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RNS Number : 1166B Crest Nicholson Holdings PLC 28 January 2020
28 January 2020
The information contained in this announcement is deemed by the Company to
constitute inside information for the purposes of Article 7 of the Market
Abuse Regulation (EU) No. 596/2014
Crest Nicholson Holdings plc
Preliminary Results announcement for the year ended 31 October 2019
Good early progress in implementing updated strategy
Crest Nicholson Holdings plc (Crest Nicholson) today announces its Preliminary
Results for the year ended 31 October 2019 and an updated strategy:
Highlights(1)
· Sales, including the Group's share from joint ventures, at
£1,094.9m (2018: £1,122.0m)
· Home completions down 4% at 2,912 (2018: 3,048) units
· Net cash at year end increase to £37.2m (2018: £14.1m)
· Adjusted operating profit margin(2) at 12.2% (2018: 16.2%)
· Adjusted profit before tax(2) down to £121.1m (2018: £168.7m)
in line with previous guidance
· Exceptional charge in respect of fire-risk of £18.4m
· Statutory profit before tax of £102.7m (2018: £168.7m)
· Forward sales at mid-January of £503.5m (2018: £648.3m)
· Significant improvements in customer service
· Total full year dividend maintained at 33.0p per share (2018:
33.0p per share)
Updated Strategy
· Five strategic priorities
o Building on our reputation and strengths in placemaking and build quality
o Realising the value from our flexible and long-term land portfolio
o A greater focus on operational efficiency
§ Simplified ways of working and organisational restructure
§ Introduction of new enhanced house type range and a consistent group wide
specification review
§ Reduction in sales-related costs and overheads already underway
o An ambition to be consistently rated Five-Star for customer service
o Growing our partnerships business and multi-channel, multi-tenure
capability
· Four foundations
o Safety, Health and Environment - our number one priority
o Sustainability and Social Value - our responsibilities to our stakeholders
o People - we will continue to invest in our people
o Financial Targets - we will rebuild trust in our performance
(1) Financial comparatives for 2018 have been restated to reflect the adoption
of IFRS15 with effect from 1 November 2018
(2) 2019 figures, adjusted for the £18.4m exceptional item relating to the
combustible materials charge, net of £3.5m tax credit where appropriate
New forward financial guidance
As part of our updated strategy we have set ourselves new three-year financial
targets to FY2022
· Home completions to increase to 3,500 units (2019: 2,912)
· Outlets to grow to a minimum of 70 (2019: 59)
· Adjusted operating profit margin to improve by a minimum of
250bps (from 2019: 12.2%)
· Administrative expenses to be 5% of sales (2019: 6.0%)
· Return on capital employed to increase to a minimum of 20% (2019:
15.9%)
· Strong cash generation and disciplined capital allocation
· Dividend per share of 33.0p in FY2020, 33.0p + RPI from FY2021
(2019: 33.0p per share)
· Anticipated sales contribution - Private: 60%, Affordable:
20-25%, Bulk: 15-20%
Chief Executive, Peter Truscott commented:
"Today I am pleased to announce the details of our updated strategy and new
financial targets. We have already taken decisive action in reducing our
sales-related costs and overheads, launched an enhanced house type range
including a full specification review, and have made organisational changes to
realise our ambitions in our partnerships division.
We have assembled an experienced new leadership team with the necessary skills
and capabilities to take Crest Nicholson forward. In 2020 we will continue to
work quickly in implementing further changes to improve performance and to
create value for shareholders. I look forward to updating you on progress in
future communications. Crest Nicholson is a resilient business with a bright
future. I am confident that our updated strategy will restore Crest Nicholson
to being one of the UK's leading house builders."
Current trading and outlook
We believe the decisive political outcome should provide support for the
sector in the near term. While it is too early to form a view on the impact
for FY2020 trading we are seeing some encouraging signs. Footfall and visitor
numbers on our developments have increased and traffic on our website is up.
We remain confident in our ability to deliver on our previous guidance and
re-iterate our expectations for FY2020 Adjusted profit before tax at
£110m-£120m.
Key Financials
£m (unless otherwise stated) 2019 2018(3) Change % Change
Home completions (units) 2,912 3,048 (136) -4%
Revenue 1,086.4 1,121.0 (34.6) -3%
Adjusted gross profit(4) 201.9 246.9 (45.0) -18%
Adjusted gross profit %(4) 18.6% 22.0% (340)bps
Administrative expenses (65.5) (64.9) (0.6)
Net impairment losses on financial assets (3.4) - (3.4)
Adjusted operating profit(4) 133.0 182.0 (49.0) -27%
Adjusted operating profit %(4) 12.2% 16.2% (400)bps
Adjusted profit before tax(4) 121.1 168.7 (47.6) -28%
Adjusted profit after tax(4) 97.4 136.6 (39.2) -29%
Profit before tax 102.7 168.7 (66.0) -39%
Profit after tax 82.5 136.6 (54.1) -40%
Earnings per share (pence)
Adjusted basic(4) 38.0 53.3 (15.3) -29%
Basic 32.1 53.3 (21.2) -40%
Adjusted diluted(4) 37.9 53.0 (15.1) -28%
Net cash 37.2 14.1 23.1 +164%
(3) Restated to reflect the adoption of IFRS 15 with effect from 1 November
2018.
(4) 2019 figures, adjusted for the £18.4m exceptional item relating to the
combustible materials charge, net of £3.5m tax credit where appropriate.
Corporate Advisers
The Company confirms that with immediate effect its joint corporate brokers
and financial advisers are now Barclays Bank PLC and HSBC Bank plc.
Financial Calendar
A full calendar of financial announcements for the forthcoming period is
available via the Company's Investor Relations website at
http://www.crestnicholson.com/investor-relations
(http://www.crestnicholson.com/investor-relations)
Analyst presentation
There will be an analysts and investor meeting at 8.30am today at 1 Moorgate
Place, London, EC2R 6EA. The presentation will be broadcast live on Crest
Nicholson website, www.crestnicholson.com (http://www.crestnicholson.com) from
8.30am today. A playback facility will be available shortly after the
presentation has finished via link:
https://www.investis-live.com/crest-nicholson/5df79ae452202e0d003e4d1d/afbl
(https://www.investis-live.com/crest-nicholson/5df79ae452202e0d003e4d1d/afbl)
An audio playback facility will be available at
https://www.crestnicholson.com/investor-relations
(https://www.crestnicholson.com/investor-relations)
A conference call facility is available:
Dial in: 020 3936 2999
Access Code: 870942
An audio playback facility will be available at
https://www.crestnicholson.com/investor-relations
(https://www.crestnicholson.com/investor-relations) following
the presentation
For further information, please contact:
Crest Nicholson
Jenny Matthews, Head of Investor
Relations +44 (0) 7552
842720
Finsbury
+44 (0) 20 7251 3801
Faeth Birch
Philip Walters
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
Chief Executive's Review
I am delighted to have joined a business that has a strong brand and
reputation for building high quality homes and creating attractive,
sustainable communities.
Having visited all of our sites and divisions I can see that Crest Nicholson
is, fundamentally, a strong business. However, the recent disappointments in
financial performance illustrate the need to evolve and change.
Towards the end of the year, I led the new Executive Leadership Team's review
of our strategy. We concluded that we want to retain and develop many of the
elements that have made Crest Nicholson the business it is today. However, we
also identified, and have already implemented, a number of major changes to
the way we do things, our structure, and how we operate as a Group.
I am confident that the new Executive Leadership Team has the experience and
capabilities it needs to build on these strengths and to introduce new
standards and ideas that will take the Company forward, leading to improved
operational and financial performance.
I look forward to being able to update you on progress against our updated
strategy over the course of the coming year. Finally, I would like to thank
Chris Tinker for all his efforts as interim Chief Executive and for the
support he gave me on joining in September.
Trading summary
We are disappointed with the financial results achieved in FY2019 against the
strategy established in the previous year.
Our strategy in FY2018 set out to de-risk the business amid continued market
uncertainty, with a focus on three strategic priorities:
1. Prioritising cash flow and dividends by increasing partnerships
and more forward sales to Registered Providers (RPs) and the Private Rented
Sector (PRS)
2. Maximising value in the land portfolio
3. Driving operational efficiencies, especially through investment
in offsite construction.
Despite the financial performance, we did make some progress against these
priorities. Firstly, we continued to build our partnerships business,
delivering good levels of forward sales, especially in the first half. We
delivered on our commitment to end the year with a stronger level of net cash
than in the previous year and we took decisive action over the course of the
autumn to reduce sales-related costs and central overheads.
We also took action in two other areas. We regularly review the selling prices
and rates of all of our housing stock and we decided to reduce the prices of a
number of properties located within the greater London area. The effect of
these reductions has created a charge in this year's income statement of
£7.0m as we have had to adjust their carrying value on the balance sheet. We
feel this is a necessary step to reposition these properties in a challenging
sales market in London and it strikes the right balance between realising
margin and cash utilisation.
In addition, David Marchant, our Group Production Director, has been
undertaking a detailed review of all legacy-sold and for-sale properties in
respect of the latest guidance on fire risk. This has rightly been an
increasing area of regulatory focus since the tragic incident at Grenfell
Tower and the Executive Leadership Team takes this matter very seriously. This
year, new Government guidance notes were issued which we have been carefully
considering in respect of any investigative or remedial work which may be
required to comply with the updated guidance. Accordingly, we have concluded
that it is necessary to make a charge to this year's income statement of
£18.4m to cover these potential liabilities and work is now underway on
several properties.
Safety, Health & Environment (SHE)
SHE is our number one priority. We are taking steps to reinforce this as we
strive for continuous improvement in this area. We are setting ourselves a
target to be amongst the best in the industry in terms of our SHE performance
and culture. SHE is integral to our operations and the Executive Leadership
Team and I are fully committed to taking all necessary steps to ensure we
realise this ambition.
During the year, we implemented further improvements to our SHE compliance
policies and procedures and to our leadership structure, with David Marchant,
now the new executive lead for SHE.
As a reminder of the critical importance of maintaining a constant focus in
this area, I was deeply saddened to report the tragic loss of one of our
subcontractors who was fatally injured on site late last year. Clearly this
tragedy is unacceptable and we must maintain our strong focus on safety and
risk management across all sites.
We have made commitments in the following areas in respect of Safety, Health
& Environment:
- Demonstrating strong leadership throughout the
organisation
- Delivering compliance with legislation and our
own policies
- Health and well-being
- Supply chain competence and management
- The competence, training and qualifications of
our employees
- New reporting and insights
- Environmental management.
An updated strategy and a renewed focus
Our Foundations Our Strategic Priorities
Safety, Health & Environment Placemaking & Quality
Sustainability & Social Value Land Portfolio
People Operational Efficiency
Financial Targets Five-Star Customer Service
Multi Channel Approach
When I joined the business in September, I initially spent of lot of time
visiting all our sites and listening to our teams. I was immediately struck by
the passion and talent that exists within the organisation. I was also
impressed by the quality of our land portfolio. It was a major reason for me
wanting to join as Chief Executive and my confidence has only grown that this
represents a significant opportunity to generate value for customers,
communities and shareholders.
However, I and the rest of the new Executive Leadership Team also identified
some obvious challenges getting in the way of performance. We observed a
bespoke mindset to house type design and specification which had led to
inherent procurement inefficiencies. The ratio of sales and marketing costs
and central overheads needed reducing in order to reflect our weaker trading
performance and align with industry norms. In some regions, we were seeking to
command a price premium versus our competition that was unsustainable against
a market backdrop of more generous discounts and incentives. This was starting
to impact on volumes and was causing stock levels to rise.
Our updated strategy seeks to build on the many positive elements of Crest
Nicholson. We want to maintain and enhance our good reputation for placemaking
and quality and continue our strong heritage in sourcing and developing both
short-term and strategic land. In order for this to be an effective business
model capable of delivering the returns our shareholders rightly expect, we
must bring much more discipline to our operational efficiency.
I also believe it is essential for Crest Nicholson to be consistently rated
five-star for customer service and we have made that ambition very clear
internally.
Finally, we have made significant progress in the past few years in building
both relationships and capabilities to deliver our housing with partners or
other organisations. Our updated strategy sets out to accelerate these plans,
recognising that the economic model is often very different and that it must
demonstrate strong capital efficiency and reduced risk to justify the lower
margin.
Placemaking & Quality
Crest Nicholson enjoys an enviable reputation for its placemaking skills, and
we intend to preserve and build on this. In many ways, it is what we are known
for.
We define placemaking in subjective terms - aiming to create developments
that, through their distinctive design, quality public realm and attention to
detail, are simply 'places in which our customers wish to live'. The
Government agenda, led by its new National Design Guide, is very much aligned
to our strengths in this area.
However, placemaking extends far beyond the physical environment that we
create; it also encompasses building strong, sustainable communities. Some of
the best examples of where we have delivered this are seen in our Garden
Villages, such as Tadpole Garden Village in Swindon, Wiltshire.
We enjoy a reputation for building high quality, well-specified developments
using careful methods of construction. We will continue setting ourselves
these high standards. However, great placemaking and build quality must be
balanced with delivering strong returns. We are a business of significant
scale, operating across a number of geographies in the UK, and we must ensure
we focus our investment in design and quality on the areas most valued by
customers and communities.
Land Portfolio
Crest Nicholson has a large and desirable land portfolio with a strong
weighting in Southern England where the demand is high and the supply side is
more constrained. The larger proportion of this land is held under option, or
is drawn down gradually, representing good capital efficiency for the Company
and its shareholders. The Executive Leadership Team believe there is
significant future value in this portfolio for our stakeholders, and that
enhanced returns can be delivered by overlaying our planned operational
efficiencies onto these assets. This is a core part of the Group's future
investment proposition.
In recent years the Group has sold an increasing proportion of land to realise
immediate value. While some external land sales can be supported by an
overwhelmingly strong economic case, and because our land is held in a
capital- efficient manner, there is limited need from a cash flow perspective
to sell these assets in the short term. We will adopt an approach on our
larger sites whereby the land portfolio is utilised firstly for our own
operational needs and, only after this, for partnerships and joint ventures or
external disposals.
We will need to increase our number of outlets and points of sale. In each
case, our initial priority is for one Crest Nicholson sales outlet, or two
where the product offering can be differentiated.
In the future, we will assess the demand and returns for bulk sales to
institutional investors. Joint venture undertakings and external land sales,
each offering different risks and benefits, will be assessed on a case by case
basis.
We will also seek to improve the interface between Crest Strategic Projects
(CSP) and the divisions when servicing larger sites and handing over the
individual parcels.
In summary, the land portfolio is extensive, of high quality and efficient to
hold. Our initiatives will add to what is already an excellent asset base.
Operational Efficiency
This is the strategic priority that will have the biggest impact on our
earnings growth in the future. Historically, we have defined operational
efficiency in terms of building an off-site manufacturing (OSM) capability.
OSM will remain an important development for our sector and we will continue
to assess its relevance for our delivery model. However, our operational
efficiency opportunity is much wider than just OSM and this historically
narrow view reflects where we have lost pace with our competitors and their
ways of working.
Currently, we are inconsistent with many aspects of our operations, often
doing things differently from site to site and from one division to another.
This has led to higher build costs than necessary, inconsistent quality and
delivery, excessive overheads and selling costs, and inefficient use of
working capital. Additionally, this inconsistency means there is limited
opportunity to develop best practice through benchmarking.
Significant benefits will be derived from the adoption of our new house type
range which is currently being rolled out across the Group. It comprises 24
core house types and builds on some of the benefits of open and broken plan
living that was pioneered through the previous Aurora Range. The new range
also adds closed plan options within the same building shell. It is designed
to be plotted effectively with common depths enabling efficient roof
construction and the ability for accommodation to be arranged over two, two
and a half, and three floors. An added benefit is the flexibility of the range
to be dressed with a wide variety of elevational styles so as to ensure the
built design is always individual and appropriate to its local vernacular,
supporting our commitments to placemaking and distinctiveness. We will target
80% of our production coming from this new range over time and we have begun
the process of re-planning current sites starting with St. Laurence View in
Ludlow, Shropshire.
Our build costs will benefit from the introduction of the new house type range
and we also anticipate significant savings being derived from a standard group
specification. Previously, we specified our product too widely across
divisions and our supply chain, leading to excessive costs and insufficient
buying power. We will continue to provide a high quality specification within
our homes, but we will do so in a more consistent and cost effective manner.
Our delivery processes have become inconsistent and cumbersome, driving
complexity and execution challenges. Accordingly, our overhead costs are far
higher than our peer group. We have already made significant reductions in
this area without impacting on operational performance. Over time, we will
continue to reduce overhead costs as our model
is simplified.
As with our build costs and overheads, our selling costs are also too high due
to a lack of consistency, challenge and benchmarking. Again, action has been
taken to address this without impacting the quality of our customer
experience. These activities and associated costs will continue to reduce as
our product and processes are standardised across our divisions.
Our use of working capital is also inefficient and can improve significantly
with greater focus and use of best practice. Build times are inconsistent
across sites and can be improved with more focus and challenge.
Many of the above challenges can be addressed by greater uniformity of method
and execution. Almost everything identified is already done well somewhere in
Crest Nicholson, so the evidence is there and the challenges are not beyond
our teams. It is the absence of standardised products and processes that makes
performance measurement and improvement across divisions extremely difficult
to achieve. In order to drive this Group-wide change in focus, we decided to
create the role of Chief Operating Officer and to bring in someone with Tom
Nicholson's experience and capabilities to help lead the change.
The final action that we have taken to address this strategic priority is to
review our organisational structure. Currently, we have five dedicated
divisions operating in clearly defined areas. Alongside this, the Crest
Nicholson Regeneration (CNR) division builds and sells homes in these
geographies, overlapping with other divisions and tackling the most complex
projects. In addition to the build and sales operation, CNR deals with key
external partnering arrangements.
In future, the type of projects we deliver will be less specialised in nature.
We have therefore announced internally our intention to create a sixth
division, based on a newly defined geographical area - Crest Nicholson
Southern Counties (CNSC). It will be based in Hampshire and will initially
develop the majority of CNR's current projects with a dedicated team.
The balance of the CNR operation, comprising its Major Projects bid-winning
specialism and its relationship management and commercial development arms,
will become Crest Nicholson Partnerships and Regeneration (CNPR). CNPR will
operate a team of sales professionals focused on the third-party investor and
affordable homes markets. Essentially, this will create a dedicated business
development function with the build and individual sales functions being
undertaken by the divisions that have the regional knowledge and insight.
Five-Star Customer Service
To be considered as a leading UK house builder, we must be able to demonstrate
commitment to delivering an outstanding customer experience. This is assessed
during the process of buying a new Crest Nicholson home and through the
quality of the aftercare service that we provide. Excellence in this respect
is best acknowledged by being a five-star housebuilder accredited by the Home
Builders Federation (HBF). We must strive to achieve this status every year.
While I am pleased with the progress we have made this year, we must do more.
Our quality and aftercare service must become more consistent; we have sites
that have achieved outstanding results but, on some occasions, we have to
acknowledge that we have fallen below the standards that we set for ourselves.
David Marchant, Group Production Director, is taking a lead on this strategic
priority at Executive Leadership Team level. He is working on a fundamental
review of our delivery of homes and aftercare, with a stronger emphasis on
site teams having more direct responsibility for quality, supported by the
divisional-based customer service teams in providing aftercare.
Multi-Channel Approach
Our desire to build a multi-channel, multi-tenure business is driven by two
factors - how we source our land and how the way our customers choose to live
is changing.
We are a better and more resilient business for being able to acquire land
from different sources. We already have a large strategic land portfolio,
managed by CSP. This capability enables us to acquire land following the
granting of planning permission, usually at a discount and usually in the
context of a one-to-one price negotiation. It results in enhanced margins and
is a capital- efficient method of controlling land. However, this approach to
acquisition comes with a high degree of uncertainty of delivery timescales and
often sites are large and complex.
Crest Nicholson also has a strong track record of working with partners to
acquire land to be developed jointly. Our partners range from Homes England
and the Defence Infrastructure Organisation to financial institutions. Again,
these sites tend to be large and complex, and in
or near urban areas. These partnering arrangements can be very capital
efficient for all parties concerned, with the risk being shared. Our
reconfigured CNPR entity will be responsible for managing these projects and
the relationships that accompany them.
The nature of these developments results in generally complex projects with
uncertainty around the time that they will come through to production.
Accordingly, we also need to acquire a proportion of our land on the open
market. This land is short term in nature and far more predictable from a
timing and delivery perspective, but it is more likely to have been purchased
following a competitive process and can carry a larger capital investment in
the initial land cost. These shorter-term sites have lower associated margins,
reflecting the lower level of risk and higher level of certainty.
Broadening our channels to market
New sales profile Historic sales profile*
Open market (private) 60% 70%
Affordable 20 to 25% 20 to 25%
Bulk 15 to 20% 5 to 10%
* Based on average unit numbers for the trading period 1 November 2014 to 31
October 2017.
Our ability to acquire these sites in competition, and then to deliver to at
least our target margins, means we must be very efficient as a business. In
many ways, this discipline is good for the organisation as the benefit of
efficiency enables stronger returns to be delivered from
our discounted land.
Although the larger part of our sales will still come from selling individual
homes to individual buyers, where margins will be at their highest, these
sales tend to be more discretionary, and more cyclical. We will therefore be a
stronger business overall, and a better investment proposition, by having more
than one route to market.
Bulk sales are typically undertaken at times of market difficulty or stress
and, therefore, have a greater chance of being completed on less favourable
economic terms. Given the land portfolio we control and the longer term
appetite for well capitalised institutional investors to acquire stock across
the different points of the cycle, we see an opportunity to develop strategic
relationships and dependent revenue streams in all market circumstances. While
these sales will, in all likelihood, be at lower prices than could be achieved
for individual sales, the advanced cash inflows and certainty yield a stronger
return on capital employed for a portion of our future business. Our CNPR team
will be responsible for bulk sales and key relationships, with the divisions
delivering the build.
We will continue to focus on sales of homes to RPs for the provision of
affordable homes of different tenures. The key to maximising revenue streams
from this part of our business is through close working with RPs to maximise
the grant funding available, as they identify the appropriate homes and tenure
models needed. CNPR will manage these relationships and will seek to develop
them over the long term.
These different sources of acquiring land and routes to market for our
completed homes will diversify our income streams and make us more resilient
to changes in the economic cycle over time.
Finally, in order to ensure we move at pace on this strategic priority, I am
delighted that we have been able to recruit Kieran Daya to the role of
Managing Director for CNPR. Kieran brings a wealth of experience in this area
gained as a senior executive in Galliford Try plc's partnerships division.
People
The quality of its people, and the decisions they make, is fundamental to the
success of any organisation - and this is certainly the case in the
housebuilding sector. Accordingly, 'People' is one of the four foundations of
our updated strategy.
Although it has been necessary to make significant changes to the Executive
Leadership Team, both as a result of retirements and because of a need to
inject new ideas and ways of working into Crest Nicholson, I have been
impressed with the quality of the people I have met throughout the Company.
Retaining and developing our valuable pool of talent will ensure the best of
Crest Nicholson's legacy is maintained, while at the same time supporting
talented individuals in their development by introducing new and better ways
of working.
The quality of our teams is a testament to the success of the strong graduate
and trainee management schemes that have existed within Crest Nicholson over
many years.
In the period ahead, it is important that we reflect the changing ways in
which people wish to work. For this reason, the Executive Leadership Team have
quickly communicated our plans for a more flexible approach to working for
many job roles. This 'Agile Working' approach will help us to recruit and
retain a more diverse workforce which will make us
a stronger, more resilient business.
We are currently working on a number of initiatives to increase the proportion
of female employees in Crest Nicholson, as well as extending this focus to
ethnicity, sexual orientation, disability and other minority groups. We will
also focus on social mobility challenges and second careers for the senior
workforce. We will be a far more effective business if we have a workforce
that better reflects the communities in which we operate.
We recognise the considerable challenge across the wider construction sector
in recruiting and training a workforce to replace workers who retire or
otherwise leave the industry. It is possible that fewer construction workers
will come into the UK from the EU in the years ahead. In time, OSM will help
in this regard but this is some way from being a mature model that we can
quickly transition to. We will work closely with Government to better
understand and tackle the constraints to the wide and timely adoption of OSM
to supplement traditional ways of working.
Financial Targets
As part of our updated strategy, we have set new financial targets for the
business. We understand the importance of re-building trust in our
performance.
Financial year 2019 Financial year 2022
Home completions (units) 2,912 >3,500
Outlets 59 >70
Adjusted operating margin(1,2) 12.2% Minimum of 250bps growth by FY2022
Admin expenses as % of sales 6% 5%
Return on capital employed 15.9% >20.0%
Net cash £37.2m Strong cash surplus to invest or return
Dividend per share 33.0p 33.0p + RPI from FY2021
Historic(3) Future
Multi-channel sales contribution Private: 70% Diversify income at better ROCE
Affordable: 20-25%
Bulk: 5-10% Private: 60%
Affordable: 20-25%
Bulk: 15-20%
(1) Adjusted operating profit margin is an alternative performance measures
consisting of statutory operating profit margin adjusted for the impact of the
exceptional item relating to the combustible materials provision. See note 4
to the Consolidated Financial Statements for further details.
(2) Adjusted operating profit margin is calculated on the same basis as
earnings before interest and tax (EBIT) as referred to in the forthcoming
Directors Remuneration Report.
(3) Based on average trading units for the period 1 November 2014 to 31
October 2017.
Peter Truscott
Chief Executive
Financial Review
I am pleased to present my first full-year set of results since joining Crest
Nicholson as Group Finance Director in June 2019. During this year of
significant change, our trading performance and results have clearly been
disappointing, delivering beneath our original expectations. We are taking
decisive action to return the business to growth and have an updated strategy
with clear ambitions and targets for the future. I look forward to playing my
part in delivering on our commitments for our customers and shareholders.
The Group has restated all relevant comparator figures following the adoption
of IFRS 15 'Revenue from Contracts with Customers' in the year. See note 29
for the impact of this change.
As in previous years, the business continues to report two alternative
performance measures relating to sales and return on capital employed. During
the year, management introduced a further alternative performance measure,
being "adjusted" performance metrics as a result of the exceptional charge
relating to the combustible materials provision.
Sales, including joint ventures, was £1,094.9m (2018: £1,122.0m), down 2.4%
on the previous year. This comprised £1,086.4m of statutory revenue (2018:
£1,121.0m) and £8.5m of the Group's share of revenue through joint ventures
(2018: £1.0m).
Total home completions were 4.5% lower for the year, at 2,912 (2018: 3,048).
This comprised open market completions of 2,171 (2018: 2,371), down 8.4%, and
affordable completions of 741 (2018: 677), up 9.5%.
Continuing our commitment to re-position more of our developments to lower
average selling price (ASP) locations and housing types, open market ASPs
declined 2.0% in the year to £388,000.
In the first half of the year, Crest Nicholson delivered a number of bulk
sales to Registered Providers (RPs) and Private Rented Sector (PRS) investors,
which were supportive to revenue growth.
During the second half of the year, there was increased volatility in the
number of site visits, reservations and completions, and elevated cancellation
rates as customers continued to cite concerns over political and economic
uncertainty stemming from Brexit.
Over the summer, a new Prime Minister was appointed generating speculation of
an impending Budget update and possible amendments to Stamp Duty charges.
Housing became an active policy discussion point for all parties with possible
reform of the current planning system a key feature in the debate.
As we moved into the traditionally stronger autumn selling season, it became
increasingly clear that the composition of MPs in Parliament would be unable
to agree on a way forward on Brexit, and that a General Election or similar
event would be necessary to break the deadlock. In our geographies and at our
price points, the resulting uncertainty has led consumers to refrain from
buying until the economic and political landscape is clearer.
Our market remains an attractive one. We have a shortfall of housing supply to
meet demand in the UK and Crest Nicholson has a strong track record of
delivering high quality homes with attractive designs and appearance. We have
a strong land portfolio biased to the South of the UK, where economic and
population growth has traditionally been strongest. We are hopeful that a more
stable political backdrop will now support a more positive sales environment
and that the actions we are taking in respect to costs and simplifying our
business model will return the business to profit growth.
We generated revenue from land sales and mixed-use commercial property sales
in the year of £99.4m (2018: £55.7m). As part of our updated strategy, we
have outlined that we intend to deliver a lower level of land sales in the
next financial year. As a business with an enviable land portfolio in
attractive geographies, we will continue to appraise land sale opportunities
as they arise. However, this will only be when the value created through such
a transaction will, in all certainty, exceed that of developing it, either
ourselves, with a partner or through increasing outlet breadth.
During the year, we experienced project-specific cost challenges in the
Midlands division. We continue to experience build cost inflation as the weak
value of sterling pushes up prices of imported materials. In the labour
market, uncertainty surrounding Brexit has added to the increasing scarcity of
skilled resources in the construction sector as EU nationals consider the
possible implications and outcomes.
Adjusted gross margin for the year declined to 18.6% (2018: 22.0%). A number
of factors contributed to this decline including poorer than expected levels
of open market sales, especially in the second half of the year. A lack of
sales price growth together with build cost inflation also had a dilutive
effect on margin rate. In addition, we reduced selling prices on a number of
London-located sites to reflect current trading conditions in the capital.
This necessitated a £7.0m charge to reduce the carrying values of those
sites. These downward pressures on gross margin were offset by a higher
year-on-year level of contribution from land sales.
Adjusted operating profit also fell to £133.0m (2018: £182.0m), down to
12.2% (2018: 16.2%). This reduction was principally driven by lower
year-on-year gross profits. We also recorded a charge of £3.2m in the year
relating to a provision for future expected credit losses on recoverable
interest from the Bonner Road joint venture, representing our
latest valuation of that scheme.
Administrative expenses as a percentage of revenue increased to 6.0% (2018:
5.8%). As part of the updated strategy, the business has identified and
implemented an immediate reduction in sales-related costs and overheads. These
represent £9m of annualised savings to be realised in the next financial
year. Additional overhead, specification and build cost savings will be
delivered as part of the operational efficiency programme.
Exceptional item
Following the latest Government guidance notes in respect of combustible
materials, fire risk and protection and regulatory compliance on completed
developments, the Group has recorded an exceptional charge of £18.4m (2018:
£nil). The Group has conducted a detailed review of all current and legacy
buildings impacted, forecasting remediation costs for each building, where
appropriate. Due to the size and nature of the charge management has
considered it appropriate to report this as an exceptional item. See note 4
for further information.
Finance expense and taxation
Net financing expense of £11.0m (2018: £12.0m) is £1.0m lower, primarily
due to lower levels of borrowing using our revolving credit facility
throughout the year, offset by slightly higher rates.
Adjusted income tax expense in the year of £23.7m (2018: £32.1m) represented
an effective tax rate of 19.6% (2018: 19.0%).
Profit before taxation
Adjusted profit before tax for the year of £121.1m (2018: £168.7m) was 28.2%
lower than the prior year. This was due to pressures on margins during the
year, as outlined above. Profit before tax after exceptional items for the
year was £102.7m (2018: £168.7m), reflecting the impact of the one-off
combustible materials charge outlined above.
Dividend
The Board proposes to pay a final dividend of 21.8 pence per share for the
financial year end 31 October 2019 which, subject to shareholder approval, is
expected to be paid on 9 April 2020 to shareholders on the register at the
close of business on 20 March 2020.
We recognise the importance of our dividend policy to shareholders. The
updated strategy has a strong focus on cash generation, supported by a
disciplined approach to capital allocation. We believe there is a significant
opportunity to optimise the use of cash in the business, particularly in
the way we manage our work-in-progress and site completion programmes. Our
revised financial targets forecast the generation of a cash surplus over the
next three years and, subject to no material deterioration in market
conditions, we are committed to paying this dividend in the future as well.
Cash flow and financial position
The Group had net assets at 31 October 2019 of £854.4m (2018: £872.7m),
a decrease of 2.1% on the previous year.
Inventories at 31 October 2019 were £1,151.1m (2018: £1,213.2m), down 5.1%
year-on-year - reflecting lower levels of work in progress at the year end
date. Land inventory continues to represent approximately two-thirds of the
inventory balance.
Stocks of completed units have risen to £207.1m (2018: £168.1m),
principally due to slower than expected open market sales throughout the year.
About one-fifth (2018: one-fifth) of the stock of completed units was
represented by show homes. Our updated strategy places a significant focus on
better stock and working capital management.
Net cash generated from operating activities amounted to an inflow of £125.2m
(2018: £62.3m) as the Group continued its focus on cash generation and
maintaining a robust balance sheet. Reduced operating profit meant the return
on capital employed (ROCE) achieved in the year decreased to 15.9% (2018:
22.2%).
During 2019, the Group extended its bank revolving credit facilities for a
further year to June 2024 (2018: the Group extended its revolving credit
facilities for one year to June 2023). Our current financing facilities
provide adequate liquidity to allow the business to execute its updated
strategy and give the Group appropriate resilience should market conditions
become more challenging.
At 31 October 2019, the Group had net cash of £37.2m (2018: £14.1m) and was
ungeared (2018: ungeared).
Land portfolio and pipeline
The Group has a strong and attractive land portfolio built over many years
through our knowledge, capabilities and relationships with a wide range of
stakeholders. The updated strategy focuses on implementing a more efficient
operating model that converts our land into developments which deliver
attractive returns, by way of either increased margins or ROCE.
The opportunity in our short-term land portfolio remains compelling
with approximately £1.3bn of embedded gross margin, representing 5.8 years
of supply.
2019 2018
Units GDV(1) - £m Units GDV - £m
Short-term housing 16,960 5,417 19,507 6,365
Short-term commercial - 95 - 263
Total short-term 16,960 5,512 19,507 6,628
Strategic land 20,169 6,624 16,837 5,538
Total land pipeline 37,129 12,137 36,344 12,166
(1) 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.
During the year, we added 1,775 further plots to the short-term land
portfolio. This growth predominantly arose in our expanding Midlands division
and included transfers from our strategic portfolios at our Surrey-based
developments, Longcross and Cranleigh. This was offset by the utilisation of
4,322 plots - 2,912 home completions, 419 units transferred to our joint
venture with Sovereign Housing Association, and the remainder being land sales
and other movements across several other sites. Accordingly, our short-term
land portfolio at 31 October 2019 was 16,960 units (2018: 19,507), down 2,547
on prior year.
The ASP of units within the short-term portfolio, including affordable units
and units being sold for private rental, decreased slightly over the year to
£319,000 (2018: £326,000), 2.1% lower than prior year.
The updated strategy clearly outlines our prioritisation for developing our
land - opening a Crest Nicholson outlet and then additional outlets, PRS
developments or bulk deals to RPs, JV developments or an outright disposal of
land. We expect to record a lower level of land contribution in 2020 than in
2019. Any of these land transactions will be subject to a disciplined approach
of capital allocation and a rigorous monitoring of returns.
Duncan Cooper
Group Finance Director
CREST NICHOLSON HOLDINGS PLC
Consolidated Income Statement
For the year ended 31 October 2019
2019 2019 2019 2018
Pre- exceptional item Exceptional item Total (Restated*)
(note 4)
Note £m £m £m £m
Revenue 3 1,086.4 - 1,086.4 1,121.0
Cost of sales (884.5) (18.4) (902.9) (874.1)
Gross profit 201.9 (18.4) 183.5 246.9
Administrative expenses (65.5) - (65.5) (64.9)
Net impairment losses on financial assets 17 (3.4) - (3.4) -
Operating profit 5 133.0 (18.4) 114.6 182.0
Finance income 7 3.6 - 3.6 3.0
Finance expense 7 (14.6) - (14.6) (15.0)
Net finance expense (11.0) - (11.0) (12.0)
Share of post-tax losses of joint ventures using the equity method 13 (0.9) - (0.9) (1.3)
Profit before tax 121.1 (18.4) 102.7 168.7
Income tax expense 8 (23.7) 3.5 (20.2) (32.1)
Profit for the year attributable to equity shareholders 97.4 (14.9) 82.5 136.6
Earnings per ordinary share
Basic 10 38.0p 32.1p 53.3p
Diluted 10 37.9p 32.1p 53.0p
* Restated to reflect the adoption of IFRS 15 with effect from 1 November
2018. See note 29.
CREST NICHOLSON HOLDINGS PLC
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 October 2019
2019 2018
(Restated*)
Note £m £m
Profit for the year attributable to equity shareholders 82.5 136.6
Other comprehensive (expense)/income:
Items that will not be reclassified to the consolidated income statement:
Actuarial (losses)/gains of defined benefit schemes 16 (17.3) 1.3
Change in deferred tax on actuarial (losses)/gains of defined benefit schemes 15 3.3 (0.2)
Other comprehensive (expense)/income for the year net of income tax (14.0) 1.1
Total comprehensive income attributable to equity shareholders 68.5 137.7
* Restated to reflect the adoption of IFRS 15 with effect from 1 November
2018. See note 29.
The notes on pages 21 to 64 form part of these financial statements.
CREST NICHOLSON HOLDINGS PLC
Consolidated Statement of Changes in Equity
For the year ended 31 October 2019
Share capital Share premium account Retained earnings Total equity
Note £m £m £m £m
Balance at 31 October 2017 - Originally reported 12.8 74.1 730.9 817.8
Change in accounting policy 29 - - 0.3 0.3
Balance at 31 October 2017 - Restated* 12.8 74.1 731.2 818.1
Profit for the year attributable to equity shareholders - - 136.6 136.6
Actuarial gains of defined benefit schemes 16 - - 1.3 1.3
Change in deferred tax on actuarial gains of defined benefit schemes 15 - - (0.2) (0.2)
Total comprehensive income for the year - - 137.7 137.7
Transactions with shareholders:
Equity-settled share-based payments 16 - - 2.5 2.5
Deferred tax on equity-settled share-based payments 15 - - (1.0) (1.0)
Share capital issued 23 - 0.1 - 0.1
Dividends paid 9 - - (84.7) (84.7)
Balance at 31 October 2018 12.8 74.2 785.7 872.7
Balance at 31 October 2018 - Originally reported 12.8 74.2 791.6 878.6
Change in accounting policy 29 - - (5.9) (5.9)
Balance at 31 October 2018 - Restated* 12.8 74.2 785.7 872.7
Profit for the year attributable to equity shareholders - - 82.5 82.5
Actuarial losses of defined benefit schemes 16 - - (17.3) (17.3)
Change in deferred tax on actuarial losses of defined benefit schemes 15 - - 3.3 3.3
Total comprehensive income for the year - - 68.5 68.5
Transactions with shareholders:
Equity-settled share-based payments 16 - - (0.4) (0.4)
Deferred tax on equity-settled share-based payments 15 - - 0.2 0.2
Purchase of own shares 23 - - (3.8) (3.8)
Transfers in respect of share options - - 1.9 1.9
Dividends paid 9 - - (84.7) (84.7)
Balance at 31 October 2019 12.8 74.2 767.4 854.4
* Restated to reflect the adoption of IFRS 15 with effect from 1 November
2018. See note 29.
The notes on pages 21 to 64 form part of these financial statements.
CREST NICHOLSON HOLDINGS PLC
Consolidated Statement of Financial Position
As at 31 October 2019
2019 2018
(Restated*)
ASSETS Note £m £m
Non-current assets
Intangible assets 11 29.0 29.0
Property, plant and equipment 12 6.1 4.8
Investments in joint ventures 13 2.0 1.3
Other financial assets** 14 - 7.2
Financial assets at fair value through profit and loss 14 6.2 -
Deferred tax assets 15 6.4 6.0
Retirement benefit surplus 16 - 2.5
Trade and other receivables 17 58.5 59.0
108.2 109.8
Current assets
Inventories 18 1,151.1 1,213.2
Other financial assets** 14 - 3.3
Financial assets at fair value through profit and loss 14 1.0 -
Trade and other receivables 17 145.3 109.9
Cash and cash equivalents 19 170.6 184.3
1,468.0 1,510.7
Total assets 1,576.2 1,620.5
LIABILITIES
Non-current liabilities
Interest-bearing loans and borrowings 20 (131.5) (168.3)
Trade and other payables 21 (149.4) (143.3)
Deferred tax liabilities 15 - (0.5)
Retirement benefit obligations 16 (6.2) -
Provisions 22 (11.8) (0.9)
(298.9) (313.0)
Current liabilities
Interest-bearing loans and borrowings 20 (1.9) (1.9)
Trade and other payables 21 (412.9) (421.4)
Current income tax liabilities (3.2) (9.8)
Provisions 22 (4.9) (1.7)
(422.9) (434.8)
Total liabilities (721.8) (747.8)
Net assets 854.4 872.7
EQUITY
Share capital 23 12.8 12.8
Share premium account 23 74.2 74.2
Retained earnings 767.4 785.7
Total equity 854.4 872.7
* Restated to reflect the adoption of IFRS 15 with effect from 1 November
2018. See note 29.
** IFRS 9 changed other financial assets to financial assets at fair value
through profit and loss.
The notes on pages 21 to 64 form part of these financial statements.
CREST NICHOLSON HOLDINGS PLC
Consolidated Cash Flow STATEMENT
For the year ended 31 October 2019
2019 2018
(Restated*)
Note £m £m
Cash flows from operating activities
Profit for the year attributable to equity shareholders 82.5 136.6
Adjustments for:
Depreciation 12 2.5 1.9
Net finance expense 7 11.0 12.0
Share-based payment (credit)/expense 16 (0.4) 2.5
Share of post-tax loss of joint ventures using the equity method 13 0.9 1.3
Income tax expense 8 20.2 32.1
Operating profit before changes in working capital and provisions 116.7 186.4
Increase in trade and other receivables (11.5) -
Decrease/(increase) in inventories 62.1 (125.9)
Increase in trade and other payables 2.2 57.1
Contribution to retirement benefit obligations (9.0) (9.0)
Cash generated from operations 160.5 108.6
Interest paid (11.1) (10.3)
Taxation paid (24.2) (36.0)
Net cash generated from operating activities 125.2 62.3
Cash flows from investing activities
Purchases of property, plant and equipment (3.8) (2.5)
Disposal of other financial assets** - 5.2
Disposal of financial assets at fair value through profit and loss 3.5 -
Dividends received from joint ventures - 0.8
Net funding to joint ventures (15.1) -
Interest received 0.6 0.4
Net cash (outflow)/inflow from investing activities (14.8) 3.9
Cash flows from financing activities
Repayment of bank and other borrowings (36.9) (1.9)
Proceeds from new loans - 30.0
Debt arrangement and facility fees (0.6) (0.6)
Dividends paid 9 (84.7) (84.7)
Purchase of own shares (3.8) -
Transfers in respect of share options 1.9 -
Net proceeds from the issue of shares - 0.1
Net cash outflow from financing activities (124.1) (57.1)
Net (decrease)/increase in cash and cash equivalents (13.7) 9.1
Cash and cash equivalents at the beginning of the year 184.3 175.2
Cash and cash equivalents at end of the year 19 170.6 184.3
* Restated to reflect the adoption of IFRS 15 with effect from 1 November
2018. See note 29.
** IFRS 9 changed other financial assets to financial assets at fair value
through profit and loss.
The notes on pages 21 to 64 form part of these financial statements.
CREST NICHOLSON HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1 ACCOUNTING POLICIES
Basis of preparation
Crest Nicholson Holdings plc (the 'Company') is a public limited company
incorporated, listed and domiciled in the UK. The address of the registered
office is Crest Nicholson Holdings plc, Crest House, Pyrcroft Road, Chertsey,
Surrey KT16 9GN. 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 (£m).
The Group financial statements have been prepared and approved by the
Directors in accordance with International Financial Reporting Standards
('IFRS') and interpretations issued by the IFRS Interpretations Committee
('IFRS IC') as adopted by the European Union (together 'EU IFRS'), and with
those parts of the Companies Act 2006 applicable to companies reporting under
EU IFRS, 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 on pages 65 to
68.
The preparation of financial statements in conformity with IFRS requires
management 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 management 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 significant effect on the financial statements and
estimates with a significant risk of material adjustment in the next year are
discussed below.
The Group's activities are financed by a combination of ordinary shares, bank
borrowings, senior loan notes and cash in hand. At 31 October 2019 the Group
held cash and cash equivalents of £170.6m (2018: £184.3m) and cash resources
net of borrowings of £37.2m (2018: £14.1m). The Group has operated within
its banking covenants throughout the year, has bank facilities of £250.0m
expiring in June 2024, with £215.0m remaining available for drawdown under
such facilities at 31 October 2019. The Directors reviewed detailed cashflows
and financial forecasts for the next year and summary cashflows and financial
forecasts for the following two years. Throughout this review period the Group
is forecast to operate within its banking covenants and is 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 Group.
The accounting policies set out below have, unless otherwise stated, been
applied consistently to all periods presented in these Group financial
statements.
Adoption of new and revised standards
During the financial year ended 31 October 2019, the Group has adopted and
applied the following standards and amendments issued by the International
Accounting Standards Board (IASB) that are relevant to its operations for the
first time in the year commencing 1 November 2018:
· IFRS 9 'Financial instruments'
· IFRS 15 'Revenue from Contracts with Customers'
· IFRS 2 'Share-based Payment' (amendments) - classification and
measurement of share-based payment transactions
· IAS 28 'Investments in Associates and Joint Ventures'
(amendments) - long-term interests in associates and joint ventures.
· Annual improvements to IFRSs 2014 - 2016 Cycle
In the current year the Group adopted IFRS 9. The impact on Group profit of
adopting IFRS 9 is immaterial with no prior year restatement made in respect
of this change. IFRS 9 changed the presentation in the consolidated statement
of financial position, reclassifying other financial assets to financial
assets at fair value through profit and loss.
Information on the initial application of IFRS 15, including the impact on the
financial position and performance of the Group, can be found in note 29.
The adoption of the other amendments in the year did not have a material
impact on the financial statements.
CREST NICHOLSON HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
Standards and interpretations in issue but not yet effective, or yet to be
endorsed by the European Union
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 Group's lease commitments will be brought
onto the consolidated statement of financial position along with an associated
asset, subject to applying the short-term lease exemption where applicable.
The operating lease rental expense currently charged to operating profit in
the consolidated income statement will be replaced by an amortisation charge
for the right of use assets recognised in operating profit and an interest
charge on the lease liabilities recognised in finance costs. The Group has
carried out a detailed exercise to determine the impact of IFRS 16 on the
Group's financial position and performance based on the lease commitments of
the Group as at 31 October 2019. The Group will adopt the modified
retrospective approach to transition, applying the practical expedients
available under this approach. A right of use asset of around £8.7m will be
recognised on the consolidated statement of financial position, being a £9.5m
asset reduced by the existing £0.8m onerous lease provision transferred from
provisions, with a corresponding lease liability of around £9.6m. The impact
on net assets on transition to IFRS 16 will therefore be a reduction of around
£0.1m. The right of use asset has been calculated with reference to the
practical expedient available under IFRS 16. The approximate impact on
operating profit for the financial year ending 31 October 2020 is an extra
charge of around £0.2m.
The following amendments to standards and interpretations have also been
issued but are not yet effective:
· IFRIC 23 'Uncertainty over Income Tax Treatments'
· Amendments to IAS 19 'Employee Benefits' (amendments) - plan
amendment, curtailment or settlement
· Annual improvements to IFRSs 2015 - 2017 Cycle
· Amendment to IFRS 9, 'Financial Instruments', on prepayment
features with negative compensation and modification of financial liabilities
· Amendments to IFRS 3 'Business Combinations' - definition of a
business
· Amendments to IAS 1 'Presentation of Financial Statements' and
IAS 8 'Accounting Policies, Changes in Accounting Estimates and Errors' on the
definition of material
The Directors do not expect that the adoption of the standards, amendments and
interpretations listed above will have a material impact on the financial
statements of the Group in future periods.
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 interest 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. Unrealised gains on transactions between
the Group and its joint ventures are eliminated on consolidation. Accounting
policies of joint ventures have been changed where necessary, to ensure
consistency with policies adopted by the Group.
CREST NICHOLSON HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
(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.
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 period of 22 years from 24 March 2009, when the goodwill
arose on the acquisition of Castle Bidco Limited. Goodwill is assessed for
impairment at each reporting date. Any impairment loss is recognised
immediately in the consolidated income statement. Goodwill is allocated to
cash-generating units for the purpose of impairment testing. The allocation is
made to those cash-generating units that are expected to benefit from the
business combination in which the goodwill arose.
Revenue and profit recognition
In the current year, the Group adopted IFRS 15 'Revenue from Contracts with
Customers'. The new standard establishes a comprehensive five-step model to
determine the amount and timing of revenue recognised from contracts with
customers. Further information on the adoption of IFRS 15 and the impact on
the financial position and performance of the Group for the prior year can be
found in note 29.
Revenue comprises the fair value of the consideration received or receivable,
net of value added tax, rebates and discounts. The Group does 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. Surpluses or deficits on the disposal of
part exchange properties, which are bought in at their forecast recoverable
amount, are recognised directly within gross profit. Proceeds received on the
disposal of part exchange properties, which is not included in revenue, are
£58.0m (2018: £46.6m). Profit / loss on the disposal of part exchange
properties is not material to the results of the Group.
Under IFRS 15 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 investor as it is
considered that upon transfer of freehold title that the investor controls the
work in progress. Where freehold legal title and control is passed to the
investor, revenue is recognised on any upfront sale of land (where applicable)
and then on the housing units as the build of the related units progress.
Where freehold legal title is not passed to the investor, 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 investor.
The Group previously recognised revenue on affordable and other sales in bulk
on practical completion and when substantially all risks and rewards of
ownership are transferred to the buyer for housing units and on unconditional
exchange of contracts where there is a separate associated land sale
contract.
Under IFRS 15 revenue is recognised on land sales when legal title passes to
the buyer. The Group previously recognised revenue on land sales at the point
of unconditional exchange of contracts.
Under IFRS 15 revenue recognition on commercial property sales is dependent on
freehold legal title being passed to the purchaser, as it is considered that
upon transfer of freehold title that the purchaser controls the work in
progress. Where freehold legal title is passed to the purchaser, revenue is
recognised on any upfront sale of land (where applicable) and then on the
development revenue as the build of the related commercial units progress.
Where freehold legal title is not passed to the purchaser revenue is not
recognised on any upfront sale of land and the revenue on the commercial
property is recognised at handover of completed commercial unit to the
purchaser. The Group previously recognised revenue on commercial property
sales at the point of unconditional exchange of contracts.
Under IFRS15 revenue is recognised on freehold reversion sales when the
purchaser is contractually entitled to the ground rent revenue stream
associated with the units purchased. The Group previously did not recognise
revenue on the disposal of freehold reversions instead being treated as a
reduction in land cost.
Under IFRS15 revenue on specification upgrades paid for by the purchaser or on
the cost of specification upgrades offered to the purchaser as part of the
purchase price is recognised as revenue when legal title passes to the buyer.
The Group previously did not recognise revenue on specification upgrades paid
for by the purchaser or on the cost of specification upgrades offered to the
purchaser as part of the purchase price.
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.
Where the Group performs the role of project manager on joint venture projects
and receives a fee for this service, this fee is recognised within cost of
sales in the year it is receivable. The Group defers recognition of project
management fees in accordance with the Groups interest in the joint venture
where the joint venture capitalises the cost of this fee within its work in
progress. Deferred project management fee income is recognised by the Group in
accordance with revenue recognised on sales made by the joint venture entity.
CREST NICHOLSON HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
Exceptional items
Exceptional items are items of income or expenditure which, in the opinion of
the Directors, are material or unusual in nature or of such significance that
they require separate disclosure on the face of the consolidated income
statement in accordance with IAS 1 'Presentation of Financial Statements'.
Should these items be reversed, disclosure of this would also be as
exceptional items.
Operating leases
Leases in which substantially all the risks and rewards of ownership are
retained by the lessor are classified as operating leases. Operating lease
rentals are charged to the consolidated income statement or work in progress
on a straight line basis over the period of the lease.
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.
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.
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 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 period in which they are
approved by the Company's shareholders.
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 net deficit 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; service costs are spread systematically over
the lives of employees 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)/surplus recognised in the consolidated
statement of financial position represents the (deficit)/surplus of the fair
value of the scheme's assets over the present value of scheme liabilities,
with a 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 schemes 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 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.
Own shares held by Employee Share Ownership Plan trust (ESOP)
Transactions of the Company-sponsored ESOP trust are included in both the
Group financial statements and the Company's own financial statements. The
purchase of shares in the Company by the trust are charged directly to equity.
CREST NICHOLSON HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
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 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.
Inventories
Inventories are stated at the lower of cost and net realisable value ('NRV').
Work in progress and completed buildings including show homes comprises 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 net realisable
value, which includes an assessment of costs of management and resale. Any
profit or loss on the disposal of part exchange properties is recognised
within cost of sales in the consolidated income statement.
Options purchased in respect of land are recognised initially at cost within
inventories. Regular reviews are completed for impairment in the value of
these options, and provisions made accordingly to reflect loss of value. The
impairment reviews consider the period elapsed since the date of the purchase
of the option, given that the option contract has not been exercised at the
review date. Further, the impairment reviews consider the remaining life of
the option, taking into account any concerns over whether the remaining time
available will allow successful exercise of the option.
Land inventories and the associated land payables are recognised in the
consolidated statement of financial position from the date of unconditional
exchange of contracts.
Provision is made for any losses foreseen in completing a site as soon as they
become apparent.
Financial assets
Financial assets are initially recognised at fair value and subsequently
classified into one of the following measurement categories:
- measured at amortised cost;
- measured subsequently at fair value through profit or loss (FVTPL); and
- measured subsequently at fair value through other comprehensive income
(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 net
operating 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 loss (which comprise shared
equity receivables) are classified as being available for sale and initially
recognised at fair value. Changes in fair value relating to the expected
recoverable amount are recognised in the consolidated income statement. In the
prior year financial assets at fair value through profit and loss were
presented as other financial assets with changes in fair value relating to the
expected recoverable amount being recognised in the consolidated income
statement, and changes in fair value arising from a change of discount factor
being recognised in other comprehensive income and accumulated in equity,
until the asset is divested.
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 and other receivables. The amount of the loss is recognised 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. In the prior year, before the implementation
of IFRS 9, trade and other receivables were impaired when there was evidence
that the Group would not be able to collect the amounts due.
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. In the prior year contract assets were presented as
amounts recoverable on contracts.
CREST NICHOLSON HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
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
Borrowings are recognised initially at fair value, net of direct transaction
costs. 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:
- measured at amortised cost; and
- measured subsequently at fair value through profit or loss (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 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 interest expense over the duration of the
deferred period. Before the implementation of IFRS 9 trade and other payables
were stated at their nominal amount which was considered to be their fair
value.
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 in which revenue is recognised over time. Contract liabilities are
recognised initially at their fair value and subsequently measured at
amortised cost using the effective interest method. In the prior year contract
liabilities were presented as payments on account.
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.
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.
Critical accounting estimates and judgements
The preparation of the consolidated financial statements under IFRS requires
management 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 Directors have made no
individual judgements that have a significant impact on the financial
statements. Areas of significant estimation are described below.
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.
Management considers the key sources of estimation uncertainty that has a risk
of causing a material adjustment to the carrying value of assets and
liabilities as described below.
CREST NICHOLSON HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
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 and NRV. On a monthly basis management
update estimates of future revenue and expenditure for each development.
Future revenue and expenditure may differ from estimate which could lead to an
impairment of inventory. Where forecast revenues are lower than forecast
expenditure an inventory provision is made. This provision may be reversed in
subsequent periods if there is evidence of improved revenue or reduced
expenditure forecast on a development. If forecast revenue was 10% lower on
sites within our short-term portfolio as at 31 October 2019, the impact on
profit before tax and inventories would have been £7.5m lower (2018: £4.3m).
Estimation of development profitability
Due to the nature of development activity and, in particular, the length of
the development cycle, the Group has to allocate site-wide development costs
such as infrastructure between units being built and/or completed in the
current year and those for future years. It also has to make estimates of the
cost to complete such developments. 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 up front shared
infrastructure costs to have greater estimation uncertainty than sites of
shorter duration with less infrastructure requirements. If forecast costs were
10% higher on sites which contributed to the year ended 31 October 2019 and
which are forecast to still be in production beyond the year ending 31 October
2021 (2018: beyond the year ending 31 October 2020), profit before tax in the
current year would have been £21.5m (2018: £14.9m) lower.
Combustible materials
The combustible materials provision requires assumptions to be made in the
calculation of the costs of interrogation, replacement materials, works to
complete and disruption to customers, along with the timing of forecast
expenditure. See note 4 for additional details.
Other accounting estimates
Management considers other accounting estimates made in the financial
statements to be related to:
Goodwill
The carrying value of goodwill is substantially dependent on the ability of
the Group to successfully progress its strategic land holdings. Changes to the
planning regime could undermine current assumptions and estimates about the
sites which are expected to be successfully developed. See note 11 for
additional details.
Financial assets at fair value through profit and loss
Financial assets at fair value through profit and loss comprise shared equity
receivables. The estimation of the fair value of future anticipated cash
receipts takes into account the Directors' view of an appropriate discount
rate, future house price movements, receipt timings and default rates.
Directors review the assumptions at each year end. See note 14 for additional
details.
Pension liabilities
In determining the valuation of the pension scheme assets and liabilities, the
Group utilises the services of an actuary. The actuary uses key assumptions
being inflation rate, life expectancy, discount rate, pension growth rates 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.
Share-based payments
Assumptions are made in determining the fair value of employee services
received in exchange for the grant of options under share-based payments
awards at the date of grant, and of the likely outcome of non-market
conditions. See note 16 for additional details.
2 SEGMENTAL ANALYSIS
The Executive Leadership Team (per the Strategic Report), 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
Leadership 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.
CREST NICHOLSON HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
3 REVENUE
Revenue type 2019 2018
(Restated*)
£m £m
Open market housing including specification upgrades 848.3 947.7
Affordable housing 134.2 111.6
Total housing 982.5 1,059.3
Land and commercial sales 99.4 55.7
Freehold reversions 4.5 6.0
Total 1,086.4 1,121.0
* Restated to reflect the adoption of IFRS 15 with effect from 1 November
2018. See note 29.
Timing of revenue recognition 2019 2018
£m £m
Revenue recognised at a point in time 875.3 1,028.5
Revenue recognised over time 211.1 92.5
Total revenue 1,086.4 1,121.0
Proceeds received on the disposal of part exchange properties, which is not
included in revenue, were £58.0m (2018: £46.6m). These have been included
within cost of sales.
* Restated to reflect the adoption of IFRS 15 with effect from 1 November
2018. See note 29.
Assets and liabilities related to contracts with customers 2019 2018
(Restated*)
£m £m
Contract assets (note 17) 70.0 38.1
Contract liabilities (note 21) (33.6) (69.7)
* Restated to reflect the adoption of IFRS 15 with effect from 1 November
2018. See note 29.
Contract assets have increased to £70.0m from £38.1m in 2018, reflecting
more unbilled work in progress on affordable and other sales in bulk at the
year end. This increase is in line with the increased proportion of revenue
recognised over time, which has increased to £211.1m from £92.5m in 2018.
Contract liabilities have reduced to £33.6m from £69.7m in 2018, 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
in which revenue is recognised over time. The reduction is caused by the
timing in 2018 of receipts on certain land and commercial sales.
Based on historical trends, management expects a significant proportion of the
contract liabilities total to be recognised as revenue in the next reporting
period.
4 EXCEPTIONAL ITEM
Following the latest Government guidance notes in respect of combustible
materials, fire risk and protection and regulatory compliance on completed
developments, the Group has recorded an exceptional charge of £18.4m (2018:
£nil). The Group has conducted a detailed review of all current and legacy
buildings to identify those that are impacted and has estimated remediation
costs where a legal or constructive obligation to remediate the buildings
exists. At the year-end remediation is under way on several buildings.
This is a complex calculation considering many different inputs including the
height and square footage of the impacted buildings, costs of interrogation,
estimated costs of replacement materials and labour, the extent of the works
to be complete and potential disruption to customers. In addition
interpretation of these latest guidelines continues to evolve requiring
contemporary reviews of the Group's estimates.
As such this provision represents Management's best estimate of these costs at
31 October 2019. Management will continue to assess the magnitude and
utilisation of this provision in future financial reporting periods and
expects to have completed any remedies within a five-year period.
The combustible materials provision has been included as an exceptional item
due to the size of the provision and the high level of estimation required to
determine the liability.
CREST NICHOLSON HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
5 OPERATING PROFIT BFORE EXCEPTIONAL ITEMS
Operating profit from continuing activities is stated after charging:
2019 2018
£m £m
Inventories expensed in the year (Restated*) 843.5 855.4
Inventories net realisable value provided in the year 7.0 0.4
Staff costs (note 6) 68.8 71.3
Depreciation (note 12) 2.5 1.9
Operating lease rentals
Land and buildings 2.5 2.5
Other operating lease rentals 1.7 1.7
Joint venture project management fees 0.8 0.9
* 2018 restated to reflect the adoption of IFRS 15 with effect from 1 November
2018. See note 29.
Auditors' remuneration £000 £000
Audit of these consolidated financial statements 57 61
Audit of financial statements of subsidiaries pursuant to legislation 396 283
Other non-audit services 57 56
Fees payable to the Group's auditors for non-audit services included £57,000
(2018: £56,000) in respect of an independent review of the half-year results.
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 £20,000 (2018: £23,000) and are met by
the assets of the scheme, and the fees associated with services to Group joint
ventures are £30,500 (2018: £30,750).
6 STAFF NUMBERS AND COSTS
(a) Average monthly number of persons employed by the Group 2019 2018
Number Number
Development 1,005 1,016
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) 2019 2018
£m £m
Wages and salaries 58.6 58.2
Social security costs 7.2 7.6
Other pension costs 3.4 3.0
Share-based payments (note 16) (0.4) 2.5
68.8 71.3
(c) Key management remuneration 2019 2018
£m £m
Salaries and short-term employee benefits 3.4 2.8
Other pension costs - 0.1
Share-based payments 0.1 1.1
3.5 4.0
Key management comprises the Executive Leadership 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.
CREST NICHOLSON HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
(d) Directors' remuneration 2019 2018
£m £m
Salaries and short-term employee benefits 1.9 2.0
Payments to Directors for loss of office 0.5 0.3
Other pension costs - 0.1
Share-based payments 0.2 0.7
2.6 3.1
During the year £0.1m (2018: nil) of accrued payments to Directors for loss
of office were written back as the amount was no longer required.
Further information relating to Directors' remuneration, incentive plans,
share options, pension entitlement and the highest paid Director, appears in
the Directors' Remuneration Report.
7 FINANCE INCOME AND EXPENSE
2019 2018
Finance income £m £m
Interest income 1.3 1.8
Interest on amounts due from joint ventures 2.1 0.4
Interest on financial assets at fair value through profit and loss (note 14) 0.2 0.8
3.6 3.0
Finance expense
Interest on bank loans 10.0 10.7
Revolving credit facility issue costs 0.7 0.7
Interest on deferred land payables 3.5 3.0
Net interest on defined benefit pension plan obligations (note 16) 0.4 0.6
14.6 15.0
Net finance expense 11.0 12.0
8 INCOME TAX EXPENSE
2019 2018
(Restated*)
£m £m
Current tax
UK corporation tax on profits for the year 17.8 28.3
Adjustments in respect of prior periods (0.2) (0.6)
Total current tax 17.6 27.7
Deferred tax
Origination and reversal of temporary differences in the current year 2.6 4.4
Total deferred tax (note 15) 2.6 4.4
Total tax in consolidated income statement 20.2 32.1
* Restated to reflect the adoption of IFRS 15 with effect from 1 November
2018. See note 29.
The effective tax rate for the year is 19.7% (2018: 19.0%), which is higher
than (2018: the same as) the standard rate of UK corporation tax of 19.0%
(2018: 19.0%). The Group expects this profile to continue in future years.
CREST NICHOLSON HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
2019 2018
(Restated*)
Reconciliation of tax charge in the year £m £m
Profit before tax 102.7 168.7
Tax on profit at 19.0% (2018: 19.0%) 19.5 32.1
Effects of:
Expenses not deductible for tax purposes 1.4 1.2
Enhanced tax deductions (0.5) (0.6)
Adjustments in respect of prior periods (0.2) (0.6)
Total tax in consolidated income statement 20.2 32.1
* Restated to reflect the adoption of IFRS 15 with effect from 1 November
2018. See note 29.
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.
9 DIVIDENDS
2019 2018
Dividends recognised as distributions to equity shareholders in the year: £m £m
Prior year final dividend per share of 21.8p (2018: 21.8p) 56.0 56.0
Current year interim dividend per share of 11.2p (2018: 11.2p) 28.7 28.7
84.7 84.7
2019 2018
Dividends declared as distributions to equity shareholders in the year: £m £m
Final dividend for the year ended 31 October 2019 of 21.8p (2018: 21.8p) 56.0 56.0
The proposed final dividend is subject to approval by shareholders at the
Annual General Meeting on 24 March 2020, 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.
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.
CREST NICHOLSON HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
Earnings Weighted average number of ordinary shares Per share amount
£m Number Pence
Year ended 31 October 2019 - Total
Basic earnings per share 82.5 256,630,910 32.1
Dilutive effect of share options - 456,142
Diluted earnings per share 82.5 257,087,052 32.1
Year ended 31 October 2019 - Pre-exceptional items
Basic earnings per share 97.4 256,630,910 38.0
Dilutive effect of share options - 456,142
Diluted earnings per share 97.4 257,087,052 37.9
Year ended 31 October 2018 (Restated*)
Basic earnings per share 136.6 256,199,678 53.3
Dilutive effect of share options - 1,508,898
Diluted earnings per share 136.6 257,708,576 53.0
* Restated to reflect the adoption of IFRS 15 with effect from 1 November
2018. See note 29.
11 INTANGIBLE ASSETS
Goodwill 2019 2018
£m £m
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 Castle Bidco Limited on 24 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 8.50% (2018: 9.05%), covering a period of 22 years from 2009 and based
on current market conditions. 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 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.
CREST NICHOLSON HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
12 PROPERTY, PLANT AND EQUIPMENT
Fixtures and fittings Computer equipment and software Total
£m £m £m
Cost
At 1 November 2017 2.1 7.1 9.2
Additions 0.1 2.4 2.5
Disposals - (0.2) (0.2)
At 31 October 2018 2.2 9.3 11.5
Additions - 3.8 3.8
At 31 October 2019 2.2 13.1 15.3
Accumulated depreciation
At 1 November 2017 0.4 4.6 5.0
Charge for the year 0.2 1.7 1.9
Disposals - (0.2) (0.2)
At 31 October 2018 0.6 6.1 6.7
Charge for the year 0.4 2.1 2.5
At 31 October 2019 1.0 8.2 9.2
Net book value
At 31 October 2019 1.2 4.9 6.1
At 31 October 2018 1.6 3.2 4.8
At 1 November 2017 1.7 2.5 4.2
The Group has contractual commitments for the acquisition of property, plant
and equipment of £nil (2018: £nil).
CREST NICHOLSON HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
13 INVESTMENTS
Investments in joint ventures
Below are the joint ventures that the Directors consider to be material to the
Group.
· 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 2026. 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.
· 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.
The LLP is forecast to start construction in 2020, with sales completion
forecast for 2024. 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 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 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 Limited to procure and develop a site
in Oxfordshire. The LLP commenced construction in 2018, with sales completion
forecast for 2023. 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 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 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 Limited to procure and develop a site
in Oxfordshire. The LLP commenced construction in 2018, with sales completion
forecast for 2023. 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.
2019 2018
(Restated*)
Total investments in joint ventures £m £m
Crest Sovereign (Brooklands) LLP - -
Bonner Road LLP - -
Crest A2D (Walton Court) LLP 0.8 0.8
Elmsbrook (Crest A2D) LLP 1.1 0.2
Other non-material joint ventures 0.1 0.3
Total investments in joint ventures 2.0 1.3
* Restated to reflect the adoption of IFRS 15 with effect from 1 November
2018. See note 29.
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. See note 30 for further details.
CREST NICHOLSON HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
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.
2019 Crest Sovereign (Brooklands) LLP Bonner Road LLP Crest A2D (Walton Court) LLP Elmsbrook (Crest A2D) LLP Other non-material joint ventures Total
£m £m £m £m £m £m
Summarised statement of financial position
Current assets
Cash and cash equivalents 1.5 - 0.3 2.5 1.5 5.8
Inventories 37.0 59.0 30.2 11.4 - 137.6
Other current assets 0.3 - 6.0 0.8 0.3 7.4
Current liabilities
Financial liabilities (2.8) - (1.5) (9.6) (0.7) (14.6)
Other current liabilities (0.8) (0.1) (3.5) (3.0) (0.9) (8.3)
Non-current liabilities
Financial liabilities (36.2) (68.0) (29.9) - - (134.1)
Net (liabilities)/assets (1.0) (9.1) 1.6 2.1 0.2 (6.2)
Reconciliation to carrying amounts
Opening net (liabilities)/assets at 1 November 2018 - (6.5) 1.6 0.3 0.6 (4.0)
(Loss)/profit for the year (1.0) (2.6) 0.5 1.8 (0.4) (1.7)
Capital contribution reserve - - (0.5) - - (0.5)
Closing net (liabilities)/assets at 31 October 2019 (1.0) (9.1) 1.6 2.1 0.2 (6.2)
Group's share in closing net (liabilities)/assets at 31 October 2019 (0.5) (4.6) 0.8 1.1 0.1 (3.1)
Losses recognised against receivable from joint venture 0.5 4.6 - - - 5.1
Group's share in joint venture - - 0.8 1.1 0.1 2.0
Amount due to Crest Nicholson Group (note 17) 19.7 26.4* 9.7 4.8 0.7 61.3
Amount due from Crest Nicholson Group (note 21) - - 4.8 - 0.1 4.9
Summarised income statement
Revenue - - 5.7 11.2 - 16.9
Expenditure - (0.1) (4.5) (9.4) (0.4) (14.4)
Operating (loss)/profit before financing expense - (0.1) 1.2 1.8 (0.4) 2.5
Finance expense (1.0) (2.5) (0.7) - - (4.2)
Pre-tax and post-tax (loss)/profit for the year (1.0) (2.6) 0.5 1.8 (0.4) (1.7)
Group's share in joint venture (loss)/profit for the year (0.5) (1.3) 0.2 0.9 (0.2) (0.9)
* Stated after expected credit loss of £3.2m. See note 17.
CREST NICHOLSON HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
2018 Bonner Road LLP Crest A2D (Walton Court) LLP Elmsbrook (Crest A2D) LLP Other non-material joint ventures Total
(Restated*) (Restated*)
£m £m £m £m £m
Summarised statement of financial position
Current assets
Cash and cash equivalents 0.9 0.3 1.3 2.2 4.7
Inventories 58.2 23.9 7.2 - 89.3
Other current assets 0.1 - 0.8 0.6 1.5
Non-current assets - - - 0.1 0.1
Current liabilities
Financial liabilities - (2.3) - (0.2) (2.5)
Other current liabilities (0.2) (0.4) (2.2) (2.1) (4.9)
Non-current liabilities
Financial liabilities (65.5) (19.9) (6.8) - (92.2)
Net (liabilities)/assets (6.5) 1.6 0.3 0.6 (4.0)
Reconciliation to carrying amounts
Opening net (liabilities)/assets at 1 November 2017 (4.2) 1.4 - 2.1 (0.7)
(Loss)/profit for the year (2.3) (0.7) 0.3 0.1 (2.6)
Dividends paid - - - (1.6) (1.6)
Capital contribution reserve - 0.9 - 0.9
Closing net (liabilities)/assets at 31 October 2018 (6.5) 1.6 0.3 0.6 (4.0)
Group's share in closing net (liabilities)/assets at 31 October 2018 (3.3) 0.8 0.2 0.3 (2.0)
Losses recognised against receivable from joint venture 3.3 - - - 3.3
Group's share in joint venture - 0.8 0.2 0.3 1.3
Amount due to Crest Nicholson Group (note 17) 29.6 11.1 3.6 0.2 44.5
Summarised income statement
Revenue - - 1.9 - 1.9
Expenditure - - (1.5) 0.1 (1.4)
Operating profit before financing expense - - 0.4 0.1 0.5
Finance expense (2.3) (0.7) - - (3.0)
Pre-tax and post-tax (loss)/profit for the year (2.3) (0.7) 0.4 0.1 (2.5)
Group's share in joint venture (loss)/profit for the year (1.2) (0.4) 0.2 0.1 (1.3)
* Restated to reflect the adoption of IFRS 15 with effect from 1 November
2018. See note 29.
Group commitments to joint ventures at 31 October 2019 and 31 October 2018 is
equal to the amounts due to the Crest Nicholson Group. 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.
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 (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 30.
CREST NICHOLSON HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
14 FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT AND LOSS*
2019 2018
£m £m
At beginning of the year 10.5 14.9
Disposals (3.5) (5.2)
Imputed interest 0.2 0.8
At end of the year 7.2 10.5
Of which:
Non-current assets 6.2 7.2
Current assets 1.0 3.3
7.2 10.5
* IFRS 9 changed the presentation in the consolidated statement of financial
position, reclassifying other financial assets to financial assets at fair
value through profit and loss.
Financial assets at fair value through profit and loss (FVTPL) 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.
FVTPL 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.
Assumptions 2019 2018
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
2019 2019
Increase assumptions by 1 %/year Decrease assumptions by 1 %/year
£m £m
Sensitivity - effect on value of FVTPL (less)/more
Discount rate, incorporating default rate (0.2) 0.2
House price inflation for the next three years 0.0 (0.1)
Timing of receipt (0.3) 0.4
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 31 October 2019 was £0.2m (2018: £0.8m).
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
income statement.
CREST NICHOLSON HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
15 DEFERRED TAX ASSETS AND LIABILITIES
Deferred tax assets Inventories fair value Share-based payments Pension deficit Other temporary differences Total
£m £m £m £m £m
At 1 November 2017 7.4 1.9 1.3 0.5 11.1
Consolidated income statement movements (2.2) (0.4) (1.1) (0.2) (3.9)
Equity movements - (1.0) (0.2) - (1.2)
At 31 October 2018 5.2 0.5 - 0.3 6.0
Consolidated income statement movements (1.6) (0.5) (1.7) 1.2 (2.6)
Equity movements - 0.2 2.8 - 3.0
At 31 October 2019 3.6 0.2 1.1 1.5 6.4
Deferred tax liabilities Pension surplus Total
£m £m
At 1 November 2017 - -
Consolidated income statement movements (0.5) (0.5)
At 31 October 2018 (0.5) (0.5)
Equity movements 0.5 0.5
At 31 October 2019 - -
Deferred tax expected to be recovered or settled in less than 12 months is
£1.7m (2018: £1.1m), and in more than 12 months is £4.7m (2018: £4.4m).
At the consolidated statement of financial position date the substantively
enacted future corporation tax rate for FY20 and beyond is 17.0%. The deferred
tax assets have been evaluated at the rates at which they are expected to
reverse based on current forecasts (accounting period ends: 31 October 2020:
17.83% and 31 October 2021 and subsequent: 17.0%). 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 Castle Bidco Limited 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.
CREST NICHOLSON HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
16 EMPLOYEE BENEFITS
(a) Retirement benefit surplus
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 £3.1m
(2018: £2.6m). At the consolidated statement of financial position date there
were no outstanding or prepaid contributions (2018: £nil).
Defined benefit scheme
The Company sponsors the Crest Nicholson Group Pension and Life Assurance
Scheme, a funded defined benefit pension scheme in the UK. The Scheme is
administered within a trust that is legally separate from the Company.
Trustees are appointed by both the Company and the Scheme's members and act in
the interest of the Scheme and all relevant stakeholders, including the
members and the Company. The Trustees are 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 Trustees are required to use
prudent assumptions to value the liabilities and costs of the Scheme whereas
the accounting assumptions must be best estimates.
Responsibility for making good 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 Trustees 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 2018. The actuarial valuation was 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 2018 have been
projected to 31 October 2019 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. At 31 October
2019, the allocation of the Scheme's invested assets was 59% in return seeking
investments, 18% in corporate bonds, 22% in index linked gilts and 1% in cash.
Details of the investment strategy can be found in the Scheme's Statement of
Investment Principles, which the Trustees update 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 case, overall pension
benefits now need to be equalised to eliminate inequalities between males and
females in Guaranteed Minimum Pensions. The Company has always allowed for
this in its accounts by adding a 2% reserve reflecting an approximate estimate
of the additional liability. As a reserve already exists there is no effect on
this year's disclosures. The real cost will be known once the relevant
calculations have been carried out, which is not expected to be for some time.
Once the true cost is known, any difference from the estimated 2% is expected
to flow through other comprehensive income.
2019 2018 2017
£m £m £m
The amounts recognised in the consolidated statement of financial position are
as follows:
Present value of scheme liabilities (216.5) (195.4) (202.5)
Fair value of scheme assets 210.3 197.9 195.3
Net amount recognised at year end ((deficit)/surplus) (6.2) 2.5 (7.2)
The retirement benefit (obligation)/surplus recognised in the consolidated
statement of financial position represents the (deficit)/surplus of the fair
value of the Scheme's assets over the present value of Scheme liabilities. The
rules of the Crest Nicholson Group Pension and Life Assurance Scheme provide
Crest Nicholson 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, any net surplus in the
Scheme is recognised in full. A deferred tax asset of £1.1m (2018: deferred
tax liability £0.5m) has been recognised in the consolidated statement of
financial position.
CREST NICHOLSON HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
The amounts recognised in comprehensive income
are:
The current and past service costs, settlements and curtailments, together
with the net interest expense for the year are included in the consolidated
statement of comprehensive income. Remeasurements of the net defined benefit
(liability)/asset are included in other comprehensive income.
2019 2018
£m £m
Administration expenses (0.6) (0.5)
Net interest income/(expense) 0.2 (0.1)
Expense recognised in the consolidated income statement (0.4) (0.6)
2019 2018
£m £m
Remeasurements of the net (liability)/asset
Return on Scheme assets 4.4 (5.9)
(Loss)/gain arising from changes in financial assumptions (24.5) 1.7
Gain arising from changes in demographic assumptions 2.4 1.1
Experience gain 0.4 4.4
(Loss)/gain recorded in the consolidated statement of comprehensive income (17.3) 1.3
Total defined benefit scheme (loss)/gain (17.7) 0.7
The principal actuarial assumptions used were: 2019 2018
% %
Liability discount rate 1.95 2.80
Inflation assumption - RPI 3.15 3.40
Inflation assumption - CPI 2.35 2.60
Revaluation of deferred pensions 2.35 2.60
Increases for pensions in payment
Benefits accrued in respect of GMP 3.00 3.00
Benefits accrued in excess of GMP pre-1997 3.00 3.00
Benefits accrued post-1997 3.05 3.25
Proportion of employees commuting pension for cash 100.0 100.0
Mortality assumption - pre-retirement AC00 AC00
Mortality assumption - male post-retirement SAPS S2 PMA _LCMI_2017 with smoothing parameter of 8.0 ltr 1.25% SAPS S2 PMA _LCMI_2017 with smoothing parameter of 8.0 ltr 1.5%
Mortality assumption - female post-retirement SAPS S2 PFA_L CMI_2017 with smoothing parameter of 8.0 ltr 1.25% SAPS S2 PFA_L CMI_2017 with smoothing parameter of 8.0 ltr 1.5%
2019 2018
Years Years
Future expected lifetime of current pensioner at age 65
Male aged 65 at year end 23.5 23.6
Female aged 65 at year end 24.5 24.6
Future expected lifetime of future pensioner at age 65
Male aged 45 at year end 24.8 25.2
Female aged 45 at year end 26.0 26.4
CREST NICHOLSON HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
Changes in the present value of assets over the year
2019 2018
£m £m
Fair value of assets at beginning of the year 197.9 195.3
Interest income 5.6 5.4
Return on assets (excluding amount included in net interest expense) 4.4 (5.9)
Contributions from the employer 9.0 9.0
Benefits paid (6.0) (5.4)
Administration expenses (0.6) (0.5)
Fair value of assets at end of the year 210.3 197.9
Changes in the present value of liabilities over the year
2019 2018
£m £m
Liabilities at beginning of the year (195.4) (202.5)
Interest cost (5.4) (5.5)
Remeasurement (losses)/gains
(Loss)/gain arising from changes in financial assumptions (24.5) 1.7
Gain arising from changes in demographic assumptions 2.4 1.1
Experience gains 0.4 4.4
Benefits paid 6.0 5.4
Liabilities at end of the year (216.5) (195.4)
The split of the Scheme's liabilities by category of membership is as follows: 2019 2018
£m £m
Deferred pensioners (123.4) (107.1)
Pensions in payment (93.1) (88.3)
(216.5) (195.4)
2019 2018
Years Years
Average duration of the Scheme's liabilities at the end of the year 17.0 17.0
This can be subdivided as follows:
Deferred pensioners 21.0 21.0
Pensions in payment 12.0 12.0
The major categories of scheme assets are as follows:
2019 2018
£m £m
Return seeking
Overseas equities 14.0 13.1
Other (hedge funds, multi-strategy and absolute return funds) 105.9 91.7
119.9 104.8
Debt instruments
Corporates 36.1 30.4
Index linked 44.9 40.9
81.0 71.3
Other
Cash 1.7 14.2
Insured annuities 7.7 7.6
9.4 21.8
Total market value of assets 210.3 197.9
The Scheme has no investments in the Group or in property occupied by the
Group.
The Group's statutory funding obligation was met as at 31 January 2018 with
the Scheme achieving a 101% funding level on a technical provisions basis. The
Company will continue to fund the Scheme with contributions of £0.75m per
month until the earlier of, 30 June 2022 or the Scheme meeting its funding
objective on a self-sufficiency basis. The Group expects to contribute £9.0m
(2019: £9.0m) to scheme funding in the year ending 31 October 2020.
CREST NICHOLSON HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(continued)
Sensitivity of the liability value to changes in the principal
assumptions
If the discount rate was 0.25% higher/(lower), the Scheme liabilities would
decrease by £8.9m (increase by £9.5m) if all the other assumptions remained
unchanged.
If the inflation assumption was 0.25% higher/(lower), the Scheme liabilities
would increase by £5.2m (decrease by £4.9m) if all the other assumptions
remained unchanged.
If life expectancies were to increase by one year, the scheme liabilities
would increase by £10.6m if all the other assumptions remained unchanged.
CREST NICHOLSON HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
(b) Share-based payments
The Group operates an LTIP, employee share option scheme (ESOS), SAYE and a
deferred bonus plan. Expected volatility for all plans/schemes for the current
and previous year (where applicable) is based on the historical share price
movements of Crest Nicholson Holdings plc since the Company listed in February
2013.
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. Awards
under the plan vest over three years and are subject to three years' service,
and return on capital and profit performance conditions. Options granted under
the plan are exercisable between 3 and 10 years after the date of grant.
Awards may be satisfied by shares held in the employee benefit trust (EBT),
the issue of new shares (directly or to the EBT) or the acquisition of shares
in the market.
Date of grant 27 Feb 2015 26 Feb 2016 28 Feb 2017 28 Feb 2018 22 Mar 2018 16 April 2019 21 June 2019
Options granted 1,270,176 1,075,943 1,266,364 1,112,762 150,898 1,140,962 278,558
Fair value at measurement date £4.02 £5.07 £4.67 £3.89 £3.67 £3.15 £3.15
Share price on date of grant £4.45 £5.62 £5.41 £4.76 £4.54 £4.00 £3.55
Exercise price £0.00 £0.00 £0.00 £0.00 £0.00 £0.00 £0.00
Vesting period 3 years 3 years 3 years 3 years 3 years 3 years 3 years
Expected dividend yield 3.20% 3.50% 5.09% 6.93% 7.27% 8.20% 8.20%
Expected volatility 30.00% 30.00% 45.00% 35.00% 35.00% 35.00% 35.00%
Risk free interest rate 0.86% 0.43% 0.14% 0.84% 0.92% 0.81% 0.81%
Valuation model Binomial Binomial Binomial Binomial Binomial Binomial Binomial
Contractual life from 27 Feb 2015 26 Feb 2016 28 Feb 2017 28 Feb 2018 22 Mar 2018 16 April 2019 21 June 2019
Contractual life to 26 Feb 2025 25 Feb 2026 27 Feb 2027 27 Feb 2028 21 Mar 2028 15 April 2029 20 June 2029
Number of options Number of options Number of options Number of options Number of options Number of options Number of options Total number of options
Movements in the year
Outstanding at 1 November 2017 964,522 927,778 1,194,276 - - - - 3,086,576
Granted during the year - - - 1,112,762 150,898 - - 1,263,660
Exercised during the year (940,586) - - - - - - (940,586)
Lapsed during the year (18,578) (75,089) (255,986) (221,862) - - - (571,515)
Outstanding at 31 October 2018 5,358 852,689 938,290 890,900 150,898 - - 2,838,135
Granted during the year - - - - - 1,140,962 278,558 1,419,520
Exercised during the year (5,358) (198,170) - - - - - (203,528)
Lapsed during the year - (653,001) (218,443) (133,935) (150,898) (79,713) - (1,235,990)
Outstanding at 31 October 2019 - 1,518 719,847 756,965 - 1,061,249 278,558 2,818,137
Exercisable at 31 October 2019 - 1,518 - - - - - 1,518
Exercisable at 31 October 2018 5,358 - - - - - - 5,358
£m £m £m £m £m £m £m Total £m
Charge to income for the current year - - (1.0) (0.2) - - - (1.2)
Charge to income for the prior year 0.4 0.6 0.2 0.2 - - - 1.4
The weighted average exercise price of LTIP options was £nil (2018: £nil).
CREST NICHOLSON HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
Employee share option scheme
This is a limited scheme which represents the balance of shares from the
previous management incentive plan, which vested at admission. The balance of
shares are held by the Group's Employee Share Ownership Trust and certain
options have been granted to Executive Directors and other employees. Options
granted under the plan are exercisable between 2 and 10 years after the date
of grant. The options are valued at the admission price or share price on date
of grant. There are no performance criteria but recipients must remain
employed by the Group on the applicable vesting date.
Date of grant 1 Jun 2018
Options granted 10,000
Fair value at measurement date £0.00
Share price on date of grant £4.40
Exercise price £0.00
Vesting period 2 years
Expected dividend yield N/A
Expected volatility N/A
Risk free interest rate N/A
Valuation model N/A
Contractual life from 1 Jun 2018
Contractual life to 31 May 2028
Movements in the year Number of options Total number of options
Outstanding at 1 November 2017 - -
Granted during the year 10,000 10,000
Outstanding at 31 October 2018 10,000 10,000
Lapsed during the year (10,000) (10,000)
Outstanding at 31 October 2019 - -
Exercisable at 31 October 2019 - -
Exercisable at 31 October 2018 - -
£m £m
Charge to income for the current year - -
Charge to income for the prior year - -
The weighted average exercise price of employee share options was £nil (2018:
£nil).
CREST NICHOLSON HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
Save As You Earn (SAYE)
Executive Directors and eligible employees are invited to make regular monthly
contributions to a Sharesave scheme operated by Equiniti. 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.
Date of grant 15 Jul 16 Jul 1 Aug 3 Aug 26 Jul 30 Jul
2014 2015 2016 2017 2018 2019
Options granted 569,998 257,264 1,208,742 453,663 712,944 935,208
Fair value at measurement date £0.70 £1.03 £1.11 £1.06 £0.52 £0.54
Share price on date of grant £3.44 £5.63 £3.56 £5.41 £3.77 £3.68
Exercise price £2.76 £4.51 £2.86 £4.20 £3.15 £2.86
Vesting period 3 years 3 years 3 years 3 years 3 years 3 years
Expected dividend yield 2.50% 3.00% 4.80% 5.10% 8.76% 8.96%
Expected volatility 28.90% 29.00% 45.00% 35.00% 35.00% 35.00%
Risk free interest rate 1.61% 1.16% 0.19% 0.30% 0.85% 0.38%
Valuation model Binomial Binomial Binomial Binomial Binomial Binomial
Contractual life from 1 Aug 1 Aug 1 Sep 1 Sep 1 Sep 1 Sep
2014 2015 2016 2017 2018 2019
Contractual life to 1 Feb 1 Feb 1 Mar 1 Mar 1 Mar 1 Mar
2018 2019 2020 2021 2022 2023
Movements in the year Number of options Number of options Number of options Number of options Number of options Number of options Total number of options Weighted average exercise price
Outstanding at 1 November 2017 27,384 82,495 1,044,940 448,523 - - 1,603,342 £3.32
Granted during the year - - - - 712,944 - 712,944 £3.15
Exercised during the year (27,366) - (8,390) - - - (35,756) £2.78
Lapsed during the year (18) (11,674) (162,549) (224,791) (31,193) - (430,225) £3.63
Outstanding at 31 October 2018 - 70,821 874,001 223,732 681,751 - 1,850,305 £3.19
Granted during the year - - - - - 935,208 935,208 £2.86
Exercised during the year - - (667,791) - - - (667,791) £2.86
Lapsed during the year - (70,821) (95,277) (76,150) (230,370) (29,888) (502,506) £3.43
Outstanding at 31 October 2019 - - 110,933 147,582 451,381 905,320 1,615,216 £3.06
Exercisable at 31 October 2019 - - 110,933 - - - 110,933
Exercisable at 31 October 2018 - 70,821 - - - - 70,821
£m £m £m £m £m £m Total £m
(Credit)/charge to income for the current year - (0.1) 0.2 (0.1) 0.1 - 0.1
Charge to income for the prior year - - 0.3 - 0.1 - 0.4
CREST NICHOLSON HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
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 1 and 10 years after the date of grant. Deferred bonus plan option
numbers are based on the share price on date of grant.
Date of grant 27 Feb 2015 26 Feb 2016 28 Feb 2017 28 Feb 28 Feb 28 Feb 26 Feb 28 Feb 28 Feb
2018 2018 2018 2019 2019 2019
Options granted 257,219 140,185 133,761 17,720 2,457 188,122 16,040 4,012 50,676
Fair value at measurement date £4.45 £5.62 £5.41 £5.04 £5.04 £4.89 £3.91 £3.91 £3.95
Share price on date of grant £4.45 £5.62 £5.41 £5.04 £5.04 £4.89 £3.91 £3.91 £3.95
Exercise price £0.00 £0.00 £0.00 £0.00 £0.00 £0.00 £0.00 £0.00 £0.00
Vesting period 1 / 3 years 1 / 3 years 1 / 3 years 3 year 1 year 1 / 3 years 3 year 1 year 1 year
Expected dividend yield and volatility N/A 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 N/A
Valuation model N/A N/A N/A N/A N/A N/A N/A N/A N/A
Contractual life from 27 Feb 2015 26 Feb 2016 28 Feb 2017 28 Feb 2018 28 Feb 28 Feb 26 Feb 28 Feb 28 Feb
2018 2018 2019 2019 2019
Contractual life to 26 Feb 2025 25 Feb 2026 27 Feb 2027 26 Feb 2025 27 Feb 27 Feb 25 Feb 27 Feb 27 Feb
2027 2028 2029 2029 2029
Movements in the year Number of options Number of options Number of options Number of options Number of options Number of options Number of options Number of options Number of options Total number of options
Outstanding at 1 November 2017 120,519 83,252 133,761 - - - - - - 337,532
Granted during the year - - - 17,720 2,457 188,122 - - - 208,299
Exercised during the year (120,519) - (43,864) (17,720) (2,457) - - - - (184,560)
Lapsed during the year - - - - - (1,349) - - - (1,349)
Outstanding at 31 October 2018 - 83,252 89,897 - - 186,773 - - - 359,922
Granted during the year - - - - - - 16,040 4,012 50,676 70,728
Exercised during the year - (83,252) - - - (50,951) (16,040) (4,012) - (154,255)
Lapsed during the year - - (5,793) - - - - - (18,816) (24,609)
Outstanding at 31 October 2019 - - 84,104 - - 135,822 - - 31,860 251,786
Exercisable at 31 October 2019 - - - - - - - - - -
Exercisable at 31 October 2018 - - - - - - - - - -
£m £m £m £m £m £m £m £m £m Total £m
Charge to income for the current year - - 0.1 - - 0.3 - - 0.1 0.5
Charge to income for the prior year - 0.1 0.2 0.1 - 0.3 - - - 0.7
The weighted average exercise price of deferred bonus plan share options was
£nil (2018: £nil).
Total share incentive schemes 2019 2018
Movements in the year Number of options Number of options
Outstanding at beginning of the year 5,058,362 5,027,450
Granted during the year 2,425,456 2,194,903
Exercised during the year (1,025,574) (1,160,902)
Lapsed during the year (1,773,105) (1,003,089)
Outstanding at end of the year 4,685,139 5,058,362
Exercisable at end of the year 112,451 76,179
£m £m
(Credit)/charge to income for the year (0.4) 2.5
The weighted average share price at the date of exercise of share options
exercised during the year was £3.69 (2018: £4.77). The options outstanding
had a range of exercise prices of £nil to £4.20 (2018: £nil to £4.51) and
a weighted average remaining contractual life of 6.6 years (2018: 6.0 years).
The gain on shares exercised during the year was £1.9m (2018: £5.4m).
Included within the credit to income for the year is a charge of £0.2m
relating to options to be issued to Peter Truscott.
CREST NICHOLSON HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
17 TRADE AND OTHER RECEIVABLES
2019 2018
(Restated*)
£m £m
Non-current
Trade receivables 5.2 18.3
Loss allowance on trade receivables (0.2) -
Due from joint ventures 56.7 40.7
Loss allowance on amounts due from joint ventures (3.2) -
58.5 59.0
Current
Trade receivables 56.4 54.9
Contract assets** 70.0 38.1
Due from joint ventures 7.8 3.8
Other receivables 7.6 8.9
Prepayments and accrued income 3.5 4.2
145.3 109.9
* Restated to reflect the adoption of IFRS 15 with effect from 1 November
2018. See note 29.
** Contract assets in the prior year were presented as amounts recoverable on
contracts, in accordance with IFRS 15.
Current trade receivables of £17.2m have been collected as of 3 January 2020
(2018: £16.7m collected as of 4 January 2019). The remaining balance is due
according to contractual terms. At the consolidated statement of financial
position date the difference between the fair value of non-current amounts due
from joint ventures and nominal value is £8.1m (2018: £4.1m).
The Group considers the credit quality of financial assets that are neither
past due nor impaired as good. Trade and other receivables mainly comprise
contractual amounts due from housing associations and land sales to other
quoted housebuilders.
Amounts due from joint ventures comprises funding provided on four (2018:
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 £5.1m (2018: £3.3m). See note 13
for additional details on the Group's interests in joint ventures.
Non-current amounts due from joint ventures are stated after an allowance of
£3.2m has been made (2018: £nil) in respect of expected credit losses.
£3.2m (2018: £nil) provision was made during the year, £nil (2018: £nil)
was utilised, and £nil (2018: £nil) provision was released during the year.
Current trade and other receivables are stated after an allowance of £0.2m
(2018: £nil) has been made in respect of expected credit losses. £0.2m
(2018: £nil) provision was made during the year, £nil (2018: £nil) was
utilised, and £nil (2018: £nil) provision was released during the year.
Contract assets are recoverable according to contractual terms and the
expected credit loss is considered immaterial. See note 3 for further details.
The maturity of non-current receivables is as follows:
2019 2018
£m £m
Due between one and two years 9.3 24.0
Due between two and five years 49.2 34.8
Due after five years - 0.2
58.5 59.0
CREST NICHOLSON HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
18 INVENTORIES
2019 2018
(Restated*)
£m £m
Work in progress 917.2 1,011.2
Completed buildings including show homes 207.1 168.1
Part exchange inventories 26.8 33.9
1,151.1 1,213.2
* Restated to reflect the adoption of IFRS 15 with effect from 1 November
2018. See note 29.
Included within inventories is a fair value adjustment of £16.5m (2018:
£24.6m) which arose on the acquisition of Castle Bidco Limited 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. The amount of
fair value provision unwound in cost of sales in the year was £8.1m (2018:
£10.7m). Total inventories of £843.5m (2018: £857.6m) were recognised as
cost of sales in the year. Total inventories are stated net of a net
realisable value provision of £7.8m (2018: £0.8m), mainly relating to legacy
London sites where the market conditions have been more challenging.
19 MOVEMENT IN NET CASH/(DEBT)
2019 Movement 2018
£m £m £m
Cash and cash equivalents 170.6 (13.7) 184.3
Bank loans, senior loan notes and other loans (133.4) 36.8 (170.2)
Net cash 37.2 23.1 14.1
20 INTEREST-BEARING LOANS AND BORROWINGS
2019 2018
£m £m
Non-current
Revolving credit facility 35.0 70.0
Senior loan notes 100.0 100.0
Revolving credit and senior loan notes issue costs (3.5) (3.6)
Other loans - 1.9
131.5 168.3
Current
Other loans 1.9 1.9
There were undrawn amounts of £215.0m (2018: £180.0m) under the revolving
credit facility at the consolidated statement of financial position date.
During the year the Group repaid £35.0m under the revolving credit facility
on the same terms and conditions. See note 24 for additional disclosures.
CREST NICHOLSON HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
21 TRADE AND OTHER PAYABLES
2019 2018
(Restated*)
£m £m
Non-current
Land payables on contractual terms 125.3 123.3
Contract liabilities 1.6 -
Other payables 4.9 6.5
Accruals 17.6 13.5
149.4 143.3
Current
Land payables on contractual terms 91.2 86.4
Other trade payables 38.7 38.0
Contract liabilities** 32.0 69.7
Due to joint ventures 4.9 -
Taxes and social security costs 5.5 2.9
Other payables 6.2 11.0
Accruals 234.4 213.4
412.9 421.4
* Restated to reflect the adoption of IFRS 15 with effect from 1 November
2018. See note 29.
** Contract liabilities in the prior year were presented as payments on
account, in accordance with IFRS 15.
Land payables are recognised from the date of unconditional exchange of
contracts, and represents 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 interest expense through the consolidated income statement. At 31
October 2019 the difference between the fair value and nominal value of
non-current land payables is £6.0m (2018: £7.5m).
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, management expects a significant proportion of the contract
liabilities total to be recognised as revenue in the next reporting period.
Amounts due to joint ventures is interest free and repayable on demand. See
note 13 for additional details on the Group's interests in joint ventures.
Other trade payables mainly comprise amounts due to suppliers and
subcontractors 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.
CREST NICHOLSON HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
22 PROVISIONS
Combustible materials Commercial properties Other provisions Total Commercial properties Other provisions Total
2019 2019 2019 2019 2018 2018 2018
£m £m £m £m £m £m £m
At beginning of the year - 2.2 0.4 2.6 3.5 - 3.5
Provided in the year 18.4 - 1.5 19.9 - 0.4 0.4
Utilised in the year (3.8) (0.9) (0.5) (5.2) (1.3) - (1.3)
Released in the year - (0.5) (0.1) (0.6) - - -
At end of the year 14.6 0.8 1.3 16.7 2.2 0.4 2.6
Of which:
Non-current 11.0 - 0.8 11.8 0.9 - 0.9
Current 3.6 0.8 0.5 4.9 1.3 0.4 1.7
14.6 0.8 1.3 16.7 2.2 0.4 2.6
The Group has recorded a combustible materials exceptional charge in the year
of £18.4m (2018: £nil), of which £14.6m (2018: £nil) is remaining as a
provision at year end. The Group expects to utilise £3.6m of the remaining
provision within one year, and the balance within two to five years. See note
4 for additional details.
Commercial properties reflect rental and other obligations in respect of
commercial properties, and the provision covers the shortfall on commercial
head leases, rates and related service charges for the years the Group
anticipates the leases being onerous. The Group has head leases expiring up to
September 2020.
Other provisions mainly relate to dilapidations on Group offices and loss of
office provisions for former Executives. In the prior year the provisions
mainly relates to a loss of office provision for the former Group Finance
Director.
CREST NICHOLSON HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
23 SHARE CAPITAL
Shares Nominal value Share capital Share premium account
issued
Number Pence £ £
Ordinary shares as at 31 October 2017 255,759,637 5 12,787,981 74,129,478
New share capital 1,160,902 5 58,046 97,738
Ordinary shares as at 31 October 2018 and 31 October 2019 256,920,539 5 12,846,027 74,227,216
Ordinary shares are issued and fully paid. Authorised ordinary shares of 5
pence each are 342,560,719 (2018: 341,049,337).
During the prior year the Company issued the following new ordinary shares of
5 pence each to satisfy share options under the Company's share incentive
schemes.
Shares issued Exercise price Share capital Share premium account
Number Pence £ £
2015 LTIP 940,586 - 47,030 -
2014 SAYE 27,366 276 1,368 74,162
2016 SAYE 8,390 286 420 23,576
2015 Deferred bonus plan 138,239 - 6,912 -
2017 Deferred bonus plan 46,321 - 2,316 -
1,160,902 58,046 97,738
For details of outstanding share options at 31 October 2019 see note 16.
Own shares held
The Group and Company holds shares within the Crest Nicholson Employee Share
Ownership Trust (the 'Trust') for participants of certain
share-based payment schemes. These are held within retained earnings. During
the year 1,031,671 shares were purchased by the Trust for £3.8m (2018: nil
shares, nil cost) and the Trust transferred 1,025,574 (2018: £nil) shares to
employees and directors to satisfy options as detailed in note 16. The number
of shares held within the Trust (Treasury shares) and on which dividends have
been waived, at 31 October 2019 was 144,410 (2018: 138,313). These shares are
held within the financial statements at a cost of £0.5m (2018: nil). The
market value of these shares at 31 October 2019 was £0.6m (2018: £0.5m).
CREST NICHOLSON HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
24 FINANCIAL RISK MANAGEMENT
The Group's financial instruments comprise cash, bank loans, senior loan
notes, trade and other receivables, contract assets, financial assets at fair
value through profit and loss and trade 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 borrowings.
The Group seeks to manage its capital through control of expenditure, dividend
payments and through its banking facilities.
The revolving credit facility 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 £215.0m (2017: £180.0m) under the revolving
credit facility at the consolidated statement of financial position date.
Financial risk
As 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 primarily 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 £170.6m (2018: £184.3m) 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 The Royal Bank of Scotland, 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 £250.0m expiring in June 2024, with £215.0m
remaining available for drawdown under such facilities at 31 October 2019.
Financial assets at fair value through profit and loss, as described in note
14, of £7.2m (2018: £10.5m) 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 and contract assets is
mainly amounts due from housing association sales, land sales and commercial
sales and equates to the Group's exposure to credit risk which is set out in
note 17. Amounts due from joint ventures of £61.3m (2018: £44.5m) is funding
provided on four (2018: three) joint venture developments which are being
project managed by the Group and are subject to contractual arrangements.
Within trade and other receivables the other largest single amount outstanding
at the year end is £14.9m (2018: £11.2m) which is within agreed terms.
The Group considers the credit quality of financial assets that are neither
past due nor impaired as good, as described in note 17.
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 management does not expect any material losses from
non-performance of any counterparties, including in respect of receivables not
yet due. No material financial assets are past due, or are considered to be
impaired as at the consolidated statement of financial position date (2018:
none).
Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its
financial obligations as they fall due.
CREST NICHOLSON HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
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 2019:
2019 Carrying value Contractual cash flows Within 1 year 1-2 years 2-3 years More than 3 years
£m £m £m £m £m £m
Revolving credit facility 35.0 35.1 0.1 - - 35.0
Senior loan notes 100.0 126.6 3.5 3.5 3.5 116.1
Other loans 1.9 1.9 1.9 - - -
Financial liabilities carrying interest 91.3 93.5 20.6 37.5 35.4 -
Financial liabilities carrying no interest 431.9 437.9 359.2 37.0 19.7 22.0
At 31 October 2019 660.1 695.0 385.3 78.0 58.6 173.1
2018 Carrying value Contractual cash flows Within 1 year 1-2 years 2-3 years More than 3 years
£m £m £m £m £m £m
Revolving credit facility 70.0 70.2 0.2 - - 70.0
Senior loan notes 100.0 130.2 3.5 3.5 3.5 119.7
Other loans 3.8 4.0 2.0 2.0 - -
Financial liabilities carrying interest 65.6 68.1 10.8 20.3 37.0 -
Financial liabilities carrying no interest 426.5 434.0 342.8 49.5 23.0 18.7
At 31 October 2018 665.9 706.5 359.3 75.3 63.5 208.4
Other loans (LIFF loans) are development specific loans from the HCA and are
repayable on the earlier of legal completion of related units or long stop
dates. 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 revolving
credit facility is subject to floating interest rates based on LIBOR, and the
LIFF loans are subject to the EU reference rate. 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 £100m of senior loan notes which are at fixed
interest rates. For the year ended 31 October 2019 it is estimated that an
increase of 1% in interest rates applying for the full year would decrease the
Group's PBT by £1.0m (2018: £1.4m).
At 31 October 2019, the interest rate profile of the financial liabilities of
the Group was:
2019 2018
£m £m
Sterling bank borrowings, loan notes and long-term creditors
Floating rate financial liabilities 36.9 73.8
Financial liabilities carrying interest 191.3 165.6
Financial liabilities carrying no interest 431.9 426.5
660.1 665.9
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 38 months (2018: 40 months).
CREST NICHOLSON HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
2019 2018
£m £m
The maturity of the financial liabilities is:
Repayable within one year 377.3 350.7
Repayable between one and two years 72.1 68.4
Repayable between two and five years 144.5 145.5
Repayable after five years 66.2 101.3
660.1 665.9
Fair Values
Financial assets
The Group's financial assets comprise cash equivalents, financial assets at
fair value through profit and loss, trade and other receivables and contract
assets. The carrying amounts of financial assets equate to their fair value.
At 31 October 2019 cash equivalents consisted of sterling cash deposits of
£170.6m (2018: £184.3m), with solicitors and on current account, £7.2m
(2018: £10.5m) of financial assets at fair value through profit and loss,
£139.0m (2018: £120.2m restated to reflect the adoption of IFRS 15 with
effect from 1 November 2018. See note 29) of trade, other receivables and
contract assets, and £61.3m (2018: £44.5m) of amounts due from joint
ventures. 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 comprise the revolving credit facility, loan
notes, other loans, trade payables, loans from joint ventures and accruals,
the carrying amounts of which equate to their fair value. The fair values of
the revolving credit facility, 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:
2019 Nominal interest rate Face Carrying value Fair Maturity
value value
£m £m £m
Revolving credit facility 3 mth LIBOR + 2.15% 35.0 35.0 35.0 2024
Senior loan notes 3.15% - 3.87% 100.0 100.0 100.0 2024-2029
Total non-current interest-bearing loans 135.0 135.0 135.0
LIFF loans EU reference rate + 2.2% 1.9 1.9 1.9 2020
Total current interest-bearing loans 1.9 1.9 1.9
2018 Nominal interest rate Face Carrying value Fair Maturity
value value
£m £m £m
Revolving credit facility 3 mth LIBOR + 2.15% 70.0 70.0 70.0 2023
Senior loan notes 3.15% - 3.87% 100.0 100.0 100.0 2024-2029
LIFF loans EU reference rate + 2.2% 1.9 1.9 1.9 2020
Total non-current interest-bearing loans 171.9 171.9 171.9
LIFF loans EU reference rate + 2.2% 1.9 1.9 1.9 2019
Total current interest-bearing loans 1.9 1.9 1.9
CREST NICHOLSON HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
Financial assets and liabilities by category
2019 2018
(Restated*)
Financial assets £m £m
Sterling cash deposits 170.6 184.3
Trade receivables 61.4 73.2
Amounts due from joint ventures 61.3 44.5
Contract assets** 70.0 38.1
Other receivables 7.6 8.9
Total cash equivalents and trade and other receivables 370.9 349.0
Financial assets at fair value through profit and loss 7.2 10.5
Total financial assets 378.1 359.5
* Restated to reflect the adoption of IFRS 15 with effect from 1 November
2018. See note 29.
** Contract assets in the prior year were amounts recoverable on contracts, in
accordance with IFRS 15.
2019 2018
Financial liabilities £m £m
Revolving credit facility 35.0 70.0
Senior loan notes 100.0 100.0
Other loans 1.9 3.8
Land payments on contractual terms carrying interest 91.3 65.6
Land payments on contractual terms carrying no interest 125.2 144.1
Amounts due to joint ventures 4.9 -
Other trade payables 38.7 38.0
Other payables 11.1 17.5
Accruals 252.0 226.9
Financial liabilities at amortised cost 660.1 665.9
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. Management consider the possibility of a cash outflow in
settlement of performance bonds and other arrangements to be remote.
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
liability within the consolidated statement of financial position. No
contingent liability 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 contingent liability in respect of
such claims has been recognised.
The Group has made a combustible materials provision in the year following the
latest Government guidance notes. This provision is subject to Management
estimates on costs and timing. The Group recognises that guidance in this area
is evolving over time and that assumptions may require revising, resulting in
a further cash outflow. The Group is reviewing the recoverability of costs
incurred from third parties where we have a contractual right to recourse. No
contingent assets have been recognised.
CREST NICHOLSON HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
26 OPERATING LEASES
Outstanding commitments for future minimum lease payments under
non-cancellable operating leases were:
2019 2018
£m £m
Land and buildings
Within one year 1.8 2.5
Less: minimum sub-lease income (0.2) (0.4)
Between one and five years 4.1 4.8
Less: minimum sub-lease income - (0.1)
After five years 0.4 0.9
6.1 7.7
Other
Within one year 1.3 1.7
Between one and five years 0.9 2.1
2.2 3.8
27 NET DEBT AND LAND CREDITORS
2019 2018
£m £m
Cash and cash equivalents 170.6 184.3
Non-current interest-bearing loans and borrowings (131.5) (168.3)
Current interest-bearing loans and borrowings (1.9) (1.9)
Land payments on contractual terms carrying interest (91.3) (65.6)
Land payments on contractual terms carrying no interest (125.2) (144.1)
Total net debt and land creditors (179.3) (195.6)
28 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. There were no other
transactions between the Group and key management personnel in the year.
The Company's Directors and Non-Executive Directors have associations other
than with the Company. From time to time the Group may buy products or
services from 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.
Leslie Van de Walle, Deputy Chairman and Senior Independent Non-Executive
Director is a Non-Executive Director of HSBC UK Bank plc, to which the Group
drew up promissory notes of £nil (2018: £9.3m) and satisfied promissory
notes of £nil (2018: £23.9m).
Stephen Stone, former Non-Executive Chairman, is a Non-Executive Director of
the HBF and the NHBC. The Group paid subscription and other fees during the
year to the HBF of £0.1m (2018: £0.1m) and paid fees (mainly relating to
warranty insurance costs on new homes built) to the NHBC of £2.9m (2018:
£3.9m).
The Group had the following transactions with its joint ventures: (i) the
Group received £2.1m (2018: £0.4m) interest on joint venture funding, (ii)
the Group received £0.8m (2018: £0.9m) in project management fees, (iii)
the amount of outstanding loans due to the Group from joint ventures was
£61.3m (2018: £44.5m), (iv) the amount of outstanding loans due from the
Group to joint ventures was £4.9m (2018: £nil), and, (v) the Group received
a dividend in the prior year of £0.7m.
CREST NICHOLSON HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
29 IMPACT OF CHANGES IN ACCOUNTING POLICIES
IFRS 15: Revenue from Contracts with Customers
IFRS 15: Revenue from Contracts with Customers sets out requirements for
revenue recognition from contracts with customers, using a five-step model to
apportion revenue to individual performance obligations within a contract. The
Group has applied IFRS 15 from 1 November 2018 with comparative results being
restated using the full retrospective transition method.
Adjustments in respect of purchasers' extras and freehold reversions
The Group previously did not recognise revenue on the disposal of freehold
reversions being treated as a reduction in land cost. Under IFRS 15 freehold
reversion disposals are treated as part of revenue when the purchaser is
contractually entitled to the ground rent revenue stream associated with the
units purchased. The Group previously did not recognise revenue on
specification upgrades paid for by the purchaser or on the cost of
specification upgrades offered to the purchaser as part of the purchase price.
Under IFRS 15 specification upgrades are treated as part of revenue.
Adjustments in respect of Land sales
The Group previously recognised revenue on land sales at unconditional
exchange of contracts. Under IFRS 15 revenue is recognised when title passes
to the buyer, which is the point at which the performance obligation is
satisfied. The adjustments below relate to land transactions that were
unconditionally exchanged at period end, but title had not been passed to the
buyer, thus the sale would not be recognised as revenue in the reporting
period under IFRS 15.
Adjustments in respect of revenue recognition on affordable and other sales in
bulk
The Group previously recognised revenue on affordable and other sales in bulk
on practical completion and when substantially all risks and rewards of
ownership are transferred to the buyer for housing units and on unconditional
exchange of contracts where there is a separate associated land sale contract.
Under IFRS 15 revenue recognition on affordable and other sales in bulk is
dependent on freehold legal title being passed to the investor as it is
considered that upon transfer of freehold title that the investor controls the
work in progress, which is the point at which the performance obligation is
satisfied. Where freehold legal title and control is passed to the investor,
revenue is recognised on the upfront sale of land and then on the housing
units as the build of the related units progresses. Where freehold legal title
is not passed to the investor, 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 investor.
CREST NICHOLSON HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
Year ended 31 October 2018
Impact on Consolidated Income Statement Year ended 31 October 2018 as previously reported Adjustments in respect of purchasers' extras and freehold reversions Adjustments in respect of land sales Adjustments in respect of revenue recognition on affordable and other sales in Year ended 31 October 2018 as reported
bulk
£m £m £m £m £m
Revenue 1,136.1 15.4 (25.6) (4.9) 1,121.0
Cost of sales (881.4) (15.4) 18.8 3.9 (874.1)
Gross profit 254.7 - (6.8) (1.0) 246.9
Administrative expenses (64.9) - - - (64.9)
Operating profit 189.8 - (6.8) (1.0) 182.0
Finance income 3.0 - - - 3.0
Finance expense (15.0) - - - (15.0)
Net finance expense (12.0) - - - (12.0)
Share of post-tax results of joint ventures (1.4) - - 0.1 (1.3)
Profit before tax 176.4 - (6.8) (0.9) 168.7
Income tax expense (33.6) - 1.3 0.2 (32.1)
Profit for the year 142.8 - (5.5) (0.7) 136.6
Earnings per ordinary share
Basic 55.7p - (2.1) (0.3) 53.3
Diluted 55.4p - (2.1) (0.3) 53.0
Impact on Consolidated Statement of Changes in Equity Year ended 31 October 2018 as previously reported Adjustments in respect of purchasers' extras and freehold reversions Adjustments in respect of land sales Adjustments in respect of revenue recognition on affordable and other sales in Year ended 31 October 2018 as reported
bulk
£m £m £m £m £m
Balance at 1 November 2017 817.8 - (0.3) 0.6 818.1
Profit for the year 142.8 - (5.5) (0.7) 136.6
Actuarial gains of defined benefit schemes 1.3 - - - 1.3
Change in deferred tax on actuarial gains of defined benefit schemes (0.2) - - - (0.2)
Total comprehensive income for the year 143.9 - (5.5) (0.7) 137.7
Transactions with shareholders:
Equity-settled share-based payments 2.5 - - - 2.5
Deferred tax on equity-settled share-based payments (1.0) - - - (1.0)
Share capital issued 0.1 - - - 0.1
Dividends paid (84.7) - - - (84.7)
Balance at 31 October 2018 878.6 - (5.8) (0.1) 872.7
CREST NICHOLSON HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
Impact on Consolidated Statement of Financial Position Year ended 31 October 2018 as previously reported Adjustments in respect of land sales Adjustments in respect of revenue recognition on affordable and other sales in Year ended 31 October 2018 as reported
bulk
£m £m £m £m
ASSETS
Non-current assets
Intangible assets 29.0 - - 29.0
Property, plant and equipment 4.8 - - 4.8
Investments in joint ventures 1.2 - 0.1 1.3
Other financial assets 7.2 - - 7.2
Deferred tax assets 6.0 - - 6.0
Retirement benefit surplus 2.5 - - 2.5
Trade and other receivables 59.0 - - 59.0
109.7 - 0.1 109.8
Current assets
Inventories 1,186.2 19.3 7.7 1,213.2
Other financial assets 3.3 - - 3.3
Trade and other receivables 93.9 (0.4) 16.4 109.9
Cash and cash equivalents 184.3 - - 184.3
1,467.7 18.9 24.1 1,510.7
Total assets 1,577.4 18.9 24.2 1,620.5
LIABILITIES
Non-current liabilities
Interest-bearing loans and borrowings (168.3) - - (168.3)
Trade and other payables (143.3) - - (143.3)
Deferred tax liabilities (0.5) - - (0.5)
Retirement benefit obligations - - - -
Provisions (0.9) - - (0.9)
(313.0) - - (313.0)
Current liabilities
Interest-bearing loans and borrowings (1.9) - - (1.9)
Trade and other payables (371.0) (26.0) (24.4) (421.4)
Current income tax liabilities (11.2) 1.3 0.1 (9.8)
Provisions (1.7) - - (1.7)
(385.8) (24.7) (24.3) (434.8)
Total liabilities (698.8) (24.7) (24.3) (747.8)
Net assets 878.6 (5.8) (0.1) 872.7
EQUITY
Share capital 12.8 - - 12.8
Share premium account 74.2 - - 74.2
Retained earnings 791.6 (5.8) (0.1) 785.7
Total equity 878.6 (5.8) (0.1) 872.7
Included within trade and other receivables:
Current contract assets 22.1 (0.4) 16.4 38.1
Included within trade and other payables:
Current contract liabilities (19.3) (26.0) (24.4) (69.7)
CREST NICHOLSON HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
Impact on Consolidated Cash Flow Statement Year ended 31 October 2018 as previously reported Adjustments in respect of land sales Adjustments in respect of revenue recognition on affordable and other sales in Year ended 31 October 2018 as reported
bulk
£m £m £m £m
Cash flows from operating activities
Profit for the year attributable to equity shareholders 142.8 (5.5) (0.7) 136.6
Adjustments for:
Depreciation 1.9 - - 1.9
Net finance expense 12.0 - - 12.0
Share-based payment expense 2.5 - - 2.5
Share of post-tax loss of joint ventures 1.4 - (0.1) 1.3
Income tax expense 33.6 (1.3) (0.2) 32.1
Operating profit before changes in working capital and provisions 194.2 (6.8) (1.0) 186.4
Decrease/(increase) in trade and other receivables 2.5 0.4 (2.9) -
Increase in inventories (99.7) (18.8) (7.4) (125.9)
Increase in trade and other payables 20.6 25.2 11.3 57.1
Contribution to retirement benefit obligations (9.0) - - (9.0)
Cash generated from operations 108.6 - - 108.6
Interest paid (10.3) - - (10.3)
Taxation paid (36.0) - - (36.0)
Net cash generated from operating activities 62.3 - - 62.3
Cash flows from investing activities
Purchases of property, plant and equipment (2.5) - - (2.5)
Decrease in other financial assets 5.2 - - 5.2
Dividends received from joint ventures 0.8 - - 0.8
Interest received 0.4 - - 0.4
Net cash inflow from investing activities 3.9 - - 3.9
Cash flows from financing activities
Repayment of bank and other borrowings (1.9) - - (1.9)
Proceeds from new loans 30.0 - - 30.0
Debt arrangement and facility fees (0.6) - - (0.6)
Dividends paid (84.7) - - (84.7)
Net proceeds from the issue of shares 0.1 - - 0.1
Net cash outflow from financing activities (57.1) - - (57.1)
Net increase in cash and cash equivalents 9.1 - - 9.1
Cash and cash equivalents at the beginning of the period 175.2 - - 175.2
Cash and cash equivalents at end of the period 184.3 - - 184.3
CREST NICHOLSON HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
30 GROUP UNDERTAKINGS
In accordance with s409 Companies Act 2006, the following is a list of all the
Group's undertakings at 31 October 2019.
Subsidiary undertakings
At 31 October 2019 the Group had an interest in the below subsidiary
undertakings, which are included in the consolidated financial statements.
Entity name Registered office Place of incorporation Active / dormant Year end date Voting rights and shareholding (direct or indirect)
Bartley Wood Management Services No.2 Limited 1 8 9 31 March 100%
Bath Riverside Estate Management Company Limited 2 8 10 31 October 100%
Bath Riverside Liberty Management Company Limited 2 8 10 31 October 100%
Block F3 Whitelands Park Limited 1 8 10 31 October 100%
Block L1-L3 Whitelands Park Limited 1 8 10 31 October 100%
Brenville Limited 1 8 10 31 October 100%
Brightwells Residential 1 Company Limited 1 8 10 31 October 100%
Brightwells Residential 2 Company Limited 1 8 10 31 October 100%
Bristol Parkway North Limited 1 8 10 31 October 100%
C N Nominees Limited 1 8 10 31 October 100%
Camberley Res No.1 Limited 1 8 10 31 October 100%
Camberley Res No.2 Limited 1 8 10 31 October 100%
Camberley Res No.3 Limited 1 8 10 31 October 100%
Camberley Res No.4 Limited 1 8 10 31 October 100%
Camberley Res No.5 Limited 1 8 10 31 October 100%
Cardiff Freeport Limited 1 8 10 31 October 100%
Castle Bidco plc* 1 8 9 31 October 100%
Clevedon Developments Limited 1 8 10 31 October 100%
Clevedon Investment Limited 1 8 9 31 October 100%
CN Properties Limited 1 8 10 31 October 100%
Crest (Claybury) Limited 1 8 10 31 October 100%
Crest (Napsbury) Limited 1 8 10 31 October 100%
Crest Construction Limited 1 8 10 31 October 100%
Crest Developments Limited 1 8 10 31 October 100%
Crest Estates Limited 1 8 10 31 October 100%
Crest Homes (Chiltern) Limited 1 8 10 31 October 100%
Crest Homes (Eastern) Limited 1 8 10 31 October 100%
Crest Homes (Midlands) Limited 1 8 10 31 October 100%
Crest Homes (Nominees) Limited 1 8 10 31 October 100%
Crest Homes (Nominees No. 2) Limited 1 8 9 31 October 100%
Crest Homes (Northern) Limited 1 8 10 31 October 100%
Crest Homes (South East) Limited 1 8 10 31 October 100%
Crest Homes (South West) Limited 1 8 10 31 October 100%
Crest Homes (South) Limited 1 8 10 31 October 100%
Crest Homes (Wessex) Limited 1 8 10 31 October 100%
Crest Homes (Westerham) Limited 1 8 10 31 October 100%
Crest Homes Limited 1 8 10 31 October 100%
Crest Homes Management Limited 1 8 10 31 October 100%
Crest Manhattan Limited 1 8 10 31 October 100%
Crest Nicholson (Bath Western) Limited 1 8 10 31 October 100%
Crest Nicholson (Bath) Holdings Limited 1 8 10 31 October 100%
*Castle Bidco plc is the only direct holding of Crest Nicholson Holdings plc.
CREST NICHOLSON HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
Entity name Registered office Place of incorporation Active / dormant Year end date Voting rights and shareholding (direct or indirect)
Crest Nicholson (Chiltern) Limited 1 8 10 31 October 100%
Crest Nicholson (Eastern) Limited 1 8 10 31 October 100%
Crest Nicholson (Epsom) Limited 1 8 10 31 October 100%
Crest Nicholson (Henley-on-Thames) Limited 1 8 9 31 October 100%
Crest Nicholson (Highlands Farm) Limited 1 8 10 31 October 100%
Crest Nicholson (Londinium) Limited 1 8 10 31 October 100%
Crest Nicholson (London) Limited 1 8 10 31 October 100%
Crest Nicholson (Midlands) Limited 1 8 10 31 October 100%
Crest Nicholson (Rainsford Road) Limited 1 8 10 31 October 100%
Crest Nicholson (South East) Limited 1 8 10 31 October 100%
Crest Nicholson (South West) Limited 1 8 10 31 October 100%
Crest Nicholson (South) Limited 1 8 10 31 October 100%
Crest Nicholson (Stotfold) Limited 1 8 9 31 October 100%
Crest Nicholson (Wainscott) 1 8 10 31 October 100%
Crest Nicholson (Wessex) Limited 1 8 10 31 October 100%
Crest Nicholson Developments (Chertsey) Limited 1 8 9 31 October 100%
Crest Nicholson Greenwich Limited 1 8 10 31 October 100%
Crest Nicholson Operations Limited 1 8 9 31 October 100%
Crest Nicholson Overseas Limited 1 8 10 31 October 100%
Crest Nicholson Pension Trustee Ltd 1 8 10 31 January 100%
Crest Nicholson plc 1 8 9 31 October 100%
Crest Nicholson Projects Limited 1 8 10 31 October 100%
Crest Nicholson Properties Limited 1 8 10 31 October 100%
Crest Nicholson Quest Trustee Limited 1 8 10 31 October 100%
Crest Nicholson Regeneration Limited 1 8 10 31 October 100%
Crest Nicholson Residential (London) Limited 1 8 10 31 October 100%
Crest Nicholson Residential (Midlands) Limited 1 8 10 31 October 100%
Crest Nicholson Residential (South East) Limited 1 8 10 31 October 100%
Crest Nicholson Residential (South) Limited 1 8 10 31 October 100%
Crest Nicholson Residential Limited 1 8 10 31 October 100%
Crest Nominees Limited 1 8 10 31 October 100%
Crest Partnership Homes Limited 1 8 10 31 October 100%
Crest Strategic Projects Limited 1 8 10 31 October 100%
Dialled Despatches Limited 1 8 10 31 October 100%
Eastern Perspective Management Company Limited 1 8 10 31 October 100%
Essex Brewery (Walthamstow) LLP 1 8 10 31 October 100%
Grassphalte-Gaze Limited 1 8 10 31 October 100%
Landscape Estates Limited 1 8 10 31 October 100%
Mertonplace Limited 1 8 10 31 October 100%
Nicholson Estates (Century House) Limited 1 8 10 31 October 100%
Nicholson Homes Limited 1 8 10 31 October 100%
Park Central Management (Central Plaza) Limited 1 8 10 31 October 100%
Ellis Mews (Park Central) Management Limited 1 8 9 31 October 100%
Park Central Management (Zone 11) Limited 1 8 10 31 October 100%
Park Central Management (Zone 12) Limited 1 8 10 31 October 100%
Park Central Management (Zone 1A North) Limited 1 8 10 31 October 100%
Park Central Management (Zone 1A South) Limited 1 8 10 31 October 100%
Park Central Management (Zone 1B) Limited 1 8 10 31 October 100%
Park Central Management (Zone 3/1) Limited 1 8 10 31 October 100%
CREST NICHOLSON HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
Entity name Registered office Place of incorporation Active / dormant Year end date Voting rights and shareholding (direct or indirect)
Park Central Management (Zone 3/2) Limited 1 8 10 31 October 100%
Park Central Management (Zone 3/3) Limited 1 8 10 31 October 100%
Park Central Management (Zone 3/4) Limited 1 8 10 31 October 100%
Park Central Management (Zone 4/41 & 42) Limited 1 8 10 31 October 100%
Park Central Management (Zone 4/43/44) Limited 1 8 10 31 October 100%
Park Central Management (Zone 5/53) Limited 1 8 10 31 October 100%
Park Central Management (Zone 5/54) Limited 1 8 10 31 October 100%
Park Central Management (Zone 5/55) Limited 1 8 10 31 October 100%
Park Central Management (Zone 6/61-64) Limited 1 8 10 31 October 100%
Park Central Management (Zone 7/9) Limited 1 8 10 31 October 100%
Park Central Management (Zone 8) Limited 1 8 9 31 October 100%
Park Central Management (Zone 9/91) Limited 1 8 10 31 January 100%
The Gloucester Docks Trading Company Limited 1 8 10 31 October 100%
Timberform Building Systems Limited 1 8 10 31 October 100%
Toptool Products Limited 1 8 10 31 October 100%
Yawbrook Limited 1 8 10 31 October 100%
Building 7 Harbourside Management Company Limited 2 8 9 29 October 58.33%
Buildings 3A, 3B & 4 Harbourside Management Company Limited 2 8 10 31 December 83.33%
Harbourside Leisure Management Company Limited 1 8 9 30 December 71.43%
Park West Management Services Limited 1 8 9 31 March 62.00%
CREST NICHOLSON HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
Joint venture undertakings
At 31 October 2019 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.
Entity name Registered office Place of incorporation Active / dormant Year end date Voting rights and shareholding (direct or indirect)
Material joint ventures
Bonner Road LLP 6 8 9 31 March 50%
Crest A2D (Walton Court) LLP 1 8 9 31 March 50%
Crest Sovereign (Brooklands) LLP 5 8 9 30 April 50%
Elmsbrook (Crest A2D) LLP 7 8 9 31 March 50%
Other joint ventures not material to the Group
Brentford Lock Limited 3 8 9 31 December 50%
Crest/Galliford Try (Epsom) LLP 1 8 9 31 October 50%
Crest Nicholson Bioregional Quintain LLP 1 8 9 31 October 50%
Crest Nicholson Bioregional Quintain (Gallions) LLP 1 8 10 31 October 50%
English Land Banking Company Limited 1 8 9 31 October 50%
Haydon Development Company Limited 4 8 9 30 April 21.36%
Kitewood (Cossall) Limited 1 8 9 31 October 50%
North Swindon Development Company Limited 4 8 9 31 October 32.64%
The Century House Property Company Limited 1 8 10 31 October 50%
Registered
office
Place of incorporation Active
/ dormant
1 Crest House, Pyrcroft Road, Chertsey, Surrey KT16 9GN,
UK 8
England
9 active
2 Unit 2 & 3 Beech Court, Wokingham Road, Hurst, Reading RG10 0RU, UK
10 dormant
3 Persimmon House, Fulford, York YO19 4FE, UK
4 6 Drakes Meadow, Penny Lane, Swindon, Wiltshire SN3 3LL, UK
5 Woodlands, 90 Bartholomew Street, Newbury RG14 5EE
6 Level 6, 6 More London Place, Tooley Street, London SE1 2DA
7 The Point, 37 North Wharf Road, London W2 1BD
Joint operations
The Group is party to a joint arrangement with Linden Homes Limited, the
purpose of which is 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 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 2019. 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.
Crest Nicholson Employee Share Ownership Trust
The Group operates The Crest Nicholson Employee Share Ownership Trust, 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 Crest Nicholson Employee Share Ownership Trust falls
within the scope of IFRS 10 Consolidated statements, and is consolidated
within the Group financial statements, as the Group is considered to have
control over the Trust.
CREST NICHOLSON HOLDINGS PLC
COMPANY STATEMENT OF FINANCIAL POSITION
As at 31 October 2019
2019 2018
Note £m £m
ASSETS
Non-current assets
Investments 4 0.6 1.0
Current assets
Trade and other receivables 5 243.9 222.9
TOTAL ASSETS 244.5 223.9
LIABILITIES
Current liabilities
Current income tax liabilities (1.6) (2.1)
TOTAL LIABILITIES (1.6) (2.1)
NET ASSETS 242.9 221.8
SHAREHOLDERS' EQUITY
Share capital 6 12.8 12.8
Share premium account 6 74.2 74.2
Retained earnings:
At 1 November 134.8 209.5
Profit for the year 107.1 10.0
Other changes in retained earnings (86.0) (84.7)
At 31 October 155.9 134.8
TOTAL SHAREHOLDERS' EQUITY 242.9 221.8
The Company recorded a profit for the financial year of £107.1m (2018:
£10.0m).
The notes on pages 67 to 69 form part of these financial statements.
.
CREST NICHOLSON HOLDINGS PLC
COMPANY STATEMENT OF CHANGES IN EQUITY
For the year ended 31 October 2019
Share capital Share premium account Retained earnings Total equity
Note £m £m £m £m
Balance at 1 November 2017 12.8 74.1 209.5 296.4
Profit for the financial year and total comprehensive income - - 10.0 10.0
Transactions with shareholders
Dividends paid 3 - - (84.7) (84.7)
Share capital - 0.1 - 0.1
issued
Balance at 31 October 2018 12.8 74.2 134.8 221.8
Profit for the financial year and total comprehensive income - - 107.1 107.1
Transactions with shareholders
Dividends paid 3 - - (84.7) (84.7)
Exercise of share options through employee benefit trust - - (3.2) (3.2)
Net proceeds from the issue of shares and exercise share options - - 1.9 1.9
Balance at 31 October 2019 12.8 74.2 155.9 242.9
CREST NICHOLSON HOLDINGS PLC
NOTES TO THE COMPANY FINANCIAL STATEMENTS
For the year ended 31 October 2019
1 ACCOUNTING POLICIES
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 Crest House, Pyrcroft Road, Chertsey, Surrey KT16
9GN. 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
management 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 management 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 (£m). 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 IFRS's 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.
The Directors reviewed detailed cashflows and financial forecasts for the next
year and summary cashflows and financial forecasts for the following two
years. 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 accounting policies set out below have, unless otherwise stated, been
applied consistently to all years presented in these financial statements.
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 2018 that had a material impact on the Company.
The principal accounting policies adopted are set out below.
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.
CREST NICHOLSON HOLDINGS PLC
NOTES TO THE COMPANY FINANCIAL STATEMENTS (continued)
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 period in which they are
approved by the Company's shareholders.
Investments
Investments relate to Company contributions to The Crest Nicholson Employee
Share Ownership Trust. The Trust 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:
- measured at amortised cost;
- measured subsequently at fair value through profit or loss ('FVTPL'); and
- measured subsequently at fair value through other comprehensive income
('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 net operating
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:
- measured at amortised cost; and
- measured subsequently at fair value through profit or loss ('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 ESOP trust
Transactions of the Company-sponsored ESOP trust are included in both the
Group financial statements and the Company's own financial statements. The
purchase of shares in the Company by the trust are charged directly to equity.
Audit fee
Auditor's remuneration for audit of these financial statements of
£13,125 (2018: £11,500) 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 FRS101 requires
management 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, apart from those involving estimates, which is described below.
CREST NICHOLSON HOLDINGS PLC
NOTES TO THE COMPANY FINANCIAL STATEMENTS (continued)
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. Management 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.
3 DIVIDENDS
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
2019 2018
£m £m
Investments in shares of subsidiary undertaking at cost at 1 November 1.0 -
Additions 2.8 1.0
Disposals (3.2) -
Investments in shares of subsidiary undertaking at cost at 31 October 0.6 1.0
Additions and disposals in the year relate to Company
contributions/utilisation to/from The Crest Nicholson Employee Share Ownership
Trust.
The Directors believe that the carrying value of the investments is supported
by their underlying assets.
5 TRADE AND OTHER RECEIVABLES
2019 2018
£m £m
Amounts due from Group undertakings 243.9 222.9
Amounts due from Group undertakings are unsecured, repayable on demand and
carry an interest rate of 5.0% (2018: 5.0%).
6 SHARE CAPITAL
The Company share capital is disclosed in note 23 of the consolidated
financial statements.
7 CONTINGENT LIABILITIES
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. Management consider the possibility of a cash outflow in
settlement of performance bonds and other arrangements to be remote.
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.
8 GROUP UNDERTAKINGS
A list of all the Group's undertakings at 31 October 2019 is given in note 30
of the consolidated financial statements.
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