Final Results
Crest Nicholson PLC
30 January 2003
Embargoed until 0700am on 30th January 2003
Preliminary Results Announcement
Crest Nicholson PLC, the residential development company, today announces
results for the year ended 31st October 2002.
Financial highlights: % increase
• Profit before taxation £63.0m (2001: £50.5m*) 25%
• Profit on continuing development operations £66.3m
(2001: £49.3m*) 34%
• Earnings per share 38.8p (2001: 30.8p*) 26%
• Proposed final dividend of 6.5p, making a total for the
year of 9.5p (2001: 8.0p) 19%
• Compound earnings per share growth 1998-2002 34%
• Gearing 53% (2001: 48%*)
• Net assets attributable to ordinary shares equivalent to 192p
(2001: 164p*) 17%
Operational highlights:
• Disposal of the Construction Division - Crest now trades as a single
entity, operating in the residential development sector
• 1,899 houses sold (2001: 1,543*); average price £225,100 (2001: £186,700*)
• Operating profit from development activities up 33% at £79.2m (2001:
£59.6m*)
• Land bank increases to 10,760 plots (2001: 10,424 plots*) - £2.1bn
development value (2001: £1.9bn*) - c. 5 years' supply
• Forward order book 14% up on last year (in units)
Commenting today John Matthews, Chairman, said:
"We have taken full advantage of the buoyant housing market during the year and
have taken steps to improve the quality of our business and prospects for the
future.
"Crest Nicholson will now trade as a single focused entity, operating primarily
in the residential sector and with a strong emphasis on sustainable development.
During the year, we have continued to improve the quality of our land holdings
and, in the current economic climate, we have taken the opportunity to change
the mix of units on sites in the development pipeline.
"Since our year-end on the 31st October, reservations have been excellent both
in terms of the number obtained and the price achieved. The demand for our
product remains strong and we continue to bring new projects through the
planning process. Housing in the long term cannot be immune to the overall
condition of the economy. However, given our strong land bank and broad product
range, we are well placed to withstand changes in market conditions. We believe
we are on course for another year of good progress."
* Restated for comparative purposes
Enquiries to:
John Callcutt, Chief Executive Rebecca Blackwood/
Clive Littler, Finance Director Kate Miller/
Crest Nicholson PLC Robert Gardener
Tel: 0207 404 5959 (on day of announcement) Brunswick Group Limited
Tel: 01932 847272 (thereafter) Tel: 0207 404 5959
The analyst presentation is available on the Company's web site.
CHAIRMAN'S STATEMENT
We have taken full advantage of the buoyant housing market during the year and
have taken steps to improve our business and prospects for the future.
Our profit before tax increased by 25% to £63.0m. In the five years since 1997
profits have increased from under £20m to £63m. In the year to 31st October
2002 we have raised earnings per share by 26% to 38.8p. This is an excellent
result.
The Board has given careful consideration to the recommendation as to the level
of final dividend for the year. The Board is recommending a final dividend of
6.5p, equating to 9.5p for the year as a whole, an increase of 19% over 2001.
The dividend is covered 4.1 times. The final dividend will be paid on 7th April
2003 to shareholders on the register at 7th March 2003.
Our focus on sustainable development in recent years has been crucial to our
success. Better planning and architecture enables higher densities to be
achieved without compromising the quality of life, enabling the needs of a wider
cross section of society to be accommodated within our towns and cities. Our
success in mastering these skills has been demonstrated by our ability to get
our developments through the planning process quicker, improve on conventional
planning densities and produce homes that can command a premium price.
We have continued to improve the quality of our land holdings and, in the
current economic climate, we have taken the opportunity to change the mix of
units on sites in the development pipeline to provide a broader range of product
in future years.
Operating Performance Review
It was announced at the half year that the Group had changed the analysis of its
activities and would be reviewing the accounting policy regarding income
recognition. In relation to the analysis of our activities, the Board regards
residential and commercial property development as one business and Crest now
reports its development activities as a single segment. This emphasises the
change in the type of developments undertaken which increasingly comprise large
mixed-use schemes where the project responsibility is undertaken by a single
team. As regards accounting policy, Crest has changed the point of income
recognition from exchange of contracts and plastering to exchange of contracts
and build completion. For comparative purposes, the results for 2001 and prior
years have been restated.
Turnover in 2002, including that attributable to joint ventures, increased by
£110.3m or 19% to £696.4m. In respect of the Group's development activities,
turnover increased by £122.6m or 31% to £515.5m. The number of houses sold was
1,899 (2001: 1,543) with an average sales value of £225,100 (2001: £186,700).
Turnover from the sale of houses was £427.6m (2001: £288.1m) which was augmented
by turnover from the sale of residential land and commercial uses of £87.9m
(2001: £104.8m).
On 6th December 2002 the Board announced the disposal of Pearce, the Group's
Construction Division, for £9.2m, a £50,000 premium to net assets. The sale of
Pearce was ratified by shareholders at an Extraordinary General Meeting held on
29th January and will be completed on 31st January. This discontinued activity
had turnover of £180.9m (2001: £193.2m) and incurred an operating loss of £3.4m
(2001: profit £1.2m) during the year. Crest Nicholson now trades as a single
focused entity, operating primarily in the residential development sector and
with a strong emphasis on sustainable development.
Operating profits for the Group's development activities were £79.2m (2001:
£59.6m) and the operating margin 15.4% (2001: 15.2%). Were it not for the
change in profit recognition policy we estimate the operating margin would have
been slightly higher.
The Group's balance sheet continues to strengthen. Shareholders' Funds were
£247.1m (2001: £214.0m) an increase of £33.1m made up principally of retained
earnings.
The net assets attributable to the ordinary shares were equivalent to 192p
compared to 164p a year ago. Net borrowings were £131.8m (2001: £102.5m) and
represented gearing of 53% (2001: 48%).
The Group now has £262.9m of total facilities available of which just under
£100m is for a term in excess of five years.
We continue to improve the return we obtain on our assets. The Group's return
on average capital employed increased to 21.8% from 20.8% last year. The return
on the Group's ongoing development business was 22.7%, which is evidence of the
improving quality of our core business.
Social and Environmental Policy
During the year a Committee for Social Responsibility was set up as a
sub-committee of the Board under the Chairmanship of the Chief Executive. The
objectives of the committee are to implement a formal and comprehensive approach
to social and environmental management systems, to establish clear performance
indicators and regularly review progress against such indicators.
Directors and Staff
I would like to pay tribute to all our people for their efforts during the past
year. We have been making many changes in our organisation, and in the way we
do things, and our people have responded very well.
Peter Murray will be leaving the Board on 30th June 2003 after having postponed
his retirement to help implement the reorganisation of the Commercial Division.
Don Ross left the Board yesterday following the Extraordinary General Meeting
which approved the disposal of Pearce. I would like to express my gratitude and
thanks to both of them for the hard work and help that they provided in making
these important changes possible.
Prospects
Since our year-end on 31st October, reservations have been excellent both in
terms of the number obtained and the price achieved. The demand for our product
remains strong and we continue to bring new projects through the planning
process. Housing in the long term cannot be immune from the overall condition
of the economy. However, given our strong land bank and broad product range, we
are well placed to withstand changes in the market place. We believe we are on
course for another year of good progress.
OPERATING REVIEW
The Market
House prices continued to increase driven by a continuing shortage of new homes,
low interest rates and good employment prospects. Opinion is divided as to
whether the market will have a soft landing, with price inflation moderating, or
a hard landing with real price reductions. There is a consensus that the
current rate of price increases cannot be maintained and will slow during the
year. However, since the year-end Crest's volumes have been maintained and we
have achieved prices ahead of expectation.
Public bodies have recognised the economic and social need to create an
increased supply of reasonably priced housing, providing a home in a pleasant
and sustainable environment, especially where supply is most constrained in the
South East.
Crest has for some years recognised these market issues by applying its skills
to offer local communities effective housing solutions. This approach has been
evidenced by our ability to get our developments through the planning process
quicker, improve on conventional planning densities and offer a product that can
command a premium price.
Trading Performance
Profit before tax for the Group's development activities increased in 2002 by
34% from £49.3m to £66.3m. This excellent performance was due to an increase of
around 50% in open market housing turnover, achieved by a combination of
increased volumes and higher average selling prices. It is also clear evidence
of the success of our strategy to increase profitability by releasing the value
inherent in our long land bank through increased production.
Sales volumes rose by 23% to 1,899 units compared to 1,543 last year. This
improvement was achieved by the Group's South, South West and Midlands Regions,
mainly through increased volumes from their larger sites. The housing market in
the South West was and continues to be strong and is an area where we have a
significant land bank at good margins. Port Marine performed particularly well
and a number of sites in prime locations were launched in the year. The
Midlands' market was also strong and the Company achieved considerable success
in acquiring good quality sites which will enable the region to reach optimum
production capacity in the next few years.
Average selling prices of all properties increased by 21% to £225,100 compared
with £186,700 in 2001. This was due mainly to sales from more expensive
locations and a greater proportion of our sales turnover coming from the South
East of the country. Average prices on developments in the South East increased
by 38%, whereas prices outside this area were marginally lower than last year.
The open market sales comprised 1,662 units compared with 1,348 last year, an
increase of 23%, with an average selling price of £240,200 compared with
£197,800 in 2001, an increase of £42,400.
The Group's major concept schemes, which we define as having a development value
in excess of £100m, provided an increased contribution. Six major schemes were
operational and all increased their turnover. Production commenced on two large
developments at Braydon Mead, Swindon and The Arboretum, near St. Albans. We
also obtained our first full year's production from Bolnore Village, Haywards
Heath.
Housing Association turnover increased to £28.4m compared to £21.4m last year.
Agreements to supply social housing were entered into on several of our large
schemes - The Arboretum, Braydon Mead, Mill Hill and Shinfield. As well as
improving the supply of affordable accommodation to meet Government housing
policy objectives, we also secured a committed and profitable order book which
will enable sales from this sector to double by 2004.
Build cost pressures have been well contained and had significantly less impact
on margins than last year. Material prices have shown little change and there
are alternative sources of supply in many cases. We expect subcontractor rates
to come under pressure due to the continued shortage of skilled tradesmen in
some key areas. However, large sites which can offer subcontractors longer and
more economic production runs will be less affected. In general, the impact of
cost increases has been well covered by improving sales values and we believe
this will continue in 2003.
Sales of residential land amounted to £40m compared with £55m last year. These
sales were at good margins so that Crest realised much of the original
development profit. Our ability to source good land is well recognised in the
industry. Land disposals are a regular feature of Crest's method of operation,
generating development value once the concept is established.
Commercial Property sales amounted to £48m, in line with the £50m in 2001.
Margins, however, were lower as a number of exceptionally profitable land sales
took place in the prior year.
Operating margins at 15.4% are good by industry standards and marginally ahead
of last year. Were it not for the change in income recognition policy we
estimate that the operating margin would have been slightly higher, with sales
from several high margin sites being deferred to the current year.
Land and Planning
Crest's land strategy has been to acquire sites that are well located and will
continue to sell in difficult markets. The mix of units has also been changed
with a greater emphasis on middle and lower priced sectors.
Values have continued to increase in our portfolio, particularly as our large
concept schemes fulfil their potential. Undoubtedly buoyant market conditions
have made a contribution. In light of current and anticipated market
conditions, we continue to seek higher densities on our large schemes, both to
improve utilisation of land and to maintain the affordability of our product.
Our proven optimisation skills and ability to meet the housing needs of a much
broader section of the community will be a key component of successful
development in future years.
We have for some time been concerned that the market for luxury apartments in
Central London may have become overheated. We took steps in the year to reduce
our exposure to this market by shifting our land acquisition policies towards
middle market sites. We believe this will meet a largely unsatisfied demand for
reasonably priced owner-occupier properties.
The short-term land bank comprises 10,760 plots (2001: 10,424 plots) directly
owned and consented. The portfolio has an estimated development value of
£2,127m (2001: £1,937m), an increase of 10% with an attributable gross margin of
£493m (2001: £477m). Based on last year's house sales' turnover of £427m, this
represents a five year land supply.
During the year, 24 sites for around 1,600 houses were acquired. In the first
half these included The Arboretum, which had the benefit of detailed planning
permission for 400 units. This enabled our building teams to effect an early
start and secured production for this year. At the same time we improved the
planning on this site to 550 units by significantly increasing the overall
amount of permitted development, thereby improving margins and creating
additional land value, part of which will be shared with the Regional Health
Authority who is the land vendor.
In the second half we acquired Whitelands College, Wandsworth, a site for 300 -
400 middle market units presently occupied by the Roehampton Institute. We
shall commence development when the college moves into new accommodation in late
2004.
It is intended that on a number of its urban projects, such as Attwood Green,
Birmingham, Crest will offer reasonably priced accommodation suitable for
purchase by private and public sector employees.
We continue to optimise our land holdings by improving layouts and increasing
densities. During the year the land bank increased by an additional 900 plots
which, together with the benefit of price inflation, increased the value of our
portfolio, notwithstanding that we used more land than we acquired. Since the
year end further sites have been added at Aldershot, Poole and Romford, which
will contribute approximately 750 units to the short-term land bank.
Our policy is to realise the value inherent in our land bank by raising volumes,
consequently the land lead may fall to around four times current production,
which is closer to the sector average.
The Group's strategic land holdings comprise around 900 acres, controlling
approximately 14,000 plots, of which 2,000 are allocated for development in a
draft structure plan. Options were taken on three major development sites, the
first being adjacent to our current development in Swindon, the other two were
at Crawley, Sussex and at Harlow, Essex. Since the year-end Crest has received
consent, subject to planning agreements, for 1,500 plots on its strategic site
at Red Lodge, which is located between Cambridge and Bury St. Edmunds.
The Group's total land holdings comprise around 24,500 plots compared with
22,300 a year ago. These holdings are overwhelmingly in the Southern half of
the country in areas of demand.
Quality and Customer Service
Crest maintains a strong commitment to quality in its build and customer
service, as evidenced by the latest DTI Customer Satisfaction Survey which gave
Crest the highest overall rating of any listed housebuilding company. Of equal
importance is the Group's policy to create a better built environment for its
purchasers irrespective of price or market sector. It was with particular pride
that amongst numerous awards for the quality of its product, Crest was picked
out by the Commission for Architecture and the Built Environment as an
organisation that is "rising to the challenge of providing better buildings and
places for homes, business and leisure with their fresh and creative thinking."
Change of Accounting Policy
The Group changed its income recognition policy on house sales during the year.
Income (and profit) is now recognised when units are exchanged and build
complete, compared to the old policy of recognising income when units are
exchanged and plastered.
Environmental and Social Responsibility
During the year Crest Nicholson adopted the Global Reporting Initiative (GRI)
"Sustainability Reporting Guidelines" as the basis for identifying, implementing
and measuring the Group's progress against established environmental and social
performance indicators. For the first time the Group has prepared a separate
Social and Environmental Report which will be accompanying the 2002 Report and
Accounts.
STATEMENT OF RESULTS
for the year ended 31st October 2002
2002 2001 Restated
£m £m £m £m
Turnover - including joint ventures (Note 1) 696.4 586.1
Less: attributable to joint ventures (10.4) (8.5)
_______ ______
Group turnover - continuing operations 505.1 392.9
Group turnover - discontinued operations 180.9 686.0 184.7 577.6
_____ _____
Cost of sales (553.2) (462.0)
_______ ______
Gross profit 132.8 115.6
Operating costs (59.5) (54.0)
_______ ______
Group operating profit - continuing 75.7 60.1
Group operating profit - discontinued (2.4) 73.3 1.5 61.6
_____ _____
Operating profit/(loss) of joint ventures - continuing 3.5 (0.5)
Operating loss of joint ventures - discontinued (1.0) 2.5 (0.3) (0.8)
_____ _______ _____ ______
Operating profit - including joint ventures (Note 1) 75.8 60.8
Net interest payable (12.8) (10.3)
_______ ______
Profit before taxation (Note 1) 63.0 50.5
Taxation (19.0) (15.5)
_______ ______
Profit for the financial year 44.0 35.0
Preference dividends (2.1) (2.1)
_______ ______
Profit attributable to ordinary shareholders 41.9 32.9
Ordinary dividends (10.3) (8.7)
_______ ______
Retained profit 31.6 24.2
======= ======
Earnings per share (Note 2)
Basic 38.8p 30.8p
Diluted 38.2p 28.6p
Dividends per share 9.5p 8.0p
CONSOLIDATED BALANCE SHEET
At 31st October 2002
2002 2001 Restated
£m £m £m £m
Fixed assets
Tangible assets 3.8 5.1
Investments in joint ventures 10.1 5.0
Other investments 0.6 0.1
_______ ______
14.5 10.2
Current assets
Stocks 598.3 551.4
Debtors 169.8 128.7
Cash at bank and in hand 18.3 47.6
________ ______
786.4 727.7
Creditors: amounts falling due
within one year (244.0) (297.2)
________ ______
Net current assets 542.4 430.5
_______ ______
Total assets less current liabilities 556.9 440.7
Creditors: amounts falling due
after more than one year (308.7) (225.5)
Provisions for liabilities and charges (1.1) (1.2)
________ ______
(309.8) (226.7)
_______ ______
247.1 214.0
======= ======
Shareholders' funds (Note 3) 247.1 214.0
======= ======
Net borrowings 131.8 102.5
Gearing 53% 48%
Net assets per ordinary share (Note 4) 192p 164p
Consolidated Cash Flow Statement
For the year ended 31st October 2002
2002 2001
£m £m £m £m
Net cash inflow from operating activities 15.1 12.8
Returns on investments and servicing of finance
Interest received 0.4 0.3
Interest paid (14.0) (9.0)
Preference dividends paid (2.1) (2.1)
______ _____
Net cash outflow from returns on investments and (15.7) (10.8)
servicing of finance
Taxation
Corporation tax paid (16.3) (16.0)
Capital expenditure and financial investment
Tangible fixed assets acquired (1.6) (2.8)
Tangible fixed assets disposed 0.4 0.2
Other fixed asset investments acquired (3.7) (0.4)
Other fixed asset investments disposed 0.2 0.5
______ _____
Net cash outflow from capital expenditure and financial (4.7) (2.5)
investment
Equity dividends paid (9.2) (7.8)
______ ______
Net cash outflow before financing (30.8) (24.3)
Financing
Proceeds from share issues 1.5 1.5
Increase in bank loan and loan notes 4.2 50.7
______ _____
Net cash inflow from financing 5.7 52.2
______ ______
(Decrease)/increase in cash in year (25.1) 27.9
====== ======
NOTES
1 Segmental Analysis Operating Pre-tax Capital
Turnover profit profit employed
£m £m £m £m
2002
Development 515.5 79.2 66.3 379.5
Construction - discontinued 180.9 (3.4) (3.3) (0.6)
________ ________ ________ ________
696.4 75.8 63.0 378.9
======== ======== ======== ========
2001 Restated
Development 392.9 59.6 49.3 320.3
Construction - discontinued 193.2 1.2 1.2 (3.8)
________ ________ ________ ________
586.1 60.8 50.5 316.5
======== ======== ======== ========
2 Earnings per share
Earnings per share are calculated on the profit attributable to ordinary
shareholders of £41.9m (2001 restated: £32.9m), on a weighted average of
108,140,464 (2001: 106,749,487) ordinary shares in issue during the year.
Diluted earnings per share are calculated on the profit attributable
to ordinary shareholders of £41.9m on a weighted average of 109,576,300 ordinary
shares on the basis that 4,185,672 share options had been exercised. The
diluted earnings per share for 2001 are calculated on the restated profit for
the financial year of £35.0m on a weighted average of 122,398,237 ordinary
shares on the basis that 38,636,229 preference shares had been converted into
13,642,714 ordinary shares and 2,006,036 share options exercised. The preference
shares forfeited their conversion rights on 30th April 2002.
3 Reconciliation of shareholders' funds
2002 2001
Restated
£m £m
Retained profit 31.6 24.2
Net proceeds from share issues 1.5 1.5
_______ _______
Net increase in shareholders' funds 33.1 25.7
Opening shareholders' funds restated 214.0 188.3
_______ _______
Closing shareholders' funds 247.1 214.0
======= =======
4 Net assets per share
Net assets per ordinary share is calculated on net assets of £209.1m (2001:
£175.4m), after deducting the preference capital of £38.0m (2001: £38.6m) from
the capital and reserves, on 108,770,923 (2001: 107,707,692) ordinary shares in
issue and ranking for full dividends at 31st October 2002.
5 Statutory accounts
The financial information set out above does not constitute the
Company's statutory accounts for the years ended 31st October 2002 or 2001 but
is derived from those accounts. Statutory accounts for 2001 have been delivered
to the Registrar of Companies, whereas those for 2002 will be delivered
following the Company's Annual General Meeting. The auditors have reported on
those accounts; their reports were unqualified and did not contain a statement
under Section 237(2) or (4) of the Companies Act 1985.
6 Annual General Meeting
The Annual General Meeting will be held at the Runnymede Hotel,
Windsor Road, Egham, Surrey on Thursday, 27th March 2003 at 12.00 noon.
FIVE YEAR RECORD
1998 1999 2000 2001 2002
Turnover (including joint ventures) £m £m £m £m £m
Development 277.7 383.5 411.4 392.9 515.5
Construction - discontinued 158.8 128.0 133.1 193.2 180.9
_______ _______ _______ _______ _______
436.5 511.5 544.5 586.1 696.4
_______ _______ _______ _______ _______
Operating profit (including joint ventures) £m £m £m £m £m
Development 29.1 46.6 52.2 59.6 79.2
Construction - discontinued 0.4 1.7 0.9 1.2 (3.4)
_______ _______ _______ _______ _______
29.5 48.3 53.1 60.8 75.8
_______ _______ _______ _______ _______
Operating margin - development 10.5% 12.2% 12.7% 15.2% 15.4%
Pre-tax profit £m £m £m £m £m
Development 21.0 37.3 41.9 49.3 66.3
Construction - discontinued 0.7 2.0 0.8 1.2 (3.3)
_______ _______ _______ _______ _______
21.7 39.3 42.7 50.5 63.0
_______ _______ _______ _______ _______
Housing
Houses sold 2,158 2,479 1,717 1,543 1,899
Average selling price £107,200 £121,300 £162,500 £186,700 £225,100
Land bank - Short term (units) 6,885 6,788 7,778 10,424 10,760
Average selling price £128,100 £162,600 £185,700 £185,800 £197,600
Land bank - Strategic (units) 10,924 11,680 12,562 11,862 13,735
Balance sheet £m £m £m £m £m
Shareholders' funds 148.1 167.2 188.3 214.0 247.1
Net borrowings 77.3 75.2 79.7 102.5 131.8
_______ _______ _______ _______ _______
Capital employed 225.4 242.4 268.0 316.5 378.9
_______ _______ _______ _______ _______
Gearing 52% 45% 42% 48% 53%
Return on shareholders' funds (average) 15.4% 24.9% 24.0% 25.1% 27.3%
Return on capital employed (average) 14.7% 20.6% 20.8% 20.8% 21.8%
Ordinary shares
Earnings per share 12.2p 23.4p 26.4p 30.8p 38.8p
Dividends per share 4.75p 6.00p 7.00p 8.00p 9.50p
Dividend cover 2.5x 3.9x 3.8x 3.8x 4.1x
Net tangible assets per share 104p 121p 141p 164p 192p
Note: The figures for the years 1998 to 2001 have been restated to reflect
the change in income recognition policy in 2002.
This information is provided by RNS
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