Crest falls to pre-tax loss after covid write-down

Crest Nicholson made a pre-tax loss of £13.5m for the year to October 31 after taking a nearly £50m write-off largely associated with the effects of the coronavirus crisis. The pre-tax loss, on revenue down 38% to £677m, compares with a profit of £103m in 2019.

However, the housebuilder in the South-east and Midlands said its adjusted pre-tax profit – calculated before one-off write downs – was £46m, marginally ahead of the £35-45m range predicted.

Most of the £48m write-down in profit came from a revaluation of sites, including some for commercial property, in the light of the pandemic – despite the fact that prices have risen since the lockdown in spring last year. The firm said it was still concerned about the impact of the ending of government support measures in the coming months, such as furlough payments and the stamp duty holiday.

Crest said it built 2,247 homes in the year, down 23%. Since the end of the financial year, it said that it had made 0.60 sales per site per week, compared with 0.59 across the full 2020 financial year.

Sales so far in January had been “in line with expectations”. Sales per site per week for 2019 were 0.76.

Peter Truscott, chief executive, said the covid crisis had “had a defining impact on this year’s financial performance”.

He added: “We had to make some difficult decisions during this year but because we acted swiftly we have ensured the group enters 2021 in strong shape and will remain resilient to whatever challenges this year brings.

”We have made strong progress on all elements of our strategy, delivered profit ahead of our revised guidance and strengthened the balance sheet as we promised.”

The firm said it had completed the organisational restructuring announced in June, when it said it was laying off 130 staff, and said the change will now deliver in excess of £15m in annual savings. The firm said its move to new house types is likely to deliver £30m in savings from specification costs, while it has identified another £40m of savings from the re-planning existing sites.

The firm said it expected to return operating profit margins to be “in line with industry peers” through 2021 and 2022.

The firm saw a much sharper drop in turnover than in housing completions, due to a drop in the sale of more expensive properties as it continued to exit its London business, and an 83% fall in land sales – which previously had accounted for £100m of revenue.

Crest said the decision to write down the value of its development land by £43m in the wake of the covid crisis had been taken on the basis of an assumed 7.5% fall in house prices, a decision it had reviewed and stuck with at the end of the 2020 financial year. It said the charge comprised £33.9m which was relating to current operational developments, and £9.3m of abortive work-in-progress at its Greenhithe site, a mixed-use scheme adjacent to the River Thames, which it said it has now decided to abandon work on.

The firm incurred £7.5m in restructuring costs and another £2.6m relating to the cost of repairing cladding on homes previously constructed, further to the £18.4m provided for this in the 2019 accounts.

Cenkos analyst Kevin Cammack said: “Clearly there is work to do but we do now have some signs that management action is impacting in terms of balance sheet solidity, operational efficiency and, critically, margin recovery.”