Housebuilder Crest Nicholson points going concern warning after ‘very tough’ yr | USAEMALL.com

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Housebuilder Crest Nicholson has warned over its ability to continue as a going concern, revealing in a delayed results announcement that there was a “severe but plausible” scenario where it would breach its banking covenants as soon as April.

The company gave the warning on Tuesday as it released results for the 12 months to October 31, a year that its chief executive Martyn Clark called “very tough and disappointing”.

The results had been delayed by two weeks to give auditor PwC more time to complete its work.

Crest Nicholson said on Tuesday that it maintained “good relationships” with its lenders and was in “regular dialogue” with them, adding that it was confident an amendment to the covenants would be secured if necessary.

However, it added: “This is not guaranteed and therefore this represents a material uncertainty related to going concern.”

Shares fell 4 per cent in early trading in London on Tuesday.

Crest Nicholson said its directors had evaluated a range of potential scenarios for the company’s trading, including a “base case” and a range of “adverse scenarios” including a “severe but plausible” (SBP) alternative.

It said it expected to comply with its banking covenants in the base case scenario. But it added that the “cumulative impact of the assumptions and mitigations in the SBP downside case” indicated that the group would not meet its interest cover covenant during the going concern period. The “first measurement date” was in April 2025, it said.

Tuesday’s statement was accompanied by a warning that the “slower than expected” rate of UK interest rate cuts was holding back buyers and “tempering the housing market recovery”.

The company also confirmed a big jump in fire safety remediation provisions to £249mn, in the middle of the expected range of £245mn to £255mn.

Many UK housing developers have had to take extra provisions for work to put right cladding on high-rise buildings as a result of problems discovered following the 2017 Grenfell Tower fire.

The results were the first since Clark took over as chief in June last year. Pre-tax profits for the year to October 31, adjusted for exceptional items, declined 53 per cent to £22.4mn, while revenue fell 6 per cent to £618mn.

Crest Nicholson took an exceptional charge of £166mn, including a £132mn “combustible materials charge” related to the fire safety issues.

On a statutory basis, that pushed the company into a pre-tax loss of £144mn, compared with a £23.1mn profit for the previous year.

In a statement, Clark said: “2024 has undoubtedly been a challenging year for Crest Nicholson. Previous failures to identify and implement appropriate internal controls within the group, particularly in relation to legacy operational issues on complex developments and legacy sites have significantly impacted our financial performance.”