Crest Nicholson takes £105m cladding charge

At a trading level, things are going well for Crest Nicholson, despite inflationary pressures. For the six months to 30th April 2022, adjusted operating profit rose to £54.5m (2021 H1: £40.0m), with the adjusted operating profit margin increasing to 15.0% (2021: 12.3%).

However, as previously reported, Crest Nicholson signed the government’s Building Safety Pledge in April, committing the company to pay for fixing unsafe cladding and flammable materials on buildings over 11 metres high. At that time it estimated the cost would be somewhere between £80m and £120m. In its results statement today it has taken a £105m combustible materials charge for the half year.

This puts the accounts in the red, with a pre-tax loss of £52.5m (compared to a £36.3m profit for the same period last year.

During the six-month period, open market (private) completions were 754 (2021 H1: 701), affordable completions were 184 (2021 H1: 198) and bulk completions were 158 (2021 H1: 118). Total home completions were therefore 1,096 (2021 H1: 1,017), up 7.8.

Chief executive Peter Truscott said: “We are delighted to have delivered a strong first half performance, making further strategic and operational progress. Given this underlying momentum and the resilient housing market we are upgrading our full-year adjusted profit before tax expectations to a range of £135-140m.

“We are pleased to have reached a resolution with the government by signing the Building Safety Pledge. We hope this now provides comfort and assurance to affected residents and stakeholders. It also allows the group to move forward in remediating the affected buildings directly or through another party as soon as possible.”

On managing the challenges of build cost inflation, he said: “Some materials such as steel have increased in price in direct correlation to the rise in energy prices. Other materials, such as bricks, have been more insulated where alternatives such as concrete (rather than clay) can be sourced and used instead. All these material increases have been accompanied by a moderation in the rising cost of labour. Our site teams do an outstanding job of managing this disruption on a day-to-day basis and to ensure our build rate remains on track. At a group level we continue to develop strong economic and strategic partnerships with key suppliers that create value for both parties.”

On operational efficiency, he said: “Despite some of the ongoing challenges in materials and labour availability, we have managed to maintain our build rate in line with expectations in the first half. The new house type range roll out is on track and we expect 75% of our private open market houses will be delivered using this range in 2022. Moving to these standardised house types has been strongly vindicated in an environment of labour and material shortages.

“We continue to seek opportunities to replan our sites. Plotting efficiency is an ongoing process to maintain flexibility in our product offerings and to optimise the value of the developments. Replans and replotting will continue to bring positive benefits in coverage while also enhancing the returns from these investments.”

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