership of his successor Martyn Clark, formerly of rival builder Persimmon. Clark will take up the reins tomorrow.
He said that the structural shortage of homes in the UK, as well as efforts to improve its efficiency, tackling its historic building safety issues and getting planning consent for its land bank, means Crest will be able to “strongly capture growth when the market returns”.
Truscott added: “I am confident that under Martyn’s leadership and our highly experienced management, Crest will restore growth and deliver sustainable value for all stakeholders.”
Adam Vettese, analyst at investment platform eToro, said that Crest also has to contend with political uncertainty caused by the General Election and potential homebuyers holding fire while they wait for the Bank of England to start cutting its base rate.
“Crest will hope that these factors are alleviated and that it can get back on track in the second half,” he said.
