Interim Results

Crest Nicholson PLC 01 July 2003 1st July 2003 CREST NICHOLSON PLC INTERIM RESULTS ANNOUNCEMENT Crest Nicholson PLC, the residential development company, today announces results for the six months ended 30th April 2003. Financial Highlights % increase â€¢ Profit before tax Â£32.0m (2002: Â£24.2m*) 32% â€¢ Earnings per share 19.6p (2002: 14.7p*) 33% â€¢ Interim dividend 3.5p (2002: 3.0p) 17% â€¢ Net assets per share 208p (2002: 175p*) 19% Operational Highlights â€¢ Operating margins from development activities increased to 15.5% (2002: 15.2%*) â€¢ 23% increase in turnover from house sales - 833 houses sold (2002: 736*); average selling price Â£253,300 (2002: Â£232,500*) â€¢ Development value of land bank increased to Â£2.2bn - 5 years' supply â€¢ Strong early demand for redevelopment of Park Central, Birmingham â€¢ Â£225m revolving credit facility agreed for 5 year term * Restated for comparative purposes to reflect the change effected in the accounts for the year to 31st October 2002 in the policy on the recognition of income on house sales Commenting today John Matthews, Chairman, said: "We welcome the more stable housing market and remain positive about the longer term outlook given low mortgage rates and shortage of supply, especially in the South. Crest's houses are now in sectors which appeal to a wide market and we have negligible exposure to the Inner London market or the top end sector. Our sites are selling well and we have reserved, contracted or legally completed in excess of 80% of this year's target output. The Group has a long land bank that contains all the sites we require for a significant increase in turnover in 2004. Provided there is no material deterioration in the housing market, the Directors are confident of producing further strong results and remain very positive about the prospects for the Group." Enquiries to: John Callcutt, Chief Executive Rebecca Blackwood/ Stephen Stone, Chief Operating Officer Kate Miller/ Clive Littler, Finance Director Robert Gardener Crest Nicholson PLC Brunswick Group Limited Tel: 0207 404 5959 (on day of announcement) Tel: 0207 404 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. CHAIRMAN'S STATEMENT RESULTS AND DIVIDEND Profit before tax was Â£32.0m (2002: Â£24.2m) for the six months to 30th April 2003, an increase of 32%. This excellent result was due to an 18% increase in turnover to Â£249.1m (2002: Â£210.4m) from our development operations and a more efficient recovery of overheads. Performance was also enhanced by the successful disposal of our loss making Construction business (2002: Â£1.3m loss). Basic earnings per share rose to 19.6p (2002: 14.7p), an increase of 33%. The Directors are pleased to declare an increased interim dividend of 3.5p (2002: 3.0p) to be paid on 1st September 2003 to shareholders on the register at the close of business on 8th August 2003. REVIEW OF OPERATIONS Development activities Operating profits from the Group's continuing development activities (comprising the sale of houses, residential land and commercial development) increased by 20% from Â£32.0m to Â£38.5m. Operating margins increased to 15.5% (2002: 15.2%). Turnover from house sales increased 23% to Â£211.0m (2002: Â£171.1m) from 833 units (2002: 736 units) at an average selling price of Â£253,300 (2002: Â£232,500). The increase in volumes arose from buoyant sales on a number of very attractive and well designed developments, such as those at Port Marine in Portishead, Braydon Mead in Swindon and The Forum in Bath. Turnover included Â£8m from 64 social housing sales. Production of affordable homes is expected to increase substantially in the second half with over 200 units scheduled for completion over ten operational sites. Our housing association volumes will continue to increase as many of our sites make their contributions under various planning agreements. We have secured a profitable forward order book amounting to Â£80.5m in sales value. Turnover from sales of residential land was Â£30.7m (2002 Â£22.6m). Our ability to source land and improve its value is a key strength and land disposals are a regular feature of our operations, generating development profit and cash. This also ensures we maintain a well balanced land bank and optimise our return on capital. In the first half we continued to reduced our exposure to higher price products in the South East and sold land in the South West which was in excess of our requirements. Turnover from commercial uses was Â£7.4m (2002: Â£16.7m). There are several large pre-funding and pre-letting agreements under negotiation on a number of the company's mixed use developments. We therefore expect activity in this area to increase. We remain strongly committed to quality in both product and after sales service as a key component of our strategy. Crest's leadership in this field is evidenced by the formal recognition in 2002 of Crest as a champion of good design by the Commission for Architecture and the Built Environment. In addition, Ingress Park at Greenhithe won the Royal Town Planning Institute's Award for the UK's Best Development in the category of Planning and Urban Design. We also achieved high recognition in a number of competitions for quality, design and service. These achievements clearly promote Crest's brand awareness with the house buying public and land owners. As at 30th June 2003, the forward order book was 1,596 units with a development value of Â£249.5m. Land and Planning We have continued our strategy of improving the quality of our land holdings by acquiring sites in premium strategic locations where there will be ongoing demand, whilst at the same time placing greater emphasis on the middle and lower priced market sectors. In the half year we acquired 18 sites comprising 2,575 plots with a projected development value in excess of Â£430m. Approximately half the development value acquired was represented by three strategic sites in the Eastern and Midlands regions. These sites comprised the later phases of already proven locations at Hinckley in Leicestershire and Stowmarket in Suffolk and a site for a new community of approximately 1,000 new homes at Red Lodge near Newmarket. The average selling price of the plots acquired is Â£167,000 compared with an average unit sales price of Â£253,300 in the first half. This demonstrates our ability to restock our land bank with lower and mid market plots at a time when obtaining a supply of residential land is an increasingly challenging task. It also shows the effectiveness of our investment strategy and is a great credit to our land buying teams both in the regions and at Head Office. The further expansion of our Midlands Region was underpinned by the acquisition of five sites. It also launched a 1,800 unit urban regeneration project at Park Central, Birmingham targeted at the lower to mid market sector. The region now has a development programme which should enable it to make a greater contribution to the Group in future years. The short term land bank comprises 11,899 directly owned and consented plots (2002: 10,808 plots) with a projected development value of Â£2.22bn (2002: Â£2.07bn), an increase of 7.6% over twelve months. The land bank has an attributable gross margin in excess of Â£500m and represents nearly five years' land supply, based on the previous twelve months' housing turnover of Â£468m. Our high quality strategic land bank comprises 12,699 plots, virtually all of which will in due course receive planning, so that our total land holdings for residential development comprise 24,598 plots, primarily in areas of strong demand in the South of England and the Midlands. The provision of an adequate supply of land for housing must increasingly be based on sustainable sources, the most important of which is the recycling of brown and urban land. Our new communities at Port Marine, Portishead and Ingress Park, Greenhithe have been widely acclaimed and together represent over 3,500 houses which will be built on previously derelict industrial areas. The recent successful launch of the development of Park Central, Birmingham and the selection of Crest as the preferred developer for mixed use, town centre, redevelopments at Farnham, Aylesbury and Camberley further testify to the Company's leading position in urban regeneration. FINANCE The Company's financial position continues to strengthen. Shareholders' funds at 30th April 2003 were Â£265.2m, compared with Â£227.8m at April last year and Â£247.1m at October. Net assets per ordinary share at 208p, show an increase of 19% on last year. Net borrowings were Â£184.3m compared with Â£154.3m a year ago and Â£131.8m at the year end. Gearing is 69% (2002: 68%). Of the borrowing, Â£120.1m, equivalent to gearing of 45%, is medium term US private placement finance at a fixed rate with an average maturity in excess of five years. Net interest payable for the half year is Â£6.5m (2002: Â£6.4m) and is covered 5.9 times by operating profits. In June 2003 the Company put in place a Â£225m five year revolving credit facility from a syndicate of nine banks. This replaces a facility of Â£136m which was due to expire in 2004. The Group therefore has total resources of Â£617m comprising shareholders' funds of Â£265m and committed borrowing facilities of Â£352m. DIRECTORS On 29th April the Board announced the appointment of Stephen Lidgate as a non-executive Director. The Board is pleased that Richard Scholes has accepted its invitation to become a non-executive Director to replace Bob Erith who will retire on 8th August. Richard Scholes is a chartered accountant and a non-executive director of three other listed companies, Bodycote International Plc, Keller Group Plc and Chaucer Holdings Plc. We thank Bob Erith for his contribution to the Group and wish him well in his retirement. The Board is also pleased to announce that Peter Murray's retirement date has been extended to 31st October 2003. PROSPECTS After several years of house price inflation the market shows real signs of settling down. We welcome this more stable market as it provides the base for future sustainable profit growth. The longer term outlook for housing remains positive given low mortgage rates and shortage of supply, especially in the South. By far the greater proportion of Crest's houses are now in sectors which appeal to a wide market and we have negligible exposure to the Inner London market or the top end sector. Our sites are selling well and we have reserved, contracted or legally completed in excess of 80% of this year's target output. The Group has a long land bank which contains all the sites we require for a significant increase in turnover in 2004. Most of these sites are either fully operational or have planning consent. The Company's planning and development skills are the key to our success and continue to create excellent development opportunities for the future. Provided there is no material deterioration in the housing market, the Directors are confident of producing further strong results and remain very positive about the prospects for the Group. John Matthews 1st July 2003 STATEMENT OF RESULTS Unaudited Group results for the Half Year to 30th April 2003 Half Year Half Year Full Year Note 2003 2002 2002 Restated Â£m Â£m Â£m Turnover - including joint ventures 2 273.0 297.2 696.4 Less: attributable to joint ventures (9.2) (0.2) (10.4) __________ __________ __________ Turnover - Group companies 263.8 297.0 686.0 ========== ========== ========== Group turnover - continuing operations 239.9 210.2 505.1 - discontinued operations 23.9 86.8 180.9 Operating profit - Group companies 38.0 31.2 73.3 Operating profit/(loss) of joint ventures 0.5 (0.6) 2.5 __________ __________ __________ Operating profit - including joint ventures 2 38.5 30.6 75.8 Operating profit - continuing operations 38.5 32.0 79.2 - discontinued operations - (1.4) (3.4) Net interest payable (6.5) (6.4) (12.8) __________ __________ __________ Profit before taxation 2 32.0 24.2 63.0 Estimated taxation 3 (9.6) (7.3) (19.0) __________ __________ __________ Profit after taxation 22.4 16.9 44.0 Preference dividends (1.0) (1.1) (2.1) __________ __________ __________ Profit attributable to ordinary shareholders 21.4 15.8 41.9 Ordinary dividends (3.8) (3.2) (10.3) __________ __________ __________ Retained profit 17.6 12.6 31.6 ========== ========== ========== Earnings per 10p ordinary share 4 Basic 19.6p 14.7p 38.8p Diluted 19.4p 14.4p 38.2p Dividends per 10p ordinary share 3.5p 3.0p 9.5p There are no recognised gains or losses other than those shown above. SUMMARY BALANCE SHEET Unaudited Consolidated Balance Sheet as at 30th April 2003 Note April April October 2003 2002 2002 Restated Â£m Â£m Â£m Fixed assets Tangible assets 1.9 5.0 3.8 Investments 15.5 5.5 10.7 _________ _________ _________ 17.4 10.5 14.5 ========= ========= ========= Current assets/liabilities Stocks 677.4 574.0 598.3 Debtors 148.2 133.7 169.8 Creditors (222.4) (250.2) (244.0) Net cash in hand 15.8 21.7 18.3 _________ _________ _________ Net current assets 619.0 479.2 542.4 _________ _________ _________ Total assets less current liabilities 636.4 489.7 556.9 Creditors falling due after more than one year Bank and other loans (200.1) (176.0) (150.1) Other creditors and provisions (171.1) (85.9) (159.7) _________ _________ _________ (371.2) (261.9) (309.8) _________ __________ __________ Net Assets represented by Shareholders' funds 5 265.2 227.8 247.1 ========= ========= ========= Net borrowings 184.3 154.3 131.8 Gearing 69% 68% 53% Net assets per ordinary share 6 208p 175p 192p SUMMARY CASH FLOW STATEMENT Unaudited Consolidated Cash Flow Statement for the Half Year to 30th April 2003 Half Year Half Year Full Year 2003 2002 2002 Â£m Â£m Â£m Net cash (outflow)/inflow from operating activities (36.7) (30.0) 15.1 Returns on investments and servicing of finance Interest received 0.2 0.2 0.4 Interest paid (6.6) (7.1) (14.0) Preference dividends paid (1.0) (1.1) (2.1) _________ _________ _________ (7.4) (8.0) (15.7) _________ _________ _________ Taxation paid (5.0) (7.6) (16.3) Proceeds from disposal of Pearce Group 7.7 - - Other capital expenditure and financial investment (4.5) (1.4) (4.7) Equity dividends paid (7.1) (6.0) (9.2) _________ _________ _________ Net cash flow before financing (53.0) (53.0) (30.8) Financing Share issues 0.5 1.2 1.5 Increase in bank and other loans 50.0 30.1 4.2 _________ _________ _________ 50.5 31.3 5.7 _________ _________ _________ Decrease in cash (2.5) (21.7) (25.1) ========= ========= ========= 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 the 2002 half year have been restated to reflect the change in accounting policy for income recognition as disclosed in the 2002 Annual Report. The figures for 31st October 2002 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 2003 2002 2002 Restated Â£m Â£m Â£m Turnover Development 249.1 210.4 515.5 Construction - discontinued 23.9 86.8 180.9 ________ ________ ________ 273.0 297.2 696.4 ======= ======= ======= Operating profit Development 38.5 32.0 79.2 Construction - discontinued - (1.4) (3.4) ________ ________ ________ 38.5 30.6 75.8 ======= ======= ======= Pre-tax profit Development 32.0 25.5 66.3 Construction - discontinued - (1.3) (3.3) ________ ________ ________ 32.0 24.2 63.0 ======= ======= ======= 3 Taxation Half Year Half Year Full Year 2003 2002 2002 Restated Â£m Â£m Â£m Corporation tax charge at 30% (9.6) (7.3) (18.4) Deferred tax - - 0.1 Joint venture undertakings - - (0.7) ________ ________ ________ (9.6) (7.3) (19.0) ======= ======= ======= 4 Earnings per share Basic earnings per share are calculated on the profit attributable to ordinary shareholders of Â£21.4m (2002: Â£15.8m) on a weighted average of 109.1m (2002: 107.9m) ordinary shares in issue during the six months. Diluted earnings per share are calculated on the profit attributable to ordinary shareholders of Â£21.4m (2002: Â£15.8m) on a weighted average of 110.1m (2002: 109.6m) ordinary shares on the basis that 3.7m (2002: 4.3m) share options had been exercised and, for the 2002 half year, that the preference shares whose holders opted to convert at 30th April 2002, the final conversion date, had done so. 5 Reconciliation of shareholders' funds Half Year Half Year Full Year 2003 2002 2002 Restated Â£m Â£m Â£m Retained profit 17.6 12.6 31.6 Net proceeds from share issues 0.5 1.2 1.5 ________ ________ _______ Net increase in shareholders' funds 18.1 13.8 33.1 Opening shareholders' funds 247.1 214.0 214.0 ________ ________ _______ Closing shareholders' funds 265.2 227.8 247.1 ======= ======= ======= 6 Net assets per share Net assets per ordinary share is calculated on net assets of Â£227.2m (2002: Â£189.2m) after deducting the preference capital of Â£38.0m (2002: Â£38.6m) from the capital and reserves, on 109.4m (2002: 108.2m) ordinary shares in issue at 30th April 2003. 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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