REG - Crest Nicholson Hdgs - Final Results <Origin Href="QuoteRef">CRST.L</Origin> - Part 2
24/01/2018 07:07
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for the period beginning 1st November 2016.
· Amendment to IAS 1 Presentation of Financial Statements. Effective for the period beginning 1st November 2016.
· Amendment to IAS 16 Property, Plant and Equipment. Effective for the period beginning 1st November 2016.
· Amendment to IAS 27 Separate Financial Statements. Effective for the period beginning 1st November 2016.
· Amendment to IAS 28 Investments in Associates and Joint Ventures. Effective for the period beginning 1st November 2016.
· Amendment to IAS 38 Intangible Assets. Effective for the period beginning 1st November 2016.
· Annual Improvements 2014. Effective for the period beginning 1st November 2016.
Standards and interpretations in issue but not yet effective, or yet to be endorsed by the European Union
The below standards and amendments have not been applied in these financial statements:
· IFRS 9 Financial Instruments and the amendment on general hedge accounting. Effective for the period beginning 1st
November 2018.
· IFRS 15 Revenue from Contracts with Customers and the amendment. Effective for the period beginning 1st November 2018.
· IFRS 16 Leases. Effective for the period beginning 1st November 2019.
· Amendment to IAS 7 Statement of Cash Flows. Effective for the period beginning 1st November 2017.
· Amendment to IAS 12 Income Taxes. Effective for the period beginning 1st November 2017.
· Amendment to IAS 40 Investment Property. Effective for the period beginning 1st November 2018.
· Amendment to IFRS 2 Share-based payments. Effective for the period beginning 1st November 2018.
· Amendment to IFRS 4 Insurance Contracts regarding the implementation of IFRS 9 Financial Instruments. Effective for the
period beginning 1st November 2018.
· Annual Improvements 2015. Effective for the period beginning 1st November 2017.
· Annual Improvements 2016. Effective for the period beginning 1st November 2018.
The above standards and the amendments will be adopted in the financial statements in the year they become effective and
have not been adopted early.
With the exception of IFRS 9 'Financial Instruments', IFRS 15 'Revenue from Contracts with Customers' and IFRS 16 'Leases',
their adoption is not expected to have a significant effect on the Group's financial statements.
IFRS 9 addresses the classification, measurement and recognition of financial assets and financial liabilities. It replaces
the guidance in IAS 39 that relates to the classification and measurement of financial instruments. The assessment of the
full effect of IFRS 9 will be completed during the year ending 31st October 2018.
IFRS 15 establishes principles for reporting useful information to users of financial statements about the nature, amount,
timing and uncertainty of revenue and cash flows arising from an entity's contracts with customers. Revenue is recognised
when a customer obtains control of a good or service and thus has the ability to direct the use and obtain the benefits
from the good or service. The standard replaces IAS 18 'Revenue' and IAS 11 'Construction Contracts' and related
interpretations. The new standard is effective for the Group for the 2019 financial year commencing on 1st November 2018.
The Group is currently assessing whether IFRS 15 will have a material impact on the Group's results. We are working with
advisors and others in the industry to determine the appropriate treatment for the recognition of revenue with customers
such as commercial investors under PRS and Registered Providers of social housing where there can be separate land sale and
construction contracts. This matter was considered by the International Financial Reporting Interpretations Committee at
their meeting on 22nd November 2017. The assessment of the full effect of IFRS 15 will be completed during the year ending
31st October 2018.
IFRS 16 replaces IAS 17 'Leases', and related interpretations, and requires lessees to recognise a lease liability and
asset for virtually all right of use lease assets; certain short-term leases and leases of low-value assets can apply an
optional exemption. The new standard is effective for the Group for the 2020 financial year commencing on 1st November
2019. The Group has not yet completed its assessment of the impact of the standard on the Group's consolidated income
statement and consolidated statement of financial position. The Group expects that most of the Group's lease commitments
will be brought onto the consolidated statement of financial position along with an associated asset. This change will
affect the timing of recognition of lease costs within the consolidated income statement. An assessment of the full effect
of IFRS 16 is expected to be completed during the year ending 31st October 2018.
2 SEGMENTAL ANALYSIS
The Executive Management Team, 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 Executive Management Team approves investment
decisions, allocates Group resources and performs divisional performance reviews. The Group operating segments are
considered to be its divisions (including the regional divisions, as well as the Major Projects and Strategic Land
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, having regard to the aggregation criteria in IFRS 8, the Group has one
reportable operating segment.
3 OPERATING PROFIT
Operating profit from continuing activities is stated after charging:
2017 2016
£m £m
Staff costs (Note 4) 67.2 65.3
Depreciation (Note 10) 1.5 1.2
Operating lease rentals
Land and buildings 2.4 3.0
Other operating lease rentals 1.6 1.4
Auditors' remuneration £000 £000
Audit of these consolidated financial statements 52 50
Audit of financial statements of subsidiaries pursuant to legislation 164 165
Audit related assurance services 43 32
Fees payable to the Group's auditors for audit related assurance services included £34,000 (2016: £32,000) in respect of an
independent review of the half-year results and £8,500 (2016: £nil) for professional fees relating to £100m senior loan
notes that were issued during the year.
In addition to the above, PricewaterhouseCoopers LLP provide audit services to the Crest Nicholson Group Pension and Life
Assurance Scheme. The fees associated with these services £18,940 (2016: £21,845) are met by the assets of the scheme.
Additionally, PricewaterhouseCoopers LLP provide audit services to joint venture undertakings of the Group. The fees
associated with these services £16,500 (2016: £16,000) are met by the joint venture undertakings.
4 STAFF NUMBERS AND COSTS
(a) Average monthly number of persons employed by the Group 2017 2016
Number Number
Development 905 849
The Directors consider all employees of the Group to be employed within the same category of Development.
(b) Staff costs (including Directors and key management) 2017 2016
£m £m
Wages and salaries 52.9 51.2
Social security costs 7.4 7.3
Other pension costs 2.3 2.4
Share-based payments (Note 21) 4.6 4.4
67.2 65.3
(c) Key management remuneration 2017 2016
£m £m
Salaries and short-term employee benefits 4.2 4.0
Other pension costs 0.1 0.1
Share-based payments 2.0 2.2
6.3 6.3
Key management comprises the Executive Management Team (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 2017 2016
£m £m
Salaries and short-term employee benefits 3.1 1.9
Other pension costs 0.1 0.1
Share-based payments 1.6 1.3
4.8 3.3
Further information relating to Directors' remuneration, incentive plans, share options and pension entitlement appears in
the Directors' Remuneration Report.
5 FINANCE INCOME AND EXPENSE
2017 2016
Finance income £m £m
Interest income 2.2 2.3
Imputed interest on amounts due from associates 0.6 -
Imputed interest on other financial assets (Note 12) 1.5 3.5
4.3 5.8
Finance expense
Interest on bank loans 8.4 8.7
Debt issue costs 0.7 0.7
Imputed interest on deferred land payables 2.6 3.9
Net interest on defined benefit pension plan obligations (Note 21) 0.9 0.6
12.6 13.9
Net finance expense 8.3 8.1
6 INCOME TAX EXPENSE
2017 2016
£m £m
Current tax
UK Corporation tax on profits for the year 35.1 31.7
Adjustments in respect of prior periods 0.5 0.8
Total current tax 35.6 32.5
Deferred tax
Origination and reversal of temporary differences in the current year 2.8 4.7
Adjustments in respect of prior periods - 1.0
Total deferred tax (Note 13) 2.8 5.7
Total tax in income statement 38.4 38.2
The effective tax rate for the year is 18.6% (2016: 19.6%) which is lower (2016: lower) than the standard rate of UK
corporation tax of 19.42% (2016: 20.0%). The effective tax rate benefits from the effect of enhanced tax deductions in
excess of other items which are not deductible for tax purposes, and the Group expects this profile to continue in future
years. The differences are explained below:
2017 2016
£m £m
Profit before tax 207.0 195.0
Tax on profit at 19.42% (2016: 20.00%) 40.2 39.0
Effects of:
Expenses not deductible for tax purposes 0.1 0.5
Enhanced tax deductions (2.4) (3.3)
Deferred tax change in rate - 0.2
Adjustments in respect of prior periods 0.5 1.8
Total tax in income statement 38.4 38.2
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. Examples are share schemes, defined benefit pension payments and land
remediation enhanced allowances. Adjustments 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.
7 DIVIDENDS
2017 2016
Dividends recognised as distributions to equity shareholders in the year: £m £m
Prior year final dividend per share of 18.5p (2016: 13.3p) 47.2 33.5
Current year interim dividend per share of 11.2p (2016: 9.1p) 28.7 23.1
75.9 56.6
2017 2016
Dividends declared as distributions to equity shareholders in the year: £m £m
Final dividend for the year ended 31st October 2017 of 21.8p (2016: 18.5p) 55.6 47.2
The proposed final dividend is subject to approval by shareholders at the Annual General Meeting on 22nd March 2018, and in
accordance with IAS 10 'Events after the Reporting Period', has not been included as a liability in these financial
statements, and there are no income tax consequences.
8 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.
Earnings Weighted average number of Ordinary shares Per share amount
£m Number Pence
Year ended 31st October 2017
Basic earnings per share 168.6 254,966,699 66.1
Dilutive effect of share options - 4,104,811
Diluted earnings per share 168.6 259,071,510 65.1
Year ended 31st October 2016
Basic earnings per share 156.8 252,848,299 62.0
Dilutive effect of share options - 4,820,986
Diluted earnings per share 156.8 257,669,285 60.9
9 INTANGIBLE ASSETS
Goodwill 2017 2016
£m £m
Cost at beginning and end of the year 47.7 47.7
Impairment at beginning and end of the year (18.7) (18.7)
At beginning and end of the year 29.0 29.0
Goodwill arose on the acquisition of Castle Bidco Limited on 24th March 2009. Goodwill is allocated to acquired strategic
land holdings (cash-generating units) within the Group. 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. 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 9.05% (2016: 9.05%), covering a period of 22 years from 2009 (being the minimum period that management expects to
benefit from the acquired strategic land holdings) and based on current market conditions. The recoverable value of the
cash-generating units is substantially in excess of the carrying value of goodwill. Sensitivity analysis has been
undertaken by changing discount rates, profit margins and other variables applicable to the cash-generating units. None of
the sensitivities, either individually or combined, resulted in the fair value of the goodwill being reduced to below its
current book value amount.
10 PROPERTY, PLANT AND EQUIPMENT
Fixtures and fittings Computer equipment Total
£m £m £m
Cost
At 1st November 2015 1.5 8.9 10.4
Additions 0.7 1.1 1.8
Disposals - (0.3) (0.3)
At 31st October 2016 2.2 9.7 11.9
Additions 0.6 1.9 2.5
Disposals (0.7) (4.5) (5.2)
At 31st October 2017 2.1 7.1 9.2
Accumulated depreciation
At 1st November 2015 0.7 7.1 7.8
Charge for the year 0.2 1.0 1.2
Disposals - (0.3) (0.3)
At 31st October 2016 0.9 7.8 8.7
Charge for the year 0.2 1.3 1.5
Disposals (0.7) (4.5) (5.2)
At 31st October 2017 0.4 4.6 5.0
Net book value
At 31st October 2017 1.7 2.5 4.2
At 31st October 2016 1.3 1.9 3.2
At 1st November 2015 0.8 1.8 2.6
The Group has contractual commitments for the acquisition of property, plant and equipment of £nil (2016: £nil).
11 INVESTMENTS
Interests in joint ventures
Below are the joint ventures that the Directors consider are material to the Group. All 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.
2017 2016
Entity £m £m
Kitewood (Cossall) Limited 1.0 0.6
Bonner Road LLP - -
Crest A2D (Walton Court) LLP 0.7 -
Other non-material joint ventures 0.1 0.1
1.8 0.7
· Kitewood (Cossall) Limited: in April 2015 the Group acquired a 50% interest in the ordinary share capital of Kitewood (Cossall) Limited, which was set up to develop a site in London. Construction of 123 apartments was completed on the site in 2017. The Group performs the role of project manager, for which it receives a project management fee from the company. The Group provided funding to the company to facilitate construction, which was repaid in the year following completion of the construction
works.
· Bonner Road LLP: in August 2015 the Group entered into a partnership agreement with Your LifeSpace Limited to procure and develop a site in London. Pending a successful residential planning application, the LLP is forecast to start construction in 2018. 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 will receive a project management fee upon a successful residential planning permission and
throughout the life of the project.
· Crest A2D (Walton Court) LLP: in January 2016 the Group entered into a partnership agreement with A2 Dominion Limited to procure and develop a site in Surrey. The LLP submitted a residential planning application in March 2017, with construction forecast to start early 2018, subject to planning being achieved. 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.
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 and not Crest Nicholson Holdings plc's share of those amounts.
Kitewood (Cossall) Limited Bonner Road LLP Crest A2D (Walton Court) LLP Other non-material joint ventures Total
2017 2016 2017 2016 2017 2016 2017 2016 2017 2016
£m £m £m £m £m £m £m £m £m £m
Summarised statement of financial position
Current assets
Cash and cash equivalents 6.2 - 1.0 0.3 0.1 - 0.1 - 7.4 0.3
Other current assets 1.0 20.1 55.4 53.4 22.5 24.5 0.3 0.1 79.2 98.1
Non-current assets - - - - - - 0.1 0.1 0.1 0.1
Current liabilities
Financial liabilities - - - - (2.5) - - - (2.5) -
Other current liabilities (3.9) (3.5) - - (0.1) (0.1) (0.4) (0.1) (4.4) (3.7)
Non-current liabilities
Financial liabilities - (15.4) (60.6) (55.9) (18.6) (24.4) - - (79.2) (95.7)
Other non-current liabilities (1.3) - - - - - - - (1.3) -
Net assets/(liabilities) 2.0 1.2 (4.2) (2.2) 1.4 - 0.1 0.1 (0.7) (0.9)
Reconciliation to carrying amounts
Opening net assets/(liabilities) at 1st November 2016 1.2 0.6 (2.2) (0.2) - - 0.1 (14.8) (0.9) (14.4)
Profit/(loss) for the year 10.7 0.6 (2.0) (2.0) (1.2) - - 15.1 7.5 13.7
Dividends paid (9.9) - - - - - - (0.2) (9.9) (0.2)
Capital contribution reserve - - - - 2.6 - - - 2.6 -
Closing net assets/(liabilities) at 31st October 2017 2.0 1.2 (4.2) (2.2) 1.4 - 0.1 0.1 (0.7) (0.9)
Group's share in closing net assets/(liabilities) at 31st October 2017 1.0 0.6 (2.1) (1.1) 0.7 - 0.1 0.1 (0.3) (0.4)
Recognised against receivable from joint venture - - 2.1 1.1 - - - - 2.1 1.1
Group's share in joint venture 1.0 0.6 - - 0.7 - 0.1 0.1 1.8 0.7
Amount due to Crest Nicholson Group (Note 15) - 15.4 28.6 27.0 10.6 12.4 - - 39.2 54.8
Kitewood (Cossall) Limited Bonner Road LLP Crest A2D (Walton Court) LLP Other non-material joint ventures Total
Summarised income statement 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016
£m £m £m £m £m £m £m £m £m £m
Revenue 44.8 6.1 - - - - - 0.6 44.8 6.7
Expenditure (31.0) (4.7) (0.1) - - - - (0.6) (31.1) (5.3)
Operating profit/(loss) before financing costs 13.8 1.4 (0.1) - - - - - 13.7 1.4
Member balances written off - - - - - - - 15.1 - 15.1
Interest expense (0.5) (0.6) (1.9) (2.0) (1.2) - - - (3.6) (2.6)
Income tax expense (2.6) (0.2) - - - - - - (2.6) (0.2)
Profit/(loss) for the year 10.7 0.6 (2.0) (2.0) (1.2) - - 15.1 7.5 13.7
Group's share in joint venture profit/(loss) for the year 5.3 0.3 (1.0) (1.0) (0.6) - - 7.6 3.7 6.9
Provided in financial statements in prior years - - - - - - - (7.6) - (7.6)
Group's share in joint venture after Group provision 5.3 0.3 (1.0) (1.0) (0.6) - - - 3.7 (0.7)
Commitments and contingent liabilities in respect of joint ventures
Commitments - joint ventures - - - - - - - - - -
Commitment to provide funding - 5.7 - 1.9 - - - - - 7.6
Contingent liabilities - joint ventures - - - - - - - - - -
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 included in the consolidated financial statements.
Subsidiary Nature of
business
Castle Bidco plc Holding
Company
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 26.
12 OTHER FINANCIAL ASSETS
2017 2016
£m £m
At beginning of the year 18.5 24.2
Disposals (5.1) (9.2)
Imputed interest 1.5 3.5
At end of the year 14.9 18.5
Of which:
Non-current assets 11.4 16.3
Current assets 3.5 2.2
14.9 18.5
Other financial assets 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.
Other financial assets comprise shared equity loans secured by way of a second charge on the property. The loans can be
repaid at any time within the loan agreement, the amount of which is dependent on the market value of the asset at the date
of repayment. The assets are recorded at fair value, being the estimated amount receivable by the Group, discounted to
present day values.
The fair value of future anticipated cash receipts takes into account Directors' views of an appropriate discount rate
(incorporating purchaser default rate), future house price movements and the expected timing of receipts. These assumptions
are given below and are reviewed at each year end.
2017 2016
Assumptions
Discount rate, incorporating default rate 10.5% 10.5%
House price inflation for the next three years 3.0% 3.0%
Timing of receipt 8 to 15 years 8 to 15 years
2017 2017
Increase assumptions by 1 % / year Decrease assumptions by 1 % / year
£m £m
Sensitivity - effect on value of other financial assets (less)/more
Discount rate, incorporating default rate (0.3) 0.4
House price inflation for the next three years 0.3 (0.3)
Timing of receipt (0.7) 0.5
The difference between the anticipated future receipt and the initial fair value is charged over the estimated deferred
term to financing, with the financial asset increasing to its full expected cash settlement value on the anticipated
receipt date. The imputed interest credited to financing for the year ended 31st October 2017 was £1.5m (2016: £3.5m).
At initial recognition, the fair values of the assets are calculated using a discount rate, appropriate to the class of
assets, which reflects market conditions at the date of entering into the transaction. The Directors consider at the end of
each reporting period whether the initial market discount rate still reflects up-to-date market conditions. If a revision
is required, the fair values of the assets are remeasured at the present value of the revised future cash flows using this
revised discount rate. The difference between these values and the carrying values of the assets is recorded against the
carrying value of the assets and recognised directly in the consolidated statement of comprehensive income.
13 DEFERRED TAX ASSETS
Inventories fair value Share-based payments Pension deficit Tax losses Other temporary differences Total
£m £m £m £m £m £m
At 1st November 2015 14.3 3.3 1.4 1.1 0.8 20.9
Income statement movements (4.2) (0.4) - (1.1) - (5.7)
Equity movements
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