Final Results
Crest Nicholson PLC
25 January 2007
25th January 2007
Crest Nicholson PLC
Preliminary Results Announcement
Crest Nicholson PLC, the residential and mixed use development company, today
announces results for the year ended 31st October 2006.
Financial highlights: %
increase
__________
• Pre-tax profit of £80.1m (2005: £78.9m) +2%
• Earnings per share of 51.2p (2005: 48.2p) +6%
• Proposed dividend of 9.7p, making a total for the year +10%
of 14.2p (2005: 12.9p)
• Net assets attributable to ordinary shares equivalent +13%
to 265p (2005: 235p)
Operational highlights:
• 22% increase in housing completions in 2006 to 2,946 (2005: 2,417) and a
further 15% expected for 2007 as the regeneration business grows
• 4,694 plots added to the short term housing land bank, 1,748 more than were
completed in 2006
• Short term housing land bank of 16,322 plots (2005:16,237 plots) representing
over 5 years supply
• Total land bank (including strategic land and sites in solicitors hands) of
32,204 plots (2005: 31,970 plots)
• Housing forward sales at year end of £400.6m (2005:£389.6m)
• 53% of 2007 target completions already secured (2005:50%)
• Business Improvement Initiative on track to produce £10m of cost savings per
annum by 2008 and now being fed into additional land buying and margins.
Commenting today, Stephen Stone, Chief Executive said:
"I am delighted with the way that the company has performed in my first year as
CEO. We have achieved record operating profits and laid solid foundations for
future growth.
Given a steady housing market, we can look forward with confidence. The length
and strength of our land bank, the progress of the regeneration business, and
the steps we are taking to improve the business leave us well positioned to
deliver strong growth over the next few years."
Enquiries to:
Crest Nicholson PLC Brunswick Group LLP
Stephen Stone, Chief Executive Andrew Fenwick
Peter Darby, Finance Director Kate Miller
Robert Gardener
Tel: 020 7404 5959 (on day of announcement) Tel: 020 7404 5959
Tel: 01932 580555 (thereafter)
The analyst presentation will be available on the Company's web site
www.crestnicholson.com from 9.30am
BUSINESS REVIEW
RESULTS
We are delighted to report an excellent year of progress for Crest Nicholson PLC
both in the financial performance achieved and in the foundations laid for
future growth and performance improvements.
Operating profit reached a new record high of £99.2m (2005: £98.9m) on turnover
of £690.7m (2005: £699m). Profit before tax rose to £80.1m (2005: £78.9m) and
earnings per share increased by 6% to 51.2p (2005: 48.2p).
We are proposing a dividend of 9.7p per share. This will give a total for the
year of 14.2p, up 10.1% (2005: 12.9p) and is a reflection of our confidence in
the future prospects of the company. We plan to pay the dividend on 10th April
to shareholders on the register on 9th March.
TRADING
Housing
The company operates through six regional business units (four in the South
East, one in the South West and one in the Midlands) and one central
regeneration business unit.
Total housing completions in 2006 were c. 22% higher than in 2005 at 2,946 units
(2005: 2,417).
Open market housing completions of 2,035 were slightly ahead of the 2,000 we
predicted at the interim results and the 2005 comparative of 1,960. As expected,
we have doubled affordable unit completions to 911 (2005: 457).
As predicted, the average selling price was £199k, down from £225k in 2005,
largely due to this increased proportion of affordable units. The average
selling price of open market completions was £227k (2005: £248k). The average
selling price of affordable unit completions was £135k (2005: £126k).
For 2007, we are on track to increase both open market and affordable housing
completions by c.15%. The main improvement stems from the regeneration business
unit which is well set to grow unit volumes strongly in 2007 and 2008. The
investment made in regeneration expertise in previous years has improved our
ability to source additional land and underpins our future growth.
The average selling price in 2007 is expected to be around £200k. The volume
gains will principally benefit the second half because of the pattern of
apartment completions.
Forward sales at the financial year end were £400.6m (2005: £389.6m). At 22nd
January , 53% of target 2007 housing turnover had been secured (2005: 50%).
In 2006, we experienced a sound housing market which has continued since our
year end. However, affordability ratios are stretched and recent interest rate
rises, including the 0.25% increase this month, are likely to moderate 2007
volumes and prices.
For the longer term, house prices remain underpinned by a continuing shortage of
supply in our areas of operation.
Mixed Use Commercial
As expected, commercial property sales from our mixed use schemes were lower in
2006 at £51.1m (2005: £92.3m). Commercial property sales in 2007 are expected to
exceed 2006, supported by a full year contribution from Camberley.
In 2006, we experienced a strong appetite from institutional investors for
tenanted commercial property but a weaker commercial lettings market than in
2005.
Land Sales
As expected, land sales in 2006 were lower than in 2005 at £54.3m (2005:
£62.7m).
Crest's unit volumes show good growth in 2007 and 2008 and the planning system
is showing no signs of easing. We therefore plan to sell significantly less land
in 2007 than in 2006.
Margins
Operating margin improved to 14.4% (2005: 14.1%) including a £2.9m capital
profit on the sale and leaseback of our Chertsey office. If the Chertsey office
sales value of £10.2m had been recorded as turnover, the operating margin would
have been 14.1%, in line with the prior year.
Our investment in regeneration expertise over the last few years has diluted
operating margin but, in 2007 and beyond, the returns from our regeneration
business are set to increase significantly.
Land Bank
Our land bank can be summarised in terms of units and gross development value as
follows:
2006 2005
Units GDV £m Units GDV £m
Short term housing 16,322 3,075 16,237 2,992
Short term commercial 491 471
__________________ ________________
Total short term 16,322 3,566 16,237 3,463
Strategic land 12,926 2,204 12,181 2,039
__________________ ________________
Total under contract 29,248 5,770 28,418 5,502
Terms agreed/solicitors instructed 2,956 583 3,552 710
__________________ ________________
Total Land Bank 32,204 6,353 31,970 6,212
__________________ ________________
2006 was a successful year for land buying in which we added 4,694 plots to the
short term housing portfolio,1,748 more than were completed in 2006, leaving us
well placed to deliver volume gains in 2007 and 2008. At the 2006 level of
turnover the short term housing portfolio represents over 5 years supply.
Our short term commercial portfolio consists principally of further phases of
our Bristol Harbourside development, Camberley and Chertsey North.
We have added to our strategic land portfolio in 2006 and we have made
significant progress with our holdings at Huntsgrove, Gloucester and Holmer
Lane, Hereford. We also expect extensions to our strategic sites at Stowmarket
and Red Lodge. Planning applications have now been submitted for a total of
2,211 units in our strategic land bank.
Projects where purchase terms have been agreed and solicitors have been
instructed include Woolston Riverside in Southampton where we have been
nominated as lead developer as well as a number of traditional development
projects in our regional business units.
Since year end, the total number of plots under control has increased by 1,097
plots from 32,204 to 33,301 due to further successes in getting agreed land
purchases into solicitors hands.
Design and Business Improvement Initiatives
Good design, increasing environmental standards and modern methods of
construction are all essential ingredients in working partnerships with local
and central government to secure new land.
Crest's reputation for design innovation is well established. Our recent success
in the ODPM Design for Manufacture competition with the 'SixtyK' submission
demonstrated our ability to produce groundbreaking designs to increasingly
demanding standards. This success has led to securing three sites totalling 445
plots.
Crest's ability to meet government aspirations for sustainable development is a
key factor in land sourced from the public sector which accounts for 2,200 of
the plots now in solicitors hands. Producing more new homes is a key objective
for Government and doing so in an environmentally responsible manner is
essential.
Crest recognises and welcomes the increasing importance of environmental
concerns and has developed the necessary expertise to meet the higher standards
required for more sustainable development. We believe this will give us a
competitive advantage in the land market in the future.
The Business Improvement Initiative is on track to produce £10m of cost savings
per annum by 2008. The savings identified are being used both to secure
additional land by improving competitiveness in the land market and to improve
margins. The Business Improvement process is now embedded in our organisation
and culture and, through it, we expect continuously to seek better design, lower
costs, better practices and greater added value.
FINANCIAL POSITION
The Group's capital employed of £453.1m has increased by £8.1m and the return on
average capital employed is 22.1% compared to 22.7% in 2005.
The Group operates a defined contribution pension scheme for new employees and
the defined benefit scheme is closed to new entrants. The deficit on the defined
benefit scheme has increased in 2006 by £9.7m net of tax (2005: £3.3m) from
£24.7m to £34.4m due principally to the effects of longevity assumptions.
Shareholders funds increased by £35.2m or 13.4% to £298.5m. The net assets
attributable to the ordinary shares are equivalent to 265p per share compared
with 235p at October 2005, an increase of 13%.
At October 2006, the Group has total borrowing facilities available of £357.4m
(2005: £364m). Of these £97.4m at year end exchange rates relate to US private
placement notes of which £18.4m has been repaid in December 2006.
Improved working capital controls have contributed to a £27.1m reduction in net
borrowings from £181.7m at October 2005 to £154.6m at October 2006. Gearing was
reduced to 51.8% (2005: 69.0%).
On 2 November 2005, the 5.5% Cumulative Redeemable Preference Shares of £38m
were repaid at par. The repayment of the preference shares has converted non tax
deductible preference dividends into tax deductible interest charges. While this
reduces profit before tax by around £2m, earnings per share are enhanced.
OUTLOOK
While interest rate increases could moderate house price inflation in 2007, the
fundamentals of the housing market remain good with low unemployment and a
continuing shortage of supply in our main areas of operation in southern England
and the Midlands.
Given a steady housing market, we can look forward with confidence. The length
and strength of our land bank, the progress of the regeneration business, and
the steps we are taking to improve the business leave us well positioned to
deliver strong growth over the next few years.
Note: On 12 January 2007, Crest confirmed it is in discussions with Castle Bidco
Limited ("Castle Bidco") with a view to Castle Bidco making an offer for all the
issued and to be issued share capital of Crest which it does not already own, at
629.7 pence per share, consisting of a cash offer of 620 pence per share and the
right to a final dividend of 9.7 pence per share. The Board intends to recommend
the offer.
In view of this the Takeover Panel has agreed to extend the "put up or shut up"
deadline to 28 February 2007. There can be no certainty that an offer will be
forthcoming. A further announcement will be made as and when appropriate.
Consolidated income statement
for year ended 31st October 2006
2006 2005
£m £m
Revenue 690.7 699.0
Cost of sales (544.8) (547.5)
______ ______
Gross profit 145.9 151.5
Administrative expenses (50.8) (54.0)
Share of post tax profits from jointly controlled entities 1.2 1.4
Other operating income 2.9 -
______ ______
Profit from Operations 99.2 98.9
______ ______
Finance income 5.9 5.6
Finance costs (25.0) (25.6)
______ ______
Profit before taxation 80.1 78.9
Income tax expense (22.5) (25.0)
______ ______
Profit for the period 57.6 53.9
====== ======
Earnings per share (Note 1)
Basic 51.2p 48.2p
Diluted 50.8p 47.8p
Dividends per share
Paid 4.50p 4.20p
Proposed 9.70p 8.70p
Consolidated balance sheet
at 31st October 2006
2006 2005
£m £m
Non-current assets 24.8 47.3
Current assets
Inventories 713.7 742.0
Trade and other receivables 73.3 42.7
Cash and cash equivalents 29.3 57.0
______ ______
816.3 841.7
Current liabilities (317.4) (295.7)
______ ______
Net current assets 498.9 546.0
Non-current liabilities (225.2) (330.0)
______ ______
Net assets 298.5 263.3
====== ======
Total shareholders' equity (Note 2) 298.5 263.3
====== ======
Net borrowings 154.6 181.7
Gearing 52% 69%
Net assets per share (Note 3) 265p 235p
Consolidated cash flow statement
for year ended 31st October 2006
2006 2005
£m £m
Cash flows from operating activities
Profit for the year 57.6 53.9
Adjustments for:
Depreciation charge 0.8 1.0
Finance charge 19.1 20.0
Share of profit of joint ventures (1.2) (1.4)
Gain on sale of property, plant and equipment (2.9) -
Equity settled share-based payment expenses 1.0 0.6
Taxation 22.5 25.0
______ ______
Operating profit before changes in working
capital and provisions 96.9 99.1
(Increase)/decrease in trade and other receivables (31.1) (8.6)
(Increase)/decrease in inventories 28.3 (14.4)
Increase/(decrease) in trade and other payables (38.0) (7.7)
______ ______
Cash generated from the operations 56.1 68.4
Interest paid (19.9) (17.0)
Income tax paid (14.4) (24.1)
______ ______
Net cash from operating activities 21.8 27.3
______ ______
Cash flows from investing activities
Proceeds from sale/Purchases of property, plant
and equipment 2.0 (1.0)
Interest received 1.2 0.4
Repayment of loans to joint ventures 12.6 5.6
Increase in investment properties (2.4) (0.7)
______ ______
Net cash from investing activities 13.4 4.3
______ ______
Cash flows from financing activities
Proceeds from the issue of share capital 0.7 0.8
(Decrease) /Increase in bank & other loans (19.0) 18.0
Repayment of preference shares (38.0)
Dividends paid (14.9) (14.0)
______ ______
Net cash flow from financing activities (71.2) 4.8
______ ______
Net (decrease) / increase in cash and cash
equivalents (36.0) 36.4
Cash and cash equivalents at beginning of the
period 56.9 20.5
______ ______
Cash and cash equivalents at end of the period 20.9 56.9
====== ======
Notes
1 Earnings per share
Basic earnings per share are calculated on the profit attributable to ordinary
shareholders of £57.6m (2005 £53.9m) on a weighted average of 112,407,321 (2005
111,852,392) ordinary shares in issue during the year.
Diluted earnings per share are calculated on the profit attributable to ordinary
shareholders of £57.6m (2005 £53.9m) on a weighted average of 113,344,118 (2005
112,700,749) ordinary shares, on the basis that 2,402,821 (2005 2,282,232) share
options had been exercised.
2 Reconciliation of equity shareholders' funds
2006 2005
£m £m
Retained profit 42.7 39.9
Net proceeds from share issues 0.7 0.8
Actuarial losses on defined benefit pension (10.4) (3.3)
scheme, net of tax
Cash flow hedges: effective portion of changes 0.8 (3.9)
in fair value, net of tax
Equity settled share based payments, net of tax 1.4 0.6
______ ______
Net increase in shareholders' funds 35.2 34.1
Opening shareholders' funds 263.3 229.2
______ ______
Closing shareholders' funds 298.5 263.3
====== ======
3 Net assets per share
Net assets per ordinary share is calculated on net assets of £298.5m (2005
£263.3m) on 112,796,209 (2005 112,128,638) ordinary shares in issue and ranking
for full dividends at 31st October 2006.
4 Statutory accounts
The financial information set out above does not constitute the Company's
statutory accounts for the years ended 31st October 2006 or 2005 but is derived
from those accounts. Statutory accounts for 2005 have been delivered to the
Registrar of Companies, whereas those for 2006 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.
FIVE YEAR RECORD
2002 2003 2004 2005 2005 2006
UK GAAP UK GAAP UK GAAP UK GAAP Restated IFRS
to
IFRS
Turnover £m £m £m £m £m £m
Development - subsidiaries 505.1 538.5 631.2 701.7 699.0 690.7
Development - joint ventures 10.4 12.0 12.0 12.6
Construction - discontinued 180.9 23.9 - - - -
___________________________________________________
696.4 574.4 643.2 714.3 699.0 690.7
___________________________________________________
Operating profit (including joint
ventures)
Development 79.2 87.3 94.9 94.9 98.9 99.2
Construction - discontinued (3.4) - - - - -
___________________________________________________
75.8 87.3 94.9 94.9 98.9 99.2
___________________________________________________
Operating margin - development 15.4% 15.9% 14.8% 13.3% 14.1% 14.4%
Pre-tax profit
Development 66.3 74.6 82.1 79.2 78.9 80.1
Construction - discontinued (3.3) - - - - -
___________________________________________________
63.0 74.6 82.1 79.2 78.9 80.1
___________________________________________________
Housing
Houses sold (units) 1,899 1,936 2,524 2,486 2,417 2,946
Average selling price £225,100 £239,300 £210,000 £219,600 £225,100 £198,700
Land bank - Short term (units) 10,760 13,204 15,060 14,945 16,237 16,322
Average selling price £197,600 £187,900 £192,200 £184,500 £184,300 £188,400
Land bank - Strategic (units) 13,735 13,236 13,182 12,181 12,181 12,926
Balance sheet
Shareholders' funds 247.1 285.8 328.4 367.4 263.3 298.5
Net borrowings 131.8 81.9 178.4 160.0 181.7 154.6
___________________________________________________
Capital employed 378.9 367.7 506.8 527.4 445.0 453.1
___________________________________________________
Gearing 53% 29% 54% 44% 69% 52%
Return on shareholders' funds
(average) 27.3% 28.0% 26.7% 22.8% 32.0% 28.5%
Return on capital employed
(average) 21.8% 23.4% 21.7% 18.4% 22.7% 22.1%
Ordinary shares
Earnings per share 38.8p 45.2p 49.4p 47.0p 48.2p 51.2p
Dividends per share 9.5p 11.0p 12.3p 12.9p 12.9p 14.2p
Dividend cover 4.1x 4.1x 4.0x 3.6x 3.7x 3.6x
Net tangible assets per share 192p 224p 260p 294p 235p 265p
This information is provided by RNS
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