Crest Nicholson’s profit slumps over high-cost ‘legacy sites’ as potential £13m legal bill looms
Crest Nicholson reported a slump in profits for 2023 amid runaway costs and has prepared for a possible legal bill of £13m over a 2021 fire, after the FTSE 100 housebuilder issued its third profit warning in six months last week.
The firm also announced that current chief executive Peter Truscott will retire later this year and be replaced by rival Persimmon’s chief commercial officer Martyn Clark.
The company’s pretax profit slumped to £41.4m from £137.8m year-on-year, dragged down by additional costs of £5.5m related to issues at its Brightwells Yard regeneration scheme in Farnham and “other legacy and low-margin sites”.
It won a contract to build a mixed use development site in Farnham back in 2003 but after struggling to find financial backing it is only now close to completion two decades later.
The firm has also earmarked £13m to cover potential costs tied to a legal claim over a fire at one of its low-rise apartment sites in 2021.
Crest Nicholson’s revenue cratered by more than a quarter (28 per cent) to £657.5m, which the firm said reflected “weakness in the housing market”.
Home completions plunged to 2,020 from 2,734 the previous year.
“The combination of challenging trading conditions and incremental cost movements associated with Farnham and other legacy low-margin sites have led to a disappointing set of results in FY23,” outgoing chief Truscott said.
“Recently there has been some positive macro trends with inflation and mortgage rates falling, which bode well for the housing sector. Although it is too early to gauge customer behaviour, we have been encouraged by an increase in customer interest levels and inquiries this calendar year. However, we remain mindful of ongoing uncertainties within the broader economy.”
The firm noted a “deterioration of trading conditions” with a tough macroeconomic backdrop, leading it to undergo a wide-ranging restructuring.
It said it was reviewing “all activities” to reduce overheads and “streamline” the business, including slowing down plans for geographical expansion.
Incoming chief executive Clark said he was “looking forward to joining Crest Nicholson and working with the board and wider team in the next phase of the group’s growth”.
Susannah Streeter, head of money and markets at Hargreaves Lansdown, said that “with other housebuilders making progress as hopes have risen that interest rate cuts could be in sight there had been hopes of a slightly better final number”.
Crest Nicholson’s shares were largely flat on Tuesday morning due to the profit warning.