Crest Nicholson profits tumble after sales hit by Brexit paralysis

Profits at Crest Nicholson plunged almost 40 per cent after the UK housebuilder took an exceptional charge for fire safety review costs following the Grenfell tragedy and experienced a slowdown in sales.

The FTSE 250 group said pre-tax profit fell 39 per cent to £102.7m in the year to October 31. That included an exceptional £18.4m charge in relation to remedial fire safety work deemed necessary after a blaze at Grenfell Tower, a housing block in west London in 2017 that killed 72 people. It prompted new regulations from the government.

The group said it had reviewed both sold as well as new properties following the latest government guidance on fire risk and that work was “under way on several properties”. Excluding this charge, pre-tax profit fell 28 per cent to £121.1m, towards the lower end of revised guidance it issued last year following a profit warning.

Sales fell 2.4 per cent year on year to just under £1.1bn and completions were down 4 per cent to 2,912.

Chief executive Peter Truscott, who joined from Galliford Try last September, said he was encouraged by the emphatic Conservative election victory at the end of 2019 which provided greater clarity for potential homebuyers.

“We believe the decisive political outcome should provide support for the sector in the near term,” he said. The group expects adjusted pre-tax profit of £110m to £120m in its current financial year.

Shares rose 3.3 per cent to 454.8p in London trading.

The London and south-east-focused housebuilder said customers delayed making decisions over whether to purchase a property last autumn, which it blamed on uncertainty over the UK’s departure from the EU and political deadlock. It reduced selling prices at some of its developments in London resulting in a £7m charge.

Taylor Wimpey set aside £30m in 2018 to replace flammable cladding on its developments after Grenfell. A public inquiry into the disaster is ongoing.

Crest Nicholson said it wanted home completions to increase to 3,500 units in the next three years as it set out new financial targets. It aims to grow its adjusted operating profit margin by at least 250 basis points, from the current 12.2 per cent.

“The new three-year financial targets highlight a renewed focus from CEO Peter Truscott, but it remains to be seen how quickly improvements can be made,” analysts at Peel Hunt wrote in a note.

The full-year dividend was flat at 33 pence per share.