REG - Crest Nicholson Hdgs - Final Results
23/01/2024 07:00
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RNS Number : 5316A Crest Nicholson Holdings PLC 23 January 2024
Crest Nicholson Holdings plc
EARLY SIGNS OF RETURNING CONSUMER CONFIDENCE AND IMPROVING DEMAND
STRONG LAND PORTFOLIO TO SUPPORT GROWTH AMBITIONS
Crest Nicholson Holdings plc ('Crest Nicholson' or 'Group') today announces
its Preliminary Results for the year ended 31 October 2023:
FY23 Financial Summary
· Revenue down 28% at £657.5m (FY22: £913.6m), reflecting the
weakness in the housing market
· Home completions at 2,020 (FY22: 2,734), comprising open market
completions (including bulk deals) of 1,495 (FY22: 2,212) and affordable
completions of 525 (FY22: 522)
· Sales per outlet week (SPOW) of 0.52 (FY22: 0.60) with average
outlets at 47 (FY22: 54).
· Adjusted profit before tax(1) at £41.4m (FY22: £137.8m)
o Following a comprehensive review, additional costs of £5.5m were recorded
at year end relating to Farnham and other legacy and low-margin sites
· Exceptional charge of £13.0m recognised in respect of a legal
claim recently received relating to 2021 fire damage of a low-rise bespoke
apartment scheme built by the Group
· Group's year end net cash(1) position at £64.9m (FY22: £276.5m)
with land creditors at £205.5m (FY22: £198.7m). During the year, the Group
increased investment in WIP and land compared to prior year
· Forward sales as at 19 January 2024 of 1,732 units and £434.9m
Gross Development Value (GDV) (13 January 2023: 2,018 units and £510.8m GDV)
· Proposed final dividend of 11.5 pence per share. Total dividend
for FY23 to be in line with prior year at 17.0 pence per share. The Board
expects to return to its policy of 2.5 times cover going forward
FY23 Operational Summary
· 3,864 plots, (FY22: 2,771 plots) were approved to be added to the
portfolio in FY23 at a forecast gross margin of 25.2% with planning approvals
underway. These sites all provide excellent prospects to support future growth
· Operational review completed and implemented in FY23
o Moderated the pace of growth in Yorkshire - now expecting 300 to 350 units
in 2026
o Incorporated East Anglia division into the existing Eastern division with
revised boundaries
o Aligned headcount and resources in existing divisions to the expected
level of output in FY24
o Expected overhead reduction of £3m in FY24
· Increase in WIP in the year reflecting a more normalised build
level
· Build cost inflation has reduced further from mid-single digit
percentages and we expect this to continue to moderate in FY24
· Significant investment was made in people, process and systems
and as a result we have consistently achieved >90% customer satisfaction
rating since February 2023, on track to return to a five-star rating in the
year to September 2024
· In line with our sustainability targets as we actively
collaborate with our supply chain and wider industry to reduce greenhouse gas
emissions and prepare for upcoming regulations
· Good progress with our fire safety remediation programme
(1. ) Adjusted basis represent the FY23 and FY22 statutory figures adjusted
for exceptional items as disclosed in note 4. Adjusted performance metrics and
net cash are non-statutory alternative performance measures (APMs) used by the
Directors to manage the business which they believe should be shared for a
greater understanding of the performance of the Group. The definitions of
these APMs and the reconciliation to the statutory numbers are included below.
Farnham and other legacy sites
As announced in our November trading statement Brightwells Yard, Farnham
recorded circa £11m incremental build costs in the year. The Group has
subsequently conducted a comprehensive review of the costs to complete this
project as well as our other legacy and low margin sites. Consequently,
further additional costs of £5.5m have been identified, including £2.5m at
Farnham, which have impacted FY23 adjusted profit before tax (APBT). The Group
has commenced a thorough plan to improve commercial processes and controls to
mitigate the risk of future cost overruns. Construction at the Farnham scheme
is now in its final stages.
Exceptional costs
An exceptional charge of £13.0m was recorded for a legal claim the Group
recently received. This relates to a low-rise bespoke apartment block built by
the Group which was damaged by fire in 2021. The building, constructed in
early 2019, is part of a scheme consisting of five low-rise blocks. This is
unrelated to the general fire remediation programme that the Group is
currently delivering.
Building safety
On 13 March 2023 the Group entered into the UK Government's Developer
Remediation Contract. This incorporated into contractual arrangements the
commitments made by the Group under the Building Safety Pledge, signed in
April 2022. This provides clarity for future remediation, particularly with
regards to the standards required for internal and external remedial works on
legacy buildings. The Group has recorded a further charge of £11.3m related
to build costs inflation and scope of work required and recovered £10.0m in
cash from third parties in the year in respect of defective design and
workmanship. The Group has a total provision of £144.8m (FY22: £140.8m).
Current trading and Outlook
We entered the new year with a forward order book which is 52% covered for
FY24 revenue, and have contracted several PRS and private Registered
Providers' partners' deals to be delivered over the next few years. It is
encouraging to see the reduction in mortgage rates, and despite the seasonal
lull, as expected we have seen some uptick in customer activity.
We will continue to maintain a disciplined approach to capital allocation for
FY24. The strength of our land portfolio, supported by recent investment,
means we will be highly selective in land acquisitions and will apply a
rigorous approach to work-in-progress to align with expected sales rates.
Our focus in 2024 is to drive sales and margins growth, controlling costs,
obtaining timely planning consents, restoring five-star customer services and
continue to maintain a robust balance sheet.
Peter Truscott, Chief Executive, commented:
"The combination of challenging trading conditions and incremental cost
movements associated with Farnham and other legacy low-margin sites have led
to a disappointing set of results in FY23. We have proactively streamlined the
business to align with the challenging trading environment and have taken
decisive measures to address operational challenges associated with Farnham
and other legacy sites, implementing strategies to control costs and ensure a
more precise and feasible path towards projects completion.
Recently there has been some positive macro trends with inflation and mortgage
rates falling, which bode well for the housing sector. Although it is too
early to gauge customer behaviour, we have been encouraged by an increase in
customer interest levels and inquiries this calendar year. However, we
remain mindful of ongoing uncertainties within the broader economy.
The medium-term prospects for housing demand remain positive with the
structural under supply of housing, however the challenging planning
environment is likely to slow volume growth in the sector. We have acquired
some excellent sites that are at advanced stages in the planning process, and
have a strong strategic land pipeline, leaving us well positioned for the
future when market conditions improve."
Key financial metrics
£m (unless otherwise stated) FY23 FY22 % change
Adjusted basis(1)
Operating profit 44.2 140.9 (68.6)
Operating profit margin 6.7% 15.4% (870)bps
Profit before tax 41.4 137.8 (70.0)
Basic earnings per share (p) 12.3 42.5 (71.1)
Statutory basis
Revenue 657.5 913.6 (28.0)
Operating profit 29.9 38.4 (22.1)
Operating profit margin 4.5% 4.2% 30bps
Profit before tax 23.1 32.8 (29.6)
Basic earnings per share (p) 7.0 10.3 (32.0)
Other metrics
Home completions (units) 2,020 2,734 (26.1)
Net cash(1,2) 64.9 276.5 (76.5)
Dividend per share (p) 17.0 17.0 0.0
1. Adjusted basis represent the FY23 and FY22 statutory figures adjusted for
exceptional items as disclosed in note 4. Adjusted performance metrics and net
cash are non-statutory alternative performance measures (APMs) used by the
Directors to manage the business which they believe should be shared for a
greater understanding of the performance of the Group. The definitions of
these APMs and the reconciliation to the statutory numbers are included below.
2. Net cash is defined as cash and cash equivalents less interest-bearing
loans and borrowings. See note 19 to the consolidated financial statements.
Analyst and investor meeting, conference call and webcast
There will be a meeting for analysts at 9.00 am today at Norton Rose
Fulbright, 3 More London Riverside, London SE1 2AQ hosted by Peter Truscott,
Chief Executive and Bill Floydd, Group Finance Director.
To join the presentation, please use the following link: Crest FY23 Results
webcast
(https://eur03.safelinks.protection.outlook.com/?url=https%3A%2F%2Fwww.investis-live.com%2Fcrest-nicholson%2F659c198b4f87571200286606%2Ftfds&data=05%7C02%7Cjenny.matthews%40crestnicholson.com%7Cebd8786e300447dc3f0908dc1065ea37%7Cbdd51e2c3db04b59b17d7c70ac9bdec9%7C0%7C0%7C638403277135275558%7CUnknown%7CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXVCI6Mn0%3D%7C3000%7C%7C%7C&sdata=lyw8%2B%2FDWAd30xu3gBWZxPxlaXf5PxKj1xdJSF07tmHc%3D&reserved=0)
There is also a facility to join the presentation and Q&A session via a
conference call. Participants should dial +44 (0)203 936 2999 and use
confirmation code 378512. A playback facility will be available shortly after
the presentation has finished.
For further information, please contact:
Crest Nicholson
Jenny Matthews, Head of Investor Relations
+44 (0) 7557 842720
Teneo
James Macey White / Giles Kernick
+44 (0) 20 7353 4200
23 January 2024
Cautionary statement regarding forward-looking statements
This release may include statements that are, or may be deemed to be,
'forward-looking statements'. These forward-looking statements can be
identified by the use of forward-looking terminology, including the terms
'believes', 'estimates', 'plans', 'projects', 'anticipates', 'expects',
'intends', 'may', 'will' or 'should' or, in each case, their negative or other
variations or comparable terminology, or by discussions of strategy, plans,
objectives, goals, future events or intentions. These forward-looking
statements include all matters that are not historical facts. They appear in a
number of places throughout this release and include, but are not limited to,
statements regarding the Group's intentions, beliefs or current expectations
concerning, among other things, the Group's results of operations, financial
position, liquidity, prospects, growth, strategies and expectations of the
industry.
By their nature, forward-looking statements involve risk and uncertainty
because they relate to future events and circumstances. Forward-looking
statements are not guarantees of future performance and the development of the
markets and the industry in which the Group operates may differ materially
from those described in, or suggested by, any forward-looking statements
contained in this release. In addition, even if the development of the markets
and the industry in which the Group operates are consistent with the
forward-looking statements contained in this release, those developments may
not be indicative of developments in subsequent periods. A number of factors
could cause developments to differ materially from those expressed or implied
by the forward-looking statements including, without limitation, general
economic and business conditions, industry trends, competition, commodity
prices, changes in law or regulation, changes in its business strategy,
political and economic uncertainty. Save as required by the Listing and
Disclosure Guidance and Transparency Rules, the Company is under no obligation
to update the information contained in this release. Past performance cannot
be relied on as a guide to future performance.
Crest Nicholson Holdings plc
Registered no. 6800600
Chief Executive's review
Introduction
The past financial year proved to be one characterised by significant
uncertainty in the housing sector. In contrast to the previous year, which
experienced robust market conditions despite supply chain challenges affecting
home delivery, FY23 saw a reversal of this trend. The sales market weakened
and supply chain pressures gradually eased, leading to a reduction in
inflationary impacts.
While we have encountered challenging conditions, and performance was more
disappointing than anticipated, the Group remained profitable, concluding the
year with a strong balance sheet which facilitated a dividend payout at the
same level as FY22.
The economy and housing market
The housing market showed signs of weakening during late summer and early
autumn of 2022. This downturn was triggered by the poorly received Mini-Budget
from the Truss-Kwarteng Government in September 2022, leading to a significant
and rapid increase in interest rates, causing a temporary collapse in housing
sales. Confidence gradually returned with the establishment of a more stable
Government and the subsequent easing of mortgage rates, resulting in more
steady sales rates by late winter and early spring 2023.
Nevertheless, the market faced additional challenges, including a rise in
interest rates due to persistently high inflation, renewing concerns of
declining house prices. The Bank of England continued to raise interest rates
to control these inflationary pressures.
While there was initially an expectation of significant price reductions,
prices remained stable, followed by modest declines through autumn. Factors
such as high mortgage rates, buyer concerns regarding potential future
decreases in house prices, and the customary summer slowdown contributed to a
period of very low sales rates. As overall economic conditions stabilised,
sales rates slowly improved.
Multi Channel Approach
One of our strategic priorities is the Multi Channel Approach. This approach
serves as a counter-cyclical element during volatile trading environments,
offering increased visibility of revenue in the business. This provides the
Group with resilience and a diversified income stream. Leveraging our highly
experienced Partnerships and Strategic Land (PSL) division, over the past few
years, we have cultivated strategic relationships with institutions and
Registered Providers (RPs). Consequently, we have successfully negotiated and
delivered 273 units for FY23, as well as further units for future
developments.
Build programme
We diligently manage our build programme and work-in-progress. However, due to
supply chain issues in the second half of FY22, we commenced the new financial
year with a lower build position than originally planned. Despite the
challenging sales environment, we seized the opportunity to maintain our
planned production output during the first half of the financial year as more
labour and materials became available. This enabled us to restore a normalised
build activity by the end of FY23.
Build cost inflation remained elevated in the first half of our financial
year. This was due to high energy costs and competitors finishing homes for
their financial year-ends. A positive outlook for housebuilding in the spring
created additional pressure on building supplies. The lagged effect of the
dramatic increase in energy costs from the previous year continued to abate,
and with labour costs moderating, build cost inflation in the second half of
the financial year started to reduce to mid-single digit percentages. We
anticipate this trend will continue into FY24.
Farnham and other legacy sites
As announced in our November trading statement Brightwells Yard, Farnham
recorded c. £11m incremental build costs in the year. The Group has
subsequently conducted a comprehensive review of the costs to complete this
project as well as our other legacy and low margin sites. Consequently,
further additional costs of £5.5m have been identified, including £2.5m at
Farnham, which have impacted FY23 adjusted profit before tax (APBT). The Group
has commenced a thorough plan to improve commercial processes and controls to
mitigate the risk of future cost overruns. Construction at the Farnham scheme
is now in its final stages.
Land and planning
The supply of land continued to tighten due to the Government's decision to
eliminate top-down housing targets, resulting in delays to new site
allocations. This situation is compounded by broader issues within the
planning system, including challenges related to nutrients, water neutrality,
recreational impact zones and air quality constraints. Additionally, there is
an under-resourced and inefficient development control function at the local
authority level.
Against this challenging backdrop, and in the aftermath of a period of acute
economic uncertainty, many of our housebuilding peers signalled their
intention to reduce land activity and withdraw from some land deals. In
contrast, we took the opportunity to acquire several highly desirable sites in
attractive locations, thereby strengthening our land portfolio and securing
favourable economic terms. Our decision to remain active in the land market
positions us to mitigate planning delays, ensuring a higher number of outlets
are in place when market conditions improve. Our land acquisition programme
will remain at a reduced level during FY24.
Accordingly, the Group's year end cash position reduced to £64.9m from
£276.5m in the prior year, reflecting both this investment and
work-in-progress, as referred to earlier.
Streamlining Group operations
In response to the deterioration of trading conditions experienced in the
second half of the year, we have conducted a thorough and diligent review of
all activities within the Group to reduce overheads. It is never easy for
employees during difficult trading conditions, and I would like to thank my
colleagues for their dedication and hard work during these times.
Reduced pace of geographical expansion
In October 2021 we outlined a growth plan for our business involving
geographical expansion, with the aim of increasing the number of our
housebuilding divisions. However, this plan was devised in a stable,
normalised trading environment. Since then, the housebuilding industry has
encountered acute economic challenges and a deteriorating trading environment.
As responsible management, it is necessary to review our business plan to
align with prevailing market conditions.
Yorkshire will remain unaffected given it is now a fully operational, and will
now be expected to grow at a reduced pace, targeting 300 to 350 units per
annum by FY26, instead of 500 units. East Anglia is now covered by our
existing Eastern division and the geographical boundaries have been revised.
The Eastern division is based at Brentwood in Essex and we will retain East
Anglia's satellite office in Bury St Edmunds. As previously announced, we have
postponed the opening of the additional new division.
The revised footprint allows for wider overall coverage and enhanced volumes
and reflects the difficult market conditions in the short term and the
constrained land and planning environment in the medium term.
Costs and overheads
The Group has taken proactive steps to reduce the cost base at the end of FY23
with the revised growth plan as outlined previously and will continue to seek
ways to operate more productively. As announced in our November 2023 Trading
Statement, we have reduced overheads to align with worsening market conditions
and aim to reduce annualised administrative expenses by circa. £3m in FY24.
Consequently, a restructuring charge of £0.5m has been included in our FY23
results.
Combustible materials
On 13 March 2023 the Group entered into the UK Government's Developer
Remediation Contract. This incorporated into contractual arrangements the
commitments made by the Group under the Building Safety Pledge, signed in
April 2022. This agreement regulates a method of building remediation going
forward and sets out the basis of the timing and phasing of the recovery of
funds expended by the Building Safety Fund. It also positively set out a more
balanced and consistent method in assessing building remediations.
During the year we continued to focus on the remediation of affected
buildings, building risk assessments, scoping and design.
We have received some recoveries from subcontractors and suppliers which has
mitigated the impact and our overall fire safety provision remains broadly
unchanged despite the high build cost inflation we have experienced.
Customer experience
In 2022 our customer service standards fell below the level to which we aspire
and understandably, our customers reflected this in lower NHBC Customer
Satisfaction Survey ratings. Following significant investment in FY23, in
people, processes and systems, there are encouraging signs that quality and
customer service standards are improving, and for legal completions from
February 2023, in excess of 90% of customers have said they would recommend
Crest Nicholson to a friend. Sustaining this level and building on the ongoing
efforts to enhance customer experience, positions us well to regain our HBF
five-star status in 2025.
Sustainability progress
Our sustainability strategy is split into three priority areas - protect the
environment, make a positive impact on our communities and operate the
business responsibly. These three priority areas guide our commitment to drive
positive action across our activities and value chain.
We made positive progress against our sustainability targets in FY23,
including a reduction in our greenhouse gas emissions.
We also became a Living Wage Employer and we continued to collaborate with our
supply chain and industry peers on sustainability initiatives and to prepare
for future regulatory changes.
Current trading
We entered FY24 with a forward position at 19 January 2024 of 1,732 units at
£434.9m GDV, reflecting the current challenging environment. We expect
trading conditions will improve towards the second half of 2024 with a strong
pipeline of private rented sector and RPs.
Summary
The last financial year has been amongst the most challenging for the Group
since the Global Financial Crisis in 2008. Against a backdrop of a difficult
market, with significantly reduced housing sales activity and modest low
single digit price falls, our focus and priorities for the future are centred
on supporting our growth strategy. This will preserve and maintain a robust
balance sheet and continue to control our overheads and administrative costs
effectively.
During FY23 we increased investment in work-in-progress and strategically
acquired high quality land to strengthen our land portfolio, supported by our
balance sheet. This strategic move positions the Group to capitalise on growth
when the market returns to a more normalised level. There continues to be a
significant imbalance in the supply and demand of housing in the UK, and this
undersupply is particularly acute in Southern England, where Crest Nicholson
principally operates. With a highly attractive asset base, experienced
management and a strong balance sheet we remain confident in our future growth
prospects.
Outlook
We expect the housing market will remain challenging in 2024 with elevated
interest rates remaining in place until inflation falls to its target level.
In addition, the absence of any Government support for first time buyers,
coupled with higher borrowing costs continues to impact affordability.
However, there are reasons to be optimistic with year-on-year inflation now
halved and real wage growth starting to be felt in households across the UK.
We have acquired some excellent sites that are at advanced stages in the
planning process, leaving us well positioned to trade in whatever market
conditions emerge.
Peter Truscott
Chief Executive
Financial review
As in previous years, the Group continues to report alternative performance
measures relating to sales, return on capital employed and 'adjusted'
performance metrics because of the exceptional items as detailed in note 4 of
the consolidated financial statements. Exceptional items are those which, in
the opinion of the Directors, are material by size and/or non-recurring in
nature and therefore require separate disclosure within the consolidated
income statement in order to assist the users of the financial statements to
better understand the performance of the Group, which is also how the
Directors internally manage the business. Alternative performance measures are
detailed below.
FY23 trading performance
FY23 saw a weakening sales market compared to FY22 which has impacted levels
of demand for new homes. Supply chain pressures, labour inflation and rising
prices of raw materials experienced in FY22 eased during FY23 leading to a
reduction in inflationary impacts during the year, albeit still higher than
average historic rates.
Sales prices remained stable, with modest declines through autumn.
FY23 has been impacted by domestic political uncertainty. At the end of FY22
the Mini-Budget led to rising interest rates resulting in a temporary collapse
in housing sales. Confidence gradually returned to the housing market as
increases in interest rates began to stabilise, with a steadier sales rate
being achieved by spring 2023.
The weakening sales market, driven by domestic economic uncertainty, increases
in interest rates, modest reductions in sales prices, build cost inflation and
ongoing challenges at some of our sites have in combination impacted financial
metrics compared to FY22.
Sales, including joint ventures is down 27.6% on prior year at £692.1m (FY22:
£955.8m). This comprised £657.5m of statutory revenue (FY22: £913.6m) and
£34.6m of the Group's share of revenue through joint ventures (FY22:
£42.2m). The Group entered into a new joint venture in the year that is
expected to start contributing to Group profit in FY24.
The Group delivered 2,020 (FY22: 2,734) home completions during the year, down
26.1% on prior year. 1,495 of these were open market completions (including
bulk deals) (FY22: 2,212), down 32.4% on prior year, with the balance derived
from affordable completions at 525 (FY22: 522), up 0.6% on prior year. Current
and prior year comparative values both state joint ventures at full unit count
and include an allocation for any land sale element that is present in any
relevant completed transaction, referring to this as being on an equivalent
unit basis.
Open market (including bulk) average selling prices increased to £406,000
(FY22: £388,000) during the year due to the mix of units recognised.
Adjusted gross profit was £100.6m (FY22: £194.3m), down 48.3% on prior year,
reflecting the weaker sales environment and build cost challenges. Adjusted
gross margin was down on prior year at 15.3% (FY22: 21.3%). As announced in
our November trading statement Brightwells Yard, Farnham recorded c£11m
incremental build costs in the year. The Group has subsequently conducted a
comprehensive review of the costs to complete this project as well as our
other legacy and low margin sites. Consequently, further additional costs of
£5.5m have been identified, including £2.5m at Farnham, which have impacted
FY23 APBT. The Group has commenced a thorough plan to improve commercial
processes and controls to mitigate the risk of future cost overruns.
Construction at the Farnham scheme is now in its final stages. Gross profit
was £86.3m (FY22: £91.8m), down 6.0% on prior year due to the impact of
significantly higher level of exceptional items in FY22 offset by the impact
of the challenging sales market in FY23.
Net administrative expenses for the year were £55.8m (FY22: £51.1m). With
the expectation of tougher trading conditions, the Group undertook a
rationalisation exercise in the second half including the merger of the East
Anglia division with our Eastern division and the streamlining of operations
which is expected to reduce annualised administrative expenses by circa £3.0m
in FY24. Included within net administrative expenses is a restructuring charge
of £0.5m which was substantially completed at the end of the year.
Net impairment losses on financial assets were £0.6m (2022: £2.3m). The FY22
charge related to the disposal of the Group's 50% share in the joint venture
containing the London Chest Hospital to its joint venture partner.
Adjusted operating profit (or Earnings Before Interest and Tax - EBIT)
decreased in the year to £44.2m (FY22: £140.9m) with EBIT margin decreasing
from 15.4% to 6.7% due to lower revenue falling through to margin. Finally,
APBT for the year was £41.4m (FY22: £137.8m), down 70.0% on prior year and
profit before tax after exceptional items for the year was £23.1m (FY22:
£32.8m), reflecting the impact of the weaker year-on-year operating profit
contribution offset by the exceptional charge outlined below. Operating profit
was £29.9m (FY22: £38.4m), down 22.1% on prior year due to the weaker
trading environment and build cost challenges.
Control environment
Commercial controls in two divisions have not been effective during the year.
Weaknesses were identified in the divisions' management and forecasting of
build costs and margin of which the most material example was in Farnham. At
the end of FY23, the Group completed its rollout of a new ERP system which
going forward will strengthen the key financial and commercial controls that
operate across the business. A new Group Commercial Assurance team has been
established to monitor key commercial controls. In addition, the appointment
of a new Chief Operating Officer from 1 January 2024 will provide additional
group oversight.
Exceptional items
As a consequence of signing the Developer Remediation Contract on 13 March
2023, the Group has entered into contractual commitments with the Government
to identify and remediate those buildings it has developed with possible
life-critical fire safety defects. The combustible materials charge in FY23
represents changes in forecast build costs and in the discount rate applied to
the provision. See notes 4 and 22 of the consolidated financial statements for
additional information.
In FY23 the Group recorded an exceptional total combustible materials related
charge of £5.3m (FY22: £105.0m) representing forecast changes in build costs
and in the provision discount in the year. This total charge is after a
£10.0m cash receipt from a third party relating to buildings included within
the combustible materials provision.
The Group also recognised a charge of £13.0m as it is subject to a legal
claim relating to a low rise apartment, three-storey scheme built by the Group
which was damaged by fire in 2021. Due to the size and nature of the claim,
and in line with the Group's accounting policy, this has been presented as an
exceptional item.
The tax credit on exceptional items is £4.8m (FY22: £22.4m).
Finance expense and taxation
Adjusted net finance expense of £5.5m (FY22: £7.1m) is £1.6m lower
year-on-year, and the Group Revolving Credit Facility (RCF) remained undrawn
for the duration of the year. Net finance expense was £10.1m (FY22: £8.1m).
Income tax charge in the year of £5.2m (FY22: £6.4m) represented an
effective tax rate of 22.5% (FY22: 19.5%). This increase is due to the impact
of changes in UK tax rates. Further detail can be found in note 8 of the
consolidated financial statements.
£250m Revolving Credit Facility
The Group's previous £250m RCF was due to expire in June 2024. During the
prior year we completed a new Sustainability Linked Revolving Credit Facility.
The £250m facility expires in October 2026. It is also linked to the Group's
sustainability strategy with a lower interest payable if certain targets are
achieved. These targets include:
· Reduction in absolute scope 1 and 2 emissions in line with our
science-based targets
· Increasing the number of our suppliers engaging with the Supply
Chain Sustainability School
· Reduction in carbon emissions associated with the use of our
homes
· Increasing the number of our employees in trainee positions and
on training programmes.
For FY23 all targets have been met. This will result in a margin reduction of
0.05%.
Dividend
The Board proposes to pay a final dividend of 11.5 pence per share for the
financial year ended 31 October 2023 which, subject to shareholder approval,
is expected to be paid on 23 April 2024 to shareholders on the Register of
Members on 22 March 2024. This is in addition to the 5.5 pence per share
interim dividend that was paid in October 2023. The Group expects to revert to
its policy of dividend cover of 2.5 times for FY24, having deviated from
policy in FY23 to meet our commitment to maintain the same cash dividend as
FY22.
Financial position
The Group had net cash of £64.9m at 31 October 2023 (FY22: £276.5m). Net
cash and land creditors were £(140.6)m (FY22: £77.8m).
Inventories at 31 October 2023 were £1,164.8m (FY22: £990.1m), up 17.6%
year-on-year. During FY23 the Group increased investment in inventories and
strategically acquired high quality land to strengthen its land portfolio,
supported by its strong balance sheet. This strategic move positions the Group
to capitalise on growth when the market returns to a more normalised level.
Included within this balance is an NRV provision of £20.2m (FY22: £12.6m)
which principally relates to the Group's scheme at Brightwell's Yard, Farnham.
Completed units at 31 October 2023 were £89.6m (FY22: £30.1m). Further
detail on inventory can be found in note 19 of the consolidated financial
statements.
Net cash outflow from operating activities was £165.6m (FY22: £51.7m inflow)
and return on capital employed (ROCE) reduced in the year to 6.3% (FY22:
22.4%), reflecting the decrease in earnings and investment in land. Net assets
at 31 October 2023 were £856.3m (FY22: £883.1m), a decrease of 3.0% on prior
year.
Land portfolio
The supply of land continued to tighten in the year due to the Government
changing the top-down housing targets and planning issues around nutrients,
water neutrality, recreation zones and air quality constraints. With the
uncertain economic outlook during FY23 some developers did not complete
planned acquisitions or temporarily withdrew from the market. The Group took
the opportunity to acquire several highly desirable sites and strengthening
its land portfolio and securing favourable terms. The Group's decision to
remain active in the land market positions it to mitigate planning delays,
ensuring a higher number of outlets are in place when market conditions
improve. The land acquisition programme will remain at a reduced level during
FY24. FY23 average outlets were 47 (FY22: 54) and it is expected that FY24
will be at a similar level, reflecting the backdrop outlined above. 3,864
plots have been approved in FY23 for purchase at a gross margin of 25.2%
(after sales and marketing costs).
The Group's short-term land portfolio at 31 October 2023 comprised 14,922
(FY22: 14,250) plots, representing approximately five years of supply. In
addition, the Group's strategic land portfolio comprised 18,830 plots (FY22:
22,450), resulting in a total land portfolio at 31 October 2023 of 33,752
(FY22: 36,700) plots with a Gross Development Value (GDV) of £12.2bn (FY22:
£12.1bn). During the year the Group added 3,501 units to the short-term land
portfolio and delivered 2,020 home completions.
FY23 FY22
Units(1) GDV(2) - £m Units(1) GDV(2) - £m
Short-term housing 14,922 5,054 14,250 4,661
Short-term commercial - 60 - 41
Total short term 14,922 5,114 14,250 4,702
Strategic land 18,830 7,049 22,450 7,409
Total land pipeline 33,752 12,163 36,700 12,111
(1) Units based on management estimates of site capacity. Includes joint
venture units at full unit count and on an equivalent unit basis which
allocates a proportion of the unit count for a deal to the land sale element
where the deal contains a land sale.
(2) Gross development value (GDV) is a management estimate calculated on the
basis of a number of assumptions, for example, assumed sale price, number of
units within the assumed development and the split between open market and
affordable housing units, and the obtaining of planning permission. These are
management's estimates and do not provide assurance as to the valuation of the
Group's portfolio. Units based on management estimates of site capacity.
Bill Floydd
Group Finance Director
Principal risks
The Group's emerging and principal risks are outlined below. They are
monitored by the Board, the Audit and Risk Committee and the Executive
Leadership Team.
Emerging risks
Emerging risks have the potential to impact our strategy but currently are not
fully defined, or are principal risks, which are particularly elevated or
increasing in velocity.
Our emerging risks are identified through horizon-scanning by the Board and
Executive Leadership Team including in relation to industry and macro-economic
trends. This is supported by our divisional risk review process.
Examples of emerging risks which were considered during the year are:
Economic outlook
We continue to monitor the developing uncertainties surrounding the political
and economic outlook, rising interest rates and mortgage availability, which
could lead to lower sales volumes. As a result we have taken actions to adjust
our strategy and reduce overhead costs.
Build costs
We have continued to review and discuss risks surrounding our build costs
forecasting. Additional oversight controls are being implemented and we are
strengthening our reporting through the ERP system.
Regulatory change
This risk has continued to evolve during the year and impacts us in several
ways. We have continuously reviewed the speed of progress on in-scope remedial
fire safety work in addressing our commitments with the UK Government's
Developer Remediation Contract. There can often be challenges with a shortage
in available fire safety professionals, getting access to sites, including
legal consent, all of which can affect our ability to progress work as quickly
as possible.
Changes to our principal risks
As part of the Group's risk review processes, some risks have evolved during
the year:
· Market conditions - increasing trend
· Supply chain - reducing trend
· Customer service and quality - reducing trend
· Build cost management - increasing trend
· Attracting and retaining our skilled people - reducing trend
· Solvency and liquidity - increasing trend
· Laws, policies and regulations - increasing trend
· Land availability and planning - increasing trend
Principal risks
1. Market conditions
Risk description Actions/mitigations Development in the year
A decline in macro-economic conditions in the UK, which negatively impacts the We continually evaluate our strategy which we can flex and adjust as demand Demand for housing has deteriorated during the year, with significant economic
UK residential property market and reduces the ability for people to buy profiles change. headwinds. Mortgage borrowing has become significantly more expensive with no
homes, either through unemployment or low employment, constraints on mortgage
Government support for first-time buyers.
availability.
Regular sales forecasts and cost reviews to manage potential impact on sales
volumes. We have significantly reduced land activity during the year and have reduced
Decreased sales volumes occurring from a drop in housing demand, could see an
the Group's overhead position. We have incorporated the newly created East
increasing number of units held as unreserved and part exchange stock with a Anglia division into its existing Eastern division with revised boundaries.
potential loss realised on final sales.
Forward sales, land expenditure and work-in-progress are all carefully
monitored to ensure they are aligned to levels of demand.
We continued to build our pipeline of trusted partners and have negotiated
Changes to regulations and taxes, for example Stamp Duty Land Tax and the several bulk deals on appropriate commercial terms with partners which will
impact of Government schemes such as Help to Buy and Equity Loan.
provide volume delivery in future years.
Our Multi Channel Approach gives us access to a range of tenure options and
earning resilience in changing market conditions.
We have introduced a series of new sales products and sales schemes that
reflect current market conditions such as Smart Own and Family Cashback.
We focus on strategic purchase of sites, continued development of shared
ownership models and engagement with a variety of incentive schemes.
The Group has adequate liquidity to deal with all plausible downside market
scenarios and continues to focus and monitor its cash position, ensuring build
We actively develop our sales offering by introducing new and innovative costs and capital outlay match sales demand.
products to reflect the nature of market conditions.
2. Safety, Health & Environment (SHE)
Risk description Actions/mitigations Development in the year
A significant health and safety event could result in a fatality, serious We have effective SHE management systems in place with increased authority for We have increased focus to ensure compliance with subcontractor Risk
injury or a dangerous situation to an individual. divisional build managers and Group SHE advisors to undertake incident Assessment and Method Statements (RAMS).
investigations and
implement follow up actions.
Significant environmental damage could be caused by operations on-site or in
We have expanded reporting of safety performance to help assess root causes.
our offices (for example, water contamination from pollution).
We use external independent safety auditors to conduct regular site safety
reviews as appropriate and without warning. We have continued to expand our training and communications across our build
Lack of recognition of the importance of the wellbeing of employees.
teams and provide regular safety bulletins and
guidance updates.
We have a network of mental health first aiders and a dedicated Employee
These incidents or situations could have an adverse effect on people affected Assistance Programme.
by our actions, our reputation and ability to secure public contracts and/or,
if illegal, prosecution or significant financial losses. We have expanded our network of mental health first aiders across our
divisions.
SHE performance is a bonus metric target used across the Group.
Where appropriate, interim risk mitigation solutions have been deployed in
buildings where fire safety concerns have been identified. Delivering on our commitments contained in Developer Remediation Contract, the
Group has
continued to identify and risk assess any buildings impacted by possible
safety issues.
3. Supply chain
Risk description Actions/mitigations Development in the year
Changing production levels across the industry put pressure on our materials Established long-term relationships with our supply chain partners through Access to site labour and materials through the supply chain has improved
supply chain. Group trading agreements and multi-year subcontractor framework agreements. throughout the year due to reducing inflation and lower production levels. We
continued to focus on price competitiveness through re-tendering, quality and
improved product selection.
The industry struggles to attract the next generation of talent into skilled We engage in dialogue with major suppliers to understand critical supply chain
trade professions. The labour market may not have the knowledge and skills risks and respond effectively.
required to deliver modern methods of construction projects.
Where possible and appropriate we forward order materials to secure supply and
also utilise alternative products if they are available and it is appropriate
to do so.
We have developed effective procurement schedules to mitigate supply
Materials availability can be impacted by changes in demand, rising energy challenges.
prices and dislocation in supply chains due to external events.
Different construction methods are considered such as timber frame or using
There may be a risk of suppliers and subcontractors facing insolvency due to alternative materials such as concrete bricks.
adverse economic conditions.
4. Customer service and quality
Risk description Actions/mitigations Development in the year
Customer service and build quality falls below our required standards, We continue to focus on enhancing build quality, achieving high customer We have continued to enhance our quality processes and have recruited
resulting in reduction of reputation and trust, which could impact sales and satisfaction ratings and a retained commitment to excellent placemaking. additional resources to support the quality improvements.
volumes.
Enhanced quality and build stage inspections to monitor adherence to our We have developed processes and introduced new technology to support new
Unforeseen product safety or quality issues or latent defects emerge due to quality standards. regulatory requirements for the Future Homes Standard - Part L.
new construction methods.
Our Legacy Collection house type range established that reduces complexity and We implemented the requirements of the New Homes Quality Code in February 2023
Failure to effectively implement or comply with new regulations on build drives improvements in quality. and made significant changes to our customer service processes and systems
quality or customer service requirements and respond to emerging technologies
which are subject to further ongoing review and monitoring.
There is a central team of quality assurance and customer relationship
managers to cover all divisions. We have introduced a wider range of options and extras for customers and
deployed a 24-hour web chat service along with online home demonstrations.
Customer service and quality performance is a bonus metric target used across
the Group.
5. Build cost management
Risk description Actions/mitigations Development in the year
Build cost inflation and unforeseen cost increases driven by demands in the We benchmark our costs against existing sites to ensure rates remain We have continued to monitor our build costs closely, ensuring effective
supply chain or failure to implement adequate cost control systems. competitive. management of inventory levels and competitive re-tendering through the supply
chain.
Lack of awareness and understanding of external factors that may impact build A fair and competitive tender process is in place and we are committed to
costs including complex planning permissions and emerging sustainability and paying our suppliers and subcontractors promptly. We completed the implementation of COINS, our new ERP platform. This has
environmental regulations.
enhanced the reporting and visibility of build costs across the Group. We are
enhancing the independent assurance of build costs reporting through a
centralised second line commercial team providing periodic review and advisory
There are regular divisional build cost review processes and site-based support to the divisions.
A lack of quality in the build process could expose the Group to increased quality reviews.
costs, reduced selling price and volume, and impact our reputation.
We continue to investigate alternative sources of supply where possible and
utilise alternative production methods or materials where it is appropriate to
do so.
6. Information security and business continuity
Risk description Actions/mitigations Development in the year
Cyber security risks such as data breaches, ransomware or phishing attacks We employ network security measures and intrusion detection monitoring, We continued to utilise a Security Operations Centre to monitor our networks
leading to the loss of operational systems, market-sensitive information or including virus protection on all computers and systems, and have enhanced our security policies and procedures with further training
other critical data which risks non-compliance with data privacy requirements.
for employees.
and carry out annual security-breach tests.
This in turn could result in a higher risk of fraud and, as a result,
We have also provided executive level training to the Board on Cyber security.
financial penalties and an impact to reputation. We utilise customer relationship management systems for storing sensitive data
to prevent negligent misuse by employees. We operate in a cloud environment
with resilient IT providers, reducing centralised and physical risk exposure.
We continued to review emerging risks, such as Artificial Intelligence and
have developed policies to ensure appropriate use in the organisation.
This is complemented by employee training on data protection and internet
security, data classification, retention policies and toolsets with
appropriate and responsive procedures embedded to respond to data privacy
matters; and IT disaster recovery and business continuity plans. The IT Cyber
Security and Data Sub-Board Committee, chaired by the Group Finance Director
meets throughout the year to address cyber security matters, assess threat
levels and develop appropriate policies and procedures.
We are Cyber Essentials Plus certified and are subject to regular external and
internal audit review.
7. Attracting and retaining our skilled people
Risk description Actions/mitigations Development in the year
An increasing skills gap in the industry at all levels resulting in difficulty Employee engagement surveys to enable the Board and ELT to understand employee Continued to evolve our people strategy and have expanded the range of
with recruiting the right and diverse mix of people for vacant positions. feedback. leadership and personal skills training across the Group.
Employee turnover and requirement to induct and embed new employees, alongside Continual focus on improving flexible and agile working arrangements to We became Gold Accredited through The 5% Club in respect to our recruitment
the cost of wages increasing as a result of inflation.
and development of trainees.
support employees.
Loss of knowledge within the Group which could result in inefficiencies,
Developed our diversity and inclusion policies and initiatives and have held a
productivity loss, delays to business operations, increasing costs, and an Programmes of work to develop robust succession plans and improve diversity number of executive sponsored Affinity Group meetings.
overuse or reliance on consultants and the supply chain. and inclusion across the Group.
Established the Women in the Workplace forum.
Ensuring we have the right culture and environment to attract and retain We monitor pay structures and market trends to ensure we remain competitive
talent. against our competitors.
We have implemented a new enterprise wide talent management, recruitment, HR
and payroll system this year
We monitor employee turnover, absence statistics and feedback from exit
interviews.
8. Solvency and liquidity
Risk description Actions/mitigations Development in the year
Cash generation for the Group is a key part of our strategy and our cash Cash performance is measured against forecast with a variance analysis issued While net cash has reduced in the year, the Group continued to benefit from a
headroom could be affected by economic pressures that result in delayed weekly. Cash performance is also considered in detail at a divisional board strong balance sheet with diverse sources of funding.
receipts and potentially lower sales in the short to medium term. level.
We continued to stress test the Group's financial resilience for various
Commitments to significant land and build obligations that are made ahead of We scrutinise the cash terms of land transactions. Private Rented Sector and scenarios and are satisfied that adequate funding is in place. We have
revenue certainty. bulk sales offer us the potential for early cash inflow. maintained a disciplined focus on cash performance and capital allocation
throughout the year.
Reduction in margins as average selling prices fall, inability to restructure The Group has available the use of a £250m Sustainability Linked Revolving
appropriately and unsustainable levels of work-in-progress. Credit Facility (RCF).
We generally control strategic land rather than own it and have limited
capital tied up on the balance sheet. These sites are subject to regular
review and diligent appraisal before
being drawn down.
9. Laws, policies and regulations
Risk description Actions/mitigations Development in the year
The housebuilding industry is subject to complex regulation, policy changes We engage with the Government directly and through the HBF, various The pace of regulatory reform has continued to increase in the housebuilding
and Government intervention. memberships of Industry groups and build relationships in key local authority industry.
areas.
Future regulatory changes could impact our ability to make medium and
We are developing our operating framework to support various regulatory
longer-term decisions. We continue to assess and plan for emerging regulation and developments in requirements.
readiness for potential regulatory change.
Failure to effectively implement new regulations including the Future Homes Implemented the New Homes Quality Code and relaunched the standard housing
Standard, the Environment Act 2021, New Homes Quality Code and the Building range in the spring to comply with Phase 1 of the Future Homes standard.
Safety Act 2022 could impact the Group.
10. Climate change
Risk description Actions/mitigations Development in the year
The Group will need to further enhance its sustainable practices and processes Our Sustainability Committee oversees our sustainability strategy, including Implemented the interim update to Part L of the Building Regulations, which
as we transition to a net-zero carbon business by 2045 and continue to meet our approach to climate change. The Committee monitors performance against our requires a 31% reduction in carbon emissions compared to the prior
evolving Government regulations and growing investor expectations. climate targets and assesses climate-related risks and opportunities. regulations.
Climate change could impact our business through transition and physical We are members of the Future Homes Hub, an industry-wide initiative to support Continued to collaborate with our energy assessors, supply chain and wider
risks. the implementation of the Future Homes Delivery Plan to meet climate and industry to prepare for the Future Homes Standard.
environmental targets. We also have internal workstreams to plan for new
regulations, including the Future Homes Standard.
Transition risks include increasing regulatory change, increased carbon Our Sustainability Linked RCF incorporated targets to reduce GHG emissions
pricing and shifts in stakeholder preferences.
associated with our operations and the use of our homes. We achieved both RCF
Near and long-term science-based targets are in place, driving action to climate-related targets.
reduce GHG emissions.
Physical risks are direct impacts from a changing climate including rising
temperatures and changing weather patterns.
Executive Directors have GHG emission reduction targets within their Long-Term
Incentive Plan.
Failure to manage climate-related risks could lead to additional costs, build
programme delays and damage to our reputation.
11. Land availability and planning
Risk description Actions/mitigations Development in the year
Maintaining a supply of suitable strategic and consented land at the right Expertise within our Land teams to ensure we acquire sites in the best Our strategy has increased focus on achieving planning consent on land under
economic terms to support our growth ambitions. locations and that allow us to demonstrate our placemaking credentials. our control as we have reduced land acquisitions and acquiring new sites.
Acquired land is delayed in the planning process where local authorities and Formal relationships with key land suppliers, landowners and agents and local The planning process continues to be highly complex and time consuming with
public sector resources are constrained. authorities. ongoing demands relating to affordable housing, Section 106 obligations and
the community infrastructure levy. There has been a particular challenge in
some of our divisions regarding nutrients and water neutrality which has
impacted the speed of planning approvals.
The regulatory planning and environmental requirements continue to evolve with Land acquisitions are subject to formal appraisal and viability assessment
the national policy framework developments. Environmental requirements such as prior to bid submission and exchange of contracts. These complexities increase the cost of development and the time taken to move
nutrients, water neutrality and biodiversity obligations are increasing. This
land through the planning process, which is also impacted by resource
increases the constraints in local authority planning departments.
challenge of providing quality and affordable homes in the locations required. The planning status of all our sites are regularly reviewed.
We undertake close consultation with the Government on planning reform.
12. Combustible materials
Risk description Actions/mitigations Development in the year
Failure to plan and implement the changes required by the Government in A dedicated specialist team is in place with controls and processes in respect The Group continued to review the risk register of legacy buildings in scope,
respect of combustible materials and fire safety in a timely manner, which of combustible materials. There is a regular review process in place which is assessing the latest guidelines against each affected building, advice from
could significantly impact our reputation. overseen by the Chief Executive, Group Finance Director and the internal technical or legal advisors along with relevant notifications from a variety
project team responsible for this area. of stakeholders. We monitor and report progress of remedial work to DLUHC on a
periodic basis. Management has considered the progress of any remedial works
and adjusted the financial provision to reflect the Group's best estimate of
This is a complex area where it is often difficult to identify and implement
any future costs. We continue to review the appropriateness of our combustible
remedies quickly. The rapidly changing landscape of regulatory guidance and There is a detailed risk register of all schemes under review including any materials provision.
the need to engage with multiple stakeholders contribute to this complexity, safety considerations, recent customer or stakeholder correspondence and
as does the limited availability of qualified resource to oversee work considers how the Group may choose to respond. In addition, the central team
performed. Given this, costs can be difficult to estimate and could be subject assesses whether faulty workmanship or design was a factor in the potential
to considerable variability and Government legislation, or regulation could remedial works, and, if appropriate, seeks to recover these costs directly The Board signed the Developers Remediation contract and we are now
further change increasing the scope of legacy buildings and from the subcontractor or consultant involved, or through engagement of
external legal counsel. contractually obligated to the pledge.
required remedial works.
Statement of Directors' responsibilities in respect of the financial
statements
The Directors are responsible for preparing the Annual Report and financial
statements in accordance with applicable law and regulation.
Company law requires the Directors to prepare financial statements for each
financial year. Under that law the Directors have prepared the Group financial
statements in accordance with UK-adopted international accounting standards
and the Company financial statements in accordance with United Kingdom
Generally Accepted Accounting Practice (United Kingdom Accounting Standards,
comprising FRS 101 'Reduced Disclosure Framework', and applicable law).
Under company law, Directors must not approve the financial statements unless
they are satisfied that they give a true and fair view of the state of affairs
of the Group and Company and of the profit or loss of the Group for that
period. In preparing the financial statements, the Directors are required to:
· Select suitable accounting policies and then apply them
consistently
· State whether applicable UK-adopted international accounting
standards have been followed for the Group financial statements and United
Kingdom Accounting Standards, comprising FRS 101 have been followed for the
Company financial statements, subject to any material departures disclosed and
explained in the financial statements
· Make judgements and accounting estimates that are reasonable and
prudent, and
· Prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Group and Company will continue
in business.
The Directors are responsible for safeguarding the assets of the Group and
Company and hence for taking reasonable steps for the prevention and detection
of fraud and other irregularities.
The Directors are also responsible for keeping adequate accounting records
that are sufficient to show and explain the Group's and Company's transactions
and disclose with reasonable accuracy at any time the financial position of
the Group and Company and enable them to ensure that the financial statements
and the Directors' Remuneration Report comply with the Companies Act 2006.
The Directors are responsible for the maintenance and integrity of the
Company's website. Legislation in the United Kingdom governing the preparation
and dissemination of financial statements may differ from legislation in other
jurisdictions.
Directors' confirmations
The Directors consider that the Annual Report and financial statements, taken
as a whole, is fair, balanced and understandable and provides the information
necessary for shareholders to assess the Group's and Company's position and
performance, business model and strategy.
Each of the Directors, whose names and functions are listed on pages 56 to 57
of our 2023 Annual Report and financial statements to be published in February
2023 confirm that, to the best of their knowledge:
· The Group financial statements, which have been prepared in
accordance with UK-adopted international accounting standards, give a true and
fair view of the assets, liabilities, financial position and profit of the
Group
· The Company financial statements, which have been prepared in
accordance with United Kingdom Accounting Standards, comprising FRS 101, give
a true and fair view of the assets, liabilities and financial position of the
Company, and
· The Strategic Report includes a fair review of the development
and performance of the business and the position of the Group and Company,
together with a description of the principal risks and uncertainties that it
faces.
In the case of each Director in office at the date the Directors' Report is
approved:
· So far as the Director is aware, there is no relevant audit
information of which the Group's and Company's auditors are unaware, and
· They have taken all the steps that they ought to have taken as a
Director in order to make themselves aware of any relevant audit information
and to establish that the Group's and Company's auditors are aware of that
information.
On behalf of the Board
Peter Truscott
Chief Executive
23 January 2024
audited financial information
The consolidated financial statements and notes 1 to 28 for the year ended 31
October 2023 are derived from the Group's annual financial statements which
have been audited by PricewaterhouseCoopers LLP. The unmodified audit report
is available for inspection at the Group's registered office.
CREST NICHOLSON HOLDINGS PLC
Consolidated Income Statement
For the year ended 31 October 2023
2023 2023 2023 2022 2022 2022
Pre- exceptional items Exceptional items Total Pre- exceptional items Exceptional items Total
(note 4) (note 4)
Note £m £m £m £m £m £m
Revenue 3 657.5 - 657.5 913.6 - 913.6
Cost of sales (556.9) (14.3) (571.2) (719.3) (102.5) (821.8)
Gross profit/(loss) 100.6 (14.3) 86.3 194.3 (102.5) 91.8
Net administrative expenses 5 (55.8) - (55.8) (51.1) - (51.1)
Net impairment losses on financial assets 17 (0.6) - (0.6) (2.3) - (2.3)
Operating profit/(loss) 5 44.2 (14.3) 29.9 140.9 (102.5) 38.4
Finance income 7 4.1 - 4.1 3.1 - 3.1
Finance expense 7 (9.6) (4.6) (14.2) (10.2) (1.0) (11.2)
Net finance expense (5.5) (4.6) (10.1) (7.1) (1.0) (8.1)
Share of post-tax profits/(losses) of joint ventures using the equity method 14 2.7 0.6 3.3 4.0 (1.5) 2.5
Profit/(loss) before tax 41.4 (18.3) 23.1 137.8 (105.0) 32.8
Income tax (expense)/credit 8 (10.0) 4.8 (5.2) (28.8) 22.4 (6.4)
Profit/(loss) for the year attributable to equity shareholders 31.4 (13.5) 17.9 109.0 (82.6) 26.4
Earnings per ordinary share
Basic 10 12.3p 7.0p 42.5p 10.3p
Diluted 10 12.2p 7.0p 42.3p 10.2p
The notes below form part of these consolidated financial statements.
CREST NICHOLSON HOLDINGS PLC
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 October 2023
2023 2022
Note £m £m
Profit for the year attributable to equity shareholders 17.9 26.4
Other comprehensive (expense)/income:
Items that will not be reclassified to the consolidated income statement:
Actuarial losses of defined benefit schemes 16 (2.5) (8.4)
Change in deferred tax on actuarial losses of defined benefit schemes 15 1.1 1.6
Other comprehensive expense for the year net of income tax (1.4) (6.8)
Total comprehensive income attributable to equity shareholders 16.5 19.6
The notes below form part of these consolidated financial statements.
CREST NICHOLSON HOLDINGS PLC
Consolidated Statement of Changes in Equity
For the year ended 31 October 2023
Share capital Share premium account Retained earnings Total equity
Note £m £m £m £m
Balance at 1 November 2021 12.8 74.2 814.6 901.6
Profit for the year attributable to equity shareholders - - 26.4 26.4
Actuarial losses of defined benefit schemes 16 - - (8.4) (8.4)
Change in deferred tax on actuarial losses of defined benefit schemes 15 - - 1.6 1.6
Total comprehensive income for the year - - 19.6 19.6
Transactions with shareholders:
Equity-settled share-based payments 16 - - 1.9 1.9
Deferred tax on equity-settled share-based payments 15 - - (0.4) (0.4)
Purchase of own shares 23 - - (1.1) (1.1)
Dividends paid 9 - - (38.5) (38.5)
Balance at 31 October 2022 12.8 74.2 796.1 883.1
Profit for the year attributable to equity shareholders - - 17.9 17.9
Actuarial losses of defined benefit schemes 16 - - (2.5) (2.5)
Change in deferred tax on actuarial losses of defined benefit schemes 15 - - 1.1 1.1
Total comprehensive income for the year - - 16.5 16.5
Transactions with shareholders:
Equity-settled share-based payments 16 - - 1.5 1.5
Deferred tax on equity-settled share-based payments 15 - - (0.2) (0.2)
Purchase of own shares 23 - - (1.9) (1.9)
Transfers in respect of share options - - 0.9 0.9
Dividends paid 9 - - (43.6) (43.6)
Balance at 31 October 2023 12.8 74.2 769.3 856.3
The notes below form part of these consolidated financial statements.
CREST NICHOLSON HOLDINGS PLC
Consolidated Statement of Financial Position
As at 31 October 2023
2023 2022
ASSETS Note £m £m
Non-current assets
Intangible assets 11 29.0 29.0
Property, plant and equipment 12 2.2 0.9
Right-of-use assets 13 6.1 3.7
Investments in joint ventures 14 10.7 9.0
Financial assets at fair value through profit and loss 2.6 3.3
Deferred tax assets 15 3.3 4.8
Retirement benefit surplus 16 10.0 11.1
Trade and other receivables 17 6.0 35.0
69.9 96.8
Current assets
Inventories 18 1,164.8 990.1
Financial assets at fair value through profit and loss 1.1 1.3
Trade and other receivables 17 120.0 116.3
Current income tax receivable 11.9 1.1
Cash and cash equivalents 19 162.6 373.6
1,460.4 1,482.4
Total assets 1,530.3 1,579.2
LIABILITIES
Non-current liabilities
Interest-bearing loans and borrowings 20 (83.5) (97.1)
Trade and other payables 21 (71.1) (41.8)
Lease liabilities 13 (4.4) (2.3)
Deferred tax liabilities 15 (2.5) (3.2)
Provisions 22 (73.8) (70.8)
(235.3) (215.2)
Current liabilities
Interest-bearing loans and borrowings 20 (14.2) -
Trade and other payables 21 (337.0) (407.1)
Lease liabilities 13 (2.0) (1.6)
Provisions 22 (85.5) (72.2)
(438.7) (480.9)
Total liabilities (674.0) (696.1)
Net assets 856.3 883.1
EQUITY
Share capital 23 12.8 12.8
Share premium account 23 74.2 74.2
Retained earnings 769.3 796.1
Total equity 856.3 883.1
The notes below form part of these consolidated financial statements.
These consolidated financial statements were approved by the Board of
Directors on 23 January 2024.
On behalf of the Board
Peter Truscott Bill Floydd
Director Director
CREST NICHOLSON HOLDINGS PLC
Consolidated Cash Flow STATEMENT
For the year ended 31 October 2023
2023 2022
Note £m £m
Cash flows from operating activities
Profit for the year attributable to equity shareholders 17.9 26.4
Adjustments for:
Depreciation on property, plant and equipment 12 0.5 0.4
Depreciation on right-of-use assets 13 2.3 1.9
Retirement benefit obligation administrative expenses 16 0.6 0.9
Net finance expense 7 10.1 8.1
Share-based payment expense 16 1.5 1.9
Share of post-tax profits of joint ventures using the equity method 14 (3.3) (2.5)
Impairment of inventories movement 18 7.6 (8.1)
Net impairment of financial assets 17 0.6 2.3
Income tax expense 8 5.2 6.4
Operating profit before changes in working capital, provisions and 43.0 37.7
contributions to retirement benefit obligations
Decrease/(increase) in trade and other receivables 27.0 (17.0)
(Increase)/decrease in inventories (182.3) 55.5
Decrease in trade and other payables and provisions (31.9) (13.4)
Contribution to retirement benefit obligations 16 (1.5) (3.4)
Cash (used by)/ generated from operations (145.7) 59.4
Finance expense paid (5.6) (6.3)
Income tax paid (14.3) (1.4)
Net cash (outflow)/inflow from operating activities (165.6) 51.7
Cash flows from investing activities
Purchases of property, plant and equipment 12 (1.8) (0.1)
Disposal of financial assets at fair value through profit and loss 0.9 0.7
Funding to joint ventures (13.0) (7.5)
Repayment of funding from joint ventures 11.7 18.8
Dividends received from joint ventures 1.5 2.4
Finance income received 2.3 0.1
Net cash inflow from investing activities 1.6 14.4
Cash flows from financing activities
Principal elements of lease payments 13 (2.4) (2.1)
Dividends paid 9 (43.6) (38.5)
Net purchase of own shares (1.0) (1.1)
Debt arrangement and facility fees - (1.5)
Net cash outflow from financing activities (47.0) (43.2)
Net (decrease)/increase in cash and cash equivalents (211.0) 22.9
Cash and cash equivalents at the beginning of the year 373.6 350.7
Cash and cash equivalents at the end of the year 19 162.6 373.6
The notes below form part of these consolidated financial statements.
CREST NICHOLSON HOLDINGS PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1 ACCOUNTING POLICIES
Basis of preparation
Crest Nicholson Holdings plc (Company) is a public limited company
incorporated, listed and domiciled in the UK. The address of the registered
office is 500 Dashwood Lang Road, Bourne Business Park, Addlestone, Surrey
KT15 2HJ. The Group financial statements consolidate those of the Company and
its subsidiaries (together referred to as the Group) and include the Group's
interest in jointly controlled entities. The parent company financial
statements present information about the Company as a separate entity and not
about its Group.
The financial statements are presented in pounds sterling and amounts stated
are denominated in millions (£m), unless otherwise stated.
The Group financial statements have been prepared and approved by the
Directors in accordance with UK-adopted international accounting standards,
and with the requirements of the Companies Act 2006 as applicable to companies
reporting under those standards and have been prepared on the historical cost
basis except for financial assets at fair value through profit and loss, which
are as otherwise stated. The parent company financial statements are presented
below.
The preparation of financial statements in conformity with UK-adopted
international accounting standards requires the Directors to make assumptions
and judgements that affect the application of policies and reported amounts
within the financial statements. Assumptions and judgements are based on
experience and other factors that the Directors consider reasonable under the
circumstances. Actual results may differ from these estimates.
Judgements made by the Directors, in the application of these accounting
policies that have a significant effect on the financial statements and
estimates with a significant risk of material adjustment in the next year are
discussed below.
Going concern
The Directors have adopted the going concern basis in preparing the financial
statements and have concluded that there are no material uncertainties leading
to significant doubt about the Group's going concern status. The assessment
has been performed over the 15 month period to April 2025, aligning with the
measurement date of the Group's covenants on its lending facilities.
Assessment of principal risks
The Directors assessed the Group's principal risks as detailed above and
considered three overarching risks when developing the stress testing for this
assessment. These risks were selected due to the potential impact over the
period assessed for going concern, which is shorter than the period used for
the principal risk assessment.
Risk Mitigation and other considerations Link to principal risks
Will the volume of home completions fall further?
· Will the current economic activity disrupt future operations and our · The Group has successfully demonstrated its ability to trade effectively in · Market conditions
ability to build and sell properties? previous downturns in the housing cycle and benefits from a strong balance
sheet and good forward order book · Supply chain
· Will material and labour availability worsen due to energy prices or
other economic factors and impact project timelines? · The UK Government has consistently demonstrated its support for the housing
lending market, encouraging lenders to maintain good levels of mortgage
availability
· The Group benefits from strong supplier and subcontractor relationships
that help mitigate availability issues.
Will UK house prices fall?
· Will the current or further decline in macro economic conditions result · The Group has a good forward order book of reservations and exchanges at · Market conditions
in lower prices for UK property due to reduced demand through unemployment or prevailing prices
mortgage availability?
· There is appetite for institutional capital investment into the UK
· Will the higher cost of mortgages persist and create an affordability property market that helps mitigate any cyclical drop in confidence in the
gap? private market
· The Group participates in affordability schemes such as Deposit Unlock.
Will build cost inflation remain high and sustained?
· Will the availability of materials and labour remain scarce because of the · Supply chain
war in Ukraine and high energy prices?
· The Group benefits from well-negotiated central contracts with suppliers · Build cost management
Will the move to more sustainable building practices and materials lead to an which help mitigate cost increases
increase in construction costs?
· The Group's implementation of COINS as its new ERP platform will enhance
the reporting of build costs for the divisions once initial issues are
resolved, the implementation was completed in FY23 with all divisions now
using a consistent system.
Applying these risks against future forecasts
The Directors have considered prior years trading performance and the
completed weeks of trading since 31 October 2023. The Group retains a good
level of working capital and liquidity to execute its strategy. During the
prior year the Group completed a £250.0m Sustainability Linked RCF which
expires in October 2026. The Group also benefits from £100.0m of senior loan
notes. Both of these sources of financing are subject to three financial
covenant tests, details of these covenants can be found in note 24. The RCF is
also subject to sustainability targets which are aligned to the Group's
sustainability strategy with a lower interest rate payable if these are
achieved, see note 24 for more information. Given the Group's good liquidity
position the Directors consider the possibility of breaching one of the
financial covenants as being the first sign that the Group could be in
distress and should be the basis of its going concern assessment in this
year's financial statements.
The Directors have then considered three scenarios that stress test how the
Group would perform against the risks outlined above.
1. 'Base case'. The Directors have considered the forecast for FY24 and
FY25 covering the period to April 2025. The forecasts include the Directors
current assessment of the potential impact of the economic uncertainty
currently being experienced in the UK. These impacts include sales price and
sales volume expectation, but are not disclosed as the Group considers them to
be commercially sensitive.
The Group has already secured a significant proportion of sales for FY24 by
way of its forward order book. Under this scenario the Group maintains a good
level of liquidity and financial headroom throughout FY24 and across the going
concern period and remains compliant with all three covenants with comfortable
headroom.
2. 'Severe but plausible downside case'. The Directors have applied the
three risks outlined above to the base case scenario without double counting
the sales price and volume assumptions implicit in that base case. These risks
are considered effective from 1 November 2023 and include a 0.37 SPOW (FY23
SPOW was 0.52), a reduction in forecast average selling prices that increases
over time and reaches a peak of 7% before recovering and a 10.0% increase in
forecast build costs. Build costs include the Group's stated commitment under
the Developer Remediation Contract to remediate legacy buildings and therefore
any assumed increase in build costs also increases the size of this
commitment. Each of these risks has been applied individually and the Group
remains compliant with all three covenants with sufficient headroom. The
Directors have then applied the 7.0% sales price reduction together with the
0.37 SPOW rate, to reflect what they consider to be a 'severe but plausible
downside case' outcome and trading environment. The build cost inflation risk
was not included in this severe but plausible downside case, as during a
downturn as severe as that considered, the Group has historically seen build
cost deflation as suppliers and subcontractors swiftly recalibrate their
pricing to compete for work in shrinking forward order books. As such,
applying all three risks in aggregate was not considered plausible. This
combined scenario inevitably places a higher stress than the base case
scenario, but again the Group remains compliant with all three covenants, with
sufficient headroom.
In all three 'downside' individual scenarios, and in the combined scenario,
the Group has used appropriate mitigations available to enable it to offset
the deterioration in financial performance. These mitigations are within the
control of the Group and can be enacted in good time, and are outlined below.
3. 'Test to failure'. The assumptions have then individually, and again in
combination, been applied to each of the risks above to a level beyond that
which is considered to be a plausible 'downside' scenario. This informs the
Directors as to what level of stress would be needed to realise a breach in
any of the covenants. The results of these tests are not disclosed as they are
considered commercially sensitive.
Mitigation options and considerations
Based on the assessment methodology outlined above the Directors have
considered some of the mitigations that could be applied in a deteriorating
trading environment to either increase profit or conserve cash. Some of these
measures are implicit outcomes of a downturn (such as reduction in build
spend) rather than mitigating actions which the Group would have to apply.
The Group has experience of applying such mitigations in the past, which
include but are not limited to:
· The impact of any immediate reduction in home reservations or
achieved average selling prices would be mitigated by the Group's forward
order book of reservations and exchanges
· A reduction in Group overheads to reflect the lower build and selling
activity in a weaker trading environment
· Renegotiation of supplier arrangements as the amount of build
activity contracts, and materials suppliers and subcontractors are required to
be more competitive, reducing build spend
· Mothballing unproductive and/or capital-intensive schemes
· Repaying interest-bearing products to reduce the net interest charge,
recognising the Group's current liquidity position
· A reduction in sales and marketing costs to reflect a fall in sales
volumes
· A reduction in discretionary land acquisitions and therefore land
expenditure as we require less land to replenish the land portfolio
· Reduction in dividend to conserve cash.
Conclusion on going concern
In reviewing the assessment outlined above the Directors are confident that
the Group has the necessary resources and mitigations available to continue
trading for at least 12 months from the date of signing of the financial
statements. Accordingly, the consolidated financial statements continue to be
prepared on a going concern basis.
Critical accounting estimates and judgements
The preparation of the consolidated financial statements under UK-adopted
international accounting standards requires the Directors to make estimates
and assumptions that affect the application of policies and reported amounts
of assets and liabilities, income and expenses and related disclosures. In
applying the Group's accounting policies, the key judgements that have a
significant impact on the financial statements, include those involving
estimates, which are described below, the judgement to present certain items
as exceptional (see note 4), certain revenue policies relating to part
exchange sales, the identification of performance obligations where a revenue
transaction involves the sale of both land and residential units and revenue
on the units is then subsequently recognised over time where the land sale
element takes place at the start of the contract (see note 3 for the split of
revenue recognised at a point in time and recognised over time), the
recognition of the defined benefit pension scheme net surplus (see note 16)
and the current and non-current presentation of the combustible materials
provision.
The Group has made a judgement to not recognise revenue on the proceeds
received on the disposal of properties taken in part exchange against a new
property as they are incidental to the main revenue-generating activities of
the Group. As part exchange sales are deemed incidental, the income and
expenses associated with part exchange properties are recognised in other
operating income and other operating expenses which are presented within net
administrative expenses in the consolidated income statement. Income is
recognised when legal title is passed to the customer. Previously the income
and associated costs arising on these sales was presented net within cost of
sales. The prior year balance has not been restated since the net result is
immaterial to the Group and there is no change to the operating profit
realised in each year.
Estimates and associated assumptions affecting the financial statements are
based on historical experience and various other factors that are believed to
be reasonable under the circumstances. The estimates and underlying
assumptions are reviewed on an ongoing basis. Changes in accounting estimates
may be necessary if there are changes in the circumstances on which the
estimate was based or as a result of new information.
Revisions to accounting estimates are recognised in the year in which the
estimate is revised if the revision affects only that year, or in the year of
revision and future years if the revision affects both current and future
years.
The Directors have made consistent estimates and assumptions in reviewing the
going concern assumption as those detailed above. The Directors consider the
key sources of estimation uncertainty that have a risk of causing a material
adjustment to the carrying value of assets and liabilities as described below.
Carrying value of inventories
Inventories of work-in-progress, completed buildings including show homes and
part exchange inventories are stated in the consolidated statement of
financial position at the lower of cost or NRV. On a regular basis management
update estimates of future revenue and expenditure for each development.
Future revenue and expenditure may differ from estimates which could lead to
an impairment of inventory if there are adverse changes. Where forecast
revenues are lower than forecast total costs an inventory provision is made.
This provision may be reversed in subsequent periods if there is evidence of
sustained improved revenue or reduced expenditure forecast on a development.
If forecast revenue was 10.0% lower on sites within the short-term portfolio
(total land portfolio excluding strategic land) as at 31 October 2023, the
impact on profit before tax would have been £15.9m lower (2022: £7.0m
lower).
Estimation of development profitability
Due to the nature of development activity and, in particular, the length of
the development cycle, the Group has to make estimates of the costs to
complete developments, in particular those which are multi-phase and/or may
have significant infrastructure costs. These estimates are reflected in the
margin recognised on developments in relation to sales recognised in the
current and future years. There is a degree of inherent uncertainty in making
such estimates. The Group has established internal controls that are designed
to ensure an effective assessment of estimates is made of the costs to
complete developments. The Group considers estimates of the costs to complete
on longer-term sites, which typically have higher upfront shared
infrastructure costs to have greater estimation uncertainty than sites of
shorter duration with less infrastructure requirements. A change in estimated
margins on sites, for example due to changes in estimates of build cost
inflation or a reduction in house prices, could alter future profitability. If
forecast costs were 10.0% higher on sites which contributed to the year ended
31 October 2023 and which are forecast to still be in production beyond the
year ending 31 October 2025 (2022: beyond the year ending 31 October 2024),
profit before tax in the current year would have been £32.3m lower (2022:
£25.3m lower).
The Group has considered the potential financial impacts associated with
transitional and physical climate-related risks and opportunities. The primary
known impact is the FHS, due to be implemented from 2025, which is expected to
increase build cost for individual units. The anticipated additional build
cost has been included in new project acquisition appraisals since the FHS was
announced. Projects already underway will be substantially built out before
the new regulations commence. It is not expected that the additional build
cost will have a material impact on the carrying value of inventories or their
associated project margins or the value of goodwill. The longer term costs
associated with climate-related risks are considered to be beyond the
timescale of the projects the Group is currently contracted to and as such do
not impact the carrying value of inventories or their associated project
margins. Further information on climate-related risks and opportunities is
provided on pages 47-48 of our 2023 annual report and financial statements to
be published in February 2024, and this represents an area of estimation
rather than a critical accounting estimate.
Valuation of the pension scheme assets and liabilities
In determining the valuation of the pension scheme assets and liabilities, the
Directors utilise the services of an actuary. The actuary uses key assumptions
being inflation rate, life expectancy, discount rate and Guaranteed Minimum
Pensions, which are dependent on factors outside the control of the Group. To
the extent that such assumptions differ to that expected, the pension
liability would change. See note 16 for additional details.
Combustible materials
The combustible materials provision requires a number of key estimates and
assumptions in its calculation. If it is deemed that the costs are probable
and can be reliably measured then, as per IAS 37, a provision is recorded. If
costs are considered possible or cannot be reliably estimated, then they are
recorded as contingent liabilities (see note 25). During the year, the
combustible materials provision has been increased to reflect the most
contemporaneous assessment of these costs. The Group signed the Developer
Remediation Contract on 13 March 2023, which did not materially alter the
provision required from that recorded as at 31 October 2022. In the previous
financial year, the Group signed the UK Government's Building Safety Pledge
(the Pledge), a consequence of which the Group has committed to funding the
remediation of life-critical fire safety issues on buildings over 11 metres in
which the Group was involved from 1992.
The key assumptions used to determine the provision include but are not
limited to identification of the properties impacted through the period of
construction considered. The key estimates then applied to these properties
include the potential costs of investigation, replacement materials and works
to complete, along with the timing of forecast expenditure. The Directors have
used BSF cost information, other external information, and internal
assessments as a basis for the estimated remedial costs. These estimates are
inherently uncertain due to the highly complex and bespoke nature of the
buildings. The actual costs may differ to the amounts notified by the BSF
costed projects, and fire safety reports in progress may require different
levels of remediation and associated costs than those currently estimated. If
forecast remediation costs on buildings currently provided for are 20.0%
higher than provided, the pre-tax exceptional items charge in the consolidated
income statement would be £29.0m higher. If further buildings are identified
this could also increase the required provision, but the potential quantity of
this change cannot be readily determined without further claims or
investigative work. See notes 4 and 22 for additional details.
Adoption of new and revised standards
There are no new standards, amendments to standards and interpretations that
are applicable to the Group and are mandatory for the first time for the
financial year beginning 1 November 2022 which have had a material impact on
the Group.
Impact of standards and interpretations in issue but not yet effective
There are a number of standards, amendments and interpretations that have been
published that are not mandatory for the 31 October 2023 reporting period and
have not been adopted early by the Group. The Group does not expect that the
adoption of these standards, amendments and interpretations will have a
material impact on the financial statements of the Group in future years.
Other accounting policies
The accounting policies set out below have, unless otherwise stated, been
applied consistently to all periods presented in these Group financial
statements except in respect of the presentation of the proceeds generated
from the disposal of part exchange properties as detailed within critical
accounting estimates and judgements.
Alternative performance measures
The Group has adopted various APMs, as presented below. These measures are not
defined by IFRS and therefore may not be directly comparable with other
companies' APMs, and should be considered in addition to, and are not intended
to be a substitute for, or superior to, IFRS measurements.
Consolidation
The consolidated financial statements include the financial statements of
Crest Nicholson Holdings plc, its subsidiary undertakings and the Group's
share of the results of joint ventures and joint operations. Inter-company
transactions, balances and unrealised gains on transactions between group
companies are eliminated on consolidation.
(a) Subsidiaries
Subsidiaries are entities in which the Group has control. The Group controls
an entity when the Group is exposed to, or has rights to, variable returns
through its power over the entity. In assessing control, potential voting
rights that are currently exercisable or convertible are taken into account.
The profits and losses of subsidiaries are included in the consolidated
financial statements from the date that control commences until the date that
control ceases.
The acquisition method of accounting is used by the Group to account for the
acquisition of subsidiaries that are a business under IFRS 3. On acquisition
of a subsidiary, all of the subsidiary's separable, identifiable assets and
liabilities existing at the date of acquisition are recorded at their fair
values reflecting their condition at that date. All changes to those assets
and liabilities and the resulting gains and losses that arise after the Group
has gained control of the subsidiary are charged to the post-acquisition
consolidated income statement or consolidated statement of comprehensive
income. Accounting policies of acquired subsidiaries are changed where
necessary, to ensure consistency with policies adopted by the Group.
Acquisitions of subsidiaries which do not qualify as a business under IFRS 3
are accounted for as an asset acquisition rather than a business combination.
Under such circumstances the fair value of the consideration paid for the
subsidiary is allocated to the assets and liabilities purchased based on their
relative fair value at the date of purchase. No goodwill is recognised on such
transactions.
(b) Joint ventures
A joint venture is a contractual arrangement in which the Group and other
parties undertake an economic activity that is subject to joint control and
these parties have rights to the net assets of the arrangement. The Group
reports its interests in joint ventures using the equity method of accounting.
Under this method, interests in joint ventures are initially recognised at
cost and adjusted thereafter to recognise the Group's share of the
post-acquisition profits or losses and movements in other comprehensive
income. The Group's share of results of the joint venture after tax is
included in a single line in the consolidated income statement. Where the
share of losses exceeds the Group's interest in the entity and there is no
obligation to fund these losses, the carrying amount is reduced to nil and
recognition of further losses is discontinued, unless there is a long-term
receivable due from the joint venture in which case, if appropriate, the loss
is recognised against the receivable. If an obligation to fund losses exists
the further losses and a provision are recognised. Unrealised gains on
transactions between the Group and its joint ventures are eliminated on
consolidation. Accounting policies of joint ventures are changed where
necessary, to ensure consistency with policies adopted by the Group.
(c) Joint operations
A joint operation is a joint arrangement that the Group undertakes with other
parties, in which those parties have rights to the assets and obligations of
the arrangement. The Group accounts for joint operations by recognising its
share of the jointly controlled assets and liabilities and income and
expenditure on a line-by-line basis in the consolidated statement of financial
position and consolidated income statement.
Goodwill
Goodwill arising on consolidation represents the excess of the cost of
acquisition over the Group's interest in the fair value of the identifiable
assets and liabilities of the acquired entity at the date of the acquisition
and is not amortised. Goodwill arising on acquisition of subsidiaries and
businesses is capitalised as an asset. The goodwill balance has been allocated
to the strategic land holdings within the Group. The Group expects to benefit
from the strategic land holdings for a further period of 14 years to 2038. The
period used in the assessment represents the estimated time it will take to
obtain planning and build out on the remaining acquired strategic land
holdings. Goodwill is assessed for impairment at each reporting date. The
sites acquired are considered as a singular cash generating unit and the value
in use is calculated on a discounted cash flow basis with more speculative
strategic sites given a lower probability of reaching development. The
calculated discounted cash flow value is compared to the goodwill balance to
assess if it is impaired. Any impairment loss is recognised immediately in the
consolidated income statement.
Revenue and profit recognition
Revenue comprises the fair value of the consideration received or receivable,
net of value added tax and discounts.
The Group has made a judgement to not recognise revenue on the proceeds
received on the disposal of properties taken in part exchange against a new
property as they are incidental to the main revenue-generating activities of
the Group. As part exchange sales are deemed incidental, the income and
expenses associated with part exchange properties are recognised in other
operating income and other operating expenses which are presented within net
administrative expenses in the consolidated income statement. Income is
recognised when legal title is passed to the customer. Previously the income
and associated costs arising on these sales was presented net within cost of
sales. The prior year balance has not been restated since the net result is
immaterial to the Group and there is no change to the operating profit
realised in each year.
Revenue is recognised on house and apartment sales at legal completion. For
affordable and other sales in bulk, revenue recognition is dependent on
freehold legal title being passed to the customer as it is considered that
upon transfer of freehold title that the customer controls the
work-in-progress. Where freehold legal title and control is passed to the
customer, revenue is recognised on any upfront sale of land (where applicable)
and then on the housing units as the build of the related units progresses,
via surveys of work performed on contract activity. Where freehold legal title
is not passed to the customer, revenue is not recognised on any upfront sale
of land and the revenue on the housing units and sale of land is recognised at
handover of completed units to the customer. The transaction price for all
housing units is derived from contractual negotiations and does not include
any material variable consideration.
Revenue is predominantly recognised on land sales when legal title passes to
the customer. If the Group has remaining performance obligations, such as the
provision of services to the land, an element of revenue is allocated to these
performance obligations and recognised as the obligations are performed, which
can be when the works are finished if the work-in-progress is controlled by
the Group or over the performance of the works if they are controlled by the
customer.
Revenue recognition on commercial property sales is dependent on freehold
legal title being passed to the customer, as it is considered that upon
transfer of freehold title that the customer controls the work-in-progress.
Where freehold legal title is passed to the customer, revenue is recognised on
any upfront sale of land (where applicable) and then on the development
revenue over time as the build of the related commercial units progress. Where
freehold legal title is not passed to the customer revenue is not recognised
on any upfront sale of land and the revenue on the commercial property is
recognised at handover of the completed commercial unit to the customer.
The transaction price for commercial property revenue may include an element
of variable consideration based on the commercial occupancy of the units when
they are completed, though this is not expected to be material. If this is the
case, the Directors take the view that unless the lettings not yet contracted
are highly probable they should not be included in the calculation of the
transaction price. The transaction price is regularly updated to reflect any
changes in the accounting period.
Revenue is recognised on freehold reversion sales when the customer is
contractually entitled to the ground rent revenue stream associated with the
units purchased.
Revenue on specification upgrades paid for by the customer or on the cost of
specification upgrades offered to the customer as part of the purchase price
is recognised as revenue when legal title passes to the customer.
Profit is recognised on a plot-by-plot basis, by reference to the margin
forecast across the related development site. Due to the development cycle
often exceeding one financial year, plot margins are forecast, taking into
account the allocation of site-wide development costs such as infrastructure,
and estimates required for the cost to complete such developments.
Exceptional items
Exceptional items are those which, in the opinion of the Directors, are
material by size and/or non-recurring in nature such as significant costs and
settlements associated with combustible materials, significant costs
associated with acquiring another business, significant legal matters and
significant inventory impairments. Where appropriate, the Directors consider
that items should be considered as categories or classes of items, such as any
credits/costs impacting the consolidated income statement which relate to
combustible materials, notwithstanding where an item may be individually
immaterial. The Directors believe that these items require separate disclosure
within the consolidated income statement in order to assist the users of the
financial statements to better understand the performance of the Group, which
is also how the Directors internally manage the business. Where appropriate,
the material reversal of any of these amounts will also be reflected through
exceptional items. Additional charges/credits to items classified as
exceptional items in prior years will be classified as exceptional in the
current year, unless immaterial to the financial statements. As these
exceptional items can vary significantly year on year, they may introduce
volatility into the reported earnings. The income tax impacts of exceptional
items are reflected at the actual tax rate related to these items.
Net finance expense
Interest income is recognised on a time apportioned basis by reference to the
principal outstanding and the effective interest rate. Interest costs are
recognised in the consolidated income statement on an accruals basis in the
period in which they are incurred. Imputed interest expense on deferred land
creditors and combustible materials discounting is recognised over the life of
associated cash flows.
Income and deferred tax
Income tax comprises current tax and deferred tax. Income tax is recognised in
the consolidated income statement except to the extent that it relates to
items recognised in other comprehensive income, in which case it is recognised
in other comprehensive income. Current tax is the expected tax payable on
taxable profit for the year and any adjustment to tax payable in respect of
previous years. Taxable profit is profit before tax per the consolidated
income statement after adjusting for income and expenditure that is not
subject to tax, and for items that are subject to tax in other accounting
periods. The Group's liability for current tax is calculated using tax rates
that have been enacted or substantively enacted by the consolidated statement
of financial position date. Current tax assets are recognised to the extent
that it is probable the asset is recoverable.
Deferred tax is provided in full on temporary differences between the carrying
amounts of assets and liabilities in the financial statements and the
corresponding tax bases used in the computation of taxable profits.
Deferred tax assets are recognised to the extent that it is probable that
taxable profits will be available against which deductible temporary
differences can be utilised. Deferred tax liabilities are recognised for all
temporary differences. Deferred tax is calculated using tax rates that have
been substantively enacted by the consolidated statement of financial position
date.
Dividends
Final and interim dividend distributions to the Company's shareholders are
recorded in the Group's financial statements in the earlier of the period in
which they are approved by the Company's shareholders, or paid.
Employee benefits
(a) Pensions
The Group operates a defined benefit (DB) scheme (closed to new employees
since October 2001 and to future service accrual since April 2010) and also
makes payments into a defined contribution scheme for employees.
In respect of the DB scheme, the retirement benefit deficit or surplus is
calculated by estimating the amount of future benefit that employees have
earned in return for their service in the current and prior periods, such
benefits measured at discounted present value, less the fair value of the
scheme assets. The rate used to discount the benefits accrued is the yield at
the consolidated statement of financial position date on AA credit rated bonds
that have maturity dates approximating to the terms of the Group's
obligations. The calculation is performed by a qualified actuary using the
projected unit method. The operating and financing costs of such plans are
recognised separately in the consolidated income statement; past service costs
and financing costs are recognised in the periods in which they arise. The
Group recognises expected scheme gains and losses via the consolidated income
statement and actuarial gains and losses are recognised in the period they
occur directly in other comprehensive income, with associated deferred tax.
The retirement benefit deficit or surplus recognised in the consolidated
statement of financial position represents the deficit or surplus of the fair
value of the scheme's assets over the present value of scheme liabilities,
with any net surplus recognised to the extent that the employer can gain
economic benefit as set out in the requirements of IFRIC 14.
Payments to the defined contribution scheme are accounted for on an accruals
basis.
(b) Share-based payments
The fair value of equity-settled, share-based compensation plans is recognised
as an employee expense with a corresponding increase in equity. The fair value
is measured as at the date the options are granted and the charge amended if
vesting does not take place due to non-market conditions (such as service or
performance) not being met. The fair value is spread over the period during
which the employees become unconditionally entitled to the shares and is
adjusted to reflect the actual number of options that vest. At the
consolidated statement of financial position date, if it is expected that
non-market conditions will not be satisfied, the cumulative expense recognised
in relation to the relevant options is reversed. The proceeds received are
credited to share capital (nominal value) and share premium when the options
are exercised if new shares are issued. If treasury shares are used the
proceeds are credited to retained reserves. There are no cash-settled
share-based compensation plans.
Own shares held by Employee Share Ownership Trust (ESOT)
Transactions of the Company-sponsored ESOT are included in both the Group
financial statements and the Company's own financial statements. The purchase
of shares in the Company by the ESOT are charged directly to equity.
Software as a Service (SaaS) arrangements
Implementation costs including costs to configure or customise a cloud
provider's application software are recognised as administrative expenses when
the services are received, and the Group determines that there is no control
over the asset in development.
Property, plant and equipment
Property, plant and equipment is stated at cost less accumulated depreciation.
Cost includes the original purchase price of the asset and the costs
attributable to bringing the asset to its working condition. Depreciation is
calculated to write off the cost of the assets on a straight-line basis to
their estimated residual value over its expected useful life at the following
rates:
Fixtures and fittings 10%
Computer equipment and non-SaaS software 20% to 33%
The asset residual values, carrying values and useful lives are reviewed on an
annual basis and adjusted if appropriate at each consolidated statement of
financial position date.
Right-of-use assets and lease liabilities
The Group assesses at lease inception whether a contract is, or contains, a
lease. The Group recognises a right-of-use asset and a lease liability at
lease commencement.
The right-of-use asset is initially recorded at the present value of future
lease payments and subsequently measured net of depreciation, which is charged
to the consolidated income statement as an administrative expense over the
shorter of its useful economic life or its lease term on a straight-line
basis.
The Group recognises lease liabilities at the present value of future lease
payments, lease payments being discounted at the rate implicit in the lease or
the Group's incremental borrowing rate as determined with reference to the
most recently issued financial liabilities carrying interest. The discount is
subsequently unwound and recorded in the consolidated income statement over
the lease term as a finance expense. The lease term comprises the
non-cancellable period of the contract, together with periods covered by an
option to extend the lease where the Group is reasonably certain to exercise
that option.
The Group has elected not to recognise right-of-use assets and lease
liabilities for short-term leases that have a lease term of 12 months or less
and leases of low value assets. The Group recognises the lease payments
associated with these leases as an expense on a straight-line basis over the
lease term.
Inventories
Inventories are stated at the lower of cost and NRV.
Work-in-progress and completed buildings including show homes comprise land
under development, undeveloped land, land option payments, direct materials,
sub-contract work, labour costs, site overheads, associated professional fees
and other attributable overheads, but excludes interest costs.
Part exchange inventories are held at the lower of cost and NRV, which
includes an assessment of costs of management and resale.
Land inventories and the associated land payables are recognised in the
consolidated statement of financial position from the date of unconditional
exchange of contracts. Land payables are recognised as part of trade and other
payables.
Options purchased in respect of land are recognised initially as a prepayment
within inventories and written down on a straight-line basis over the life of
the option. If planning permission is granted and the option exercised, the
option is not written down during that year and its carrying value is included
within the cost of land purchased.
Provisions are established to write down inventories where the estimated net
sales proceeds less costs to complete exceed the current carrying value.
Adjustments to the provisions will be required where selling prices or costs
to complete change. NRV for inventories is assessed by estimating selling
prices and costs, taking into account current market conditions.
Financial assets
Financial assets are initially recognised at fair value and subsequently
classified into one of the following measurement categories:
· At amortised cost
· Subsequently at FVTPL
· Subsequently at FVOCI.
The classification of financial assets depends on the Group's business model
for managing the asset and the contractual terms of the cash flows. Assets
that are held for the collection of contractual cash flows that represent
solely payments of principal and interest are measured at amortised cost, with
any interest income recognised in the consolidated income statement using the
effective interest rate method.
Financial assets that do not meet the criteria to be measured at amortised
cost are classified by the Group as measured
at FVTPL. Fair value gains and losses on financial assets measured at FVTPL
are recognised in the consolidated income statement and presented within
administrative expenses. The Group currently has no financial assets measured
at FVOCI.
Financial assets at fair value through profit and loss
Financial assets at fair value through profit and loss (which comprise shared
equity receivables) are classified as being held to collect and initially
recognised at fair value. Changes in fair value relating to the expected
recoverable amount are recognised in the consolidated income statement as a
finance income or expense. These assets are held as current or non-current
based on their contractual repayment dates.
Trade and other receivables
Trade and other receivables are recognised initially at fair value and
subsequently measured at amortised cost, using the effective interest method,
less provision for impairment. A provision for impairment of trade and other
receivables is established based on an expected credit loss model applying the
simplified approach, which uses a lifetime expected loss allowance for all
trade and other receivables. The amount of the loss is recognised separately
in the consolidated income statement. Current trade and other receivables do
not carry any interest and are stated at their amortised cost, as reduced by
appropriate allowances for estimated irrecoverable amounts. Non-current trade
and other receivables are discounted to present value when the impact of
discounting is deemed to be material, with any discount to nominal value being
recognised in the consolidated income statement as interest income over the
duration of the deferred payment.
Contract assets
Contract assets represent unbilled work-in-progress on affordable and other
sales in bulk on contracts in which revenue is recognised over time. Contract
assets are recognised initially at fair value and subsequently measured at
amortised cost, using the effective interest method, less provision for
impairment. Contract assets do not carry any interest and are stated at their
amortised cost, as reduced by appropriate allowances for estimated
irrecoverable amounts.
Cash and cash equivalents
Cash and cash equivalents are cash balances in hand and in the bank and are
carried in the consolidated statement of financial position at nominal value.
Interest-bearing loans and borrowings
Interest-bearing loans and borrowings are recognised initially at fair value,
net of direct transaction costs, and subsequently measured at amortised cost.
Finance charges are accounted for on an accruals basis in the consolidated
income statement using the effective interest method and are added to the
carrying amount of the instrument to the extent that they are not settled in
the period in which they arise or included within interest accruals.
Financial liabilities
Financial liabilities are initially recognised at fair value and subsequently
classified into one of the following measurement categories:
· At amortised cost
· Subsequently at FVTPL.
Non-derivative financial liabilities are measured at FVTPL when they are
considered held for trading or designated as such on initial recognition. The
Group has no non-derivative financial liabilities measured at FVTPL.
Land payables
Land payables are recognised in the consolidated statement of financial
position from the date of unconditional exchange of contracts. Where land is
purchased on deferred settlement terms then the land and the land payable are
discounted to their fair value using the effective interest method in
accordance with IFRS 9. The difference between the fair value and the nominal
value is amortised over the deferment period, with the financing element being
charged as an interest expense through the consolidated income statement.
Trade and other payables
Trade and other payables are recognised initially at their fair value and
subsequently measured at amortised cost using the effective interest method.
Trade and other payables on deferred terms are initially recorded at their
fair value, with the discount to nominal value being charged to the
consolidated income statement as an interest expense over the duration of the
deferred period.
Contract liabilities
Contract liabilities represent payments on account, received from customers,
in excess of billable work-in-progress on affordable and other sales in bulk
on contracts. Contract liabilities are recognised initially at their fair
value and subsequently measured at amortised cost using the effective interest
method.
Provisions
A provision is recognised in the consolidated statement of financial position
when the Group has a present legal or constructive obligation as a result of a
past event and it is probable that an outflow of economic benefits will be
required to settle the obligation, and the amount can be reliably estimated.
Provisions are discounted to present value on a discounted cash flow basis
using an interest rate appropriate to the class of the provision, where the
effect is material.
Seasonality
In common with the rest of the UK housebuilding industry, activity occurs
throughout the year, with peaks in sales completions in spring and autumn.
This creates seasonality in the Group's trading results and working capital.
2 SEGMENTAL REPORTING
The ELT (comprising Peter Truscott (Chief Executive), Duncan Cooper (Group
Finance Director until 13 December 2023), Bill Floydd (Group Finance Director
from 13 November 2023) David Marchant (Group Operations Director), Kieran Daya
(Managing Director, Crest Nicholson Partnerships and Strategic Land until 31
December 2023 and Chief Operating Officer from 01 January 2024), Jane Cookson
(Group HR Director), Kevin Maguire (General Counsel and Company Secretary
until 18 August 2023), Heather O'Sullivan (General Council from 25 September
2023), Penny Thomas (Group Company Secretary from 1 January 2024), Alex Stark
(Executive Managing Director until 8 August 2023) and David Brown (Executive
Managing Director until 15 December 2023)), which is accountable to the Board,
has been identified as the chief operating decision maker for the purposes of
determining the Group's operating segments. The ELT approves investment
decisions, allocates group resources and performs divisional performance
reviews. The Group operating segments are considered to be its divisions, each
of which has its own management board. All divisions are engaged in
residential-led, mixed-use developments in the United Kingdom and therefore
with consideration of relevant economic indicators such as the nature of the
products sold and customer base, and, having regard to the aggregation
criteria in IFRS 8, the Group identifies that it has one reportable operating
segment.
3 REVENUE
2023 2022
Revenue type £m £m
Open market housing including specification upgrades 550.0 803.7
Affordable housing 88.0 76.9
Total housing 638.0 880.6
Land and commercial sales 19.5 32.0
Freehold reversions - 1.0
Total revenue 657.5 913.6
2023 2022
Timing of revenue recognition £m £m
Revenue recognised at a point in time 552.4 842.6
Revenue recognised over time 105.1 71.0
Total revenue 657.5 913.6
2023 2022
Assets and liabilities related to contracts with customers £m £m
Contract assets (note 17) 6.9 25.1
Contract liabilities (note 21) (6.0) (19.3)
Contract assets have decreased to £6.9m from £25.1m in 2022, reflecting less
unbilled work-in-progress on affordable and other sales in bulk at the year
end. This is in line with the trading of the Group and the contractual
arrangements in the Group's contracts. Contract liabilities have reduced to
£6.0m from £19.3m in 2022, reflecting a lower amount of payments on account
received from customers in excess of billable work-in-progress on affordable
and other sales in bulk on contracts on which revenue is recognised over time.
This fall was driven primarily by a reduction in a number of sites where
revenue was recognised at a point in time in the current year but the Group
had received progress payments from the customer in the prior year.
Based on historical trends, the Directors expect a significant proportion of
the contract liabilities total to be recognised as revenue in the next
reporting period.
Included in revenue during the year was £16.1m (2022: £19.6m) that was
included in contract liabilities at the beginning of the year.
During the year £nil (2022: £nil) of revenue was recognised from performance
obligations satisfied or partially satisfied in previous years.
As at 31 October 2023 there was £229.1m (2022: £322.4m) of transaction price
allocated to performance obligations that are unsatisfied or partially
unsatisfied on contracts exchanged with customers. Forecasts recognise
£114.3m (2022: £257.4m) of transaction prices allocated to performance
obligations that are unsatisfied on contracts exchanged with customers within
one year, £112.0m (2022: £65.0m) within two to five years, and £2.8m (2022:
£nil) over five years.
4 EXCEPTIONAL ITEMS
Exceptional items are those which, in the opinion of the Directors, are
material by size and/or non-recurring in nature and therefore require separate
disclosure within the consolidated income statement in order to assist the
users of the financial statements to better understand the performance of the
Group, which is also how the Directors internally manage the business. Where
appropriate, the Directors consider that items should be considered as
categories or classes of items, such as any credits/costs impacting the
consolidated income statement which relate to combustible materials,
notwithstanding where an item may be individually immaterial. Where
appropriate, a material reversal of these amounts will be reflected through
exceptional items.
2023 2022
£m £m
Cost of sales
Combustible materials charge (11.3) (102.5)
Combustible materials credit 10.0 -
Net combustible materials charge (1.3) (102.5)
Legal provision (13.0) -
Total cost of sales charge (14.3) (102.5)
Net finance expense
Combustible materials imputed interest (4.6) (1.0)
Share of post-tax profit/(loss) of joint ventures
Combustible materials credit/(charge) of joint ventures 0.6 (1.5)
Total exceptional charge (18.3) (105.0)
Tax credit on exceptional charge 4.8 22.4
Total exceptional charge after tax credit (13.5) (82.6)
Net combustible materials charge
As a consequence of signing the Developer Remediation Contract on 13 March
2023, the Group has entered into contractual commitments with the UK
Government to identify and remediate those buildings it has developed with
possible life-critical fire safety defects. The Group is currently working on
circa 90 buildings in various stages of design, procurement and works. The
combustible materials charge represents forecast changes in build costs and in
the provision discount. The Group has recovered £10.0m cash from third
parties in the year in respect of defective design and workmanship. See note
22 for additional information.
Legal provision
The Group is subject to a legal claim relating to a low-rise bespoke apartment
block built by the Group which was damaged by fire in 2021. Due to the size
and nature of the claim, and in line with the Group's accounting policy, this
has been presented as an exceptional item. See note 22 for additional
information.
Net finance expense
The combustible materials imputed interest reflects the unwind of the imputed
interest on the provision to reflect the time value of the liability.
Share of post-tax loss of joint ventures
The combustible materials credit/(charge) of joint ventures represents the
Group's share of exceptional combustibles materials credit/(charge) in its
joint venture Crest Nicholson Bioregional Quintain LLP. The joint venture
recognised a provision in the prior year and the current year credit
represents a recovery from third parties, net of changes in build costs.
Taxation
An exceptional income tax credit of £4.8m (2022: £22.4m) has been recognised
in relation to the above exceptional items using the actual tax rate
applicable to these items.
5 NET ADMINISTRATIVE EXPENSES AND OPERATING PROFIT
Operating profit of £29.9m (2022: £38.4m) from continuing activities is
stated after (charging)/crediting:
Note 2023 2022
£m £m
Inventories expensed in the year (520.2) (705.3)
Inventories impairment movement in the year 18 (7.6) 8.1
Employee costs 6 (60.7) (58.4)
Depreciation on property, plant and equipment 12 (0.5) (0.4)
Depreciation on right-of-use assets 13 (2.3) (1.9)
Joint venture project management fees recognised in administrative expenses 27 1.9 2.0
Net administrative expenses £m £m
Administrative expenses (55.0) (51.1)
Other operating income 40.1 48.9
Other operating expenses (40.9) (47.4)
Net administrative expenses (55.8)
Other operating income and other operating expenses shown above relate to the
income and associated costs arising on the sale of part exchange properties.
For the year ended 31 October 2023, both the income and associated costs of
these sales has been presented within net administrative expenses in the
consolidated income statement. Previously the income and associated costs
arising on these sales was included within cost of sales. The prior year has
not been restated since the net result is immaterial to the Group and there is
no change to the operating profit realised in the year.
2023 2022
Auditors' remuneration £000 £000
Audit of these consolidated financial statements 166 137
Audit of financial statements of subsidiaries pursuant to legislation 819 783
Other non-audit services 154 95
The audit fees payable in 2022 included £30,000 in relation to additional
costs for the 2021 audit.
Fees payable to the Group's auditors for non-audit services included £100,000
(2022: £95,000) in respect of an independent review of the half-year results
and £54,000 for other non-audit assurance services for sustainability
reporting.
In addition to the above, PricewaterhouseCoopers LLP provide audit services to
the Crest Nicholson Group Pension and Life Assurance Scheme and Group joint
ventures. The fees associated with the services to the Crest Nicholson Group
Pension and Life Assurance Scheme are £35,565 (2022: £25,400) and are met by
the assets of the scheme, and the fees associated with services to Group joint
ventures are £20,000 (2022: £22,000).
6 EMPLOYEE NUMBERS AND COSTS
(a) Average monthly number of persons employed by the Group 2023 2022
Number Number
Development 778 727
The Directors consider all employees of the Group to be employed within the
same category of Development.
(b) Employee costs (including Directors and key management) 2023 2022
£m £m
Wages and salaries 50.4 48.0
Social security costs 5.8 6.0
Other pension costs 3.0 2.5
Share-based payments (note 16) 1.5 1.9
60.7 58.4
(c) Key management remuneration 2023 2022
£m £m
Salaries and short-term employee benefits 3.5 4.0
Directors' remuneration for loss of office - 0.5
Share-based payments 0.6 1.0
4.1 5.5
Key management comprises the ELT (which includes the Executive Directors of
the Board) and Non-Executive Directors as they are considered to have the
authority and responsibility for planning, directing and controlling the
activities of the Group.
(d) Directors' remuneration 2023 2022
£m £m
Salaries and short-term employee benefits 1.7 2.6
Directors' remuneration for loss of office - 0.5
Share-based payments 0.5 0.7
2.2 3.8
Further information relating to Directors' remuneration, incentive plans,
share options, pension entitlement and the highest paid Director, appears in
the Directors' Remuneration Report, which is presented on pages 81-98 of our
2023 annual report and financial statements to be published in February 2024.
7 FINANCE INCOME AND EXPENSE
2023 2022
Finance income £m £m
Interest income 2.4 0.7
Interest on amounts due from joint ventures (note 27) 1.2 2.1
Net interest on defined benefit pension scheme (note 16) 0.5 0.3
4.1 3.1
Finance expense
Interest on bank loans (5.7) (6.6)
Revolving credit facility issue costs (0.6) (0.7)
Imputed interest on deferred land payables (3.1) (2.8)
Interest on lease liabilities (note 13) (0.2) (0.1)
Imputed interest on combustible materials provision - exceptional (note 22) (4.6) (1.0)
(14.2) (11.2)
Net finance expense (10.1) (8.1)
8 INCOME TAX EXPENSE
2023 2022
£m £m
Current tax
UK corporation tax expense on profit for the year (4.2) (6.1)
Adjustment in respect of prior periods 0.7 -
Total current tax expense (3.5) (6.1)
Deferred tax
Origination and reversal of temporary differences in the year (1.7) (0.3)
Total deferred tax charge (note 15) (1.7) (0.3)
Total income tax expense in consolidated income statement (5.2) (6.4)
Corporation tax is calculated at 22.5%, based on a tax rate of 19.0% up until
1 April 2023, and a tax rate of 25.0% from 1 April 2023 (2022: 19.0%), of the
profit chargeable to tax for the year. From 1 April 2022 the Group is subject
to the RPDT at an additional rate of 4.0%. This results in a weighted
statutory rate of corporation tax of 26.5% (2022: 21.3%) for the year. The
effective tax rate for the year is 22.5% (2022: 19.5%), which is lower than
(2022: lower than) the weighted standard rate of UK corporation tax due to the
impact of a prior year adjustment, enhanced tax deductions and the RPDT annual
allowance. The Group expects the effective tax rate to be more aligned to the
standard rate of corporation tax in future years as deferred tax on temporary
differences unwinds.
2023 2022
Reconciliation of tax expense in the year £m £m
Profit before tax 23.1 32.8
Tax charge on profit at 26.5% (2022: 21.3%) (6.1) (7.0)
Effects of:
Expenses not deductible for tax purposes (0.8) (0.7)
Enhanced tax deductions 0.3 0.2
Adjustment in respect of prior periods 0.7 -
Effect of change in rate of tax - 0.6
Impact of RPDT annual allowance and adjustments 0.7 0.5
Total income tax expense in consolidated income statement (5.2) (6.4)
RPDT came into force in April 2022 and is therefore applicable to relevant
profits for the full financial year. RPDT is an additional tax on profits
generated from residential property development activity, in excess of an
annual threshold and adjusting for amounts disallowable under RPDT, such as
interest expense. The impact of RPDT annual allowance and adjustments reflects
the net tax benefit of the annual threshold and interest adjustment.
Expenses not deductible for tax purposes include business entertaining and
other permanent disallowable expenses. Enhanced tax deductions include items
for which, under tax law, a corporation tax deduction is available in excess
of the amount shown in the consolidated income statement. For example, land
remediation enhanced allowances.
Adjustment in respect of prior periods reflect the difference between the
estimated consolidated income statement tax charge in the prior year and that
of the actual tax outcome.
9 DIVIDENDS
2023 2022
Dividends recognised as distributions to equity shareholders in the year: £m £m
Current year interim dividend of 5.5 pence per share (2022: 5.5 pence per 14.1 14.1
share)
Prior year final dividend per share of 11.5 pence per share (2022: 9.5 pence 29.5 24.4
per share)
43.6 38.5
2023 2022
Dividends proposed as distributions to equity shareholders in the year: £m £m
Final dividend for the year ended 31 October 2023 of 11.5 pence per share 29.5 29.5
(2022: 11.5 pence per share)
The proposed final dividend was approved by the Board on 23 January 2024 and,
in accordance with IAS 10: Events after the Reporting Period, has not been
included as a liability in this financial year. The final dividend will be
paid on 23 April 2024 to all ordinary shareholders on the Register of Members
on 22 March 2024.
10 EARNINGS PER ORDINARY SHARE
Basic earnings per share is calculated by dividing profit attributable to
equity shareholders by the weighted average number of ordinary shares in issue
during the year. For diluted earnings per share, the weighted average number
of shares is increased by the average number of potential ordinary shares held
under option during the year. This reflects the number of ordinary shares
which would be purchased using the difference in value between the market
value of shares and the share option exercise price. The market value of
shares has been calculated using the average ordinary share price during the
year. Only share options which have met their cumulative performance criteria
have been included in the dilution calculation. The earnings and weighted
average number of shares used in the calculations are set out below.
Earnings Weighted average number of ordinary shares Per share amount
£m Number Pence
Year ended 31 October 2023
Basic earnings per share 17.9 256,131,621 7.0
Dilutive effect of share options - 594,762
Diluted earnings per share 17.9 256,726,383 7.0
Year ended 31 October 2023 - Pre-exceptional items
Adjusted basic earnings per share 31.4 256,131,621 12.3
Dilutive effect of share options - 594,762
Adjusted diluted earnings per share 31.4 256,726,383 12.2
Year ended 31 October 2022
Basic earnings per share 26.4 256,405,006 10.3
Dilutive effect of share options - 1,320,375
Diluted earnings per share 26.4 257,725,381 10.2
Year ended 31 October 2022 - Pre-exceptional items
Adjusted basic earnings per share 109.0 256,405,006 42.5
Dilutive effect of share options - 1,320,375
Adjusted diluted earnings per share 109.0 257,725,381 42.3
11 INTANGIBLE ASSETS
Goodwill 2023 2022
£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 CN Finance plc (formerly Castle Bidco
plc) on 24 March 2009. The goodwill relating to items other than the holding
of strategic land was fully impaired in prior periods. The remaining goodwill
was allocated to acquired strategic land holdings (the cash-generating unit)
within the Group and has not previously been impaired. The goodwill is
assessed for impairment annually. The recoverable amount is equal to the
higher of value in use and fair value less costs of disposal. The Directors
have therefore assessed value in use, being the present value of the forecast
cash flows from the expected development and sale of properties on the
strategic land. These cash flows are the key estimates in the value in use
assessment. The forecast looks at the likelihood and scale of permitted
development, forecast build costs and forecast selling prices, using a pre-tax
discount rate of 9.5% (2022: 8.5%), covering a further period of 14 years to
2038, and based on current market conditions. The discount rate is based on an
externally produced weighted average cost of capital range estimate. For 2023
9.5% (2022: 8.5%) falls within the range. The FHS will not impact the
estimated development cash flows as sites in production already incorporate
the forecast extra costs, and for those under option the extra costs will be
adjusted in the land values payable. The period used in this assessment
represents the estimated time it will take to obtain planning and build out on
the remaining acquired strategic land holdings. The recoverable value of the
cash generating unit is substantially in excess of the carrying value of
goodwill. Sensitivity analysis has been undertaken by changing the discount
rates by plus or minus 1.0% and the forecast profit margins applicable to the
site within the cash generating unit. None of the sensitivities, either
individually or in aggregate, resulted in the fair value of the goodwill being
reduced to below its current book value amount. As the forecast covers the
entire life of the cash generating unit no growth rate has been used to
extrapolate the cash flow projection, and as such the rate is not disclosed.
12 PROPERTY, PLANT AND EQUIPMENT
Fixtures and fittings Computer equipment and software Total
£m £m £m
Cost
At 1 November 2021 1.8 3.2 5.0
Additions - 0.1 0.1
Disposals (0.1) (0.4) (0.5)
At 31 October 2022 1.7 2.9 4.6
Additions 1.8 - 1.8
Disposals - (0.7) (0.7)
At 31 October 2023 3.5 2.2 5.7
Accumulated depreciation
At 1 November 2021 1.0 2.8 3.8
Charge for the year 0.2 0.2 0.4
Disposals (0.1) (0.4) (0.5)
At 31 October 2022 1.1 2.6 3.7
Charge for the year 0.3 0.2 0.5
Disposals - (0.7) (0.7)
At 31 October 2023 1.4 2.1 3.5
Net book value
At 31 October 2023 2.1 0.1 2.2
At 31 October 2022 0.6 0.3 0.9
At 1 November 2021 0.8 0.4 1.2
The Group has contractual commitments for the acquisition of property, plant
and equipment of £nil (2022: £nil).
13 RIGHT-OF-USE ASSETS AND LIABILITIES
Office buildings Motor vehicles Total
£m £m £m
Cost
At 1 November 2021 13.1 4.2 17.3
Additions - 1.3 1.3
Disposals - (1.0) (1.0)
At 31 October 2022 13.1 4.5 17.6
Additions 2.8 1.9 4.7
Disposals (7.3) (1.6) (8.9)
At 31 October 2023 8.6 4.8 13.4
Accumulated depreciation
At 1 November 2021 10.7 2.9 13.6
Charge for the year 1.0 0.9 1.9
Disposals - (1.0) (1.0)
Reclassification (0.6) - (0.6)
At 31 October 2022 11.1 2.8 13.9
Charge for the year 1.3 1.0 2.3
Disposals (7.3) (1.6) (8.9)
At 31 October 2023 5.1 2.2 7.3
Net book value
At 31 October 2023 3.5 2.6 6.1
At 31 October 2022 2.0 1.7 3.7
At 1 November 2021 2.4 1.3 3.7
Lease liabilities included in the consolidated statement of financial position
2023 2022
£m £m
Non-current 4.4 2.3
Current 2.0 1.6
Total lease liabilities 6.4 3.9
Amounts recognised in the consolidated income statement
2023 2022
£m £m
Depreciation on right-of-use assets 2.3 1.9
Interest on lease liabilities 0.2 0.1
Amounts recognised in the consolidated cash flow statement
2023 2022
£m £m
Principal element of lease payments 2.4 2.1
Maturity of undiscounted contracted lease cash flows
2023 2022
£m £m
Less than one year 2.2 1.7
One to five years 3.2 2.4
More than five years 1.6 -
Total 7.0 4.1
14 INVESTMENTS
Investments in joint ventures
Below are the joint ventures that the Directors consider to be material to the
Group:
· Crest A2D (Walton Court) LLP: In January 2016 the Group entered into
a partnership agreement with A2 Dominion Developments Limited to procure and
develop a site in Surrey. The LLP commenced construction in 2019, with sales
completion forecast for 2025. The development will be equally funded by both
parties by way of interest free loans. The Group performs the role of project
manager, for which it receives a project management fee
· Elmsbrook (Crest A2D) LLP: In July 2017 the Group entered into a
partnership agreement with A2 Dominion Developments Limited to procure and
develop a site in Oxfordshire. The LLP commenced construction in 2018, with
sales completion forecast for 2024. The development will be equally funded by
both parties by way of interest free loans. The Group performs the role of
project manager, for which it receives a project management fee
· Crest Sovereign (Brooklands) LLP: In April 2019 the Group entered
into a partnership agreement with Sovereign Housing Association Limited to
develop a site in Bristol. The LLP commenced construction in 2019, with sales
completion forecast for 2027. The LLP will be equally funded by both parties,
who will receive interest on loaned sums. The Group performs the role of
project manager, for which it receives a project management fee
· Crest Peabody (Turweston) LLP: In September 2023 the Group entered
into a partnership agreement with the Peabody Trust to develop a site in
Buckinghamshire. The LLP is expecting to commence construction in 2024, with
sales completion forecast for 2029. The development will be equally funded by
both parties by way of interest free loans. The Group performs the role of
project manager, for which it will receive a project management fee and a
sales and marketing fee.
2023 2022
Total investments in joint ventures £m £m
Crest A2D (Walton Court) LLP 2.3 3.4
Elmsbrook (Crest A2D) LLP 3.5 3.3
Crest Sovereign (Brooklands) LLP 4.9 2.3
Crest Peabody (Turweston) LLP - -
Other non-material joint ventures - -
Total investments in joint ventures 10.7 9.0
All material joint ventures have their place of business in Great Britain, are
50% owned and are accounted for using the equity method, in line with the
prior year. See note 28 for further details.
Summarised financial information for joint ventures
The tables below provide financial information for joint ventures that are
material to the Group. The information disclosed reflects the amounts
presented in the financial statements of the relevant joint ventures, where
the Group retains an interest, and not the Group's share of those amounts.
2023 Crest A2D (Walton Elmsbrook (Crest A2D) LLP Crest Crest Other non-material joint ventures Total
Court) LLP Sovereign (Brooklands) LLP Peabody (Turweston) LLP
£m £m £m £m £m £m
Summarised statement of financial position
Current assets
Cash and cash equivalents 0.2 6.0 0.4 - 0.2 6.8
Inventories 64.8 4.6 16.7 - - 86.1
Other current assets 0.2 1.0 1.9 5.3 2.0 10.4
Current liabilities
Financial liabilities (52.0) (1.4) (1.1) (0.3) - (54.8)
Other current liabilities (5.7) (3.3) (8.1) (5.0) (3.9) (26.0)
Non-current liabilities
Financial liabilities (3.0) - - - - (3.0)
Net assets/(liabilities) 4.5 6.9 9.8 - (1.7) 19.5
Reconciliation to carrying amounts
Opening net assets/(liabilities) at 1 November 2022 6.7 6.5 4.6 - (2.9) 14.9
(Loss)/profit for the year (3.2) 3.4 5.2 - 1.2 6.6
Capital contribution reserve 1.0 - - - - 1.0
Dividends paid - (3.0) - - - (3.0)
Closing net assets/(liabilities) at 31 October 2023 4.5 6.9 9.8 - (1.7) 19.5
Group's share of closing net assets/(liabilities) at 31 October 2023 2.3 3.5 4.9 - (0.9) 9.8
Fully provided in the Group financial statements (note 22) - - - - 0.9 0.9
Group's share in joint venture 2.3 3.5 4.9 - - 10.7
Amount due to the Group (note 17) 27.4* 1.4 0.4 0.3 - 29.5
Amount due from the Group (note 21) - - - - 0.7 0.7
Summarised income statement for the 12 months ending 31 October 2023
Revenue 0.9 21.1 47.2 - - 69.2
Expenditure (2.6) (17.7) (41.1) - - (61.4)
Expenditure - exceptional item (note 4) - - - - 1.2 1.2
Operating (loss)/profit before finance expense (1.7) 3.4 6.1 - 1.2 9.0
Finance expense (1.5) - (0.9) - - (2.4)
Pre-tax and post-tax (loss)/profit for the year (3.2) 3.4 5.2 - 1.2 6.6
Group's share in joint venture (loss)/profit for the year (1.6) 1.7 2.6 - 0.6 3.3
* £27.4m stated after expected credit loss of £0.1m.
The Group is committed to provide such funding to joint ventures as may be
required by the joint venture in order to carry out the project if called.
Funding of this nature is currently expected to be £5.9m (2022: £1.2m). The
Group has recognised its share of the accumulated losses of its joint ventures
against the carrying value of investments or loans in the joint venture where
appropriate, in line with IAS 28.
2022 Bonner Road LLP* Crest A2D (Walton Court) LLP Elmsbrook (Crest A2D) LLP Crest Other non-material joint ventures Total
Sovereign (Brooklands) LLP
£m £m £m £m £m £m
Summarised statement of financial position
Current assets
Cash and cash equivalents - 0.1 1.6 0.3 0.2 2.2
Inventories - 40.4 7.8 28.8 - 77.0
Other current assets - 0.1 0.1 2.3 0.2 2.7
Current liabilities
Financial liabilities - (0.6) - (1.0) - (1.6)
Other current liabilities - (1.4) (3.0) (6.9) (3.3) (14.6)
Non-current liabilities
Financial liabilities - (31.9) - (18.9) - (50.8)
Net assets/(liabilities) - 6.7 6.5 4.6 (2.9) 14.9
Reconciliation to carrying amounts
Opening net (liabilities)/assets at 1 November 2021 (13.7) 4.3 8.9 (1.0) 0.2 (1.3)
(Loss)/profit for the year (1.2) 1.2 2.4 5.6 (3.1) 4.9
Capital contribution reserve - 1.2 - - - 1.2
Dividends paid - - (4.8) - - (4.8)
Disposal in the year 14.9* - - - - 14.9
Closing net assets/(liabilities) at 31 October 2022 - 6.7 6.5 4.6 (2.9) 14.9
Group's share of closing net assets/(liabilities) at 31 October 2022 - 3.4 3.3 2.3 (1.4) 7.6
Losses recognised against receivable from joint venture (note 17) - - - - 0.2 0.2
Fully provided in the Group financial statements (note 22) - - - - 1.2 1.2
Group's share in joint venture - 3.4 3.3 2.3 - 9.0
Amount due to the Group (note 17) - 15.9** 0.8 10.4 - 27.1
Amount due from the Group (note 21) - - - - 0.1 0.1
Summarised income statement for the 12 months ending 31 October 2022
Revenue - 26.0 11.0 47.4 - 84.4
Expenditure - (23.6) (8.6) (39.9) (0.1) (72.2)
Expenditure - exceptional item (note 4) - - - - (3.0) (3.0)
Operating profit/(loss) before finance expense - 2.4 2.4 7.5 (3.1) 9.2
Finance expense (1.2) (1.2) - (1.9) - (4.3)
Pre-tax and post-tax (loss)/profit for the year (1.2) 1.2 2.4 5.6 (3.1) 4.9
Group's share in joint venture (loss)/profit for the year (0.6) 0.6 1.2 2.8 (1.5) 2.5
* Group's share of the net liabilities comprises £7.5m made up of brought
forward net liabilities of £6.9m and current year loss of £0.6m. Bonner Road
LLP was disposed of on 6 May 2022.
** £15.9m stated after expected credit loss of £0.1m.
Subsidiary undertakings
The subsidiary undertakings that are significant to the Group and traded
during the year are set out below. The Group's interest is in respect of
ordinary issued share capital that is wholly owned and all the subsidiary
undertakings are incorporated in Great Britain and are included in the
consolidated financial statements.
Subsidiary
Nature of business
CN Finance
plc
Holding company (including group financing)
Crest Nicholson
plc
Holding company
Crest Nicholson Operations
Limited
Residential and commercial property development
A full list of the Group's undertakings including subsidiaries and joint
ventures is set out in note 28.
15 DEFERRED TAX ASSETS AND LIABILITIES
Deferred tax assets Inventories fair value Share-based payments Other temporary differences Total
£m £m £m £m
At 1 November 2021 1.5 0.4 2.9 4.8
Consolidated income statement movements - 0.5 (0.1) 0.4
Equity movements - (0.4) - (0.4)
At 31 October 2022 1.5 0.5 2.8 4.8
Consolidated income statement movements (0.4) (0.1) (0.8) (1.3)
Equity movements - (0.2) - (0.2)
At 31 October 2023 1.1 0.2 2.0 3.3
Deferred tax liabilities Pension surplus Total
£m £m
At 1 November 2021 (4.1) (4.1)
Consolidated income statement movements (0.7) (0.7)
Equity movements 1.6 1.6
At 31 October 2022 (3.2) (3.2)
Consolidated income statement movements (0.4) (0.4)
Equity movements 1.1 1.1
At 31 October 2023 (2.5) (2.5)
Total deferred tax credited to equity in the year is £0.9m (2022: £1.2m).
Deferred tax assets expected to be recovered in less than 12 months is £1.0m
(2022: £1.5m), and in more than 12 months is £2.3m (2022: £3.3m). Deferred
tax liabilities are expected to be settled in more than 12 months.
At the consolidated statement of financial position date the substantively
enacted future corporation tax rate is 25.0% (as from 1 April 2023). RPDT
became effective from 1 April 2022 and is an additional tax at 4.0% of profits
generated from residential property development activity, in excess of an
annual threshold. Deferred tax assets and liabilities have been evaluated
using the applicable tax rates when the asset is forecast to be realised and
the liability is forecast to be settled. The Group has no material
unrecognised deferred tax assets.
Inventories fair value represents temporary differences on the carrying value
of inventory fair valued on the acquisition of CN Finance plc in 2009. These
temporary differences are expected to be recoverable in full as it is
considered probable that taxable profits will be available against which the
deductible temporary differences can be utilised, and are therefore recognised
as deferred tax assets in the above amounts.
16 EMPLOYEE BENEFITS
(a) Retirement benefit obligations
Defined contribution scheme
The Group operates a defined contribution scheme for new employees. The assets
of the scheme are held separately from those of the Group in an independently
administered fund. The contributions to this scheme for the year were £2.8m
(2022: £2.3m). At the consolidated statement of financial position date there
were no outstanding or prepaid contributions (2022: £nil).
Defined benefit scheme
The Company sponsors the Crest Nicholson Group Pension and Life Assurance
Scheme (Scheme), a funded defined benefit pension scheme in the UK. The Scheme
is administered within a trust that is legally separate from the Company. A
Trustee company (Trustee) is appointed by the Company and the Company and the
Scheme's members appoint Trustee Directors. The Trustee is appointed to act in
the interest of the Scheme and all relevant stakeholders, including the
members and the Company. The Trustee is also responsible for the investment of
the Scheme's assets.
The Scheme closed to future accrual from 30 April 2010. Accrued pensions in
relation to deferred members are revalued at statutory revaluation in the
period before retirement. Benefits also increase either at a fixed rate or in
line with inflation while in payment. The Scheme provides pensions to members
on retirement and to their dependants on death.
The Company pays contributions to improve the Scheme's funding position as
determined by regular actuarial valuations. The Trustee is required to use
prudent assumptions to value the liabilities and costs of the Scheme whereas
the accounting assumptions must be best estimates.
Responsibility for meeting any deficit within the Scheme lies with the Company
and this introduces a number of risks for the Company. The major risks are:
interest rate risk, inflation risk, investment risk and longevity risk. The
Company and Trustee are aware of these risks and manage them through
appropriate investment and funding strategies.
The Scheme is subject to regular actuarial valuations, which are usually
carried out every three years. The last actuarial valuation was carried out
with an effective date of 31 January 2021. These actuarial valuations are
carried out in accordance with the requirements of the Pensions Act 2004 and
so include deliberate margins for prudence. This contrasts with these
accounting disclosures, which are determined using best estimate assumptions.
The results of the actuarial valuation as at 31 January 2021 have been
projected to 31 October 2023 by a qualified independent actuary. The figures
in the following disclosure were measured using the Projected Unit Method.
The investment strategy in place for the Scheme is to invest in a mix of
return seeking, index linked and fixed interest investments. As at 31 October
2023, the allocation of the Scheme's invested assets was 18% in return seeking
investments, 40% in liability-driven investing, 40% in cash and 2% in insured
annuities. Details of the investment strategy can be found in the Scheme's
Statement of Investment Principles, which the Trustee updates as their policy
evolves.
It should also be noted that liabilities relating to insured members of the
Scheme have been included as both an asset and a liability.
Following the High Court judgement in the Lloyds Banking Group Pensions
Trustees Limited v Lloyds Bank plc and others (2018) case, overall pension
benefits now need to be equalised to eliminate inequalities between males and
females in Guaranteed Minimum Pensions (GMP). The Company has allowed for this
in its accounts by adding a 1.3% (2022: 1.3%) reserve reflecting an
approximate estimate of the additional liability.
2023 2022 2021
£m £m £m
The amounts recognised in the consolidated statement of financial position are
as follows:
Fair value of scheme assets 141.3 160.0 241.9
Present value of scheme liabilities (131.3) (148.9) (225.2)
Net surplus amount recognised at year end 10.0 11.1 16.7
Deferred tax liability recognised at year end within non-current liabilities (2.5) (3.2) (4.1)
The retirement benefit surplus recognised in the consolidated statement of
financial position represents the surplus of the fair value of the Scheme's
assets over the present value of the Scheme's liabilities.
The rules of the Scheme provide the Group with an unconditional right to a
refund of surplus assets on the gradual settlement of the Scheme's
liabilities. In the ordinary course of business the Scheme Trustee has no
unilateral right to wind the Scheme up. Based on these rights and in
accordance with IFRIC 14, the Group has made the judgement that the net
surplus in the Scheme is recognised in full.
At the consolidated statement of financial position date the corporation tax
rate is 25.0%. The deferred tax liability on the retirement benefit surplus
has been evaluated applying this rate. RPDT of 4.0% is applicable to
residential property development trading income only.
Amounts recognised in comprehensive
income:
The current and past service costs, settlements and curtailments, together
with the interest income for the year are included in the consolidated
statement of comprehensive income. Remeasurements of the net defined benefit
asset are included in the consolidated statement of comprehensive income.
2023 2022
£m £m
Service cost
Administrative expenses (0.6) (0.9)
Interest income 0.5 0.3
Recognised in the consolidated income statement (0.1) (0.6)
2023 2022
£m £m
Remeasurements of the net liability
Return on Scheme assets (18.5) (82.6)
Gains arising from changes in financial assumptions 12.5 79.8
Gains/(losses) arising from changes in demographic assumptions 6.1 (0.1)
Experience losses (2.6) (5.5)
Actuarial losses recorded in the consolidated statement of comprehensive (2.5) (8.4)
income
Total defined benefit scheme losses (2.6) (9.0)
2023 2022
% %
The principal actuarial assumptions used were:
Liability discount rate 5.6 4.8
Inflation assumption - RPI 3.3 3.2
Inflation assumption - CPI 2.7 2.6
Revaluation of deferred pensions 2.7 2.6
Increases for pensions in payment
Benefits accrued in excess of GMP pre-1997 3.0 3.0
Benefits accrued post-1997 3.1 3.0
Proportion of employees opting for early retirement 0.0 0.0
Proportion of employees commuting pension for cash 100.0 100.0
Mortality assumption - pre-retirement AC00 AC00
Mortality assumption - male and female post-retirement S3PA light base tables S3PA light base tables
(males and females) projected in line with CMI_2022 projected in line with CMI_2021
core model with core parameters (Sk = core model with core parameters (Sk =
7.0, an initial addition of 0.25%, w2020 7.0, an initial addition of 0.25%, w2020
and w2021 set to zero and 2022 set to 25%) and with a long-term rate of and w2021 set to zero) and with a long-term rate of improvement of 1.25% p.a
improvement of 1.25% p.a
2023 Years 2022
Years
Future expected lifetime of current pensioner at age 65
Male aged 65 at year end 22.9 23.4
Female aged 65 at year end 24.6 25.0
Future expected lifetime of future pensioner at age 65
Male aged 45 at year end 24.1 24.6
Female aged 45 at year end 25.9 26.3
2023 2022
£m £m
Changes in the present value of assets over the year
Fair value of assets at beginning of the year 160.0 241.9
Interest income 7.5 4.1
Return on assets (excluding amount included in net interest income) (18.5) (82.6)
Contributions from the employer 1.5 3.4
Benefits paid (8.6) (5.9)
Administrative expenses (0.6) (0.9)
Fair value of assets at end of the year 141.3 160.0
Actual return on assets over the year (10.9) (78.5)
2023 2022
£m £m
Changes in the present value of liabilities over the year
Liabilities at beginning of the year (148.9) (225.2)
Interest cost (7.0) (3.8)
Remeasurement gains/(losses)
Gains arising from changes in financial assumptions 12.5 79.8
Gains/(losses) arising from changes in demographic assumptions 6.1 (0.1)
Experience losses (2.6) (5.5)
Benefits paid 8.6 5.9
Liabilities at end of the year (131.3) (148.9)
2023 2022
£m £m
Split of the Scheme's liabilities by category of membership
Deferred pensioners (57.8) (71.5)
Pensions in payment (73.5) (77.4)
(131.3) (148.9)
2023 2022
Years Years
Average duration of the Scheme's liabilities at end of the year 12.0 14.0
This can be subdivided as follows:
Deferred pensioners 16.0 18.0
Pensions in payment 9.0 10.0
2023 2022
£m £m
Major categories of scheme assets
Return seeking
Overseas equities 2.4 2.3
Other (hedge funds, multi asset strategy and absolute return funds) 23.6 55.9
26.0 58.2
Debt instruments
Corporates 11.8 -
Liability-driven investing 44.1 71.6
55.9 71.6
Other
Cash 55.9 25.9
Insured annuities 3.5 4.3
59.4 30.2
Total market value of assets 141.3 160.0
The Scheme has implemented a Liability Driven Investment (LDI) strategy
designed to closely align investment returns with movements in the Scheme's
liabilities on a low-risk basis, thereby reducing the volatility of the
Scheme's funding level. The use of LDI brings liquidity risk as the demand for
additional collateral to maintain the Scheme's hedging can change over short
periods when interest rates change. In consultation with the Company, during
the 2022 gilts crisis the Scheme continued to follow their LDI strategy,
maintaining their interest rate and inflation hedging during the period of
significant market volatility. Following the 2022 gilts crisis, the Trustee
worked with its investment adviser (and in consultation with the Company) to
review the investment strategy in April 2023. As a result, LCP (the Trustee's
investment adviser) estimate that as at 30 September 2023 the Scheme has
sufficient liquidity in the LDI portfolio (and Liquidity Plus Fund alongside)
to withstand a greater than 4% p.a. increase in yields (from already historic
highs) across the curve (assuming no accompanying fall in the value of
collateral) before other assets would need to be sold to maintain the Scheme's
hedge.
£nil (2022: £nil) of Scheme assets have a quoted market price in active
markets, £90.9m (2022: £106.2m) of Scheme assets have valuation inputs other
than quoted market prices, including quoted market prices for similar assets
in active markets, £21.4m (2022: £42.4m) of Scheme assets are instruments
that are valued based on quoted prices for similar instruments but for which
significant unobservable adjustments or assumptions are required to reflect
the differences between the instruments, and £29.0m (2022: £11.4m) of Scheme
assets are cash and insured pension annuities.
The Scheme has no investments in the Group or in property occupied by the
Group.
The Scheme had a deficit as at the latest valuation date of 31 January 2021,
with a recovery plan agreed between the Group and the Trustee. The Scheme was
in surplus on the Technical Provisions basis, and so no further contributions
were payable in respect of the shortfall in funding in accordance with the
Recovery Plan dated 8 February 2022. In order to continue to move the Scheme
towards the Trustee's secondary funding objective, the Trustee and the Group
have agreed that the Company will fund the Scheme with contributions of £1.5m
p.a., payable monthly until 30 April 2025. When the Scheme is at least 95%
funded on the Secondary Funding Basis for a period of three consecutive months
then the Group has the option to pay any remaining contributions to an escrow
account. The Group expects to contribute £1.5m to scheme funding in the year
ending 31 October 2024.
Sensitivity of the liability value to changes in the principal
assumptions
The sensitivities included are consistent with those shown in prior years and
show the change in the consolidated statement of financial position as at 31
October 2023 as a result of a change to the key assumptions.
If the discount rate was 0.25% higher/(lower), the Scheme liabilities would
decrease by £3.8m/(increase by £3.9m) if all the other assumptions remained
unchanged.
If the inflation assumption was 0.25% higher/(lower), the Scheme liabilities
would increase by £2.3m/(decrease by £2.4m) if all the other assumptions
remained unchanged.
If life expectancies were to increase by one year, the scheme liabilities
would increase by £4.7m if all the other assumptions remained unchanged.
(b) Share-based payments
The Group operates a Long-Term Incentive Plan (LTIP), save as you earn (SAYE)
and a deferred bonus plan.
Long-Term Incentive Plan
The Group's LTIP is open to the Executive Directors and senior management with
awards being made at the discretion of the Remuneration Committee. Options
granted under the plan are exercisable between three and 10 years after the
date of grant. Awards may be satisfied by shares held in the ESOT, the issue
of new shares (directly or to the ESOT) or the acquisition of shares in the
market. Awards made prior to 31 October 2020 vest over three years and are
subject to three years' service, and return on capital and profit performance
conditions.
Awards issued between 2021 and 2023 are subject to three years' service and
assessed against return on capital, profit performance conditions and relative
total shareholder returns (TSR). The non-market based return on capital and
profit performance conditions applies to 60% of the award and value the
options using a binomial option valuation model. The market-based TSR
performance conditions apply to 40% of the award and values the options using
the Monte Carlo valuation model. The TSR-based performance conditions are
split one-third FTSE 250 excluding investment funds and two-thirds sector peer
group. 1,320,566 of the options awarded in 2023 (961,765 of the 2022 award)
are subject to an additional post-vesting holding period, where shares cannot
be sold for two years after vesting date.
The 2021 fair value at measurement date of the different valuation elements
are £2.25 TSR (FTSE 250), £1.85 TSR (peer group), and £2.84 for the
non-market-based return on capital and profit performance conditions. The
correlation of FTSE 250 and peer group calculated for each individual
comparator company relative to the Group is 30% and 67% respectively. The
average fair value at measurement date is £2.50 per option.
The 28 January 2022 grant fair value at measurement date of the different
valuation elements of the unrestricted options are £1.68 TSR (FTSE 250),
£1.55 TSR (peer group), and £2.62 for the non-market-based return on capital
and profit performance conditions. The 2023 fair value at measurement date of
the different valuation elements of the restricted options are £1.51 TSR
(FTSE 250), £1.40 TSR (peer group), and £2.36 for the non-market-based
return on capital and profit performance conditions. The correlation of FTSE
250 and peer group calculated for each individual comparator company relative
to the Group is 31% and 68% respectively. The average fair value at
measurement date is £2.10 per option. The average fair value at measurement
date of the 25 August 2023 grant is £1.59 per option.
The 27 January 2023 grant fair value at measurement date of the different
valuation elements of the unrestricted options are £1.84 TSR (FTSE 250),
£1.68 TSR (peer group), and £2.45 for the non-market-based return on capital
and tCO2 elements. The 2023 fair value at measurement date of the different
valuation elements of the restricted options are £1.58 TSR (FTSE 250), £1.44
TSR (peer group), and £2.10 for the non-market-based return on capital and
profit performance conditions. The correlation of FTSE 250 and peer group
calculated for each individual comparator company relative to the Group is 33%
and 65% respectively. The average fair value at measurement date is £1.88 per
option.
Date of grant 26 Feb 2016 16 Apr 2019 21 Jun 2019 20 Feb 2020 04 Aug 2020 08 Feb 2021 28 Jan 2022 25 Aug 2022 06 Mar 07 Aug 27 Jan
2023 2023 2023
Options granted 1,075,943 1,140,962 278,558 1,125,531 7,298 1,328,192 1,341,918 23,955 29,462 508 1,771,417
Fair value at measurement date £5.07 £3.15 £3.15 £4.28 £1.53 £2.50 £2.10 £1.59 £2.75 £2.46 £1.88
Share price on date of grant £5.62 £4.00 £3.55 £5.16 £1.85 £3.23 £3.07 £2.33 £2.32 £2.14 £2.45
Exercise price £0.00 £0.00 £0.00 £0.00 £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 3 years 3 years 3 years 3 years
Expected dividend yield 3.50% 8.20% 8.20% 6.40% 6.40% 4.30% 5.30% 5.30% N/A N/A 0.0%
Expected volatility 30.0% 35.0% 35.0% 30.0% 30.0% 40.0% 40.0% 40.0% N/A N/A 45.0%
Risk-free interest rate 0.43% 0.81% 0.81% 0.45% 0.45% 0.03% 0.97% 0.97% N/A N/A 3.23%
Valuation model Binomial Binomial Binomial Binomial Binomial Binomial/ Monte Carlo Binomial/ Monte Carlo Binomial/ Monte Carlo N/A N/A Binomial/ Monte Carlo
Contractual life from 26.02.16 16.04.19 21.06.19 20.02.20 04.08.20 08.02.21 28.01.22 25.08.22 06.03.23 07.08.23 27.01.23
Contractual life to 25.02.26 15.04.29 20.06.29 19.02.30 03.08.30 07.02.31 27.02.32 27.02.32 19.02.30 03.08.30 26.01.33
Number Number Number Number Number Number Number of options Number of options Number of options Number Number Total number of options
of options of options of options of options of options of options of options of options
Movements in the year
Outstanding at 1 November 2021 1,518 692,934 278,558 954,131 7,298 1,276,437 - - - - - 3,210,876
Granted during the year - - - - - - 1,341,918 23,955 - - - 1,365,873
Exercised during the year (1,518) - - - - - - - - - - (1,518)
Lapsed during the year - (692,934) (278,558) (62,161) - (78,761) (29,443) - - - - (1,141,857)
Outstanding at 31 October 2022 - - - 891,970 7,298 1,197,676 1,312,475 23,955 - - - 3,433,374
Granted during the year - - - - - - - - 29,462 508 1,771,407 1,801,377
Exercised during the year - - - (417,308) (3,948) - - - (29,462) (508) - (451,226)
Lapsed during the year - - - (474,662) (3,350) (167,438) (181,150) - - - (201,028) (1,027,628)
Outstanding at 31 October 2023 - - - - - 1,030,238 1,131,325 23,955 - - 1,570,379 3,755,897
Exercisable at 31 October 2023 - - - - - - - - - - - -
Exercisable at 31 October 2022 - - - - - - - - - - - -
-
£m £m £m £m £m £m £m £m £m £m £m Total £m
Charge to income for the current year - - - 0.1 - - 0.1 - 0.1 - 0.3 0.6
Charge to income for the prior year - - - 1.1 - (0.1) 0.2 - - - - 1.2
The weighted average exercise price of LTIP options was £nil (2022: £nil).
Save As You Earn
Executive Directors and eligible employees are invited to make regular monthly
contributions to a Sharesave scheme administered by EQ. On completion of the
three-year contract period employees are able to purchase ordinary shares in
the Company based on the market price at the date of invitation less a 20%
discount. There are no performance conditions.
Date of grant 26 Jul 30 Jul 07 Aug 03 Aug 02 Aug 28 Jul
2018 2019 2020 2021 2022 2023
Options granted 712,944 935,208 1,624,259 256,132 975,549 1,938,156
Fair value at measurement date £0.52 £0.54 £0.36 £1.15 £0.66 £1.51
Share price on date of grant £3.77 £3.68 £1.94 £4.14 £2.67 £2.19
Exercise price £3.15 £2.86 £1.70 £3.42 £1.94 £1.51
Vesting period 3 years 3 years 3 years 3 years 3 years 3 years
Expected dividend yield 8.76% 8.96% 5.20% 1.98% 5.63% 7.78%
Expected volatility 35.00% 35.00% 40.00% 45.30% 42.20% 41.6%
Risk-free interest rate 0.85% 0.38% -0.08% 0.14% 1.62% 4.63%
Valuation model Binomial Binomial Binomial Binomial Binomial Binomial
Contractual life from 01.09.18 01.09.19 01.09.20 01.09.21 01.09.22 01.09.23
Contractual life to 01.03.22 01.03.23 01.03.24 01.03.25 01.03.26 01.03.27
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 2021 40,842 147,357 1,124,088 244,294 - - 1,556,581 £2.12
Granted during the year - - - - 975,549 - 975,549 £1.94
Exercised during the year (8,854) - (5,764) - - - (14,618) £2.58
Lapsed during the year (31,988) (50,525) (210,555) (160,163) (62,992) - (516,223) £2.47
Outstanding at 31 October 2022 - 96,832 907,769 84,131 912,557 - 2,001,289 £1.94
Granted during the year - - - - - 1,938,156 1,938,156 £1.51
Exercised during the year - - (522,976) - - - (522,976) £1.70
Lapsed during the year - (96,832) (61,983) (41,201) (486,485) (158,774) (845,275) £2.02
Outstanding at 31 October 2023 - - 322,810 42,930 426,072 1,779,382 2,571,194 £1.64
Exercisable at 31 October 2023 - - 322,810 - - - 322,810
Exercisable at 31 October 2022 - 96,832 - - - - 96,832
£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 0.1 0.1 - 0.3
Deferred bonus plan
Under the terms of certain bonus schemes, some parts of bonus payments must be
deferred into share options. The options carry no performance criteria and
vest over one or three years. Options granted under the plan are exercisable
between one and 10 years after the date of grant. Deferred bonus plan option
numbers are based on the share price on the date of grant.
Date of grant 28 Feb 26 Feb 01 Mar 28 Jan 09 Feb 06 Mar 2023 06 Mar 2023 27 Jan 2023
2020 2021 2022 2022 2022
Options granted 20,956 34,800 251 230,605 58,848 151 2,897 340,125
Fair value at measurement date £4.52 £3.28 £4.06 £2.76 £2.76 £2.75 £2.53 £2.44
Share price on date of grant £4.52 £3.28 £2.70 £3.06 £3.27 £2.32 £2.32 £2.45
Exercise price £0.00 £0.00 £0.00 £0.00 £0.00 £0.00 £0.00 £0.00
Vesting period 3 years 1 year N/A 3 years 1 year N/A N/A 3/1 year
Expected dividend yield and volatility N/A N/A N/A N/A N/A N/A N/A N/A
Risk-free interest rate N/A N/A N/A N/A N/A N/A N/A N/A
Valuation model N/A N/A N/A N/A N/A N/A N/A N/A
Contractual life from 28.02.20 26.02.21 02.03.22 28.01.22 09.02.22 06.03.23 06.03.23 27.01.23
Contractual life to 27.02.30 25.02.31 25.02.31 27.01.25 08.02.23 27.02.30 08.02.32 28.02.33
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 Total number of options
of
options
Outstanding at 1 November 2021 2,260 34,800 - - - - - - 37,060
Granted during the year - - 251 230,605 58,848 - - - 289,704
Exercised during the year - (24,985) (251) - - - - - (25,236)
Lapsed during the year - (9,815) - - - - - - (9,815)
Outstanding at 31 October 2022 2,260 - - 230,605 58,848 - - - 291,713
Granted during the year - - - - - 151 2,897 340,125 343,173
Exercised during the year (2,260) - - - (48,374) (151) (2,897) - (53,682)
Lapsed during the year - - - - (10,474) - - (21,108) (31,582)
Outstanding at 31 October 2023 - - - 230,605 - - - 319,017 549,622
Exercisable at 31 October 2023 - - - - - - - - -
Exercisable at 31 October 2022 - - - - - - - - -
£m £m £m £m £m £m £m £m Total £m
Charge to income for the current year - - - 0.2 - - - 0.2 0.4
Charge to income for the prior year - - - 0.4 - - - - 0.4
The weighted average exercise price of deferred bonus plan share options was
£nil (2022: £nil).
Total share incentive schemes 2023 2022
Movements in the year Number of options Number of options
Outstanding at beginning of the year 5,726,376 4,804,517
Granted during the year 4,082,706 2,631,126
Exercised during the year (1,027,884) (41,372)
Lapsed during the year (1,904,485) (1,667,895)
Outstanding at end of the year 6,876,713 5,726,376
Exercisable at end of the year 322,810 96,832
£m £m
Charge to income for share incentive schemes 1.5 1.9
The weighted average share price at the date of exercise of share options
exercised during the year was £2.77 (2022: £3.59). The options outstanding
had a range of exercise prices of £nil to £3.42 (2022: £nil to £3.42) and
a weighted average remaining contractual life of 6.2 years (2022: 6.4 years).
The gain on shares exercised during the year was £0.1m (2022: £0.6m).
17 TRADE AND OTHER RECEIVABLES
Trade and other receivables before expected credit loss Expected credit loss Trade and other receivables after expected credit loss Trade and other receivables before expected credit loss Expected credit loss Trade and other receivables after expected credit loss
2023 2023 2023 2022 2022 2022
£m £m £m £m £m £m
Non-current
Trade receivables 4.6 (0.1) 4.5 9.7 - 9.7
Due from joint ventures 1.5 - 1.5 25.4 (0.1) 25.3
6.1 (0.1) 6.0 35.1 (0.1) 35.0
Current
Trade receivables 57.1 (0.7) 56.4 49.7 (0.3) 49.4
Contract assets 6.9 - 6.9 25.2 (0.1) 25.1
Due from joint ventures 28.1 (0.1) 28.0 1.8 - 1.8
Other receivables 27.0 (0.2) 26.8 38.1 - 38.1
Prepayments and accrued income 1.9 - 1.9 1.9 - 1.9
121.0 (1.0) 120.0 116.7 (0.4) 116.3
Non-current and current 127.1 (1.1) 126.0 151.8 (0.5) 151.3
Trade receivables and contract assets mainly comprise contractual amounts due
from housing associations, bulk sale purchasers and land sales to other
housebuilders. Other receivables mainly comprise two development agreements
where the Group is entitled to recovery of costs incurred under the agreement.
Current trade receivables of £20.2m have been collected as of 1 January 2024
(2022: £21.2m have been collected as of 1 January 2023). The remaining
balance is due according to contractual terms, and no individually material
amounts are past due. At the consolidated statement of financial position date
the difference between the fair value of amounts due from joint ventures and
nominal value is £0.2m (2022: £0.4m).
Amounts due from joint ventures comprises funding provided on four (2022:
three) joint venture developments which are being project managed by the Group
and are repayable according to contractual arrangements. Amounts due from
joint ventures are stated net of losses of £nil (2022: £0.2m). See note 14
for additional details on the Group's interests in joint ventures.
Amounts due from joint ventures are stated after a loss allowance of £0.1m
(2022: £0.1m) in respect of expected credit losses. £nil (2022: £2.3m)
provision was made during the year, £nil (2022: £14.1m) was utilised and
£nil (2022: £nil) provision was released during the year.
Trade receivables, contract assets and other receivables are stated after a
loss allowance of £1.0m (2022: £0.4m) in respect of expected credit losses,
assessed on an estimate of default rates. £0.7m (2022: £nil) provision was
made during the year, £nil (2022: £nil) was utilised and £0.1m (2022:
£nil) provision was released during the year.
Movements in total loss allowance for expected credit losses
2023 2022
£m £m
At beginning of the year 0.5 12.3
Charged in the year on joint venture balances - 2.3
Charged in the year on trade and other trade receivables 0.7 -
Released in the year on contract assets (0.1) -
Utilised in the year on joint venture balances - (14.1)
At end of the year 1.1 0.5
Maturity of non-current receivables:
2023 2022
£m £m
Due between one and two years 5.8 34.2
Due between two and five years 0.2 0.8
Due after five years - -
6.0 35.0
18 INVENTORIES
2023 2022
£m £m
Work-in-progress 1,040.7 942.8
Completed buildings including show homes 89.6 30.1
Part exchange inventories 34.5 17.2
1,164.8 990.1
Included within inventories is a fair value adjustment of £1.3m (2022:
£2.0m) which arose on the acquisition of CN Finance plc in 2009 and will
continue to unwind to cost of sales in future years as the units against which
the original fair value provision was recognised are sold or otherwise
divested. The amount of fair value provision unwound in cost of sales in the
year was £0.7m (2022: £0.5m). Total inventories of £520.2m (2022: £705.3m)
were recognised as cost of sales in the year.
During the year £13.4m additional NRV was charged, mainly relating to the
legacy Farnham development.
Inventories are stated after an NRV provision of £20.2m (2022: £12.6m),
which it is currently forecast that over a third will be used in the next
financial year.
Movements in the NRV provision in the current and prior year are shown below:
2023 2022
£m £m
At beginning of the year 12.6 20.7
Pre-exceptional NRV charged in the year 13.4 9.6
Pre-exceptional NRV used in the year (5.0) (7.2)
Exceptional NRV used in the year (0.8) (10.5)
Total movement in NRV in the year 7.6 (8.1)
At end of the year 20.2 12.6
19 MOVEMENT IN NET CASH
2023 Movement 2022
£m £m £m
Cash and cash equivalents 162.6 (211.0) 373.6
Bank loans and senior loan notes (97.7) (0.6) (97.1)
Net cash 64.9 (211.6) 276.5
20 INTEREST-BEARING LOANS AND BORROWINGS
2023 2022
£m £m
Non-current
Senior loan notes 85.0 100.0
Revolving credit and senior loan notes issue costs (1.5) (2.9)
83.5 97.1
Current
Senior loan notes 15.0 -
Revolving credit and senior loan notes issue costs (0.8) -
14.2 -
There were undrawn amounts of £250.0m (2022: £250.0m) under the RCF at the
consolidated statement of financial position date. The Group was undrawn
throughout the financial year (2022: undrawn) under the RCF. See note 24 for
additional disclosures.
21 TRADE AND OTHER PAYABLES
2023 2022
£m £m
Non-current
Land payables on contractual terms 64.7 32.9
Other payables 2.0 2.3
Contract liabilities 0.3 0.3
Accruals and deferred income 4.1 6.3
71.1 41.8
Current
Land payables on contractual terms 140.8 165.8
Other trade payables 61.8 41.1
Contract liabilities 5.7 19.0
Amounts due to joint ventures 0.7 0.1
Taxes and social security costs 1.7 1.8
Other payables 1.1 3.2
Accruals and deferred income 125.2 176.1
337.0 407.1
Land payables are recognised from the date of unconditional exchange of
contracts, and represent amounts due to land vendors for development sites
acquired. All land payables are due according to contractual terms. Where land
is purchased on deferred settlement terms then the land and the land payable
are discounted to their fair value using the effective interest method in
accordance with IFRS 9. The difference between the fair value and the nominal
value is amortised over the deferment period, with the financing element being
charged as an interest expense through the consolidated income statement. As
at 31 October 2023 the difference between the fair value and nominal value of
land payables is £6.8m (2022: £2.4m).
Contract liabilities represent payments on account, received from customers,
in excess of billable work-in-progress on affordable and other sales in bulk
on contracts in which revenue is recognised over time. Based on historical
trends, the Directors expect a significant proportion of the contract
liabilities total to be recognised as revenue in the next reporting period.
Amounts due to joint ventures are interest free and repayable on demand. See
note 14 for additional details on the Group's interests in joint ventures.
Other trade payables mainly comprise amounts due to suppliers and
subcontractor retentions. Suppliers are settled according to agreed payment
terms and subcontractor retentions are released once the retention condition
has been satisfied.
Accruals are mainly work-in-progress related where work has been performed but
not yet invoiced.
22 PROVISIONS
Combustible materials Legal provision Joint ventures Other provisions Total
£m £m £m £m £m
At 1 November 2021 42.6 - - 0.5 43.1
Provided in the year 102.5 - - 0.3 102.8
Imputed interest 1.0 - - - 1.0
Utilised in the year (5.3) - - - (5.3)
Released in the year - - - (0.4) (0.4)
Funding commitment recognised - - 1.2 - 1.2
Reclassification - - - 0.6 0.6
At 31 October 2022 140.8 - 1.2 1.0 143.0
Provided in the year 12.0 13.0 - 0.4 25.4
Imputed interest 4.6 - - - 4.6
Utilised in the year (12.6) - - (0.6) (13.2)
Released in the year - - - (0.2) (0.2)
Funding commitment change - - (0.3) - (0.3)
At 31 October 2023 144.8 13.0 0.9 0.6 159.3
At 31 October 2023
Non-current 73.6 - - 0.2 73.8
Current 71.2 13.0 0.9 0.4 85.5
144.8 13.0 0.9 0.6 159.3
At 31 October 2022
Non-current 70.5 - - 0.3 70.8
Current 70.3 - 1.2 0.7 72.2
140.8 - 1.2 1.0 143.0
Combustible materials
As a consequence of signing the Developer Remediation Contract on 13 March
2023, the Group has entered into contractual commitments with the UK
Government to identify and remediate those buildings it has developed with
possible life-critical fire safety defects. The signing of the contract did
not materially alter the provision required as at 31 October 2022, which
reflected the requirements of the Pledge. The Group is currently working on
circa 90 buildings in various stages of design, procurement and works.
The combustible materials provision reflects the estimated costs to complete
the remediation of life-critical fire safety issues on identified buildings.
The Directors have used a combination of BSF costed information, other
external information, and internal assessments as a basis for the provision,
which is a best estimate at this time.
The Group recorded a further net combustible materials charge of £12.0m in
the year predominantly related to changes in forecast build cost scope and
price over the duration of remediation, net of the change in discounting.
£11.3m of the charge relates to exceptional items per note 4. The provision
is stated after a related discount of £7.3m, which unwinds to the
consolidated income statement as finance expense over the expected duration of
the provision using the effective interest rate method.
The provision of £144.8m represents the Group's best estimate of future costs
on 31 October 2023. The Group will continue to assess the magnitude and
utilisation of this provision in future reporting periods. The Group
recognises that required remediation works could be subject to further
inflationary pressures and cash outflows. If forecast remediation costs on
buildings currently provided for are 20.0% higher than provided, the pre-tax
exceptional items charge in the consolidated income statement would be £29.0m
higher. If further buildings are identified this could also increase the
required provision, but the potential quantity of this change cannot be
readily determined without further claims or investigative work.
The Group spent £12.6m in the year across several buildings requiring further
investigative costs, including balcony and cladding-related works. The Group
expects to have completed any required remediation within a five-year period,
using £71.2m of the remaining provision within one year, and the balance
within one to five years. The timing of the expenditure is based on the
Directors best estimates of the timing of remediating buildings and repaying
the BSF incurred costs. Actual timing may differ due to delays in agreeing
scope of works, obtaining licences, tendering works contracts and the BSF
payment schedule differing to our forecast.
The Group is continuing to review the recoverability of costs incurred from
third parties where it has a contractual right of recourse. In the year
£10.0m was recovered from third parties by the Group. The Group also
recognised its share of recoveries from third parties in its joint venture
Crest Nicholson Bioregional Quintain LLP of £0.6m, net of changes in build
costs. Recoveries are not recognised until they are virtually certain to be
received. See note 4 for consolidated income statement disclosure.
Legal provision
The Group is subject to a legal claim relating to a low-rise bespoke apartment
block built by the Group which was damaged by fire in 2021. The fire caused
extensive damage to the property which was subsequently demolished and is
currently being rebuilt by the freeholder. In June 2023 the Group received a
letter of claim alleging fire safety defects and claiming compensation for the
rebuild and other associated costs. The Group has now assessed the claim and
the provision recorded represents managements best estimate of the Group's
potential exposure taking into account legal and professional advice. The
claim and ultimate route to settlement is ongoing but the Group currently does
not have a set timeline for when the matter will be concluded.
Joint ventures
Joint ventures represents the Group's legal or constructive obligation to fund
losses on joint ventures.
Other provisions
Other provisions comprise dilapidation provisions on Group offices and
dilapidation provisions on commercial properties where the Group previously
held the head lease. In the prior year the Group reclassified the brought
forward balance of dilapidations on Group offices which were previously offset
against right of use assets.
23 SHARE CAPITAL
Shares Nominal value Share capital Share premium account
issued
Number Pence £ £
Ordinary shares as at 1 November 2021, 31 October 2022 and 31 October 2023 256,920,539 5 12,846,027 74,227,216
Ordinary shares are issued and fully paid. Authorised ordinary shares of five
pence each are 342,560,719 (2022: 342,560,719).
For details of outstanding share options at 31 October 2023 see note 17.
Own shares held
The Group and Company holds shares within ESOT for participants of certain
share-based payment schemes. These are held within retained earnings. During
the year 840,000 shares were purchased by the ESOT for £1.9m (2022: 440,000
shares were purchased by the ESOT for £1.1m) and the ESOT transferred
1,027,884 (2022: 41,382) shares to employees and Directors to satisfy options
as detailed in note 17. The number of shares held within the ESOT (Treasury
shares), and on which dividends have been waived, at 31 October 2023 was
600,256 (2022: 788,140). These shares are held within the financial statements
in equity at a cost of £1.5m (2022: £2.5m). The market value of these shares
at 31 October 2023 was £1.0m (2022: £1.6m).
24 FINANCIAL RISK MANAGEMENT
The Group's financial instruments comprise cash, trade and other receivables,
financial assets at fair value through profit and loss, bank loans, senior
loan notes, and trade and other payables. The main objective of the Group's
policy towards financial instruments is to maximise returns on the Group's
cash balances, manage the Group's working capital requirements and finance the
Group's ongoing operations.
Capital management
The Group's policies seek to match long-term assets with long-term finance and
ensure that there is sufficient working capital to meet the Group's
commitments as they fall due, comply with the loan covenants and continue to
sustain trading.
The Group's capital comprises shareholders' funds and net cash. A five-year
summary of this can be found in the unaudited historical summary below, in
addition to its return on average capital employed.
The Group seeks to manage its capital through control of expenditure, dividend
payments and through its banking facilities. The RCF and senior loan notes
impose certain minimum capital requirements on the Group. These requirements
are integrated into the Group's internal forecasting process and are regularly
reviewed. The Group has, and is forecasting, to operate within these capital
requirements.
There were undrawn amounts of £250.0m (2022: £250.0m) under the revolving
credit facility at the consolidated statement of financial position date. The
revolving credit facility carries interest at SONIA plus 1.85% and ends in
2026.
Both the senior loan notes and the RCF are subject to three covenants that are
measured quarterly in January, April, July and October each year, they are,
gearing being of a maximum of 70%, interest cover being a minimum of 3 times
and consolidated tangible net worth being not less than £500m, all based on
measures as defined in the facilities agreements which are adjusted from the
equivalent IFRS amounts. As at the statement of financial position date
gearing was 17.0%, interest cover was 8.0 times and consolidated tangible net
worth was £827.3m
On 12 October 2022 the Group signed an amendment to the RCF. This amendment
extended the facility to run through to October 2026 and changed the facility
into a Sustainability Linked RCF.
Under this amended facility the margin applicable can vary by plus or minus
0.05% depending on the Group's progress against four targets. These targets
include:
· Reduction in absolute scope 1 and 2 emissions in line with our
science-based targets
2023. Target met. A focus on efficient use of materials and fuel with an
absolute reduction in site activity
· Increasing the number of our suppliers engaging with the Supply
Chain Sustainability School
2023. Target met. Proactive engagement with our key suppliers in the year
· Reduction in carbon emissions associated with the use of our
homes
2023. Target met. Impact of the switch to standard house types across the
business
· Increasing the number of our employees in trainee positions and
on training programmes
2023. Target met. A continued priority with dedicated resource and strong
employee engagement.
As a result of meeting 4 out of 4 of the metrics for FY23 the margin on the
RCF will be amended down by 0.05% from the date of submission of the
compliance documents for the facility.
Financial risk
As virtually all of the operations of the Group are in sterling, there is no
direct currency risk, and thus the Group's main financial risks are credit
risk, liquidity risk and market interest rate risk. The Board is responsible
for managing these risks and the policies adopted are as set out below:
Credit risk
Credit risk is the risk of financial loss to the Group if a customer or other
counterparty to a financial instrument fails to meet its contractual
obligations, and arises principally from the Group's cash deposits, as most
receivables are secured on land and buildings.
The Group has cash deposits of £162.6m (2022: £373.6m) which are held by the
providers of its banking facilities. These are primarily provided by HSBC Bank
Plc, Barclays Bank Plc, Lloyds Bank Plc and Natwest Group Plc, being four of
the UK's leading financial institutions. The security and suitability of these
banks is monitored by the treasury function on a regular basis. The Group has
bank facilities of £250.0m expiring in October 2026, with £250.0m remaining
available for drawdown under such facilities at 31 October 2023.
Financial assets at fair value through profit and loss of £3.7m (2022:
£4.6m) are receivables on extended terms granted as part of a sales
transaction and are secured by way of a legal charge on the relevant property
and therefore credit risk is considered low.
The carrying value of trade and other receivables is mainly contractual
amounts due from housing associations, bulk sale purchasers, land sales to
other housebuilders and a development agreement where the Group is entitled to
recovery of costs incurred under the agreement, and equates to the Group's
exposure to credit risk which is set out in note 17. Amounts due from joint
ventures of £29.5m (2022: £27.1m) is funding provided on four (2022: three)
joint venture developments which are being project managed by the Group and
are subject to contractual arrangements. The Group has assessed the expected
credit loss impact on the carrying value of trade and other receivables as set
out in note 17. Within trade receivables the other largest single amount
outstanding at 31 October 2023 is £12.1m (2022: £11.5m) which is within
agreed terms.
The Group considers the credit quality of financial assets that are neither
past due nor impaired as good. In managing risk the Group assesses the credit
risk of its counterparties before entering into a transaction. No credit
limits were exceeded during the reporting year, and the Directors do not
expect any material losses from non-performance of any counterparties,
including in respect of receivables not yet due. No individually material
financial assets are past due, or are considered to be impaired as at the
consolidated statement of financial position date (2022: none).
Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its
financial obligations as they fall due. Cash flow forecasts are produced to
monitor the expected cash flow requirements of the Group against the available
facilities. The principal risks within these cash flows relate to achieving
the level of sales volume and prices in line with current forecasts.
The following are the contractual maturities of the financial liabilities of
the Group at 31 October 2023:
2023 Carrying value Contractual cash flows Within 1 year 1-2 years 2-3 years More than 3 years
£m £m £m £m £m £m
Senior loan notes 100.0 112.5 18.5 23.1 2.4 68.5
Financial liabilities carrying no interest 401.4 408.8 333.5 44.1 28.3 2.9
At 31 October 2023 501.4 521.3 352.0 67.2 30.7 71.4
2022 Carrying value Contractual cash flows Within 1 year 1-2 years 2-3 years More than 3 years
£m £m £m £m £m £m
Senior loan notes 100.0 116.1 3.5 18.5 23.1 71.0
Financial liabilities carrying interest 29.8 30.1 30.1 - - -
Financial liabilities carrying no interest 395.2 397.8 357.6 37.5 1.1 1.6
At 31 October 2022 525.0 544.0 391.2 56.0 24.2 72.6
Other financial liabilities carrying interest are land acquisitions using
promissory notes. The timing and amount of future cash flows given in the
table above is based on the Directors' best estimate of the likely outcome.
Market interest rate risk
Market interest rate risk reflects the Group's exposure to fluctuations to
interest rates in the market. The risk arises because the Group's RCF is
subject to floating interest rates based on SONIA. The Group accepts a degree
of interest rate risk, and monitors rate changes to ensure they are within
acceptable limits and in line with banking covenants. The Group has partially
mitigated this risk by placing £100m of senior loan notes which are at fixed
interest rates. For the year ended 31 October 2023 it is estimated that an
increase of 1.0% in interest rates applying for the full year would decrease
the Group's profit before tax and equity by £nil (2022: £nil). The Group
currently does not have any interest carrying liabilities with floating
interest rates.
The interest rate profile of the financial liabilities of the Group was:
2023 2022
£m £m
Sterling bank borrowings, loan notes and long-term creditors
Financial liabilities carrying interest 100.0 129.8
Financial liabilities carrying no interest 401.4 395.2
501.4 525.0
For financial liabilities that have no interest payable but for which imputed
interest is charged, consisting of land payables, the weighted average period
to maturity is 26 months (2022: 14 months).
2023 2022
£m £m
The maturity of the financial liabilities is:
Repayable within one year 344.0 385.2
Repayable between one and two years 61.7 52.1
Repayable between two and five years 78.9 72.1
Repayable after five years 16.8 15.6
501.4 525.0
Fair values
Financial assets
The Group's financial assets are detailed in a table below. The carrying value
of cash and cash equivalents and trade and other receivables is a reasonable
approximation of fair value which would be measured under a level 3 hierarchy.
Financial assets at fair value through profit and loss are carried at fair
value and categorised as level 3 (inputs not based on observable market data)
within the hierarchical classification of IFRS 13: Revised.
Financial liabilities
The Group's financial liabilities are detailed in a table below, the carrying
amounts of which are deemed to be a reasonable approximation to their fair
value. The fair values of the RCF, other loans and loan notes are calculated
based on the present value of future principal and interest cash flows,
discounted at the market rate of interest at the consolidated statement of
financial position date.
The fair values of the facilities determined on this basis are:
2023 Nominal interest rate Face Carrying value Fair Maturity
value value
£m £m £m
Current
Senior loan notes 3.15% 15.0 15.0 15.0 2024
Non-current
Senior loan notes 3.32% - 3.87% 85.0 85.0 85.0 2025-2029
Total interest-bearing loans 100.0 100.0 100.0
2022 Nominal interest rate Face Carrying value Fair Maturity
value value
£m £m £m
Senior loan notes 3.15% - 3.87% 100.0 100.0 100.0 2024-2029
Total non-current interest-bearing loans 100.0 100.0 100.0
Financial assets and liabilities by category
2023 2022
Financial assets £m £m
Sterling cash deposits 162.6 373.6
Trade receivables 60.9 59.1
Amounts due from joint ventures 29.5 27.1
Other receivables 22.7 29.6
Total financial assets at amortised cost 275.7 489.4
Financial assets at fair value through profit and loss 3.7 4.6
Total financial assets 279.4 494.0
Financial liabilities 2023 2022
£m £m
Senior loan notes 100.0 100.0
Land payables on contractual terms carrying interest - 29.8
Land payables on contractual terms carrying no interest 205.5 168.9
Amounts due to joint ventures 0.7 0.1
Lease liabilities 6.4 3.9
Other trade payables 61.8 41.1
Other payables 3.1 5.5
Accruals 123.9 175.7
Total financial liabilities at amortised cost 501.4 525.0
25 CONTINGENCIES AND COMMITMENTS
There are performance bonds and other engagements, including those in respect
of joint venture partners, undertaken in the ordinary course of business. It
is impractical to quantify the financial effect of performance bonds and other
arrangements. The Directors consider the possibility of a cash outflow in
settlement of performance bonds and other arrangements to be remote and
therefore this does not represent a contingent liability for the Group.
In the ordinary course of business, the Group enters into certain land
purchase contracts with vendors on a conditional exchange basis. The
conditions must be satisfied for the Group to recognise the land asset and
corresponding liabilities within the consolidated statement of financial
position. No land payable in respect of conditional land acquisitions has been
recognised.
The Group provides for all known material legal actions, where having taken
appropriate legal advice as to the likelihood of success of the actions, it is
considered probable that an outflow of economic resource will be required, and
the amount can be reliably measured. No material contingent liability in
respect of such claims has been recognised since there are no known claims of
this nature.
As a consequence of signing the Developer Remediation Contract on 13 March
2023, the Group has entered into contractual commitments with the UK
Government to identify and remediate those buildings it has developed with
possible life-critical fire safety defects. Accordingly, while the Group
believes that most significant liabilities will have been identified through
the process of building owners assessing buildings and applying for BSF
funding and through Crest commissioning assessments to date, contingent
liabilities exist where additional buildings have not yet been identified
which require remediation. Due to the enduring challenges of developing a
reliable estimate of these possible costs, it is not practicable to disclose
an expected range.
The Group is reviewing the recoverability of costs incurred from third parties
where it has a contractual right of recourse. As reflected in these financial
results, the Group has a track record of successfully obtaining such
recoveries, however no contingent assets have been recognised in these
consolidated financial statements for such items.
26 NET CASH AND LAND CREDITORS
2023 2022
£m £m
Cash and cash equivalents 162.6 373.6
Non-current Interest-bearing loans and borrowings (83.5) (97.1)
Current Interest-bearing loans and borrowings (14.2) -
Net cash 64.9 276.5
Land payables on contractual terms carrying interest - (29.8)
Land payables on contractual terms carrying no interest (205.5) (168.9)
Net cash and land creditors (140.6) 77.8
27 RELATED PARTY TRANSACTIONS
Transactions between fellow subsidiaries, which are related parties, are
eliminated on consolidation, as well as transactions between the Company and
its subsidiaries during the current and prior year.
Transactions between the Group and key management personnel mainly comprise
remuneration which is given in note 6. Detailed disclosure for Board members
is given within the Directors' Remuneration Report on pages 81-98 of our 2023
annual report and financial statements to be published in February 2024. There
were no other transactions between the Group and key management personnel in
the year.
Transactions between the Group and the Crest Nicholson Group Pension and Life
Assurance Scheme is given in note 16.
The Company's Directors and Non-Executive Directors have associations other
than with the Company. From time to time the Group may trade with
organisations with which a Director or Non-Executive Director has an
association. Where this occurs, it is on normal commercial terms and without
the direct involvement of the Director or Non-Executive Director.
The Group had the following transactions/balances with its joint ventures in
the year/at year end:
2023 2022
£m £m
Interest income on joint venture funding 1.2 2.1
Project management fees recognised 1.9 2.0
Amounts due from joint ventures, net of expected credit losses 29.5 27.1
Amounts due to joint ventures 0.7 0.1
Funding to joint ventures (13.0) (7.5)
Repayment of funding from joint ventures 11.7 18.8
Dividends received from joint ventures 1.5 2.4
28 GROUP UNDERTAKINGS
In accordance with Section 409 Companies Act 2006, the following is a list of
all the Group's undertakings at 31 October 2023.
Subsidiary undertakings
At 31 October 2023 the Group had an interest in the below subsidiary
undertakings, which are included in the consolidated financial statements. All
subsidiaries were incorporated in England and Wales.
Entity name Registered office(1) Active / dormant Year end date Voting rights and shareholding (direct or indirect)
Bath Riverside Estate Management Company Limited 2 Dormant 31 October 100%
Bath Riverside Liberty Management Company Limited 2 Dormant 31 October 100%
Castle Bidco Home Loans Limited 1 Active 31 October 100%
Brightwells Residential 1 Company Limited 1 Dormant 31 October 100%
Bristol Parkway North Limited 1 Dormant 31 October 100%
Building 7 Harbourside Management Company Limited 2 Active 31 December 58.33%
Buildings 3A, 3B & 4 Harbourside Management Company Limited 2 Dormant 31 December 83.33%
Clevedon Developments Limited 1 Dormant 31 October 100%
Clevedon Investment Limited 1 Active 31 October 100%
CN Finance plc(2) 1 Active 31 October 100%
CN Nominees Limited 1 Dormant 31 October 100%
CN Properties Limited 1 Dormant 31 October 100%
CN Secretarial Limited 1 Dormant 31 October 100%
CN Shelf 2 LLP 1 Dormant 31 October 100%
CN Shelf 3 LLP 1 Dormant 31 October 100%
Crest (Claybury) Limited 1 Dormant 31 October 100%
Crest Developments Limited 1 Dormant 31 October 100%
Crest Estates Limited 1 Dormant 31 October 100%
Crest Homes (Eastern) Limited 1 Dormant 31 October 100%
Crest Homes (Midlands) Limited 1 Dormant 31 October 100%
Crest Homes (Nominees) Limited 1 Dormant 31 October 100%
Crest Homes (Nominees No. 2) Limited 1 Active 31 October 100%
Crest Homes (Northern) Limited 1 Dormant 31 October 100%
Crest Homes (South East) Limited 1 Dormant 31 October 100%
Crest Homes (South West) Limited 1 Dormant 31 October 100%
Crest Homes (South) Limited 1 Dormant 31 October 100%
Crest Homes (Wessex) Limited 1 Dormant 31 October 100%
Crest Homes (Westerham) Limited 1 Dormant 31 October 100%
Crest Homes Limited 1 Dormant 31 October 100%
Crest Manhattan Limited 1 Dormant 31 October 100%
Crest Nicholson (Bath) Holdings Limited 1 Dormant 31 October 100%
Crest Nicholson (Chiltern) Limited 1 Dormant 31 October 100%
Crest Nicholson (Eastern) Limited 1 Dormant 31 October 100%
Crest Nicholson (Epsom) Limited 1 Dormant 31 October 100%
Crest Nicholson (Henley-on-Thames) Limited 1 Active 31 October 100%
Crest Nicholson (Highlands Farm) Limited 1 Dormant 31 October 100%
Crest Nicholson (Londinium) Limited 1 Dormant 31 October 100%
Crest Nicholson (Midlands) Limited 1 Dormant 31 October 100%
Crest Nicholson (Peckham) Limited 1 Active 31 October 100%
Crest Nicholson (South East) Limited 1 Dormant 31 October 100%
Crest Nicholson (South West) Limited 1 Dormant 31 October 100%
Crest Nicholson (South) Limited 1 Dormant 31 October 100%
Crest Nicholson (Stotfold) Limited 1 Active 31 October 100%
Crest Nicholson Developments (Chertsey) Limited 1 Active 31 October 100%
Crest Nicholson Operations Limited 1 Active 31 October 100%
Crest Nicholson Pension Trustee Limited 1 Dormant 31 January 100%
Crest Nicholson plc 1 Active 31 October 100%
Crest Nicholson Projects Limited 1 Dormant 31 October 100%
Crest Nicholson Properties Limited 1 Dormant 31 October 100%
Crest Nicholson Regeneration Limited 1 Dormant 31 October 100%
Crest Nicholson Residential (London) Limited 1 Dormant 31 October 100%
Crest Nicholson Residential (Midlands) Limited 1 Dormant 31 October 100%
Crest Nicholson Residential (South East) Limited 1 Dormant 31 October 100%
Crest Nicholson Residential (South) Limited 1 Dormant 31 October 100%
Crest Nicholson Residential Limited 1 Dormant 31 October 100%
Crest Nicholson (Wheatley) LLP 1 Active 31 October 100%
Crest Partnership Homes Limited 1 Dormant 31 October 100%
Crest Strategic Projects Limited 1 Dormant 31 October 100%
Eastern Perspective Management Company Limited 1 Dormant 31 October 100%
Essex Brewery (Walthamstow) LLP 1 Dormant 31 October 100%
Harbourside Leisure Management Company Limited 1 Active 30 December 71.43%
Landscape Estates Limited 1 Dormant 31 October 100%
Mertonplace Limited 1 Dormant 31 October 100%
Nicholson Estates (Century House) Limited 1 Dormant 31 October 100%
Park Central Management (Central Plaza) Limited 1 Dormant 31 October 100%
Ellis Mews (Park Central) Management Limited 1 Active 31 October 100%
Park Central Management (Zone 11) Limited 1 Dormant 31 October 100%
Park Central Management (Zone 12) Limited 1 Dormant 31 October 100%
Park Central Management (Zone 1A North) Limited 1 Dormant 31 October 100%
Park Central Management (Zone 1A South) Limited 1 Dormant 31 October 100%
Park Central Management (Zone 1B) Limited 1 Dormant 31 October 100%
Park Central Management (Zone 3/1) Limited 1 Dormant 31 October 100%
Park Central Management (Zone 3/2) Limited 1 Dormant 31 October 100%
Park Central Management (Zone 3/3) Limited 1 Dormant 31 October 100%
Park Central Management (Zone 3/4) Limited 1 Dormant 31 October 100%
Park Central Management (Zone 4/41 & 42) Limited 1 Dormant 31 October 100%
Park Central Management (Zone 4/43/44) Limited 1 Dormant 31 October 100%
Park Central Management (Zone 5/53) Limited 1 Dormant 31 October 100%
Park Central Management (Zone 5/54) Limited 1 Dormant 31 October 100%
Park Central Management (Zone 5/55) Limited 1 Dormant 31 October 100%
Park Central Management (Zone 6/61-64) Limited 1 Dormant 31 October 100%
Park Central Management (Zone 7/9) Limited 1 Dormant 31 October 100%
Park Central Management (Zone 8) Limited 1 Dormant 31 October 100%
Park Central Management (Zone 9/91) Limited 1 Dormant 31 January 100%
Park West Management Services Limited 1 Active 29 March 62.00%
(1) 1: 500 Dashwood Lang Road, Bourne Business Park, Addlestone, Surrey KT15
2HJ.
2: Unit 2 & 3 Beech Court, Wokingham Road, Hurst, Reading RG10 0RU.
(2) CN Finance plc is the only direct holding of Crest Nicholson Holdings plc.
Subsidiary audit exemption
The following subsidiaries have taken advantage of an exemption from audit
under section 479A of the Companies Act 2006. The parent of the subsidiaries,
Crest Nicholson plc, has provided a statutory guarantee for any outstanding
liabilities of these subsidiaries. All subsidiary undertakings have been
included in the consolidated financial statements of Crest Nicholson Holdings
plc as at 31 October 2023.
Clevedon Investment Limited (00454327)
Crest Homes (Nominees No. 2) Limited (02213319)
Crest Nicholson (Henley-on-Thames) Limited (03828831)
Crest Nicholson (Peckham) Limited (07296143)
Crest Nicholson (Stotfold) Limited (08774274)
Crest Nicholson (Bath) Holdings Limited
(05235961)
Crest Nicholson Developments (Chertsey) Limited (04707982)
Crest Homes (Nominees) Limited (01715768)
Crest Nicholson Residential Limited
(00714425)
Joint venture undertakings
At 31 October 2023 the Group had an interest in the following joint venture
undertakings which are equity accounted within the consolidated financial
statements. The principal activity of all undertakings is that of residential
development. All joint ventures were incorporated in England and Wales.
Entity name Registered office(1) Active / dormant Year end date Voting rights and shareholding (direct or indirect)
Material joint ventures
Crest A2D (Walton Court) LLP 1 Active 31 March 50%
Elmsbrook (Crest A2D) LLP 4 Active 31 March 50%
Crest Sovereign (Brooklands) LLP 3 Active 31 October 50%
Crest Peabody (Turweston) LLP 1 Active 31 May 50%
Other joint ventures not material to the Group
Crest/Vistry (Epsom) LLP 1 Active 31 October 50%
Crest Nicholson Bioregional Quintain LLP 1 Active 31 October 50%
English Land Banking Company Limited 1 Active 31 October 50%
Haydon Development Company Limited 2 Active 30 April 21.36%
North Swindon Development Company Limited 2 Active 31 December 32.64%
(1) 1: 500 Dashwood Lang Road, Bourne Business Park, Addlestone, Surrey KT15
2HJ.
2: 6 Drakes Meadow, Penny Lane, Swindon, Wiltshire SN3 3LL.
3: Sovereign House, Basing View, Basingstoke RG21 4FA.
4: The Point, 37 North Wharf Road, London W2 1BD.
Joint operations
The Group is party to a joint unincorporated arrangement with Linden Homes
Limited, the purpose of which was to acquire, and develop, a site in Hemel
Hempstead, Hertfordshire. The two parties are jointly responsible for the
control and management of the site's development, with each party funding 50%
of the cost of the land acquisition and development of the site, in return for
50% of the returns. As such this arrangement was designated as a joint
operation.
The Group is party to a joint unincorporated arrangement with CGNU Life
Assurance Limited, the purpose of which is to acquire, and develop, a site in
Chertsey, Surrey. The two parties are jointly responsible for the control and
management of the site's development, with each party funding 50% of the cost
of the land acquisition and development of the site, in return for 50% of the
returns. As such this arrangement has been designated as a joint operation.
The Group is party to a joint arrangement with Passion Property Group Limited,
the purpose of which was to develop a site in London. The development was
completed in 2014 and there are no material balances in the Group financial
statements relating to this joint arrangement as at 31 October 2023. The two
parties were jointly responsible for the control and management of the site's
development, with each party having prescribed funding obligations and
returns. As such this arrangement has been designated as a joint operation.
In line with the Group's accounting policies, the Group has recognised its
share of the jointly controlled assets and liabilities, and income and
expenditure, in relation to these joint arrangements on a line-by-line basis
in the consolidated statement of financial position and consolidated income
statement as there is no legal entity in place and the arrangements as
structured such that the Group has a direct interest in the underlying assets
and liabilities of each arrangement.
Crest Nicholson Employee Share Ownership Trust
The Group operates the Crest Nicholson ESOT, which is used to satisfy awards
granted under the Group's share incentive schemes, shares are allotted to the
Trust or the Trust is funded to acquire shares in the open market. The ESOT
falls within the scope of IFRS 10: Consolidated Financial Statements, and is
consolidated within the Group financial statements, as the Group is considered
to have control over the ESOT.
As at 31 October 2023
2023 2022
Note £m £m
ASSETS
Non-current assets
Investments 4 1.6 2.6
Current assets
Trade and other receivables 5 186.4 222.4
TOTAL ASSETS 188.0 225.0
NET ASSETS 188.0 225.0
SHAREHOLDERS' EQUITY
Share capital 6 12.8 12.8
Share premium account 6 74.2 74.2
Retained earnings:
At 1 November 138.0 166.1
Profit for the year 8.6 10.5
Other changes in retained earnings (45.6) (38.6)
At 31 October 101.0 138.0
TOTAL SHAREHOLDERS' EQUITY 188.0 225.0
The Company recorded a profit for the financial year of £8.6m (2022:
£10.5m).
The notes below form part of these financial statements.
The financial statements below were approved by the Board of Directors on 23
January 2024.
On behalf of the Board
Peter Truscott
Bill Floydd
Director
Director
CREST NICHOLSON HOLDINGS PLC
COMPANY STATEMENT OF CHANGES IN EQUITY
For the year ended 31 October 2023
Share capital Share premium account Retained earnings Total equity
Note £m £m £m £m
Balance at 1 November 2021 12.8 74.2 166.1 253.1
Profit for the financial year and total comprehensive income - - 10.5 10.5
Transactions with shareholders
Dividends paid - - (38.5) (38.5)
Exercise of share options through employee share ownership trust 4 - - (0.1) (0.1)
Balance at 31 October 2022 12.8 74.2 138.0 225.0
Profit for the financial year and total comprehensive income - - 8.6 8.6
Transactions with shareholders
Dividends paid - - (43.6) (43.6)
Exercise of share options through employee share ownership trust 4 - - (2.9) (2.9)
Net proceeds from the issue of shares and exercise of share options - - 0.9 0.9
Balance at 31 October 2023 12.8 74.2 101.0 188.0
CREST NICHOLSON HOLDINGS PLC
NOTES TO THE COMPANY FINANCIAL STATEMENTS
1 ACCOUNTING POLICIES
Basis of preparation
Crest Nicholson Holdings plc (the Company) is a public company limited by
shares, incorporated, listed and domiciled in England and Wales. The address
of the registered office is 500 Dashwood Lang Road, Bourne Business Park,
Addlestone, Surrey KT15 2HJ. The Company financial statements have been
prepared and approved by the Directors in accordance with Financial Reporting
Standard 101 Reduced Disclosure Framework (FRS 101), in accordance with the
Companies Act 2006 as applicable to companies using FRS 101, and have been
prepared on the historical cost basis. The preparation of financial statements
in conformity with FRS 101 requires the Directors to make assumptions and
judgements that affect the application of policies and reported amounts within
the financial statements. Assumptions and judgements are based on experience
and other factors that the Directors consider reasonable under the
circumstances. Actual results may differ from these estimates.
The financial statements are presented in pounds sterling and amounts stated
are denominated in millions (£m), unless otherwise stated. The accounting
policies have been applied consistently in dealing with items which are
considered material.
These financial statements present information about the Company as an
individual undertaking and not about its group. Under Section 408 of the
Companies Act 2006 the Company is exempt from the requirement to present its
own profit and loss account.
As outlined in FRS 101 paragraph 8(a) the Company is exempt from the
requirements of paragraphs 45(b) and 46 to 52 of IFRS 2 Share-based Payments.
This exemption has been taken in the preparation of these financial
statements.
As outlined in FRS 101 paragraph 8(d-e) the Company is exempt from the
requirements of IFRS 7 Financial Instruments: Disclosures, and from the
requirements of paragraphs 91 to 99 of IFRS 13 Fair Value Measurement. These
exemptions have been taken in the preparation of these financial statements.
As outlined in FRS 101 paragraph 8(h) the Company is exempt from the
requirement to prepare a cash flow statement on the grounds that a parent
undertaking includes the Company in its own published consolidated financial
statements. This exemption has been taken in the preparation of these
financial statements.
As outlined in FRS 101 paragraph 8(i) the Company is exempt from the
requirement to provide information about the impact of IFRSs that have been
issued but are not yet effective. This exemption has been taken in the
preparation of these financial statements.
Under FRS 101 paragraph 8(j) the Company is exempt from the requirement to
disclose related party transactions with its subsidiary undertakings on the
grounds that they are wholly owned subsidiary undertakings of Crest Nicholson
Holdings plc. This exemption has been taken in the preparation of these
financial statements.
Going concern
The Directors reviewed detailed cash flows and financial forecast for the
period up to April 2025, in line the those modelled for the Group's going
concern assessment. The Company is reliant upon the performance of the Group
as a whole to meet its liabilities. Throughout this review period the Company
is forecast to be able to meet its liabilities as they fall due. Therefore,
having assessed the principal risks and all other relevant matters, the
Directors consider it appropriate to adopt the going concern basis of
accounting in preparing the financial statements of the Company. The Group's
going concern assessment can be found in note 1 of the consolidated financial
statements.
Adoption of new and revised standards
There were no new standards, amendments or interpretations that were adopted
by the Company and effective for the first time for the financial year
beginning 1 November 2022 that have had a material impact on the Company.
The principal accounting policies set out below have, unless otherwise stated,
been applied consistently to all years presented in these financial
statements.
Share-based payments
The Company issues equity-settled share-based payments to certain employees of
its subsidiaries. Equity-settled share-based payments are measured at fair
value at the grant date, and charged to the income statement on a
straight-line basis over the vesting period, based on the estimate of shares
that will vest. The cost of equity-settled share-based payments granted to
employees of subsidiary companies is borne by the employing company.
Taxation
Income tax comprises current tax and deferred tax. Income tax is recognised in
the Company's income statement except to the extent that it relates to items
recognised in other comprehensive income, in which case it is also recognised
in other comprehensive income.
Current tax is the expected tax payable on taxable profit for the year and any
adjustment to tax payable in respect of previous years. Taxable profit is
profit before tax per the Company's income statement after adjusting for
income and expenditure that is not subject to tax, and for items that are
subject to tax in other accounting periods. The Company's liability for
current tax is calculated using tax rates that have been enacted or
substantively enacted by the statement of financial position date. Where
uncertain tax liabilities exist, the liability recognised is assessed as the
amount that is probable to be payable.
Deferred tax is provided in full on temporary differences between the carrying
amounts of assets and liabilities in the financial statements and the
corresponding tax bases used in the computation of taxable profit. Deferred
tax assets are recognised to the extent that it is probable that taxable
profits will be available against which deductible temporary differences can
be utilised. Deferred tax is calculated using tax rates that have been
substantively enacted by the statement of financial position date.
Dividends
Final and interim dividend distributions to the Company's shareholders are
recorded in the Company's financial statements in the earlier of the period in
which they are approved by the Company's shareholders, or paid.
Investments
Investments relate to Company contributions to the Crest Nicholson ESOT. The
ESOT will use the contribution to acquire Company ordinary shares in the
market in order to satisfy share options under the Company's share incentive
schemes.
Financial assets
Financial assets are initially recognised at fair value and subsequently
classified into one of the following measurement categories:
· At amortised cost
· Subsequently at FVTPL
· Subsequently at FVOCI.
The classification of financial assets depends on the Company's business model
for managing the asset and the contractual terms of the cash flows. Assets
that are held for the collection of contractual cash flows that represent
solely payments of principal and interest are measured at amortised cost, with
any interest income recognised in the income statement using the effective
interest rate method. Financial assets that do not meet the criteria to be
measured at amortised cost are classified by the Company as measured at FVTPL.
Fair value gains and losses on financial assets measured at FVTPL are
recognised in the income statement and presented within administrative
expenses. The Company currently has no financial assets measured at FVOCI.
Trade and other receivables
Trade and other receivables are recognised initially at fair value and
subsequently measured at amortised cost, using the effective interest method,
less provision for impairment. A provision for impairment of trade receivables
is established based on an expected credit loss model applying the simplified
approach, which uses a lifetime expected loss allowance for all trade
receivables. The amount of the loss is recognised in the income statement.
Financial liabilities
Financial liabilities are initially recognised at fair value and subsequently
classified into one of the following measurement categories:
· At amortised cost
· Subsequently at FVTPL.
Non-derivative financial liabilities are measured at FVTPL when they are
considered held for trading or designated as such on initial recognition. The
Company has no non-derivative financial liabilities measured at FVTPL.
Own shares held by ESOT
Transactions of the Company sponsored ESOT are included in both the Group
financial statements and the Company's own financial statements. The purchase
of shares in the Company by the ESOT are charged directly to equity.
Audit fee
Auditor's remuneration for audit of these financial statements of £30,000
(2022: £27,500) was met by Crest Nicholson plc. No disclosure of other
non-audit services has been made as this is included within note 5 of the
consolidated financial statements.
Critical accounting estimates and judgements
The preparation of the Company financial statements under FRS 101 requires the
Directors to make estimates and assumptions that affect the application of
policies and reported amounts of assets and liabilities, income and expenses
and related disclosures.
In applying the Company's accounting policies, the Directors have made no
individual judgements that have a significant impact on the financial
statements.
Estimates and associated assumptions affecting the financial statements are
based on historical experience and various other factors that are believed to
be reasonable under the circumstances. The estimates and underlying
assumptions are reviewed on an ongoing basis. Changes in accounting estimates
may be necessary if there are changes in the circumstances on which the
estimate was based or as a result of new information. Revisions to accounting
estimates are recognised in the year in which the estimate is revised if the
revision affects only that year, or in the year of revision and future years
if the revision affects both current and future years. The Directors do not
consider there are any significant sources of estimation uncertainty that have
a risk of causing a material adjustment to the carrying value of assets and
liabilities of the Company.
2 DIRECTORS AND EMPLOYEES
The Company had no employees during either year. Details of Directors'
emoluments, which were paid by another Group company, are set out in the
Directors' Remuneration Report on pages 81-98 of the 2023 annual report and
financial statements to be published in February 2024.
3 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
2023 2022
£m £m
Investments in shares of subsidiary undertaking at cost at beginning of the 2.6 1.6
year
Additions 1.9 1.1
Disposals (2.9) (0.1)
Investments in shares of subsidiary undertaking at cost at end of the year 1.6 2.6
Additions and disposals in the year relate to Company
contributions/utilisation to/from the Trust.
The Directors believe that the carrying value of the investments is supported
by their underlying assets.
5 TRADE AND OTHER RECEIVABLES
2023 2022
£m £m
Amounts due from Group undertakings 186.4 222.4
Amounts due from Group undertakings are unsecured, repayable on demand and
carry an interest rate of 5.0% (2022: 5.0%).
Amounts due from Group undertakings are stated after an allowance of £nil has
been made (2022: £nil) in respect of expected credit losses. £nil (2022:
£nil) provision was made during the year, £nil (2022: £nil) was utilised,
and £nil (2022: £nil) provision was released during the year.
6 SHARE CAPITAL
The Company share capital is disclosed in note 23 of the consolidated
financial statements.
7 CONTINGENCIES AND COMMITMENTS
There are performance bonds and other arrangements, including those in respect
of joint venture partners, undertaken in the ordinary course of business. It
is impractical to quantify the financial effect of performance bonds and other
arrangements. The Directors consider the possibility of a cash outflow in
settlement of performance bonds and other arrangements to be remote and
therefore this does not represent a contingent liability for the Company.
In addition, the Company is required from time to time to act as guarantor for
the performance by subsidiary undertakings of contracts entered into in the
normal course of their business and typically provide that the Company will
ensure that the obligations of the subsidiary are carried out or met in the
unlikely event that any subsidiary default occurs. The Company considers the
likelihood of an outflow of cash under these arrangements to be remote and
therefore this does not represent a contingent liability for the Company.
8 GROUP UNDERTAKINGS
A list of all the Group's undertakings at 31 October 2023 is given in note 28
of the consolidated financial statements.
CREST NICHOLSON HOLDINGS PLC
ALTERNATIVE PERFORMANCE MEASURES (UNAUDITED)
The Group uses a number of APM which are not defined within IFRS. The
Directors use the APM, along with IFRS measures, to assess the operational
performance of the Group as detailed in the Strategic Report on pages 1-52 of
the 2023 annual report and financial statements to be published in February
2024, and above. Definitions and reconciliations of the financial APM used
compared to IFRS measures, are included below:
Sales
The Group uses sales as a core management measure to reflect the full extent
of its business operations and responsibilities. Sales is a combination of
statutory revenue as per the consolidated income statement and the Group's
share of revenue earned by joint ventures, as detailed in the below table:
2023 2022
£m £m
Revenue 657.5 913.6
Group's share of joint venture revenue (note 14) 34.6 42.2
Sales 692.1 955.8
Return on capital employed
The Group uses ROCE as a core management measure to reflect the profitability
and efficiency with which capital is employed. ROCE is calculated as adjusted
operating profit before joint ventures divided by average capital employed
(capital employed = equity plus net borrowing or less net cash), as presented
below. The Group has long-term performance measures linked to ROCE. ROCE
achieved by the Group in the year reduced to 6.3% (2022: increased to 22.4%).
2023 2022
Adjusted operating profit £m 44.2 140.9
Average of opening and closing capital employed £m 699.0 627.7
ROCE % 6.3 22.4
Capital employed 2023 2022 2021
Equity shareholders' funds £m 856.3 883.1 901.6
Net cash (note 19) £m (64.9) (276.5) (252.8)
Closing capital employed £m 791.4 606.6 648.8
Land creditors as a percentage of net assets
The Group uses land creditors as a percentage of net assets as a core
management measure to ensure that the Group is maintaining a robust financial
position when entering into future land commitments. Land creditors as a
percentage of net assets is calculated as land creditors divided by net
assets, as presented below. Land creditors as a percentage of net assets has
increased in the year to 24.0% (2022: reduced to 22.5%).
2023 2022
Land creditors (note 21) £m 205.5 198.7
Net assets £m 856.3 883.1
Land creditors as a percentage of net assets % 24.0 22.5
Net cash
Net cash is cash and cash equivalents plus non-current and current
interest-bearing loans and borrowings. Net cash illustrates the Group's
overall liquidity position and general financial resilience. Net cash has
reduced in the year to £64.9m from £276.5m in 2022.
2023 2022
£m £m
Cash and cash equivalents 162.6 373.6
Interest-bearing loans and borrowings (97.7) (97.1)
Net cash 64.9 276.5
Adjusted performance metrics
Adjusted performance metrics as shown below comprise statutory metrics
adjusted for the exceptional items as presented in note 4 of the consolidated
financial statements. The exceptional items have a material impact to reported
performance and arise from recent, unforeseen events. As such, the Directors'
consider these adjusted performance metrics reflect a more accurate view of
its core operations and business performance. EBIT margin for share award
performance conditions is equivalent to operating profit margin.
Year ended 31 October 2023 Statutory Exceptional items Adjusted
Gross profit £m 86.3 14.3 100.6
Gross profit margin % 13.1 2.2 15.3
Operating profit £m 29.9 14.3 44.2
Operating profit margin % 4.5 2.2 6.7
Net finance expense £m (10.1) 4.6 (5.5)
Share of post-tax profit/(loss) of joint ventures using the equity method £m 3.3 (0.6) 2.7
Profit before tax £m 23.1 18.3 41.4
Income tax expense £m (5.2) (4.8) (10.0)
Profit after tax £m 17.9 13.5 31.4
Basic earnings per share Pence 7.0 5.3 12.3
Diluted earnings per share Pence 7.0 5.2 12.2
Year ended 31 October 2022 Statutory Exceptional items Adjusted
Gross profit £m 91.8 102.5 194.3
Gross profit margin % 10.0 11.3 21.3
Operating profit £m 38.4 102.5 140.9
Operating profit margin % 4.2 11.2 15.4
Net finance expense £m (8.1) 1.0 (7.1)
Share of post-tax profit/(loss) of joint ventures using the equity method £m 2.5 1.5 4.0
Profit before tax £m 32.8 105.0 137.8
Income tax expense £m (6.4) (22.4) (28.8)
Profit after tax £m 26.4 82.6 109.0
Basic earnings per share Pence 10.3 32.2 42.5
Diluted earnings per share Pence 10.2 32.1 42.3
CREST NICHOLSON HOLDINGS PLC
HISTORICAL SUMMARY (UNAUDITED)
For the year ended/as at 31 October 2023
Note 2023(1) 2022(1) 2021(2) 2020(3) 2019(4)
Consolidated income statement
Revenue £m 657.5 913.6 786.6 677.9 1,086.4
Gross profit £m 100.6 194.3 166.7 107.7 201.9
Gross profit margin % 15.3 21.3 21.2 15.9 18.6
Net administrative expenses £m (55.8) (51.1) (51.1) (50.3) (65.5)
Net impairment losses on financial assets £m (0.6) (2.3) (1.0) (0.3) (3.4)
Operating profit before joint ventures £m 44.2 140.9 114.6 57.1 133.0
Operating profit before joint ventures margin % 6.7 15.4 14.6 8.4 12.2
Share of post-tax profit/(loss) of joint ventures £m 2.7 4.0 1.7 (0.5) (0.9)
Operating profit after joint ventures £m 46.9 144.9 116.3 56.6 132.1
Operating profit after joint ventures margin % 7.1 15.9 14.8 8.3 12.2
Net finance expense £m (5.5) (7.1) (9.1) (10.7) (11.0)
Profit before taxation £m 41.4 137.8 107.2 45.9 121.1
Income tax expense £m (10.0) (28.8) (19.9) (8.5) (23.7)
Profit after taxation attributable to equity shareholders £m 31.4 109.0 87.3 37.4 97.4
Basic earnings per share Pence 12.3 42.5 34.0 14.6 38.0
Consolidated statement of financial position
Equity shareholders' funds 1 £m 856.3 883.1 901.6 825.3 854.4
Net cash 2 £m (64.9) (276.5) (252.8) (142.2) (37.2)
Capital employed closing £m 791.4 606.6 648.8 683.1 817.2
Gearing 3 % (8.2) (45.6) (39.0) (20.8) (4.6)
Land creditors £m 205.5 198.7 222.9 205.7 216.5
Net (cash)/debt and land creditors 4 £m 140.6 (77.8) (29.9) 63.5 179.3
Return on average capital employed 5 % 6.3 22.4 17.2 7.6 15.9
Return on average equity 6 % 3.6 12.2 10.1 4.5 11.3
Housing
Home completions 7 Units 2,020 2,734 2,407 2,247 2,912
Average selling price - open market 8 £000 406 388 359 336 388
Short-term land 9 Units 14,922 14,250 14,677 14,991 16,960
Strategic land 10 Units 18,830 22,450 22,308 22,724 20,169
Total short-term and strategic land Units 33,752 36,700 36,985 37,715 37,129
Land pipeline gross development value 11 £m 12,163 12,111 11,834 11,360 12,137
(1) Consolidated income statement statistics, return on average capital
employed and return on average equity are presented before exceptional items
as presented in note 4 of the 2023 consolidated financial statements.
(2) Consolidated income statement statistics, return on average capital
employed and return on average equity are presented before exceptional items
relating to net combustible materials provision charge £28.8m, inventory
impairment credit £8.0m, and finance expense credit £0.5m.
(3) Consolidated income statement statistics, return on average capital
employed and return on average equity are presented before exceptional items
relating to combustible materials provision £0.6m, inventory impairment
£43.7m, restructuring costs £7.5m and impairment losses on financial assets
£7.6m. 2020 equity shareholders' funds, capital employed closing, gearing and
return on average equity have been restated to reflect the change in
accounting policy on land options.
(4) Consolidated income statement statistics, return on average capital
employed and return on average equity are presented before £18.4m exceptional
item relating to combustible materials provision. Not restated to reflect the
change in accounting policy on land options from 1 November 2020.
Note
1 Equity shareholders' funds = Group total equity (share capital plus
share premium plus retained earnings).
2 Net (cash)/borrowings = Cash and cash equivalents plus non-current and
current interest-bearing loans and borrowings.
3 Gearing = Net (cash)/borrowings divided by capital employed closing.
4 Net (cash)/debt and land creditors = land creditors less net cash or
add net borrowings.
5 Return on capital employed = adjusted operating profit before joint
ventures divided by average capital employed (capital employed = equity
shareholders' funds plus net borrowing or less net cash).
6 Return on average equity = adjusted profit after taxation attributable
to equity shareholders divided by average equity shareholders' funds.
7 Units completed = Open market and housing association homes recognised
in the year. In 2023, 2022 and 2021 units completed includes joint ventures
units at full unit count and is stated on an equivalent unit basis. This
equivalent unit basis allocates a proportion of the unit count for a deal to
the land sale element where the deal contains a land sale. 2019 to 2020 units
completed includes the Group's share of joint venture units and no equivalent
unit allocation to land sale elements.
8 Average selling price - open market = Revenue recognised in the year
on open market homes (including the Group's share of revenue recognised in the
year on open market homes by joint ventures), divided by open market home
completions (adjusted to reflect the Group's share of joint venture units).
9 Short-term land = Land controlled by the Group with a minimum
resolution to grant planning permission.
10 Strategic land = Longer-term land controlled by the Group without
planning permission.
11 Land pipeline gross development value = Forecast development revenue of
the land pipeline.
Glossary
Act The Companies Act 2006
AGM Annual General Meeting
APM Alternative performance measures
AQIs Audit Quality Indicators
BEIS Department for Business, Energy and Industrial Strategy
BSF Building Safety Fund
Code UK Corporate Governance Code
Crest Crest Nicholson Holdings plc and its undertakings
CVR Cost and Value Reconciliation
DBP Deferred Bonus Plan
D&I Diversity & Inclusion
EBIT Earnings before interest and taxes
ELT Executive Leadership Team
ERP Enterprise resource planning
ESG Environment, Social & Governance
ESOT or Trust Employee share ownership trust
FRC Financial Reporting Council
FHS Future Homes Standard
FVTPL Fair value through profit or loss
FVOCI Fair value through other comprehensive income
GDV Gross Development Value
GHG Greenhouse gas
HBF Home Builders Federation
IFRS International Financial Reporting Standards
IPPF International Professional Practice Framework
KPI Key Performance Indicator
LTIP Long-Term Incentive Plan
NHBC National House Building Council
NHQC New Homes Quality Code
Notice The Notice of the AGM
NRV Net realised value
PBT Profit before tax
PSL Partnerships and Strategic Land
Pledge Building Safety Pledge
PRS Private Rented Sector
OF Operational Framework
RAMS Risk Assessment and Method Statements
RCF Revolving Credit Facility
ROCE Return on capital employed
RPDT Residential property developer tax
RPs Registered Providers
SaaS Software as a Service
SAYE Save as you earn/Sharesave
SBTi Science Based Targets Initiative
SHE Safety, Health & Environment
SPOW Sales per outlet per week
SuDS Sustainable drainage systems
Supplier Code Sustainable Procurement Policy and Supply Chain Code of Conduct
TCFD Task Force on Climate-related Financial Disclosures
tCO2e Tonnes of carbon dioxide equivalent
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