Crest Nicholson (LSE:CRST) Holdings PLC shares dipped on Tuesday morning as the housebuilder said signing the Building Safety Pledge would likely cost it £80-120mln.
The company said it has been in intense discussions with the Department for Levelling Up, Housing and Communities (DLUHC) since the department’s head, Michael Gove, announced in January that he wanted housebuilders to pay a greater share of remediation costs in the wake of the 2017 Grenfell Tower fire, which took place in one of London’s richest boroughs and in which 72 people died.
Persimmon PLC (LSE:PSN), the biggest company in the sector, has also signed the pledge, which sets out the industry’s commitments to remove cladding and remediate fire safety issues in buildings over 11 metres in height.
READ Gove signals governmental change of heart in post-Grenfell Tower cladding initiative
Failing to agree to these new guidelines would carry further consequences, implemented by the DLUHC, that would affect Crest Nicholson (LSE:CRST)’s ability to operate and trade normally within the housing market so its decision to sign up is not a big surprise although given today is the deadline for signing the pledge, it has left it late.
As a result of making these new commitments, the group will need to record a further exceptional charge in its financial statements.
“This is a complex and judgemental area, and the group will continue to work at speed to refine its latest estimate of these costs. As such the board consider that a charge in the range of £80mln to £120mln currently represents its best estimate of this further liability,” the company’s statement said.
The housebuilder said it is also considering whether any further regulatory approvals are required in respect of this proposed charge.
The cash outflows required to remediate the affected buildings will occur over several years, the company noted.
“Given the group's well capitalised financial position and strong current trading performance, the board does not consider this to present a risk to current or future operations,” Crest Nicholson (LSE:CRST) added.
Persimmon signs Building Safety Pledge: says £75m already set aside is enough to remediate fire safety issues on all buildings over 11 metres they developed in the 30 years leading up to today. pic.twitter.com/3jaCoft3l1
— Peter Bill (@peterproperty) April 5, 2022
Shares in Crest Nicholson (LSE:CRST) were down 1.9% at 271.4p and are at less than half the level they were at back in 2017 but on the other hand, the shares have recovered from their pandemic low of 164.5p two years ago.
Meanwhile, sector peers are also on the slide; Barratt Developments PLC (LSE:BDEV) is down 3.0%; Bellway PLC (LSE:BWY) is 1.1% lighter; Berkeley Group Holdings PLC (LSE:BKG) is off 0.9%; Taylor Wimpey PLC (LSE:TW.) is 1.9% lower and Vistry PLC is 1.7% cheaper.
Persimmon PLC (LSE:PSN), however, is up 0.6% after it said it still believes the £75mln it has earmarked for the rectification works remains sufficient.
“Over a year go we said that leaseholders in multi-storey buildings Persimmon constructed should not have to pay for the remediation of cladding and fire-related issues. We are pleased to reaffirm this commitment today,” said Dean Finch, Persimmon’s chief executive.
“We made this commitment last year as we believed it was not only fair for leaseholders but also the right thing to do as one of the country’s leading homebuilders,” he added.
"Housing developers have until today to sign the government’s Building Safety Pledge for ending the cladding crisis"
Crest Nicholson (LSE:CRST) is the first to go public... Waiting to see @Barrattplc's "pledge" as they've not been helpful or fixed anything yet. #EndOurCladdingScandal https://t.co/gMMHiPtOjX
— Cladding Victim (@LostInSW19) April 5, 2022