Interim Results - Pre-tax Profit Up 10%
Crest Nicholson PLC
22 June 2000
Interim Results Announcement
Crest Nicholson PLC, the residential development company with interests in
property and construction, today announces results for the six months ended
30th April 2000.
- Residential Division operating profits increased by 43% to £23.2m (1999:
£16.2m)
- Short term land bank now up to 8,554 plots, representing 5 years' supply
- Profit before tax up 10% to £22.1m (1999: £20.1m)
- Earnings per share increased by 10% to 13.61p (1999: 12.35p)
- Interim dividend 2.20p (1999: 2.00p), an increase of 10%
Commenting today John Matthews, Chairman, said:
'Crest Nicholson has enjoyed a strong first half this year, the housing
market has been buoyant, sales have improved and cancellation rates are low.
In particular, the Residential Division has shown a significant improvement
in operating profits which increased by 43%.
Five years ago we anticipated the changes that would take place in our
industry and altered the strategic direction of the Group. We are now
building better quality schemes that are sensitive to their environment.
With our strong land bank behind us we will be able to capitalise on the
increased willingness of planning authorities to grant higher densities and
purchasers' readiness to pay premium prices for schemes designed with flair
and imagination.
The Board is, therefore, confident that 2000 should be another good year and
that the business will continue to grow over the longer term.'
A copy of the interim statement, consolidated profit and loss account,
balance sheet and cash flow statement are attached.
Enquiries to:
John Callcutt/Clive Littler Crest Nicholson PLC 020 7404 5959 (22nd June)
01932 847272 (thereafter)
Rebecca Blackwood/ Brunswick Group Limited 020 7404 5959
Caroline Roberts-West
Web address: www.crestnicholson.com
CHAIRMAN'S STATEMENT
RESULTS AND DIVIDEND
Profit before tax was £22.1m (1999: £20.1m) for the six months to 30th April
2000, an increase of 10%.
The highlight of the half year was the 43% increase in the operating profit
of the Residential Division.
Group turnover for the six months was £229.0m (1999: £240.6m), a reduction
of 5%. This was due to lower first half turnover in the Property Division
and increasing volumes of internal work by the Construction Division.
Residential, however, achieved a significant increase in turnover.
Operating profit, including joint ventures, rose by 10% to £26.9m (1999:
£24.5m). Margins on Group turnover were 11.7% compared to 10.2% in the
equivalent period last year.
Basic earnings per share rose to 13.61p (1999: 12.35p), an increase of 10%.
The Directors are pleased to declare an interim dividend of 2.20p (1999:
2.00p) to be paid on 2nd October 2000 to shareholders on the register at the
close of business on 4th September 2000.
REVIEW OF OPERATIONS
Residential
Results
Operating profits were £23.2m (1999: £16.2m), an increase of 43%. Margins
on turnover showed a significant improvement at 14.7% (1999: 11.6%). This
demonstrates the transformation in the value and profitability of the
Group's land bank which was alluded to in the last Chairman's Statement.
Average sales prices rose strongly to £166,000 (1999: £113,700). Excluding
social housing sales, average prices were £173,100 (1999: £128,200) which
reflects both the gradual shift to better locations across all of our
regions and inflation.
While volumes were lower at 851 units (1999: 1,199 units), residential
turnover increased to £157m (1999: £140m). Included in these volumes were
55 social housing units (1999: 237). Overall residential turnover included
£16m from the sale of land and property from the major residential projects.
Such transactions release value from the large sites and provide the
resource to finance initial infrastructure. This is expected to be an
ongoing source of profits and cash.
The Market
The market has been strong for the first half year. Sales have continued to
improve. Cancellation rates remain low and sales incentives have declined.
There have been some signs since May that the rate of price increase has
slowed. The Group welcomes this development as growth rates for the sector
need to settle to a level which is sustainable.
Land
In the half year 16 sites, comprising 3,400 plots, were added to the Group's
short term land bank. These included two major land assemblies promoted by
our Strategic Land operation.
The first is Bolmore Village, a 50 acre site at Haywards Heath, Sussex.
This will be a new community of over 500 households. It should begin to
contribute to sales next year - 2001.
The second assembly is at the Haydon Sector, Swindon. Planning permission
for an estimated 1,800 plots was obtained this month and the site will be
developed on an exclusive basis over a ten year period. It is expected that
the first units will contribute to profits in 2002.
The short term portfolio comprises 8,554 plots with a projected development
value of around £1.5 billion. At the Group's current annual rate of housing
turnover this represents a land lead of around five years which compares
with a lead of just under 3.5 years at the end of the last financial year.
Included are five major sites each with a sales value in excess of £100m
(Repton Park, Chigwell; Ingress Park, Greenhithe; Port Marine, Portbury;
Bolmore Village, Haywards Heath; and the Haydon Sector, Swindon). The first
three of these sites are major urban renewal projects.
The Group's strategic land holdings, mainly held under option or conditional
contract, comprise 12,184 plots on 912 acres. These sites are in good
locations with realistic prospects of planning consent.
The Group's total land holdings are, therefore, in excess of 20,000 plots.
There is a strong bias towards the more prosperous parts of the South East
and South West of England, areas where shortages of building land are acute.
Property
The Property Division made an operating profit of £3.8m (1999: £7.9m) at a
margin of 15.3% for the six months to 30th April 2000. The 1999 result
included the sale of a site for a supermarket.
The strength of the market for business space was demonstrated by the
success of three of the Division's Business Parks - Bristol Parkway North,
South Bristol Business Park and the Perry Centre at Quedgeley in Gloucester.
The Division continues to do well in the retail sector. The final letting
has been achieved on a large retail park at Colchester and the Division has
recently acquired, on deferred terms, the Westgate Buildings' site in
Newport, South Wales. Lettings have already been agreed on all the space.
A number of urban regeneration schemes are being promoted which, if
successful, will revitalise derelict areas in Bristol Harbourside and at
Gloucester Docks. These contain retail, leisure and residential uses.
Negotiations relating to these sites are ongoing but the Division is
confident these schemes will be commercially successful, as well as meeting
the aspirations of their respective communities.
Construction
The Pearce Group made an operating loss of £0.1m compared with an operating
profit of £0.4m in the first half of 1999 due to lower turnover from retail
and general contracting work. Turnover at £46.9m is after deduction of
£23.1m of work for other Group Companies.
The order book as at 30th April 2000 stands at £131m and is well ahead of
the figure of £117m recorded this time a year ago.
Orders received in the first half were ahead of expectations at £90m. This
compares to £107m achieved in the first six months last year.
Orders included the construction of a teaching block for the University of
the West of England near Bristol, a retail supermarket at Greenhithe (a site
sold by our Strategic Land Division last year) and the conversion of a 17
storey office block into a 230 bed hotel for the Travel Inn Division of
Whitbread.
After a slow period M and W Pearce Limited, our Associated Company, obtained
orders totalling £14m and there are positive indicators of an upturn in its
markets.
FINANCE
Capital and reserves at 30th April 2000 were £191m compared with £170m at
30th April last year. Net assets per ordinary share continue to grow and,
at 142p, show an increase of 15% on last year.
Net borrowings at £120.9m compare with £75.2m at the last year end and
£90.6m a year ago. Gearing is 63%. Net interest payable for the half year
was £4.8m (1999: £4.4m) and is covered 5.6 times by operating profits.
The Group has borrowing facilities of £197.6m of which £167.5m is secured
for a term in excess of four years or is project specific.
PROSPECTS
There is ample resource of equity and mortgage finance for house purchases.
Nominal interest rates are expected to remain low compared to the 1980's and
early 1990's.
There is an increased willingness on the part of planners to grant
permission for higher densities on schemes which deliver a better quality of
design. In addition, well located schemes that show flair and imagination
in their design are able to command premium prices. There has been a
significant increase in operating margins which reflects the progress the
Group has made in capitalising on these changes.
The outlook remains very encouraging for the industry and demand remains
strong as purchasers' affordability ratios in most areas remain undemanding
by historic standards. A shortage of good land, particularly in areas of
greatest demand, should underpin the profitability of those in the industry
with strong land banks. The short term land bank now represents over five
years' production.
The Board is, therefore, confident that 2000 should be another good year and
that the business will continue to grow over the longer term.
STATEMENT OF RESULTS
Unaudited Group results for the Half Year to 30th April 2000
Half Year Half Year Full Year
Note 2000 1999 1999
£m £m £m
Turnover - including joint
ventures 2 229.0 240.6 512.5
Less: attributable to
joint ventures (0.7) (3.5) (6.8)
__________ __________ _________
Turnover - Group companies 228.3 237.1 505.7
__________ __________ _________
Operating profit - Group
companies 27.0 24.3 49.4
Operating (loss)/profit of
joint ventures (0.1) 0.2 (0.4)
__________ __________ _________
Operating profit -
including joint ventures 2 26.9 24.5 49.0
Net interest payable (4.8) (4.4) (9.0)
__________ __________ _________
Profit before taxation 2 22.1 20.1 40.0
Estimated taxation 3 (6.6) (6.0) (12.7)
__________ __________ _________
Profit after taxation 15.5 14.1 27.3
Preference dividends (1.1) (1.1) (2.1)
__________ __________ _________
Profit attributable to
ordinary shareholders 14.4 13.0 25.2
Ordinary dividends (2.3) (2.1) (6.4)
__________ __________ _________
Retained profit 12.1 10.9 18.8
__________ __________ _________
Earnings per 10p ordinary
share 4
Basic 13.61p 12.35p 23.88p
Fully diluted 12.82p 11.74p 22.59p
Dividends per 10p ordinary
share 2.20p 2.00p 6.00p
There are no recognised gains or losses other than those shown above.
SUMMARY BALANCE SHEET
Unaudited Consolidated Balance Sheet as at 30th April 2000
Note April April October
2000 1999 1999
£m £m £m
Fixed assets
Tangible assets 3.6 3.7 3.8
Investments 8.9 1.8 0.3
________ _______ _________
12.5 5.5 4.1
_______ _______ _________
Current assets/liabilities
Stocks 409.0 330.2 338.3
Debtors 143.4 138.3 134.7
Creditors (188.8) (168.8) (192.6)
Net cash in hand 17.6 26.9 41.3
_______ _______ _________
Net current assets 381.2 326.6 321.7
_______ _______ _________
Total assets less current
liabilities 393.7 332.1 325.8
Creditors falling due after more
than one year
Bank and other loans (138.5) (117.5) (116.5)
Other creditors and provisions (64.1) (44.6) (30.8)
_______ _______ _________
191.1 170.0 178.5
_______ _______ _________
Shareholders' funds 5 191.1 170.0 178.5
_______ _______ _________
Net borrowings 120.9 90.6 75.2
Gearing 63% 53% 42%
Net assets per ordinary share 6 142p 124p 131p
SUMMARY CASH FLOW STATEMENT
Unaudited Consolidated Cash Flow Statement for the Half Year to 30th April
2000
Half Year Half Year Full Year
2000 1999 1999
£m £m £m
Net cash (outflow)/inflow from
operating activities (23.5) (4.1) 28.5
Dividends from joint ventures - - 0.4
Returns on investments and servicing
of finance
Interest received 0.4 0.3 0.7
Interest paid (4.5) (4.0) (8.8)
Preference dividends paid (1.1) (1.1) (2.1)
_________ _________ _________
(5.2) (4.8) (10.2)
_________ _________ _________
Taxation paid (4.4) (0.7) (11.4)
Capital expenditure and financial
investment (9.2) (0.5) (0.8)
Equity dividends paid (4.3) (3.4) (5.5)
_________ _________ _________
Net cash flow before financing (46.6) (13.5) 1.0
Financing
Share issues 0.9 0.2 1.1
Increase in bank and other loans 22.0 6.5 5.5
_________ _________ _________
22.9 6.7 6.6
_________ _________ _________
(Decrease)/increase in cash (23.7) (6.8) 7.6
_________ _________ _________
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 1999 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
2000 1999 1999
£m £m £m
Turnover
Residential 157.3 139.8 309.5
Property 24.8 43.3 75.0
Construction 46.9 57.5 128.0
______ ________ ________
229.0 240.6 512.5
______ ________ ________
Operating profit
Residential 23.2 16.2 36.6
Property 3.8 7.9 10.7
Construction (0.1) 0.4 1.7
______ ________ ________
26.9 24.5 49.0
______ ________ ________
Pre-tax profit
Residential 18.6 12.2 28.3
Property 3.6 7.4 9.7
Construction (0.1) 0.5 2.0
______ ________ ________
22.1 20.1 40.0
______ ________ ________
3 Taxation
Half Year Half Year Full Year
2000 1999 1999
£m £m £m
Corporation tax charge at 30% (6.6) (6.0) (12.8)
Deferred tax at 30% - - 0.2
Adjustment in respect of prior
years - - (0.1)
_________ _________ _________
(6.6) (6.0) (12.7)
_________ ________ _________
4 Earnings per share
Earnings per share are calculated on the profit attributable to ordinary
shareholders of £14.4m (1999: £13.0m) on a weighted average of 105.8m (1999:
105.3m) ordinary shares in issue during the six months.
Fully diluted earnings per share are calculated on the profit after taxation
of £15.5m (1999: £14.1m) on a weighted average of 120.9m (1999: 120.1m)
ordinary shares on the basis that the preference shares had been converted and
the share options exercised.
5 Reconciliation of shareholders' funds
Half Year Half Year Full Year
2000 1999 1999
£m £m £m
Retained profit 12.1 10.9 18.8
Net proceeds from share issues 0.5 0.2 0.8
_________ ________ _________
Net increase in shareholders' funds 12.6 11.1 19.6
Opening shareholders' funds 178.5 158.9 158.9
_________ ________ _________
Closing shareholders' funds 191.1 170.0 178.5
_________ ________ _________
6 Net assets per share
Net assets per ordinary share is calculated on net assets of £152.4m (1999:
£131.3m) after deducting the preference capital of £38.7m (1999: £38.7m) from
the capital and reserves, on 105.6m (1999: 105.6m) ordinary shares in issue at
30th April 2000.
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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