The FTSE 250 housebuilder issued a warning about its ability to continue as a solvent business as it swung to a loss before tax of £143.7 million for the year ended October 31, 2024.

In an update alongside its full-year results, Crest Nicholson said it was at risk of breaching a covenant on its bank lending in a “severe but plausible” scenario modelled by its directors.

It comes after what Martyn Clark, the company’s chief executive, called a “very tough and disappointing year” in which profits fell by 53pc to £22.5m in the year ending Oct 31.

Crest Nicholson said it was confident that its banking covenants could be amended even if they were breached, but that it was not guaranteed and therefore represented a risk to its future. Banks can theoretically demand that debt is repaid if a covenant is breached.

Mr Clark said: “We’ve been talking to our banks. We’ve got a very good relationship with [them].”

He added that the business is able to reduce its costs by either selling or resizing sites within its land bank, which is undergoing a “comprehensive review”.

Mr Clark, who became chief executive in June last year, said: “There is a little bit of self-help we can perhaps do in the future to reduce our interest costs in the year, by adjusting our land bank.

“We’ve got such a large land bank. It’s not really required to be that big, for the size of our business.

“Six hundred million pounds of land on our balance sheet is not ideal, so if we sell some of those sites or reshape the size of [them], we can either get more outlets or reduce our land holding, which will lessen the impact of that severe but plausible case.”

He added: “I think 2025 is going to have to be a year of transition. We’ve set an awful lot of plans in motion within the business, and I want to have a strategy that focuses on the customer at the same time as building really good quality homes.

“Then what we can do in the future is we can utilise the brand strength, the quality strength that we will embed within the business to really focus on using that land bank that we’ve got that is quite significant to maximise the potential for shareholder returns. It’s early days, as we have good traction, but there’s a long way to go yet.”