Interim Results

27th June 2002 Interim Results Announcement Crest Nicholson PLC, the residential development company, today announces results for the six months ended 30th April 2002. Financial Highlights Profit before tax £32.0m (2001: £25.1m) up 27% Earnings per share 19.7p (2001: 15.5p) up 27% Interim dividend 3.0p (2001: 2.5p) up 20% Operational Highlights Operating profits from development activities increased by 35% to £39.8m (2001: £29.4m) Operating margins from development activities increased to 17.5% (2001: 15.1%) Development value of land bank increased to £2bn - 5.7 years' supply 827 houses sold (2001: 814) at an average selling price of £227,200 (2001: £ 194,700) Sales value of house reservations up 36% Commenting today John Matthews, Chairman, said: "Our focus in recent years on sustainable development has been crucial to the success of our business. We continue to get developments through the planning process, improve on conventional planning densities and produce a product that commands a premium price. The shortage of development land in the South, good levels of affordability and low unemployment are maintaining a buoyant housing market. Whilst it is unlikely that current levels of house price inflation will be sustained, we expect any correction to take the form of a slowdown in the rate of house price inflation. We have taken advantage of current market conditions to underpin the current year's production. With our extensive land holdings and highly attractive product, we are capable of increasing sales volumes. This puts us in an excellent position for the current year and we are optimistic that the Group can maintain progress thereafter." Enquiries to: John Callcutt, Chief Executive Rebecca Blackwood/ Clive Littler, Finance Director Kate Miller/ Crest Nicholson PLC Jonathan Ayrton Tel: 0207 404 5959 (on day of Brunswick Group Limited announcement) Tel: 01932 847272 (thereafter) Tel: 0207 404 5959 An interview with John Callcutt, Chief Executive, is available at http:// www.cantos.com in video, audio and text. The analyst presentation is available on the Company's web site. A copy of the Interim statement, consolidated profit & loss account, balance sheet and cash flow statement are attached. CHAIRMAN'S STATEMENT RESULTS AND DIVIDEND Profit before tax was £32.0m (2001: £25.1m) for the six months to 30th April 2002, an increase of 27%. This strong performance is due to an increase in Group turnover for the six months to £314.0m (2001: £265.1m) and an improvement in operating margins from development activities. Basic earnings per share rose to 19.7p (2001: 15.5p), an increase of 27%. The Directors are pleased to declare an interim dividend of 3.0p (2001: 2.5p) to be paid on 1st October 2002 to shareholders on the register at the close of business on 6th September 2002. REVIEW OF OPERATIONS Development Activities Results Operating profits from the Group's development activities (which now combine the profits from the sale of houses and residential land with that of commercial development) increased to £39.8m (2001: £29.4m), an increase of 35%. Turnover from house sales increased to £187.9m (2001: £158.5m) on unit volumes that were broadly unchanged at 827 units (2001: 814 units). Average sales prices increased by 17% to £227,200 (2001: £194,700). Land supply continues to be constrained in the South East and Crest has been particularly successful in acquiring and bringing forward major concept schemes and other large sites in the South East. Consequently a greater proportion of turnover was achieved in high value areas within the London Suburbs and commuter towns in the South East. A total of 100 social housing units were sold (2001: 73). This is becoming an increasingly important aspect of modern development, particularly on large sites and we expect volumes to increase significantly next year. Agreements were entered into for the construction and sale of social housing units on several large sites realising cash early and improving project returns. Sales of residential land amounted to £22.6m (2001: £8.1m) at attractive margins and arose principally out of a decision to balance our portfolio by reducing our extensive holdings in the South West. The proceeds were either reinvested in, or earmarked for, attractive development opportunities in the South East Regions. We do not anticipate land sales will significantly contribute to profit in the second half of the year. Commercial property sales were £16.7m (2001: £27.7m) and arose from the final letting on a pre-funded retail project in the centre of Oxford and two other disposals. Operating Margins Operating margins from the Group's development activities were 17.5%, compared to 15.1% for the same period last year and 14.9% for the year ended 31st October 2001. The high quality of our development portfolio was a positive influence on margins. This enabled us to generate premium prices on houses and accelerate the realisation of development value from land and plot sales. In recent years we have addressed the challenge of developing much larger, complex and non-standard developments. This has required the Group to place greater emphasis on project management and the recruitment of high calibre staff. The benefits of this focus are already apparent with costs being well controlled and rates of production increasing without compromising our high standard of quality and customer service. The Market Crest's strategy has been to create a portfolio of premium sites and it now has the majority of its outlets in areas of strong demand in Southern England. Whilst the highest proportion of sites are in areas of relatively high value, most developments are targeted at middle market owner-occupiers. At the half year end reservations were 36% ahead of the previous year by value and this trend has since continued. Crest's extensive land holdings in the South and South East of England in particular, ensures that we have the land and production capability to continue to increase volumes and turnover. Land Our focus in recent years on sustainable development has been crucial to the success of our business and has put us in an excellent position. Our success in mastering such skills has been demonstrated by our ability to get our developments through the planning process quicker, improve on conventional planning densities and produce a product that can command a premium price. During the half year the Group secured 1,041 plots on 14 sites. These include the former Napsbury Hospital site near St. Albans set in 120 acres of mature woodland, with several buildings suitable for residential refurbishment and a leisure centre. Our aim is to create a community along the lines of our successful development at Repton Park, Chigwell. Napsbury was purchased in January this year with detailed planning for 385 new and refurbished units and we hope to achieve approval for additional units on the site. Progress has been excellent with a show complex opening next month and the likelihood is that the first units should be occupied by the end of this calendar year. The short term land bank comprises 10,246 plots (2001: 7,037) with a projected development value of £1.95bn (2001: £1.4bn) and an attributable gross margin of £486m (2001: £357m). Over the last twelve months projected development value has increased by nearly 40%. This represents a land lead on the basis of the last twelve months' turnover of 5.7 years. Crest's strategic land holdings amount to 11,200 plots. Two sites for a total of 350 units at Moreton in the Marsh and Hinckley, Leicestershire, were transferred into the short term land bank which will contribute to the expansion of our smallest Region in the Midlands. Crest's total land holdings, therefore, are in excess of 21,000 plots of which the overwhelming proportion is in Southern England. Construction The Pearce Group incurred an operating loss of £1.4m compared with an operating profit of £0.5m in the same period last year. However, this was after an exceptional loss of £1.0m being the Group's share of the cost of closing M+W Pearce, its joint venture producing clean rooms for the semiconductor industry. The cost of the closure and the write-off of our investment has been fully provided for in these accounts. Turnover at £86.8m (2001: £70.8m) increased by 23%. The specialist Retail business traded well and benefited by the major grocery chains commitment to store renovation and renewals. The Leisure business, especially hotels, suffered following the terrorist attacks in September as decisions to commit capital expenditure were delayed. Business is now picking up and prospects for the second half are encouraging. The general contracting business, Pearce Construction, performed well. In addition several of the Group's newly acquired commercial opportunities should be a good source of contracting work and future profitability. Contract completions are invariably significantly higher in the second half of the year so that we expect an improvement in trading results. FINANCE Shareholders' funds at 30th April 2002 were £250m compared with £219m at April last year and £231m at October. Net assets per ordinary share have continued to grow and, at 196p, show an increase of 17% on last year. Net borrowings at £154.3m compare with £119.9m a year ago and £102.5m at the 2001 year end. Borrowings include £120m of US private placement finance at a fixed rate, with a maturity in excess of seven years. Gearing is 62% (2001: 55%). Net interest payable for the half year was £6.4m (2001: £4.8m) and is covered six times by operating profits. Segmental Analysis The type of developments undertaken by the Group has changed in recent years. Its residential sites, in particular major concept schemes, routinely contain commercial uses and its property portfolio is increasingly mixed use. The most significant project is the regeneration of Bristol Harbourside, which contains 469 residential apartments. In these circumstances, the Board believes it is appropriate to combine the Property Division and the Residential Division as management's prime objective is to maximise the performance of its development operations as a whole. Property has also in recent years become a smaller proportion of the Group's business as Residential continues to grow. As a result the Board has decided, with effect from this half year, to change its segmental analysis to more accurately reflect the operations of the Group. Financial Reporting Standard 18 Financial Reporting Standard 18 requires companies to adopt the accounting policies most appropriate to their circumstances and to review them regularly to ensure they remain appropriate. Crest has historically recognised income from the sale of houses when contracts are exchanged and the building is plastered. At exchange of contracts, the customer has secured the property, together with the benefit or risk of any subsequent movement in its market value. However, most of the housebuilding industry recognises profit on legal completion. Crest has the highest overall rating of any listed housebuilding company in the DTI sponsored Customer Satisfaction Survey and its principal objective is to preserve its reputation for quality and service with its customers. The use of legal completion for income recognition purposes can lead to compromised quality and service. Crest therefore intends to continue to separate the handover of the property to the customer from the point at which the dwelling can be regarded as practically complete and income is recognised. The Board is, however, continuing to review the point at which a building is regarded as being substantially complete and it is likely that this review will result in the point of profit recognition being brought significantly closer to legal completion. The Board is confident that any change it may decide to implement will have no material adverse impact on profits for the current year. PROSPECTS The current shortage of suitable building land, good levels of affordability and low unemployment are maintaining a buoyant housing market. Whilst the current levels of house price inflation cannot be maintained, we believe that any correction will take the form of a slowdown in the rate of house price inflation. Crest has taken advantage of current market conditions to underpin substantially its volumes for the current year. With its extensive and well bought land holding and its highly attractive product offering in an area of supply shortage, Crest has the capability to increase sales volumes. The Board is therefore confident for the current year and optimistic that it can continue to maintain progress thereafter. John Matthews 27th June 2002 STATEMENT OF RESULTS Unaudited Group results for the Half Year to 30th April 2002 Half Year Half Year Full Year Note 2002 2001 2001 £m £m £m Turnover - including joint 2 314.0 265.1 608.5 ventures Less: attributable to joint (0.3) (7.7) (10.6) ventures _________ __________ ________ Turnover - Group companies 313.7 257.4 597.9 ======= ======== ======== Operating profit - Group 39.4 30.0 63.7 companies Operating loss of joint (1.0) (0.1) (0.3) ventures _________ _________ _________ Operating profit - including 2 38.4 29.9 63.4 joint ventures Net interest payable (6.4) (4.8) (10.3) _________ __________ _________ Profit before taxation 2 32.0 25.1 53.1 Estimated taxation 3 (9.6) (7.5) (16.2) _________ _________ _________ Profit after taxation 22.4 17.6 36.9 Preference dividends (1.1) (1.1) (2.1) _________ _________ _________ Profit attributable to ordinary 21.3 16.5 34.8 shareholders Ordinary dividends (3.2) (2.7) (8.7) Retained profit 18.1 13.8 26.1 ======= ======= ======= Earnings per 10p ordinary share 4 Basic 19.7p 15.5p 32.6p Diluted 19.4p 14.4p 30.2p Dividends per ordinary share 3.0p 2.5p 8.0p There are no recognised gains or losses other than those shown above. SUMMARY BALANCE SHEET Unaudited Consolidated Balance Sheet as at 30th April 2002 Note April April October 2002 2001 2001 £m £m £m Fixed assets Tangible assets 5.0 4.3 5.1 Investments 5.6 6.1 5.5 ________ _________ _________ 10.6 10.4 10.6 ________ _________ _________ Current assets/liabilities Stocks 490.0 396.1 475.6 Debtors 243.9 182.7 214.2 Creditors (254.0) (185.6) (286.1) Net cash in hand/(borrowings) 21.7 (1.2) 43.4 ________ _________ _________ Net current assets 501.6 392.0 447.1 ________ _________ _________ Total assets less current 512.2 402.4 457.7 liabilities Creditors falling due after more than one year Bank and other loans (176.0) (118.7) (145.9) Other creditors and provisions (85.9) (65.0) (80.8) ________ _________ _________ (261.9) (183.7) (226.7) ________ _________ _________ Net Assets represented by Shareholders' funds 5 250.3 218.7 231.0 ====== ======= ======== Net borrowings 154.3 119.9 102.5 Gearing 62% 55% 44% Net assets per ordinary share 6 196p 168p 179p SUMMARY CASH FLOW STATEMENT Unaudited Consolidated Cash Flow Statement for the Half Year to 30th April 2002 Half Half Full Year Year Year 2002 2001 2001 £m £m £m Net cash (outflow)/inflow from (30.0) (23.1) 12.8 operating activities Returns on investments and servicing of finance Interest received 0.2 0.1 0.3 Interest paid (7.1) (5.6) (9.0) Preference dividends paid (1.1) (1.1) (2.1) ________ _______ ________ (8.0) (6.6) (10.8) ________ _______ ________ Taxation paid (7.6) (5.3) (16.0) Capital expenditure and financial (1.4) (1.5) (2.5) investment Equity dividends paid (6.0) (5.1) (7.8) ________ _______ ________ Net cash flow before financing (53.0) (41.6) (24.3) Financing Share issues 1.2 1.5 1.5 Increase in bank and other loans 30.1 23.5 50.7 ________ _______ ________ 31.3 25.0 52.2 ________ _______ ________ (Decrease)/increase in cash (21.7) (16.6) 27.9 ======= ====== ======= 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 2001 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 Full Year Year 2002 2001 2001 £m £m £m Turnover Development 227.2 194.3 416.0 Construction 86.8 70.8 192.5 ________ _______ _______ 314.0 265.1 608.5 ======= ====== ====== Operating profit Development 39.8 29.4 62.0 Construction (1.4) 0.5 1.4 ________ _______ _______ 38.4 29.9 63.4 ======= ====== ====== Pre-tax profit Development 33.3 24.7 51.7 Construction (1.3) 0.4 1.4 ________ _______ _______ 32.0 25.1 53.1 ======= ====== ====== 3 Taxation Half Year Half Full Year Year 2002 2001 2001 £m £m £m Corporation tax charge at 30% (9.6) (7.5) (16.3) Joint venture undertakings - - 0.1 ________ _______ _______ (9.6) (7.5) (16.2) ======= ====== ====== 4 Earnings per share Basic earnings per share are calculated on the profit attributable to ordinary shareholders of £21.3m (2001: £16.5m) on a weighted average of 107.9m (2001: 106.5m) ordinary shares in issue during the six months. Diluted earnings per share are calculated on the profit attributable to ordinary shareholders of £21.3m on a weighted average of 109.6m ordinary shares on the basis that the preference shares whose holders opted to convert at 30th April 2002, the final conversion date, had done so and that the share options had been exercised. The comparative figures for 2001 assumed full conversion of the preference shares. 5 Reconciliation of shareholders' funds Half Year Half Full Year Year 2002 2001 2001 £m £m £m Retained profit 18.1 13.8 26.1 Net proceeds from share issues 1.2 1.5 1.5 ________ _______ _______ Net increase in shareholders' funds 19.3 15.3 27.6 Opening shareholders' funds 231.0 203.4 203.4 ________ _______ _______ Closing shareholders' funds 250.3 218.7 231.0 ====== ====== ====== 6 Net assets per share Net assets per ordinary share is calculated on net assets of £211.7m (2001: £ 180.0m) after deducting the preference capital of £38.6m (2001: £38.7m) from the capital and reserves, on 108.2m (2001: 107.1m) ordinary shares in issue at 30th April 2002. 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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