Final Results - Year Ended 31 October 1999
Crest Nicholson PLC
27 January 2000
Preliminary Results Announcement
Crest Nicholson, the residential development company with interests in
property and construction, today announces results for the year ended 31
October 1999.
Financial highlights: per cent increase
- Operating profit £49.0m (1998: £35.9m) 36 per cent
- Profit before taxation £40.0m (1998: £28.1m) 42 per cent
- Earnings per share 23.88p (1998: 16.60p) 44 per cent
- Proposed final dividend of 4.00p, making a total for
the year of 6.00p (1998: 4.75p) 26 per cent
- Compound earnings per share growth 1996-1999 68 per cent
- Gearing 42 per cent (1998: 49 per cent)
Operational highlights:
- Short term land bank margins increase to 24 per cent
- Record number of homes sold 2,422
- Nicholson Estates a leading brand in city centre development
- Planning obtained on four major schemes
Commenting today John Matthews, Chairman, said:
'The Group achieved another year of major profits growth. A significant
achievement of the year has been the change in the balance of the land bank
which has changed from a large number of small developments to a fewer number
of much larger schemes. The transformation in the value and profitability of
the Group's land bank will continue as more large schemes come into production
for 2000 and beyond.
The Group's integrated approach is opening up new areas of business and
sources of land as well as providing better control on timing, cost and
quality. We expect this trend towards Group integration to continue, aided by
a major investment in new technology.
Inevitably there remain areas of the business where further improvement can be
made and, as we do so, we shall further increase our margins. The Group has
the land, products and the other necessary resources and, given a stable
market, 2000 should be another good year.'
Enquiries to:
John Callcutt, Chief Executive Rebecca Blackwood/
Clive Littler, Finance Director Caroline Roberts-West
Crest Nicholson PLC Brunswick Group Limited
Tel: 0171 404 5959 (on day of announcement) Tel: 0171 404 5959
Tel: 01932 847272 (thereafter)
Crest Nicholson PLC
Results for the year ended 31st October 1999
OVERVIEW
1999 was a year of considerable achievement for Crest. The Group produced
record profits, obtained planning and commenced construction on a number of
environmentally sensitive well designed and well built developments - 'concept
schemes'. The most notable feature of the year, however, was the increase in
both the value and profitability of its short-term residential land bank.
The Group continued with its policy of investing in urban and mixed-use sites
generating increased profits from its Property and Construction Divisions.
Success on the planning front will ensure that the high margins in our land
bank have an impact on Group returns in 2000.
RESULTS
Pre-tax profits reached £40m, over 42 per cent higher than last year.
Turnover increased from £465m to £512m and operating profit rose from £35.9m
to £49.0m. Earnings per share increased by 44 per cent to 23.88p.
DIVIDEND
The Board is recommending a final dividend of 4.00p (1998: 3.25p) which,
together with the interim dividend of 2.00p (1998: 1.50p), gives a total for
the year of 6.00p (1998: 4.75p).
This is a year on year increase of 26 per cent. The Board's policy is to
continue to raise dividends as profitability increases.
The dividend will be paid on 6th April 2000 to shareholders on the register at
10th March 2000.
REVIEW OF OPERATIONS
1999 1998
Profit Profit
Turnover Operating before Operating before
profit taxation Turnover profit taxation
£m £m £m £m £m £m
Residential 309.5 36.6 28.3 269.9 32.3 25.7
Property 75.0 10.7 9.7 36.7 3.2 1.7
Construct- 128.0 1.7 2.0 158.8 0.4 0.7
ion
---- ---- ---- ---- ---- ----
512.5 49.0 40.0 465.4 35.9 28.1
---- ---- ---- ---- ---- ----
RESIDENTIAL
The Residential Division made a profit before taxation of £28.3m compared to
£25.7m in 1998, an increase of 10 per cent. However, 1999 was essentially a
year in which we continued to change the composition of our land bank,
obtained planning and started construction work on a number of large concept
schemes.
Sales of Houses
The number of houses sold was 2,422 compared to 2,210 sold in 1998. The
increase was mainly due to greater volumes of social housing. Open market
sales at 2,021 were a modest 87 units up on 1998.
In 2000 the emphasis will be firmly on margin improvement rather than volume.
Housing Association turnover was £22.3m compared to £21.5m in 1998 and was
made up of nineteen schemes. The provision of social housing is generally a
pre-requisite for many developments. Our skill base and knowledge of this
sector of the market is an important facilitator in the development process.
Sales Price Improvements
The average house price was £124,500 compared to £117,800 last year. However,
open market average sales prices were £138,200, an increase of £15,000
compared to 1998. Average sales prices are expected to increase to around
£170,000 in 2000 due to a higher concentration of volume in London and the
South East and a shift in developments outside of the South East towards city
centre and urban production.
Land Bank
At the time of the interim results Crest highlighted the progress that it had
made in changing the shape of its land bank from small sites to large concept
schemes. During the year the Group spent £122m to acquire 48 sites for 2,659
plots compared to 3,155 plots acquired in the previous year. The average
selling price of houses to be built on these plots was higher than in 1998.
Land for immediate development, i.e. the short-term land bank, comprised 6,296
plots at the year-end compared to 6,329 plots at the same time last year. The
projected development value of this land increased from £812m to £1,033m
during the year with the appraised gross margin up from 20.5 per cent to 24.0
per cent. The strategic land bank consists of 11,680 plots (1998 10,924) of
which 5,240 are included in areas designated for development and are likely to
augment the short term land bank in the near future.
Nicholson Estates successfully established itself as a leading brand in the
quality urban residential market. It acquired a number of sites in city
centre locations in London, Birmingham and Manchester. Several new projects
involve the conversion of commercial buildings to residential rather than new
build. This speeds up the development process and improves returns.
Since the year-end a number of large sites have been procured or transferred
from strategic to the short term land bank. Of particular note is a 50 acre
'greenfield' site for 500 houses at Haywards Heath. This site has been
granted planning permission and it is intended to create a community in the
Sussex style using designs and materials indigenous to the locality. This
site will be the fourth major scheme that will come into production during the
current year.
Future Strategy
The outlook for housing is good and the Group has made substantial progress
during the year, however our industry is undergoing a period of significant
change. Product quality and customer satisfaction have been taken up at
Government level in the form of the proposed 'league tables' sponsored by the
Department of the Environment, Transport and Regions. If successful this
initiative will shift the priorities of housebuilders towards the cost
effective delivery of quality and service to new home purchasers.
Additional and potentially more far reaching changes are also occurring as
environmental considerations and principles of sustainability become more
central to the planning process. The Government appears to recognise that the
creation of communities and the use of designs and materials that respect our
heritage lie at the heart of sustainability.
Crest Homes has been in the forefront of many of these changes so we believe
we have a head start. These larger and more complex schemes take longer to
bring into production and are more expensive to build than the traditional
estates. However, the benefits of more efficient land use and better selling
values should more than offset these costs.
The higher margins in the short term land bank are due to premium prices and
improved densities which indicate that Crest's confidence in the cost
effectiveness of its strategy is well founded.
PROPERTY
The Property Division achieved a profit before taxation of £9.7m, an increase
of £8.0m over last year. Turnover more than doubled to £75.0m (1998: £36.8m).
Operating margins on the increased turnover rose to 14.3 per cent (1998: 8.7
per cent).
This excellent performance demonstrates the effectiveness of the Group's
integrated property strategy. The occupier risk was removed on all
substantial schemes by either sale or pre-letting before the development was
undertaken.
During the second half of the year investment demand at the Bartley Wood
Business Park at Hook continued to be strong with further pre-funded sales of
110,000 sq ft to the Norwich Union.
Capital employed in the business at the year-end was £31.7m and a positive
cash flow of £12m was generated for reinvestment in our residential and mixed-
use schemes.
The Division's growing reputation in the retail sector continues to boost
turnover with a number of lettings being achieved and a major joint venture
project with a national retailer under construction.
Working in close co-operation with the Residential and Construction Divisions,
the Property Division is active in the development of a number of major urban
regeneration projects, the most prominent of which are at Bristol Harbourside
and Gloucester Docks.
Overall the Division controls in excess of 230 acres of land for commercial
use and continues to work closely with other divisions within the Group to
optimise the value of its extensive holdings.
A feature of large scale residential development schemes is the significant
number of major retail and leisure opportunities that are generated. During
the year a food retail site adjacent to the new residential development scheme
at Greenhithe was sold to ASDA. We expect a number of additional retail and
leisure opportunities will be created as large schemes obtain planning. The
early sale of these commercial uses provides valuable working capital as well
as profits.
The Division is undertaking a number of other business park developments at
the edge of towns principally in Bristol, Gloucester and other well located
sites on or near motorways.
Business was steady for the Group's marinas, which apart from generating a
good cash flow, increase the value of new homes on water related schemes. For
example, we expect that house values on our major regeneration scheme around
Portbury Dock near Bristol will be significantly enhanced by a new marina
planned for the dock basin in the centre of the development.
Whilst 1999 was an exceptional year, the Property Division should be able to
deliver a stream of sustainable profits for the longer term not only through
its own trading but also through participation in urban mixed-use and other
large scale development projects.
CONSTRUCTION
The Pearce Group increased turnover to £178.9m during the year and achieved a
significant £1.3m increase in profit before taxation to £2.0m (1998 £0.7m).
Turnover sourced from the Group's operations amounted to £50.9m compared to
£3.8m in the previous year. Crest Construction Management was formed last
year to provide expertise in the project management and control of major
development schemes. The move away from standard house types and traditional
estate development is making new and greater demands on housebuilders'
management.
Participation by our Construction Division in Group projects is already
delivering major benefits in both speed of build and cost control. The
process of integrating building operations through Crest Construction
Management and the introduction of new information technology will enable
significant savings and efficiencies to be achieved throughout the Group.
The specialist Retail and Leisure businesses successfully expanded their
customer base, although turnover was lower than in the previous year due to
work programmes being scheduled later than planned. The relentless change in
the retail sector and the growth in the health and fitness sector augur well
for the growth of these businesses.
The recession in the semiconductor market adversely affected our joint venture
company in 1999. There are now strong indications that a recovery in this
sector is underway. In the meantime alternative markets in the food and
biotechnology industries are being developed and the prospects for orders are
promising.
The Construction Division continues to trade using minimal capital employed
and in the year to 31st October 1999 generated a positive cash flow of £2.2m.
Pearce has established a strong reputation in its specialised markets being a
preferred contractor for a number of major companies in the retail and leisure
fields. However, the facilitation and management of major development
projects within the Group is of growing importance. We expect profits from
this division to grow steadily.
FINANCE
Shareholders' funds at £178.5m increased by £19.6m.
The net tangible assets attributable to the ordinary shares are equivalent to
131p per share compared to 114p per share a year ago, an increase of 15 per
cent.
Net borrowings at 31st October 1999 were £75.2m (1998 £77.3m) and represented
gearing of 42 per cent (1998 49 per cent).
Interest costs at £9.0m increased from £7.8m in 1998 due to higher average
borrowings and the increased cost of longer term committed borrowings.
Interest cover is 5.4x compared to 4.6x in 1998.
The positive cash flow of £2.1m and reduction in year-end gearing were
achieved after a significant expansion of our residential land bank.
Cash generated from operations of £28.5m was due to positive cash flows from
all trading divisions, including £14.5m from our Property and Construction
Divisions.
The Group bank facilities were increased by £30.0m. Total facilities
available to the Group are £197.6m of which £167.5m is either for a term in
excess of 4 years or project specific finance. Facilities are now closely
aligned with the longer development timescale of the Group's major land
holdings.
PROSPECTS
The Group achieved another year of major profits growth. Our mission is to
meet customers' expectations through the provision of environmentally
sensitive, well designed and well built developments.
The transformation in the value and profitability of the Group's land bank
will continue as more large schemes come into production for 2000 and beyond.
The Group's integrated approach is opening up new areas of business and
sources of land as well as providing better control on timing, cost and
quality. We expect this trend towards Group integration to continue, aided by
a major investment in new technology.
Inevitably there remain areas of the business where further improvement can be
made and, as we do so, we shall further increase our margins. The Group has
the land, products and the other necessary resources and, given a stable
market, 2000 should be another good year.
STATEMENT OF RESULTS
1999 1998
£m £m
Turnover - including joint 512.5 465.4
ventures
Less: attributable to joint (6.8) (8.6)
ventures
_______ _______
505.7 456.8
_______ ________
Operating profit 49.4 36.6
Operating loss of joint ventures (0.4) (0.7)
______ ______
Operating profit - including 49.0 35.9
joint ventures
Net interest payable
Group (9.0) (7.9)
Joint ventures - 0.1
______ ______
(9.0) (7.8)
______ ______
Profit before taxation 40.0 28.1
Taxation (12.7) (8.9)
______ ______
Profit after taxation 27.3 19.2
Preference dividends (2.1) (2.1)
______ ______
Profit attributable to ordinary 25.2 17.1
shareholders
Ordinary dividends (6.4) (5.0)
______ ______
Retained profit 18.8 12.1
===== =====
Earnings per 10p ordinary share
(Note 1)
Basic 23.88p 16.60p
Fully diluted 22.59p 16.37p
Dividends per 10p ordinary share 6.00p 4.75p
CONSOLIDATED BALANCE SHEET
31st October 31st October
1999 1998
£m £m £m £m
Fixed assets
Tangible assets 3.8 3.8
Investments in joint
ventures 0.3 1.4
Other investments - 0.2
______ _______
4.1 5.4
Current assets
Stocks 338.3 307.5
Debtors 134.7 118.7
Cash at bank and in
hand 41.7 35.1
______ ______
514.7 461.3
Creditors: amounts
falling due 193.0 151.8
within one year
______ _____
Net current assets 321.7 309.5
_______ ______
Total assets less
current liabilities 325.8 314.9
Creditors: amounts
falling due
after more than one
year 146.2 154.7
Provisions for
liabilities and charges 1.1 1.3
______ ______
147.3 156.0
_______ _______
178.5 158.9
====== ======
Shareholders' funds
(Note 2) 178.5 158.9
======= ======
Net borrowings 75.2 77.3
Gearing 42 per 49 per
cent cent
Net assets per ordinary
share (Note 3) 131p 114p
CONSOLIDATED CASH FLOW STATEMENT
1999 1998
£m £m £m £m
Net cash inflow/(outflow) from
operating activities 28.5 (22.1)
Dividends from joint ventures 0.4 -
Returns on investments and
servicing
of finance
Interest received 0.7 0.7
Interest paid (8.8) (8.7)
Preference dividends paid (2.1) (2.1)
_______ _______
Net cash outflow from returns on
investments and servicing of
finance
(10.2) (10.1)
Taxation
Corporation tax paid (11.4) (5.8)
Capital expenditure and financial
investment
Tangible fixed assets acquired (1.0) (1.5)
Fixed asset investments acquired
(0.5) (0.2)
Repayment of fixed asset
investment loan 0.7 2.8
_____ _____
(0.8) 1.1
Equity dividends paid (5.5) (4.1)
Net cash inflow/(outflow) before
financing 1.0 (41.0)
===== ======
Financing
Proceeds from share issues (1.1) (6.7)
Increase in bank loan and loan
notes (5.5) (41.0)
_____ ______
Net cash flow from financing (6.6) (47.7)
Increase in cash 7.6 6.7
______ ______
1.0 (41.0)
______ ______
NOTES
1 Earnings per share
Earnings per share are calculated on the profit attributable to ordinary
shareholders of £25.2m (1998: £17.1m), on a weighted average of 105,519,334
(1998: 103,024,306) ordinary shares in issue during the year.
Fully diluted earnings per share are calculated on the profit for the
financial year of £27.3m (1998: £19.2m) on a weighted average of 120,866,125
(1998: 117,266,641) ordinary shares on the basis that the preference shares
had been converted and the share options exercised.
2 Reconciliation of shareholders' funds
1999 1998
£m £m
Retained profit 18.8 12.1
Net proceeds from share issues 0.8 6.7
______ ______
Net increase in shareholders' funds 19.6 18.8
Opening shareholders' funds 158.9 140.1
______ ______
Closing shareholders' funds 178.5 158.9
====== ======
3 Net assets per share
Net assets per ordinary share is calculated on net assets of £139.8m (1998:
£120.2m), after deducting the preference capital of £38.7m (1998: £38.7m) from
the capital and reserves, on 106,327,352 (1998: 105,415,267) ordinary shares
in issue at 31st October 1999.
4 Statutory accounts
The financial information set out above does not constitute the Company's
statutory accounts for the years ended 31st October 1999 or 1998 but is
derived from those accounts. Statutory accounts for 1998 have been delivered
to the Registrar of Companies, whereas those for 1999 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.
5 Annual General Meeting
The Annual General Meeting will be held at the Runnymede Hotel, Windsor Road,
Egham, Surrey on Thursday, 23rd March 2000 at 12.00 noon.
FIVE YEAR RECORD
1995 1996 1997 1998 1999
£m £m £m £m £m
Turnover (including
joint ventures)
Residential 186.8 192.2 201.9 269.9 309.5
Property 35.3 23.0 22.9 36.7 75.0
Construction 91.9 117.1 128.2 158.8 128.0
_______ _____ _____ _____ ______
314.0 332.3 353.0 465.4 512.5
_______ _____ _____ _____ ______
Operating profit
(including joint
ventures)
Residential 9.3 13.7 23.1 32.3 36.6
Property 2.3 1.5 1.5 3.2 10.7
Construction (0.6) - 0.9 0.4 1.7
_______ _____ _____ _____ ______
11.0 15.2 25.5 35.9 49.0
_______ _____ _____ _____ ______
Pre-tax profit
Residential 6.4 10.2 19.3 25.7 28.3
Property (0.3) (0.8) (0.3) 1.7 9.7
Construction 0.1 0.6 1.5 0.7 2.0
_______ _____ _____ _____ ______
6.2 10.0 20.5 28.1 40.0
_______ _____ _____ _____ ______
Return on sales 2.0 per 3.0 per 5.8 per 6.0 per 7.8 per
cent cent cent cent cent
Residential
Houses sold 1,717 1,902 1,965 2,210 2,422
Average selling price £90,300 £94,700 £98,400 £117,800 £124,500
Operating profit per 5.0 per 7.1 per 11.4 per 12.0 per 11.8 per
cent cent cent cent cent cent
Land bank - Short term 3,006 3,869 5,795 6,329 6,296
(units)
Average selling price £89,900 £92,300 £105,500 £128,200 £164,200
Land bank - Strategic
(units) 4,400 5,411 8,010 10,924 11,680
Balance sheet
Shareholders' funds 129.5 131.8 140.1 158.9 178.5
Net borrowings 55.7 46.9 43.1 77.3 75.2
_______ ______ ______ ______ ______
Capital employed 185.2 178.7 183.2 236.2 253.7
_______ ______ ______ ______ ______
Gearing 43 per 36 per 31 per 49 per 42 per
cent cent cent cent cent
Return on 4.8 per 7.8 per 15.6 per 20.1 per 25.2 per
shareholders' funds cent cent cent cent cent
(opening)
Return on capital 6.7 per 8.2 per 14.3 per 19.6 per 20.7 per
employed (opening) cent cent cent cent cent
Ordinary shares
Earnings per share 3.02p 4.74p 11.75p 16.60p 23.88p
Dividends per share 2.00p 2.50p 3.75p 4.75p 6.00p
Dividend cover 1.5x 1.9x 3.1x 3.4x 3.9x
Net tangible assets
per share 92p 94p 101p 114p 131p
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