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Crest Nicholson HoldingsAnnouncement

13/02/2017 12:00

RNS Number : 7393W
Crest Nicholson Holdings PLC
13 February 2017
Crest Nicholson Holdings plc
LEI: 213800ROIFXRRRKVQD25
Crest Nicholson Holdings plc ("the Company")
2016 ANNUAL INTEGRATED REPORT & NOTICE OF ANNUAL GENERAL MEETING
The Company released its preliminary results announcement for the year ended 31 October 2016 on 24 January 2017 and has today published its 2016 Annual Integrated Report for the same period, and Notice of the 2017 Annual General Meeting which is to be held on 23 March 2017. 
These documents will shortly be available for inspection at the National Storage Mechanism which is located at http://www.morningstar.co.uk/uk/NSM. Hard copy versions have been posted to shareholders who have elected to receive them in paper form.
The Notice of Annual General Meeting and Annual Integrated Report are also available to view or download in pdf format from the Company's website at www.crestnicholson.com/investor-relations. 
The Company's financial statements and extracts of the Strategic Report were included in the Company's preliminary results announcement. That information together with the Appendix to this announcement, which contains additional information that has been extracted from the Annual Integrated Report for the year ended 31 October 2016, constitute the material required to be communicated in unedited full text for the purposes of compliance with Disclosure Guidance and Transparency Rule 6.3.5. Page numbers and cross references in the extracted information refer to page numbers and cross references in the Annual Integrated Report. 
For further information, please contact:
Kevin Maguire
Company Secretary
Crest Nicholson Holdings plc
+44 (0) 1932 580 555
13 February 2017
Appendix
Risk area
Impact
Controls and mitigation
Adverse macro-economic climate, caused by uncertainty following the UK vote to leave the EU
General economic slowdown with wider global growth issues (especially China and the Eurozone)
Uncertainty arising from policy, law or tax changes after the EU vote and government changes could affect both consumer demand and regulations in the market
Higher unemployment or fear of unemployment could undermine consumer confidence and reduce enthusiasm for purchasing a new home or the ability to secure a mortgage
Maintain review of economic and political environment and consider potential responses to changes in trading conditions
Consider exposure to specific areas (e.g. London) and broaden portfolio in more affordable areas
Loss of income at housing associations due to budget changes to rents
Returns on our strategic land holdings could be undermined; site starts could be delayed
Cascade s106 mechanisms to restore viability and continue to develop a balanced portfolio
Pressure on cash headroom and generation due to:
potential for delayed receipts in short term due to uncertainty over the UK leaving the EU; commitments to land and build obligations made ahead of certainty in revenue; high work-in-progress costs for new sites
Cash resources may be over-committed, leading to business disruption, reputational issues, covenant
breaches, dividend loss and stakeholder dissatisfaction
Robust cash management and borrowing/spending controls
Access to funding and use of alternative payment mechanisms
PRS offering potential for early cash generation
Build cost inflation
Increased build costs absorb
or exceed higher sales prices
Margin squeeze disappoints
Investors
Delivery uncertainty, as suppliers seek to 'price in' sales price inflation
Use alternative suppliers and
production methods
Robust contract arrangements to control costs
Leverage volume through long-term partnerships with strategic suppliers
Rapid and extensive changes to planning system and changes in political priorities combined with under resourcing in planning departments produce uncertainty, delays and potential challenges to viable development
Delays in obtaining planning consents and operational starts
Land becomes unviable due to increased planning cost burden
Work closely with key regulators and national/local
decision makers
Regularly review the Strategic Land Portfolio to accurately forecast operational starts
Seek prior planning approval on significant projects 
Influence new CIL viability testing and appraise costs
Costs not adequately
controlled and managed;
unforeseen cost increases
Unreliable forecasting and sudden cost changes can erode margins
Pressure to maintain margins
and control costs can impact
on product quality
Regular cost forecast reviews
and increased standardisation in cost reporting
Early budget uploads and greater adherence to Agresso procedures
Quality standards set, met and reviewed
Cyber security breach
Theft of personal and/or business data
Subject to external financial crime
Disruption to IT services, affecting business operation
Robust virus protection and
internet security 
Web checking of internet
traffic
Robust server set-up and
annual cyber security breach tests
Education of employees on
cyber security vulnerabilities
and encryption of data
The Government's new
Starter Homes policy (as
currently drafted)
Planning delays are likely
as local authorities balance
affordable provision
and viability
Distortions in sales activity
as purchasers seek to
secure windfalls resulting
from policy
Cash flow and ROCE
implications of reduced
upfront affordable housing
funding; increased macroeconomic
risk
Identify and prioritise most
complex aspects of current
draft and seek further
amendment or clarity
Seek to move back towards
original provisions, i.e. use
of previously unallocated
brownfield and 100% starter
home offers
Work with HBF to establish a
common understanding and
set of proposals with other
HBF members
Help to Buy
incentive scheme
A reduction in size or
eligibility criteria could
reduce overall mortgage
access impacting demand,
sales values and rates of
sale, which could undermine
confidence in the market
There are alternative incentives but these are less compelling
Maintain policy-maker
awareness of construction sector economic contribution and need for first-time buyer incentives
High quality sales training to
increase resilience and prepare for a tougher market
Rising complexity
of projects
Cost over-runs on complex
projects can affect margins
Latent defects can generate
extra costs and reputational
damage, where new
materials and systems have
been deployed
Heightened expectations can
result in rushed projects and
subsequent problems
Project Committee oversight
and risk-based review by the
Group Technical Director
Consultative and partnership
approach at planning/
designing stage
Robust Crest Nicholson
project management
New hurdle rate matrix
addressing complexity and
other risks
Increased focus on re-use of
house types
Customer service falls
significantly below targeted
Crest Nicholson standard
Cost of remediation in time
and money
Loss of focus on more strategic activity and a lack
of staff morale as pride in job
is affected
Robust inspection process and use of Priority 1 monitoring to ensure an efficient approach
Penalties for sub-contractors in cases of poor workmanship
Launch of Making Customers
Feel Special and Valued learning programme
Employee retention and
succession management
Experience gaps lead to
poor outcomes
Shortages of key staff in
critical business areas
can introduce cost, delays
in bringing developments
forward or quality issues,
which can undermine
shareholder confidence and
erode customer satisfaction
Increased employee turnover
can create instability
and uncertainty
Skills and experience lost,
including through retirement,
are difficult to replace and
loss of knowledge within
the business can affect
overall efficiency
Ensure competitive pay, benefits, incentives and bonuses
Improved succession planning in place, with formal succession plans drawn up
Maintaining strong apprentice
and graduate programmes
Executive management and
coaching creating more internal candidates
Reputational damage from
a major product failure or
significant environmental,
health or safety issue
Injury or potential loss of life
Remediation costs
Loss of projects and associated revenues
Damage to Crest Nicholson
brand
Potential civil or criminal
prosecution
Board leadership and scrutiny of health, safety and environment
Raising profile of health and
safety across the Group and
setting objectives annually
New approaches trialled prior
to wider roll-out and product
quality guidelines agreed and monitored
Training for all employees
and awareness of industry
product debates
Supply and quality of materials and/or labour fails
to match desired production
levels, affecting lead times,
efficiency and cost
Supply chain issues constrain output and impact
on business performance
Adverse customer
experience as build
completion forecasting
is difficult and subject to
variation, which could mean
mortgage offers expire
and further delays to
legal completions
Dialogue with major suppliers
to help with advance planning and call-off by divisions
Spread risk across suppliers,
e.g. kitchen supply-and-fit contracts
Examine alternative production approaches, e.g. timber frame as opposed to blocks, and offsite manufacture
Maintain strong apprenticeship programme and encourage suppliers to do the same
The Directors are responsible for preparing the Annual integrated report, the Directors' remuneration report and the financial statements in accordance with applicable law and regulations.
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 International Financial Reporting Standards (IFRS) as adopted by the European Union, and the parent Company financial statements in accordance with Financial Reporting Standard 101 'Reduced Disclosure Framework', in accordance with the Companies Act 2006. Under company law the 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 the Company and of the profit or loss of the Group for that period. In preparing these financial statements, the Directors are required to: 
 select suitable accounting policies and then apply them consistently
 make judgements and accounting estimates that are reasonable and prudent
 state whether IFRSs as adopted by the European Union and applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the Group and parent Company financial statements respectively
 prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business. 
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and the Group and enable them to ensure that the financial statements and the Directors' remuneration report comply with the Companies Act 2006 and, as regards the Group financial statements, Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the Company and the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
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.
The Directors consider that the annual integrated report and accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's performance, business model and strategy. 
Each of the Directors, whose names and functions are listed on page 52, confirm that, to the best of their knowledge:
 the Group financial statements, which have been prepared in accordance with IFRS as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit of the Group; and
 the Strategic report includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal risks and uncertainties that it faces.
Having assessed the principal risks and the other matters discussed in connection with the Viability statement, the Directors considered it appropriate to adopt the going concern basis of accounting in preparing the financial statements.

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