Crest Nicholson hit by £105m cladding charge as housebuilder puts brakes on expansion plans

Crest Nicholson’s latest pre-tax profit fell 62% due to £105m it has set aside to cover its developer pledge charge as it confirmed that it was parking plans to open a new regional division this year because of the slowdown in the housing sector.

The housebuilder, in its full year results for the year to 31 October, today reported a pre-tax profit of £32.8m, down from £86.9m the year before.

The firm, along with 46 other housebuilders, last summer agreed in principle to pay to fix ‘life-critical’ fire safety defects on their own blocks going back 30 years under the ‘developer pledge’.

Crest Nicholson, which initially estimated its pledge cost at between £80m and £120m, has now recognised a £105m charge in its accounts for the work.

However, its adjusted pre-tax profit, which excludes exceptional items including the developer pledge, rose 29% to £137.8m, which the housebuilder said was in line with expectations.

Crest also increased its revenue 16.1% to £913.6m, boosted by a 17.5% increase in sales income aided by rising prices.

The group has shifted its focus away from London in the past three years and rolled out its standard house type, which it said is “typically more efficient to build and offered to customers at lower price points than the group’s legacy house types”.

It said this shift would have reduced selling prices but this has been wiped out by the increased costs of building homes. The group’s average open market sales price rose from £359,000 to £388,000 year-on-year.

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The group also reiterated previously announced plans to halt the opening of a new regional division this year.

It said: “Given the current macroeconomic uncertainty the group has decided to defer the planned opening of a third new division in 2023 until further notice and will adjust the pace of expansion across the group.”

In October 2021, Crest announced a strategy to grow through geographical expansion. It has launched new divisions in Yorkshire and East Anglia and had been due to open a third this year.

The move follows other actions by major housebuilders to mitigate against the economic slowdown. Taylor Wimpey is eyeing £20m of cost-cutting, Persimmon has announced a pause in site openings and Barratt is halting hiring new staff.

The firm increased its completions 13.6% to 2,734 homes. Open market completions jumped from 1,924 to 2,212 homes while affordable completions rose from 483 to 522.