Crest Nicholson squeezed by build cost rise and weak sales

Aaron Morby 5 years ago
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South East house builder Crest Nicholson saw profits fall for the first time in years after being squeezed by higher build cost inflation and softening market conditions in the south east.

Chief executive Patrick Bergin says demand is weakening amid political uncertainty
Chief executive Patrick Bergin says demand is weakening amid political uncertainty

The firm has now closed its London division with all sites in the capital now managed by offices in the Home Counties.

It also said it had sold several schemes to affordable housing providers and private rental specialists to offset weak sales in and around the capital.

Pretax profit fell 15% to £176m due to pressure on margins, which slid from over 20% to 16.7% in the year to October 2018.

Patrick Bergin, chief executive, said that the business has had a good year operationally, with a 3% increase completions to just over 3,000. This lifted revenue 9% to £1.14bn.

He said: “However, we have faced some challenges in London and with sales at higher price points where political and economic uncertainty has adversely impacted customer demand and this is likely to continue pending Brexit resolution.”

Bergin said: “The business took decisive action to mitigate the loss of sales volumes by accelerating bulk sales to registered providers and PRS investors, selecting land sales on long tail sites and adjusting our build programmes.

“However, these measures, taken together with flat pricing in the market and continuing build cost inflation, had an adverse impact on margins.”

Looking ahead, Bergin added: “Our forward sales are strong, boosted by our strategic partnerships and our new channels to market.

“Pricing is stable, build cost inflation has moderated and we have implemented plans to mitigate margin pressure, which will take effect progressively over the next few years.”

He said Crest also had now taken a number of actions in its supply chain and reviewed its own processes to offset build cost pressures

Crest has implemented fresh designs for both houses and apartments. These are expected to offer significant cost efficiencies through greater standardisation and would make procurement and construction easier over time, he said.

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