Interim Results
Crest Nicholson PLC
24 June 2004
24TH June 2004
CREST NICHOLSON PLC
Interim Results Announcement
Crest Nicholson PLC, the residential and mixed use development company, today
announces results for the six months ended 30th April 2004.
Financial Highlights % increase
* Profit before tax increased to £36.0m (2003: £32.0m) 13%
* Earnings per share increased to 21.8p (2003: 19.6p) 11%
* Interim dividend 4.0p (2003: 3.5p) 14%
* Net assets per share 241p (2003: 208p) 16%
Operational Highlights
* Total housing units up 27% to 1,055 houses sold (2003: 833)
- Affordable housing up 388% to 312 (2003: 64)
* Housing sales up 7.5% to £227m (2003: £211m)
- Affordable housing £41m (2003: £8m)
* As anticipated, average selling price fell to £215,000 (FY2003: £239,000)
reflecting increased volume of affordable housing
* Current housing forward sales up 35% to a record £325m (2003: £241m)
- Over 85% of 2004 housing sales now secured
* Short term housing land bank up 11% at 14,700 plots (October 2003: 13,204)
* Development value of short term housing portfolio increased to £2.75bn
(October 2003: £2.48bn) - over 5 years' supply
* Land sales £18.7m (2003: £30.7m)
* Strong commercial sales on mixed use projects of £37.5m (2003: £7.4m)
Commenting today John Callcutt , Chief Executive, said:
"These results show the substantial progress Crest has made in its core business
of residential and mixed use development with its strong emphasis on
sustainability and urban regeneration.
"The volume of affordable unit sales will more than double in 2004 and we expect
total 2004 housing volumes to be up around 30% on 2003. As anticipated,
commercial sales came through strongly in the first half from our mixed use
projects. Our emphasis on product quality and sustainable development has
enabled us to grow our land bank, which is equivalent to over five years'
supply. We are, therefore, well placed to continue to deliver good returns for
our shareholders"
Enquiries to:
Crest Nicholson PLC Brunswick Group LLP
John Callcutt, Chief Executive Andrew Fenwick
Stephen Stone, Chief Operating Officer Kate Miller
Peter Darby, Finance Director Robert Gardener
Tel: 020 7404 5959 (on day of announcement) Tel: 020 7404 5959
Tel: 01932 847272 (thereafter)
The analyst presentation is available on the Company's web site:
www.crestnicholson.com
A copy of the Interim statement, consolidated profit & loss account, balance
sheet and cash flow statement are attached.
CHIEF EXECUTIVE'S STATEMENT
RESULTS AND DIVIDEND
Profit before tax was £36.0m (2003: £32.0m) for the six months to 30th April
2004, an increase of 12.5%.
Turnover from the continuing development operations was up by 13.6% to £283.0m
(2003: £249.1m).
Basic earnings per share rose to 21.8p (2003: 19.6p), an increase of 11.2%.
The Directors are pleased to declare a 14% increase in the interim dividend to
4.0p (2003: 3.5p) to be paid on 1st September 2004 to shareholders on the
register at the close of business on 30th July 2004.
REVIEW OF OPERATIONS
Housing
Turnover from housing sales increased by 7.5% to £226.8m (2003: £211.0m) from
1,055 units (2003: 833 units) at an average selling price of £215,000 (2003:
£253,000).
Included in the housing numbers, our affordable housing sales increased five
fold to £40.5m (2003: £8.0m) from 312 units (2003: 64 units). In our 2003 Annual
Report, we said that we expected to double our affordable housing volume in 2004
compared with the 308 units achieved in 2003. With 312 units achieved in the
first half year, we are on track to exceed this.
We achieved 743 open market unit sales in the first half, which was 6% up on our
budget for the first half, but slightly down on the first half of 2003 (769
units).
In the Annual Report, we said that we expected to increase our overall unit
output (open market and affordable housing combined) by over 20%. Reservations
in the first half have been strong and the step change in production is on
track, with the result that we now expect unit volumes for the full year to be
around 30% higher than in 2003. Given a stable market, we would expect a further
volume increase of about 10% in 2005.
Our strategy of reducing our exposure to high priced South East units, expanding
our Midlands region and increasing our affordable housing volumes reduced our
average selling price by about 10% from £239,000 to c. £215,000, as we
anticipated in our 2003 Annual Report. We would expect the full year average
selling price to be in the £210,000 to £215,000 range.
Margins on our open market housing sales remain strong and the margin on the
short term housing land bank as a whole continues to improve. However, average
housing margins have, as expected, reduced slightly because of the volume growth
in affordable housing, which carries a lower margin but gives us cash flow
advantages and a better risk profile.
Demand for our product continues to be strong and at the end of April we had a
forward order book amounting to £256m sales value, which compares with £193m at
the end of October 2003 and £172m at April 2003. Currently, the forward order
book stands at a record £325m. Over 85% of 2004 housing sales are now secured.
We aim to subdivide our Eastern region by the end of this year. This will
improve the utilisation of our existing land bank in the Thames Gateway and in
East Anglia and increase our volume potential to around 4000 units per annum. As
other regions reach full capacity, they will be subdivided to provide further
growth.
Land Sales
Sales of housing land amounted to £18.7m (2003: £30.7m) and arose on sites in
the South East and South West.
Land disposals will continue to be an integral part of Crest's method of
operation. As part of our strategy, we assemble large sites and create
substantial land value as we bring them through the planning process and
establish new price levels through the quality of our design concepts. In order
to deliver consistent profit growth and a good return on capital to our
shareholders, we will sell land where appropriate to generate profits and cash
and rebalance our risk profile.
Mixed Use Commercial
Sales of the commercial elements of mixed use schemes amounted to £37.5m (2003:
£7.4m). In our Annual Report, we described the low level of turnover from
commercial property sales as a "temporary lull" before the flow of sales from
our mixed use schemes at Bristol Harbourside and Attwood Green, Birmingham.
In the first half, at Bristol Harbourside we have successfully concluded the
letting to Clerical Medical Investment Group (HBOS) of a 170,000 sq ft office
and its sale. Lettings to Marks and Spencer, Gala and Accor hotels have also
been exchanged. We have sold the commercial content of the mixed use scheme at
Hemel Hempstead, where the anchor tenant is Debenhams.
Where we are able to eliminate in advance, or significantly reduce, planning,
occupation and funding risks, our margin requirements for the commercial content
of mixed-use schemes are reduced accordingly and are generally lower than for
open market housing.
Operating Margins
As anticipated, operating margins are lower than last year at 14.7% compared
with 15.5%.
Significantly higher volumes of affordable and lower cost housing and of
commercial business have reduced gross margins from 24.7% to 23.0% in the first
half year.
The 1.7% reduction in gross margins has been offset by a 0.9% improvement in the
overhead percentage of sales. Overhead recovery has improved because of turnover
gains and tight overhead controls. We expect further improvement in overhead
utilisation in the second half.
Going forward, as we have now adjusted our business mix to include higher levels
of affordable housing and commercial sales, we expect operating margins, given a
stable market, to be sustainable at around the half year level.
Product Quality
We have continued to receive awards for quality and service, gaining the top
rating (3 stars) in all categories in the recent MORI National Customer
Satisfaction Survey.
We have also received the Quality Service Award for the third year running at
the Daily Express Housebuilder Awards.
We have received more awards from The Commission for Architecture and the Built
Environment (CABE) than any other major housebuilder. We have two Gold Standard
"Building for Life" awards and a citation for design excellence.
We are pleased to have been admitted to membership of the FTSE4Good Index
Series, which consists of companies that meet globally recognised corporate
responsibility standards. Companies in the FTSE4Good Index Series are working
towards environmental sustainability and developing positive relationships with
stakeholders.
These awards improve awareness of the Crest Nicholson brand, which creates land
opportunities for us with both public and private sector land vendors.
Housing and Commercial Portfolios
In the half year we acquired 23 sites comprising 2,144 plots, with a projected
development value of just under £370m.
The short term housing portfolio now stands at 14,700 plots (2003: 13,150 plots)
with a projected development value of £2.75bn (2003: £2.46bn), an increase of
12% over the twelve months. At the current level of turnover, the portfolio
represents over 5 years' supply.
Our strategic land bank consists of 796 acres controlling 12,935 plots (2003:
12,699). In accordance with our strategy, our prime focus is on brownfield urban
regeneration opportunities and we would therefore expect to reduce our
investment in greenfield strategic land as we bring it through to our short term
portfolio.
The commercial land portfolio covers over 100 acres for 1.8 million square feet
of commercial space with a development value of £467m. The majority of this
relates to the mixed use schemes at Bristol Harbourside, Hemel Hempstead,
Attwood Green in Birmingham, Farnham and Chertsey. In addition there is around
270 acres of potential commercial land in our strategic land bank.
FINANCE
Shareholders' funds at 30th April 2004 are £305.8m, compared with £265.2m at
April last year and £285.5m at October. The increases have been almost
exclusively due to retained earnings. Net assets per share are 241p and are 16%
higher than a year ago.
Net borrowings are £179.2m compared with £184.3m at April last year and £81.9m
at the year end. Gearing is 59% (2003: 69%). Tighter cash controls continue to
produce improvements in asset/turnover ratios.
The Group has borrowing facilities of £352m of which £120m is medium term US
private placement finance at a fixed rate with an average maturity of in excess
of five years and £225m is a revolving credit facility which is due to expire in
2008.
Net interest cost for the half year was £5.7m (2003: £6.5m) which is covered 7.3
times by operating profits.
PROSPECTS
We are industry leaders in product quality and sustainable development. This has
enabled us to build up exceptionally strong land banks in areas of supply
shortage with good long term economic growth prospects. Our urban regeneration
strategy addresses housing needs in our areas of operation and matches
government thinking on remedying housing shortfalls. We believe benefits will
flow from having established ourselves as the partner of choice for urban
regeneration projects.
We are, therefore, well placed to make good progress in the current year and to
continue to deliver good returns for our shareholders in the longer term.
John Callcutt
24th June 2004
STATEMENT OF RESULTS
Unaudited Group results for the Half Year to 30th April 2004
Half Year Half Year Full Year
Note 2004 2003 2003
£m £m £m
Turnover - including
joint ventures 2 283.0 273.0 574.4
Less: attributable to
joint ventures (5.0) (9.2) (12.0)
-------- -------- --------
Turnover - Group companies 278.0 263.8 562.4
======== ======== ========
------------------------------------------------------------------------------
Group turnover - continuing
operations 278.0 239.9 538.5
- discontinued
operations - 23.9 23.9
------------------------------------------------------------------------------
Operating profit - Group
companies 40.8 38.0 87.9
Operating profit/(loss)
of joint ventures 0.9 0.5 (0.6)
-------- -------- --------
Operating profit
including joint
ventures - continuing
operations 2 41.7 38.5 87.3
Net interest payable (5.7) (6.5) (12.7)
-------- -------- --------
Profit before taxation 2 36.0 32.0 74.6
Estimated taxation 3 (10.8) (9.6) (23.0)
-------- -------- --------
Profit after taxation 25.2 22.4 51.6
Preference dividends (1.0) (1.0) (2.1)
-------- -------- --------
Profit attributable to
ordinary shareholders 24.2 21.4 49.5
Ordinary dividends (4.5) (3.8) (12.2)
-------- -------- --------
Retained profit 19.7 17.6 37.3
======== ======== ========
Earnings per 10p ordinary
share 4
Basic 21.8p 19.6p 45.2p
Diluted 21.6p 19.4p 44.7p
Dividends per 10p
ordinary share 4.0p 3.5p 11.0p
There are no recognised gains or losses other than those shown above.
SUMMARY BALANCE SHEET
Unaudited Consolidated Balance Sheet as at 30th April 2004
Note April April October
2004 2003 2003
£m £m £m
Fixed assets
Tangible assets 2.4 1.9 2.1
Investments 22.1 15.5 15.6
-------- -------- --------
24.5 17.4 17.7
-------- -------- --------
Current assets/liabilities
Stocks 735.8 677.4 651.6
Debtors 176.2 148.2 125.9
Creditors (265.8) (222.4) (298.9)
Net cash in hand 20.8 15.8 53.2
-------- -------- --------
Net current assets 667.0 619.0 531.8
-------- -------- --------
Total assets less current liabilities 691.5 636.4 549.5
Creditors falling due after more
than one year
Bank and other loans (200.0) (200.1) (135.1)
Other creditors and provisions (185.7) (171.1) (128.9)
-------- -------- --------
(385.7) (371.2) (264.0)
======== ======== ========
Net Assets represented by
Shareholders' funds 5 305.8 265.2 285.5
======== ======== ========
Net borrowings 179.2 184.3 81.9
Gearing 59% 69% 29%
Net assets per ordinary share 6 241p 208p 224p
SUMMARY CASH FLOW STATEMENT
Unaudited Consolidated Cash Flow Statement for the Half Year to 30th April 2004
Half Year Half Year Full Year
2004 2003 2003
£m £m £m
Net cash (outflow)/inflow from operating
activities (68.5) (36.7) 88.7
Returns on investments and servicing of
finance
Interest received 0.3 0.2 0.3
Interest paid (5.6) (6.6) (13.2)
Preference dividends paid (1.0) (1.0) (2.1)
-------- -------- --------
(6.3) (7.4) (15.0)
-------- -------- --------
Taxation paid (12.9) (5.0) (15.8)
Proceeds from disposal of Pearce Group - 7.7 7.7
Other capital expenditure and financial
investment (1.8) (4.5) (5.9)
Equity dividends paid (8.4) (7.1) (10.9)
-------- -------- --------
Net cash flow before financing (97.9) (53.0) 48.8
Financing
Share issues 0.6 0.5 1.1
Increase/(decrease) in bank and other
loans 64.9 50.0 (15.0)
-------- -------- --------
65.5 50.5 (13.9)
-------- -------- --------
(Decrease)/increase in cash (32.4) (2.5) 34.9
======== ======== ========
NOTES
1 Basis of presentation
The summarised half year financial information is unaudited and does not
constitute full accounts. The accounting policies are as stated in the last
Annual Report.
The figures for 31st October 2003 are not the Company's statutory accounts but
the information has been extracted from statutory accounts which have been
reported on by the auditors and filed with the Registrar of Companies. The
report of the auditors was unqualified and did not contain a statement under
Section 237(2) or (4) of the Companies Act 1985.
2 Segmental analysis
Half Year Half Year Full Year
2004 2003 2003
£m £m £m
Turnover
Development 283.0 249.1 550.5
Construction - discontinued - 23.9 23.9
-------- ------- -------
283.0 273.0 574.4
======== ======= =======
Operating profit
Development 41.7 38.5 87.3
Construction - discontinued - - -
-------- ------- -------
41.7 38.5 87.3
======== ======= =======
Pre-tax profit
Development 36.0 32.0 74.6
Construction - discontinued - - -
-------- ------- -------
36.0 32.0 74.6
======== ======= =======
3 Taxation
Half Year Half Year Full Year
2004 2003 2003
£m £m £m
Corporation tax charge at 30% (10.5) (9.6) (23.2)
Joint venture undertakings (0.3) - 0.2
-------- ------- -------
(10.8) (9.6) (23.0)
======== ======= =======
4 Earnings per share
Basic earnings per share are calculated on the profit attributable to ordinary
shareholders of £24.2m (2003: £21.4m) on a weighted average of 110.8m (2003:
109.1m) ordinary shares in issue during the six months.
Diluted earnings per share are calculated on the profit attributable to ordinary
shareholders of £24.2m (2003: £21.4m) on a weighted average of 111.8m (2003:
110.1m) ordinary shares on the basis that 2.5m (2003: 3.7m) share options had
been exercised.
5 Reconciliation of shareholders' funds
Half Year Half Year Full Year
2004 2003 2003
£m £m £m
Retained profit 19.7 17.6 37.3
Net proceeds from share issues 0.6 0.5 1.1
-------- ------- -------
Net increase in shareholders' funds 20.3 18.1 38.4
Opening shareholders' funds 285.5 247.1 247.1
-------- ------- -------
Closing shareholders' funds 305.8 265.2 285.5
======== ======= =======
6 Net assets per share
Net assets per ordinary share is calculated on net assets of £267.8m (2003:
£227.2m), after deducting the preference capital of £38.0m (2003: £38.0m) from
the capital and reserves, on 111.2m (2003: 109.4m) ordinary shares in issue at
30th April 2004.
7 Interim Statement
The Interim Statement for the half year will be sent to all shareholders and
copies will also be available from Crest House, 39 Thames Street, Weybridge,
Surrey KT13 8JL, the Company's Registered Office.
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