Housebuilder says ‘turnaround complete’ after torrid few years
Crest Nicholson has moved back into profit following a strong sales performance and an overhaul of its balance sheet.
The housebuilder, in its results for the year to 31 October, reported pre-tax profit of £86.9m compared to a £13.5m loss the previous year. The firm said its adjusted pre-tax profit, taken before accounting for £20.8m of exceptional items, rose from £45.9m in 2020 to £107.2m, ahead of expectations at the start of the year.
Crest’s total revenue jumped 16% from £677.9m to £786.6m. This is still significantly down, however, on the £1.1bn recorded in 2019, pre-pandemic.
The firm’s results were boosted by a 17.4% increase in sales, from £693.1m in the covid-hit 2020 year to £813.6m to October 2021. The housebuilder also said its sales per outlet week increased from 0.59 to 0.8.
It added that forward sales as of this week stood at 2,702 units with a gross development value of £719m, compared to 2,435 with a GDV of £564.5m this time last year.
The return to profitability follows a restructuring after a difficult few years for the housebuilder, which made a string of profit warnings pre-pandemic and in 2020 announced redundancies as it slumped into the red.
In its latest results, Crest said it has now transformed its balance sheet, nearly doubling its net cash over the year to £252.8m from £142.2m. It said this was due to “more disciplined capital allocation”, better aligning build stages to sales rates and the divesting of “poorer legacy schemes.”
The housebuilder said the improved balance sheet would allow it to grow and it plans to start to set up new divisions in Yorkshire and East Anglia this year.
Crest said material shortages and labour availability have created “inflationary pressures in some areas” but it has monitored these risks and “maintained effective relationships with supply chain partners through comprehensive trade agreements.”
“During this financial year the pandemic continued to affect operations, however the market remained open throughout, and the sales environment was largely favourable,” said Peter Truscott, chief executive of Crest Nicholson.
Crest increased its provision for fire safety remediation work after assessing potential building work of all its properties, adding a further £28.8m to the £14.8m already set aside.
Crest also said it was looking at the impact of Michael Gove’s announcement last week of plans to force housebuilders to pay £4bn into a fund for fire safety work on blocks between 11 and 18 metres in height. It said: “The board is carefully considering the impact of this update and is representing its views in response through the Home Builders Federation (HBF), who have sought to establish a dialogue with the government in this area.
“The group recognises the distress caused to homeowners from living in a property that they rightfully expect is safe and has been built to a standard that is compliant with all the necessary building regulations.”
The £28.8 charge for cladding work contributed to an overall £20.8m of exceptional items, which also included an £8m boost from the revaluation of land. This compares to a £43.8m write-down in the 2020 figures.
Crest also announced this week it has agreed a £120m deal with funds managed by global investment firm, Oaktree Capital Management and CompassRock International to sell 403 build-to-rent homes across three developments in southern England.