Crest Nicholson warns of fewer house builds and £15 million hit from defects

19 March 2024 , 09:56

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Crest Nicholson has warned it may build 11% fewer houses this year (Image: PA Wire/PA Images)

Crest Nicholson says there could be a fall of up to 11% in the number of homes completed this year and warned of a potential loss of about £15 million as a result of faults in previous developments.

For the year ending in October, the housebuilder expects to complete 1,800 to 2,000 homes, less than the 2,020 finished in the same period the year before. The company said this reflected the "opening order book and the low level of reservations in the first two months of the financial year".

Crest Nicholson indicated that the rate at which homes are sold each week at each of its outlets has increased in the eight weeks leading up to March 15, despite having faced challenges leading up to Christmas. The company said that the construction industry's overall level of activity has remained low, but that this is resulting in a decrease in labour costs.

"Overall build cost inflation has largely stabilised and at a level lower than prior year," it added. After uncovering "certain build defects" at four sites that were mostly finished before 2019, when the group closed its redevelopment and London branches, Crest also indicated a loss of up to £15 million.

"These sites will require remediation over the next three years at an estimated cost of up to £15 million," the company said. It added: "As a result, the board has decided to appoint third-party consultants to provide greater assurance on the adequacy of current provisions around these and other sites completed prior to 2019."

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Crest Nicholson will give more details in its interim results in June. Crest recently reported a significant drop in annual underlying pre-tax profits, from £137.8 million the previous year to £41.4 million in 2022-23. This was due to market conditions and issues with past builds.

The company also informed shareholders that it had set aside £13 million to cover a legal claim related to a fire in one of its low-rise buildings in 2021. Peter Truscott announced his retirement as chief executive after five years in the role. He will be succeeded by Martyn Clark, who is currently the chief commercial officer at larger competitor Persimmon.

Lawrence Matheson