TIDMCRST
RNS Number : 5316A
Crest Nicholson Holdings PLC
23 January 2024
Crest Nicholson Holdings plc
EARLY SIGNS OF RETURNING CONSUMER CONFIDENCE AND IMPROVING
DEMAND
STRONG LAND PORTFOLIO TO SUPPORT GROWTH AMBITIONS
Crest Nicholson Holdings plc ('Crest Nicholson' or 'Group')
today announces its Preliminary Results for the year ended 31
October 2023:
FY23 Financial Summary
-- Revenue down 28% at GBP657.5m (FY22: GBP913.6m), reflecting
the weakness in the housing market
-- Home completions at 2,020 (FY22: 2,734), comprising open
market completions (including bulk deals) of 1,495 (FY22: 2,212)
and affordable completions of 525 (FY22: 522)
-- Sales per outlet week (SPOW) of 0.52 (FY22: 0.60) with average outlets at 47 (FY22: 54).
-- Adjusted profit before tax(1) at GBP41.4m (FY22: GBP137.8m)
o Following a comprehensive review, additional costs of GBP5.5m
were recorded at year end relating to Farnham and other legacy and
low-margin sites
-- Exceptional charge of GBP13.0m recognised in respect of a
legal claim recently received relating to 2021 fire damage of a
low-rise bespoke apartment scheme built by the Group
-- Group's year end net cash(1) position at GBP64.9m (FY22:
GBP276.5m) with land creditors at GBP205.5m (FY22: GBP198.7m) .
During the year, the Group increased investment in WIP and land
compared to prior year
-- Forward sales as at 19 January 2024 of 1,732 units and
GBP434.9m Gross Development Value (GDV) (13 January 2023: 2,018
units and GBP510.8m GDV)
-- Proposed final dividend of 11.5 pence per share. Total
dividend for FY23 to be in line with prior year at 17.0 pence per
share. The Board expects to return to its policy of 2.5 times cover
going forward
FY23 Operational Summary
-- 3,864 plots, (FY22: 2,771 plots) were approved to be added to
the portfolio in FY23 at a forecast gross margin of 25.2% with
planning approvals underway. These sites all provide excellent
prospects to support future growth
-- Operational review completed and implemented in FY23
o Moderated the pace of growth in Yorkshire - now expecting 300
to 350 units in 2026
o Incorporated East Anglia division into the existing Eastern
division with revised boundaries
o Aligned headcount and resources in existing divisions to the
expected level of output in FY24
o Expected overhead reduction of GBP3m in FY24
-- Increase in WIP in the year reflecting a more normalised build level
-- Build cost inflation has reduced further from mid-single
digit percentages and we expect this to continue to moderate in
FY24
-- Significant investment was made in people, process and
systems and as a result we have consistently achieved >90%
customer satisfaction rating since February 2023, on track to
return to a five-star rating in the year to September 2024
-- In line with our sustainability targets as we actively
collaborate with our supply chain and wider industry to reduce
greenhouse gas emissions and prepare for upcoming regulations
-- Good progress with our fire safety remediation programme
(1.) Adjusted basis represent the FY23 and FY22 statutory
figures adjusted for exceptional items as disclosed in note 4.
Adjusted performance metrics and net cash are non-statutory
alternative performance measures (APMs) used by the Directors to
manage the business which they believe should be shared for a
greater understanding of the performance of the Group. The
definitions of these APMs and the reconciliation to the statutory
numbers are included below.
Farnham and other legacy sites
As announced in our November trading statement Brightwells Yard,
Farnham recorded circa GBP11m incremental build costs in the year.
The Group has subsequently conducted a comprehensive review of the
costs to complete this project as well as our other legacy and low
margin sites. Consequently, further additional costs of GBP5.5m
have been identified, including GBP2.5m at Farnham, which have
impacted FY23 adjusted profit before tax (APBT). The Group has
commenced a thorough plan to improve commercial processes and
controls to mitigate the risk of future cost overruns. Construction
at the Farnham scheme is now in its final stages.
Exceptional costs
An exceptional charge of GBP13.0m was recorded for a legal claim
the Group recently received. This relates to a low-rise bespoke
apartment block built by the Group which was damaged by fire in
2021. The building, constructed in early 2019, is part of a scheme
consisting of five low-rise blocks. This is unrelated to the
general fire remediation programme that the Group is currently
delivering.
Building safety
On 13 March 2023 the Group entered into the UK Government's
Developer Remediation Contract. This incorporated into contractual
arrangements the commitments made by the Group under the Building
Safety Pledge, signed in April 2022. This provides clarity for
future remediation, particularly with regards to the standards
required for internal and external remedial works on legacy
buildings. The Group has recorded a further charge of GBP11.3m
related to build costs inflation and scope of work required and
recovered GBP10.0m in cash from third parties in the year in
respect of defective design and workmanship. The Group has a total
provision of GBP144.8m (FY22: GBP140.8m).
Current trading and Outlook
We entered the new year with a forward order book which is 52%
covered for FY24 revenue, and have contracted several PRS and
private Registered Providers' partners' deals to be delivered over
the next few years. It is encouraging to see the reduction in
mortgage rates, and despite the seasonal lull, as expected we have
seen some uptick in customer activity.
We will continue to maintain a disciplined approach to capital
allocation for FY24. The strength of our land portfolio, supported
by recent investment, means we will be highly selective in land
acquisitions and will apply a rigorous approach to work-in-progress
to align with expected sales rates.
Our focus in 2024 is to drive sales and margins growth,
controlling costs, obtaining timely planning consents, restoring
five-star customer services and continue to maintain a robust
balance sheet.
Peter Truscott, Chief Executive, commented:
"The combination of challenging trading conditions and
incremental cost movements associated with Farnham and other legacy
low-margin sites have led to a disappointing set of results in
FY23. We have proactively streamlined the business to align with
the challenging trading environment and have taken decisive
measures to address operational challenges associated with Farnham
and other legacy sites, implementing strategies to control costs
and ensure a more precise and feasible path towards projects
completion.
Recently there has been some positive macro trends with
inflation and mortgage rates falling, which bode well for the
housing sector. Although it is too early to gauge customer
behaviour, we have been encouraged by an increase in customer
interest levels and inquiries this calendar year. However, we
remain mindful of ongoing uncertainties within the broader
economy.
The medium-term prospects for housing demand remain positive
with the structural under supply of housing, however the
challenging planning environment is likely to slow volume growth in
the sector. We have acquired some excellent sites that are at
advanced stages in the planning process, and have a strong
strategic land pipeline, leaving us well positioned for the future
when market conditions improve."
Key financial metrics
GBPm (unless otherwise
stated) FY23 FY22 % change
Adjusted basis(1)
Operating profit 44.2 140.9 (68.6)
Operating profit margin 6.7% 15.4% (870)bps
Profit before tax 41.4 137.8 (70.0)
Basic earnings per share
(p) 12.3 42.5 (71.1)
Statutory basis
Revenue 657.5 913.6 (28.0)
Operating profit 29.9 38.4 (22.1)
Operating profit margin 4.5% 4.2% 30bps
Profit before tax 23.1 32.8 (29.6)
Basic earnings per share
(p) 7.0 10.3 (32.0)
Other metrics
Home completions (units) 2,020 2,734 (26.1)
Net cash(1,2) 64.9 276.5 (76.5)
Dividend per share (p) 1 7.0 17.0 0.0
1. Adjusted basis represent the FY23 and FY22 statutory
figures adjusted for exceptional items as disclosed in
note 4. Adjusted performance metrics and net cash are
non-statutory alternative performance measures (APMs)
used by the Directors to manage the business which they
believe should be shared for a greater understanding
of the performance of the Group. The definitions of these
APMs and the reconciliation to the statutory numbers
are included below.
2. Net cash is defined as cash and cash equivalents less
interest-bearing loans and borrowings. See note 19 to
the consolidated financial statements.
Analyst and investor meeting, conference call and webcast
There will be a meeting for analysts at 9.00 am today at Norton
Rose Fulbright, 3 More London Riverside, London SE1 2AQ hosted by
Peter Truscott, Chief Executive and Bill Floydd, Group Finance
Director.
To join the presentation, please use the following link: Crest
FY23 Results webcast
There is also a facility to join the presentation and Q&A
session via a conference call. Participants should dial +44 (0)203
936 2999 and use confirmation code 378512. A playback facility will
be available shortly after the presentation has finished.
For further information, please contact:
Crest Nicholson
Jenny Matthews, Head of Investor Relations +44 (0) 7557 842720
Teneo
James Macey White / Giles Kernick +44 (0) 20 7353 4200
23 January 2024
Cautionary statement regarding forward-looking statements
This release may include statements that are, or may be deemed
to be, 'forward-looking statements'. These forward-looking
statements can be identified by the use of forward-looking
terminology, including the terms 'believes', 'estimates', 'plans',
'projects', 'anticipates', 'expects', 'intends', 'may', 'will' or
'should' or, in each case, their negative or other variations or
comparable terminology, or by discussions of strategy, plans,
objectives, goals, future events or intentions. These
forward-looking statements include all matters that are not
historical facts. They appear in a number of places throughout this
release and include, but are not limited to, statements regarding
the Group's intentions, beliefs or current expectations concerning,
among other things, the Group's results of operations, financial
position, liquidity, prospects, growth, strategies and expectations
of the industry.
By their nature, forward-looking statements involve risk and
uncertainty because they relate to future events and circumstances.
Forward-looking statements are not guarantees of future performance
and the development of the markets and the industry in which the
Group operates may differ materially from those described in, or
suggested by, any forward-looking statements contained in this
release. In addition, even if the development of the markets and
the industry in which the Group operates are consistent with the
forward-looking statements contained in this release, those
developments may not be indicative of developments in subsequent
periods. A number of factors could cause developments to differ
materially from those expressed or implied by the forward-looking
statements including, without limitation, general economic and
business conditions, industry trends, competition, commodity
prices, changes in law or regulation, changes in its business
strategy, political and economic uncertainty. Save as required by
the Listing and Disclosure Guidance and Transparency Rules, the
Company is under no obligation to update the information contained
in this release. Past performance cannot be relied on as a guide to
future performance.
Crest Nicholson Holdings plc
Registered no. 6800600
Chief Executive's review
Introduction
The past financial year proved to be one characterised by
significant uncertainty in the housing sector. In contrast to the
previous year, which experienced robust market conditions despite
supply chain challenges affecting home delivery, FY23 saw a
reversal of this trend. The sales market weakened and supply chain
pressures gradually eased, leading to a reduction in inflationary
impacts.
While we have encountered challenging conditions, and
performance was more disappointing than anticipated, the Group
remained profitable, concluding the year with a strong balance
sheet which facilitated a dividend payout at the same level as
FY22.
The economy and housing market
The housing market showed signs of weakening during late summer
and early autumn of 2022. This downturn was triggered by the poorly
received Mini-Budget from the Truss-Kwarteng Government in
September 2022, leading to a significant and rapid increase in
interest rates, causing a temporary collapse in housing sales.
Confidence gradually returned with the establishment of a more
stable Government and the subsequent easing of mortgage rates,
resulting in more steady sales rates by late winter and early
spring 2023.
Nevertheless, the market faced additional challenges, including
a rise in interest rates due to persistently high inflation,
renewing concerns of declining house prices. The Bank of England
continued to raise interest rates to control these inflationary
pressures.
While there was initially an expectation of significant price
reductions, prices remained stable, followed by modest declines
through autumn. Factors such as high mortgage rates, buyer concerns
regarding potential future decreases in house prices, and the
customary summer slowdown contributed to a period of very low sales
rates. As overall economic conditions stabilised, sales rates
slowly improved.
Multi Channel Approach
One of our strategic priorities is the Multi Channel Approach.
This approach serves as a counter-cyclical element during volatile
trading environments, offering increased visibility of revenue in
the business. This provides the Group with resilience and a
diversified income stream. Leveraging our highly experienced
Partnerships and Strategic Land (PSL) division, over the past few
years, we have cultivated strategic relationships with institutions
and Registered Providers (RPs). Consequently, we have successfully
negotiated and delivered 273 units for FY23, as well as further
units for future developments.
Build programme
We diligently manage our build programme and work-in-progress.
However, due to supply chain issues in the second half of FY22, we
commenced the new financial year with a lower build position than
originally planned. Despite the challenging sales environment, we
seized the opportunity to maintain our planned production output
during the first half of the financial year as more labour and
materials became available. This enabled us to restore a normalised
build activity by the end of FY23.
Build cost inflation remained elevated in the first half of our
financial year. This was due to high energy costs and competitors
finishing homes for their financial year-ends. A positive outlook
for housebuilding in the spring created additional pressure on
building supplies. The lagged effect of the dramatic increase in
energy costs from the previous year continued to abate, and with
labour costs moderating, build cost inflation in the second half of
the financial year started to reduce to mid-single digit
percentages. We anticipate this trend will continue into FY24.
Farnham and other legacy sites
As announced in our November trading statement Brightwells Yard,
Farnham recorded c. GBP11m incremental build costs in the year. The
Group has subsequently conducted a comprehensive review of the
costs to complete this project as well as our other legacy and low
margin sites. Consequently, further additional costs of GBP5.5m
have been identified, including GBP2.5m at Farnham, which have
impacted FY23 adjusted profit before tax (APBT). The Group has
commenced a thorough plan to improve commercial processes and
controls to mitigate the risk of future cost overruns. Construction
at the Farnham scheme is now in its final stages.
Land and planning
The supply of land continued to tighten due to the Government's
decision to eliminate top-down housing targets, resulting in delays
to new site allocations. This situation is compounded by broader
issues within the planning system, including challenges related to
nutrients, water neutrality, recreational impact zones and air
quality constraints. Additionally, there is an under-resourced and
inefficient development control function at the local authority
level.
Against this challenging backdrop, and in the aftermath of a
period of acute economic uncertainty, many of our housebuilding
peers signalled their intention to reduce land activity and
withdraw from some land deals. In contrast, we took the opportunity
to acquire several highly desirable sites in attractive locations,
thereby strengthening our land portfolio and securing favourable
economic terms. Our decision to remain active in the land market
positions us to mitigate planning delays, ensuring a higher number
of outlets are in place when market conditions improve. Our land
acquisition programme will remain at a reduced level during
FY24.
Accordingly, the Group's year end cash position reduced to
GBP64.9m from GBP276.5m in the prior year, reflecting both this
investment and work-in-progress, as referred to earlier.
Streamlining Group operations
In response to the deterioration of trading conditions
experienced in the second half of the year, we have conducted a
thorough and diligent review of all activities within the Group to
reduce overheads. It is never easy for employees during difficult
trading conditions, and I would like to thank my colleagues for
their dedication and hard work during these times.
Reduced pace of geographical expansion
In October 2021 we outlined a growth plan for our business
involving geographical expansion, with the aim of increasing the
number of our housebuilding divisions. However, this plan was
devised in a stable, normalised trading environment. Since then,
the housebuilding industry has encountered acute economic
challenges and a deteriorating trading environment. As responsible
management, it is necessary to review our business plan to align
with prevailing market conditions.
Yorkshire will remain unaffected given it is now a fully
operational, and will now be expected to grow at a reduced pace,
targeting 300 to 350 units per annum by FY26, instead of 500 units.
East Anglia is now covered by our existing Eastern division and the
geographical boundaries have been revised. The Eastern division is
based at Brentwood in Essex and we will retain East Anglia's
satellite office in Bury St Edmunds. As previously announced, we
have postponed the opening of the additional new division.
The revised footprint allows for wider overall coverage and
enhanced volumes and reflects the difficult market conditions in
the short term and the constrained land and planning environment in
the medium term.
Costs and overheads
The Group has taken proactive steps to reduce the cost base at
the end of FY23 with the revised growth plan as outlined previously
and will continue to seek ways to operate more productively. As
announced in our November 2023 Trading Statement, we have reduced
overheads to align with worsening market conditions and aim to
reduce annualised administrative expenses by circa. GBP3m in FY24.
Consequently, a restructuring charge of GBP0.5m has been included
in our FY23 results.
Combustible materials
On 13 March 2023 the Group entered into the UK Government's
Developer Remediation Contract. This incorporated into contractual
arrangements the commitments made by the Group under the Building
Safety Pledge, signed in April 2022. This agreement regulates a
method of building remediation going forward and sets out the basis
of the timing and phasing of the recovery of funds expended by the
Building Safety Fund. It also positively set out a more balanced
and consistent method in assessing building remediations.
During the year we continued to focus on the remediation of
affected buildings, building risk assessments, scoping and
design.
We have received some recoveries from subcontractors and
suppliers which has mitigated the impact and our overall fire
safety provision remains broadly unchanged despite the high build
cost inflation we have experienced.
Customer experience
In 2022 our customer service standards fell below the level to
which we aspire and understandably, our customers reflected this in
lower NHBC Customer Satisfaction Survey ratings. Following
significant investment in FY23, in people, processes and systems,
there are encouraging signs that quality and customer service
standards are improving, and for legal completions from February
2023, in excess of 90% of customers have said they would recommend
Crest Nicholson to a friend. Sustaining this level and building on
the ongoing efforts to enhance customer experience, positions us
well to regain our HBF five-star status in 2025.
Sustainability progress
Our sustainability strategy is split into three priority areas -
protect the environment, make a positive impact on our communities
and operate the business responsibly. These three priority areas
guide our commitment to drive positive action across our activities
and value chain.
We made positive progress against our sustainability targets in
FY23, including a reduction in our greenhouse gas emissions.
We also became a Living Wage Employer and we continued to
collaborate with our supply chain and industry peers on
sustainability initiatives and to prepare for future regulatory
changes.
Current trading
We entered FY24 with a forward position at 19 January 2024 of
1,732 units at GBP434.9 m GDV, reflecting the current challenging
environment. We expect trading conditions will improve towards the
second half of 2024 with a strong pipeline of private rented sector
and RPs.
Summary
The last financial year has been amongst the most challenging
for the Group since the Global Financial Crisis in 2008. Against a
backdrop of a difficult market, with significantly reduced housing
sales activity and modest low single digit price falls, our focus
and priorities for the future are centred on supporting our growth
strategy. This will preserve and maintain a robust balance sheet
and continue to control our overheads and administrative costs
effectively.
During FY23 we increased investment in work-in-progress and
strategically acquired high quality land to strengthen our land
portfolio, supported by our balance sheet. This strategic move
positions the Group to capitalise on growth when the market returns
to a more normalised level. There continues to be a significant
imbalance in the supply and demand of housing in the UK, and this
undersupply is particularly acute in Southern England, where Crest
Nicholson principally operates. With a highly attractive asset
base, experienced management and a strong balance sheet we remain
confident in our future growth prospects.
Outlook
We expect the housing market will remain challenging in 2024
with elevated interest rates remaining in place until inflation
falls to its target level. In addition, the absence of any
Government support for first time buyers, coupled with higher
borrowing costs continues to impact affordability.
However, there are reasons to be optimistic with year-on-year
inflation now halved and real wage growth starting to be felt in
households across the UK. We have acquired some excellent sites
that are at advanced stages in the planning process, leaving us
well positioned to trade in whatever market conditions emerge.
Peter Truscott
Chief Executive
Financial review
As in previous years, the Group continues to report alternative
performance measures relating to sales, return on capital employed
and 'adjusted' performance metrics because of the exceptional items
as detailed in note 4 of the consolidated financial statements.
Exceptional items are those which, in the opinion of the Directors,
are material by size and/or non-recurring in nature and therefore
require separate disclosure within the consolidated income
statement in order to assist the users of the financial statements
to better understand the performance of the Group, which is also
how the Directors internally manage the business. Alternative
performance measures are detailed below.
FY23 trading performance
FY23 saw a weakening sales market compared to FY22 which has
impacted levels of demand for new homes. Supply chain pressures,
labour inflation and rising prices of raw materials experienced in
FY22 eased during FY23 leading to a reduction in inflationary
impacts during the year, albeit still higher than average historic
rates.
Sales prices remained stable, with modest declines through
autumn.
FY23 has been impacted by domestic political uncertainty. At the
end of FY22 the Mini-Budget led to rising interest rates resulting
in a temporary collapse in housing sales. Confidence gradually
returned to the housing market as increases in interest rates began
to stabilise, with a steadier sales rate being achieved by spring
2023.
The weakening sales market, driven by domestic economic
uncertainty, increases in interest rates, modest reductions in
sales prices, build cost inflation and ongoing challenges at some
of our sites have in combination impacted financial metrics
compared to FY22.
Sales, including joint ventures is down 27.6% on prior year at
GBP692.1m (FY22: GBP955.8m). This comprised GBP657.5m of statutory
revenue (FY22: GBP913.6m) and GBP34.6m of the Group's share of
revenue through joint ventures (FY22: GBP42.2m). The Group entered
into a new joint venture in the year that is expected to start
contributing to Group profit in FY24.
The Group delivered 2,020 (FY22: 2,734) home completions during
the year, down 26.1% on prior year. 1,495 of these were open market
completions (including bulk deals) (FY22: 2,212), down 32.4% on
prior year, with the balance derived from affordable completions at
525 (FY22: 522), up 0.6% on prior year. Current and prior year
comparative values both state joint ventures at full unit count and
include an allocation for any land sale element that is present in
any relevant completed transaction, referring to this as being on
an equivalent unit basis.
Open market (including bulk) average selling prices increased to
GBP406,000 (FY22: GBP388,000) during the year due to the mix of
units recognised.
Adjusted gross profit was GBP100.6m (FY22: GBP194.3m), down
48.3% on prior year, reflecting the weaker sales environment and
build cost challenges. Adjusted gross margin was down on prior year
at 15.3% (FY22: 21.3%). As announced in our November trading
statement Brightwells Yard, Farnham recorded cGBP11m incremental
build costs in the year. The Group has subsequently conducted a
comprehensive review of the costs to complete this project as well
as our other legacy and low margin sites. Consequently, further
additional costs of GBP5.5m have been identified, including GBP2.5m
at Farnham, which have impacted FY23 APBT. The Group has commenced
a thorough plan to improve commercial processes and controls to
mitigate the risk of future cost overruns. Construction at the
Farnham scheme is now in its final stages. Gross profit was
GBP86.3m (FY22: GBP91.8m), down 6.0% on prior year due to the
impact of significantly higher level of exceptional items in FY22
offset by the impact of the challenging sales market in FY23.
Net administrative expenses for the year were GBP55.8m (FY22:
GBP51.1m). With the expectation of tougher trading conditions, the
Group undertook a rationalisation exercise in the second half
including the merger of the East Anglia division with our Eastern
division and the streamlining of operations which is expected to
reduce annualised administrative expenses by circa GBP3.0m in FY24.
Included within net administrative expenses is a restructuring
charge of GBP0.5m which was substantially completed at the end of
the year.
Net impairment losses on financial assets were GBP0.6m (2022:
GBP2.3m). The FY22 charge related to the disposal of the Group's
50% share in the joint venture containing the London Chest Hospital
to its joint venture partner.
Adjusted operating profit (or Earnings Before Interest and Tax -
EBIT) decreased in the year to GBP44.2m (FY22: GBP140.9m) with EBIT
margin decreasing from 15.4% to 6.7% due to lower revenue falling
through to margin. Finally, APBT for the year was GBP41.4m (FY22:
GBP137.8m), down 70.0% on prior year and profit before tax after
exceptional items for the year was GBP23.1m (FY22: GBP32.8m),
reflecting the impact of the weaker year-on-year operating profit
contribution offset by the exceptional charge outlined below.
Operating profit was GBP29.9m (FY22: GBP38.4m), down 22.1% on prior
year due to the weaker trading environment and build cost
challenges.
Control environment
Commercial controls in two divisions have not been effective
during the year. Weaknesses were identified in the divisions'
management and forecasting of build costs and margin of which the
most material example was in Farnham. At the end of FY23, the Group
completed its rollout of a new ERP system which going forward will
strengthen the key financial and commercial controls that operate
across the business. A new Group Commercial Assurance team has been
established to monitor key commercial controls. In addition, the
appointment of a new Chief Operating Officer from 1 January 2024
will provide additional group oversight.
Exceptional items
As a consequence of signing the Developer Remediation Contract
on 13 March 2023, the Group has entered into contractual
commitments with the Government to identify and remediate those
buildings it has developed with possible life-critical fire safety
defects. The combustible materials charge in FY23 represents
changes in forecast build costs and in the discount rate applied to
the provision. See notes 4 and 22 of the consolidated financial
statements for additional information.
In FY23 the Group recorded an exceptional total combustible
materials related charge of GBP5.3m (FY22: GBP105.0m) representing
forecast changes in build costs and in the provision discount in
the year. This total charge is after a GBP10.0m cash receipt from a
third party relating to buildings included within the combustible
materials provision.
The Group also recognised a charge of GBP13.0m as it is subject
to a legal claim relating to a low rise apartment, three-storey
scheme built by the Group which was damaged by fire in 2021. Due to
the size and nature of the claim, and in line with the Group's
accounting policy, this has been presented as an exceptional
item.
The tax credit on exceptional items is GBP4.8m (FY22:
GBP22.4m).
Finance expense and taxation
Adjusted net finance expense of GBP5.5m (FY22: GBP7.1m) is
GBP1.6m lower year-on-year, and the Group Revolving Credit Facility
(RCF) remained undrawn for the duration of the year. Net finance
expense was GBP10.1m (FY22: GBP8.1m). Income tax charge in the year
of GBP5.2m (FY22: GBP6.4m) represented an effective tax rate of
22.5% (FY22: 19.5%). This increase is due to the impact of changes
in UK tax rates. Further detail can be found in note 8 of the
consolidated financial statements.
GBP250m Revolving Credit Facility
The Group's previous GBP250m RCF was due to expire in June 2024.
During the prior year we completed a new Sustainability Linked
Revolving Credit Facility. The GBP250m facility expires in October
2026. It is also linked to the Group's sustainability strategy with
a lower interest payable if certain targets are achieved. These
targets include:
-- Reduction in absolute scope 1 and 2 emissions in line with our science-based targets
-- Increasing the number of our suppliers engaging with the Supply Chain Sustainability School
-- Reduction in carbon emissions associated with the use of our homes
-- Increasing the number of our employees in trainee positions and on training programmes.
For FY23 all targets have been met. This will result in a margin
reduction of 0.05%.
Dividend
The Board proposes to pay a final dividend of 11.5 pence per
share for the financial year ended 31 October 2023 which, subject
to shareholder approval, is expected to be paid on 23 April 2024 to
shareholders on the Register of Members on 22 March 2024. This is
in addition to the 5.5 pence per share interim dividend that was
paid in October 2023. The Group expects to revert to its policy of
dividend cover of 2.5 times for FY24, having deviated from policy
in FY23 to meet our commitment to maintain the same cash dividend
as FY22.
Financial position
The Group had net cash of GBP64.9m at 31 October 2023 (FY22:
GBP276.5m). Net cash and land creditors were GBP(140.6)m (FY22:
GBP77.8m).
Inventories at 31 October 2023 were GBP1,164.8m (FY22:
GBP990.1m), up 17.6% year-on-year. During FY23 the Group increased
investment in inventories and strategically acquired high quality
land to strengthen its land portfolio, supported by its strong
balance sheet. This strategic move positions the Group to
capitalise on growth when the market returns to a more normalised
level. Included within this balance is an NRV provision of GBP20.2m
(FY22: GBP12.6m) which principally relates to the Group's scheme at
Brightwell's Yard, Farnham. Completed units at 31 October 2023 were
GBP89.6m (FY22: GBP30.1m). Further detail on inventory can be found
in note 19 of the consolidated financial statements.
Net cash outflow from operating activities was GBP165.6m (FY22:
GBP51.7m inflow) and return on capital employed (ROCE) reduced in
the year to 6.3% (FY22: 22.4%), reflecting the decrease in earnings
and investment in land. Net assets at 31 October 2023 were
GBP856.3m (FY22: GBP883.1m), a decrease of 3.0% on prior year.
Land portfolio
The supply of land continued to tighten in the year due to the
Government changing the top-down housing targets and planning
issues around nutrients, water neutrality, recreation zones and air
quality constraints. With the uncertain economic outlook during
FY23 some developers did not complete planned acquisitions or
temporarily withdrew from the market. The Group took the
opportunity to acquire several highly desirable sites and
strengthening its land portfolio and securing favourable terms. The
Group's decision to remain active in the land market positions it
to mitigate planning delays, ensuring a higher number of outlets
are in place when market conditions improve. The land acquisition
programme will remain at a reduced level during FY24. FY23 average
outlets were 47 (FY22: 54) and it is expected that FY24 will be at
a similar level, reflecting the backdrop outlined above. 3,864
plots have been approved in FY23 for purchase at a gross margin of
25.2% (after sales and marketing costs).
The Group's short-term land portfolio at 31 October 2023
comprised 14,922 (FY22: 14,250) plots, representing approximately
five years of supply. In addition, the Group's strategic land
portfolio comprised 18,830 plots (FY22: 22,450), resulting in a
total land portfolio at 31 October 2023 of 33,752 (FY22: 36,700)
plots with a Gross Development Value (GDV) of GBP12.2bn (FY22:
GBP12.1bn). During the year the Group added 3,501 units to the
short-term land portfolio and delivered 2,020 home completions.
FY23 FY22
Units(1) GDV(2) Units(1) GDV(2)
- GBPm - GBPm
--------- -------- --------- --------
Short-term housing 14,922 5,054 14,250 4,661
--------- -------- --------- --------
Short-term commercial - 60 - 41
--------- -------- --------- --------
Total short term 14,922 5,114 14,250 4,702
--------- -------- --------- --------
Strategic land 18,830 7,049 22,450 7,409
--------- -------- --------- --------
Total land pipeline 33,752 12,163 36,700 12,111
--------- -------- --------- --------
(1) Units based on management estimates of site capacity.
Includes joint venture units at full unit count and on an
equivalent unit basis which allocates a proportion of the unit
count for a deal to the land sale element where the deal contains a
land sale.
(2) Gross development value (GDV) is a management estimate
calculated on the basis of a number of assumptions, for example,
assumed sale price, number of units within the assumed development
and the split between open market and affordable housing units, and
the obtaining of planning permission. These are management's
estimates and do not provide assurance as to the valuation of the
Group's portfolio. Units based on management estimates of site
capacity.
Bill Floydd
Group Finance Director
Principal risks
The Group's emerging and principal risks are outlined below.
They are monitored by the Board, the Audit and Risk Committee and
the Executive Leadership Team.
Emerging risks
Emerging risks have the potential to impact our strategy but
currently are not fully defined, or are principal risks, which are
particularly elevated or increasing in velocity.
Our emerging risks are identified through horizon-scanning by
the Board and Executive Leadership Team including in relation to
industry and macro-economic trends. This is supported by our
divisional risk review process.
Examples of emerging risks which were considered during the year
are:
Economic outlook
We continue to monitor the developing uncertainties surrounding
the political and economic outlook, rising interest rates and
mortgage availability, which could lead to lower sales volumes. As
a result we have taken actions to adjust our strategy and reduce
overhead costs.
Build costs
We have continued to review and discuss risks surrounding our
build costs forecasting. Additional oversight controls are being
implemented and we are strengthening our reporting through the ERP
system.
Regulatory change
This risk has continued to evolve during the year and impacts us
in several ways. We have continuously reviewed the speed of
progress on in-scope remedial fire safety work in addressing our
commitments with the UK Government's Developer Remediation
Contract. There can often be challenges with a shortage in
available fire safety professionals, getting access to sites,
including legal consent, all of which can affect our ability to
progress work as quickly as possible.
Changes to our principal risks
As part of the Group's risk review processes, some risks have
evolved during the year:
-- Market conditions - increasing trend
-- Supply chain - reducing trend
-- Customer service and quality - reducing trend
-- Build cost management - increasing trend
-- Attracting and retaining our skilled people - reducing trend
-- Solvency and liquidity - increasing trend
-- Laws, policies and regulations - increasing trend
-- Land availability and planning - increasing trend
Principal risks
1. Market conditions
Risk description Actions/mitigations Development in the
A decline in macro-economic We continually evaluate year
conditions in the UK, our strategy which we Demand for housing has
which negatively impacts can flex and adjust deteriorated during
the UK residential property as demand profiles change. the year, with significant
market and reduces the economic headwinds.
ability for people to Regular sales forecasts Mortgage borrowing has
buy homes, either through and cost reviews to become significantly
unemployment or low manage potential impact more expensive with
employment, constraints on sales volumes. no Government support
on mortgage availability. for first-time buyers.
Forward sales, land
Decreased sales volumes expenditure and work-in-progress We have significantly
occurring from a drop are all carefully monitored reduced land activity
in housing demand, could to ensure they are aligned during the year and
see an increasing number to levels of demand. have reduced the Group's
of units held as unreserved overhead position. We
and part exchange stock Our Multi Channel Approach have incorporated the
with a potential loss gives us access to a newly created East Anglia
realised on final sales. range of tenure options division into its existing
and earning resilience Eastern division with
Changes to regulations in changing market conditions. revised boundaries.
and taxes, for example
Stamp Duty Land Tax We focus on strategic We continued to build
and the impact of Government purchase of sites, continued our pipeline of trusted
schemes such as Help development of shared partners and have negotiated
to Buy and Equity Loan. ownership models and several bulk deals on
engagement with a variety appropriate commercial
of incentive schemes. terms with partners
which will provide volume
We actively develop delivery in future years.
our sales offering by
introducing new and We have introduced a
innovative products series of new sales
to reflect the nature products and sales schemes
of market conditions. that reflect current
market conditions such
as Smart Own and Family
Cashback.
The Group has adequate
liquidity to deal with
all plausible downside
market scenarios and
continues to focus and
monitor its cash position,
ensuring build costs
and capital outlay match
sales demand.
---------------------------------------- ----------------------------------
2. Safety, Health & Environment (SHE)
Risk description Actions/mitigations Development in the
A significant health We have effective SHE year
and safety event could management systems in We have increased focus
result in a fatality, place with increased to ensure compliance
serious injury or a authority for divisional with subcontractor Risk
dangerous situation build managers and Group Assessment and Method
to an individual. SHE advisors to undertake Statements (RAMS).
incident investigations
Significant environmental and We have expanded reporting
damage could be caused implement follow up of safety performance
by operations on-site actions. to help assess root
or in our offices (for causes.
example, water contamination We use external independent
from pollution). safety auditors to conduct We have continued to
regular site safety expand our training
Lack of recognition reviews as appropriate and communications across
of the importance of and without warning. our build teams and
the wellbeing of employees. provide regular safety
We have a network of bulletins and
These incidents or situations mental health first guidance updates.
could have an adverse aiders and a dedicated
effect on people affected Employee Assistance We have expanded our
by our actions, our Programme. network of mental health
reputation and ability first aiders across
to secure public contracts SHE performance is a our divisions.
and/or, if illegal, bonus metric target
prosecution or significant used across the Group. Delivering on our commitments
financial losses. Where appropriate, contained in Developer
interim risk mitigation Remediation Contract,
solutions have been the Group has
deployed in buildings continued to identify
where fire safety concerns and risk assess any
have been identified. buildings impacted by
possible safety issues.
---------------------------------------- ----------------------------------
3. Supply chain
Risk description Actions/mitigations Development in the
Changing production Established long-term year
levels across the industry relationships with our Access to site labour
put pressure on our supply chain partners and materials through
materials supply chain. through Group trading the supply chain has
agreements and multi-year improved throughout
The industry struggles subcontractor framework the year due to reducing
to attract the next agreements. inflation and lower
generation of talent production levels. We
into skilled trade professions. We engage in dialogue continued to focus on
The labour market may with major suppliers price competitiveness
not have the knowledge to understand critical through re-tendering,
and skills required supply chain risks and quality and improved
to deliver modern methods respond effectively. product selection.
of construction projects.
We have developed effective Where possible and appropriate
Materials availability procurement schedules we forward order materials
can be impacted by changes to mitigate supply challenges. to secure supply and
in demand, rising energy also utilise alternative
prices and dislocation Different construction products if they are
in supply chains due methods are considered available and it is
to external events. such as timber frame appropriate to do so.
or using alternative
There may be a risk materials such as concrete
of suppliers and subcontractors bricks.
facing insolvency due
to adverse economic
conditions.
---------------------------------------- ----------------------------------
4. Customer service and quality
Risk description Actions/mitigations Development in the
Customer service and We continue to focus year
build quality falls on enhancing build quality, We have continued to
below our required standards, achieving high customer enhance our quality
resulting in reduction satisfaction ratings processes and have recruited
of reputation and trust, and a retained commitment additional resources
which could impact sales to excellent placemaking. to support the quality
and volumes. improvements.
Enhanced quality and
Unforeseen product safety build stage inspections We have developed processes
or quality issues or to monitor adherence and introduced new technology
latent defects emerge to our quality standards. to support new regulatory
due to new construction requirements for the
methods. Our Legacy Collection Future Homes Standard
house type range established - Part L.
Failure to effectively that reduces complexity
implement or comply and drives improvements We implemented the requirements
with new regulations in quality. of the New Homes Quality
on build quality or Code in February 2023
customer service requirements There is a central team and made significant
and respond to emerging of quality assurance changes to our customer
technologies and customer relationship service processes and
managers to cover all systems which are subject
divisions. to further ongoing review
and monitoring.
Customer service and
quality performance We have introduced a
is a bonus metric target wider range of options
used across the Group. and extras for customers
and deployed a 24-hour
web chat service along
with online home demonstrations.
---------------------------------------- ----------------------------------
5. Build cost management
Risk description Actions/mitigations Development in the
Build cost inflation We benchmark our costs year
and unforeseen cost against existing sites We have continued to
increases driven by to ensure rates remain monitor our build costs
demands in the supply competitive. closely, ensuring effective
chain or failure to management of inventory
implement adequate cost A fair and competitive levels and competitive
control systems. tender process is in re-tendering through
place and we are committed the supply chain.
Lack of awareness and to paying our suppliers
understanding of external and subcontractors promptly. We completed the implementation
factors that may impact of COINS, our new ERP
build costs including There are regular divisional platform. This has enhanced
complex planning permissions build cost review processes the reporting and visibility
and emerging sustainability and site-based quality of build costs across
and environmental regulations. reviews. the Group. We are enhancing
the independent assurance
A lack of quality in We continue to investigate of build costs reporting
the build process could alternative sources through a centralised
expose the Group to of supply where possible second line commercial
increased costs, reduced and utilise alternative team providing periodic
selling price and volume, production methods or review and advisory
and impact our reputation. materials where it is support to the divisions.
appropriate to do so.
---------------------------------------- ----------------------------------
6. Information security and business continuity
Risk description Actions/mitigations Development in the
Cyber security risks We employ network security year
such as data breaches, measures and intrusion We continued to utilise
ransomware or phishing detection monitoring, a Security Operations
attacks leading to the including virus protection Centre to monitor our
loss of operational on all computers and networks and have enhanced
systems, market-sensitive systems, our security policies
information or other and carry out annual and procedures with
critical data which security-breach tests. further training for
risks non-compliance employees.
with data privacy requirements. We utilise customer
relationship management We have also provided
This in turn could result systems for storing executive level training
in a higher risk of sensitive data to prevent to the Board on Cyber
fraud and, as a result, negligent misuse by security.
financial penalties employees. We operate
and an impact to reputation. in a cloud environment We continued to review
with resilient IT providers, emerging risks, such
reducing centralised as Artificial Intelligence
and physical risk exposure. and have developed policies
to ensure appropriate
This is complemented use in the organisation.
by employee training
on data protection and
internet security, data
classification, retention
policies and toolsets
with appropriate and
responsive procedures
embedded to respond
to data privacy matters;
and IT disaster recovery
and business continuity
plans. The IT Cyber
Security and Data Sub-Board
Committee, chaired by
the Group Finance Director
meets throughout the
year to address cyber
security matters, assess
threat levels and develop
appropriate policies
and procedures.
We are Cyber Essentials
Plus certified and are
subject to regular external
and internal audit review.
---------------------------------------- ----------------------------------
7. Attracting and retaining our skilled people
Risk description Actions/mitigations Development in the
An increasing skills Employee engagement year
gap in the industry surveys to enable the Continued to evolve
at all levels resulting Board and ELT to understand our people strategy
in difficulty with recruiting employee feedback. and have expanded the
the right and diverse range of leadership
mix of people for vacant Continual focus on improving and personal skills
positions. flexible and agile working training across the
arrangements to Group.
Employee turnover and support employees.
requirement to induct We became Gold Accredited
and embed new employees, Programmes of work to through The 5% Club
alongside the cost of develop robust succession in respect to our recruitment
wages increasing as plans and improve diversity and development of trainees.
a result of inflation. and inclusion across
the Group. Developed our diversity
Loss of knowledge within and inclusion policies
the Group which could We monitor pay structures and initiatives and
result in inefficiencies, and market trends to have held a number of
productivity loss, delays ensure we remain competitive executive sponsored
to business operations, against our competitors. Affinity Group meetings.
increasing costs, and
an overuse or reliance We monitor employee Established the Women
on consultants and the turnover, absence statistics in the Workplace forum.
supply chain. and feedback from exit
interviews. We have implemented
Ensuring we have the a new enterprise wide
right culture and environment talent management, recruitment,
to attract and retain HR and payroll system
talent. this year
---------------------------------------- ----------------------------------
8. Solvency and liquidity
Risk description Actions/mitigations Development in the
Cash generation for Cash performance is year
the Group is a key part measured against forecast While net cash has reduced
of our strategy and with a variance analysis in the year, the Group
our cash headroom could issued weekly. Cash continued to benefit
be affected by economic performance is also from a strong balance
pressures that result considered in detail sheet with diverse sources
in delayed receipts at a divisional board of funding.
and potentially lower level.
sales in the short to We continued to stress
medium term. We scrutinise the cash test the Group's financial
terms of land transactions. resilience for various
Commitments to significant Private Rented Sector scenarios and are satisfied
land and build obligations and bulk sales offer that adequate funding
that are made ahead us the potential for is in place. We have
of revenue certainty. early cash inflow. maintained a disciplined
focus on cash performance
Reduction in margins The Group has available and capital allocation
as average selling prices the use of a GBP250m throughout the year.
fall, inability to Sustainability Linked
restructure Revolving Credit Facility
appropriately and (RCF).
unsustainable
levels of work-in-progress. We generally control
strategic land rather
than own it and have
limited capital tied
up on the balance sheet.
These sites are subject
to regular review and
diligent appraisal before
being drawn down.
---------------------------------------- ----------------------------------
9. Laws, policies and regulations
Risk description Actions/mitigations Development in the
The housebuilding industry We engage with the Government year
is subject to complex directly and through The pace of regulatory
regulation, policy changes the HBF, various memberships reform has continued
and Government intervention. of Industry groups and to increase in the housebuilding
build relationships industry.
Future regulatory changes in key local authority
could impact our ability areas. We are developing our
to make medium and longer-term operating framework
decisions. We continue to assess to support various regulatory
and plan for emerging requirements.
Failure to effectively regulation and developments
implement new regulations in readiness for potential Implemented the New
including the Future regulatory change. Homes Quality Code and
Homes Standard, the relaunched the standard
Environment Act 2021, housing range in the
New Homes Quality Code spring to comply with
and the Building Safety Phase 1 of the Future
Act 2022 could impact Homes standard.
the Group.
---------------------------------------- ----------------------------------
10. Climate change
Risk description Actions/mitigations Development in the
The Group will need Our Sustainability Committee year
to further enhance its oversees our sustainability Implemented the interim
sustainable practices strategy, including update to Part L of
and processes as we our approach to climate the Building Regulations,
transition to a net-zero change. The Committee which requires a 31%
carbon business by 2045 monitors performance reduction in carbon
and continue to meet against our climate emissions compared to
evolving Government targets and assesses the prior regulations.
regulations and growing climate-related risks
investor expectations. and opportunities. Continued to collaborate
with our energy assessors,
Climate change could We are members of the supply chain and wider
impact our business Future Homes Hub, an industry to prepare
through transition and industry-wide initiative for the Future Homes
physical risks. to support the implementation Standard.
of the Future Homes
Transition risks include Delivery Plan to meet Our Sustainability Linked
increasing regulatory climate and environmental RCF incorporated targets
change, increased carbon targets. We also have to reduce GHG emissions
pricing and shifts in internal workstreams associated with our
stakeholder preferences. to plan for new regulations, operations and the use
including the Future of our homes. We achieved
Physical risks are direct Homes Standard. both RCF climate-related
impacts from a changing targets.
climate including rising Near and long-term science-based
temperatures and changing targets are in place,
weather patterns. driving action to reduce
GHG emissions.
Failure to manage climate-related
risks could lead to Executive Directors
additional costs, build have GHG emission reduction
programme delays and targets within their
damage to our reputation. Long-Term Incentive
Plan.
---------------------------------------- ----------------------------------
11. Land availability and planning
Risk description Actions/mitigations Development in the
Maintaining a supply Expertise within our year
of suitable strategic Land teams to ensure Our strategy has increased
and consented land at we acquire sites in focus on achieving planning
the right economic terms the best locations and consent on land under
to support our growth that allow us to demonstrate our control as we have
ambitions. our placemaking credentials. reduced land acquisitions
and acquiring new sites.
Acquired land is delayed Formal relationships
in the planning process with key land suppliers, The planning process
where local authorities landowners and agents continues to be highly
and public sector resources and local authorities. complex and time consuming
are constrained. with ongoing demands
Land acquisitions are relating to affordable
The regulatory planning subject to formal appraisal housing, Section 106
and environmental requirements and viability assessment obligations and the
continue to evolve with prior to bid submission community infrastructure
the national policy and exchange of contracts. levy. There has been
framework developments. a particular challenge
Environmental requirements The planning status in some of our divisions
such as nutrients, water of all our sites are regarding nutrients
neutrality and biodiversity regularly reviewed. and water neutrality
obligations are increasing. which has impacted the
This increases the We undertake close consultation speed of planning approvals.
challenge of providing with the Government These complexities increase
quality and affordable on planning reform. the cost of development
homes in the locations and the time taken to
required. move land through the
planning process, which
is also impacted by
resource constraints
in local authority planning
departments.
---------------------------------------- ----------------------------------
12. Combustible materials
Risk description Actions/mitigations Development in the
Failure to plan and A dedicated specialist year
implement the changes team is in place with The Group continued
required by the Government controls and processes to review the risk register
in respect of combustible in respect of combustible of legacy buildings
materials and fire safety materials. There is in scope, assessing
in a timely manner, a regular review process the latest guidelines
which could significantly in place which is overseen against each affected
impact our reputation. by the Chief Executive, building, advice from
Group Finance Director technical or legal advisors
This is a complex area and the internal project along with relevant
where it is often difficult team responsible for notifications from a
to identify and implement this area. variety of stakeholders.
remedies quickly. The We monitor and report
rapidly changing landscape There is a detailed progress of remedial
of regulatory guidance risk register of all work to DLUHC on a periodic
and the need to engage schemes under review basis. Management has
with multiple stakeholders including any safety considered the progress
contribute to this complexity, considerations, recent of any remedial works
as does the limited customer or stakeholder and adjusted the financial
availability of qualified correspondence and considers provision to reflect
resource to oversee how the Group may choose the Group's best estimate
work performed. Given to respond. In addition, of any future costs.
this, costs can be difficult the central team assesses We continue to review
to estimate and could whether faulty workmanship the appropriateness
be subject to considerable or design was a factor of our combustible materials
variability and Government in the potential remedial provision.
legislation, or regulation works, and, if appropriate,
could further change seeks to recover these The Board signed the
increasing the scope costs directly from Developers Remediation
of legacy buildings the subcontractor or contract and we are
and consultant involved, now
required remedial works. or through engagement contractually obligated
of external legal counsel. to the pledge.
---------------------------------------- ----------------------------------
Statement of Directors' responsibilities in respect of the
financial statements
The Directors are responsible for preparing the Annual Report
and financial statements in accordance with applicable law and
regulation.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law the Directors
have prepared the Group financial statements in accordance with
UK-adopted international accounting standards and the Company
financial statements in accordance with United Kingdom Generally
Accepted Accounting Practice (United Kingdom Accounting Standards,
comprising FRS 101 'Reduced Disclosure Framework', and applicable
law).
Under company law, Directors must not approve the financial
statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Group and Company and of the
profit or loss of the Group for that period. In preparing the
financial statements, the Directors are required to:
-- Select suitable accounting policies and then apply them consistently
-- State whether applicable UK-adopted international accounting
standards have been followed for the Group financial statements and
United Kingdom Accounting Standards, comprising FRS 101 have been
followed for the Company financial statements, subject to any
material departures disclosed and explained in the financial
statements
-- Make judgements and accounting estimates that are reasonable and prudent, and
-- Prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Group and Company
will continue in business.
The Directors are responsible for safeguarding the assets of the
Group and Company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
The Directors are also responsible for keeping adequate
accounting records that are sufficient to show and explain the
Group's and Company's transactions and disclose with reasonable
accuracy at any time the financial position of the Group and
Company and enable them to ensure that the financial statements and
the Directors' Remuneration Report comply with the Companies Act
2006.
The Directors are responsible for the maintenance and integrity
of the Company's website. Legislation in the United Kingdom
governing the preparation and dissemination of financial statements
may differ from legislation in other jurisdictions.
Directors' confirmations
The Directors consider that the Annual Report and financial
statements, taken as a whole, is fair, balanced and understandable
and provides the information necessary for shareholders to assess
the Group's and Company's position and performance, business model
and strategy.
Each of the Directors, whose names and functions are listed on
pages 56 to 57 of our 2023 Annual Report and financial statements
to be published in February 2023 confirm that, to the best of their
knowledge:
-- The Group financial statements, which have been prepared in
accordance with UK-adopted international accounting standards, give
a true and fair view of the assets, liabilities, financial position
and profit of the Group
-- The Company financial statements, which have been prepared in
accordance with United Kingdom Accounting Standards, comprising FRS
101, give a true and fair view of the assets, liabilities and
financial position of the Company, and
-- The Strategic Report includes a fair review of the
development and performance of the business and the position of the
Group and Company, together with a description of the principal
risks and uncertainties that it faces.
In the case of each Director in office at the date the
Directors' Report is approved:
-- So far as the Director is aware, there is no relevant audit
information of which the Group's and Company's auditors are
unaware, and
-- They have taken all the steps that they ought to have taken
as a Director in order to make themselves aware of any relevant
audit information and to establish that the Group's and Company's
auditors are aware of that information.
On behalf of the Board
Peter Truscott
Chief Executive
23 January 2024
audited financial information
The consolidated financial statements and notes 1 to 28 for the
year ended 31 October 2023 are derived from the Group's annual
financial statements which have been audited by
PricewaterhouseCoopers LLP. The unmodified audit report is
available for inspection at the Group's registered office.
CREST NICHOLSON HOLDINGS PLC
Consolidated Income Statement
For the year ended 31 October 2023
2023 2023 2023 2022 2022 2022
Pre- exceptional Exceptional Total Pre- exceptional Exceptional Total
items items items items
(note (note
4) 4)
Note GBPm GBPm GBPm GBPm GBPm GBPm
Revenue 3 657.5 - 657.5 913.6 - 913.6
Cost of sales (556.9) (14.3) (571.2) (719.3) (102.5) (821.8)
---------------- ----------- ------- ---------------- ----------- -------
Gross profit/(loss) 100.6 (14.3) 86.3 194.3 (102.5) 91.8
Net administrative
expenses 5 (55.8) - (55.8) (51.1) - (51.1)
Net impairment losses
on financial assets 17 (0.6) - (0.6) (2.3) - (2.3)
---------------- ----------- ------- ---------------- ----------- -------
Operating profit/(loss) 5 44.2 (14.3) 29.9 140.9 (102.5) 38.4
Finance income 7 4.1 - 4.1 3.1 - 3.1
Finance expense 7 (9.6) (4.6) (14.2) (10.2) (1.0) (11.2)
---------------- ----------- ------- ---------------- ----------- -------
Net finance expense (5.5) (4.6) (10.1) (7.1) (1.0) (8.1)
Share of post-tax
profits/(losses) of
joint ventures using
the equity method 14 2.7 0.6 3.3 4.0 (1.5) 2.5
---------------- ----------- ------- ---------------- ----------- -------
Profit/(loss) before
tax 41.4 (18.3) 23.1 137.8 (105.0) 32.8
Income tax (expense)/credit 8 (10.0) 4.8 (5.2) (28.8) 22.4 (6.4)
---------------- ----------- ------- ---------------- ----------- -------
Profit/(loss) for
the year attributable
to equity shareholders 31.4 (13.5) 17.9 109.0 (82.6) 26.4
---------------- ----------- ------- ---------------- ----------- -------
Earnings per ordinary
share
Basic 10 12.3p 7.0p 42.5p 10.3p
Diluted 10 12.2p 7.0p 42.3p 10.2p
The notes below form part of these consolidated financial
statements.
CREST NICHOLSON HOLDINGS PLC
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 October 2023
2023 2022
Note GBPm GBPm
Profit for the year attributable to equity shareholders 17.9 26.4
Other comprehensive (expense)/income:
Items that will not be reclassified to the consolidated
income statement:
Actuarial losses of defined benefit schemes 16 (2.5) (8.4)
Change in deferred tax on actuarial losses of
defined benefit schemes 15 1.1 1.6
Other comprehensive expense for the year net
of income tax (1.4) (6.8)
Total comprehensive income attributable to equity
shareholders 16.5 19.6
----- -----
The notes below form part of these consolidated financial
statements.
CREST NICHOLSON HOLDINGS PLC
Consolidated Statement of Changes in Equity
For the year ended 31 October 2023
Share
Share premium Retained Total
capital account earnings equity
Note GBPm GBPm GBPm GBPm
Balance at 1 November 2021 12.8 74.2 814.6 901.6
Profit for the year attributable
to equity shareholders - - 26.4 26.4
Actuarial losses of defined
benefit schemes 16 - - (8.4) (8.4)
Change in deferred tax on actuarial
losses of defined benefit schemes 15 - - 1.6 1.6
--------- --------- ---------- --------
Total comprehensive income
for the year - - 19.6 19.6
--------- --------- ---------- --------
Transactions with shareholders:
Equity-settled share-based payments 16 - - 1.9 1.9
Deferred tax on equity-settled
share-based payments 15 - - (0.4) (0.4)
Purchase of own shares 23 - - (1.1) (1.1)
Dividends paid 9 - - (38.5) (38.5)
Balance at 31 October 2022 12.8 74.2 796.1 883.1
Profit for the year attributable
to equity shareholders - - 17.9 17.9
Actuarial losses of defined
benefit schemes 16 - - (2.5) (2.5)
Change in deferred tax on actuarial
losses of defined benefit schemes 15 - - 1.1 1.1
--------- --------- ---------- --------
Total comprehensive income
for the year - - 16.5 16.5
--------- --------- ---------- --------
Transactions with shareholders:
Equity-settled share-based payments 16 - - 1.5 1.5
Deferred tax on equity-settled
share-based payments 15 - - (0.2) (0.2)
Purchase of own shares 23 - - (1.9) (1.9)
Transfers in respect of share
options - - 0.9 0.9
Dividends paid 9 - - (43.6) (43.6)
Balance at 31 October 2023 12.8 74.2 769.3 856.3
--------- --------- ---------- --------
The notes below form part of these consolidated financial
statements.
CREST NICHOLSON HOLDINGS PLC
Consolidated Statement of Financial Position
As at 31 October 2023
2023 2022
ASSETS Note GBPm GBPm
Non-current assets
Intangible assets 11 29.0 29.0
Property, plant and equipment 12 2.2 0.9
Right-of-use assets 13 6.1 3.7
Investments in joint ventures 14 10.7 9.0
Financial assets at fair value through profit
and loss 2.6 3.3
Deferred tax assets 15 3.3 4.8
Retirement benefit surplus 16 10.0 11.1
Trade and other receivables 17 6.0 35.0
------- -------
69.9 96.8
------- -------
Current assets
Inventories 18 1,164.8 990.1
Financial assets at fair value through profit
and loss 1.1 1.3
Trade and other receivables 17 120.0 116.3
Current income tax receivable 11.9 1.1
Cash and cash equivalents 19 162.6 373.6
------- -------
1,460.4 1,482.4
------- -------
Total assets 1,530.3 1,579.2
------- -------
LIABILITIES
Non-current liabilities
Interest-bearing loans and borrowings 20 (83.5) (97.1)
Trade and other payables 21 (71.1) (41.8)
Lease liabilities 13 (4.4) (2.3)
Deferred tax liabilities 15 (2.5) (3.2)
Provisions 22 (73.8) (70.8)
------- -------
(235.3) (215.2)
------- -------
Current liabilities
Interest-bearing loans and borrowings 20 (14.2) -
Trade and other payables 21 (337.0) (407.1)
Lease liabilities 13 (2.0) (1.6)
Provisions 22 (85.5) (72.2)
------- -------
(438.7) (480.9)
------- -------
Total liabilities (674.0) (696.1)
------- -------
Net assets 856.3 883.1
------- -------
EQUITY
Share capital 23 12.8 12.8
Share premium account 23 74.2 74.2
Retained earnings 769.3 796.1
Total equity 856.3 883.1
------- -------
The notes below form part of these consolidated financial
statements.
These consolidated financial statements were approved by the
Board of Directors on 23 January 2024.
On behalf of the Board
Peter Truscott Bill Floydd
Director Director
CREST NICHOLSON HOLDINGS PLC
Consolidated Cash Flow STATEMENT
For the year ended 31 October 2023
2023 2022
Note GBPm GBPm
Cash flows from operating activities
Profit for the year attributable to equity
shareholders 17.9 26.4
Adjustments for:
Depreciation on property, plant and equipment 12 0.5 0.4
Depreciation on right-of-use assets 13 2.3 1.9
Retirement benefit obligation administrative
expenses 16 0.6 0.9
Net finance expense 7 10.1 8.1
Share-based payment expense 16 1.5 1.9
Share of post-tax profits of joint ventures
using the equity method 14 (3.3) (2.5)
Impairment of inventories movement 18 7.6 (8.1)
Net impairment of financial assets 17 0.6 2.3
Income tax expense 8 5.2 6.4
Operating profit before changes in working
capital, provisions and contributions to retirement
benefit obligations 43.0 37.7
Decrease/(increase) in trade and other receivables 27.0 (17.0)
(Increase)/decrease in inventories (182.3) 55.5
Decrease in trade and other payables and provisions (31.9) (13.4)
Contribution to retirement benefit obligations 16 (1.5) (3.4)
Cash (used by)/ generated from operations (145.7) 59.4
Finance expense paid (5.6) (6.3)
Income tax paid (14.3) (1.4)
Net cash (outflow)/inflow from operating activities (165.6) 51.7
------- ------
Cash flows from investing activities
Purchases of property, plant and equipment 12 (1.8) (0.1)
Disposal of f inancial assets at fair value
through profit and loss 0.9 0.7
Funding to joint ventures (13.0) (7.5)
Repayment of funding from joint ventures 11.7 18.8
Dividends received from joint ventures 1.5 2.4
Finance income received 2.3 0.1
------- ------
Net cash inflow from investing activities 1.6 14.4
------- ------
Cash flows from financing activities
Principal elements of lease payments 13 (2.4) (2.1)
Dividends paid 9 (43.6) (38.5)
Net purchase of own shares (1.0) (1.1)
Debt arrangement and facility fees - (1.5)
Net cash outflow from financing activities (47.0) (43.2)
------- ------
Net (decrease)/increase in cash and cash equivalents (211.0) 22.9
Cash and cash equivalents at the beginning
of the year 373.6 350.7
Cash and cash equivalents at the end of the
year 19 162.6 373.6
------- ------
The notes below form part of these consolidated financial
statements.
CREST NICHOLSON HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1 ACCOUNTING POLICIES
Basis of preparation
Crest Nicholson Holdings plc (Company) is a public limited
company incorporated, listed and domiciled in the UK. The address
of the registered office is 500 Dashwood Lang Road, Bourne Business
Park, Addlestone, Surrey KT15 2HJ. The Group financial statements
consolidate those of the Company and its subsidiaries (together
referred to as the Group) and include the Group's interest in
jointly controlled entities. The parent company financial
statements present information about the Company as a separate
entity and not about its Group.
The financial statements are presented in pounds sterling and
amounts stated are denominated in millions (GBPm), unless otherwise
stated.
The Group financial statements have been prepared and approved
by the Directors in accordance with UK-adopted international
accounting standards, and with the requirements of the Companies
Act 2006 as applicable to companies reporting under those standards
and have been prepared on the historical cost basis except for
financial assets at fair value through profit and loss, which are
as otherwise stated. The parent company financial statements are
presented below.
The preparation of financial statements in conformity with
UK-adopted international accounting standards requires the
Directors to make assumptions and judgements that affect the
application of policies and reported amounts within the financial
statements. Assumptions and judgements are based on experience and
other factors that the Directors consider reasonable under the
circumstances. Actual results may differ from these estimates.
Judgements made by the Directors, in the application of these
accounting policies that have a significant effect on the financial
statements and estimates with a significant risk of material
adjustment in the next year are discussed below.
Going concern
The Directors have adopted the going concern basis in preparing
the financial statements and have concluded that there are no
material uncertainties leading to significant doubt about the
Group's going concern status. The assessment has been performed
over the 15 month period to April 2025, aligning with the
measurement date of the Group's covenants on its lending
facilities.
Assessment of principal risks
The Directors assessed the Group's principal risks as detailed
above and considered three overarching risks when developing the
stress testing for this assessment. These risks were selected due
to the potential impact over the period assessed for going concern,
which is shorter than the period used for the principal risk
assessment.
Risk Mitigation and other considerations Link to
principal
risks
Will the volume of home
completions fall further? * The Group has successfully demonstrated its ability * Market conditions
* Will the current economic activity disrupt future to trade effectively in previous downturns in the
operations and our ability to build and sell housing cycle and benefits from a strong balance
properties? sheet and good forward order book * Supply chain
* Will material and labour availability worsen due to * The UK Government has consistently demonstrated its
energy prices or other economic factors and impact support for the housing lending market, encouraging
project timelines? lenders to maintain good levels of mortgage
availability
* The Group benefits from strong supplier and
subcontractor relationships that help mitigate
availability issues.
------------------------------------------------------------ -----------------------------
Will UK house prices fall?
* Will the current or further decline in macro economic * The Group has a good forward order book of * Market conditions
conditions result in lower prices for UK property due reservations and exchanges at prevailing prices
to reduced demand through unemployment or mortgage
availability?
* There is appetite for institutional capital
investment into the UK property market that helps
* Will the higher cost of mortgages persist and create mitigate any cyclical drop in confidence in the
an affordability gap? private market
* The Group participates in affordability schemes such
as Deposit Unlock.
------------------------------------------------------------ -----------------------------
Will build cost inflation
remain high and sustained? * Supply chain
* Will the availability of materials and labour remain * The Group benefits from well-negotiated central
scarce because of the war in Ukraine and high energy contracts with suppliers which help mitigate cost
prices? increases * Build cost management
Will the move to more * The Group's implementation of COINS as its new ERP
sustainable building practices platform will enhance the reporting of build costs
and materials lead to for the divisions once initial issues are resolved,
an increase in construction the implementation was completed in FY23 with all
costs? divisions now using a consistent system.
------------------------------------------------------------ -----------------------------
Applying these risks against future forecasts
The Directors have considered prior years trading performance
and the completed weeks of trading since 31 October 2023. The Group
retains a good level of working capital and liquidity to execute
its strategy. During the prior year the Group completed a GBP250.0m
Sustainability Linked RCF which expires in October 2026. The Group
also benefits from GBP100.0m of senior loan notes. Both of these
sources of financing are subject to three financial covenant tests,
details of these covenants can be found in note 24. The RCF is also
subject to sustainability targets which are aligned to the Group's
sustainability strategy with a lower interest rate payable if these
are achieved, see note 24 for more information. Given the Group's
good liquidity position the Directors consider the possibility of
breaching one of the financial covenants as being the first sign
that the Group could be in distress and should be the basis of its
going concern assessment in this year's financial statements.
The Directors have then considered three scenarios that stress
test how the Group would perform against the risks outlined
above.
1. 'Base case'. The Directors have considered the forecast for
FY24 and FY25 covering the period to April 2025. The forecasts
include the Directors current assessment of the potential impact of
the economic uncertainty currently being experienced in the UK.
These impacts include sales price and sales volume expectation, but
are not disclosed as the Group considers them to be commercially
sensitive.
The Group has already secured a significant proportion of sales
for FY24 by way of its forward order book. Under this scenario the
Group maintains a good level of liquidity and financial headroom
throughout FY24 and across the going concern period and remains
compliant with all three covenants with comfortable headroom.
2. 'Severe but plausible downside case'. The Directors have
applied the three risks outlined above to the base case scenario
without double counting the sales price and volume assumptions
implicit in that base case. These risks are considered effective
from 1 November 2023 and include a 0.37 SPOW (FY23 SPOW was 0.52),
a reduction in forecast average selling prices that increases over
time and reaches a peak of 7% before recovering and a 10.0%
increase in forecast build costs. Build costs include the Group's
stated commitment under the Developer Remediation Contract to
remediate legacy buildings and therefore any assumed increase in
build costs also increases the size of this commitment. Each of
these risks has been applied individually and the Group remains
compliant with all three covenants with sufficient headroom. The
Directors have then applied the 7.0% sales price reduction together
with the 0.37 SPOW rate, to reflect what they consider to be a
'severe but plausible downside case' outcome and trading
environment. The build cost inflation risk was not included in this
severe but plausible downside case, as during a downturn as severe
as that considered, the Group has historically seen build cost
deflation as suppliers and subcontractors swiftly recalibrate their
pricing to compete for work in shrinking forward order books. As
such, applying all three risks in aggregate was not considered
plausible. This combined scenario inevitably places a higher stress
than the base case scenario, but again the Group remains compliant
with all three covenants, with sufficient headroom.
In all three 'downside' individual scenarios, and in the
combined scenario, the Group has used appropriate mitigations
available to enable it to offset the deterioration in financial
performance. These mitigations are within the control of the Group
and can be enacted in good time, and are outlined below.
3. 'Test to failure'. The assumptions have then individually,
and again in combination, been applied to each of the risks above
to a level beyond that which is considered to be a plausible
'downside' scenario. This informs the Directors as to what level of
stress would be needed to realise a breach in any of the covenants.
The results of these tests are not disclosed as they are considered
commercially sensitive.
Mitigation options and considerations
Based on the assessment methodology outlined above the Directors
have considered some of the mitigations that could be applied in a
deteriorating trading environment to either increase profit or
conserve cash. Some of these measures are implicit outcomes of a
downturn (such as reduction in build spend) rather than mitigating
actions which the Group would have to apply.
The Group has experience of applying such mitigations in the
past, which include but are not limited to:
-- The impact of any immediate reduction in home reservations or
achieved average selling prices would be mitigated by the Group's
forward order book of reservations and exchanges
-- A reduction in Group overheads to reflect the lower build and
selling activity in a weaker trading environment
-- Renegotiation of supplier arrangements as the amount of build
activity contracts, and materials suppliers and subcontractors are
required to be more competitive, reducing build spend
-- Mothballing unproductive and/or capital-intensive schemes
-- Repaying interest-bearing products to reduce the net interest
charge, recognising the Group's current liquidity position
-- A reduction in sales and marketing costs to reflect a fall in sales volumes
-- A reduction in discretionary land acquisitions and therefore
land expenditure as we require less land to replenish the land
portfolio
-- Reduction in dividend to conserve cash.
Conclusion on going concern
In reviewing the assessment outlined above the Directors are
confident that the Group has the necessary resources and
mitigations available to continue trading for at least 12 months
from the date of signing of the financial statements. Accordingly,
the consolidated financial statements continue to be prepared on a
going concern basis.
Critical accounting estimates and judgements
The preparation of the consolidated financial statements under
UK-adopted international accounting standards requires the
Directors to make estimates and assumptions that affect the
application of policies and reported amounts of assets and
liabilities, income and expenses and related disclosures. In
applying the Group's accounting policies, the key judgements that
have a significant impact on the financial statements, include
those involving estimates, which are described below, the judgement
to present certain items as exceptional (see note 4), certain
revenue policies relating to part exchange sales, the
identification of performance obligations where a revenue
transaction involves the sale of both land and residential units
and revenue on the units is then subsequently recognised over time
where the land sale element takes place at the start of the
contract (see note 3 for the split of revenue recognised at a point
in time and recognised over time), the recognition of the defined
benefit pension scheme net surplus (see note 16) and the current
and non-current presentation of the combustible materials
provision.
The Group has made a judgement to not recognise revenue on the
proceeds received on the disposal of properties taken in part
exchange against a new property as they are incidental to the main
revenue-generating activities of the Group. As part exchange sales
are deemed incidental, the income and expenses associated with part
exchange properties are recognised in other operating income and
other operating expenses which are presented within net
administrative expenses in the consolidated income statement.
Income is recognised when legal title is passed to the customer.
Previously the income and associated costs arising on these sales
was presented net within cost of sales. The prior year balance has
not been restated since the net result is immaterial to the Group
and there is no change to the operating profit realised in each
year.
Estimates and associated assumptions affecting the financial
statements are based on historical experience and various other
factors that are believed to be reasonable under the circumstances.
The estimates and underlying assumptions are reviewed on an ongoing
basis. Changes in accounting estimates may be necessary if there
are changes in the circumstances on which the estimate was based or
as a result of new information.
Revisions to accounting estimates are recognised in the year in
which the estimate is revised if the revision affects only that
year, or in the year of revision and future years if the revision
affects both current and future years.
The Directors have made consistent estimates and assumptions in
reviewing the going concern assumption as those detailed above. The
Directors consider the key sources of estimation uncertainty that
have a risk of causing a material adjustment to the carrying value
of assets and liabilities as described below.
Carrying value of inventories
Inventories of work-in-progress, completed buildings including
show homes and part exchange inventories are stated in the
consolidated statement of financial position at the lower of cost
or NRV. On a regular basis management update estimates of future
revenue and expenditure for each development. Future revenue and
expenditure may differ from estimates which could lead to an
impairment of inventory if there are adverse changes. Where
forecast revenues are lower than forecast total costs an inventory
provision is made. This provision may be reversed in subsequent
periods if there is evidence of sustained improved revenue or
reduced expenditure forecast on a development. If forecast revenue
was 10.0% lower on sites within the short-term portfolio (total
land portfolio excluding strategic land) as at 31 October 2023, the
impact on profit before tax would have been GBP15.9m lower (2022:
GBP7.0m lower).
Estimation of development profitability
Due to the nature of development activity and, in particular,
the length of the development cycle, the Group has to make
estimates of the costs to complete developments, in particular
those which are multi-phase and/or may have significant
infrastructure costs. These estimates are reflected in the margin
recognised on developments in relation to sales recognised in the
current and future years. There is a degree of inherent uncertainty
in making such estimates. The Group has established internal
controls that are designed to ensure an effective assessment of
estimates is made of the costs to complete developments. The Group
considers estimates of the costs to complete on longer-term sites,
which typically have higher upfront shared infrastructure costs to
have greater estimation uncertainty than sites of shorter duration
with less infrastructure requirements. A change in estimated
margins on sites, for example due to changes in estimates of build
cost inflation or a reduction in house prices, could alter future
profitability. If forecast costs were 10.0% higher on sites which
contributed to the year ended 31 October 2023 and which are
forecast to still be in production beyond the year ending 31
October 2025 (2022: beyond the year ending 31 October 2024), profit
before tax in the current year would have been GBP32.3m lower
(2022: GBP25.3m lower).
The Group has considered the potential financial impacts
associated with transitional and physical climate-related risks and
opportunities. The primary known impact is the FHS, due to be
implemented from 2025, which is expected to increase build cost for
individual units. The anticipated additional build cost has been
included in new project acquisition appraisals since the FHS was
announced. Projects already underway will be substantially built
out before the new regulations commence. It is not expected that
the additional build cost will have a material impact on the
carrying value of inventories or their associated project margins
or the value of goodwill. The longer term costs associated with
climate-related risks are considered to be beyond the timescale of
the projects the Group is currently contracted to and as such do
not impact the carrying value of inventories or their associated
project margins. Further information on climate-related risks and
opportunities is provided on pages 47 - 48 of our 2023 annual
report and financial statements to be published in February 2024 ,
and this represents an area of estimation rather than a critical
accounting estimate.
Valuation of the pension scheme assets and liabilities
In determining the valuation of the pension scheme assets and
liabilities, the Directors utilise the services of an actuary. The
actuary uses key assumptions being inflation rate, life expectancy,
discount rate and Guaranteed Minimum Pensions, which are dependent
on factors outside the control of the Group. To the extent that
such assumptions differ to that expected, the pension liability
would change. See note 16 for additional details.
Combustible materials
The combustible materials provision requires a number of key
estimates and assumptions in its calculation. If it is deemed that
the costs are probable and can be reliably measured then, as per
IAS 37, a provision is recorded. If costs are considered possible
or cannot be reliably estimated, then they are recorded as
contingent liabilities (see note 25). During the year, the
combustible materials provision has been increased to reflect the
most contemporaneous assessment of these costs. The Group signed
the Developer Remediation Contract on 13 March 2023, which did not
materially alter the provision required from that recorded as at 31
October 2022. In the previous financial year, the Group signed the
UK Government's Building Safety Pledge (the Pledge), a consequence
of which the Group has committed to funding the remediation of
life-critical fire safety issues on buildings over 11 metres in
which the Group was involved from 1992.
The key assumptions used to determine the provision include but
are not limited to identification of the properties impacted
through the period of construction considered. The key estimates
then applied to these properties include the potential costs of
investigation, replacement materials and works to complete, along
with the timing of forecast expenditure. The Directors have used
BSF cost information, other external information, and internal
assessments as a basis for the estimated remedial costs. These
estimates are inherently uncertain due to the highly complex and
bespoke nature of the buildings. The actual costs may differ to the
amounts notified by the BSF costed projects, and fire safety
reports in progress may require different levels of remediation and
associated costs than those currently estimated. If forecast
remediation costs on buildings currently provided for are 20.0%
higher than provided, the pre-tax exceptional items charge in the
consolidated income statement would be GBP29.0m higher. If further
buildings are identified this could also increase the required
provision, but the potential quantity of this change cannot be
readily determined without further claims or investigative work.
See notes 4 and 22 for additional details.
Adoption of new and revised standards
There are no new standards, amendments to standards and
interpretations that are applicable to the Group and are mandatory
for the first time for the financial year beginning 1 November 2022
which have had a material impact on the Group.
Impact of standards and interpretations in issue but not yet
effective
There are a number of standards, amendments and interpretations
that have been published that are not mandatory for the 31 October
2023 reporting period and have not been adopted early by the Group.
The Group does not expect that the adoption of these standards,
amendments and interpretations will have a material impact on the
financial statements of the Group in future years.
Other accounting policies
The accounting policies set out below have, unless otherwise
stated, been applied consistently to all periods presented in these
Group financial statements except in respect of the presentation of
the proceeds generated from the disposal of part exchange
properties as detailed within critical accounting estimates and
judgements.
Alternative performance measures
The Group has adopted various APMs, as presented below. These
measures are not defined by IFRS and therefore may not be directly
comparable with other companies' APMs, and should be considered in
addition to, and are not intended to be a substitute for, or
superior to, IFRS measurements.
Consolidation
The consolidated financial statements include the financial
statements of Crest Nicholson Holdings plc, its subsidiary
undertakings and the Group's share of the results of joint ventures
and joint operations. Inter-company transactions, balances and
unrealised gains on transactions between group companies are
eliminated on consolidation.
(a) Subsidiaries
Subsidiaries are entities in which the Group has control. The
Group controls an entity when the Group is exposed to, or has
rights to, variable returns through its power over the entity. In
assessing control, potential voting rights that are currently
exercisable or convertible are taken into account. The profits and
losses of subsidiaries are included in the consolidated financial
statements from the date that control commences until the date that
control ceases.
The acquisition method of accounting is used by the Group to
account for the acquisition of subsidiaries that are a business
under IFRS 3. On acquisition of a subsidiary, all of the
subsidiary's separable, identifiable assets and liabilities
existing at the date of acquisition are recorded at their fair
values reflecting their condition at that date. All changes to
those assets and liabilities and the resulting gains and losses
that arise after the Group has gained control of the subsidiary are
charged to the post-acquisition consolidated income statement or
consolidated statement of comprehensive income. Accounting policies
of acquired subsidiaries are changed where necessary, to ensure
consistency with policies adopted by the Group.
Acquisitions of subsidiaries which do not qualify as a business
under IFRS 3 are accounted for as an asset acquisition rather than
a business combination. Under such circumstances the fair value of
the consideration paid for the subsidiary is allocated to the
assets and liabilities purchased based on their relative fair value
at the date of purchase. No goodwill is recognised on such
transactions.
(b) Joint ventures
A joint venture is a contractual arrangement in which the Group
and other parties undertake an economic activity that is subject to
joint control and these parties have rights to the net assets of
the arrangement. The Group reports its interests in joint ventures
using the equity method of accounting. Under this method, interests
in joint ventures are initially recognised at cost and adjusted
thereafter to recognise the Group's share of the post-acquisition
profits or losses and movements in other comprehensive income. The
Group's share of results of the joint venture after tax is included
in a single line in the consolidated income statement. Where the
share of losses exceeds the Group's interest in the entity and
there is no obligation to fund these losses, the carrying amount is
reduced to nil and recognition of further losses is discontinued,
unless there is a long-term receivable due from the joint venture
in which case, if appropriate, the loss is recognised against the
receivable. If an obligation to fund losses exists the further
losses and a provision are recognised. Unrealised gains on
transactions between the Group and its joint ventures are
eliminated on consolidation. Accounting policies of joint ventures
are changed where necessary, to ensure consistency with policies
adopted by the Group.
(c) Joint operations
A joint operation is a joint arrangement that the Group
undertakes with other parties, in which those parties have rights
to the assets and obligations of the arrangement. The Group
accounts for joint operations by recognising its share of the
jointly controlled assets and liabilities and income and
expenditure on a line-by-line basis in the consolidated statement
of financial position and consolidated income statement.
Goodwill
Goodwill arising on consolidation represents the excess of the
cost of acquisition over the Group's interest in the fair value of
the identifiable assets and liabilities of the acquired entity at
the date of the acquisition and is not amortised. Goodwill arising
on acquisition of subsidiaries and businesses is capitalised as an
asset. The goodwill balance has been allocated to the strategic
land holdings within the Group. The Group expects to benefit from
the strategic land holdings for a further period of 14 years to
2038. The period used in the assessment represents the estimated
time it will take to obtain planning and build out on the remaining
acquired strategic land holdings. Goodwill is assessed for
impairment at each reporting date. The sites acquired are
considered as a singular cash generating unit and the value in use
is calculated on a discounted cash flow basis with more speculative
strategic sites given a lower probability of reaching development.
The calculated discounted cash flow value is compared to the
goodwill balance to assess if it is impaired. Any impairment loss
is recognised immediately in the consolidated income statement.
Revenue and profit recognition
Revenue comprises the fair value of the consideration received
or receivable, net of value added tax and discounts.
The Group has made a judgement to not recognise revenue on the
proceeds received on the disposal of properties taken in part
exchange against a new property as they are incidental to the main
revenue-generating activities of the Group. As part exchange sales
are deemed incidental, the income and expenses associated with part
exchange properties are recognised in other operating income and
other operating expenses which are presented within net
administrative expenses in the consolidated income statement.
Income is recognised when legal title is passed to the customer.
Previously the income and associated costs arising on these sales
was presented net within cost of sales. The prior year balance has
not been restated since the net result is immaterial to the Group
and there is no change to the operating profit realised in each
year.
Revenue is recognised on house and apartment sales at legal
completion. For affordable and other sales in bulk, revenue
recognition is dependent on freehold legal title being passed to
the customer as it is considered that upon transfer of freehold
title that the customer controls the work-in-progress. Where
freehold legal title and control is passed to the customer, revenue
is recognised on any upfront sale of land (where applicable) and
then on the housing units as the build of the related units
progresses, via surveys of work performed on contract activity .
Where freehold legal title is not passed to the customer, revenue
is not recognised on any upfront sale of land and the revenue on
the housing units and sale of land is recognised at handover of
completed units to the customer. The transaction price for all
housing units is derived from contractual negotiations and does not
include any material variable consideration.
Revenue is predominantly recognised on land sales when legal
title passes to the customer. If the Group has remaining
performance obligations, such as the provision of services to the
land, an element of revenue is allocated to these performance
obligations and recognised as the obligations are performed, which
can be when the works are finished if the work-in-progress is
controlled by the Group or over the performance of the works if
they are controlled by the customer.
Revenue recognition on commercial property sales is dependent on
freehold legal title being passed to the customer, as it is
considered that upon transfer of freehold title that the customer
controls the work-in-progress. Where freehold legal title is passed
to the customer, revenue is recognised on any upfront sale of land
(where applicable) and then on the development revenue over time as
the build of the related commercial units progress. Where freehold
legal title is not passed to the customer revenue is not recognised
on any upfront sale of land and the revenue on the commercial
property is recognised at handover of the completed commercial unit
to the customer.
The transaction price for commercial property revenue may
include an element of variable consideration based on the
commercial occupancy of the units when they are completed, though
this is not expected to be material. If this is the case, the
Directors take the view that unless the lettings not yet contracted
are highly probable they should not be included in the calculation
of the transaction price. The transaction price is regularly
updated to reflect any changes in the accounting period.
Revenue is recognised on freehold reversion sales when the
customer is contractually entitled to the ground rent revenue
stream associated with the units purchased.
Revenue on specification upgrades paid for by the customer or on
the cost of specification upgrades offered to the customer as part
of the purchase price is recognised as revenue when legal title
passes to the customer.
Profit is recognised on a plot-by-plot basis, by reference to
the margin forecast across the related development site. Due to the
development cycle often exceeding one financial year, plot margins
are forecast, taking into account the allocation of site-wide
development costs such as infrastructure, and estimates required
for the cost to complete such developments.
Exceptional items
Exceptional items are those which, in the opinion of the
Directors, are material by size and/or non-recurring in nature such
as significant costs and settlements associated with combustible
materials, significant costs associated with acquiring another
business, significant legal matters and significant inventory
impairments. Where appropriate, the Directors consider that items
should be considered as categories or classes of items, such as any
credits/costs impacting the consolidated income statement which
relate to combustible materials, notwithstanding where an item may
be individually immaterial. The Directors believe that these items
require separate disclosure within the consolidated income
statement in order to assist the users of the financial statements
to better understand the performance of the Group, which is also
how the Directors internally manage the business. Where
appropriate, the material reversal of any of these amounts will
also be reflected through exceptional items. Additional
charges/credits to items classified as exceptional items in prior
years will be classified as exceptional in the current year, unless
immaterial to the financial statements. As these exceptional items
can vary significantly year on year, they may introduce volatility
into the reported earnings. The income tax impacts of exceptional
items are reflected at the actual tax rate related to these
items.
Net finance expense
Interest income is recognised on a time apportioned basis by
reference to the principal outstanding and the effective interest
rate. Interest costs are recognised in the consolidated income
statement on an accruals basis in the period in which they are
incurred. Imputed interest expense on deferred land creditors and
combustible materials discounting is recognised over the life of
associated cash flows.
Income and deferred tax
Income tax comprises current tax and deferred tax. Income tax is
recognised in the consolidated income statement except to the
extent that it relates to items recognised in other comprehensive
income, in which case it is recognised in other comprehensive
income. Current tax is the expected tax payable on taxable profit
for the year and any adjustment to tax payable in respect of
previous years. Taxable profit is profit before tax per the
consolidated income statement after adjusting for income and
expenditure that is not subject to tax, and for items that are
subject to tax in other accounting periods. The Group's liability
for current tax is calculated using tax rates that have been
enacted or substantively enacted by the consolidated statement of
financial position date. Current tax assets are recognised to the
extent that it is probable the asset is recoverable.
Deferred tax is provided in full on temporary differences
between the carrying amounts of assets and liabilities in the
financial statements and the corresponding tax bases used in the
computation of taxable profits.
Deferred tax assets are recognised to the extent that it is
probable that taxable profits will be available against which
deductible temporary differences can be utilised. Deferred tax
liabilities are recognised for all temporary differences. Deferred
tax is calculated using tax rates that have been substantively
enacted by the consolidated statement of financial position
date.
Dividends
Final and interim dividend distributions to the Company's
shareholders are recorded in the Group's financial statements in
the earlier of the period in which they are approved by the
Company's shareholders, or paid.
Employee benefits
(a) Pensions
The Group operates a defined benefit (DB) scheme (closed to new
employees since October 2001 and to future service accrual since
April 2010) and also makes payments into a defined contribution
scheme for employees.
In respect of the DB scheme, the retirement benefit deficit or
surplus is calculated by estimating the amount of future benefit
that employees have earned in return for their service in the
current and prior periods, such benefits measured at discounted
present value, less the fair value of the scheme assets. The rate
used to discount the benefits accrued is the yield at the
consolidated statement of financial position date on AA credit
rated bonds that have maturity dates approximating to the terms of
the Group's obligations. The calculation is performed by a
qualified actuary using the projected unit method. The operating
and financing costs of such plans are recognised separately in the
consolidated income statement; past service costs and financing
costs are recognised in the periods in which they arise. The Group
recognises expected scheme gains and losses via the consolidated
income statement and actuarial gains and losses are recognised in
the period they occur directly in other comprehensive income, with
associated deferred tax.
The retirement benefit deficit or surplus recognised in the
consolidated statement of financial position represents the deficit
or surplus of the fair value of the scheme's assets over the
present value of scheme liabilities, with any net surplus
recognised to the extent that the employer can gain economic
benefit as set out in the requirements of IFRIC 14.
Payments to the defined contribution scheme are accounted for on
an accruals basis.
(b) Share-based payments
The fair value of equity-settled, share-based compensation plans
is recognised as an employee expense with a corresponding increase
in equity. The fair value is measured as at the date the options
are granted and the charge amended if vesting does not take place
due to non-market conditions (such as service or performance) not
being met. The fair value is spread over the period during which
the employees become unconditionally entitled to the shares and is
adjusted to reflect the actual number of options that vest. At the
consolidated statement of financial position date, if it is
expected that non-market conditions will not be satisfied, the
cumulative expense recognised in relation to the relevant options
is reversed. The proceeds received are credited to share capital
(nominal value) and share premium when the options are exercised if
new shares are issued. If treasury shares are used the proceeds are
credited to retained reserves. There are no cash-settled
share-based compensation plans.
Own shares held by Employee Share Ownership Trust (ESOT)
Transactions of the Company-sponsored ESOT are included in both
the Group financial statements and the Company's own financial
statements. The purchase of shares in the Company by the ESOT are
charged directly to equity.
Software as a Service (SaaS) arrangements
Implementation costs including costs to configure or customise a
cloud provider's application software are recognised as
administrative expenses when the services are received, and the
Group determines that there is no control over the asset in
development.
Property, plant and equipment
Property, plant and equipment is stated at cost less accumulated
depreciation. Cost includes the original purchase price of the
asset and the costs attributable to bringing the asset to its
working condition. Depreciation is calculated to write off the cost
of the assets on a straight-line basis to their estimated residual
value over its expected useful life at the following rates:
Fixtures and fittings 10%
Computer equipment and non-SaaS
software 20% to 33%
The asset residual values, carrying values and useful lives are
reviewed on an annual basis and adjusted if appropriate at each
consolidated statement of financial position date.
Right-of-use assets and lease liabilities
The Group assesses at lease inception whether a contract is, or
contains, a lease. The Group recognises a right-of-use asset and a
lease liability at lease commencement.
The right-of-use asset is initially recorded at the present
value of future lease payments and subsequently measured net of
depreciation, which is charged to the consolidated income statement
as an administrative expense over the shorter of its useful
economic life or its lease term on a straight-line basis.
The Group recognises lease liabilities at the present value of
future lease payments, lease payments being discounted at the rate
implicit in the lease or the Group's incremental borrowing rate as
determined with reference to the most recently issued financial
liabilities carrying interest. The discount is subsequently unwound
and recorded in the consolidated income statement over the lease
term as a finance expense. The lease term comprises the
non-cancellable period of the contract, together with periods
covered by an option to extend the lease where the Group is
reasonably certain to exercise that option.
The Group has elected not to recognise right-of-use assets and
lease liabilities for short-term leases that have a lease term of
12 months or less and leases of low value assets. The Group
recognises the lease payments associated with these leases as an
expense on a straight-line basis over the lease term.
Inventories
Inventories are stated at the lower of cost and NRV.
Work-in-progress and completed buildings including show homes
comprise land under development, undeveloped land, land option
payments, direct materials, sub-contract work, labour costs, site
overheads, associated professional fees and other attributable
overheads, but excludes interest costs.
Part exchange inventories are held at the lower of cost and NRV,
which includes an assessment of costs of management and resale.
Land inventories and the associated land payables are recognised
in the consolidated statement of financial position from the date
of unconditional exchange of contracts. Land payables are
recognised as part of trade and other payables.
Options purchased in respect of land are recognised initially as
a prepayment within inventories and written down on a straight-line
basis over the life of the option. If planning permission is
granted and the option exercised, the option is not written down
during that year and its carrying value is included within the cost
of land purchased.
Provisions are established to write down inventories where the
estimated net sales proceeds less costs to complete exceed the
current carrying value. Adjustments to the provisions will be
required where selling prices or costs to complete change. NRV for
inventories is assessed by estimating selling prices and costs,
taking into account current market conditions.
Financial assets
Financial assets are initially recognised at fair value and
subsequently classified into one of the following measurement
categories:
-- At amortised cost
-- Subsequently at FVTPL
-- Subsequently at FVOCI.
The classification of financial assets depends on the Group's
business model for managing the asset and the contractual terms of
the cash flows. Assets that are held for the collection of
contractual cash flows that represent solely payments of principal
and interest are measured at amortised cost, with any interest
income recognised in the consolidated income statement using the
effective interest rate method.
Financial assets that do not meet the criteria to be measured at
amortised cost are classified by the Group as measured
at FVTPL. Fair value gains and losses on financial assets
measured at FVTPL are recognised in the consolidated income
statement and presented within administrative expenses. The Group
currently has no financial assets measured at FVOCI.
Financial assets at fair value through profit and loss
Financial assets at fair value through profit and loss (which
comprise shared equity receivables) are classified as being held to
collect and initially recognised at fair value. Changes in fair
value relating to the expected recoverable amount are recognised in
the consolidated income statement as a finance income or expense.
These assets are held as current or non-current based on their
contractual repayment dates.
Trade and other receivables
Trade and other receivables are recognised initially at fair
value and subsequently measured at amortised cost, using the
effective interest method, less provision for impairment. A
provision for impairment of trade and other receivables is
established based on an expected credit loss model applying the
simplified approach, which uses a lifetime expected loss allowance
for all trade and other receivables. The amount of the loss is
recognised separately in the consolidated income statement. Current
trade and other receivables do not carry any interest and are
stated at their amortised cost, as reduced by appropriate
allowances for estimated irrecoverable amounts. Non-current trade
and other receivables are discounted to present value when the
impact of discounting is deemed to be material, with any discount
to nominal value being recognised in the consolidated income
statement as interest income over the duration of the deferred
payment.
Contract assets
Contract assets represent unbilled work-in-progress on
affordable and other sales in bulk on contracts in which revenue is
recognised over time. Contract assets are recognised initially at
fair value and subsequently measured at amortised cost, using the
effective interest method, less provision for impairment. Contract
assets do not carry any interest and are stated at their amortised
cost, as reduced by appropriate allowances for estimated
irrecoverable amounts.
Cash and cash equivalents
Cash and cash equivalents are cash balances in hand and in the
bank and are carried in the consolidated statement of financial
position at nominal value.
Interest-bearing loans and borrowings
Interest-bearing loans and borrowings are recognised initially
at fair value, net of direct transaction costs, and subsequently
measured at amortised cost. Finance charges are accounted for on an
accruals basis in the consolidated income statement using the
effective interest method and are added to the carrying amount of
the instrument to the extent that they are not settled in the
period in which they arise or included within interest
accruals.
Financial liabilities
Financial liabilities are initially recognised at fair value and
subsequently classified into one of the following measurement
categories:
-- At amortised cost
-- Subsequently at FVTPL.
Non-derivative financial liabilities are measured at FVTPL when
they are considered held for trading or designated as such on
initial recognition. The Group has no non-derivative financial
liabilities measured at FVTPL.
Land payables
Land payables are recognised in the consolidated statement of
financial position from the date of unconditional exchange of
contracts. Where land is purchased on deferred settlement terms
then the land and the land payable are discounted to their fair
value using the effective interest method in accordance with IFRS
9. The difference between the fair value and the nominal value is
amortised over the deferment period, with the financing element
being charged as an interest expense through the consolidated
income statement.
Trade and other payables
Trade and other payables are recognised initially at their fair
value and subsequently measured at amortised cost using the
effective interest method. Trade and other payables on deferred
terms are initially recorded at their fair value, with the discount
to nominal value being charged to the consolidated income statement
as an interest expense over the duration of the deferred
period.
Contract liabilities
Contract liabilities represent payments on account, received
from customers, in excess of billable work-in-progress on
affordable and other sales in bulk on contracts. Contract
liabilities are recognised initially at their fair value and
subsequently measured at amortised cost using the effective
interest method.
Provisions
A provision is recognised in the consolidated statement of
financial position when the Group has a present legal or
constructive obligation as a result of a past event and it is
probable that an outflow of economic benefits will be required to
settle the obligation, and the amount can be reliably estimated.
Provisions are discounted to present value on a discounted cash
flow basis using an interest rate appropriate to the class of the
provision, where the effect is material.
Seasonality
In common with the rest of the UK housebuilding industry,
activity occurs throughout the year, with peaks in sales
completions in spring and autumn. This creates seasonality in the
Group's trading results and working capital.
2 SEGMENTAL REPORTING
The ELT (comprising Peter Truscott (Chief Executive), Duncan
Cooper (Group Finance Director until 13 December 2023), Bill Floydd
(Group Finance Director from 13 November 2023) David Marchant
(Group Operations Director), Kieran Daya (Managing Director, Crest
Nicholson Partnerships and Strategic Land until 31 December 2023
and Chief Operating Officer from 01 January 2024), Jane Cookson
(Group HR Director), Kevin Maguire (General Counsel and Company
Secretary until 18 August 2023), Heather O'Sullivan (General
Council from 25 September 2023), Penny Thomas (Group Company
Secretary from 1 January 2024), Alex Stark (Executive Managing
Director until 8 August 2023) and David Brown (Executive Managing
Director until 15 December 2023)), which is accountable to the
Board, has been identified as the chief operating decision maker
for the purposes of determining the Group's operating segments. The
ELT approves investment decisions, allocates group resources and
performs divisional performance reviews. The Group operating
segments are considered to be its divisions, each of which has its
own management board. All divisions are engaged in residential-led,
mixed-use developments in the United Kingdom and therefore with
consideration of relevant economic indicators such as the nature of
the products sold and customer base, and, having regard to the
aggregation criteria in IFRS 8, the Group identifies that it has
one reportable operating segment.
3 REVENUE
2023 2022
Revenue type GBPm GBPm
Open market housing including specification
upgrades 550.0 803.7
Affordable housing 88.0 76.9
Total housing 638.0 880.6
Land and commercial sales 19.5 32.0
Freehold reversions - 1.0
------ ------
Total revenue 657.5 913.6
------ ------
2023 2022
Timing of revenue recognition GBPm GBPm
Revenue recognised at a point in time 552.4 842.6
Revenue recognised over time 105.1 71.0
------ ------
Total revenue 657.5 913.6
------ ------
2023 2022
Assets and liabilities related to contracts
with customers GBPm GBPm
Contract assets (note 17) 6.9 25.1
Contract liabilities (note 21) (6.0) (19.3)
Contract assets have decreased to GBP6.9m from GBP25.1m in 2022,
reflecting less unbilled work-in-progress on affordable and other
sales in bulk at the year end. This is in line with the trading of
the Group and the contractual arrangements in the Group's
contracts. Contract liabilities have reduced to GBP6.0m from
GBP19.3m in 2022, reflecting a lower amount of payments on account
received from customers in excess of billable work-in-progress on
affordable and other sales in bulk on contracts on which revenue is
recognised over time. This fall was driven primarily by a reduction
in a number of sites where revenue was recognised at a point in
time in the current year but the Group had received progress
payments from the customer in the prior year.
Based on historical trends, the Directors expect a significant
proportion of the contract liabilities total to be recognised as
revenue in the next reporting period.
Included in revenue during the year was GBP16.1m (2022:
GBP19.6m) that was included in contract liabilities at the
beginning of the year.
During the year GBPnil (2022: GBPnil) of revenue was recognised
from performance obligations satisfied or partially satisfied in
previous years.
As at 31 October 2023 there was GBP229.1m (2022: GBP322.4m) of
transaction price allocated to performance obligations that are
unsatisfied or partially unsatisfied on contracts exchanged with
customers. Forecasts recognise GBP114.3m (2022: GBP257.4m) of
transaction prices allocated to performance obligations that are
unsatisfied on contracts exchanged with customers within one year,
GBP112.0m (2022: GBP65.0m) within two to five years, and GBP2.8m
(2022: GBPnil) over five years.
4 EXCEPTIONAL ITEMS
Exceptional items are those which, in the opinion of the
Directors, are material by size and/or non-recurring in nature and
therefore require separate disclosure within the consolidated
income statement in order to assist the users of the financial
statements to better understand the performance of the Group, which
is also how the Directors internally manage the business. Where
appropriate, the Directors consider that items should be considered
as categories or classes of items, such as any credits/costs
impacting the consolidated income statement which relate to
combustible materials, notwithstanding where an item may be
individually immaterial. Where appropriate, a material reversal of
these amounts will be reflected through exceptional items.
2023 2022
GBPm GBPm
Cost of sales
Combustible materials charge (11.3) (102.5)
Combustible materials credit 10.0 -
------ -------
Net combustible materials charge (1.3) (102.5)
Legal provision (13.0) -
------ -------
Total cost of sales charge (14.3) (102.5)
Net finance expense
Combustible materials imputed interest (4.6) (1.0)
Share of post-tax profit/(loss) of joint ventures
Combustible materials credit/(charge) of joint
ventures 0.6 (1.5)
Total exceptional charge (18.3) (105.0)
Tax credit on exceptional charge 4.8 22.4
------ -------
Total exceptional charge after tax credit (13.5) (82.6)
------ -------
Net combustible materials charge
As a consequence of signing the Developer Remediation Contract
on 13 March 2023, the Group has entered into contractual
commitments with the UK Government to identify and remediate those
buildings it has developed with possible life-critical fire safety
defects. The Group is currently working on circa 90 buildings in
various stages of design, procurement and works. The combustible
materials charge represents forecast changes in build costs and in
the provision discount. The Group has recovered GBP10.0m cash from
third parties in the year in respect of defective design and
workmanship. See note 22 for additional information.
Legal provision
The Group is subject to a legal claim relating to a low-rise
bespoke apartment block built by the Group which was damaged by
fire in 2021. Due to the size and nature of the claim, and in line
with the Group's accounting policy, this has been presented as an
exceptional item. See note 22 for additional information.
Net finance expense
The combustible materials imputed interest reflects the unwind
of the imputed interest on the provision to reflect the time value
of the liability.
Share of post-tax loss of joint ventures
The combustible materials credit/(charge) of joint ventures
represents the Group's share of exceptional combustibles materials
credit/(charge) in its joint venture Crest Nicholson Bioregional
Quintain LLP. The joint venture recognised a provision in the prior
year and the current year credit represents a recovery from third
parties, net of changes in build costs.
Taxation
An exceptional income tax credit of GBP4.8m (2022: GBP22.4m) has
been recognised in relation to the above exceptional items using
the actual tax rate applicable to these items.
5 NET ADMINISTRATIVE EXPENSES AND OPERATING PROFIT
Operating profit of GBP29.9m (2022: GBP38.4m) from continuing activities
is stated after (charging)/crediting:
Note 2023 2022
GBPm GBPm
Inventories expensed in the year (520.2) (705.3)
Inventories impairment movement in the year 18 (7.6) 8.1
Employee costs 6 (60.7) (58.4)
Depreciation on property, plant and equipment 12 (0.5) (0.4)
Depreciation on right-of-use assets 13 (2.3) (1.9)
Joint venture project management fees recognised
in administrative expenses 27 1.9 2.0
Net administrative expenses GBPm GBPm
Administrative expenses (55.0) (51.1)
Other operating income 40.1 48.9
Other operating expenses (40.9) (47.4)
---------
Net administrative expenses (55.8)
---------
Other operating income and other operating expenses shown above
relate to the income and associated costs arising on the sale of
part exchange properties. For the year ended 31 October 2023, both
the income and associated costs of these sales has been presented
within net administrative expenses in the consolidated income
statement. Previously the income and associated costs arising on
these sales was included within cost of sales. The prior year has
not been restated since the net result is immaterial to the Group
and there is no change to the operating profit realised in the
year.
2023 2022
Auditors' remuneration GBP000 GBP000
Audit of these consolidated financial statements 166 137
Audit of financial statements of subsidiaries
pursuant to legislation 819 783
Other non-audit services 154 95
The audit fees payable in 2022 included GBP30,000 in relation to
additional costs for the 2021 audit.
Fees payable to the Group's auditors for non-audit services
included GBP100,000 (2022: GBP95,000) in respect of an independent
review of the half-year results and GBP54,000 for other non-audit
assurance services for sustainability reporting.
In addition to the above, PricewaterhouseCoopers LLP provide
audit services to the Crest Nicholson Group Pension and Life
Assurance Scheme and Group joint ventures. The fees associated with
the services to the Crest Nicholson Group Pension and Life
Assurance Scheme are GBP35,565 (2022: GBP25,400) and are met by the
assets of the scheme, and the fees associated with services to
Group joint ventures are GBP20,000 (2022: GBP22,000).
6 EMPLOYEE NUMBERS AND COSTS
(a) Average monthly number of persons 2023 2022
employed by the Group
Number Number
Development 778 727
The Directors consider all employees of the Group to be employed
within the same category of Development.
(b) Employee costs (including Directors 2023 2022
and key management)
GBPm GBPm
Wages and salaries 50.4 48.0
Social security costs 5.8 6.0
Other pension costs 3.0 2.5
Share-based payments (note
16) 1.5 1.9
----- -----
60.7 58.4
----- -----
(c) Key management remuneration 2023 2022
GBPm GBPm
Salaries and short-term
employee benefits 3.5 4.0
Directors' remuneration
for loss of office - 0.5
Share-based payments 0.6 1.0
----- -----
4.1 5.5
----- -----
Key management comprises the ELT (which includes the Executive
Directors of the Board) and Non-Executive Directors as they are
considered to have the authority and responsibility for planning,
directing and controlling the activities of the Group.
(d) Directors' remuneration 2023 2022
GBPm GBPm
Salaries and short-term
employee benefits 1.7 2.6
Directors' remuneration
for loss of office - 0.5
Share-based payments 0.5 0.7
----- -----
2.2 3.8
----- -----
Further information relating to Directors' remuneration,
incentive plans, share options, pension entitlement and the highest
paid Director, appears in the Directors' Remuneration Report, which
is presented on pages 81 - 98 of our 2023 annual report and
financial statements to be published in February 2024 .
7 FINANCE INCOME AND EXPENSE
2023 2022
Finance income GBPm GBPm
Interest income 2.4 0.7
Interest on amounts due from joint ventures (note
27) 1.2 2.1
Net interest on defined benefit pension scheme
(note 16) 0.5 0.3
------- ---------
4.1 3.1
------- ---------
Finance expense
Interest on bank loans (5.7) (6.6)
Revolving credit facility issue costs (0.6) (0.7)
Imputed interest on deferred land payables (3.1) (2.8)
Interest on lease liabilities (note 13) (0.2) (0.1)
Imputed interest on combustible materials provision
- exceptional (note 22) (4.6) (1.0)
------- ---------
(14.2) (11.2)
------- ---------
Net finance expense (10.1) (8.1)
------- ---------
8 INCOME TAX EXPENSE
2023 2022
GBPm GBPm
Current tax
UK corporation tax expense on profit for
the year (4.2) (6.1)
Adjustment in respect of prior periods 0.7 -
Total current tax expense (3.5) (6.1)
------ ------
Deferred tax
Origination and reversal of temporary
differences in the year (1.7) (0.3)
Total deferred tax charge (note 15) (1.7) (0.3)
------ ------
Total income tax expense in consolidated
income statement (5.2) (6.4)
------ ------
Corporation tax is calculated at 22.5%, based on a tax rate of
19.0% up until 1 April 2023, and a tax rate of 25.0% from 1 April
2023 (2022: 19.0%), of the profit chargeable to tax for the year.
From 1 April 2022 the Group is subject to the RPDT at an additional
rate of 4.0%. This results in a weighted statutory rate of
corporation tax of 26.5% (2022: 21.3%) for the year. The effective
tax rate for the year is 22.5% (2022: 19.5%), which is lower than
(2022: lower than) the weighted standard rate of UK corporation tax
due to the impact of a prior year adjustment, enhanced tax
deductions and the RPDT annual allowance. The Group expects the
effective tax rate to be more aligned to the standard rate of
corporation tax in future years as deferred tax on temporary
differences unwinds.
2023 2022
Reconciliation of tax expense in the GBPm GBPm
year
Profit before tax 23.1 32.8
------ ------
Tax charge on profit at 26.5% (2022: 21.3%) (6.1) (7.0)
Effects of:
Expenses not deductible for tax purposes (0.8) (0.7)
Enhanced tax deductions 0.3 0.2
Adjustment in respect of prior periods 0.7 -
Effect of change in rate of tax - 0.6
Impact of RPDT annual allowance and adjustments 0.7 0.5
------ ------
Total income tax expense in consolidated
income statement (5.2) (6.4)
------ ------
RPDT came into force in April 2022 and is therefore applicable
to relevant profits for the full financial year. RPDT is an
additional tax on profits generated from residential property
development activity, in excess of an annual threshold and
adjusting for amounts disallowable under RPDT, such as interest
expense. The impact of RPDT annual allowance and adjustments
reflects the net tax benefit of the annual threshold and interest
adjustment.
Expenses not deductible for tax purposes include business
entertaining and other permanent disallowable expenses. Enhanced
tax deductions include items for which, under tax law, a
corporation tax deduction is available in excess of the amount
shown in the consolidated income statement. For example, land
remediation enhanced allowances.
Adjustment in respect of prior periods reflect the difference
between the estimated consolidated income statement tax charge in
the prior year and that of the actual tax outcome.
9 DIVIDS
2023 2022
Dividends recognised as distributions to equity GBPm GBPm
shareholders in the year:
Current year interim dividend of 5.5 pence per
share (2022: 5.5 pence per share) 14.1 14.1
Prior year final dividend per share of 11.5
pence per share (2022: 9.5 pence per share) 29.5 24.4
43.6 38.5
2023 2022
Dividends proposed as distributions to equity GBPm GBPm
shareholders in the year:
Final dividend for the year ended 31 October
2023 of 11.5 pence per share (2022: 11.5 pence
per share) 29.5 29.5
----- -----
The proposed final dividend was approved by the Board on 23
January 2024 and, in accordance with IAS 10: Events after the
Reporting Period, has not been included as a liability in this
financial year. The final dividend will be paid on 23 April 2024 to
all ordinary shareholders on the Register of Members on 22 March
2024.
10 EARNINGS PER ORDINARY SHARE
Basic earnings per share is calculated by dividing profit
attributable to equity shareholders by the weighted average number
of ordinary shares in issue during the year. For diluted earnings
per share, the weighted average number of shares is increased by
the average number of potential ordinary shares held under option
during the year. This reflects the number of ordinary shares which
would be purchased using the difference in value between the market
value of shares and the share option exercise price. The market
value of shares has been calculated using the average ordinary
share price during the year. Only share options which have met
their cumulative performance criteria have been included in the
dilution calculation. The earnings and weighted average number of
shares used in the calculations are set out below.
Weighted
average number
of ordinary Per share
Earnings shares amount
GBPm Number Pence
Year ended 31 October 2023
Basic earnings per share 17.9 256,131,621 7.0
Dilutive effect of share options - 594,762
--------- ----------------
Diluted earnings per share 17.9 256,726,383 7.0
--------- ----------------
Year ended 31 October 2023 - Pre-exceptional
items
Adjusted basic earnings per share 31.4 256,131,621 12.3
Dilutive effect of share options - 594,762
--------- ----------------
Adjusted diluted earnings per share 31.4 256,726,383 12.2
--------- ----------------
Year ended 31 October 2022
Basic earnings per share 26.4 256,405,006 10.3
Dilutive effect of share options - 1,320,375
--------- ----------------
Diluted earnings per share 26.4 257,725,381 10.2
--------- ----------------
Year ended 31 October 2022 - Pre-exceptional
items
Adjusted basic earnings per share 109.0 256,405,006 42.5
Dilutive effect of share options - 1,320,375
--------- ----------------
Adjusted diluted earnings per share 109.0 257,725,381 42.3
--------- ----------------
11 INTANGIBLE ASSETS
Goodwill 2023 2022
GBPm GBPm
Cost at beginning and end of the year 47.7 47.7
Accumulated impairment (18.7) (18.7)
------- -------
At beginning and end of the year 29.0 29.0
------- -------
Goodwill arose on the acquisition of CN Finance plc (formerly
Castle Bidco plc) on 24 March 2009. The goodwill relating to items
other than the holding of strategic land was fully impaired in
prior periods. The remaining goodwill was allocated to acquired
strategic land holdings (the cash-generating unit) within the Group
and has not previously been impaired. The goodwill is assessed for
impairment annually. The recoverable amount is equal to the higher
of value in use and fair value less costs of disposal. The
Directors have therefore assessed value in use, being the present
value of the forecast cash flows from the expected development and
sale of properties on the strategic land. These cash flows are the
key estimates in the value in use assessment. The forecast looks at
the likelihood and scale of permitted development, forecast build
costs and forecast selling prices, using a pre-tax discount rate of
9.5% (2022: 8.5%), covering a further period of 14 years to 2038,
and based on current market conditions. The discount rate is based
on an externally produced weighted average cost of capital range
estimate. For 2023 9.5% (2022: 8.5%) falls within the range. The
FHS will not impact the estimated development cash flows as sites
in production already incorporate the forecast extra costs, and for
those under option the extra costs will be adjusted in the land
values payable. The period used in this assessment represents the
estimated time it will take to obtain planning and build out on the
remaining acquired strategic land holdings. The recoverable value
of the cash generating unit is substantially in excess of the
carrying value of goodwill. Sensitivity analysis has been
undertaken by changing the discount rates by plus or minus 1.0% and
the forecast profit margins applicable to the site within the cash
generating unit. None of the sensitivities, either individually or
in aggregate, resulted in the fair value of the goodwill being
reduced to below its current book value amount. As the forecast
covers the entire life of the cash generating unit no growth rate
has been used to extrapolate the cash flow projection, and as such
the rate is not disclosed.
12 PROPERTY, PLANT AND EQUIPMENT
Fixtures and fittings Computer equipment and software Total
GBPm GBPm GBPm
Cost
At 1 November 2021 1.8 3.2 5.0
Additions - 0.1 0.1
Disposals (0.1) (0.4) (0.5)
At 31 October 2022 1.7 2.9 4.6
Additions 1.8 - 1.8
Disposals - (0.7) (0.7)
At 31 October 2023 3.5 2.2 5.7
---------------------- -------------------------------- ------
Accumulated depreciation
At 1 November 2021 1.0 2.8 3.8
Charge for the year 0.2 0.2 0.4
Disposals (0.1) (0.4) (0.5)
At 31 October 2022 1.1 2.6 3.7
Charge for the year 0.3 0.2 0.5
Disposals - (0.7) (0.7)
At 31 October 2023 1.4 2.1 3.5
---------------------- -------------------------------- ------
Net book value
At 31 October 2023 2.1 0.1 2.2
---------------------- -------------------------------- ------
At 31 October 2022 0.6 0.3 0.9
---------------------- -------------------------------- ------
At 1 November 2021 0.8 0.4 1.2
---------------------- -------------------------------- ------
The Group has contractual commitments for the acquisition of
property, plant and equipment of GBPnil (2022: GBPnil).
13 RIGHT-OF-USE ASSETS AND LIABILITIES
Office buildings Motor vehicles Total
GBPm GBPm GBPm
Cost
At 1 November 2021 13.1 4.2 17.3
Additions - 1.3 1.3
Disposals - (1.0) (1.0)
----------------- --------------- ------
At 31 October 2022 13.1 4.5 17.6
Additions 2.8 1.9 4.7
Disposals (7.3) (1.6) (8.9)
----------------- --------------- ------
At 31 October 2023 8.6 4.8 13.4
----------------- --------------- ------
Accumulated depreciation
At 1 November 2021 10.7 2.9 13.6
Charge for the year 1.0 0.9 1.9
Disposals - (1.0) (1.0)
Reclassification (0.6) - (0.6)
----------------- --------------- ------
At 31 October 2022 11.1 2.8 13.9
Charge for the year 1.3 1.0 2.3
Disposals (7.3) (1.6) (8.9)
At 31 October 2023 5.1 2.2 7.3
----------------- --------------- ------
Net book value
At 31 October 2023 3.5 2.6 6.1
----------------- --------------- ------
At 31 October 2022 2.0 1.7 3.7
----------------- --------------- ------
At 1 November 2021 2.4 1.3 3.7
----------------- --------------- ------
Lease liabilities included in the consolidated statement of
financial position
2023 2022
GBPm GBPm
Non-current 4.4 2.3
Current 2.0 1.6
----- -----
Total lease liabilities 6.4 3.9
----- -----
Amounts recognised in the consolidated income statement
2023 2022
GBPm GBPm
Depreciation on right-of-use assets 2.3 1.9
Interest on lease liabilities 0.2 0.1
Amounts recognised in the consolidated cash flow statement
2023 2022
GBPm GBPm
Principal element of lease payments 2.4 2.1
Maturity of undiscounted contracted lease cash flows
2023 2022
GBPm GBPm
Less than one year 2.2 1.7
One to five years 3.2 2.4
More than five years 1.6 -
----- -----
Total 7.0 4.1
----- -----
14 INVESTMENTS
Investments in joint ventures
Below are the joint ventures that the Directors consider to be
material to the Group:
-- Crest A2D (Walton Court) LLP: In January 2016 the Group
entered into a partnership agreement with A2 Dominion Developments
Limited to procure and develop a site in Surrey. The LLP commenced
construction in 2019, with sales completion forecast for 2025. The
development will be equally funded by both parties by way of
interest free loans. The Group performs the role of project
manager, for which it receives a project management fee
-- Elmsbrook (Crest A2D) LLP: In July 2017 the Group entered
into a partnership agreement with A2 Dominion Developments Limited
to procure and develop a site in Oxfordshire. The LLP commenced
construction in 2018, with sales completion forecast for 2024. The
development will be equally funded by both parties by way of
interest free loans. The Group performs the role of project
manager, for which it receives a project management fee
-- Crest Sovereign (Brooklands) LLP: In April 2019 the Group
entered into a partnership agreement with Sovereign Housing
Association Limited to develop a site in Bristol. The LLP commenced
construction in 2019, with sales completion forecast for 2027. The
LLP will be equally funded by both parties, who will receive
interest on loaned sums. The Group performs the role of project
manager, for which it receives a project management fee
-- Crest Peabody (Turweston) LLP: In September 2023 the Group
entered into a partnership agreement with the Peabody Trust to
develop a site in Buckinghamshire. The LLP is expecting to commence
construction in 2024, with sales completion forecast for 2029. The
development will be equally funded by both parties by way of
interest free loans. The Group performs the role of project
manager, for which it will receive a project management fee and a
sales and marketing fee.
2023 2022
Total investments in joint ventures GBPm GBPm
Crest A2D (Walton Court) LLP 2.3 3.4
Elmsbrook (Crest A2D) LLP 3.5 3.3
Crest Sovereign (Brooklands) LLP 4.9 2.3
Crest Peabody (Turweston) LLP - -
Other non-material joint ventures - -
----- -----
Total investments in joint ventures 10.7 9.0
----- -----
All material joint ventures have their place of business in
Great Britain, are 50% owned and are accounted for using the equity
method, in line with the prior year. See note 28 for further
details.
Summarised financial information for joint ventures
The tables below provide financial information for joint
ventures that are material to the Group. The information disclosed
reflects the amounts presented in the financial statements of the
relevant joint ventures, where the Group retains an interest, and
not the Group's share of those amounts.
2023 Crest Elmsbrook Crest Crest Other Total
A2D (Walton (Crest Sovereign Peabody non-material
Court) A2D) LLP (Brooklands) (Turweston) joint ventures
LLP LLP LLP
GBPm GBPm GBPm GBPm GBPm GBPm
Summarised statement
of financial position
Current assets
Cash and cash
equivalents 0.2 6.0 0.4 - 0.2 6.8
Inventories 64.8 4.6 16.7 - - 86.1
Other current assets 0.2 1.0 1.9 5.3 2.0 10.4
Current liabilities
Financial liabilities (52.0) (1.4) (1.1) (0.3) - (54.8)
Other current
liabilities (5.7) (3.3) (8.1) (5.0) (3.9) (26.0)
Non-current
liabilities
Financial liabilities (3.0) - - - - (3.0)
Net
assets/(liabilities) 4.5 6.9 9.8 - (1.7) 19.5
---------------------- ---------- -------------- ------------- ------------------ -------
Reconciliation to
carrying amounts
Opening net
assets/(liabilities)
at 1 November 2022 6.7 6.5 4.6 - (2.9) 14.9
(Loss)/profit for the
year (3.2) 3.4 5.2 - 1.2 6.6
Capital contribution
reserve 1.0 - - - - 1.0
Dividends paid - (3.0) - - - (3.0)
Closing net
assets/(liabilities)
at 31 October 2023 4.5 6.9 9.8 - (1.7) 19.5
---------------------- ---------- -------------- ------------- ------------------ -------
Group's share of
closing
net
assets/(liabilities)
at 31 October 2023 2.3 3.5 4.9 - (0.9) 9.8
Fully provided in the
Group financial
statements
(note 22) - - - - 0.9 0.9
---------------------- ---------- -------------- ------------- ------------------ -------
Group's share in
joint
venture 2.3 3.5 4.9 - - 10.7
---------------------- ---------- -------------- ------------- ------------------ -------
Amount due to the
Group
(note 17) 27.4* 1.4 0.4 0.3 - 29.5
Amount due from the
Group (note 21) - - - - 0.7 0.7
Summarised income
statement for the 12
months ending 31
October
2023
Revenue 0.9 21.1 47.2 - - 69.2
Expenditure (2.6) (17.7) (41.1) - - (61.4)
Expenditure -
exceptional
item (note 4) - - - - 1.2 1.2
Operating
(loss)/profit
before finance
expense (1.7) 3.4 6.1 - 1.2 9.0
Finance expense (1.5) - (0.9) - - (2.4)
Pre-tax and post-tax
(loss)/profit for
the
year (3.2) 3.4 5.2 - 1.2 6.6
---------------------- ---------- -------------- ------------- ------------------ -------
Group's share in
joint
venture
(loss)/profit
for the year (1.6) 1.7 2.6 - 0.6 3.3
* GBP27.4m stated after expected credit loss of GBP0.1m.
The Group is committed to provide such funding to joint ventures
as may be required by the joint venture in order to carry out the
project if called. Funding of this nature is currently expected to
be GBP5.9m (2022: GBP1.2m). The Group has recognised its share of
the accumulated losses of its joint ventures against the carrying
value of investments or loans in the joint venture where
appropriate, in line with IAS 28.
2022 Bonner Crest A2D Elmsbrook Crest Other non-material Total
Road LLP* (Walton (Crest Sovereign joint ventures
Court) A2D) LLP (Brooklands)
LLP LLP
GBPm GBPm GBPm GBPm GBPm GBPm
Summarised statement
of financial position
Current assets
Cash and cash
equivalents - 0.1 1.6 0.3 0.2 2.2
Inventories - 40.4 7.8 28.8 - 77.0
Other current assets - 0.1 0.1 2.3 0.2 2.7
Current liabilities
Financial liabilities - (0.6) - (1.0) - (1.6)
Other current
liabilities - (1.4) (3.0) (6.9) (3.3) (14.6)
Non-current liabilities
Financial liabilities - (31.9) - (18.9) - (50.8)
Net assets/(liabilities) - 6.7 6.5 4.6 (2.9) 14.9
----------- -------------------- ---------- -------------- ------------------- -------
Reconciliation to
carrying amounts
Opening net
(liabilities)/assets
at 1 November 2021 (13.7) 4.3 8.9 (1.0) 0.2 (1.3)
(Loss)/profit for the
year (1.2) 1.2 2.4 5.6 (3.1) 4.9
Capital contribution
reserve - 1.2 - - - 1.2
Dividends paid - - (4.8) - - (4.8)
Disposal in the year 14.9* - - - - 14.9
Closing net
assets/(liabilities)
at 31 October 2022 - 6.7 6.5 4.6 (2.9) 14.9
----------- -------------------- ---------- -------------- ------------------- -------
Group's share of closing
net
assets/(liabilities)
at 31 October 2022 - 3.4 3.3 2.3 (1.4) 7.6
Losses recognised
against
receivable from joint
venture (note 17) - - - - 0.2 0.2
Fully provided in the
Group financial
statements
(note 22) - - - - 1.2 1.2
----------- -------------------- ---------- -------------- ------------------- -------
Group's share in joint
venture - 3.4 3.3 2.3 - 9.0
----------- -------------------- ---------- -------------- ------------------- -------
Amount due to the Group
(note 17) - 15.9** 0.8 10.4 - 27.1
Amount due from the
Group (note 21) - - - - 0.1 0.1
Summarised income
statement for the 12
months ending 31 October
2022
Revenue - 26.0 11.0 47.4 - 84.4
Expenditure - (23.6) (8.6) (39.9) (0.1) (72.2)
Expenditure -
exceptional
item (note 4) - - - - (3.0) (3.0)
Operating profit/(loss)
before finance expense - 2.4 2.4 7.5 (3.1) 9.2
Finance expense (1.2) (1.2) - (1.9) - (4.3)
Pre-tax and post-tax
(loss)/profit for the
year (1.2) 1.2 2.4 5.6 (3.1) 4.9
----------- -------------------- ---------- -------------- ------------------- -------
Group's share in joint
venture (loss)/profit
for the year (0.6) 0.6 1.2 2.8 (1.5) 2.5
* Group's share of the net liabilities comprises GBP7.5m made up
of brought forward net liabilities of GBP6.9m and current year loss
of GBP0.6m. Bonner Road LLP was disposed of on 6 May 2022.
** GBP15.9m stated after expected credit loss of GBP0.1m.
Subsidiary undertakings
The subsidiary undertakings that are significant to the Group
and traded during the year are set out below. The Group's interest
is in respect of ordinary issued share capital that is wholly owned
and all the subsidiary undertakings are incorporated in Great
Britain and are included in the consolidated financial
statements.
Subsidiary Nature of business
CN Finance plc Holding company (including group financing)
Crest Nicholson plc Holding company
Crest Nicholson Operations Limited Residential and commercial
property development
A full list of the Group's undertakings including subsidiaries
and joint ventures is set out in note 28.
15 DEFERRED TAX ASSETS AND LIABILITIES
Other
Inventories Share-based temporary
Deferred tax assets fair value payments differences Total
GBPm GBPm GBPm GBPm
At 1 November 2021 1.5 0.4 2.9 4.8
Consolidated income statement
movements - 0.5 (0.1) 0.4
Equity movements - (0.4) - (0.4)
At 31 October 2022 1.5 0.5 2.8 4.8
Consolidated income statement
movements (0.4) (0.1) (0.8) (1.3)
Equity movements - (0.2) - (0.2)
At 31 October 2023 1.1 0.2 2.0 3.3
-------------- -------------- --------------- ---------
Pension
Deferred tax liabilities surplus Total
GBPm GBPm
At 1 November 2021 (4.1) (4.1)
Consolidated income statement
movements (0.7) (0.7)
Equity movements 1.6 1.6
--------- ------
At 31 October 2022 (3.2) (3.2)
Consolidated income statement
movements (0.4) (0.4)
Equity movements 1.1 1.1
--------- ------
At 31 October 2023 (2.5) (2.5)
--------- ------
Total deferred tax credited to equity in the year is GBP0.9m
(2022: GBP1.2m). Deferred tax assets expected to be recovered in
less than 12 months is GBP1.0m (2022: GBP1.5m), and in more than 12
months is GBP2.3m (2022: GBP3.3m). Deferred tax liabilities are
expected to be settled in more than 12 months.
At the consolidated statement of financial position date the
substantively enacted future corporation tax rate is 25.0% (as from
1 April 2023). RPDT became effective from 1 April 2022 and is an
additional tax at 4.0% of profits generated from residential
property development activity, in excess of an annual threshold.
Deferred tax assets and liabilities have been evaluated using the
applicable tax rates when the asset is forecast to be realised and
the liability is forecast to be settled. The Group has no material
unrecognised deferred tax assets.
Inventories fair value represents temporary differences on the
carrying value of inventory fair valued on the acquisition of CN
Finance plc in 2009. These temporary differences are expected to be
recoverable in full as it is considered probable that taxable
profits will be available against which the deductible temporary
differences can be utilised, and are therefore recognised as
deferred tax assets in the above amounts.
16 EMPLOYEE BENEFITS
(a) Retirement benefit obligations
Defined contribution scheme
The Group operates a defined contribution scheme for new
employees. The assets of the scheme are held separately from those
of the Group in an independently administered fund. The
contributions to this scheme for the year were GBP2.8m (2022:
GBP2.3m). At the consolidated statement of financial position date
there were no outstanding or prepaid contributions (2022:
GBPnil).
Defined benefit scheme
The Company sponsors the Crest Nicholson Group Pension and Life
Assurance Scheme (Scheme), a funded defined benefit pension scheme
in the UK. The Scheme is administered within a trust that is
legally separate from the Company. A Trustee company (Trustee) is
appointed by the Company and the Company and the Scheme's members
appoint Trustee Directors. The Trustee is appointed to act in the
interest of the Scheme and all relevant stakeholders, including the
members and the Company. The Trustee is also responsible for the
investment of the Scheme's assets.
The Scheme closed to future accrual from 30 April 2010. Accrued
pensions in relation to deferred members are revalued at statutory
revaluation in the period before retirement. Benefits also increase
either at a fixed rate or in line with inflation while in payment.
The Scheme provides pensions to members on retirement and to their
dependants on death.
The Company pays contributions to improve the Scheme's funding
position as determined by regular actuarial valuations. The Trustee
is required to use prudent assumptions to value the liabilities and
costs of the Scheme whereas the accounting assumptions must be best
estimates.
Responsibility for meeting any deficit within the Scheme lies
with the Company and this introduces a number of risks for the
Company. The major risks are: interest rate risk, inflation risk,
investment risk and longevity risk. The Company and Trustee are
aware of these risks and manage them through appropriate investment
and funding strategies.
The Scheme is subject to regular actuarial valuations, which are
usually carried out every three years. The last actuarial valuation
was carried out with an effective date of 31 January 2021. These
actuarial valuations are carried out in accordance with the
requirements of the Pensions Act 2004 and so include deliberate
margins for prudence. This contrasts with these accounting
disclosures, which are determined using best estimate
assumptions.
The results of the actuarial valuation as at 31 January 2021
have been projected to 31 October 2023 by a qualified independent
actuary. The figures in the following disclosure were measured
using the Projected Unit Method.
The investment strategy in place for the Scheme is to invest in
a mix of return seeking, index linked and fixed interest
investments. As at 31 October 2023, the allocation of the Scheme's
invested assets was 18% in return seeking investments, 40% in
liability-driven investing, 40% in cash and 2% in insured
annuities. Details of the investment strategy can be found in the
Scheme's Statement of Investment Principles, which the Trustee
updates as their policy evolves.
It should also be noted that liabilities relating to insured
members of the Scheme have been included as both an asset and a
liability.
Following the High Court judgement in the Lloyds Banking Group
Pensions Trustees Limited v Lloyds Bank plc and others (2018) case,
overall pension benefits now need to be equalised to eliminate
inequalities between males and females in Guaranteed Minimum
Pensions (GMP). The Company has allowed for this in its accounts by
adding a 1.3% (2022: 1.3%) reserve reflecting an approximate
estimate of the additional liability.
2023 2022 2021
GBPm GBPm GBPm
The amounts recognised in the consolidated
statement of financial position are as follows:
Fair value of scheme assets 141.3 160.0 241.9
Present value of scheme liabilities (131.3) (148.9) (225.2)
-------- -------- --------
Net surplus amount recognised at year end 10.0 11.1 16.7
-------- -------- --------
Deferred tax liability recognised at year
end within non-current liabilities (2.5) (3.2) (4.1)
The retirement benefit surplus recognised in the consolidated
statement of financial position represents the surplus of the fair
value of the Scheme's assets over the present value of the Scheme's
liabilities.
The rules of the Scheme provide the Group with an unconditional
right to a refund of surplus assets on the gradual settlement of
the Scheme's liabilities. In the ordinary course of business the
Scheme Trustee has no unilateral right to wind the Scheme up. Based
on these rights and in accordance with IFRIC 14, the Group has made
the judgement that the net surplus in the Scheme is recognised in
full.
At the consolidated statement of financial position date the
corporation tax rate is 25.0%. The deferred tax liability on the
retirement benefit surplus has been evaluated applying this rate.
RPDT of 4.0% is applicable to residential property development
trading income only.
Amounts recognised in comprehensive income:
The current and past service costs, settlements and
curtailments, together with the interest income for the year are
included in the consolidated statement of comprehensive income.
Remeasurements of the net defined benefit asset are included in the
consolidated statement of comprehensive income.
2023 2022
GBPm GBPm
Service cost
Administrative expenses (0.6) (0.9)
Interest income 0.5 0.3
------ ------
Recognised in the consolidated income statement (0.1) (0.6)
------ ------
2023 2022
GBPm GBPm
Remeasurements of the net liability
Return on Scheme assets (18.5) (82.6)
Gains arising from changes in financial assumptions 12.5 79.8
Gains/(losses) arising from changes in demographic
assumptions 6.1 (0.1)
Experience losses (2.6) (5.5)
------- -------
Actuarial losses recorded in the consolidated
statement of comprehensive income (2.5) (8.4)
------- -------
Total defined benefit scheme losses (2.6) (9.0)
------- -------
2023 2022
% %
The principal actuarial assumptions used
were:
Liability discount rate 5.6 4.8
Inflation assumption - RPI 3.3 3.2
Inflation assumption - CPI 2.7 2.6
Revaluation of deferred pensions 2.7 2.6
Increases for pensions in payment
Benefits accrued in excess of GMP pre-1997 3.0 3.0
Benefits accrued post-1997 3.1 3.0
Proportion of employees opting for early
retirement 0.0 0.0
Proportion of employees commuting pension
for cash 100.0 100.0
Mortality assumption - pre-retirement AC00 AC00
Mortality assumption - male and S3PA light base
female post-retirement tables
projected in
line with CMI_2021
core model with
core parameters
(Sk =
7.0, an initial
S3PA light base tables addition of 0.25%,
(males and females) projected in line with CMI_2022 w2020
core model with core parameters (Sk = and w2021 set
7.0, an initial addition of 0.25%, w2020 to zero) and
and w2021 set to zero and 2022 set to 25%) and with a with a long-term
long-term rate of improvement of 1.25% rate of improvement
p.a of 1.25% p.a
2023 Years 2022
Years
Future expected lifetime of current pensioner
at age 65
Male aged 65 at year end 22.9 23.4
Female aged 65 at year end 24.6 25.0
Future expected lifetime of future pensioner
at age 65
Male aged 45 at year end 24.1 24.6
Female aged 45 at year end 25.9 26.3
2023 2022
GBPm GBPm
Changes in the present value of assets over the
year
Fair value of assets at beginning of the year 160.0 241.9
Interest income 7.5 4.1
Return on assets (excluding amount included in
net interest income) (18.5) (82.6)
Contributions from the employer 1.5 3.4
Benefits paid (8.6) (5.9)
Administrative expenses (0.6) (0.9)
------- -------
Fair value of assets at end of the year 141.3 160.0
------- -------
Actual return on assets over the year (10.9) (78.5)
2023 2022
GBPm GBPm
Changes in the present value of liabilities over
the year
Liabilities at beginning of the year (148.9) (225.2)
Interest cost (7.0) (3.8)
Remeasurement gains/(losses)
Gains arising from changes in financial assumptions 12.5 79.8
Gains/(losses) arising from changes in demographic
assumptions 6.1 (0.1)
Experience losses (2.6) (5.5)
Benefits paid 8.6 5.9
-------- --------
Liabilities at end of the year (131.3) (148.9)
-------- --------
2023 2022
GBPm GBPm
Split of the Scheme's liabilities by category
of membership
Deferred pensioners (57.8) (71.5)
Pensions in payment (73.5) (77.4)
(131.3) (148.9)
-------- --------
2023 2022
Years Years
Average duration of the Scheme's liabilities at
end of the year 12.0 14.0
This can be subdivided as follows:
Deferred pensioners 16.0 18.0
Pensions in payment 9.0 10.0
2023 2022
GBPm GBPm
Major categories of scheme assets
Return seeking
Overseas equities 2.4 2.3
Other (hedge funds, multi asset strategy and absolute
return funds) 23.6 55.9
-------------- --------------
26.0 58.2
-------------- --------------
Debt instruments
Corporates 11.8 -
Liability-driven investing 44.1 71.6
-------------- --------------
55.9 71.6
-------------- --------------
Other
Cash 55.9 25.9
Insured annuities 3.5 4.3
-------------- --------------
59.4 30.2
-------------- --------------
Total market value of assets 141.3 160.0
-------------- --------------
The Scheme has implemented a Liability Driven Investment (LDI)
strategy designed to closely align investment returns with
movements in the Scheme's liabilities on a low-risk basis, thereby
reducing the volatility of the Scheme's funding level. The use of
LDI brings liquidity risk as the demand for additional collateral
to maintain the Scheme's hedging can change over short periods when
interest rates change. In consultation with the Company, during the
2022 gilts crisis the Scheme continued to follow their LDI
strategy, maintaining their interest rate and inflation hedging
during the period of significant market volatility. Following the
2022 gilts crisis, the Trustee worked with its investment adviser
(and in consultation with the Company) to review the investment
strategy in April 2023. As a result, LCP (the Trustee's investment
adviser) estimate that as at 30 September 2023 the Scheme has
sufficient liquidity in the LDI portfolio (and Liquidity Plus Fund
alongside) to withstand a greater than 4% p.a. increase in yields
(from already historic highs) across the curve (assuming no
accompanying fall in the value of collateral) before other assets
would need to be sold to maintain the Scheme's hedge.
GBPnil (2022: GBPnil) of Scheme assets have a quoted market
price in active markets, GBP90.9m (2022: GBP106.2m) of Scheme
assets have valuation inputs other than quoted market prices,
including quoted market prices for similar assets in active
markets, GBP21.4m (2022: GBP42.4m) of Scheme assets are instruments
that are valued based on quoted prices for similar instruments but
for which significant unobservable adjustments or assumptions are
required to reflect the differences between the instruments, and
GBP29.0m (2022: GBP11.4m) of Scheme assets are cash and insured
pension annuities.
The Scheme has no investments in the Group or in property
occupied by the Group.
The Scheme had a deficit as at the latest valuation date of 31
January 2021, with a recovery plan agreed between the Group and the
Trustee. The Scheme was in surplus on the Technical Provisions
basis, and so no further contributions were payable in respect of
the shortfall in funding in accordance with the Recovery Plan dated
8 February 2022. I n order to continue to move the Scheme towards
the Trustee's secondary funding objective, the Trustee and the
Group have agreed that t he Company will fund the Scheme with
contributions of GBP1.5m p.a., payable monthly until 30 April 2025.
When the Scheme is at least 95% funded on the Secondary Funding
Basis for a period of three consecutive months then the Group has
the option to pay any remaining contributions to an escrow account.
The Group expects to contribute GBP1.5m to scheme funding in the
year ending 31 October 2024.
Sensitivity of the liability value to changes in the principal
assumptions
The sensitivities included are consistent with those shown in
prior years and show the change in the consolidated statement of
financial position as at 31 October 2023 as a result of a change to
the key assumptions.
If the discount rate was 0.25% higher/(lower), the Scheme
liabilities would decrease by GBP3.8m/(increase by GBP3.9m) if all
the other assumptions remained unchanged.
If the inflation assumption was 0.25% higher/(lower), the Scheme
liabilities would increase by GBP2.3m/(decrease by GBP2.4m) if all
the other assumptions remained unchanged.
If life expectancies were to increase by one year, the scheme
liabilities would increase by GBP4.7m if all the other assumptions
remained unchanged.
(b) Share-based payments
The Group operates a Long-Term Incentive Plan (LTIP), save as
you earn (SAYE) and a deferred bonus plan.
Long-Term Incentive Plan
The Group's LTIP is open to the Executive Directors and senior
management with awards being made at the discretion of the
Remuneration Committee. Options granted under the plan are
exercisable between three and 10 years after the date of grant.
Awards may be satisfied by shares held in the ESOT, the issue of
new shares (directly or to the ESOT) or the acquisition of shares
in the market. Awards made prior to 31 October 2020 vest over three
years and are subject to three years' service, and return on
capital and profit performance conditions.
Awards issued between 2021 and 2023 are subject to three years'
service and assessed against return on capital, profit performance
conditions and relative total shareholder returns (TSR). The
non-market based return on capital and profit performance
conditions applies to 60% of the award and value the options using
a binomial option valuation model. The market-based TSR performance
conditions apply to 40% of the award and values the options using
the Monte Carlo valuation model. The TSR-based performance
conditions are split one-third FTSE 250 excluding investment funds
and two-thirds sector peer group. 1,320,566 of the options awarded
in 2023 (961,765 of the 2022 award) are subject to an additional
post-vesting holding period, where shares cannot be sold for two
years after vesting date.
The 2021 fair value at measurement date of the different
valuation elements are GBP2.25 TSR (FTSE 250), GBP1.85 TSR (peer
group), and GBP2.84 for the non-market-based return on capital and
profit performance conditions. The correlation of FTSE 250 and peer
group calculated for each individual comparator company relative to
the Group is 30% and 67% respectively. The average fair value at
measurement date is GBP2.50 per option.
The 28 January 2022 grant fair value at measurement date of the
different valuation elements of the unrestricted options are
GBP1.68 TSR (FTSE 250), GBP1.55 TSR (peer group), and GBP2.62 for
the non-market-based return on capital and profit performance
conditions. The 2023 fair value at measurement date of the
different valuation elements of the restricted options are GBP1.51
TSR (FTSE 250), GBP1.40 TSR (peer group), and GBP2.36 for the
non-market-based return on capital and profit performance
conditions. The correlation of FTSE 250 and peer group calculated
for each individual comparator company relative to the Group is 31%
and 68% respectively. The average fair value at measurement date is
GBP2.10 per option. The average fair value at measurement date of
the 25 August 2023 grant is GBP1.59 per option.
The 27 January 2023 grant fair value at measurement date of the
different valuation elements of the unrestricted options are
GBP1.84 TSR (FTSE 250), GBP1.68 TSR (peer group), and GBP2.45 for
the non-market-based return on capital and tCO2 elements. The 2023
fair value at measurement date of the different valuation elements
of the restricted options are GBP1.58 TSR (FTSE 250), GBP1.44 TSR
(peer group), and GBP2.10 for the non-market-based return on
capital and profit performance conditions. The correlation of FTSE
250 and peer group calculated for each individual comparator
company relative to the Group is 33% and 65% respectively. The
average fair value at measurement date is GBP1.88 per option.
26 16 21 20 04 08 28 25 06 07 27
Feb Apr Jun Feb Aug Feb Jan Aug Mar Aug Jan
Date of grant 2016 2019 2019 2020 2020 2021 2022 2022 2023 2023 2023
Options
granted 1,075,943 1,140,962 278,558 1,125,531 7,298 1,328,192 1,341,918 23,955 29,462 508 1,771,417
Fair value GBP5.07 GBP3.15 GBP3.15 GBP4.28 GBP1.53 GBP2.50 GBP2.10 GBP1.59 GBP2.75 GBP2.46 GBP1.88
at
measurement
date
Share price GBP5.62 GBP4.00 GBP3.55 GBP5.16 GBP1.85 GBP3.23 GBP3.07 GBP2.33 GBP2.32 GBP2.14 GBP2.45
on date of
grant
Exercise GBP0.00 GBP0.00 GBP0.00 GBP0.00 GBP0.00 GBP0.00 GBP0.00 GBP0.00 GBP0.00 GBP0.00 GBP0.00
price
Vesting 3 years 3 years 3 years 3 years 3 years 3 years 3 years 3 years 3 years 3 years 3 years
period
Expected
dividend
yield 3.50% 8.20% 8.20% 6.40% 6.40% 4.30% 5.30% 5.30% N/A N/A 0.0%
Expected
volatility 30.0% 35.0% 35.0% 30.0% 30.0% 40.0% 40.0% 40.0% N/A N/A 45.0%
Risk-free
interest
rate 0.43% 0.81% 0.81% 0.45% 0.45% 0.03% 0.97% 0.97% N/A N/A 3.23%
Binomial Binomial Binomial Binomial Binomial Binomial/ Binomial/ Binomial/ N/A N/A Binomial/
Valuation Monte Monte Monte Monte
model Carlo Carlo Carlo Carlo
Contractual 26.02.16 16.04.19 21.06.19 20.02.20 04.08.20 08.02.21 28.01.22 25.08.22 06.03.23 07.08.23 27.01.23
life from
Contractual 25.02.26 15.04.29 20.06.29 19.02.30 03.08.30 07.02.31 27.02.32 27.02.32 19.02.30 03.08.30 26.01.33
life to
Number Number Number Number Number Number Number Number Number Number Number Total
of of of of of of of of of of of number
options options options options options options options options options options options of options
Movements
in the year
Outstanding
at 1
November
2021 1,518 692,934 278,558 954,131 7,298 1,276,437 - - - - - 3,210,876
Granted
during
the year - - - - - - 1,341,918 23,955 - - - 1,365,873
Exercised
during the
year (1,518) - - - - - - - - - - (1,518)
Lapsed during
the year - (692,934) (278,558) (62,161) - (78,761) (29,443) - - - - (1,141,857)
----------
Outstanding
at 31
October
2022 - - - 891,970 7,298 1,197,676 1,312,475 23,955 - - - 3,433,374
Granted
during
the year - - - - - - - - 29,462 508 1,771,407 1,801,377
Exercised
during the
year - - - (417,308) (3,948) - - - (29,462) (508) - (451,226)
Lapsed during
the year - - - (474,662) (3,350) (167,438) (181,150) - - - (201,028) (1,027,628)
----------
Outstanding
at 31
October
2023 - - - - - 1,030,238 1,131,325 23,955 - - 1,570,379 3,755,897
---------- ---------- ---------- ---------- --------- ---------- ---------- ---------- --------- --------- ---------- ------------
Exercisable - - - - - - - - - - - -
at 31 October
2023
---------- ---------- ---------- ---------- --------- ---------- ---------- ---------- --------- --------- ---------- ------------
Exercisable - - - - - - - - - - - -
at 31 October
2022
---------- ---------- ---------- ---------- --------- ---------- ---------- ---------- --------- --------- ---------- ------------
-
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm Total
GBPm GBPm
Charge to
income for
the current
year - - - 0.1 - - 0.1 - 0.1 - 0.3 0.6
---------- ---------- ---------- ---------- --------- ---------- ---------- ---------- --------- --------- ---------- ------------
Charge to
income for
the prior
year - - - 1.1 - (0.1) 0.2 - - - - 1.2
---------- ---------- ---------- ---------- --------- ---------- ---------- ---------- --------- --------- ---------- ------------
The weighted average exercise price of LTIP options was GBPnil
(2022: GBPnil).
Save As You Earn
Executive Directors and eligible employees are invited to make
regular monthly contributions to a Sharesave scheme administered by
EQ. On completion of the three-year contract period employees are
able to purchase ordinary shares in the Company based on the market
price at the date of invitation less a 20% discount. There are no
performance conditions.
26 Jul 30 Jul 07 Aug 03 Aug 02 Aug 28 Jul
Date of grant 2018 2019 2020 2021 2022 2023
Options granted 712,944 935,208 1,624,259 256,132 975,549 1,938,156
Fair value at
measurement date GBP0.52 GBP0.54 GBP0.36 GBP1.15 GBP0.66 GBP1.51
Share price on GBP3.68 GBP1.94 GBP4.14 GBP2.67 GBP2.19
date of grant GBP3.77
Exercise price GBP3.15 GBP2.86 GBP1.70 GBP3.42 GBP1.94 GBP1.51
Vesting period 3 years 3 years 3 years 3 years 3 years 3 years
Expected dividend
yield 8.76% 8.96% 5.20% 1.98% 5.63% 7.78%
Expected volatility 35.00% 35.00% 40.00% 45.30% 42.20% 41.6%
Risk-free interest
rate 0.85% 0.38% -0.08% 0.14% 1.62% 4.63%
Valuation model Binomial Binomial Binomial Binomial Binomial Binomial
Contractual life 01.09.19 01.09.20 01.09.21 01.09.22 01.09.23
from 01.09.18
Contractual life 01.03.23 01.03.24 01.03.25 01.03.26 01.03.27
to 01.03.22
Total Weighted
Number Number Number Number Number Number number average
Movements in of of of of of of of exercise
the year options options options options options options options price
Outstanding at
1 November 2021 40,842 147,357 1,124,088 244,294 - - 1,556,581 GBP2.12
Granted during
the year - - - - 975,549 - 975,549 GBP1.94
Exercised during
the year (8,854) - (5,764) - - - (14,618) GBP2.58
Lapsed during
the year (31,988) (50,525) (210,555) (160,163) (62,992) - (516,223) GBP2.47
Outstanding
at 31 October
2022 - 96,832 907,769 84,131 912,557 - 2,001,289 GBP1.94
Granted during
the year - - - - - 1,938,156 1,938,156 GBP1.51
Exercised during
the year - - (522,976) - - - (522,976) GBP1.70
Lapsed during
the year - (96,832) (61,983) (41,201) (486,485) (158,774) (845,275) GBP2.02
Outstanding
at 31 October
2023 - - 322,810 42,930 426,072 1,779,382 2,571,194 GBP1.64
--------- --------- ---------- ---------- ---------- ---------- ---------- ---------
Exercisable
at 31 October
2023 - - 322,810 - - - 322,810
--------- --------- ---------- ---------- ---------- ---------- ----------
Exercisable at
31 October 2022 - 96,832 - - - - 96,832
--------- --------- ---------- ---------- ---------- ---------- ----------
GBPm GBPm GBPm GBPm GBPm Total
GBPm GBPm
Charge to income
for the current
year - - 0.1 - 0.3 0.1 0.5
--------- --------- ---------- ---------- ---------- ---------- ----------
Charge to income
for the prior
year - - 0.1 0.1 0.1 - 0.3
--------- --------- ---------- ---------- ---------- ---------- ----------
Deferred bonus plan
Under the terms of certain bonus schemes, some parts of bonus
payments must be deferred into share options. The options carry no
performance criteria and vest over one or three years. Options
granted under the plan are exercisable between one and 10 years
after the date of grant. Deferred bonus plan option numbers are
based on the share price on the date of grant.
28 Feb 26 Feb 01 Mar 28 Jan 09 Feb 06 Mar 06 Mar 27 Jan
Date of grant 2020 2021 2022 2022 2022 2023 2023 2023
Options granted 20,956 34,800 251 230,605 58,848 151 2,897 340,125
Fair value
at measurement
date GBP4.52 GBP3.28 GBP4.06 GBP2.76 GBP2.76 GBP2.75 GBP2.53 GBP2.44
Share price
on date of
grant GBP4.52 GBP3.28 GBP2.70 GBP3.06 GBP3.27 GBP2.32 GBP2.32 GBP2.45
Exercise price GBP0.00 GBP0.00 GBP0.00 GBP0.00 GBP0.00 GBP0.00 GBP0.00 GBP0.00
3/1
Vesting period 3 years 1 year N/A 3 years 1 year N/A N/A year
Expected dividend
yield and
volatility N/A N/A N/A N/A N/A N/A N/A N/A
Risk-free interest
rate N/A N/A N/A N/A N/A N/A N/A N/A
Valuation model N/A N/A N/A N/A N/A N/A N/A N/A
Contractual 28.02.20 26.02.21 02.03.22 28.01.22 09.02.22 06.03.23 06.03.23 27.01.23
life from
Contractual 27.02.30 25.02.31 25.02.31 27.01.25 08.02.23 27.02.30 08.02.32 28.02.33
life to
Number Number Number Number Number Number Number Number Total
of of of of of of of of number
Movements options options options options options options options options of
in the year options
Outstanding
at 1 November
2021 2,260 34,800 - - - - - - 37,060
Granted during
the year - - 251 230,605 58,848 - - - 289,704
Exercised during
the year - (24,985) (251) - - - - - (25,236)
Lapsed during
the year - (9,815) - - - - - - (9,815)
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Outstanding
at 31 October
2022 2,260 - - 230,605 58,848 - - - 291,713
Granted during
the year - - - - - 151 2,897 340,125 343,173
Exercised during
the year (2,260) - - - (48,374) (151) (2,897) - (53,682)
Lapsed during
the year - - - - (10,474) - - (21,108) (31,582)
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Outstanding
at 31 October
2023 - - - 230,605 - - - 319,017 549,622
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Exercisable - - - - - - - - -
at 31 October
2023
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Exercisable - - - - - - - - -
at 31 October
2022
--------- --------- --------- --------- --------- --------- --------- --------- ---------
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm Total
GBPm
Charge to
income for
the current
year - - - 0.2 - - - 0.2 0.4
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Charge to income
for the prior
year - - - 0.4 - - - - 0.4
--------- --------- --------- --------- --------- --------- --------- --------- ---------
The weighted average exercise price of deferred bonus plan share
options was GBPnil (2022: GBPnil).
Total share incentive schemes 2023 2022
Number Number
Movements in the year of options of options
Outstanding at beginning of
the year 5,726,376 4,804,517
Granted during the year 4,082,706 2,631,126
Exercised during the year (1,027,884) (41,372)
Lapsed during the year (1,904,485) (1,667,895)
Outstanding at end of the
year 6,876,713 5,726,376
------------ ------------
Exercisable at end of the
year 322,810 96,832
------------ ------------
GBPm GBPm
Charge to income for share
incentive schemes 1.5 1.9
------------ ------------
The weighted average share price at the date of exercise of
share options exercised during the year was GBP2.77 (2022:
GBP3.59). The options outstanding had a range of exercise prices of
GBPnil to GBP3.42 (2022: GBPnil to GBP3.42) and a weighted average
remaining contractual life of 6.2 years (2022: 6.4 years). The gain
on shares exercised during the year was GBP0.1m (2022:
GBP0.6m).
17 TRADE AND OTHER RECEIVABLES
Trade and Expected Trade and Trade and Expected Trade and
other credit other other credit other
receivables loss receivables receivables loss receivables
before expected after expected before expected after expected
credit loss credit loss credit loss credit loss
2023 2023 2023 2022 2022 2022
GBPm GBPm GBPm GBPm GBPm GBPm
Non-current
Trade receivables 4.6 (0.1) 4.5 9.7 - 9.7
Due from joint
ventures 1.5 - 1.5 25.4 (0.1) 25.3
6.1 (0.1) 6.0 35.1 (0.1) 35.0
Current
Trade receivables 57.1 (0.7) 56.4 49.7 (0.3) 49.4
Contract assets 6.9 - 6.9 25.2 (0.1) 25.1
Due from joint
ventures 28.1 (0.1) 28.0 1.8 - 1.8
Other receivables 27.0 (0.2) 26.8 38.1 - 38.1
Prepayments
and accrued
income 1.9 - 1.9 1.9 - 1.9
121.0 (1.0) 120.0 116.7 (0.4) 116.3
Non-current
and current 127.1 (1.1) 126.0 151.8 (0.5) 151.3
Trade receivables and contract assets mainly comprise
contractual amounts due from housing associations, bulk sale
purchasers and land sales to other housebuilders. Other receivables
mainly comprise two development agreements where the Group is
entitled to recovery of costs incurred under the agreement. Current
trade receivables of GBP20.2m have been collected as of 1 January
2024 (2022: GBP21.2m have been collected as of 1 January 2023). The
remaining balance is due according to contractual terms, and no
individually material amounts are past due. At the consolidated
statement of financial position date the difference between the
fair value of amounts due from joint ventures and nominal value is
GBP0.2m (2022: GBP0.4m).
Amounts due from joint ventures comprises funding provided on
four (2022: three) joint venture developments which are being
project managed by the Group and are repayable according to
contractual arrangements. Amounts due from joint ventures are
stated net of losses of GBPnil (2022: GBP0.2m). See note 14 for
additional details on the Group's interests in joint ventures.
Amounts due from joint ventures are stated after a loss
allowance of GBP0.1m (2022: GBP0.1m) in respect of expected credit
losses. GBPnil (2022: GBP2.3m) provision was made during the year,
GBPnil (2022: GBP14.1m) was utilised and GBPnil (2022: GBPnil)
provision was released during the year.
Trade receivables, contract assets and other receivables are
stated after a loss allowance of GBP1.0m (2022: GBP0.4m) in respect
of expected credit losses, assessed on an estimate of default
rates. GBP0.7m (2022: GBPnil) provision was made during the year,
GBPnil (2022: GBPnil) was utilised and GBP0.1m (2022: GBPnil)
provision was released during the year.
Movements in total loss allowance for expected credit losses
2023 2022
GBPm GBPm
At beginning of the year 0.5 12.3
Charged in the year on joint venture
balances - 2.3
Charged in the year on trade and 0.7 -
other trade receivables
Released in the year on contract (0.1) -
assets
Utilised in the year on joint venture
balances - (14.1)
At end of the year 1.1 0.5
Maturity of non-current receivables:
2023 2022
GBPm GBPm
Due between one and two
years 5.8 34.2
Due between two and five
years 0.2 0.8
Due after five years - -
6.0 35.0
18 INVENTORIES
2023 2022
GBPm GBPm
Work-in-progress 1,040.7 942.8
Completed buildings including show homes 89.6 30.1
Part exchange inventories 34.5 17.2
-------- ------
1,164.8 990.1
-------- ------
Included within inventories is a fair value adjustment of
GBP1.3m (2022: GBP2.0m) which arose on the acquisition of CN
Finance plc in 2009 and will continue to unwind to cost of sales in
future years as the units against which the original fair value
provision was recognised are sold or otherwise divested. The amount
of fair value provision unwound in cost of sales in the year was
GBP0.7m (2022: GBP0.5m). Total inventories of GBP520.2m (2022:
GBP705.3m) were recognised as cost of sales in the year.
During the year GBP13.4m additional NRV was charged, mainly
relating to the legacy Farnham development.
Inventories are stated after an NRV provision of GBP20.2m (2022:
GBP12.6m), which it is currently forecast that over a third will be
used in the next financial year.
Movements in the NRV provision in the current and prior year are
shown below:
2023 2022
GBPm GBPm
At beginning of the year 12.6 20.7
Pre-exceptional NRV charged in the year 13.4 9.6
Pre-exceptional NRV used in the year (5.0) (7.2)
Exceptional NRV used in the year (0.8) (10.5)
-------- ---------
Total movement in NRV in the year 7.6 (8.1)
-------- ---------
At end of the year 20.2 12.6
-------- ---------
19 MOVEMENT IN NET CASH
2023 Movement 2022
GBPm GBPm GBPm
Cash and cash equivalents 162.6 (211.0) 373.6
Bank loans and senior loan
notes (97.7) (0.6) (97.1)
----------- --------- --------
Net cash 64.9 (211.6) 276.5
----------- --------- --------
20 INTEREST-BEARING LOANS AND BORROWINGS
2023 2022
GBPm GBPm
Non-current
Senior loan notes 85.0 100.0
Revolving credit and senior
loan notes issue costs (1.5) (2.9)
83.5 97.1
------ ------
Current
Senior loan notes 15.0 -
Revolving credit and senior (0.8) -
loan notes issue costs
14.2 -
------ ------
There were undrawn amounts of GBP250.0m (2022: GBP250.0m) under
the RCF at the consolidated statement of financial position date.
The Group was undrawn throughout the financial year (2022: undrawn)
under the RCF. See note 24 for additional disclosures.
21 TRADE AND OTHER PAYABLES
2023 2022
GBPm GBPm
Non-current
Land payables on contractual terms 64.7 32.9
Other payables 2.0 2.3
Contract liabilities 0.3 0.3
Accruals and deferred income 4.1 6.3
------ ------
71.1 41.8
------ ------
Current
Land payables on contractual terms 140.8 165.8
Other trade payables 61.8 41.1
Contract liabilities 5.7 19.0
Amounts due to joint ventures 0.7 0.1
Taxes and social security costs 1.7 1.8
Other payables 1.1 3.2
Accruals and deferred income 125.2 176.1
------ ------
337.0 407.1
------ ------
Land payables are recognised from the date of unconditional
exchange of contracts, and represent amounts due to land vendors
for development sites acquired. All land payables are due according
to contractual terms. Where land is purchased on deferred
settlement terms then the land and the land payable are discounted
to their fair value using the effective interest method in
accordance with IFRS 9. The difference between the fair value and
the nominal value is amortised over the deferment period, with the
financing element being charged as an interest expense through the
consolidated income statement. As at 31 October 2023 the difference
between the fair value and nominal value of land payables is
GBP6.8m (2022: GBP2.4m).
Contract liabilities represent payments on account, received
from customers, in excess of billable work-in-progress on
affordable and other sales in bulk on contracts in which revenue is
recognised over time. Based on historical trends, the Directors
expect a significant proportion of the contract liabilities total
to be recognised as revenue in the next reporting period.
Amounts due to joint ventures are interest free and repayable on
demand. See note 14 for additional details on the Group's interests
in joint ventures.
Other trade payables mainly comprise amounts due to suppliers
and subcontractor retentions. Suppliers are settled according to
agreed payment terms and subcontractor retentions are released once
the retention condition has been satisfied.
Accruals are mainly work-in-progress related where work has been
performed but not yet invoiced.
22 PROVISIONS
Combustible materials Legal provision Joint ventures Other provisions Total
GBPm GBPm GBPm GBPm GBPm
At 1 November 2021 42.6 - - 0.5 43.1
Provided in the year 102.5 - - 0.3 102.8
Imputed interest 1.0 - - - 1.0
Utilised in the year (5.3) - - - (5.3)
Released in the year - - - (0.4) (0.4)
Funding commitment recognised - - 1.2 - 1.2
Reclassification - - - 0.6 0.6
---------------------- ---------------- --------------- ----------------- -------
At 31 October 2022 140.8 - 1.2 1.0 143.0
Provided in the year 12.0 13.0 - 0.4 25.4
Imputed interest 4.6 - - - 4.6
Utilised in the year (12.6) - - (0.6) (13.2)
Released in the year - - - (0.2) (0.2)
Funding commitment change - - (0.3) - (0.3)
At 31 October 2023 144.8 13.0 0.9 0.6 159.3
---------------------- ---------------- --------------- ----------------- -------
At 31 October 2023
Non-current 73.6 - - 0.2 73.8
Current 71.2 13.0 0.9 0.4 85.5
---------------------- ---------------- --------------- ----------------- -------
144.8 13.0 0.9 0.6 159.3
---------------------- ---------------- --------------- ----------------- -------
At 31 October 2022
Non-current 70.5 - - 0.3 70.8
Current 70.3 - 1.2 0.7 72.2
---------------------- ---------------- --------------- ----------------- -------
140.8 - 1.2 1.0 143.0
---------------------- ---------------- --------------- ----------------- -------
Combustible materials
As a consequence of signing the Developer Remediation Contract
on 13 March 2023, the Group has entered into contractual
commitments with the UK Government to identify and remediate those
buildings it has developed with possible life-critical fire safety
defects. The signing of the contract did not materially alter the
provision required as at 31 October 2022, which reflected the
requirements of the Pledge. The Group is currently working on circa
90 buildings in various stages of design, procurement and
works.
The combustible materials provision reflects the estimated costs
to complete the remediation of life-critical fire safety issues on
identified buildings. The Directors have used a combination of BSF
costed information, other external information, and internal
assessments as a basis for the provision, which is a best estimate
at this time.
The Group recorded a further net combustible materials charge of
GBP12.0m in the year predominantly related to changes in forecast
build cost scope and price over the duration of remediation, net of
the change in discounting. GBP11.3m of the charge relates to
exceptional items per note 4. The provision is stated after a
related discount of GBP7.3m, which unwinds to the consolidated
income statement as finance expense over the expected duration of
the provision using the effective interest rate method.
The provision of GBP144.8m represents the Group's best estimate
of future costs on 31 October 2023. The Group will continue to
assess the magnitude and utilisation of this provision in future
reporting periods. The Group recognises that required remediation
works could be subject to further inflationary pressures and cash
outflows. If forecast remediation costs on buildings currently
provided for are 20.0% higher than provided, the pre-tax
exceptional items charge in the consolidated income statement would
be GBP29.0m higher. If further buildings are identified this could
also increase the required provision, but the potential quantity of
this change cannot be readily determined without further claims or
investigative work.
The Group spent GBP12.6m in the year across several buildings
requiring further investigative costs, including balcony and
cladding-related works. The Group expects to have completed any
required remediation within a five-year period, using GBP71.2m of
the remaining provision within one year, and the balance within one
to five years. The timing of the expenditure is based on the
Directors best estimates of the timing of remediating buildings and
repaying the BSF incurred costs. Actual timing may differ due to
delays in agreeing scope of works, obtaining licences, tendering
works contracts and the BSF payment schedule differing to our
forecast.
The Group is continuing to review the recoverability of costs
incurred from third parties where it has a contractual right of
recourse. In the year GBP10.0m was recovered from third parties by
the Group. The Group also recognised its share of recoveries from
third parties in its joint venture Crest Nicholson Bioregional
Quintain LLP of GBP0.6m, net of changes in build costs. Recoveries
are not recognised until they are virtually certain to be received.
See note 4 for consolidated income statement disclosure.
Legal provision
The Group is subject to a legal claim relating to a low-rise
bespoke apartment block built by the Group which was damaged by
fire in 2021. The fire caused extensive damage to the property
which was subsequently demolished and is currently being rebuilt by
the freeholder. In June 2023 the Group received a letter of claim
alleging fire safety defects and claiming compensation for the
rebuild and other associated costs. The Group has now assessed the
claim and the provision recorded represents managements best
estimate of the Group's potential exposure taking into account
legal and professional advice. The claim and ultimate route to
settlement is ongoing but the Group currently does not have a set
timeline for when the matter will be concluded.
Joint ventures
Joint ventures represents the Group's legal or constructive
obligation to fund losses on joint ventures.
Other provisions
Other provisions comprise dilapidation provisions on Group
offices and dilapidation provisions on commercial properties where
the Group previously held the head lease. In the prior year the
Group reclassified the brought forward balance of dilapidations on
Group offices which were previously offset against right of use
assets.
23 SHARE CAPITAL
Share
Shares Nominal Share premium
issued value capital account
Number Pence GBP GBP
Ordinary shares as at 1 November
2021, 31 October 2022 and
31 October 2023 256,920,539 5 12,846,027 74,227,216
Ordinary shares are issued and fully paid. Authorised ordinary
shares of five pence each are 342,560,719 (2022: 342,560,719).
For details of outstanding share options at 31 October 2023 see
note 17.
Own shares held
The Group and Company holds shares within ESOT for participants
of certain share-based payment schemes. These are held within
retained earnings. During the year 840,000 shares were purchased by
the ESOT for GBP1.9m (2022: 440,000 shares were purchased by the
ESOT for GBP1.1m) and the ESOT transferred 1,027,884 (2022: 41,382)
shares to employees and Directors to satisfy options as detailed in
note 17. The number of shares held within the ESOT (Treasury
shares), and on which dividends have been waived, at 31 October
2023 was 600,256 (2022: 788,140). These shares are held within the
financial statements in equity at a cost of GBP1.5m (2022:
GBP2.5m). The market value of these shares at 31 October 2023 was
GBP1.0m (2022: GBP1.6m).
24 FINANCIAL RISK MANAGEMENT
The Group's financial instruments comprise cash, trade and other
receivables, financial assets at fair value through profit and
loss, bank loans, senior loan notes, and trade and other payables.
The main objective of the Group's policy towards financial
instruments is to maximise returns on the Group's cash balances,
manage the Group's working capital requirements and finance the
Group's ongoing operations.
Capital management
The Group's policies seek to match long-term assets with
long-term finance and ensure that there is sufficient working
capital to meet the Group's commitments as they fall due, comply
with the loan covenants and continue to sustain trading.
The Group's capital comprises shareholders' funds and net cash.
A five-year summary of this can be found in the unaudited
historical summary below, in addition to its return on average
capital employed.
The Group seeks to manage its capital through control of
expenditure, dividend payments and through its banking facilities.
The RCF and senior loan notes impose certain minimum capital
requirements on the Group. These requirements are integrated into
the Group's internal forecasting process and are regularly
reviewed. The Group has, and is forecasting, to operate within
these capital requirements.
There were undrawn amounts of GBP250.0m (2022: GBP250.0m) under
the revolving credit facility at the consolidated statement of
financial position date. The revolving credit facility carries
interest at SONIA plus 1.85% and ends in 2026.
Both the senior loan notes and the RCF are subject to three
covenants that are measured quarterly in January, April, July and
October each year, they are, gearing being of a maximum of 70%,
interest cover being a minimum of 3 times and consolidated tangible
net worth being not less than GBP500m, all based on measures as
defined in the facilities agreements which are adjusted from the
equivalent IFRS amounts. As at the statement of financial position
date gearing was 17.0%, interest cover was 8.0 times and
consolidated tangible net worth was GBP827.3m
On 12 October 2022 the Group signed an amendment to the RCF.
This amendment extended the facility to run through to October 2026
and changed the facility into a Sustainability Linked RCF.
Under this amended facility the margin applicable can vary by
plus or minus 0.05% depending on the Group's progress against four
targets. These targets include:
-- Reduction in absolute scope 1 and 2 emissions in line with our science-based targets
2023. Target met. A focus on efficient use of materials and fuel
with an absolute reduction in site activity
-- Increasing the number of our suppliers engaging with the Supply Chain Sustainability School
2023. Target met. Proactive engagement with our key suppliers in
the year
-- Reduction in carbon emissions associated with the use of our homes
2023. Target met. Impact of the switch to standard house types
across the business
-- Increasing the number of our employees in trainee positions and on training programmes
2023. Target met. A continued priority with dedicated resource
and strong employee engagement.
As a result of meeting 4 out of 4 of the metrics for FY23 the
margin on the RCF will be amended down by 0.05% from the date of
submission of the compliance documents for the facility.
Financial risk
As virtually all of the operations of the Group are in sterling,
there is no direct currency risk, and thus the Group's main
financial risks are credit risk, liquidity risk and market interest
rate risk. The Board is responsible for managing these risks and
the policies adopted are as set out below:
Credit risk
Credit risk is the risk of financial loss to the Group if a
customer or other counterparty to a financial instrument fails to
meet its contractual obligations, and arises principally from the
Group's cash deposits, as most receivables are secured on land and
buildings.
The Group has cash deposits of GBP162.6m (2022: GBP373.6m) which
are held by the providers of its banking facilities. These are
primarily provided by HSBC Bank Plc, Barclays Bank Plc, Lloyds Bank
Plc and Natwest Group Plc, being four of the UK's leading financial
institutions. The security and suitability of these banks is
monitored by the treasury function on a regular basis. The Group
has bank facilities of GBP250.0m expiring in October 2026, with
GBP250.0m remaining available for drawdown under such facilities at
31 October 2023.
Financial assets at fair value through profit and loss of
GBP3.7m (2022: GBP4.6m) are receivables on extended terms granted
as part of a sales transaction and are secured by way of a legal
charge on the relevant property and therefore credit risk is
considered low.
The carrying value of trade and other receivables is mainly
contractual amounts due from housing associations, bulk sale
purchasers, land sales to other housebuilders and a development
agreement where the Group is entitled to recovery of costs incurred
under the agreement, and equates to the Group's exposure to credit
risk which is set out in note 17. Amounts due from joint ventures
of GBP29.5m (2022: GBP27.1m) is funding provided on four (2022:
three) joint venture developments which are being project managed
by the Group and are subject to contractual arrangements. The Group
has assessed the expected credit loss impact on the carrying value
of trade and other receivables as set out in note 17. Within trade
receivables the other largest single amount outstanding at 31
October 2023 is GBP12.1m (2022: GBP11.5m) which is within agreed
terms.
The Group considers the credit quality of financial assets that
are neither past due nor impaired as good. In managing risk the
Group assesses the credit risk of its counterparties before
entering into a transaction. No credit limits were exceeded during
the reporting year, and the Directors do not expect any material
losses from non-performance of any counterparties, including in
respect of receivables not yet due. No individually material
financial assets are past due, or are considered to be impaired as
at the consolidated statement of financial position date (2022:
none).
Liquidity risk
Liquidity risk is the risk that the Group will not be able to
meet its financial obligations as they fall due. Cash flow
forecasts are produced to monitor the expected cash flow
requirements of the Group against the available facilities. The
principal risks within these cash flows relate to achieving the
level of sales volume and prices in line with current
forecasts.
The following are the contractual maturities of the financial
liabilities of the Group at 31 October 2023:
2023 More
Carrying Contractual Within than
value cash flows 1 year 1-2 years 2-3 years 3 years
GBPm GBPm GBPm GBPm GBPm GBPm
Senior loan notes 100.0 112.5 18.5 23.1 2.4 68.5
Financial liabilities
carrying no interest 401.4 408.8 333.5 44.1 28.3 2.9
--------- ------------ -------- ---------- ---------- ---------
At 31 October 2023 501.4 521.3 352.0 67.2 30.7 71.4
--------- ------------ -------- ---------- ---------- ---------
2022 More
Carrying Contractual Within than
value cash flows 1 year 1-2 years 2-3 years 3 years
GBPm GBPm GBPm GBPm GBPm GBPm
Senior loan notes 100.0 116.1 3.5 18.5 23.1 71.0
Financial liabilities
carrying interest 29.8 30.1 30.1 - - -
Financial liabilities
carrying no interest 395.2 397.8 357.6 37.5 1.1 1.6
--------- ------------ -------- ---------- ---------- ---------
At 31 October 2022 525.0 544.0 391.2 56.0 24.2 72.6
--------- ------------ -------- ---------- ---------- ---------
Other financial liabilities carrying interest are land
acquisitions using promissory notes. The timing and amount of
future cash flows given in the table above is based on the
Directors' best estimate of the likely outcome.
Market interest rate risk
Market interest rate risk reflects the Group's exposure to
fluctuations to interest rates in the market. The risk arises
because the Group's RCF is subject to floating interest rates based
on SONIA. The Group accepts a degree of interest rate risk, and
monitors rate changes to ensure they are within acceptable limits
and in line with banking covenants. The Group has partially
mitigated this risk by placing GBP100m of senior loan notes which
are at fixed interest rates. For the year ended 31 October 2023 it
is estimated that an increase of 1.0% in interest rates applying
for the full year would decrease the Group's profit before tax and
equity by GBPnil (2022: GBPnil). The Group currently does not have
any interest carrying liabilities with floating interest rates.
The interest rate profile of the financial liabilities of the
Group was:
2023 2022
GBPm GBPm
Sterling bank borrowings, loan notes
and long-term creditors
Financial liabilities carrying interest 100.0 129.8
Financial liabilities carrying no interest 401.4 395.2
------ ---------
501.4 525.0
------ ---------
For financial liabilities that have no interest payable but for
which imputed interest is charged, consisting of land payables, the
weighted average period to maturity is 26 months (2022: 14
months).
2023 2022
GBPm GBPm
The maturity of the financial
liabilities is:
Repayable within one year 344.0 385.2
Repayable between one and
two years 61.7 52.1
Repayable between two and
five years 78.9 72.1
Repayable after five years 16.8 15.6
------ ---------
501.4 525.0
------ ---------
Fair values
Financial assets
The Group's financial assets are detailed in a table below. The
carrying value of cash and cash equivalents and trade and other
receivables is a reasonable approximation of fair value which would
be measured under a level 3 hierarchy. Financial assets at fair
value through profit and loss are carried at fair value and
categorised as level 3 (inputs not based on observable market data)
within the hierarchical classification of IFRS 13: Revised.
Financial liabilities
The Group's financial liabilities are detailed in a table below,
the carrying amounts of which are deemed to be a reasonable
approximation to their fair value. The fair values of the RCF,
other loans and loan notes are calculated based on the present
value of future principal and interest cash flows, discounted at
the market rate of interest at the consolidated statement of
financial position date.
The fair values of the facilities determined on this basis
are:
2023 Nominal interest Face Carrying Fair
rate value value value Maturity
GBPm GBPm GBPm
Current
Senior loan notes 3.15% 15.0 15.0 15.0 2024
Non-current
Senior loan notes 3.32% - 3.87% 85.0 85.0 85.0 2025-2029
Total interest-bearing
loans 100.0 100.0 100.0
------- --------- -------
2022 Nominal interest Face Carrying Fair
rate value value value Maturity
GBPm GBPm GBPm
Senior loan notes 3.15% - 3.87% 100.0 100.0 100.0 2024-2029
------- --------- -------
Total non-current interest-bearing
loans 100.0 100.0 100.0
------- --------- -------
Financial assets and liabilities by category
2023 2022
Financial assets GBPm GBPm
Sterling cash deposits 162.6 373.6
Trade receivables 60.9 59.1
Amounts due from joint ventures 29.5 27.1
Other receivables 22.7 29.6
------ ---------
Total financial assets at amortised cost 275.7 489.4
Financial assets at fair value through
profit and loss 3.7 4.6
------ ---------
Total financial assets 279.4 494.0
------ ---------
Financial liabilities 2023 2022
GBPm GBPm
Senior loan notes 100.0 100.0
Land payables on contractual terms carrying
interest - 29.8
Land payables on contractual terms carrying
no interest 205.5 168.9
Amounts due to joint ventures 0.7 0.1
Lease liabilities 6.4 3.9
Other trade payables 61.8 41.1
Other payables 3.1 5.5
Accruals 123.9 175.7
------ ---------
Total financial liabilities at amortised
cost 501.4 525.0
------ ---------
25 CONTINGENCIES AND COMMITMENTS
There are performance bonds and other engagements, including
those in respect of joint venture partners, undertaken in the
ordinary course of business. It is impractical to quantify the
financial effect of performance bonds and other arrangements. The
Directors consider the possibility of a cash outflow in settlement
of performance bonds and other arrangements to be remote and
therefore this does not represent a contingent liability for the
Group.
In the ordinary course of business, the Group enters into
certain land purchase contracts with vendors on a conditional
exchange basis. The conditions must be satisfied for the Group to
recognise the land asset and corresponding liabilities within the
consolidated statement of financial position. No land payable in
respect of conditional land acquisitions has been recognised.
The Group provides for all known material legal actions, where
having taken appropriate legal advice as to the likelihood of
success of the actions, it is considered probable that an outflow
of economic resource will be required, and the amount can be
reliably measured. No material contingent liability in respect of
such claims has been recognised since there are no known claims of
this nature.
As a consequence of signing the Developer Remediation Contract
on 13 March 2023, the Group has entered into contractual
commitments with the UK Government to identify and remediate those
buildings it has developed with possible life-critical fire safety
defects. Accordingly, while the Group believes that most
significant liabilities will have been identified through the
process of building owners assessing buildings and applying for BSF
funding and through Crest commissioning assessments to date,
contingent liabilities exist where additional buildings have not
yet been identified which require remediation. Due to the enduring
challenges of developing a reliable estimate of these possible
costs, it is not practicable to disclose an expected range.
The Group is reviewing the recoverability of costs incurred from
third parties where it has a contractual right of recourse. As
reflected in these financial results, the Group has a track record
of successfully obtaining such recoveries, however no contingent
assets have been recognised in these consolidated financial
statements for such items.
26 NET CASH AND LAND CREDITORS
2023 2022
GBPm GBPm
Cash and cash equivalents 162.6 373.6
Non-current Interest-bearing loans
and borrowings (83.5) (97.1)
Current Interest-bearing loans (14.2) -
and borrowings
-------- --------
Net cash 64.9 276.5
Land payables on contractual terms
carrying interest - (29.8)
Land payables on contractual terms
carrying no interest (205.5) (168.9)
-------- --------
Net cash and land creditors (140.6) 77.8
-------- --------
27 RELATED PARTY TRANSACTIONS
Transactions between fellow subsidiaries, which are related
parties, are eliminated on consolidation, as well as transactions
between the Company and its subsidiaries during the current and
prior year.
Transactions between the Group and key management personnel
mainly comprise remuneration which is given in note 6. Detailed
disclosure for Board members is given within the Directors'
Remuneration Report on pages 81 - 98 of our 2023 annual report and
financial statements to be published in February 2024 . There were
no other transactions between the Group and key management
personnel in the year.
Transactions between the Group and the Crest Nicholson Group
Pension and Life Assurance Scheme is given in note 16.
The Company's Directors and Non-Executive Directors have
associations other than with the Company. From time to time the
Group may trade with organisations with which a Director or
Non-Executive Director has an association. Where this occurs, it is
on normal commercial terms and without the direct involvement of
the Director or Non-Executive Director.
The Group had the following transactions/balances with its joint
ventures in the year/at year end:
2023 2022
GBPm GBPm
Interest income on joint venture funding 1.2 2.1
Project management fees recognised 1.9 2.0
Amounts due from joint ventures, net of expected
credit losses 29.5 27.1
Amounts due to joint ventures 0.7 0.1
Funding to joint ventures (13.0) (7.5)
Repayment of funding from joint ventures 11.7 18.8
Dividends received from joint ventures 1.5 2.4
28 GROUP UNDERTAKINGS
In accordance with Section 409 Companies Act 2006, the following
is a list of all the Group's undertakings at 31 October 2023.
Subsidiary undertakings
At 31 October 2023 the Group had an interest in the below
subsidiary undertakings, which are included in the consolidated
financial statements. All subsidiaries were incorporated in England
and Wales.
Voting rights
and shareholding
Registered Active Year end (direct or
Entity name office(1) / dormant date indirect)
Bath Riverside Estate Management
Company Limited 2 Dormant 31 October 100%
----------- ----------- ------------ ------------------
Bath Riverside Liberty Management
Company Limited 2 Dormant 31 October 100%
----------- ----------- ------------ ------------------
Castle Bidco Home Loans Limited 1 Active 31 October 100%
----------- ----------- ------------ ------------------
Brightwells Residential 1 Company
Limited 1 Dormant 31 October 100%
----------- ----------- ------------ ------------------
Bristol Parkway North Limited 1 Dormant 31 October 100%
----------- ----------- ------------ ------------------
Building 7 Harbourside Management
Company Limited 2 Active 31 December 58.33%
----------- ----------- ------------ ------------------
Buildings 3A, 3B & 4 Harbourside
Management Company Limited 2 Dormant 31 December 83.33%
----------- ----------- ------------ ------------------
Clevedon Developments Limited 1 Dormant 31 October 100%
----------- ----------- ------------ ------------------
Clevedon Investment Limited 1 Active 31 October 100%
----------- ----------- ------------ ------------------
CN Finance plc(2) 1 Active 31 October 100%
----------- ----------- ------------ ------------------
CN Nominees Limited 1 Dormant 31 October 100%
----------- ----------- ------------ ------------------
CN Properties Limited 1 Dormant 31 October 100%
----------- ----------- ------------ ------------------
CN Secretarial Limited 1 Dormant 31 October 100%
----------- ----------- ------------ ------------------
CN Shelf 2 LLP 1 Dormant 31 October 100%
----------- ----------- ------------ ------------------
CN Shelf 3 LLP 1 Dormant 31 October 100%
----------- ----------- ------------ ------------------
Crest (Claybury) Limited 1 Dormant 31 October 100%
----------- ----------- ------------ ------------------
Crest Developments Limited 1 Dormant 31 October 100%
----------- ----------- ------------ ------------------
Crest Estates Limited 1 Dormant 31 October 100%
----------- ----------- ------------ ------------------
Crest Homes (Eastern) Limited 1 Dormant 31 October 100%
----------- ----------- ------------ ------------------
Crest Homes (Midlands) Limited 1 Dormant 31 October 100%
----------- ----------- ------------ ------------------
Crest Homes (Nominees) Limited 1 Dormant 31 October 100%
----------- ----------- ------------ ------------------
Crest Homes (Nominees No. 2)
Limited 1 Active 31 October 100%
----------- ----------- ------------ ------------------
Crest Homes (Northern) Limited 1 Dormant 31 October 100%
----------- ----------- ------------ ------------------
Crest Homes (South East) Limited 1 Dormant 31 October 100%
----------- ----------- ------------ ------------------
Crest Homes (South West) Limited 1 Dormant 31 October 100%
----------- ----------- ------------ ------------------
Crest Homes (South) Limited 1 Dormant 31 October 100%
----------- ----------- ------------ ------------------
Crest Homes (Wessex) Limited 1 Dormant 31 October 100%
----------- ----------- ------------ ------------------
Crest Homes (Westerham) Limited 1 Dormant 31 October 100%
----------- ----------- ------------ ------------------
Crest Homes Limited 1 Dormant 31 October 100%
----------- ----------- ------------ ------------------
Crest Manhattan Limited 1 Dormant 31 October 100%
----------- ----------- ------------ ------------------
Crest Nicholson (Bath) Holdings
Limited 1 Dormant 31 October 100%
----------- ----------- ------------ ------------------
Crest Nicholson (Chiltern) Limited 1 Dormant 31 October 100%
----------- ----------- ------------ ------------------
Crest Nicholson (Eastern) Limited 1 Dormant 31 October 100%
----------- ----------- ------------ ------------------
Crest Nicholson (Epsom) Limited 1 Dormant 31 October 100%
----------- ----------- ------------ ------------------
Crest Nicholson (Henley-on-Thames)
Limited 1 Active 31 October 100%
----------- ----------- ------------ ------------------
Crest Nicholson (Highlands Farm)
Limited 1 Dormant 31 October 100%
----------- ----------- ------------ ------------------
Crest Nicholson (Londinium)
Limited 1 Dormant 31 October 100%
----------- ----------- ------------ ------------------
Crest Nicholson (Midlands) Limited 1 Dormant 31 October 100%
----------- ----------- ------------ ------------------
Crest Nicholson (Peckham) Limited 1 Active 31 October 100%
----------- ----------- ------------ ------------------
Crest Nicholson (South East)
Limited 1 Dormant 31 October 100%
----------- ----------- ------------ ------------------
Crest Nicholson (South West)
Limited 1 Dormant 31 October 100%
----------- ----------- ------------ ------------------
Crest Nicholson (South) Limited 1 Dormant 31 October 100%
----------- ----------- ------------ ------------------
Crest Nicholson (Stotfold) Limited 1 Active 31 October 100%
----------- ----------- ------------ ------------------
Crest Nicholson Developments
(Chertsey) Limited 1 Active 31 October 100%
----------- ----------- ------------ ------------------
Crest Nicholson Operations Limited 1 Active 31 October 100%
----------- ----------- ------------ ------------------
Crest Nicholson Pension Trustee
Limited 1 Dormant 31 January 100%
----------- ----------- ------------ ------------------
Crest Nicholson plc 1 Active 31 October 100%
----------- ----------- ------------ ------------------
Crest Nicholson Projects Limited 1 Dormant 31 October 100%
----------- ----------- ------------ ------------------
Crest Nicholson Properties Limited 1 Dormant 31 October 100%
----------- ----------- ------------ ------------------
Crest Nicholson Regeneration
Limited 1 Dormant 31 October 100%
----------- ----------- ------------ ------------------
Crest Nicholson Residential
(London) Limited 1 Dormant 31 October 100%
----------- ----------- ------------ ------------------
Crest Nicholson Residential
(Midlands) Limited 1 Dormant 31 October 100%
----------- ----------- ------------ ------------------
Crest Nicholson Residential
(South East) Limited 1 Dormant 31 October 100%
----------- ----------- ------------ ------------------
Crest Nicholson Residential
(South) Limited 1 Dormant 31 October 100%
----------- ----------- ------------ ------------------
Crest Nicholson Residential
Limited 1 Dormant 31 October 100%
----------- ----------- ------------ ------------------
Crest Nicholson (Wheatley) LLP 1 Active 31 October 100%
----------- ----------- ------------ ------------------
Crest Partnership Homes Limited 1 Dormant 31 October 100%
----------- ----------- ------------ ------------------
Crest Strategic Projects Limited 1 Dormant 31 October 100%
----------- ----------- ------------ ------------------
Eastern Perspective Management
Company Limited 1 Dormant 31 October 100%
----------- ----------- ------------ ------------------
Essex Brewery (Walthamstow)
LLP 1 Dormant 31 October 100%
----------- ----------- ------------ ------------------
Harbourside Leisure Management
Company Limited 1 Active 30 December 71.43%
----------- ----------- ------------ ------------------
Landscape Estates Limited 1 Dormant 31 October 100%
----------- ----------- ------------ ------------------
Mertonplace Limited 1 Dormant 31 October 100%
----------- ----------- ------------ ------------------
Nicholson Estates (Century House)
Limited 1 Dormant 31 October 100%
----------- ----------- ------------ ------------------
Park Central Management (Central
Plaza) Limited 1 Dormant 31 October 100%
----------- ----------- ------------ ------------------
Ellis Mews (Park Central) Management
Limited 1 Active 31 October 100%
----------- ----------- ------------ ------------------
Park Central Management (Zone
11) Limited 1 Dormant 31 October 100%
----------- ----------- ------------ ------------------
Park Central Management (Zone
12) Limited 1 Dormant 31 October 100%
----------- ----------- ------------ ------------------
Park Central Management (Zone
1A North) Limited 1 Dormant 31 October 100%
----------- ----------- ------------ ------------------
Park Central Management (Zone
1A South) Limited 1 Dormant 31 October 100%
----------- ----------- ------------ ------------------
Park Central Management (Zone
1B) Limited 1 Dormant 31 October 100%
----------- ----------- ------------ ------------------
Park Central Management (Zone
3/1) Limited 1 Dormant 31 October 100%
----------- ----------- ------------ ------------------
Park Central Management (Zone
3/2) Limited 1 Dormant 31 October 100%
----------- ----------- ------------ ------------------
Park Central Management (Zone
3/3) Limited 1 Dormant 31 October 100%
----------- ----------- ------------ ------------------
Park Central Management (Zone
3/4) Limited 1 Dormant 31 October 100%
----------- ----------- ------------ ------------------
Park Central Management (Zone
4/41 & 42) Limited 1 Dormant 31 October 100%
----------- ----------- ------------ ------------------
Park Central Management (Zone
4/43/44) Limited 1 Dormant 31 October 100%
----------- ----------- ------------ ------------------
Park Central Management (Zone
5/53) Limited 1 Dormant 31 October 100%
----------- ----------- ------------ ------------------
Park Central Management (Zone
5/54) Limited 1 Dormant 31 October 100%
----------- ----------- ------------ ------------------
Park Central Management (Zone
5/55) Limited 1 Dormant 31 October 100%
----------- ----------- ------------ ------------------
Park Central Management (Zone
6/61-64) Limited 1 Dormant 31 October 100%
----------- ----------- ------------ ------------------
Park Central Management (Zone
7/9) Limited 1 Dormant 31 October 100%
----------- ----------- ------------ ------------------
Park Central Management (Zone
8) Limited 1 Dormant 31 October 100%
----------- ----------- ------------ ------------------
Park Central Management (Zone
9/91) Limited 1 Dormant 31 January 100%
----------- ----------- ------------ ------------------
Park West Management Services
Limited 1 Active 29 March 62.00%
----------- ----------- ------------ ------------------
(1) 1: 500 Dashwood Lang Road, Bourne Business Park, Addlestone,
Surrey KT15 2HJ.
2: Unit 2 & 3 Beech Court, Wokingham Road, Hurst, Reading
RG10 0RU.
(2) CN Finance plc is the only direct holding of Crest Nicholson
Holdings plc.
Subsidiary audit exemption
The following subsidiaries have taken advantage of an exemption
from audit under section 479A of the Companies Act 2006. The parent
of the subsidiaries, Crest Nicholson plc, has provided a statutory
guarantee for any outstanding liabilities of these subsidiaries.
All subsidiary undertakings have been included in the consolidated
financial statements of Crest Nicholson Holdings plc as at 31
October 2023.
Clevedon Investment Limited (00454327) Crest Homes (Nominees No.
2) Limited (02213319)
Crest Nicholson (Henley-on-Thames) Limited (03828831) Crest
Nicholson (Peckham) Limited (07296143)
Crest Nicholson (Stotfold) Limited (08774274) Crest Nicholson
(Bath) Holdings Limited (05235961)
Crest Nicholson Developments (Chertsey) Limited (04707982) Crest
Homes (Nominees) Limited (01715768)
Crest Nicholson Residential Limited (00714425)
Joint venture undertakings
At 31 October 2023 the Group had an interest in the following
joint venture undertakings which are equity accounted within the
consolidated financial statements. The principal activity of all
undertakings is that of residential development. All joint ventures
were incorporated in England and Wales.
Voting rights
and shareholding
Registered Active Year end (direct or
Entity name office(1) / dormant date indirect)
Material joint ventures
Crest A2D (Walton Court) LLP 1 Active 31 March 50%
Elmsbrook (Crest A2D) LLP 4 Active 31 March 50%
Crest Sovereign (Brooklands)
LLP 3 Active 31 October 50%
Crest Peabody (Turweston) LLP 1 Active 31 May 50%
Other joint ventures not material
to the Group
Crest/Vistry (Epsom) LLP 1 Active 31 October 50%
Crest Nicholson Bioregional
Quintain LLP 1 Active 31 October 50%
English Land Banking Company
Limited 1 Active 31 October 50%
Haydon Development Company
Limited 2 Active 30 April 21.36%
North Swindon Development Company
Limited 2 Active 31 December 32.64%
(1) 1: 500 Dashwood Lang Road, Bourne Business Park, Addlestone,
Surrey KT15 2HJ.
2: 6 Drakes Meadow, Penny Lane, Swindon, Wiltshire SN3 3LL.
3: Sovereign House, Basing View, Basingstoke RG21 4FA.
4: The Point, 37 North Wharf Road, London W2 1BD.
Joint operations
The Group is party to a joint unincorporated arrangement with
Linden Homes Limited, the purpose of which was to acquire, and
develop, a site in Hemel Hempstead, Hertfordshire. The two parties
are jointly responsible for the control and management of the
site's development, with each party funding 50% of the cost of the
land acquisition and development of the site, in return for 50% of
the returns. As such this arrangement was designated as a joint
operation.
The Group is party to a joint unincorporated arrangement with
CGNU Life Assurance Limited, the purpose of which is to acquire,
and develop, a site in Chertsey, Surrey. The two parties are
jointly responsible for the control and management of the site's
development, with each party funding 50% of the cost of the land
acquisition and development of the site, in return for 50% of the
returns. As such this arrangement has been designated as a joint
operation.
The Group is party to a joint arrangement with Passion Property
Group Limited, the purpose of which was to develop a site in
London. The development was completed in 2014 and there are no
material balances in the Group financial statements relating to
this joint arrangement as at 31 October 2023. The two parties were
jointly responsible for the control and management of the site's
development, with each party having prescribed funding obligations
and returns. As such this arrangement has been designated as a
joint operation.
In line with the Group's accounting policies, the Group has
recognised its share of the jointly controlled assets and
liabilities, and income and expenditure, in relation to these joint
arrangements on a line-by-line basis in the consolidated statement
of financial position and consolidated income statement as there is
no legal entity in place and the arrangements as structured such
that the Group has a direct interest in the underlying assets and
liabilities of each arrangement.
Crest Nicholson Employee Share Ownership Trust
The Group operates the Crest Nicholson ESOT, which is used to
satisfy awards granted under the Group's share incentive schemes,
shares are allotted to the Trust or the Trust is funded to acquire
shares in the open market. The ESOT falls within the scope of IFRS
10: Consolidated Financial Statements, and is consolidated within
the Group financial statements, as the Group is considered to have
control over the ESOT.
As at 31 October 2023
2023 2022
Note GBPm GBPm
ASSETS
Non-current assets
Investments 4 1.6 2.6
Current assets
Trade and other receivables 5 186.4 222.4
------- -------
TOTAL ASSETS 188.0 225.0
------- -------
NET ASSETS 188.0 225.0
------- -------
SHAREHOLDERS' EQUITY
Share capital 6 12.8 12.8
Share premium account 6 74.2 74.2
Retained earnings:
At 1 November 138.0 166.1
Profit for the year 8.6 10.5
Other changes in retained earnings (45.6) (38.6)
------- -------
At 31 October 101.0 138.0
------- -------
TOTAL SHAREHOLDERS' EQUITY 188.0 225.0
------- -------
The Company recorded a profit for the financial year of GBP8.6m
(2022: GBP10.5m).
The notes below form part of these financial statements.
The financial statements below were approved by the Board of
Directors on 23 January 2024.
On behalf of the Board
Peter Truscott Bill Floydd
Director Director
CREST NICHOLSON HOLDINGS PLC
COMPANY STATEMENT OF CHANGES IN EQUITY
For the year ended 31 October 2023
Share
Share premium Retained Total
capital account earnings equity
Note GBPm GBPm GBPm GBPm
Balance at 1 November 2021 12.8 74.2 166.1 253.1
Profit for the financial year and
total comprehensive income - - 10.5 10.5
Transactions with shareholders
Dividends paid - - (38.5) (38.5)
Exercise of share options through
employee share ownership trust 4 - - (0.1) (0.1)
Balance at 31 October 2022 12.8 74.2 138.0 225.0
Profit for the financial year and
total comprehensive income - - 8.6 8.6
Transactions with shareholders
Dividends paid - - (43.6) (43.6)
Exercise of share options through
employee share ownership trust 4 - - (2.9) (2.9)
Net proceeds from the issue of shares
and exercise of share options - - 0.9 0.9
Balance at 31 October 2023 12.8 74.2 101.0 188.0
--------- --------- ---------- --------
CREST NICHOLSON HOLDINGS PLC
NOTES TO THE COMPANY FINANCIAL STATEMENTS
1 ACCOUNTING POLICIES
Basis of preparation
Crest Nicholson Holdings plc (the Company) is a public company
limited by shares, incorporated, listed and domiciled in England
and Wales. The address of the registered office is 500 Dashwood
Lang Road, Bourne Business Park, Addlestone, Surrey KT15 2HJ. The
Company financial statements have been prepared and approved by the
Directors in accordance with Financial Reporting Standard 101
Reduced Disclosure Framework (FRS 101), in accordance with the
Companies Act 2006 as applicable to companies using FRS 101, and
have been prepared on the historical cost basis. The preparation of
financial statements in conformity with FRS 101 requires the
Directors to make assumptions and judgements that affect the
application of policies and reported amounts within the financial
statements. Assumptions and judgements are based on experience and
other factors that the Directors consider reasonable under the
circumstances. Actual results may differ from these estimates.
The financial statements are presented in pounds sterling and
amounts stated are denominated in millions (GBPm), unless otherwise
stated. The accounting policies have been applied consistently in
dealing with items which are considered material.
These financial statements present information about the Company
as an individual undertaking and not about its group. Under Section
408 of the Companies Act 2006 the Company is exempt from the
requirement to present its own profit and loss account.
As outlined in FRS 101 paragraph 8(a) the Company is exempt from
the requirements of paragraphs 45(b) and 46 to 52 of IFRS 2
Share-based Payments. This exemption has been taken in the
preparation of these financial statements.
As outlined in FRS 101 paragraph 8(d-e) the Company is exempt
from the requirements of IFRS 7 Financial Instruments: Disclosures,
and from the requirements of paragraphs 91 to 99 of IFRS 13 Fair
Value Measurement. These exemptions have been taken in the
preparation of these financial statements.
As outlined in FRS 101 paragraph 8(h) the Company is exempt from
the requirement to prepare a cash flow statement on the grounds
that a parent undertaking includes the Company in its own published
consolidated financial statements. This exemption has been taken in
the preparation of these financial statements.
As outlined in FRS 101 paragraph 8(i) the Company is exempt from
the requirement to provide information about the impact of IFRSs
that have been issued but are not yet effective. This exemption has
been taken in the preparation of these financial statements.
Under FRS 101 paragraph 8(j) the Company is exempt from the
requirement to disclose related party transactions with its
subsidiary undertakings on the grounds that they are wholly owned
subsidiary undertakings of Crest Nicholson Holdings plc. This
exemption has been taken in the preparation of these financial
statements.
Going concern
The Directors reviewed detailed cash flows and financial
forecast for the period up to April 2025, in line the those
modelled for the Group's going concern assessment. The Company is
reliant upon the performance of the Group as a whole to meet its
liabilities. Throughout this review period the Company is forecast
to be able to meet its liabilities as they fall due. Therefore,
having assessed the principal risks and all other relevant matters,
the Directors consider it appropriate to adopt the going concern
basis of accounting in preparing the financial statements of the
Company. The Group's going concern assessment can be found in note
1 of the consolidated financial statements.
Adoption of new and revised standards
There were no new standards, amendments or interpretations that
were adopted by the Company and effective for the first time for
the financial year beginning 1 November 2022 that have had a
material impact on the Company.
The principal accounting policies set out below have, unless
otherwise stated, been applied consistently to all years presented
in these financial statements.
Share-based payments
The Company issues equity-settled share-based payments to
certain employees of its subsidiaries. Equity-settled share-based
payments are measured at fair value at the grant date, and charged
to the income statement on a straight-line basis over the vesting
period, based on the estimate of shares that will vest. The cost of
equity-settled share-based payments granted to employees of
subsidiary companies is borne by the employing company.
Taxation
Income tax comprises current tax and deferred tax. Income tax is
recognised in the Company's income statement except to the extent
that it relates to items recognised in other comprehensive income,
in which case it is also recognised in other comprehensive
income.
Current tax is the expected tax payable on taxable profit for
the year and any adjustment to tax payable in respect of previous
years. Taxable profit is profit before tax per the Company's income
statement after adjusting for income and expenditure that is not
subject to tax, and for items that are subject to tax in other
accounting periods. The Company's liability for current tax is
calculated using tax rates that have been enacted or substantively
enacted by the statement of financial position date. Where
uncertain tax liabilities exist, the liability recognised is
assessed as the amount that is probable to be payable.
Deferred tax is provided in full on temporary differences
between the carrying amounts of assets and liabilities in the
financial statements and the corresponding tax bases used in the
computation of taxable profit. Deferred tax assets are recognised
to the extent that it is probable that taxable profits will be
available against which deductible temporary differences can be
utilised. Deferred tax is calculated using tax rates that have been
substantively enacted by the statement of financial position
date.
Dividends
Final and interim dividend distributions to the Company's
shareholders are recorded in the Company's financial statements in
the earlier of the period in which they are approved by the
Company's shareholders, or paid.
Investments
Investments relate to Company contributions to the Crest
Nicholson ESOT. The ESOT will use the contribution to acquire
Company ordinary shares in the market in order to satisfy share
options under the Company's share incentive schemes.
Financial assets
Financial assets are initially recognised at fair value and
subsequently classified into one of the following measurement
categories:
-- At amortised cost
-- Subsequently at FVTPL
-- Subsequently at FVOCI.
The classification of financial assets depends on the Company's
business model for managing the asset and the contractual terms of
the cash flows. Assets that are held for the collection of
contractual cash flows that represent solely payments of principal
and interest are measured at amortised cost, with any interest
income recognised in the income statement using the effective
interest rate method. Financial assets that do not meet the
criteria to be measured at amortised cost are classified by the
Company as measured at FVTPL. Fair value gains and losses on
financial assets measured at FVTPL are recognised in the income
statement and presented within administrative expenses. The Company
currently has no financial assets measured at FVOCI.
Trade and other receivables
Trade and other receivables are recognised initially at fair
value and subsequently measured at amortised cost, using the
effective interest method, less provision for impairment. A
provision for impairment of trade receivables is established based
on an expected credit loss model applying the simplified approach,
which uses a lifetime expected loss allowance for all trade
receivables. The amount of the loss is recognised in the income
statement.
Financial liabilities
Financial liabilities are initially recognised at fair value and
subsequently classified into one of the following measurement
categories:
-- At amortised cost
-- Subsequently at FVTPL.
Non-derivative financial liabilities are measured at FVTPL when
they are considered held for trading or designated as such on
initial recognition. The Company has no non-derivative financial
liabilities measured at FVTPL.
Own shares held by ESOT
Transactions of the Company sponsored ESOT are included in both
the Group financial statements and the Company's own financial
statements. The purchase of shares in the Company by the ESOT are
charged directly to equity.
Audit fee
Auditor's remuneration for audit of these financial statements
of GBP30,000 (2022: GBP27,500) was met by Crest Nicholson plc. No
disclosure of other non-audit services has been made as this is
included within note 5 of the consolidated financial
statements.
Critical accounting estimates and judgements
The preparation of the Company financial statements under FRS
101 requires the Directors to make estimates and assumptions that
affect the application of policies and reported amounts of assets
and liabilities, income and expenses and related disclosures.
In applying the Company's accounting policies, the Directors
have made no individual judgements that have a significant impact
on the financial statements.
Estimates and associated assumptions affecting the financial
statements are based on historical experience and various other
factors that are believed to be reasonable under the circumstances.
The estimates and underlying assumptions are reviewed on an ongoing
basis. Changes in accounting estimates may be necessary if there
are changes in the circumstances on which the estimate was based or
as a result of new information. Revisions to accounting estimates
are recognised in the year in which the estimate is revised if the
revision affects only that year, or in the year of revision and
future years if the revision affects both current and future years.
The Directors do not consider there are any significant sources of
estimation uncertainty that have a risk of causing a material
adjustment to the carrying value of assets and liabilities of the
Company.
2 DIRECTORS AND EMPLOYEES
The Company had no employees during either year. Details of
Directors' emoluments, which were paid by another Group company,
are set out in the Directors' Remuneration Report on pages 81 - 98
of the 2023 annual report and financial statements to be published
in February 2024 .
3 DIVIDS
Details of the dividends recognised as distributions to equity
shareholders in the year and those proposed after the statement of
financial position date are shown in note 9 of the consolidated
financial statements.
4 INVESTMENTS
2023 2022
GBPm GBPm
Investments in shares of subsidiary undertaking at cost at beginning of the year 2.6 1.6
Additions 1.9 1.1
Disposals (2.9) (0.1)
Investments in shares of subsidiary undertaking at cost at end of the year 1.6 2.6
------ ------
Additions and disposals in the year relate to Company
contributions/utilisation to/from the Trust.
The Directors believe that the carrying value of the investments
is supported by their underlying assets.
5 TRADE AND OTHER RECEIVABLES
2023 2022
GBPm GBPm
Amounts due from Group undertakings 186.4 222.4
------ ------
Amounts due from Group undertakings are unsecured, repayable on
demand and carry an interest rate of 5.0% (2022: 5.0%).
Amounts due from Group undertakings are stated after an
allowance of GBPnil has been made (2022: GBPnil) in respect of
expected credit losses. GBPnil (2022: GBPnil) provision was made
during the year, GBPnil (2022: GBPnil) was utilised, and GBPnil
(2022: GBPnil) provision was released during the year.
6 SHARE CAPITAL
The Company share capital is disclosed in note 23 of the
consolidated financial statements.
7 CONTINGENCIES AND COMMITMENTS
There are performance bonds and other arrangements, including
those in respect of joint venture partners, undertaken in the
ordinary course of business. It is impractical to quantify the
financial effect of performance bonds and other arrangements. The
Directors consider the possibility of a cash outflow in settlement
of performance bonds and other arrangements to be remote and
therefore this does not represent a contingent liability for the
Company.
In addition, the Company is required from time to time to act as
guarantor for the performance by subsidiary undertakings of
contracts entered into in the normal course of their business and
typically provide that the Company will ensure that the obligations
of the subsidiary are carried out or met in the unlikely event that
any subsidiary default occurs. The Company considers the likelihood
of an outflow of cash under these arrangements to be remote and
therefore this does not represent a contingent liability for the
Company.
8 GROUP UNDERTAKINGS
A list of all the Group's undertakings at 31 October 2023 is
given in note 28 of the consolidated financial statements.
CREST NICHOLSON HOLDINGS PLC
ALTERNATIVE PERFORMANCE MEASURES (UNAUDITED)
The Group uses a number of APM which are not defined within
IFRS. The Directors use the APM, along with IFRS measures, to
assess the operational performance of the Group as detailed in the
Strategic Report on pages 1 - 52 of the 2023 annual report and
financial statements to be published in February 2024 , and above.
Definitions and reconciliations of the financial APM used compared
to IFRS measures, are included below:
Sales
The Group uses sales as a core management measure to reflect the
full extent of its business operations and responsibilities. Sales
is a combination of statutory revenue as per the consolidated
income statement and the Group's share of revenue earned by joint
ventures, as detailed in the below table:
2023 2022
GBPm GBPm
Revenue 657.5 913.6
Group's share of joint venture
revenue (note 14) 34.6 42.2
Sales 692.1 955.8
------ ------
Return on capital employed
The Group uses ROCE as a core management measure to reflect the
profitability and efficiency with which capital is employed. ROCE
is calculated as adjusted operating profit before joint ventures
divided by average capital employed (capital employed = equity plus
net borrowing or less net cash), as presented below. The Group has
long-term performance measures linked to ROCE. ROCE achieved by the
Group in the year reduced to 6.3% (2022: increased to 22.4%).
2023 2022
GBP
Adjusted operating profit m 44.2 140.9
Average of opening and closing GBP
capital employed m 699.0 627.7
ROCE % 6.3 22.4
Capital employed 2023 2022 2021
GBP
Equity shareholders' funds m 856.3 883.1 901.6
GBP
Net cash (note 19) m (64.9) (276.5) (252.8)
------- -------- --------
GBP
Closing capital employed m 791.4 606.6 648.8
------- -------- --------
Land creditors as a percentage of net assets
The Group uses land creditors as a percentage of net assets as a
core management measure to ensure that the Group is maintaining a
robust financial position when entering into future land
commitments. Land creditors as a percentage of net assets is
calculated as land creditors divided by net assets, as presented
below. Land creditors as a percentage of net assets has increased
in the year to 24.0% (2022: reduced to 22.5%).
2023 2022
GBP
Land creditors (note 21) m 205.5 198.7
GBP
Net assets m 856.3 883.1
Land creditors as a percentage
of net assets % 24.0 22.5
Net cash
Net cash is cash and cash equivalents plus non-current and
current interest-bearing loans and borrowings. Net cash illustrates
the Group's overall liquidity position and general financial
resilience. Net cash has reduced in the year to GBP64.9m from
GBP276.5m in 2022.
2023 2022
GBPm GBPm
Cash and cash equivalents 162.6 373.6
Interest-bearing loans and
borrowings (97.7) (97.1)
------- -------
Net cash 64.9 276.5
------- -------
Adjusted performance metrics
Adjusted performance metrics as shown below comprise statutory
metrics adjusted for the exceptional items as presented in note 4
of the consolidated financial statements. The exceptional items
have a material impact to reported performance and arise from
recent, unforeseen events. As such, the Directors' consider these
adjusted performance metrics reflect a more accurate view of its
core operations and business performance. EBIT margin for share
award performance conditions is equivalent to operating profit
margin.
Exceptional
Year ended 31 October 2023 Statutory items Adjusted
Gross profit GBPm 86.3 14.3 100.6
Gross profit margin % 13.1 2.2 15.3
Operating profit GBPm 29.9 14.3 44.2
Operating profit margin % 4.5 2.2 6.7
Net finance expense GBPm (10.1) 4.6 (5.5)
Share of post-tax profit/(loss)
of joint ventures using the equity
method GBPm 3.3 (0.6) 2.7
Profit before tax GBPm 23.1 18.3 41.4
Income tax expense GBPm (5.2) (4.8) (10.0)
Profit after tax GBPm 17.9 13.5 31.4
Basic earnings per share Pence 7.0 5.3 12.3
Diluted earnings per share Pence 7.0 5.2 12.2
Exceptional
Year ended 31 October 2022 Statutory items Adjusted
Gross profit GBPm 91.8 102.5 194.3
Gross profit margin % 10.0 11.3 21.3
Operating profit GBPm 38.4 102.5 140.9
Operating profit margin % 4.2 11.2 15.4
Net finance expense GBPm (8.1) 1.0 (7.1)
Share of post-tax profit/(loss)
of joint ventures using the equity
method GBPm 2.5 1.5 4.0
Profit before tax GBPm 32.8 105.0 137.8
Income tax expense GBPm (6.4) (22.4) (28.8)
Profit after tax GBPm 26.4 82.6 109.0
Basic earnings per share Pence 10.3 32.2 42.5
Diluted earnings per share Pence 10.2 32.1 42.3
CREST NICHOLSON HOLDINGS PLC
HISTORICAL SUMMARY (UNAUDITED)
For the year ended/as at 31 October 2023
Note 2023(1) 2022(1) 2021(2) 2020(3) 2019(4)
Consolidated income statement
Revenue GBPm 657.5 913.6 786.6 677.9 1,086.4
Gross profit GBPm 100.6 194.3 166.7 107.7 201.9
Gross profit margin % 15.3 21.3 21.2 15.9 18.6
Net administrative expenses GBPm (55.8) (51.1) (51.1) (50.3) (65.5)
Net impairment losses on financial
assets GBPm (0.6) (2.3) (1.0) (0.3) (3.4)
Operating profit before joint
ventures GBPm 44.2 140.9 114.6 57.1 133.0
Operating profit before joint
ventures margin % 6.7 15.4 14.6 8.4 12.2
Share of post-tax profit/(loss)
of joint ventures GBPm 2.7 4.0 1.7 (0.5) (0.9)
Operating profit after joint
ventures GBPm 46.9 144.9 116.3 56.6 132.1
Operating profit after joint
ventures margin % 7.1 15.9 14.8 8.3 12.2
Net finance expense GBPm (5.5) (7.1) (9.1) (10.7) (11.0)
Profit before taxation GBPm 41.4 137.8 107.2 45.9 121.1
Income tax expense GBPm (10.0) (28.8) (19.9) (8.5) (23.7)
Profit after taxation attributable
to equity shareholders GBPm 31.4 109.0 87.3 37.4 97.4
Basic earnings per share Pence 12.3 42.5 34.0 14.6 38.0
Consolidated statement of financial
position
Equity shareholders' funds 1 GBPm 856.3 883.1 901.6 825.3 854.4
Net cash 2 GBPm (64.9) (276.5) (252.8) (142.2) (37.2)
Capital employed closing GBPm 791.4 606.6 648.8 683.1 817.2
Gearing 3% (8.2) (45.6) (39.0) (20.8) (4.6)
Land creditors GBPm 205.5 198.7 222.9 205.7 216.5
Net (cash)/debt and land creditors 4 GBPm 140.6 (77.8) (29.9) 63.5 179.3
Return on average capital employed 5% 6.3 22.4 17.2 7.6 15.9
Return on average equity 6% 3.6 12.2 10.1 4.5 11.3
Housing
Home completions 7 Units 2,020 2,734 2,407 2,247 2,912
Average selling price - open
market 8 GBP000 406 388 359 336 388
Short-term land 9 Units 14,922 14,250 14,677 14,991 16,960
Strategic land 10 Units 18,830 22,450 22,308 22,724 20,169
Total short-term and strategic
land Units 33,752 36,700 36,985 37,715 37,129
Land pipeline gross development
value 11 GBPm 12,163 12,111 11,834 11,360 12,137
(1) Consolidated income statement statistics, return on average
capital employed and return on average equity are presented before
exceptional items as presented in note 4 of the 2023 consolidated
financial statements.
(2) Consolidated income statement statistics, return on average
capital employed and return on average equity are presented before
exceptional items relating to net combustible materials provision
charge GBP28.8m, inventory impairment credit GBP8.0m, and finance
expense credit GBP0.5m.
(3) Consolidated income statement statistics, return on average
capital employed and return on average equity are presented before
exceptional items relating to combustible materials provision
GBP0.6m, inventory impairment GBP43.7m, restructuring costs GBP7.5m
and impairment losses on financial assets GBP7.6m. 2020 equity
shareholders' funds, capital employed closing, gearing and return
on average equity have been restated to reflect the change in
accounting policy on land options.
(4) Consolidated income statement statistics, return on average
capital employed and return on average equity are presented before
GBP18.4m exceptional item relating to combustible materials
provision. Not restated to reflect the change in accounting policy
on land options from 1 November 2020.
Note
1 Equity shareholders' funds = Group total equity (share capital
plus share premium plus retained earnings).
2 Net (cash)/borrowings = Cash and cash equivalents plus
non-current and current interest-bearing loans and borrowings.
3 Gearing = Net (cash)/borrowings divided by capital employed closing.
4 Net (cash)/debt and land creditors = land creditors less net cash or add net borrowings.
5 Return on capital employed = adjusted operating profit before
joint ventures divided by average capital employed (capital
employed = equity shareholders' funds plus net borrowing or less
net cash).
6 Return on average equity = adjusted profit after taxation
attributable to equity shareholders divided by average equity
shareholders' funds.
7 Units completed = Open market and housing association homes
recognised in the year. In 2023, 2022 and 2021 units completed
includes joint ventures units at full unit count and is stated on
an equivalent unit basis. This equivalent unit basis allocates a
proportion of the unit count for a deal to the land sale element
where the deal contains a land sale. 2019 to 2020 units completed
includes the Group's share of joint venture units and no equivalent
unit allocation to land sale elements.
8 Average selling price - open market = Revenue recognised in
the year on open market homes (including the Group's share of
revenue recognised in the year on open market homes by joint
ventures), divided by open market home completions (adjusted to
reflect the Group's share of joint venture units).
9 Short-term land = Land controlled by the Group with a minimum
resolution to grant planning permission.
10 Strategic land = Longer-term land controlled by the Group
without planning permission.
11 Land pipeline gross development value = Forecast development revenue of the land pipeline.
Glossary
Act The Companies Act 2006
AGM Annual General Meeting
APM Alternative performance measures
AQIs Audit Quality Indicators
BEIS Department for Business, Energy and Industrial
Strategy
BSF Building Safety Fund
Code UK Corporate Governance Code
Crest Crest Nicholson Holdings plc and its undertakings
CVR Cost and Value Reconciliation
DBP Deferred Bonus Plan
D&I Diversity & Inclusion
EBIT Earnings before interest and taxes
ELT Executive Leadership Team
ERP Enterprise resource planning
ESG Environment, Social & Governance
ESOT or Trust Employee share ownership trust
FRC Financial Reporting Council
FHS Future Homes Standard
FVTPL Fair value through profit or loss
FVOCI Fair value through other comprehensive income
GDV Gross Development Value
GHG Greenhouse gas
HBF Home Builders Federation
IFRS International Financial Reporting Standards
IPPF International Professional Practice Framework
KPI Key Performance Indicator
LTIP Long-Term Incentive Plan
NHBC National House Building Council
NHQC New Homes Quality Code
Notice The Notice of the AGM
NRV Net realised value
PBT Profit before tax
PSL Partnerships and Strategic Land
Pledge Building Safety Pledge
PRS Private Rented Sector
OF Operational Framework
RAMS Risk Assessment and Method Statements
RCF Revolving Credit Facility
ROCE Return on capital employed
RPDT Residential property developer tax
RPs Registered Providers
SaaS Software as a Service
SAYE Save as you earn/Sharesave
SBTi Science Based Targets Initiative
SHE Safety, Health & Environment
SPOW Sales per outlet per week
SuDS Sustainable drainage systems
Supplier Sustainable Procurement Policy and Supply Chain
Code Code of Conduct
TCFD Task Force on Climate-related Financial Disclosures
tCO2e Tonnes of carbon dioxide equivalent
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January 23, 2024 02:00 ET (07:00 GMT)
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