The company disclosed the provisions in its final results, published today. Provision costs rose from just £600,000 a year earlier and take the total set aside by the company to cover work on “combustible materials” to £42.6 million.
The large increase come after Housing and Levelling Up Secretary Michael Gove last week signalled that he would come after developers to cover the cost of fire safety improvement work on Britain’s tower blocks. He has ordered developers to come up with full costed plans to improve cladding and other fire safety issues on building over 11 meters tall that they worked on and told them to collectively stump up £4 billion towards improvement works across the country.
The investment is meant to fix the building safety crisis that began with the Grenfell Tower fire in 2017. Initial concern about flammable cladding on high rises across the country has morphed into more general concern about the fire safety of buildings, necessitating a wide range of improvements and fixes.
Crest Nicholson said: “The Board is carefully considering the impact of this update and is representing its views in response through the Home Builders Federation (HBF), who have sought to establish a dialogue with the Government in this area. The Group recognises the distress caused to homeowners from living in a property that they rightfully expect is safe and has been built to a standard that is compliant with all the necessary building regulations.”
Some developers have complained that the proposals, though light on detail at this stage, appear to unfairly target builders while ignoring others who contributed to the crisis, such as materials manufacturers and contractors. Vistry boss Greg Fitzgerald told the Standard house builders were “easy targets.”
News of the increase in provisions came in an otherwise strong set of results. Crest Nicholson rebounded to a profit of £70.9 million following a loss of £10.7 million the year prior. Revenue rose 16% to £786.6 million as forward sales and completions both rose. The company reinstated its final dividend at 9.5p per share, taking total dividends this year to 13.6p per share.
CEO Peter Truscott, who took over in 2019, said the results showed his three year turnaround was complete.
“It was a clear objective of the new leadership team to restore Crest Nicholson to being one of the UK’s leading housebuilders,” he said. “That challenge was undoubtedly heightened by the arrival of the pandemic. However, we can say with confidence that we have delivered the turnaround that we wanted.
“We were delighted to increase profit expectations twice in the year and we have started 2022 with a strong forward order book and everyone in Crest Nicholson is excited about our plans for expansion.”
Shares rose 3.6p, or 1%, to 343.2p.